BOOK FIVE

LABOR RELATIONS

Title I
POLICY AND DEFINITION
Chapter I
POLICY

Overview/Key Questions: Box 1

1. What are the policy objectives of our labor relations
law?
2. Employer-employee relationship must exist so that
labor relations law may apply within an enterprise. What
factors determine the existence of such relationship?
3. What are considered labor disputes? What are the
available remedies?

ART. 2 1 1 . DECLARATION OF POLICY

A. It is the policy of the State:
(a) To promote and emphasize the primacy of free collective
bargaining and negotiations, including voluntary arbitration, mediation and
conciliation, as modes of settling labor or industrial disputes;
(b) To promote free trade unionism as an instrument for the
enhancement of democracy and the promotion of social justice and
development;
(c) To foster the free and voluntary organization of a strong and
united labor movement;
(d) To promote the enlightenment of workers concerning their
rights and obligations as union members and as employees;
(e) To provide an adequate administrative machinery for the
expeditious settlement of labor or industrial disputes;
(f) To ensure a stable but dynamic and just industrial peace; and
(g) To ensure the participation of workers in decision and policy-
n&aking processes affecting their rights, duties and welfare.

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ART. 211

B. To encourage a truly d e m o c r a t i c m e t h o d of regulating the

relations between the employers and employees by means of agreements
freely entered into through collective bargaining, no court or administrative
agency or official shall have the power to set or fix wages, rates of pay, hours
of work or other terms and conditions of employment, except as otherwise
provided under this Code.
COMMENTS AND CASES
1. OVERVIEW AND VIEWPOINT
In the opening comments to the Preliminary Title in Volume I, it is said
that labor legislation is divided broadly into labor standards and labor relations.
"Labor Standards" refers to the minimum terms and conditions of employment
to which employees are legally entitled and with which employers must comply.
"Labor Relations" refers to the interactions between employer and employees
or their representatives and the mechanism by which the standards and other
terms and conditions of employment are negotiated, adjusted and enforced.
Thus defined, Books I to IV of the Code deal largely with standards and V to VII
with relations.
What is the "correct" sequence of studying the books? This is just a question
of instructional sequence which is not of great importance because the distinction
between labor standard and labor relation is in fact academic. T h e distinction
does not matter, for instance, when an employer and the employees negotiate a
labor contract, or when an employee files a complaint with a government agency.
Negotiating a contract and filing a complaint are aspects of labor relations but
their subjects oftentimes are labor standards. Similarly, the government body
that hears and decides labor disputes, in general, whether involving money
claims or anti-union acts, is called "labor relations" commission and not "labor
standards and relations" commission. Labor standards and labor relations actually
intertwine; they are not mutually exclusive.
What follows is a perspective of labor relations in the private sector.
T h e government labor relations policy is declared in Article 211 which is
a focused elaboration of the basic labor policy announced in Article 3 which,
in turn, echoes the constitutional mandates. T h e policy intends to attain social
justice through industrial peace and progress. T h e latter is significantly founded
on employee participation and collective interactions between employer and
employees. In Management parlance, the input is the parties' rights and duties,
the process is workers' organization and collective bargaining, and the output
is industrial peace and progress towards social justice as the end goal.
As in political democracy the crux of labor relations is the process and
substance of employee participation, that is, how rights and duties are exercised,
how agreements are reached, and how relationship is enhanced.
The process starts when workers organize themselves into a union or some
other form of association. They may or may not register their organization with

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ART. 211

the government, but when they do, they and their members acquire certain
rights that are legally demandable, such as the right to bargain as a group. The
labor organization itself, being a manifestation of industrial democracy, must
be democratically governed. This is why the law explicitly recognizes certain
rights of the members. T h e labor organization, furthermore, should be free
from employer's interference. If the employer tries to interfere with the workers'
organizational rights, he commits "unfair labor practice" (ULP) which may trigger
a strike or work stoppage. But a union cannot strike over intra or inter-union
disputes.
Since the main objective of the union is to represent to the employer the
needs or interest of the employees, the employees should speak as one voice,
hence they need to select only one union as their representative. If there is
union rivalry, the rivalry is resolved through an election with or without DOLE
intervention.
After the question of employee representation is settled, the employer's and
employees' representatives meet and talk over proposals and counter-proposals.
A deadlock may or may not occur; parties must find ways to avoid it or break
it. Unresolved bargaining deadlock may, again, lead to a work stoppage. T h e
agreement, when reached, is embodied in a labor contract, commonly called
collective bargaining agreement (CBA).
Work stoppage—known as "strike" by employees or "lockout" by the
employer—is not favored in law. It is recognized as a legal right but regulated as to
the purpose and manner of doing it. Deviation from the mandatory requirements
has adverse consequences to the violators. Work stoppage, because it is counter-
productive, is and has to be considered a measure of last resort.
In line with the policy promoting "free" bargaining and negotiation between
employees and employers, Article 251 even allows the parties to devise more
expeditious methods of bargaining than that prescribed in the Code. They have
this freedom as regards the subject and the manner of their negotiation, but, of
course, they and their contract cannot brush the law aside; legal standards are
deemed written into their contract.
The CBA must be ratified by the employees and registered with DOLE,
but although unregistered, it is valid and binding between the parties; it is law
between them. Its economic provisions are renegotiated not later than three
years, while the union representation stays undisturbed for five years.
Labor-management relations in the private sector are essentially inter-party.
This means that the employer and employees themselves must deal with their
problems in a manner most comfortable to them, so to speak. This view is clearly
echoed in this Supreme Court statement:
... ' T h e principle behind labor unionism in private industry is that
industrial peace cannot be secured through compulsion by law. Relations
between private employers and their employees rest on an essentially

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ART. 211

voluntary basis. Subject to the minimum requirements of wage laws

and other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the process
of collective bargaining..." (SSS Employees Association vs. Court of Appeals, 175
SCRA 686 [1989].)
The inter-party character of labor relations is likewise the reason the legal
policy prefers voluntary instead of compulsory modes of dispute settlement. The
government steps in only when the parties themselves fail to reach an agreement,
or when one disregards the defined rights of the other, such as when the employer
busts the union or commits other form of "unfair labor practice" or when, for
instance, the union blockades the company gate.
Because labor relations are primarily "domestic," third parties, even the
Government, shy away from meddling, as much as it can be helped. This is
why an in-house problem-solving structure, called grievance machinery, is a
requirement in CBAs. If this machinery fails, the parties themselves are free to
select any third party, called voluntary arbitrator, to resolve their differences. The
company is a house where the employer and employees are the family members.
Although it is the government that sets the legal boundaries, the real parties-in-
interest are the employer and employees. If the parties are observing the legal
boundaries, the government, if not invited in, is an intruder. This, finally, is the
reason a restraining order or injunction from government is frowned upon in
labor disputes; if such an order must issue at all, it will have to pass through a
strict procedural route.
But when the dispute, whether it be a lockout, a strike, a picket, or any
form of "concerted activities," violates the rights of others or is accompanied
by violence or other illegal acts — in a word, when the legal boundaries are
transgressed — then the injunctive power of the State may be invoked. In
fact, it need not be invoked when the Secretary of Labor, on his own volition,
decides to use the state's restraining power when the dispute puts national
interest at stake. In that situation, the Secretary or even the President may
either "assume jurisdiction" or "certify" the case to NLRC. Either action has
the effect of compulsory arbitration which maintains the status quo while the
government tries to resolve the dispute.
T h e laws, as a force that balances the parties' rights and obligations, are
admittedly necessary in the industrial setting. This is because, according to
the Civil Code in Article 1700, "the relations between capital and labor are
not merely contractual" and "they are so impressed with public interest that
labor contracts must yield to the common good." But, still, industrial or labor
relations are, in fine, human relations. It is not a lawyers' invention and need
not be a lawyers' game. T h e labor law prescriptions will "naturally" follow if the
parties would only adhere to the civil law precept of human relations which
succinctly states: "Every person must, in the exercise of his rights and in the

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performance of his duties, act with justice, give everyone his due, and observe
1
honesty and good faith."
2. WORKERS' ORGANIZATION
A labor or trade union is a combination of workmen organized for
the ultimate purpose of securing through united action the most favorable
conditions as regards wages, hours of labor, conditions of employment, etc.,
2
for its members.
All combinations or associations, although concerned with labor matters,
are not necessarily labor unions as they are commonly conceived. Many
associations or groups of employees, or even combinations of only several persons,
may qualify as labor organizations yet fall short of constituting a labor union. In
the popular sense a labor union is understood to be a completely organized body
of dues-paying members, operating through elected officers and constituting
a militant, vital and functioning organ. It may be said that while every labor
union is a labor organization, not every labor organization is a labor union. The
3
difference is one of organization, composition and operation.

3. WHY WORKERS ORGANIZE

The basic urge which leads workers to organize, the spark which gave
unions life and the power of growth under favorable conditions, is the human
drive toward self-advancement.
Self-help through economic action necessarily requires increasing the
bargaining power of employees; hence, one of the basic purposes of a labor
union is to eliminate competition among employees in the labor market. The
labor union seeks to exercise the power of a monopolist. T h e growth of the
large corporation diminished the bargaining power of the individual worker
to such an extent that talk of freedom of individual contract became an empty
slogan. Thus, the near-monopoly which the union obtains is often opposed by
the near-monopoly of the large corporation which is the only buyer of labor in
a local market.
Three other human desires should be noted among the forces that led
workers to organize. (1) One is the desire for j o b security. Skilled craftsmen
organized in order to secure control over available jobs so as to hold them against
the competition of unskilled immigrants. (2) Employees wished to substitute
what we should term "the rule of law" for the arbitrary and often capricious
exercise of power by the boss. Forty years ago, a foreman could discharge an
employee for any reason or no reason. Labor unions have subordinated this
absolute power to the rules set forth in collective agreements, and administration

'Article 19, Civil Code.

2
31 Am. Jur., Sec. 30, pp. 848-849.
3
I. Herbert Rothenberg, Rothenberg on Labor Relations [New York, 1949], p. 3.

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ART. 211

of the rules is usually subject to impartial review. The illustration afforded by

the regulation of discipline is typical of what has occurred throughout life in
industrial establishments. (3) Finally, unions helped to give employees a sense
of participation in the business enterprises of which they are part — a function
of labor unions which became important as organizations spread into mass
1
production industries.
The union is the recognized instrumentality and mouthpiece of the
laborers. Only through the union can the laborers exercise the right of collective
bargaining and enjoy other privileges. Without the union, laborers are impotent
to protect themselves against 'the reaction of conflicting economic changes' and
2
maintain and improve their lot.
However, it is unlawful for workmen to combine and to control the business
3
of the employer in matters not affecting the terms of their own hiring.
4. ILO CONVENTION NO. 87
We explained in Volume I (under the Preliminary Tide) that the Philippines
is a member of the International Labor Organization whose Conventions, when
ratified, become binding laws. One of these is ILO Convention No. 87.
Convention No. 87 of the International Labor Organization (effective July
4, 1950), provides in part:
Article 2 — Workers and employers, without distinction whatsoever, shall
have the right to establish and, subject only to the rules of the organization
concerned, to j o i n organizations of their own choosing without previous
authorization.
Article 3 — (1) Workers' and employers' organizations shall have the right
to draw up their constitutions and rules, to elect their representatives in full
freedom, to organize their administration and activities and to formulate their
programmes.
(2) T h e public authorities shall refrain from any interference which
would restrict this right or impede the lawful exercise thereof.
Article 8 — (1) In exercising the rights provided for in this Convention,
workers and employers and their respective organizations, like other persons or
organized collectivities, shall respect the law of the land.
(2) T h e law of the land shall not be such as to impair, nor shall it be so
applied as to impair, the guarantees provided for in this Convention.

1
Archibald Cox, Derek Curtis Bok, and Robert A. Gorman, Cases and Materials
on Labor Law, The Foundation Press, New York, 1977, p. 15.
2
A.L. Ammen Trans, vs. Bicol Trans. Employees Mutual Association, G.R. No.
L-4941,July 25, 1952.
3
31 Am. Jur., Sec. 36, p. 852.

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ART. 211

5. WORKERS' PARTICIPATION IN POLICY-MAKING

Coupled with the new concept of collective negotiation is the new right
of workers to "participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law." T h e 1986 Constitutional
Commission wrote this right for the first time in the 1987 Constitution in Article
XIII, about Social Justice and Human Rights.
Subsequently, this right was added by R.A. No. 6715, effective March 21,
1989, as paragraph (g) of Article 211 and in Article 255 of the Labor Code.
In the Philippines, therefore, participatory or consultative management is no
longer just a theory or variety of management style. It is a matter of law because
the right of employees to participate in policy- or decision-making on matters
affecting their rights, duties, benefits or welfare is guaranteed in the Constitution
and reinforced in the Labor Code and Supreme Court rulings. In Article 255
we further discuss this right.

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 C h a p t e r II

DEFINITIONS

ART. 212. DEFINITIONS

(a) "Commission'' means the National Labor Relations Commission
or any of the divisions, as the case may be, as provided under this Code.
(b) "Bureau" means the Bureau of Labor Relations a n d / o r the Labor
Relations Divisions in the regional offices established under Presidential
Decree No. 1, in the Department of Labor.
(c) "Board" means the National Conciliation and Mediation Board
established under Executive O r d e r No. 126.
(d) "Council" means the Tripartite Voluntary Arbitration Advisory
Council established under Executive O r d e r No. 126, as amended.
(e) "Employer" includes any person acting in the interest of an
employer, directly or indirectly. T h e t e r m shall not include any labor
organization or any of its officers or agents except when acting as employer.
(f) "Employee" includes any person in the employ of an employer.
The term shall not be limited to the employees of a particular employer,
unless this Code so explicitly states. It shall include any individual whose
work has ceased as a result of or in connection with any current labor dispute
or because of any unfair labor practice if he has not obtained any other
substantially equivalent and regular employment.
(g) "Labor organization" means any union or association of employees
which exists in whole or in part for the purpose of collective bargaining or
of dealing with employers concerning terms and conditions of employment.
(h) "Legitimate labor organization" means any labor organization
duly registered with the Department of Labor and Employment, and includes
any branch or local thereof.
(i) "Company union" means any labor organization whose formation,
function or administration has been assisted by any act defined as unfair
labor practice by this Code.
(j) "Bargaining representative" means a legitimate labor organization
or any officer or agent of such organization whether or not employed by the
employer.

1
As amended by Sec. 3, R.A. 6715.

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ART. 212

(k) "Unfair labor p r a c t i c e " m e a n s any unfair labor practice as

expressly defined by this Code.
(1) "Labor dispute" includes any controversy or matter concerning
terms or conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing or arranging the terms
and conditions of employment, regardless of whether the disputants stand
in the proximate relation of employer and employee.
( m ) "Managerial employee" is one who is vested with powers or
prerogatives to lay down and execute management policies a n d / o r to hire,
transfer, suspend, lay off, recall, discharge, assign or discipline employees.
Supervisory employees a r e those who, in the interest of the employer,
effectively r e c o m m e n d such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use
of independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.
(n) "Voluntary Arbitration" means any person accredited by the Board
as such, or any person named or designated in the Collective Bargaining
Agreement by the parties to act as their Voluntary Arbitrator, or one chosen
with or without the assistance of the National Conciliation and Mediation
Board, pursuant to a selection procedure agreed upon in the Collective
Bargaining Agreement, or any official that may be authorized by the Secretary
of Labor and Employment to act as Voluntary Arbitration upon the written
request and agreement of the parties to a labor dispute.
(o) "Strike" means any temporary stoppage of work by the concerted
action of employees as a result of an industrial or labor dispute.
(p) "Lockout" means the temporary refusal of an employer to furnish
work as a result of an industrial or labor dispute.
(q) "Internal union dispute" includes all disputes or grievances arising
from any violation of or disagreement over any provision of the constitution
and by-laws of a union, including any violation of the rights and conditions
of union membership provided for in this Code.
(r) "Strike-breaker" means any person who obstructs, impedes,
or interferes with by force, violence, coercion, threats or intimidation any
peaceful picketing by employees during any labor controversy affecting
wages, hours or conditions of work or in the exercise of the right of self-
organization or collective bargaining.
(s) "Strike area" means the establishment, warehouses, depots,
plants or offices, including the sites or premises used as runaway shops, of
the employer struck against, as well as the immediate vicinity actually used
by picketing strikers in moving to and fro before all points of entrance to
and exit from said establishment.
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COMMENTS AND CASES

The following comments and cases for this opening chapter of definitions
will deal only with "employee," "employer," and "labor disputes." The other
terms defined in the above article will be taken up in the chapters where they
belong.
1. EMPLOYER-EMPLOYEE RELATIONSHIP ESSENTIAL
We extensively discussed employer-employee relationship at the beginning
of Book III of this Code. The principles and rulings cited there are equally
applicable to the present Book V. If there is no employer-employee relationship
between the parties, there is no basis for organizing for purposes of collective
bargaining.
The existence of employer-employee relationship, as explained in Book III,
is determined by the presence of the following elements, namely: (a) selection
and engagement of the employee; (b) payment of wages; (c) power to dismiss; and
(d) power to control the employee's conduct. The fourth is the most important
element. The following case is illustrative.
Brotherhood Labor Unity Movement of the Philippines, et al. vs. Zamora, et al., G.R.
No. 48645, January 7, 1987 —
Facts: Petitioners have been working at the San Miguel Parola Glass Factory,
averaging about seven years of service at the time of their termination. They worked
as "cargadores" or "pahinantes" at the SMC plant, loading, unloading, piling
and palleting empty bottles and wooden shells to and from company trucks and
warehouses using company-provided tools, equipment and paraphernalia. At times,
they accompanied the company trucks on their delivery routes. They would first
report for work to the Company's superintendent-in-charge who issued gate passes.
The assistant, in turn, would inform the warehousemen and checkers who would
relay the orders to the "capatazes" or group leaders. They would order the workers
as to where, when, and what to load, unload, pile, pallet, or clean.
Work in the factory was neither regular nor continuous, depending on the
company's business activity. Work did not necessarily mean a full 8-hour day for
petitioners. But at times work exceeded 8 hours and necessitated work on Sundays
and holidays. For such extra work they were paid neither overtime pay nor extra
compensation.
They were paid every ten days on a piece-rate basis, i.e., according to the number
of cartons and wooden shells loaded, unloaded, or piled.
Petitioners worked exclusively at the SMC plant, and were never assigned to
other companies or departments of the SMC.
When petitioners organized themselves into a union and aired their grievances,
SMC refused to heed their grievances and even dismissed some of the union members.
Petitioners filed a notice of strike. Still, SMC refused to bargain with them, claiming
that they were not its employees.

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ART. 212

Ruling: Considering the length of time that petitioners have worked with
the company, it may be justifiably concluded that they were engaged to perform
activities necessary or desirable in the usual business or trade of SMC and petitioners
are, therefore, regular employees. The term of petitioners' employment appears
indefinite. Continuity and habituality of their work bolster their claim of employee
status vis-a-vis SMC.
Even if a contract of employment had indeed been executed between SMC
and an alleged labor contractor, SMC's case will, nevertheless, fail. The alleged labor
contractor had neither substantial capital nor investment to qualify as an independent
contractor under the law. The premises, tools, equipment and paraphernalia used by
petitioners in their jobs were all supplied by SMC. It is only the manpower or labor
force which the alleged contractors supply, suggesting the existence of a "labor-only"
1
contracting scheme prohibited by law.

2. WHO ARE EMPLOYEES

The term "employee":
(1) shall include any employee
(2) and shall not be limited to the employee of any particular employer,
unless the Act explicitly states otherwise
(3) and shall include any individual
(a) whose work has ceased as a consequence of, or in connection with,
any current labor dispute
(b) and who has not obtained any substantially equivalent and regular
2
employment.
This definition, like the definition of the term 'employer' by the use of the
term 'include,' is complementary. It embraces not only those who are usually and
ordinarily considered employees, but also those who have ceased as employees
as a consequence of a labor dispute. T h e term 'employee,' furthermore, is not
limited to those of a particular employer. The Court in the case Angat River
Irrigation System, et al. vs. Angat River Workers' Union (PLUM), et al, has defined
the term 'employer' as "one who employs the services of others; one for whom
employees work and who pays their wages or salaries." Correlatively, an employee
must be one who is engaged in the service of another; who performs services
3
for another; who works for salary or wages.
The definitions in D.O. No. 40-03 (March 15, 2003) which constitutes the
Implementing Rules of Book V of the Labor Code states:
"Employee" refers to any person working for an employer. It includes one
whose work has ceased in connection with any current labor dispute or because

'See related discussion in Book III, Volume I of this work.

'Article 212 [f]; Feati University vs. Bautista, 18 SCRA 1190, 1215.
3
Feati University vs. Bautista, L-21278, December 27, 1966, 18 SCRA 1191.
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ART. 212

of any unfair labor practice and one who has been dismissed from work but the
legality of the dismissal is being contested in a forum of appropriate jurisdiction.
"Employer" refers to any person or entity who employs the services of
others, one for whom employees work and who pays their wages or salaries. An
employer includes any person directly or indirectly acting in the interest of an
employer. It shall also refer to the enterprise where a labor organization operates
or seeks to operate.
An employer may be brought into bargaining and economic relationship
with persons not in his actual employ; such persons are given the status and rights
of "employees" in relation to him, in order to accord to them the protection
of the Act. Thus, the nature of a "labor dispute" does not require that the
disputants should stand in the proximate relation of employer and employee,
with consequent protection of concerted activities carried out by many persons
belonging to several employers. For example, an otherwise valid picketing is not
rendered invalid by the fact that it involves persons not in the actual employ of
1
the employer being picketed.

2.1 "One Whose Work Has Ceased..."

The definition in Article 212(f) further states that the term "employee"
includes any individual whose work has ceased as a result of, or in connection
with any unfair labor practice if he has not obtained any other substantially
equivalent and regular employment.
Gothenburg, commenting on a similar provision of the National Labor
Relations Act and citing many authoritative cases, maintains that the participation
2
of an employee in a strike does not remove him from the status of "employee."
Cessation of work due to strike or lockout, or to dismissal or suspensions
constituting unfair labor practices, does not in itself affect the "employee" status,
in the sense that the rights and benefits of the employee are protected as though
there had been no interruption of service, effective upon actual return to work.
Thus, a striker may not be deprived of a bonus merely because he had taken part
in a strike. Generally, upon reinstatement of one whose dismissal constituted an
unfair labor practice, he is entitled to backwages, seniority and other rights, in
3
order to make whole his loss as a result of the employer's unlawful act.

3. LABOR ORGANIZATION AS EMPLOYER

Exceptionally, a labor organization may be deemed an "employer" when it is
acting as such in relation to persons rendering services under hire, particularly in
connection with its activities for profit or gain. An organization may be ostensibly
a labor union, but it may attain the status of an ordinary business concern in the

1
Associated Labor Union vs. Borromeo, 26 SCRA 88 [1968].
2
Rothenberg on Labor Relations, p. 338.
3
PAL vs. PALEA, 19 SCRA 483 [1987].

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 DEFINITIONS
ART. 212

pursuit of a particular line of business. Thus, a labor organization which operates

a stevedoring and arrastre business under contracts with various shipping firms,
with an organizational structure, operational systems and facilities similar to those
of independent contractors engaged in the same line of business, is already a
1
business entity, hence, an "employer" of laborers under its hire.
The mere fact that the respondent is a labor union does not mean that
it cannot be considered an employer of the persons who work for it. Much less
should it be exempted from the very labor laws which it espouses as a labor
organization. In the case at bar, the Regional Director correctly found that the
petitioner was an employee of the respondent union as reflected in the latter's
individual payroll sheets and shown by the petitioner's membership with the
Social Security System (SSS) and the respondent union's share of remittances
in the petitioner's favor ... Bautista was selected and hired by the Union. He
was paid wages by the Union. ALU had the power to dismiss him as indeed it
dismissed him. And definitely, the Union tightly controlled the work of Bautista
2
as one of its organizers.
4. LABOR DISPUTE
T h e mere fact that the disputants do not stand in the proximate or
reciprocal relation of employer and employee does not remove the dispute
from the category of labor dispute. T h e test of whether a labor controversy
comes within the definition of a labor dispute depends on whether it involves
or concerns terms, conditions of employment or representation. So a strike to
compel dismissal of an antagonistic supervisor; or a controversy over seniority
rights; or a dispute over an asserted duty to work on legal holidays, fall within
the category of labor disputes. Any bona fide controversy concerning wage, hours
or conditions of work or representation constitutes a labor dispute within the
meaning of the Act. To qualify for that status, the controversy must involve or
concern the terms and conditions of employment or pertain to the issue of
3
representation.
Even the question of employer-employee relationship can be considered
a "labor dispute."
San Miguel Corporation Employees Union-PTGWO, et al. vs. Hon. Jesus G. Bersamira,
as Presiding Judge of Branch 166 RTC, Pasig and San Miguel Corporation, G.R.
No. 87700, June 13, 1990 —
Facts: San Miguel Corporation (SMC) entered into contracts for merchandising
services with Lipercon and D'Rite which are independent contractors duly licensed
by the DOLE. It was agreed that the workers employed by the contractors would not
be deemed employees or agents of SMC.

'Allied Free Workers Union vs. Cia. Maritima, 19 SCRA 258, 271.
2
Bautista vs. Inciong, G.R. No. 52824, March 16, 1988.
3Rothenberg on Labor Relations, p. 344.
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ART. 212

Petitioner San Miguel Corporation Employees Union-PTGWO is the union

of the monthly paid rank-and-file employees. Their CBA provides that "temporary,
probationary or contractual employees and workers are excluded from the bargaining
unit and, therefore, outside the scope of this Agreement." Despite this provision, the
Union advised SMC that some Lipercon and D'Rite workers had joined the union
and should be treated as SMC employees. Not getting a favorable response from
SMC, the Union filed a notice of strike for unfair labor practice.
SMC filed a Complaint for Injunction and Damages before the Regional Trial
Court of Pasig to enjoin the Union from representing the employees of LIPERCON
and/or D'RITE for the purpose of collective bargaining. The Court issued an Order
enjoining the Union from committing the acts complained of.
The Union argued that the controversy involved a labor dispute pending with
the NCMB-DOLE, and was thus beyond the regular court's jurisdiction. On the
other hand, SMC denied the existence of any employer-employee relationship and,
consequently, of any labor dispute between the company and the Union.
Ruling: A labor dispute exists. While it is San Miguel's submission that no
employer-employee relationship exists between itself, on the one hand, and the
contractual workers of Lipercon and D'Rite, on the other, a labor dispute can
nevertheless exist "regardless of whether the disputants stand in the proximate
relationship of employer and employee" (Article 212[1], Labor Code), provided
the controversy concerns, among others, the terms and conditions of employment
or a "change" or "arrangement" thereof. Put differently, and as defined by law,
the existence of a labor dispute is not negatived by the fact that the plaintiffs and
defendants do not stand in the proximate relation of employer and employee.
That a labor dispute, as defined by law, does exist herein is evident. At bottom,
what the Union seeks is to regularize the status of the employees contracted by
Lipercon and D'Rite and, in effect, that they be absorbed into the working unit of
San Miguel. This matter definitely dwells on the working relationship between said
employees vis-a-vis San Miguel. Terms, tenure and conditions of the employment
and the arrangement of those terms are thus involved, bringing the matter within
the purview of a labor dispute.
As the case is indisputably linked with a labor dispute, jurisdiction belongs to
the labor tribunals.

5. LABOR DISPUTES AND REMEDIES: A SUMMARY

5.1 Definition
"Labor Dispute" includes any controversy or matter concerning terms or
conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing or arranging the terms and conditions
of employment, regardless of whether the disputants stand in the proximate
1
relation of employer and employee.

1Article 212[1].

22
 DEFINITIONS
ART. 212

5.2 Tests or Criteria of "Labor Dispute"

A. Nature: Dispute arises from employer-employee relationship,
although disputants need not be proximately "employee" or "employer" of the
other.
B. Subject matter: Dispute concerns (1) terms or conditions of employ-
ment; or (2) association or representation of persons in negotiating, fixing,
maintaining, or changing terms or conditions of employment.
5.3 Kinds of Labor Disputes
A. Labor Standards Disputes: (as defined in D O L E Guidelines, 16
September 1987).
(1) Compensation — Examples: Underpayment of minimum wage;
stringent output quota; illegal pay deductions
(2) Benefits — Examples: nonpayment of holiday pay, overtime pay, or
other benefits
(3) Working conditions — Example: unrectified work hazards
B. Labor Relations Disputes:
(1) Organizational Right Dispute/ULP
Examples: coercion, restraint or interference in unionization efforts;
reprisal or discrimination due to union activities; company unionism;
ULP strike or lockout; union members' complaint against union
officers
(2) Representation Disputes
E x a m p l e s : U n c e r t a i n t y as to which is the majority union;
determination of appropriate collective bargaining unit; contest for
recognition by different sets of officers of same union;
(3) Bargaining Disputes
Examples: Refusal to bargain ( U L P ) ; bargaining in bad faith;
bargaining deadlock; economic strike or lockout
(4) Contract Administration or Personnel Policy Disputes
Examples: Noncompliance with CBA provision (ULP if gross
noncompliance with economic provisions); disregard of grievance
machinery; nonobservance or unwarranted use of union security
clause; illegal or unreasonable personnel management policies;
violation of no-strike/no-lockout agreement.
(5) Employment Tenure Disputes bar favorite
Examples: Nonregularization of employees; nonabsorption of
labor-only contracting staff; illegal termination; non-issuance of
employment contract.

23
 LABOR RELATIONS
ART. 212

5.4 Remedies in Labor Disputes

A. Grievance Procedure— in-house adjustment of complaint, problem,
or dispute following the steps prescribed in CBA or company policy.
B. Conciliation (literally means "to draw together") — a process where a
disinterested third party meets with management and labor, at their request or
otherwise, during a labor dispute or in collective bargaining conferences, and,
by cooling tempers, aids in reaching an agreement.
C. Mediation (literally means "to be in the middle") — a third party studies
each side of the dispute then makes proposal for the disputants to consider.
But a mediator, like a conciliator, cannot render an award or render a decision;
they do not adjudicate. Conciliation and mediation, usually combined, are done
primarily by "Conciliators-Mediators" of the National Conciliation and Mediation
Board.
D. Enforcement or compliance order — an act of the Secretary of Labor
(through Regional Director or other representatives) in the exercise of his
visitorial or administrative authority to enforce labor laws, policies, plans, or
1
programs, or rules and regulations.
E. Certification of bargaining representatives — determination of which
contending unions shall represent employees in collective bargaining. This
is handled by "Med-Arbiters" of DOLE Regional Offices after certification or
consent elections.
F. Arbitration — the submission of a dispute to an impartial person for
determination on the basis of evidence and arguments of the parties. Arbitration,
unlike conciliation or mediation, is adjudication and the arbitrator's decision or
award is enforcible upon the disputants. A dispute pending in arbitration cannot
be a ground for strike or lockout; to do so will be a sabotage of the arbitration
process.
"Voluntary" — if submission of the dispute is by agreement of the
parties and the arbitrators or panel of arbitrators is chosen by them. Voluntary
Arbitration is done, of course, by "voluntary arbitrators."
"Compulsory" — if submission of the dispute is by directive of law. Unlike
a conciliator or a mediator, an arbitrator is a judge; he makes decisions and
awards that the parties must accept. Compulsory Arbitration is done primarily
by "Labor Arbiters" of the NLRC.
In voluntary arbitration (VA), the award is final and unappealable, except
through certiorari.
In compulsory arbitration (CA), the decision is appealable to NLRC, then
to the Court of Appeals, thru special civil action of certiorari.

1Article 128.

24
 DEFINITIONS
ART. 212

G. Assumption of jurisdiction — an authority vested by law to the

Secretary of Labor or the President to decide a dispute causing or likely to
1
cause a strike or lockout in an industry indispensable to national interest.
H. Certification to NLRC — an action of the Secretary of Labor
empowering NLRC to compulsorily arbitrate a dispute causing or likely to cause
a strike or lockout in an industry indispensable to the national interest.
Either "assumption" or "certification" automatically enjoins an ongoing
or impending strike/lockout. A return-to-work order is issued to strikers; at
the same time the employer is ordered to immediately resume operations and
readmit all workers under the same terms and conditions prevailing before the
strike or lockout.
I. Injunction — is an extraordinary remedy which is not favored in labor
law. A writ of injunction is issued to stop or restrain an actual or threatened
commission of prohibited or unlawful acts or to require the performance of
an act, which if not restrained or performed forthwith, may cause grave or
irreparable damage to any party or render ineffectual any decision in favor of
such party. In short, an injunction makes a negative or a positive command.
As a rule, an injunction or an order to prevent or stop an act is avoided
in resolving a labor dispute. T h e state policy, rather, is to encourage the parties
to use the nonjudicial processes of negotiation and compromise, mediation-
concilation and arbitration.
The requirements or conditions to secure injunction are provided for in
Article 2 1 8 ( e ) of the Labor Code.
J. Judicial Action — complaint filed with regular court in cases falling
under its jurisdiction.
Examples: Offense against persons or property; criminal case of ULP;
illegal recruitment
K. Appeal—the process by which an order, decision, or award is elevated
to a higher authority, on specified grounds, so that the order, decision or award
may be modified or set aside and a new one issued. In instances where appeal is
allowed, the administrative remedies should be availed of, as a rule, before the
aggrieved party may go to court. This is the legal rule known as exhaustion of
administrative remedies.
Examples of appeal: an enforcement order of a Regional Director in
labor standard cases is appealable to the Secretary of Labor; a denial of union
registration in the Regional Office is appealable to the Bureau of Labor
2
Relations; a decision of a Labor Arbiter is appealable to the appropriate NLRC
division (but not to the Secretary of Labor)

1
Article 263.
'Article 236.

25
 LABOR RELATIONS
ART. 212

L. Review by court — No law allows appeal from a decision of the

Secretary of Labor, or of the NLRC, or of a Voluntary Arbitrator. In these cases
the petition for certiorari, prohibition, or mandamus (Rule 65, Rules of Court)
may be lodged with the Supreme Court or the Court of Appeals. The grounds
for petition for certiorari and/or prohibition are abuse of discretion, or lack or
excess of jurisdiction.
M. Compromise agreement — in any stage of any of these settlement
processes, the labor dispute may be resolved by the parties through a compromise
agreement, provided that the agreement is freely entered into and is not contrary
to law, moral, or public policy. A compromise agreement is also subject to
approval of the authority before whom the case is pending. Even a labor standards
1
case can be settled through a compromise.

'Article 227.

26
 Title II
NATIONAL LABOR RELATIONS COMMISSION

Chapter I
CREATION AND COMPOSITION

Overview/Key Questions: Box 2

1. What is the NLRC?
2. Is the NLRC independent of the Department of Labor
and Employment?
3. How is the NLRC's adjudicatory power distributed?

1
ART. 2 1 3 . NATIONAL LABOR RELATIONS COMMISSION
T h e r e shall be a National L a b o r Relations Commission which shall be
attached to the Department of L a b o r and Employment solely for program
and policy coordination only, composed of a Chairman and twenty-three
(23) members.
Eight ( 8 ) members each shall be chosen only from among the nominees
of the workers and employers organizations, respectively. The Chairman and
the seven ( 7 ) remaining members shall c o m e from the public sector, with the
latter to be chosen preferably from among the incumbent labor arbiters.
Upon assumption into office, the members nominated by the workers
and employers organizations shall divest themselves of any affiliation with
or interest in the federation or association to which they belong.
2
T h e Commission may sit en banc or in eight ( 8 ) divisions, each
composed of three ( 3 ) members. T h e Commission shall sit en banc only
for purposes of promulgating rules and regulations governing the hearing
and disposition of cases before any of its divisions and regional branches
and formulating policies affecting its administration and operations. The

'Articles 213 through 216 are here worded as amended by R.A. No. 9347 which
lapsed into law on July 27, 2006.
'Section 5 of R.A. No. 9347 reads:
"Sec. 5. Implementation — The creation of the additional divisions shall be
implemented for a period of not more than three (3) years."

27
 LABOR RELATIONS
ART. 213

Commission shall exercise its adjudicatory and all other powers, functions,
and duties through its divisions. Of the eight ( 8 ) divisions, the first, second,
third, fourth, fifth and sixth divisions shall handle cases coming from the
National Capital Region and other parts of Luzon: and the seventh and eighth
divisions, cases from the Visayas and Mindanao, respectively; Provided, That
the Commission sitting en banc may, on temporary or emergency basis, allow
cases within the jurisdiction of any division to be heard and decided by any
other division whose docket allows the additional workload and such transfer
will not expose litigants to unnecessary additional expense. T h e divisions of
the Commission shall have exclusive appellate jurisdiction over cases within
their respective territorial jurisdiction. (As amended by R A . No. 7 7 0 0 [May
1, 1994] and R A . No. 9 3 4 7 , effective August 2 6 , 2 0 0 6 ) .
The concurrence of two ( 2 ) Commissioners of a division shall be
necessary for the pronouncement of a judgment or resolution. Whenever the
required membership in a division is not complete and the concurrence of two
(2) Commissioners to arrive at a judgment or resolution cannot be obtained,
the Chairman shall designate such number of additional Commissioners
from the other divisions as may be necessary.
The conclusions of a division on any case submitted to it for decision
shall be reached in consultation before the case is assigned to a member for
the writing of the opinion. It shall be mandatory for the division to meet for
purposes of the consultation ordained herein. A certification to this effect
signed by the Presiding Commissioner of the division shall be issued, and a
copy thereof attached to the record of the case and served upon the parties.
The Chairman shall be the Presiding Commissioner of the first division,
and the seven (7) other members from the public sector shall be the Presiding
Commissioners of the second, third, fourth, fifth, sixth, seventh and eighth
divisions, respectively. In case of the effective absence or incapacity of the
Chairman, the Presiding Commissioner of the second division shall be the
Acting Chairman.
The Chairman, aided by the Executive Clerk of the Commission, shall
have exclusive administrative supervision over the Commission and its
regional branches and all its personnel, including the L a b o r Arbiters.
T h e Commission, when sitting en banc, shall be assisted by the same
Executive Clerk, and, when acting thru its Divisions, by said Executive Clerk
for its first division and seven ( 7 ) other Deputy Executive Clerks for the
second, third, fourth, fifth, sixth, seventh, and eighth Divisions, respectively,
in the performance of such similar or equivalent functions and duties as are
discharged by the Clerk of Court and Deputy Clerks of Court of the Court
of Appeals.

28
 CREATION AND COMPOSITION ART. 214

T h e Commission and its eight ( 8 ) divisions shall be assisted by the

Commission Attorneys in its Appellate and adjudicatory functions whose
terms shall be coterminous with the Commissioners with whom they are
assigned. T h e Commission Attorneys shall be members of the Philippine
B a r with at least one ( 1 ) year experience or exposure in the field of labor-
management relations. They shall receive annual salaries and shall be entitled
to the same allowances and benefits as those falling under Salary Grade
twenty-six (SG 2 6 ) . T h e r e shall be as many Commission Attorneys as may
be necessary for the effective and efficient operations of the Commission
but in no case m o r e than three ( 3 ) assigned to the Office of the Chairman
and each Commissioner.
No L a b o r Arbiter shall be assigned to p e r f o r m the functions of the
Commission Attorney n o r detailed to the office of any commissioner.

ART. 214. HEADQUARTERS, BRANCHES AND PROVINCIAL EXTENSION

UNITS.

T h e Commission and its first, second, third, fourth, fifth and sixth
divisions shall have their main offices in Metropolitan Manila, and the
seventh and eighth divisions in the cities of Cebu and Cagayan de O r o ,
respectively. T h e Commission shall establish as many regional branches as
there are regional offices of the Department of L a b o r and Employment,
sub-regional branches or provincial extension units. T h e r e shall be as many
labor arbiters as may be necessary for the effective and efficient operation
of the Commission. [As amended by R A . N o . 9 3 4 7 , effective August 26,
2006.]
COMMENTS AND CASES
1. NLRC: NATURE AND ORGANIZATION
1.1 Creation and Autonomy
Before the advent of the Labor Code the labor court was the Court of
Industrial Relations. When martial law was declared in September 1972, PD No.
21 (October 14,1972) abolished the CIR and replaced it with an ad hoc National
Labor Relations Commission. This NLRC was short-lived as it gave way to the
NLRC which the Labor Code created in 1974.
The Code originally envisaged the National Labor Relations Commission
as an integral part of the Department of Labor and Employment. It said that
"There shall be a National Labor Relations Commission in the Department of
Labor and Employment, x x x" But Republic Act No. 6715 (March 21, 1989)
introduced a number of amendments, one of which declared that, "There
shall be a National Labor Relations Commission which shall be attached to the
Department of Labor and Employment for program coordination only..."

29
 LABOR RELATIONS
ARTS. 213-214

1.2 Administrative Supervision Delegated to the DOLE Secretary

The limiting phrase "for program coordination only" in the first paragraph
of Article 213 did not hinder the issuance of Executive Order No. 204, dated May
5, 2005, by President Gloria Macapagal Arroyo. Premised on the presidential
power to "have control of all the executive departments, bureaus and offices"
under the constitution, the Executive Order delegated to the Secretary of Labor
"administrative supervision over the NLRC, its regional branches and all its
personnel." The Order cited two objectives: (1) to further improve the rate of
disposition of cases and (2) to enhance existing measures for the prevention of
graft and corruption in the NLRC.
In the exercise of the delegated authority the Secretary was tasked to:
"enhance existing measures within the agency, or initiate new ones,
to prevent graft and corruption, x x x" and including such measures as
management audit, performance evaluations and inspections to determine
compliance with policies, standards and guidelines;
"to investigate, on its own or upon complaint, matters involving
disciplinary action against any presidential appointees in the NLRC in
accordance with existing law and regulations."
The delegation of authority, the Executive Order stated, did not extend
to the power to review, reverse, revise, or modify decisions of the NLRC in the
exercise of its judicial functions.
After E.O. No. 204 was issued, a new Acting NLRC chairman was appointed.
But he did not last long in office because a new chairman was appointed as a new
law took effect. Republic Act No. 9347, without presidential signature, lapsed
into law on July 27, 2006 because of the constitutional provision that a bill "shall
become a law" if not vetoed by the President within 30 days from receipt. It was
published, according to NLRC, on August 11, 2006.
R.A. No. 9347 is incorporated in Articles 213 through 216 as here worded. It
reiterates that the NLRC is attached to DOLE "solely" (repeated in the word "only")
for program and policy coordination. It likewise elevates to the Court-of-Appeals
level the qualifications, pay, perquisites, and rank of the NLRC commissioners
whose number is increased from 15 to 24 in eight divisions instead of five.

1.3 Essential Character

Republic Act No. 6715 in 1989 did not abolish the National Labor Relations
Commission, or change its essential character as a supervisory and adjudicatory
body. Under said Act, as under the former law, the National Labor Relations
Commission continues to act collegially, whether it performs administrative or
rule-making functions or exercises appellate jurisdiction to review decisions and
1
final orders of the Labor Arbiters.

'Mayor vs. Macaraig, G.R. No. 87211, March 5, 1991.

30
 CREATION AND COMPOSITION ARTS. 213-214

1.4 Tripartite Composition

Another amendment by R.A. No. 6 7 1 5 is the restoration of tripartite
representation in the Commission. T h e same Article 213, as amended, provides
that the Chairman and fourteen, now twenty-three, members composing
the National Labor Relations Commission shall be chosen from the workers,
employers and the public sectors. However, once they assume office "the members
nominated by the workers and employers organization shall divest themselves
of any affiliation with or interest in the federation or association to which they
belong." Strengthening the tripartite representation, R.A. No. 9347 requires that
an appointee to a vacancy should be a nominee of the sector that nominated
the predecessor.

1.5 Allocation of Powers Between NLRC En Banc and Its Divisions

Still another amendment is in the allocation of powers and functions
between the Commission en banc, on the one hand, and its Divisions, on the
other. T h e law, as amended by R.A. No. 6715 and R.A. No. 9347, provides
that the commission "shall sit en banc only for purposes of promulgating rules
and regulations governing the hearing and disposition of cases before any
of its divisions and regional branches and formulating policies affecting its
administration and operations." Additionally, R.A. No. 7700 (May 1, 1994)
requires an en banc decision so that a case within the jurisdiction of one division
may be heard and decided by another division whose docket can accommodate
the additional workload. Lastly, the appointment of a Labor Arbiter by the
President needs a recommendation of the Commission en banc.
The NLRC "shall exercise its adjudicatory and all other powers, functions
and duties through its divisions." T h e "division" is a legal entity, not the persons
who sit in it. Hence, an individual commissioner has no adjudicatory power,
although, of course, he can concur or dissent in deciding a case. T h e law lodges
the adjudicatory power on each of the eight divisions, not on the individual
commissioners nor on the whole commission.
In view of the enactment of Republic Act 6715, the rules requiring the
Commission en banc to decide or resolve a certified dispute have accordingly
1
been repealed.
A resolution on a motion for reconsideration is valid even if the
commissioners that passed the resolution are not the same commissioners
who made the decision sought to be reconsidered. What matters is that the
2
commissioners voting on the motion are duly assigned to the division.
There is nothing irregular in temporary designation of a commissioner
to a division. T h e law empowers the NLRC Chairman to make temporary

'Union of Filipro Employees vs. NLRC, et al, G.R No. 91025, December 19,1990.
2Mina, et al vs. NLRC, G.R. Nos. 97251-52, July 14, 1995.

31
 LABOR RELATIONS
ART. 215

assignments whenever the required concurrence is not met. The law does not
say that a commissioner from the first division cannot be temporarily assigned to
the second or third division to fill the gap or vice versa. The territorial divisions
do not confer exclusive jurisdiction to each division and are merely designed
1
for administrative efficiency.
1.6 The NLRC Rules of Procedure
In the exercise of its rule-making power, the NLRC revised its rules of
procedure issued in 2002. The new set of rules, officially tided "The 2005 Revised
Rules of Procedure of the National Labor Relations Commission" was published
in newspapers on December 23, 2005 and took effect on January 7, 2006. T h e
rules govern the proceedings before the labor arbiters, the NLRC divisions, and
the NLRC en banc, as well as the internal functions of the latter two. T h e Rules
of Court supplements the NLRC rules.

ART. 2 1 5 . APPOINTMENT AND QUALIFICATIONS

T h e Chairman and other Commissioners shall be members of the
Philippine B a r and must have been engaged in the practice of law in the
Philippines for at least fifteen ( 1 5 ) years with at least five (5) years experience
or exposure in the field of labor-management relations, and shall preferably
be residents of the region where they shall hold office. T h e L a b o r Arbiters
shall likewise be members of the Philippine B a r and must have been engaged
in the practice of law in the Philippines for at least ten ( 1 0 ) years, with at
least five (5) years experience or exposure in the field of labor-management
relations:
T h e Chairman, the o t h e r Commissioners and the L a b o r Arbiters
shall hold office during good behavior until they reach the age of sixty-five
( 6 5 ) years, unless sooner removed for cause as provided by law or b e c o m e
incapacitated to discharge the duties of their office: Provided, however, That
the President of the Republic of the Philippines may extend the services of
the Commissioners and L a b o r Arbiters up to the maximum age of seventy
( 7 0 ) years upon the recommendation of the Commission en banc.
T h e Chairman, the Division Presiding Commissioners and o t h e r
Commissioners shall all be appointed by the President. Appointment to
any vacancy in a specific division shall c o m e only from the nominees of the
sector which nominated the predecessor. T h e L a b o r Arbiters shall also be
appointed by the President upon recommendation of the Commission en
banc to a specific arbitration branch preferably in the region where they are
residents, and shall be subject to Civil Service Law, rules and regulations:

'Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos, 326

SCRA 441 [2000].

32
 CREATION AND COMPOSITION ART. 216

Provided, That the L a b o r Arbiters who are presently holding office in the
region where they are residents shall be deemed appointed thereat.
The Chairman of the Commission shall appoint the staff and employees
of the Commission and its regional branches as the needs of the service may
require, subject to the Civil Service Law, rules and regulations, and upgrade
their current salaries, benefits and other emoluments in accordance with law.
(As amended by R A . No. 9 3 4 7 , effective August 2 6 , 2 0 0 6 . )

COMMENTS
REQUIRING CONFIRMATION BY COMMISSION ON APPOINTMENTS,
UNCONSTITUTIONAL
T h e third paragraph of Article 215 states that the presidential appointment
of the NLRC commissioners is "subject to confirmation by the Commission
on Appointments." T h e requirement, ruled the Supreme Court, has no
1
constitutional basis. That portion of Article 215 is therefore null and void.

ART. 2 1 6 . SALARIES, BENEFITS, AND EMOLUMENTS.

T h e Chairman and members of the Commission shall have the same
rank, receive an annual salary equivalent to, and be entitled to the same
allowances, retirement and benefits as those of the Presiding Justice and
Associate Justices of the Court of Appeals, respectively. L a b o r Arbiters shall
have the same rank, receive an annual salary equivalent to and be entitled to
the same allowances, retirement and other benefits and privileges as those
of the Judges of the Regional Trial Courts. In no case, however, shall the
provision of this Article result in the diminution of the existing salaries,
allowances and benefits of the aforementioned officials. (As amended by
R A . No. 9 3 4 7 , effective August 2 6 , 2 0 0 6 . )

'See Calderon vs. Carale, et al., G.R. No. 91636, April 23, 1992.
33
 1
Chapter II
POWERS AND DUTIES
[Part 1. Jurisdiction]

Overview/Key Questions: Box 3

1. What is a RAB?
2. What cases fall within the jurisdiction of a Labor
Arbiter?
3. What are "corporate disputes"? Who has jurisdiction
over them?
4. Where is the venue of compulsory arbitration cases?

2
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION
(a) Except as otherwise provided under this Code the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other terms
and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5. Cases arising from any violation of Article 2 6 4 of this Code,
including questions involving the legality of strikes and lockouts;
6. E x c e p t claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from employer-
employee relations, including those of persons in domestic or household

'This rather long chapter of the Code is divided here into three parts to assist
study and discussion:
Part 1. Jurisdiction
Part 2. Powers
Part 3. Procedure
2
As amended by Sec. 9, R.A. 6715.

34
 POWERS AND DUTIES
(Part 1. Jurisdiction)
ART. 217

service, involving an amount exceeding five thousand pesos ( P 5 , 0 0 0 . 0 0 )

regardless of whether accompanied with a claim for reinstatement.
b) T h e Commission shall have exclusive appellate jurisdiction over
all cases decided by L a b o r Arbiters.
( c ) Cases arising from the interpretation of collective bargaining
agreements and those arising from the interpretation or enforcement of
company personnel policies shall be disposed of by the L a b o r Arbiter by
referring the same to the grievance machinery and voluntary arbitration as
may be provided in said agreements.
C O M M E N T S AND CASES
1. ADDITIONAL CASES
To the six (6) kinds of cases mentioned in Article 217, the following should
be added:
1. Money claims arising out of employer-employee relationship or by
virtue of any law or contract, involving Filipino workers for overseas deployment,
including claims for actual, moral, exemplary and other forms of damages, as
well as employment termination of OFWs;
2. Wage distortion disputes in unorganized establishments not
voluntarily settled by the parties pursuant to Republic Act No. 6727, as reflected
in Article 124;
3. E n f o r c e m e n t of c o m p r o m i s e agreements when there is non-
compliance by any of the parties pursuant to Article 227 of the Labor Code, as
amended; and
4. Other cases as may be provided by law.
2. COMPULSORY ARBITRATION BY LABOR ARBITERS
In its broad sense, arbitration is the reference of a dispute to an impartial
third person, chosen by the parties or appointed by statutory authority to hear
and decide the case in controversy. When the consent of one of the parties is
enforced by statutory provisions, the proceeding is referred to as compulsory
arbitration. In labor cases, compulsory arbitration is the process of settlement
of labor disputes by a government agency which has the authority to investigate
1
and to make an award which is binding on all the parties.
2.1 NLRC Appellate Proceedings Not Part of Arbitration
A labor arbiter is the NLRC's representative in a RAB (regional arbitration
branch). The labor arbiters, numbering about 200, adjudicate cases in behalf of
the NLRC but their decisions are appealable to the NLRC itself sitting as any of
its eight divisions.

'Philippine Airlines, Inc. vs. National Labor Relations Commission, G.R. No.
55159, December 22, 1989.
35
 LABOR RELATIONS
ART. 217

Under the Labor Code, it is the Labor Arbiter who is clothed with the
authority to conduct compulsory arbitration on cases involving termination
1
disputes and other cases under Article 217.
Proceedings on appeal before the National Labor Relations Commission
2
cannot be considered as part of the arbitration proceedings.
When the Labor Arbiter renders his decision, compulsory arbitration
is deemed terminated because by then the hearing and determination of the
controversy has ended. Any appeal raised by an aggrieved party from the Labor
Arbiter's decision is already beyond the scope of arbitration since in the appeal
stage, the National Labor Relations Commission en banc merely reviews the
Labor Arbiter's decision for errors of fact or law and no longer duplicates the
proceedings before the Labor Arbiter. Thus, the clause "pending final resolution
of the case by arbitration" should be understood to be limited only to the
proceedings before the Labor Arbiter, such that when the latter rendered his
3
decision, the case was finally resolved by arbitration.

2.2 Nature of Proceedings

T h e NLRC Rules describe the proceedings before a Labor Arbiter as
non-litigious. Subject to the requirements of due process, the technicalities of
law and procedure in the regular courts do not apply in NLRC/labor arbiter
4
proceedings. T h e arbiter may avail himself of all reasonable means, including
ocular inspection, to ascertain the facts speedily; he shall personally conduct the
5
conferences or hearings and take full control of the proceedings.

2.3. Article 217 Yields to Articles 261 and 262

Article 217 enumerates the cases falling under "original and exclusive"
jurisdiction of labor arbiters. This gives the impression that none but a labor
arbiter can hear and decide the six categories of cases listed. But this is not really
so. Any or all of these cases can, by agreement of the parties, be presented to and
decided with finality by a voluntary arbitrator or panel of voluntary arbitrators. A
voluntary arbitrator, under Article 261, has "original and exclusive "jurisdiction
over disputes concerning CBA implementation or personnel policy enforcement.
In addition, under Article 262, the parties may submit to a voluntary
arbitrator (or panel) "all other disputes including unfair labor practices and
bargaining deadlocks."
In other words, a case under Article 217 may be lodged instead with a
voluntary arbitrator despite the seemingly "exclusive" jurisdiction of the labor

Philippine Airlines, Inc. vs. National Labor Relations Commission, G.R. No.
55159, December 22, 1989.
2
Ibid.
*Ibid.
4
Article 221.
5
Rule V, Sec. 2, NLRC Revised Rules of Procedure, 2005.
36
 POWERS AND DUTIES
(Part 1. Jurisdiction)
ART. 217

arbiter. This is because the law prefers, or gives primacy to, voluntary arbitration
(see Article 211) instead of compulsory arbitration. And this, in turn, is the
reason why the law (Article 261, last paragraph, and Article 2 1 7 [ c ] ) forbids a
compulsory arbitrator from entertaining a dispute properly belonging to the
jurisdiction of a voluntary arbitrator.
3. LABOR ARBITER'S JURISDICTION, IN GENERAL
T h e cases a labor arbiter can hear and decide are employment-related.
Employment is the one element that runs through all the cases and disputes
enumerated in Article 217.
Hawaiian-Philippine Company vs. Gulmatico, et al., G.R. No. 106231, November
16, 1994 —
Facts: The union of sugar farm workers filed with the NLRC a complaint against
Hawaiian-Philippine Company for claims under Republic Act 809 (The Sugar Act of
1952).
Petitioner company contended that the complaint could not be categorized
under any of the cases within the jurisdiction of the Labor Arbiter under Article 217,
considering that no employer-employee relationship existed between the milling
company and the farmworkers represented by the union. It asserted that the centrals
have never had any privity with the plantation laborers, since they had their own
laborers to take care of. x x x
Ruling: We find for petitioner company.
The Solicitor General, in its adverse Comment, correctly agreed with
petitioner's contention that while the jurisdiction over controversies involving
agricultural workers has been transferred from the Court of Agrarian Relations to
the Labor Arbiters, the transferred jurisdiction, however, is not without limitations.
The dispute or controversy must still fall under one of the cases enumerated under
Article 217 of the Labor Code, which cases, as ruled in San Miguel Corp. vs. NLRC,
G.R No. 80774, May 31, 1988, arise out of or are in connection with an employer-
employee relationship.
In the case at bar, it is clear that there is no employer-employee relationship
between petitioner milling company and respondent union and/or its member-
workers. Absent the jurisdictional requisite of an employer-employee relationship
between the company and the farm workers, the inevitable conclusion is that die
NLRC is without jurisdiction to hear and decide the case.

3.1 Supervisory Control, Crucial

Control over the performance of the work is the crucial indicator of
employment relationship, without which the labor arbiter has no jurisdiction
over the dispute.
One who was hired to render "professional services" as Refinery Senior
Process Design Engineer to work with the Process Design Consultant, was not

37
 LABOR RELATIONS
ART. 217

hired as an employee. When the hiring was indefinitely suspended for financial
reasons, there was no "breach of contract of employment," and the NLRC had
no jurisdiction over the case. The letter-contract stating the complainant's "Scope
of Professional Services" did not show a power of control: it specified what would
1
need to be achieved but not how to go about it.
It is well settled in law and jurisprudence that where no employee-employer
relationship exists between the parties and no issue is involved which may be
resolved by reference to the Labor Code, other labor statutes, or any collective
2
bargaining agreement, it is the Regional Trial Court that has jurisdiction.
T h e question about existence of employer-employee relationship is
explained under Articles 82 and 106 to 109.
4. VENUE
The NLRC Rules of Procedure provides:
Section 1. Venue. — (a) All cases which Labor Arbiters have authority
to hear and decide may be filed in the Regional Arbitration Branch having
jurisdiction over the workplace of the complainant or petitioner.
For purposes of venue, workplace shall be understood as the place
or locality where the employee is regularly assigned at the time the cause
of action arose. It shall include the place where the employee is supposed
to report back after a temporary detail, assignment or travel. In the case of
field employees, as well as ambulant or itinerant workers, their workplace is
where they are regularly assigned or where they are supposed to regularly
receive their salaries and wages or work instructions from, and report the
results of their assignment to their employers.
(b) Where two or more Regional Arbitration B r a n c h e s have
jurisdiction over the workplace of the complainant or petitioner the Branch
that first acquired jurisdiction over the case shall exclude the others.
(c) When venue is not objected to before the filing of position
papers, such issue shall be deemed waived.
(d) T h e venue of an action may be changed or transferred to a
different Regional Arbitration Branch other than where the complaint
was filed by written agreement of the parties or when the Commission or
Labor Arbiter before whom the case is pending so orders, upon motion
by the proper party in meritorious cases.
(e) Cases involving overseas Filipino workers may be filed before the
Regional Arbitration Branch having jurisdiction over the place where the

'Almires vs. Infinite Loop Technology Corp., et al, G.R. No. 162401, January
21,2006.
2
Lapanday Agricultural Development Corp. vs. CA, 324 SCRA 39, January 31,
2000.

38
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

complainant resides or where the principal office of any of the respondents

is situated, at the option of the complainant. (See also: Philippine National
Bank vs. Cabansag, G.R No. 157010, June 21, 2005.)
4.1 Worker's Option
Suppose the workplace is in Cebu and the employer's place of business
is also in Cebu. But the laborers, who have complaints against their employer,
reside in Manila. Should they file their complaint in Cebu? or in Manila?
Dayag, et al. vs. Canizares, NLRC, and Young Construction, G.R. No. 124193,
March 6,1998 —
Instead of attending the initial hearings set by the labor arbiter, Young
[the employer] filed on July 6, 1993 a motion to transfer the case to the Regional
Arbitration Branch, Region VII of the NLRC. He claimed that the workplace where
petitioners were regularly assigned was in Cebu City and that, in consonance with
Section 1 (a) of Rule IV of the New Rules of Procedure of the NLRC, the case should
have been filed in Cebu city [and not in the National Capital Region].
In the case of Sulpicio Lines, Inc. vs. NLRC (254 SCRA 506 [1996]), the Supreme
Court held that the question of venue essentially pertains to the trial and relates
more to the convenience of the parties rather than upon the substance and merits of
the case. It underscored the fact that the permissive rules underlying provisions on
venue are intended to assure convenience for the plaintiff and his witnesses and to
promote the ends of justice. With more reason does the principle find applicability
in cases involving labor and management because of the doctrine well-entrenched
in our jurisdiction that the State shall afford full protection to labor.
The rationale for the rule is obvious. The worker, being the economically-
disadvantaged party — whether as complainant/petitioner or as respondent,
as the case may be — the nearest governmental machinery to settled the dispute
must be placed at his immediate disposal. The other party is not to be given
the choice of another competent agency sitting in another place as this will
unduly burden the worker. Even in cases where venue has been stipulated by
the parties, the Court has not hesitated to set aside the same if it would lead to
a situation so grossly inconvenient to one party as to virtually negate his claim.
(See Suplicio Lines, Inc. vs. NRC, 254 SCRA 506 [1996].)

Where is the workplace if the complainant works in a vessel plying the

Manila and Cotabato route?
Suplicio Lines, Inc. vs. NLRC, further held that:
"Section 1, Rule IV of the 1990 NLRC Rules [as well as the 2005
Rules] additionally provides that, Tor purposes of venue, workplace shall
be understood as the place or locality where the employee is regularly
assigned when the cause of action arose.' Since the private respondent's
regular place of assignment is the vessel MV Cotabato Princess which
plies the Manila-Estancia-Iloilo-Zamboanga-Cotabato route, we are of the
39
 LABOR RELATIONS
ART. 217

opinion that Labor Arbiter Arthur L. Amansec was correct in concluding

that Manila could be considered part of the complainant's territorial
workplace."
Where the complainant is a driver of Philtranco plying the Legaspi City
- Pasay City route, the National Capital Region Arbitration Branch is a proper
1
venue, Manila being considered as part of the complainant's workplace.

4.2 Waiver
Section 1 (a), Rule IV of the New Rules of Procedure of the NLRC [and
also the 2005 Rules], speaks of the complainant/petitioner's workplace, evidently
showing that the rule is intended for the exclusive benefit of the worker. This
2
being the case, the worker may waive said benefit.
The 2005 NLRC Rules, in Sec. 1 ( c ) , Rule IV states: "When improper venue
is not objected to before the filing of position papers, such issue shall be deemed
waived."
5. LABOR ARBITER'S JURISDICTION: U.L.P. CASES
The first in the enumeration of cases cognizable by a labor arbiter is
unfair labor practice (ULP) cases. Questions about unfair labor practice — how
and under what conditions it is committed, who are liable for it, and what its
consequences are — are discussed under Article 247 and following articles. But
its essence, captured in Article 246, is any act intended or directed to weaken
or defeat the workers' right to self-organize or to engage in lawful concerted
activities. In short, unfair labor practice, when committed by an employer, carries
the effect of anti-unionism. Every such case is within the original jurisdiction
of a labor arbiter, unless the parties agree to submit it to voluntary arbitration,
pursuant to Article 262.
National Union of Bank Employees vs. Judge Alfredo Lazaro, et al, G.R. No. 56431,
January 19, 1988 —
Facts: The CBTC entered into a collective bargaining agreement with the Union
representing the rank-and-file employees. The agreement was to be effective until June
30, 1980, with automatic renewal clause until the parties execute a new agreement.
On May 30, 1980, the Union submitted to the bank management some proposals
for renegotiation of the CBA. But the next day the bank suspended negotiations
with the union because the bank had entered into a merger with the Bank of the
Philippine Islands, which assumed all assets and liabilities of CBTC. The Union filed
with the Court of First Instance a complaint for specific performance, damages and
preliminary injunction against the CBTC and the BPI. The Court dismissed the case
for lack of jurisdiction. Is the dismissal correct?

Philtranco Service Enterprises, Inc. vs. NLRC and Nieva, G.R. No. 124100,
April 1, 1998.
Ibid.

40
 POWERS AND DUTIES
(Part 1. Jurisdiction)
ART. 217

Ruling: The dismissal order is sustained. The case is an unfair labor practice
controversy within the original and exclusive jurisdiction of the labor arbiters and
the exclusive appellate jurisdiction of the National Labor Relations Commission.
The claim against the BPI for allegedly inducing the CBTC to violate the existing
collective bargaining agreement in the process of renegotiation consists mainly of
the civil aspect of the unfair labor practice charge referred to under Article 247 of
the Labor Code.
Under Article 247 of the Code, "the civil aspects of all cases involving unfair
labor practices, which may include claims for damages and other affirmative relief,
shall be under the jurisdiction of the labor arbiters."
The claimed injury as a consequence of tort allegedly committed by BPI
and CBTC under Article 1314 of the Civil Code does not necessarily give the court
jurisdiction to try the damage suit. Jurisdiction is conferred by law and not necessarily
by the nature of the action. Civil controversies are not the exclusive domain of courts.
The fact that the BPI is not a party to the collective bargaining agreement, for
which it cannot be sued for unfair labor practice at the time of the action, cannot
bestow on the trial court the jurisdiction it does not have.
Neither does the fact that the BPI was not an employer at the time the act
was committed abate a recourse to the labor arbiter. It should be noted that the BPI
assumed all the assets and liabilities of the CBTC.

6. CBA VIOLATION AMOUNTING TO ULP

If the only question is the legality of the expulsion of an employee from
the union, undoubtedly, the question is one cognizable by the Bureau of
Labor Relations. But if the question extended to the dismissal of the employee
from employment or steps leading to it, as when the employer decides the
recommended dismissal, its acts would be subject to scrutiny. Particularly,
it will be asked whether it violates or not the existing collective bargaining
agreement. Certainly, violations of the collective bargaining agreement would
be unfair labor practice which falls under the jurisdiction of the Labor Arbiters
1
and the National Labor Relations Commission.
T h e preceding ruling is affected by changes made by R.A. 6715 in 1989.
Only gross violations of a collective bargaining agreement are considered unfair
labor practice, hence, within the jurisdiction of a labor arbiter. If not gross, the
violation is not ULP. This is explained in Article 261.
7. LABOR ARBITER'S JURISDICTION: TERMINATION DISPUTES
Termination disputes or illegal dismissal complaints fall within the
jurisdiction of a labor arbiter, as stated in Article 2 1 7 ( 2 ) . The usual bone of

'Articles 250 and 217, Labor Code. Manila Mandarin Employees Union vs.
National Labor Relations Commission, G.R. No. 76989, September 29, 1987.

41
 LABOR RELATIONS
ART. 217

contention is the legality of dismissal. Its resolution depends on the validity of

the cause and the manner of the employee's dismissal, which matters are covered
in Book VI of the Code.
But a question of overlapping jurisdiction has arisen because of Article
217, last sentence. It requires a labor arbiter to refer to the grievance machinery
and voluntary arbitration all cases arising from interpretation or enforcement of
collective bargaining agreement or company personnel policies. Is the dismissal
of an employee an enforcement of personnel policy and, therefore, should be
brought to a voluntary arbitrator instead of a labor arbiter? No, not necessarily,
thus ruled the Supreme Court in San Miguel Corp. vs. NLRC (G.R. No. 108001,
March 15, 1996).
Quoting a labor law textbook, the Court explained:
"Company personnel policies are guiding principles stated in broad,
long-range terms that express the philosophy or beliefs of an organization's
top authority regarding personnel matters. They deal with matters affecting
efficiency and well-being of employees and include, among others, the
procedure in the administration of wages, benefits, promotions, transfer
and other personnel movements which are usually not spelled out in the
collective agreement. T h e usual source of grievances, however, is the rules
and regulations governing disciplinary actions. Judging therefrom, the
questioned discharges due to alleged redundancy can hardly be considered
company personnel policies and, therefore, need not directly be subject
to the grievance machinery nor to voluntary arbitration."
The Court further said that the dismissal of the U.L.P case would have
been proper for voluntary arbitration had the parties explicitly so agreed. There
was no such express agreement in the San Miguel case:
We subjected the records of this case, particularly the CBA, to
meticulous scrutiny and we find no agreement between SMC and the
respondent union that would state in unequivocal language that petitioners
and the respondent union conform to the submission of termination
disputes and unfair labor practices to voluntary arbitration. Section 1,
Article V of the CBA, cited by the herein petitioners, certainly does not
provide so. Hence, consistent with the general rule under Article 217(a)
of the Labor Code, the Labor Arbiter properly has jurisdiction over the
complaint filed by the respondent union on February 2 5 , 1 9 9 1 , for illegal
dismissal and unfair labor practice.
Still on termination disputes, does a labor arbiter have jurisdiction over
an illegal dismissal complaint filed by a church minister? Is the principle of
separation of church and state applicable? T h e Court answers:
It does not matter that the employer here is a religious sect and
that it was organized not for profit because the Labor Code applies to all
establishments whether for profit or not. (Article 278, Labor Code.)

42
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

T h e p r i n c i p l e o f s e p a r a t i o n o f C h u r c h and State finds n o

application in the case at bench. For the rationale of the principle is to
delineate or demarcate the boundaries between the two (2) institutions
(church and state) to avoid encroachments by one against the other.
T h e demarcation line calls on the two entities to "render unto Ceasar
the things that are Ceasar's and unto God the things that are God's."
This means that the State is prohibited from interfering in purely
ecclesiastical affairs, and the Church likewise is barred from meddling
in purely secular matter.
T h e case at bench is only one of dismissal of an employee in the
exercise by the employer-church of its management prerogatives and
therefore does not concern any ecclesiastical matter. While the case relates
to the church and its minister, it does N O T ipso facto give it a religious
significance, what is involved is only the relationship of the church as an
EMPLOYER and the minister as an employee which is purely SECULAR
in character and has no relation whatsoever to practice of faith, worship
or doctrines of the Seventh Day Adventist Church. T h e minister was not
excommunicated nor expelled from membership of the SDA church but
only dismissed from employment. Terminating one from his employment
is totally different from the ecclesiastical act of expelling a member from
the religious congregation. (Austria vs. NLRC & Cebu City Central Philippines
Union Mission Corporation of the Seventh Day Adventists, G.R No. 124382, August
16, 1999.)
7.1 Termination of Corporate Officer; Jurisdiction Over Intra-Corporate
Disputes Transferred From SEC to RTC
T h e dismissal of a corporate officer by a corporate board is a corporate
dispute that should be brought to the regular courts. The jurisdiction of the
Securities and Exchange Commission over such case has been transferred to
the courts by the Securities Regulation Code (R.A. No. 8799), passed on July
19, 2000. Its Section 5.2 states:
"5.2. T h e [Securities and Exchange] Commission's jurisdiction over
all cases enumerated under Section 5 of President Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the appropriate
Regional Trial Court: Provided, That the Supreme Court in the exercise
of its authority may designate the Regional Trial Court branches that
shall exercise jurisdiction over these cases. The Commission shall retain
jurisdiction over pending cases involving intra-corporate disputes submitted
for final resolution which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed as of 30 June
2000 until finally disposed."

43
 ART. 217 LABOR RELATIONS

The SEC jurisdiction under Section 5 of PD No. 902-A mentioned above

pertinently reads:
M
b) Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members, or associates;
between any or all of them and the corporation, partnership or associates
of which they are stockholders, members or associates, respectively; and
between such corporation, partnership or association and the state insofar
as it concerns their individual franchise or right to exist as such entity;
(c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations, partnerships or
associations."
In the cases narrated below, the Supreme Court rulings delineating the
jurisdictions of the NLRC and the SEC are still controlling except that the
reference to the SEC should now be to the regular courts.
Dy, et al. vs. NLRC, G.R. No. 68544, October 27, 1986 —
Facts: CHV was a director and stockholder and also the manager of the ARB,
a banking institution organized under Philippine laws. At a special stockholders'
meeting called for the purpose of electing the bank's Board of Directors, a new
board was elected. The new board elected the bank's executive officers, including
a new bank manager. After the Board passed a resolution relieving CHV of his post,
he filed a complaint for illegal dismissal and damages with the Ministry of Labor and
Employment against the President and Vice President of ARB.
Ruling: The controversy is intra-corporate. It revolves around the election
of directors, officers or managers of the bank, the relation between and among
stockholders, and between them and the corporation. These matters fall within the
jurisdiction of the Securities and Exchange Commission.
This is not a case of dismissal. The situation is that of a corporate office having
been declared vacant and of CHV's not having been elected thereafter. The matter
of whom to elect is a prerogative that belongs to the Board. It involves the exercise
of deliberate choice and the faculty of discriminative selection. Generally, the
relationship of a person to a corporation, whether as officer or as agent or employee,
is not determined by the nature of the services performed, but by the incidents of
the relationship as they actually exist.
The question of remuneration, involving as it does a person who is not a
mere employee but stockholder and officer, an integral part, it might be said, of the
corporation, is not a simple labor problem but a matter that comes within the area
of corporate affairs and management, and is in fact an intra-corporate controversy
in contemplation of the corporation.

In a similar case the corporate board of directors resolved to dismiss "L

as Executive Vice-President of the company for loss of trust and confidence.

44
 POWERS AND DUTIES
(Part 1. Jurisdiction)
ART. 217

"L" filed with the National Labor Relations Commission a complaint for
illegal dismissal, alleging that his dismissal was done without a formal hearing
and investigation and, therefore, without due process. T h e employer moved to
dismiss the complaint on the ground that his dismissal as a corporate officer
was an intra-corporate controversy over which the Securities and Exchange
Commission has original and exclusive jurisdiction.
The Court ruled that the position of Executive Vice-President was an elective
corporate office. In fact, complainant acquired that position through election
by the corporation's Board of Directors. Indeed, the election, appointment or
removal of an executive vice-president is a prerogative vested upon a corporate
board. And it must be, not only because it is a practice observed in the company
but more so, because of an express mandate of law.
After citing Section 5 of Presidential Decree No. 902-A [quoted above],
the Court concluded:
A corporate officer's dismissal is always a corporate act, or an extra-
corporate controversy and the nature is not altered by the reason or wisdom
1
with which the Board of Directors may have in taking such action.

7.2 Effect of Claim for Backwages, Benefits, or Damages

In a 1994 case involving Philippine Airlines' Executive Vice-President-
Chief Executive Officer, the Supreme Court reiterated the conclusion reached
in the preceding Dy and Fortune Cement cases. T h e position of PAL's EVP-CEO
is an elective corporate office. Where its occupant is not reelected by the Board
of Directors, the officer's complaint should be lodged with the SEC, [now
regular court] not the NLRC, even if the complainant/petitioner has claims for
backwages, employment benefits, and damages. Said the Court:
"The fact that petitioner sought payment of his backwages, other
benefits, as well as moral and exemplary damages and attorney's fees in
his complaint for illegal dismissal will not operate to prevent the SEC from
exercising its jurisdiction under PD 902-A. While the affirmative reliefs
and monetary claims sought by petitioner in his complaint may, at first
glance, mislead one into placing the case under the jurisdiction of the
Labor Arbiter, a closer examination reveals that they are actually part of
the perquisites of his elective position; hence, intimately linked with his
relations with the corporation, x x x"
T h e Court has likewise ruled in the case of Andaya vs. Abadia (228
SCRA 705 [1993]) that in intra-corporate matters, such as those affecting the
corporation, its directors, trustees, officers and shareholders, the issue of
consequential damages may just as well be resolved and adjudicated by the SEC.
Undoubtedly, it is still within the competence and expertise of the SEC to resolve

fortune Cement Corp. vs. NLRC, G.R. No. 79762, January 24, 1991.

45
 LABOR RELATIONS
ART. 217

1
all matters arising from or closely connected with all intra-corporate disputes.
Such jurisdiction of the SEC [now the RTC] is not negated by the complainant's
claims for vacation and sick leaves, 13th-month pay, Christmas bonus, medical
expenses, car expenses, and other benefits, as well as for moral and exemplary
2
damages and attorney's fees.
7.3 Mainland vs. Movilla: T h e "Better Policy" in Determining SEC
Jurisdiction
Our examination of the dividing line between the NLRC and the SEC
jurisdictions is not yet over. Espino and Lozon cases hold that intracorporate
disputes belong to SEC [now the regular courts] despite claims for backwages,
employment benefits and damages. But still, we need to call attention to Mainland
Construction vs. Movilla (1995) where the Court upheld the jurisdiction of NLRC as
against that of the SEC. In that case the Court, through Mr. Justice Hermosisima,
sets forth the "better policy" in determining the SEC jurisdiction. Said the Court:
"... (T)hat the parties involved are the stockholders and the corporation does not
necessarily place the dispute within the ambit of the jurisdiction of SEC." Thus
NLRC's jurisdiction was recognized. And yet we will see later that this "better
policy" expressed in 1995 is not observed in the 1997 case of Tabang.

Mainland Construction Co., etc. vs. Movilla, et al., G.R. No. 118088, November
23, 1995 —
Facts: Movilla was hired as accountant by Mainland Construction in 1977 and as
an employee, was registered with the SSS, Medicare, and ECC. In 1987, the board of
directors elected Movilla as board member and Administrative Manager. Meantime,
DOLE had conducted a routine inspection on the corporation and found several
labor law violations. DOLE ordered the corporation to pay its thirteen employees,
including Movilla, the unpaid holiday pay, service incentive leave, etc.
The employer paid all the employees listed in the DOLE'S order, but not Movilla;
hence, he filed a complaint with the NLRC Regional Arbitration Branch XI, Davao
City.
On February 29, 1992, Movilla died and was substituted for by his heirs.
The Labor Arbiter rendered judgment on June 26, 1992, dismissing the
complaint on the ground of lack of jurisdiction. The decision said in part:
What Movilla is claiming against respondents are his alleged unpaid
salaries and separation pay as Administrative Manager of the corporation
for which position he was appointed by the Board of Directors. His claims
therefore, fall under the jurisdiction of the Securities and Exchange
Commission because this is not a simple labor problem, but a matter that

Espino vs. NLRC and Philippine Airlines, G.R. Nos. 109642-43, January 5,
1995.
2
Lozon vs. NLRC and Philippine Airlines, Inc., G.R. No. 107660, January 2,
1995.

46
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

comes within the area of corporate affairs and management, and is in fact a
corporate controversy in contemplation of the Corporation Code. (Fortune
Cement Corporation vs. NLRC, et al, G.R No. 79762, January 24, 1991.)
The heirs appealed to the NLRC which ruled that the issue was a labor dispute
between an employee and petitioner corporation and, thus, the NLRC had jurisdiction
over the case.
Is it the NLRC or the SEC [now the RTC] that has jurisdiction over the
controversy?
Ruling: T h e NLRC, replied the Supreme Court.
In order that the SEC can take cognizance of a case, the controversy must
pertain to any of the following relationships: a) between the corporation, partnership
or association and the public; b) between the corporation, partnership or association
and its stockholders, partners, members or officers; c) between the corporation,
partnership or association and the State as far as its franchise, permit or license
to operate is concerned; and d) among the stockholders, partners or associates
themselves. The fact that the parties involved in the controversy are all stockholders
or that the parties involved are the stockholders and the corporation does not necessarily
place the dispute -within the ambit of the jurisdiction of SEC. The better policy to be followed
in determining jurisdiction over a case should be to consider concurrent factors such
as the status or relationship of the parties or the nature of the question that is the
subject of their controversy. In the absence of any one of these factors, the SEC will
not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between
the corporation and its stockholders would involve such corporate matters as only the SEC can
resolve in the exercise of its adjudicatory or quasi-judicial powers. (Emphases supplied)
In the case at bench, the claim for unpaid wages and separation pay filed by
the complainant against petitioner corporation involves a labor dispute. It does
not involve an intra-corporate matter, even when it is between a stockholder and a
corporation. It relates to an employer-employee relationship which is distinct from
the corporate relationship of one with the other. Moreover, there was no showing
of any change in the duties being performed by complainant as an Administrative
Officer and as an Administrative Manager after his election by the Board of Directors.
What comes to the fore is whether there was a change in the nature of his functions
and not merely the nomenclature or tide given to this job.
Since Movilla's complaint involves a labor dispute, it is the NLRC, under Article
217 of the Labor Code of the Philippines, which has jurisdiction over the case.

7.4 Tabang vs. NLRC: SEC Jurisdiction Reaffirmed; Corporate Officer

and Intra-corporate Controversy Defined
The "better policy" enunciated in Mainland vs. Movilla (1995), however, did
not influence and was not mentioned at all in the 1997 decision in Tabang vs.
NLRC, penned by Mr. Justice Regalado. The Court ruled, again, that all kinds of
controversies between stockholders and corporations fall under SEC'sjurisdiction
[RTC, per R.A. No. 8799]. It also clarified the term "corporate officers."

47
 ART. 217 LABOR RELATIONS

The president, vice-president, secretary and treasurer are commonly

regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the corporation.
However, other offices are sometimes created by the charter or by-laws of a
corporation, or the board of directors may be empowered under the by-laws of
1
a corporation to create additional offices as may be necessary.
Under Section 25 of the Corporation Code, the president, secretary and
treasurer are specifically mentioned as officers of the corporation. The same
section also provides that the board of directors may elect "such other officers
as may be provided for in the by-laws."
Jurisprudence leads to this definition: a "corporate officer" is the president,
secretary, or treasurer of the corporation or any other officer whose office is
created by the board of directors as authorized or required by the corporate
charter or by-laws.
It has been held that an "office" is created by the charter of the corporation
and the officer is elected by the directors or stockholders. On the other hand, an
"employee" usually occupies no office and generally is employed not by action
of the directors or stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such employee. A further
distinction may thus be drawn between an officer and an employee of a private
corporation in that the latter is subordinate to the officers and under their
control and direction... It is clear that the two terms officers and agents are by
2
no means interchangeable...
An "intra-corporate controversy" is one which arises between a stockholder
and the corporation. There is no distinction, qualification, nor any exemption whatsoever.
The provision is broad and covers all kinds of controversies between stockholders and
corporations. (Tabang vs. NLRC, above) [Italics supplied — CAA]
In Mainland, the complainant is a stockholder-employee while in Tabanghe
is a stockholder-corporate officer. Both in Mainland and Tabang the complaints
include claims for unpaid wages and 13th month pay. In Mainland the Court views
it as a labor dispute, hence under NLRC jurisdiction. But in Tabang the Court
calls it an intra-corporate controversy, hence under SEC [now RTC] jurisdiction;
then the Court concludes: "The provision is broad and covers all kinds of controversies
between stockholders and corporation. "

Nacpil vs. International Broadcasting Corp., G.R. No. 144767, March 21, 2002 —
Facts: Petitioner was Assistant General Manager for Finance/Administration
and Comptroller of respondent IBC. Alleging that he was forced to retire by the

'Tabang vs. NLRC, G.R. No. 121143, January 21, 1997.

2
PSBA vs. Leano, 127 SCRA 778 [1984], quoting Bruce v. Travelers Ins. Co.,
266 F2d 781, at pp. 784-785.

48
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

new IBC president, he filed with the NLRC a complaint for illegal dismissal and
non-payment of benefits. IBC assailed the jurisdiction of the Labor Arbiter, insisting
that the complainant was a corporate officer and that the dispute was for the SEC to
take cognizance of. Petitioner maintained that he was not a corporate officer but a
mere employee because he was appointed by the General Manager, not appointed
or elected by the Board.
Ruling: The Court has consistently held that there are two elements to be
considered in determining whether the SEC has jurisdiction over the controversy, to
wit: (1) the status or relationship of the parties; and (2) the nature of the question
1
that is the subject of their controversy.
Even assuming that the petitioner was in fact appointed by the General Manager,
such appointment was subsequently approved by the Board of Director of the IBC.
That the position of Comptroller is not expressly mentioned among the officers of
the IBC in the By-Laws is of no moment, because the IBC's Board of Directors is
empowered under Section 25 of the Corporation Code and under the corporation's
By-Laws to appoint such other officers as it may deem necessary.
The Court has held that in most cases the "by-laws may and usually do provide
for such other officers,'' and that where a corporate office is not specifically indicated
in the roster of corporate officers in the by-laws of a corporation, the board of director
may also be empowered under the by-laws to create additional officers as may be
necessary.
As petitioner's appointment as comptroller required the approval and formal
action of the IBC's Board of Directors to become valid, it is clear therefore that
petitioner is a corporate officer whose dismissal may be the subject of a controversy
cognizable by the SEC [now RTC] under Section 5(c) of P.D. 902-A which includes
controversies involving both election and appointment of corporate directors,
trustees, officers, and managers. Had petitioner been an ordinary employee, such
board action would not have been required.

After reviewing many court decisions, Villanueva (law dean and corporate
law practitioner) observes that the "business judgment doctrine" encompasses
the removal from office of a corporate officer at the discretion of the board of
directors. It appears therefore that corporate officers do not enjoy security of
tenure. Such latitude of discretion, he argues, runs counter to the guarantee of
security of tenure of "all workers" under the Constitution and the Labor Code.
2
He sees an open constitutional issue.
In the next case, the court treats the assistant vice-president as an employee,
sustains NLRC's jurisdiction, and upholds the right to security of tenure.

'Saura vs. Saura,Jr., 313 SCRA 465 [1999]; Lozano vs. De los Santos, 274 SCRA
452 [1997].
2
Cesar L. Villanueva, Philippine Corporate Law (2001), pp. 355-356.

49
 LABOR RELATIONS
ART. 217

7.5 When Bank Officer May be a Regular Employee

The Court, confronted with the plea for security of tenure of a bank
officer who rose through the ranks, ruled that she was a regular employee (not
a corporate officer) and that her dismissal complaint was correctly brought to
the NLRC.
The complainant was first appointed as an accounting clerk by the bank in
1963. From that position, she rose to become a supervisor and then was elected
by the board as an assistant vice-president, the position she occupied until her
dismissal in 1991.
The bank's contention that she merely holds an elective position and that,
in effect, she is not a regular employee is belied by the nature of her work and
her length of service with the bank. As earlier stated, she rose from the ranks
and has been employed with the bank since 1963 until the termination of her
employment in 1991. As assistant vice-president of the foreign department of
the bank, she is tasked, among others, to collect checks drawn against overseas
banks payable in foreign currency and to ensure the collection of foreign bills
or checks.
Treating the AVP as an employee, the Court held:
It has been stated that "the primary standard of determining regular
employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of the
employer." Additionally, "an employee is regular because of the nature of
work and the length of service, not because of the mode or even the reason
for hiring them." As assistant vice-president of the foreign department of
the bank she performs tasks integral to the operations of the bank and
her length of service with the bank totaling 28 years speaks volumes of her
status as a regular employee of the bank. In fine, as a regular employee,
she is entitled to security of tenure; that is, her services may be terminated
only for a just or authorized cause. This being in truth a case of illegal
dismissal, it is no wonder then that the bank endeavored to the very end
to establish loss of trust and confidence and serious misconduct on the
part of private respondent but to no avail.
1
T h e NLRC's jurisdiction over the case is upheld.

8. LABOR ARBITER'S JURISDICTION: MONEY CLAIMS

A money claim arising from employer-employee relations, excepting S S S /
ECC/Medicare claims, is within the jurisdiction of a labor arbiter —
1. if the claim, regardless of amount, is accompanied with a claim for
reinstatement; or

'Prudential Bank and Trust Co. vs. Reyes, G.R. No. 141093, February 20, 2001.

50
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

2. if the claim, w h e t h e r or not a c c o m p a n i e d with a claim for

reinstatement, exceeds five thousand pesos (P5,000) per claimant.
T h e claim under No. 1, above, is practically a termination dispute which
falls within the labor arbiter's jurisdiction, according to Article 217, except, as
already mentioned, if Article 261 or 262 is applicable.
Furthermore, the claims under either No. 1 or No. 2, above, are beyond
the jurisdiction of a D O L E regional director under Article 129 which removes
from the regional director's hands any claim for reinstatement or any money
claim exceeding five thousand pesos. Those claims should instead be filed with
the NLRC.
8.1 Only Money Claims Not Arising from CBA
May a money claim arising from implementation of the CBA be filed with
a labor arbiter?
T h e original and exclusive jurisdiction of the Labor Arbiter under
Article 2 1 7 ( c ) for m o n e y claims is limited only to those arising from
statutes or contracts other than a Collective Bargaining Agreement. T h e
Voluntary Arbitrator or Panel of Voluntary Arbitrators will have original and
exclusive jurisdiction over money claims "arising from the interpretation or
implementation of the Collective Bargaining Agreement, and those arising
from the interpretation or enforcement of company personnel policies,"
1
under Article 2 6 1 .

8.2 Money Claims Must Have Arisen From Employment

Money claims of workers which do not arise out of or in connection
with their employer-employee relationship fall within the general jurisdiction
of regular courts of justice. Hence, "money claims of workers" referred to in
paragraph 3 of Article 217 embraces money claims which arise out of or in
connection with the employer-employee relationship, or some aspect or incident
2
of such relationship.
If an employee is claiming a prize under an incentive program in his
company, where should he file his claim? In the Pepsi-Cola case decided in 1982,
the ruling says it should be filed with a labor arbiter, not with a regular court.
In the San Miguel case, decided in 1988, it says it should be filed with a regular
court, not with a labor arbiter. The difference lies in what law will be applied to resolve
the hey questions raised.

'San Jose vs. NLRC and Ocean Terminal Services, Inc., G.R. No. 121227, August
17, 1998.
2
San Miguel Corp. vs. National Labor Relations Commission, et al, G.R. No.
80774, May 31, 1988.

51
 LABOR RELATIONS
ART. 217

Pepsi-cola Bottling Co. vs. Martinez, G.R. No. Lr58877, March 15, 1982 —
Facts: The complaint filed in the Court of First Instance (now Regional Trial
Court) of Davao averred that in the annual "Sumakwel" contest conducted by the
company in 1979, Tumala was declared winner of the "Lapu-Lapu Award" for his
performance as top salesman of the year. The award entitled him to a prize of a house
and lot, but petitioner company, despite demands, refused to deliver the prize.
It was also alleged that the Company, "in a manner oppressive to labor" ...
"arbitrarily and illegally" terminated the claimant's employment.
Tumala prayed that the company be ordered to deliver his prize of house and
lot or its cash equivalent, and to pay his back salaries and separation benefits, plus
damages. He did not ask for reinstatement. He argued that his action was a civil
controversy triable exclusively by the courts of general jurisdiction.
The company moved to dismiss the complaint on grounds of lack of jurisdiction
and cause of action.
Ruling: The claim for said prize unquestionably arose from an employer-
employee relation and, therefore, falls within the coverage of Article 217 of the
Labor Code, as amended by PD 1691 which speaks of "all the claims arising from
employer-employee relations, unless expressly excluded by this Code."
Indeed, Tumala would not have qualified for the contest, much less won the
prize, if he was not an employee of the company at the time of the holding of the
contest. Besides, the cause advanced by petitioners to justify their refusal to deliver the
prize — the alleged fraudulent manipulations committed by Tumala in connection
with his duties as salesman of the company — involves an inquiry into his actuations
as an employee.
To hold that Tumala's claim for the prize should be passed upon by the
regular courts of justice, independently and separately from his claim for back
salaries, retirement benefits and damages, would be to sanction split jurisdiction.
San Miguel Corp. vs. NLRC, G.R. No. 80774, May 31, 1988 —
Facts: SMC sponsored an innovation program granting cash awards to
employees who would submit ideas and suggestions beneficial to the corporation.
Rustico submitted a proposal which, he alleged, was accepted and implemented
by SMC; hence, he demanded the cash award of P60,000. But SMC refused to pay,
prompting Rustico to file with the NLRC a complaint claiming entitlement to the
cash award.
The labor arbiter ruled that Rustico's money claim was not an incident of his
employment and that the money claim was not among those enumerated in Article
217 of the Labor Code. He dismissed the complaint.
On appeal, the NLRC reversed the labor arbiter and ordered SMC to pay
Rustico P60,000. Hence, this petition by the employer, alleging that the labor arbiter
and the NLRC had no jurisdiction over the subject matter of the case.
The Supreme Court set aside the decision of the NLRC and dismissed Rustico's
complaint, without prejudice to his right to file a suit before the proper court, if he
so desires.

52
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

Ruling: Money claims of workers which now fall within the original and exclusive
jurisdiction of the labor arbiter are those money claims which have some reasonable
causal connection with the employer-employee relationship.
In this case, SMC's Innovation Program is an employee incentive scheme
offered and open only to employees of SMC below the rank of manager. Without
the existing employer-employee relationship between the parties here, there would
have been no occasion to consider SMC's Innovation Program or the submission by
Rustico of his proposal concerning beer grande. Without that relationship, Rustico's
suit against SMC would never have arisen. The money claim of Rustico, therefore,
arose out of or in connection with his employment relationship with SMC.
However, the fact that Rustico's money claim arose out of or in connection
with his employment with SMC is not enough to bring such money claim within the
original and exclusive jurisdiction of labor arbiters.
Where the claim to the principal relief sought is to be resolved not by reference to the Labor
Code or other labor relations statute or a collective bargaining agreement but by the general civil
law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the labor
arbiter and the National Labor Relations Commission. (Italics supplied)
Here, SMC's innovation program was an invitation from SMC to its employees
to submit innovation proposals, and the SMC undertook to grant awards to employees
who accept such invitation and whose suggestions satisfied SMC's standards and
requirements of the Innovation Program, and which therefore could be translated
into substantial benefit to the corporation. Such undertaking, though unilateral in
origin, could nonetheless ripen into an enforceable contractual (facio ut des) obligation
on the part of SMC under certain circumstances.
Thus, whether or not an enforceable contract, albeit implied and
innonimate, had arisen between SMC and Rustico in this case, and if so, whether
or not it had been reached, are preeminently legal questions, questions not to be
resolved by referring to labor legislation and having nothing to do with wages or
their terms and conditions of employment, but rather by having recourse to our
law on contracts.

8.3 Money Claims of Coop Employees —

The cooperative argues that the labor arbiter has no jurisdiction to take
cognizance of the complaint because the complainants failed to submit their
dispute to the grievance machinery as required by P.D. 175 (Strengthening
the Cooperative Movement) and because of the non-issuance of a Certificate
of Non-Resolution pursuant to Section 8 of R.A. 6939 or the Cooperative
Development Authority Law. The argument does not hold. The said provisions
apply to members, officers and directors of the cooperative involved in disputes
within a cooperative or between cooperatives. There is no evidence that private
respondents are members of the cooperative, and even if they are, the dispute is
about payment of wages, overtime pay, rest day and termination of employment.

53
 ART. 217 LABOR RELATIONS

These disputes are within the original and exclusive jurisdiction of the Labor
1
Arbiter.
8.4 Jurisdiction Over Claims for Damages
Suario vs. Bank of The Philippine Islands, G.R. No. 50459, August 25, 1989 —
Money claims of workers over which the labor arbiter has original and exclusive
jurisdiction are comprehensive enough to include claims for moral damages of a
dismissed employee against his employer.
Evidently, the lawmaking authority had second thoughts about depriving the
Labor Arbiters and the National Labor Relations Commission of the jurisdiction
to award damages in labor cases because that set-up would mean duplicity of suits,
splitting the cause of action and possible conflicting findings and conclusions by two
tribunals on one and the same claim.
So, on May 1,1980, Presidential Decree No. 1691 (which substantially reenacted
Article 217 in its original form) nullified Presidential Decree No. 1367 and restored
to the Labor Arbiters and the National Labor Relations Commission their jurisdiction
to award all kinds of damages in cases arising from employer-employee relations.
The legislative intent appears clear to allow recovery in proceedings before
Labor Arbiters of moral and other forms of damages, in all cases or matters arising
from employer-employee relations. This would, no doubt, include particularly
instances where an employee has been unlawfully dismissed. In such a case, die
Labor Arbiter has jurisdiction to award to the dismissed employee not only the
reliefs specifically provided by labor laws, but also moral and other forms of damages
governed by the Civil Code.
Moral damages would be recoverable, for example, where the dismissal of the
employee was not only effected without authorized cause or due process for which
relief is granted by the Labor Code — but was attended by bad faith or fraud or
constituted an act oppressive to labor or was done in a manner contrary to morals,
good customs or public policy — for which the obtainable relief is determined by
the Civil Code.

8.5 Splitting of Actions Not Allowed

An employee who has been illegally dismissed so as to cause him moral
damages has a cause of action for reinstatement, backwages and damages.
When he institutes proceedings before the Labor Arbiter, he should make a
claim for all said relief. He cannot prosecute his claim piecemeal, separately
and contemporaneously, in a court of justice upon the same cause of action or
a part thereof. He cannot sue in two forums: one, before the Labor Arbiter for
reinstatement and recovery of backwages upon the theory that his dismissal was

•Perpetual Help Credit Cooperative, Inc. vs. Faburada, et al., G.R. No. 121948,
October 8, 2001.

54
 POWERS AND DUTIES
(Part 1. Jurisdiction)
ART. 217

illegal; and two, before a court of justice for recovery of moral damages upon
1
the theory that his dismissal was injurious or tortious.
The judgment of the Labor Arbiter granting separation pay operated as
a bar to his subsequent action for the recovery of damages before the Court of
2
First Instance under the doctrine of res judicata.
The previous ruling in Quisaba vs. Sta. Ines-Melae Veneer and Plywood, Inc. drew
a distinction between the rights of the employer to dismiss an employee, which
was declared to be within the competence of labor agencies to pass upon and
the manner in which the right was exercised and the effects flowing therefrom,
declared to be a matter cognizable only by the regular courts because it is
intrinsically civil. It is this very distinction which the law has sought to eradicate
as being tenuous and as giving rise to split jurisdiction. The Court reiterates the
doctrine that the grant of jurisdiction to the Labor Arbiter by Article 217 of the Labor Code
is sufficiently comprehensive to include claims for moral and exemplary damages sought
3
to be recovered from an employer by an employee upon the theory of his illegal dismissal.
A contrary rule would result in the splitting of actions and the consequent
multiplication of suits. T h e damages suffered by the employee only form part of
the civil component of the injury arising from the unfair labor practice. Under
Article 247 of the Labor Code, the civil aspect of all cases which include claims
for damages and other affirmative relief shall be under the jurisdiction of labor
4
arbiters.
8.6 Employer's Complaint for Damages
An employer's claim for damages against an employee may be filed as
counterclaim in the illegal dismissal case filed by the employee. Such claim for
damages, arising from employment relationship, is outside the jurisdiction of
5
the regular court.
9. LABOR ARBITER'S JURISDICTION: STRIKES AND LOCKOUTS
Questions relating to strikes or lockouts or any form of work stoppage
including incidents thereof under Article 264 fall within the labor arbiter's
jurisdiction. Whether the alleged reason for the strike is "strikeable," whether
the required strike procedure is followed, or whether the strikers committed
prohibited acts during a strike, are some of the issues a labor arbiter may be
called upon to decide.
1Primero vs. Intermediate Appellate Court, G.R. No. 72644, December 14,
1987.
2
Ibid.
Ibid.
4
Lim vs. National Labor Relations Commission, G.R. No. 79907, March 16,
1989; Sweet Lines vs. National Labor Relations Commission, G.R. No. 79975, March
16,1989.
5
Bañez vs. Hon. Valdevilla, G.R. No. 128024, May 9, 2000.
55
 ART. 217 LABOR RELATIONS

But the power to issue injunction is lodged with an NLRC division, not a
labor arbiter (see discussion under Article 218). Moreover, "national interest"
cases are handled differently. Article 263(g) empowers the DOLE Secretary
or the President of the Republic to assume jurisdiction or refer the case to the
NLRC if the labor dispute or impending strike or lockout involves an industry
indispensable to national interest.
Still another limit to the arbiter's jurisdiction is the jurisdiction of the
regular courts to hear and decide actions filed by third parties being affected by
a strike of people who are not their employees. Finally, if a crime is committed,
whether in relation to a strike or not, the prosecution of the crime has to be
done not before a labor arbiter but a regular court, because in such case the
laws to be administered are primarily the penal laws of the land.
10. LABOR A R B I T E R ' S J U R I S D I C T I O N : OFW'S MONEY CLAIMS OR
DISMISSAL
Section 10 of R.A. 8042, approved on J u n e 7 , 1 9 9 5 , known as the Migrant
Workers and Overseas Filipinos Act of 1995, transfers from the POEA to Labor
Arbiters the original and exclusive jurisdiction to hear and decide claims arising
out of an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment, including claims for actual,
moral, exemplary and other forms of damages. (See related discussion in
Volume I of this work in the chapter on POEA jurisdiction.)

Philippine National Bank vs. Cabansag, G.R. No. 157010, June 21, 2005 —
Facts: While in Singapore as a tourist, Cabansag applied with the Philippine
National Bank, Singapore Branch and was hired as Branch Credit Officer. As required,
she obtained from the Singapore Government an "Employee Pass" for two years.
Her appointment paper stated she would undergo a three-month probation that
can be terminated upon one-day notice, or, after probation with one month notice,
or equivalent pay. The Philippine embassy in Singapore processed her employment
contract and the POEA issued an "Overseas Employment Certificate'' that she was a
bona fide contract worker in Singapore.
After about three months in office, she submitted her initial performance
report which favorably impressed the branch general manager. But just one month
later the same general manager, personally and through two other bank officers, told
Cabansag that as a "cost-cutting measure" she had to resign her position. Surprised
and perflexed, she asked for a 'Formal Advice,' but she received none. She refused
to resign. The manager explained that he needed a Chinese-speaking credit officer.
Still she refused to resign, hence, the manager dismissed her just about four months
from hiring.
When she filed an illegal dismissal complaint with the NLRC, the employer
contended that the employee was a "local hire," having been hired in Singapore and
therefore "Singapore laws, customs and practice" should govern instead of Philippine
laws.

56
 POWERS AND DUTIES
(Part 1. Jurisdiction)
ART. 217

Ruling: Cabansag's obtaining an employment pass from Singapore Ministry

of Manpower was merely a compliance with that country's immigration regulations.
This is a counterpart of the requirement for a work permit from DOLE before a non-
Filipino can work in the Philippines. The pass or the permit does not imply a waiver
of the worker's national laws on labor. It does not mean that only the local laws (in
this case, Singapore laws) apply. Absent clear evidence to the contrary, the permit
simply means that its holder has a legal status as worker in the issuing country.
Moreover, the POEA certificate not only authorizes her working status; it also
entities her to all benefits and processes under Philippine statutes.
The bank is a Philippine corporation doing business through a branch in
Singapore, and Cabansag's appointment had to be approved by the PNB President
in Manila. This fact reinforces that she was a "migrant worker," making her subject to
Philippine laws on the jurisdiction of the NLRC and the labor arbiter. Section 3 [a]
of R A 8042 defines migrant workers as "a person who is to be engaged, is engaged or
has been engaged in a remunerated activity in a state in which he or she is a not legal
resident; to be used interchangeably with overseas Filipino worker." (Emphasis ours.)
Based on [Article 217, Labor Code and Section 10, R.A. No. 8042.], labor
arbiters clearly have original and exclusive jurisdiction over claims arising from
employer-employee relations, including terminations disputes involving all workers,
among whom are Overseas Filipino Workers (OFW). In any event, we recall the
following policy pronouncement of the court in Royal Crown International v. NLRC:
"x x x. Whether employed locally or overseas, all Filipino workers enjoy
the protective mantle of the Philippine labor and social legislation, contract
stipulations to die contrary notwithstanding.
This ruling is likewise rendered imperative by Article 17 of the Civil
Code which states that laws 'which have for their object public order, public
policy and good customs shall not be rendered ineffective by laws or judgments
promulgated, or by determination or conventions agreed upon in a foreign
country.'"

11. LABOR ARBITER'S JURISDICTION: WAGE DISTORTION

A salary distortion case, referred to in Article 124, is resolved either through
the CBA mechanism or, in unorganized establishments, through the NCMB. If
the NCMB fails to resolve the dispute in ten days of conciliation conferences, it
shall be referred to the appropriate branch of the NLRC.
12. LABOR ARBITER'S JURISDICTION: DISPUTES OVER COMPROMISE
SETTLEMENTS
Because labor law policy encourages voluntary resolution of disputes,
compromise settlements are ordinarily final and binding upon the parties. But
a compromise settlement may itself become the subject of a dispute. If there is
noncompliance with the compromise agreement or if there is prima facie evidence
that the settlement was obtained through fraud misrepresentation, or coercion,

57
 LABOR RELATIONS
ART. 217

then, according to Article 227, the NLRC through the labor arbiter may assume
jurisdiction over such dispute.
13. SUBMISSION TO JURISDICTION
A party cannot invoke the jurisdiction of a court to secure affirmative
relief against his opponent and, after obtaining or failing to obtain such relief,
repudiate or question that same jurisdiction. The question whether the court
had jurisdiction either over the subject matter of the action or over the parties
is barred from such conduct not because the judgment or order of the court is
valid and conclusive as an adjudication but for the reason that such a practice
1
cannot be tolerated — obviously for reasons of public policy.
Soco vs. Mercantile Corp., G.R. No. 53364, March 16, 1987 —
Facts: When the complaint for underpayment of minimum wage was pending
before the Regional Director, the employer did not raise the issue of jurisdiction but
instead actively participated in the hearings. Neither did it do so in elevating the case
to the Secretary of Labor, nor in the two motions for reconsideration of the DOLE'S
decision.
But when the case reached the Supreme Court, the employer objected to the
jurisdiction of the Secretary of Labor and the Regional Director to award the money
claims of the employees. It contended that all money claims of workers arising from
an employer-employee relationship were within the exclusive jurisdiction of the Labor
Arbiter not the Regional Director.
Ruling: This contention, which is being raised for the first time in this petition,
can no longer be considered by the Court at this stage, consistent with die ruling in
Tijam vs. Sibonghanoy (23 SCRA 29).
After voluntarily submitting a cause and encountering an adverse decision
on the merits, it is too late for the loser to question the jurisdiction or power of die
court. It is not right for a party, who has affirmed and invoked the jurisdiction of a
court in a particular matter to secure an affirmative relief, to afterwards deny that
same jurisdiction to escape a penalty.
While the rule has been applied to estop the plaintiff from raising the issue of
jurisdiction, it has likewise been applied to the defendant and more specifically, to
the employer in a labor case. The active participation of the party against whom the
action was brought coupled with his failure to object to the jurisdiction of die Court
or quasi-judicial body where the action is pending, is tantamount to an invocation
of that jurisdiction, and a willingness to abide by the resolution of the case will bar
said party from later on impugning the court or body's jurisdiction.
The Supreme Court frowns upon the undesirable practice of a party submitting
his case for decision and then accepting the judgment only if favorable, and attacking
it for lack of jurisdiction when adverse.

1Marquez vs. Secretary of Labor, G.R. No. 80685, March 16, 1989.

58
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

But another line of court decisions holds a different view: it is the law that
determines the jurisdiction of an adjudicating body and not the initiative or
acquiescence of the disputants. For instance, in La Naval Drug vs. C.A., G.R. No.
103200, August 31, 1994, the Court said: "Lack of jurisdiction over the subject
matter of the suit is yet another matter. Whenever it appears that the court has
no jurisdiction over the subject matter, the action shall be dismissed (Sec. 2, Rule
9, Rules of Court). This defense may be interposed at any time, during appeal or
even after final judgment. Such is understandable, as this kind of jurisdiction is
conferred by law and not within the courts, let alone the parties, to themselves
determine or conveniently set aside." T h e same ruling is laid down in Luzon vs.
NLRC, G.R. No. 107660, January 2, 1995. Accordingly, in the case Metromedia
Times Corp. vs. Pastorin, G.R. No. 154295, July 29, 2005, the court ruled that since
the Labor Arbiter assumed jurisdiction, when he should not over an issue which
is properly cognizable by the grievance machinery, petitioner is not estopped
from assailing the jurisdiction of the Labor Arbiter before the NLRC on appeal,
in line with... the general rule that estoppel does not confer jurisdiction.
14. IMMUNITY OF FOREIGN GOVERNMENTS
In this jurisdiction, we recognize and adopt the generally accepted
principles of international law as part of the law of the land. Immunity of State
from suit is one of these universally recognized principles. In international law,
"immunity" is commonly understood as the exemption of the state and its organs
from the judicial jurisdiction of another state. This is anchored on the principle
of the sovereign equality of states under which one state cannot assert jurisdiction
over another in violation of the maxim par in parem non habet imperium (an equal
1
has no power over an equal).
As it stands now, the application of the doctrine of immunity from suit has
been restricted to sovereign or governmental activities (jure imperii). The mantle of
state immunity cannot be extended to commercial, private and proprietary acts
2
(jure gestionis).
14.1 Immunity of the UN and Its Specialized Agencies
Being a member of the United Nations and a party to the Convention on
the Privileges and Immunities of the Specialized Agencies of the United Nations,
the Philippine Government adheres to the doctrine of immunity granted to
the United Nations and its specialized agencies. Both treaties have the force
and effect of law. The United Nations Revolving Fund for Natural Resources
Exploration (UNRFNRE), which is a special fund and subsidiary organ of the
United Nations, enjoys diplomatic immunity and is beyond the jurisdiction of a

'JUSMAG^Philippines vs. NLRC and Sacramento, G.R. No. 108813, December

15,1994.
2
Ibid.

59
 LABOR RELATIONS
ART. 217

labor arbiter. "Our courts can only assume jurisdiction over private respondent
1
if it expressly waived its immunity which is not so in the case at bench."
15. EXECUTING MONEY CLAIMS AGAINST THE GOVERNMENT
Even when a government agency enters into a business contract with a
private entity, it is not the Labor Code but C.A. No. 327 that applies in pursuing
a money claim (against the Government) arising from such contract.
Department of Agriculture vs. The National Labor Relations Commission, et al., G.R.
No. 104269, November 11, 1993 —
Facts: The Department of Agriculture and Sultan Security Agency, a private
firm, entered into a contracts for security services.
Later, several guards of the Sultan Security Agency filed a complaint for
underpayment of wages, nonpayment of 13th-month pay, uniform allowances, night
shift differential pay, holiday pay and overtime pay, as well as for damages, against
die Department of Agriculture and Sultan Security Agency.
The Executive Labor Arbiter found both respondents jointly and severally liable
for the payment of the money claims. The petitioner (Department of Agriculture)
and Sultan Security Agency did not appeal the decision; thus, the decision became
final and executory.
The Labor Arbiter issued a writ of execution against the property of the two
respondents. The City Sheriff levied on execution the motor vehicles of the petitioner
Department of Agriculture.
Issues: In this petition for certiorari, the petitioner charges the NLRC with grave
abuse of discretion for refusing to quash the writ of execution. The petitioner faults
die NLRC for assuming jurisdiction over a money claim against the Department,
which, it claims, falls under the exclusive jurisdiction of the Commission on Audit.
More importantly, the petitioner asserts, the NLRC has disregarded the cardinal rule
on the nonsuability of the State.
The private respondents, on the other hand, argue that the petitioner has
impliedly waived its immunity from suit by concluding a service contract with Sultan
Security Agency.
Ruling: In this jurisdiction, the general law waiving the immunity of the State
from suit is found in Act No. 3083, when the Philippine government "consents and
submits to be sued upon any money claim involving liability arising from contract,
express or implied, which could serve as a basis of civil action between private parties."
Implied consent, on the other hand, is conceded when the State itself commences
litigation, thus opening itself to a counter-claim or when it enters into a contract. In
this situation, the government is deemed to have descended to die level of the other
contracting party and to have divested itself of its sovereign immunity.
This rule, relied upon by the NLRC and the private respondents, is not,
however, without qualification. Not all contracts entered into by the government

'Lasco vs. UNRFNRE, G.R. Nos. 109095-109107, February 23, 1995.

60
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

operate as a waiver of its nonsuability; distinction must still be made between one
which is executed in the exercise of sovereign function and another which is done
in its proprietary capacity.
In the instant case, the Department of Agriculture has not pretended to have
assumed a capacity apart from its being a governmental entity when it entered into
the questioned contract; nor that it could have, in fact, performed any act proprietary
in character.
But, be that as it may, the claims of private respondents, i.e., for underpayment
of wages, holiday pay, overtime pay and similar other items, arising from the Contract
for Security Services, clearly constitute money claims. Act No. 3083, aforecited, gives
the consent of the State to be "sued upon any money claim involving liability arising
from contract, express or implied x x x." Pursuant, however, to Commonwealth
Act No. 327, as amended by Presidential Decree No. 1445, the money claim should
first be brought to the Commission on Audit. Thus, in Carabao, Inc. vs. Agricultural
Productivity Commission, we ruled:
[ C l a i m a n t s have to prosecute their money claims against the
Government under Commonwealth Act 327, stating that Act 3083 stands now
merely as the general law waiving the State's immunity from suit, subject to
the general limitation expressed in Section 7 thereof that "no execution shall
issue upon any judgment rendered by any Court against the Government of
the (Philippines), and that the conditions provided in Commonwealth Act 327
for filing money claims against the Government must be strictly observed."
We fail to see any substantial conflict or inconsistency between the provisions
of CA 327 and the Labor Code with respect to money claims against the State. The
Labor Code, in relation to Act No. 3083, provides the legal basis for the State liability
but the prosecution, enforcement or satisfaction thereof must still be pursued in
accordance with the rules and procedures laid down in CA 327, as amended by PD
1445.

16. LOCAL WATER DISTRICT

The question of the corporate personality of local water districts is not new.
The Court ruled in the case of Hagonoy Water District vs. NLRC, G.R. No. 81490,
August 31,1988, that they are quasi public corporations whose employees belong
to the civil service, hence, the dismissal of those employees shall be governed
by die civil service law, rules and regulations. The pertinent part of this Court's
decision reads as follows:
' T h e only question here is whether or not local water districts are
government owned or controlled corporations whose employees are
subject to the provisions of the Civil Service Law. The Labor Arbiter
asserted jurisdiction over the alleged illegal dismissal of private respondent
Villanueva by relying on Section 25 of Presidential Decree No. 198, known
as the 'Provincial Water Utilities Act of 1973' which went into effect on 25
May 1973, and which provides as follows:

61
 LABOR RELATIONS
ART. 217

'Exemption from Civil Service. — The district and its employees,

being engaged in a proprietary function, are hereby exempt from
the provisions of the Civil Service Law. Collective Bargaining shall
be available only to personnel below supervisory levels: Provided,
however, That the total of all salaries, wages, emoluments, benefits or
other compensation paid to all employees in any month shall not
exceed fifty percent (50%) of average net monthly revenue, said net
revenue representing income from water sales and sewerage service
charges, less pro rata share of debt service and expenses for fuel or
energy for pumping during the preceding fiscal year.'
The Labor Arbiter failed to take into account the provisions of
Presidential Decree No. 1479, which went into effect on 11 J u n e 1978. PD.
No. 1479 wiped away Section 25 of PD. 198 quoted above and Section 26 of
P.D. 198 was renumbered as Section 25 xxx. Thus, Section 25 of P.D. 198
exempting the employees of water districts from the application of the Civil
Service Law was removed from the statute books. (Tanjay Water District vs.
Gabaton, G.R No. 63742, April 17, 1989.)
Significantly, Article I X ( B ) , Section 2 ( 1 ) of the 1987 Constitution
provides that "(t)he civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the government, including government-
owned or controlled corporations with original charters." Inasmuch as P.D. No.
198 as amended, is the original charter of the petitioner, Tanjay Water
District, and respondent Tarlac Water District and all water districts in the
country, they come under the coverage of the civil service law, rules and
regulations. (Sec. 35, Article VIII and Sec. 37, Article IX of P.D. No. 807; Ibid.)
16.1 Exception: Where NLRC Jurisdiction is Invoked
The employees of Zamboanga Water District held a strike. The management
of the water district filed on March 17,1987 a complaint before the Labor Arbiter
to declare the strike illegal. Subsequently, the water district questioned in the
Supreme Court the labor arbiter's jurisdiction over the case. T h e Supreme Court
denied the petition, saying:
Petitioner never raised the issue of lack of jurisdiction before the
Executive Labor Arbiter, the NLRC or even this Court in G.R. Nos. 95219-
20. In fact, petitioner itself filed the complaint before the Executive Labor
Arbiter in NLRC Case No. RAB-IX-03-0090-87, sought affirmative relief
therefrom and even participated actively in the proceedings below. It is
only now in this case before us, after the NLRC ordered payment of back
wages, that petitioner raises the issue of lack of jurisdiction. Indeed, it is not
fair for a party who has voluntarily invoked the jurisdiction of a tribunal in
a particular matter to secure an affirmative relief therefrom, to afterwards
repudiate and deny that very same jurisdiction to escape a penalty. (Ocheda

62
 POWERS AND DUTIES ART. 217
(Part 1. Jurisdiction)

vs. Court of Appeals, 214 SCRA 629 [1992]; Royales vs. Intermediate Appellate
Court, 127 SCRA 470 [1984]; Tijam vs. Sibonghanoy, 23 SCRA 29 [1968];
Zamboanga City Water District vs. Buat, et al, G.R. No. 104389, May 27, 1994.)
17. REPUBLIC ACT NO. 6715 — RETROACTIVE?
Republic Act No. 6715, like its predecessors, Executive Order No. I l l
and Article 217, as amended, has retroactive application, because amendments
relative to the jurisdiction of Labor Arbiters partake of the nature of curative
1
statutes.
However, in Inciong vs. NLRC (May 21, 1990), the Court refused to apply
R.A. 6715 retroactively as regards immediate execution of an order to reinstate
an employee. Similarly, the Court did not give retroactive application to R.A.
6715 in the case of Lantion vs. NLRC and Araneta University on the question of
full backwages.
T h e Supreme Court has noted these apparently varying rulings and made
this explanation:
Our previous decisions on whether to give R.A. 6715 retroactive
application or not depended to a great extent on what amended provisions
were under consideration, as well as the factual circumstances to which
they were made to apply. In Briad, the underlying reason for applying
RA 6715 retroactively was the fact that prior to its amendment, Article
217 of the Labor Code, as amended by then Executive Order No. I l l ,
created a scenario where the Labor Arbiters and the Regional Directors
of the Department of Labor and Employment (DOLE) had overlapping
jurisdiction over money claims. This situation was viewed as a defect in the
law so that when RA 6715 was passed and delineated the jurisdiction of the
Labor Arbiters and Regional Directors, the Court deemed it a rectification
of such defect; hence, the conclusion that it was curative in nature and,
therefore, must be applied retroactively. (Silva, et al. vs. NLRC and Philtread,
G.R No. 110226, June 19, 1997.)
In the Silva case the court further explained that there was no statutory
defect that R.A. No. 6715 would cure. Not being curative in this instance, R.A.
No. 6715 need not be given retroactive effect.

•Briad Agro Development Corporation vs. De la Cerna, G.R. No. 82805,

November 9, 1989, En Banc, Sarmiento,/.
63
 Chapter II
POWERS AND DUTIES (cont'd.)
[Part 2. POWERS]

Overview/Key Questions Box 4

1. What are the powers of the NLRC?
2. Injunction is frowned upon in labor disputes. What
are the pre-conditions before an injunctive writ may
be issued?

ART. 2 1 8 . POWERS OF THE COMMISSION

The Commission shall have the power and authority:
(a) To promulgate rules and regulations governing the hearing and
disposition of cases before it and its regional branches, as well as those
pertaining to its internal functions and such rules and regulations as may
be necessary to c a r r y out the purposes of this Code;
(b) To administer oaths, summon the parties to a controversy, issue
subpoenas requiring the attendance and testimony of witnesses or the
production of such books, papers, contracts, records, statement of accounts,
agreements, and others as may be material to a just determination of the
matter under investigation, and to testify in any investigation or hearing
conducted in pursuance of this Code;
( c ) To conduct investigation for the determination of a question,
matter or controversy within its jurisdiction, p r o c e e d to hear and determine
the disputes in the absence of any party thereto who has been summoned or
served with notice to appear, conduct its proceedings or any part thereof in
public or in private, adjourn its hearings to any time and place, refer technical
matters or accounts to an e x p e r t and to accept his report as evidence after
hearing of the parties upon due notice, direct parties to be joined in or
excluded from the proceedings, correct, amend, or waive any error, defect
or irregularity whether in substance or in form, give all such direction as
it may deem necessary or expedient in the determination of the dispute
before it, and dismiss any matter or refrain from further hearing or from
determining the dispute or part thereof, where it is trivial or where further
proceedings by the Commission are not necessary or desirable; and
(d) To hold any person in contempt directly or indirectly and impose
appropriate penalties therefor in accordance with law.
64
 POWERS AND DUTIES
(Part 2. Powers)
ART. 218

A person guilty of misbehavior in the presence of or so near the

Chairman or any m e m b e r of the Commission or any L a b o r Arbiter as to
obstruct or interrupt the proceedings before the same, including disrespect
toward said officials, offensive personalities toward others, or refusal to be
sworn or to answer as a witness or to subscribe an affidavit or deposition
when lawfully required to do so, may be summarily adjudged in direct
contempt by said officials and punished by fine not exceeding five hundred
pesos ( P 5 0 0 ) or imprisonment not exceeding five ( 5 ) days, or both if it
be the Commission, or a m e m b e r thereof, or by a fine not exceeding one
hundred pesos ( P 1 0 0 ) or imprisonment not exceeding one ( 1 ) day, or both
if it be a L a b o r Arbiter. T h e person adjudged in direct contempt by a Labor
Arbiter may appeal to the Commission and the execution of the judgment
shall be suspended pending the resolution of the appeal upon the filing of
such person of a bond on condition that he will abide by and perform the
judgment of the Commission should the appeal be decided against him.
Judgment of the Commission on direct contempt is immediately executory
and unappealable. Indirect contempt shall be dealt with by the Commission
or Labor Arbiter in the manner prescribed under Rule 71 of the Revised
Rules of Court; and
(e) To enjoin or restrain any actual or threatened commission of any
or all prohibited or unlawful acts or to require the performance of a particular
act in any labor dispute which, if not restrained or performed forthwith, may
cause grave or irreparable damage to any party or render ineffectual any
decision in favor of such party: Provided, That no temporary or permanent
injunction in any case involving or growing out of a labor dispute as defined
in this Code shall be issued except after hearing the testimony of witnesses,
with opportunity for cross-examination, in support of the allegations of a
complaint made under oath, and testimony in opposition thereto, if offered,
and only after a finding of fact by the Commission, to the effect:
(1) That prohibited or unlawful acts have been threatened and will be
committed unless restrained, or have been committed and will be continued
unless restrained, but no injunction or temporary restraining order shall be
issued on account of any threat, prohibited or unlawful act, except against
the person or persons, association or organization making the threat or
committing the prohibited or unlawful act or actually authorizing or ratifying
the same after actual knowledge thereof;
(2) That substantial and irreparable injury to complainant's property
will follow;
(3) That as to each item of relief to be granted, greater injury will be
inflicted upon complainant by the denial of relief than will be inflicted upon
defendants by the granting of relief;
65
 LABOR RELATIONS
ART. 218

(4) That complainant has no adequate remedy at law; and

(5) That the public officers charged with the duty to p r o t e c t
complainant's p r o p e r t y a r e unable or unwilling to furnish adequate
protection.
Such hearing shall be held after due and personal notice thereof has
been served, in such manner as the Commission shall direct, to all known
persons against whom relief is sought, and also to the Chief Executive
and other public officials of the province or city within which the unlawful
acts have been threatened or committed charged with the duty to protect
complainant's property: Provided, however, That if a complainant shall also
allege that, unless a temporary restraining order shall be issued without
notice, a substantial and irreparable injury to complainants property will
be unavoidable, such a temporary restraining order may be issued upon
testimony under oath, sufficient, if sustained, to justify the Commission in
issuing a temporary injunction upon hearing after notice. Such a temporary
restraining order shall be effective for no longer than twenty ( 2 0 ) days
and shall b e c o m e void at the expiration of said twenty ( 2 0 ) days. No
such temporary restraining o r d e r or t e m p o r a r y injunction shall be issued
except on condition that complainant shall first file an undertaking with
adequate security in an amount to be fixed by the Commission sufficient
to recompense those enjoined for any loss, expense or damage caused
by the improvident or erroneous issuance of such o r d e r or injunction,
including all reasonable costs, together with a reasonable attorney's fee,
and expense of defense against the o r d e r or against the granting of any
injunctive relief sought in the same proceeding and subsequently denied
by the Commission.
T h e undertaking herein mentioned shall be understood to constitute
an agreement entered into by the complainant and the surety upon which
an order may be r e n d e r e d in the same suit or proceeding against said
complainant and surety, upon a hearing to assess damages, of which hearing
complainant and surety shall have reasonable notice, the said complainant
and surety submitting themselves to the jurisdiction of the Commission for
that purpose. But nothing herein contained shall deprive any party having a
claim or cause of action under or upon such undertaking from electing to
pursue his ordinary remedy by suit at law or in equity: Provided, further, That
the reception of evidence for the application of a writ of injunction may be
delegated by the Commission to any of its L a b o r Arbiters who shall conduct
such hearings in such places as he may determine to be accessible to the
parties and their witnesses and shall submit thereafter his recommendation
to the Commission.

66
 POWERS AND DUTIES
(Part 2. Powers)
ART. 219

ART. 2 1 9 . OCULAR INSPECTION

T h e C h a i r m a n , any C o m m i s s i o n e r , L a b o r A r b i t e r o r their duly
authorized representative, may at any time during working hours, conduct
an ocular inspection on any establishment, building, ship or vessel, place or
premises, including any work, material, implement, machinery, appliance
or any object therein, and ask any employee, laborer, or any person as the
case may be for any information or data concerning any matter or question
relative to the object of the investigation.
C O M M E N T S AND CASES
1. POWERS OF THE COMMISSION
1.1 Rule-Making Power
T h e Commission has the power to promulgate rules and regulations:
a) governing the hearing and disposition of cases before it and its
regional branches;
b) pertaining to its internal functions; and
c) those that may be necessary to carry out the purposes of this Code.
T h e rules and regulations promulgated by the Commission have the force
and effect of law. It is an elementary rule in administrative law that administrative
regulations and policies enacted by administrative bodies, such as the Revised
Rules of the NLRC, to interpret the law which they are entrusted to enforce,
1
have the force of law, and are entitled to great respect.
It is likewise elementary that the rules and regulations must not be in
conflict with or contrary to the provisions of the Labor Code and other laws.

1.2 Power to Issue Compulsory Processes

T h e Commission has the power to:
a) administer oaths;
b) summon parties; and
c) issue subpoenas ad testificandum and duces tecum.
1.3 Power to Investigate and Hear Disputes Within Its Jurisdiction
The Commission has the power to:
a) conduct investigations for the determination of a question, matter
or controversy within its jurisdiction; and
b) proceed to hear and determine the disputes in the manner laid
down under paragraph (c) of Article 218.

'Rizal Empire Insurance Group vs. NLRC, 150 SCRA 588, citing the case of
Español vs. PVA, 137 SCRA 314.

67
 ARTS. 218-219 LABOR RELATIONS

1.4 Contempt Power

The commission has the power to hold any person in direct or indirect
contempt under Rule IX of the NLRC 2005 Rules of Procedure.
The procedures and penalties thereof are provided under paragraph (d)
of Article 218.
Contempt is defined as a disobedience to the Court by setting up an
opposition to its authority, justice and dignity. It signifies not only a willful
disregard or disobedience of the court's orders but such conduct as tends to
bring the authority of the court and the administration of law into disrepute
or in some manner to impede the due administration of justice. There is no
question that disobedience or resistance to a lawful writ, process, order, judgment
or command of a court or injunction granted by a court or judge constitutes
1
indirect contempt punishable under Rule 71 of the Rules of Court.
It is proper for a labor arbiter to cite guilty of indirect contempt an employer
2
who refuses to reinstate an illegally dismissed employee.
1.5 Power to Conduct Ocular Inspection
Under Article 219, the chairman, any commissioner, labor arbiter or their
duly authorized representatives may, at anytime during working hours:
a) conduct an ocular inspection on any establishment, building, ship or
vessel, place or premises, including any work, material, implement, machinery,
appliance or any object therein; and
b) ask any employee, laborer or any person, as the case may be, for any
information or data concerning any matter or question relative to the object of
the investigation.
The present writer believes that this inspection power is but an adjunct
to the adjudicatory function. It can be exercised only to assist or expedite
adjudication of a pending dispute. T h e power is not meant to duplicate the
visitatorial-enforcement authority under Article 128.
1.6 Adjudicatory Power: Original
Each of the NLRC divisions has original jurisdiction over petitions for
injunction or temporary restraining order under Article 2 1 8 ( e ) .
Also, it has original jurisdiction to hear and decide "National Interest"
cases certified to it by the Secretary of Labor under Article 263(g). T h e NLRC
thereby gains jurisdiction over all questions submitted or necessarily deemed
submitted so as to resolve the dispute, even over issues that otherwise fall within
the labor arbiter's exclusive jurisdiction.

'Industrial and Transport Equipment, Inc., et al. vs. NLRC, et al, G.R. No.
113592, January 15, 1998.
Ibid.

68
 POWERS AND DUTIES ARTS. 218-219
(Part 2. Powers)

1.7 Adjudicatory Power: Appellate

The NLRC (i.e., a division) has exclusive appellate jurisdiction over all cases
1
decided by labor arbiters and the D O L E regional director or hearing officers
under Article 129.
T h e NLRC has no appellate jurisdiction over decisions rendered by (1)
a voluntary arbitrator, or (2) the secretary of labor, or (3) the bureau of labor
relations director on cases appealed from the D O L E regional offices. T h e
decisions of these three offices are appealable rather to the Court of Appeals.
As already noted, cases falling within the labor arbiter's jurisdiction are
employment-connected. Where the labor arbiter has no jurisdiction or has not
acquired jurisdiction, neither has the NLRC. Its jurisdiction over cases under
Article 217(a) is appellate, not original.
Pondoc vs. NLRC, et al, G.R. No. 116347, October 3, 1996 —
Facts: Complainant employee won a judgment at the labor arbiter's level
ordering his employer to pay sums of money representing wage differential, 13th
month pay, and so forth. On the last day to perfect the appeal, the employer moved
that his liabilities be set-off against the employee's alleged unpaid indebtedness
to him. The labor arbiter denied the proposed set-off and instead issued a writ to
execute his decision that had become final. Before execution could be done, the
employer filed with the NLRC an independent action for injunction and damages. It
also presented evidence to prove the alleged indebtedness of the employee. Over the
employee's objection the NLRC issued an order setting aside that of the labor arbiter
and allowing the setting-off of complainant employee's indebtedness of P41,051.35
against the monetary award of P44,l 18.00.
Issue: May a division of the NLRC defeat a final judgment of the labor arbiter
by entertaining a petition for injunction and damages and by receiving evidence to
recover alleged indebtedness that will offset a monetary award to the employee?
Ruling: The proceedings before the NLRC were fatally flawed.
In the first place, the NLRC should not have entertained the private
respondent's [employer's] separate or independent petition for "Injunction and
Damages." It was obvious that the petition was a scheme to defeat or obstruct the
enforcement of the [labor arbiter's] judgment; in fact, a writ of execution had
been issued. Article 218(e) of the Labor Code does not provide blanket authority
to the NLRC or any of its divisions to issue writs of injunction, while Rule XI of the
New Rules of Procedure of the NLRC makes injunction only an ancillary remedy
in ordinary labor disputes such as the one brought by the petitioner. [In the NLRC
Rules of 2005 the statement describing the power to issue injunction as "ancillary"
has been deleted. — CAA]
Secondly, the appeal of the private respondent in NLRC was not from die
decision therein, but from the order of the Labor Arbiter denying die set-off insisted
upon by the private respondent and directing the execution of the judgment.
,
Article217[b].
69
 LABOR RELATIONS
ARTS. 218-219

Therefore, the private respondent admitted the final and executory character of the
judgment.
As correctly contended by the Office of the Solicitor General, there is a complete
want of evidence that the indebtedness asserted by the [employer] against [employee]
Pondoc arose out of or was incurred in connection with the employer-employee
relationship between them. The Labor Arbiter did not then have jurisdiction over
the claim as under paragraph (a) of Article 217 of the Labor Code, Labor Arbiters
have exclusive and original jurisdiction only in the following cases: x x x On the other
hand, under paragraph (b) thereof, the NLRC has exclusive appellate jurisdiction
over all cases decided by the Labor Arbiters. This simply means that the NLRC does
not have original jurisdiction over the cases enumerated in paragraph (a) and that
if a claim does not fall within the exclusive original jurisdiction of the Labor Arbiter,
the NLRC cannot have appellate jurisdiction thereon.

2. POWER TO ISSUE INJUNCTION OR TEMPORARY RESTRAINING ORDER

Aside from the powers mentioned above, the NLRC has injunction power
or, simply, the power to command that an act be done or not done. It may enjoin
any actual or threatened commission of any or all prohibited or unlawful acts,
or require the performance of a particular act in any labor dispute which, if not
restrained or performed forthwith, may cause grave or irreparable damage to
any party or render ineffectual any decision in favor of such party. An injunction,
in short, may either require, forbid, or stop the doing of an act.
Article 218(e) explains the injunctive power of the Commission and the
prerequisites for its exercise. But it must first be stressed that injunctions or
restraining orders are frowned upon as a matter of labor relations policy. This
no-injunction rule is found in Article 254 which provides: "No temporary or
permanent injunction or restraining order in any case involving or growing out
of labor dispute shall be issued by any court or other entity, except as otherwise
provided in Articles 218 and 264 of this Code." This policy explains why Article
218(e) prescribes the particular procedure and requisites that must be carefully
observed before an injunctive writ may issue.
T h e action for injunction is distinct from the ancillary remedy of
preliminary injunction which cannot exist except only as part or an incident of
an independent action or proceeding. As a matter of course, in an action for
injunction, the auxiliary remedy of preliminary injunction, whether prohibitory
or mandatory, may issue. Under the present state of the law, the main action
of injunction seeks a judgment embodying a final injunction which is distinct
from, and should not be confused with the provisional remedy of preliminary
injunction, the sole object of which is to preserve the status quo until the merits
can be heard. A writ of preliminary injunction is generally based solely on initial
and incomplete evidence. T h e evidence submitted during the hearing on an
application for a writ of preliminary injunction is not conclusive or complete

70
 POWERS AND DUTIES ARTS. 218-219
(Part 2. Powers)

for only a "sampling" is needed to give the trial court an idea of the justification
for the preliminary injunction pending the decision of the case on the merits.
As such, the findings of fact and opinion of a court when issuing the writ of
preliminary injunction are interlocutory in nature and made even before the
trial on the merits is commenced or terminated. It does not necessarily proceed
1
that when a writ of preliminary injunction is issued, final injunction will follow.
T h e reasons for the petition for injunction must be specified, but it is not
necessary to allege in verbatim the requisites for the issuance of the temporary
restraining order a n d / o r writ of preliminary injunction under Article 218(e)
of the Labor Code. For instance, the bank has made sufficient allegations that
members of petitioner union were unlawfully preventing or obstructing the
free ingress to and egress from the respondent bank premises; and disrupting
operations, causing great and continuing damage to the bank in terms of lost
revenues. These were proven by the bank during the proceedings for the issuance
2
of a writ of preliminary injunction.
Where the trial court [now N L R C ] did not follow and observe the
procedure outlined and provided for in Section 9 ( d ) of Republic Act No.
875 [counterpart of present Article 2 1 8 ( e ) ] in issuing the preliminary writ of
prohibitory injunction, the said writ is illegal and void, although the court had
3
jurisdiction to issue it.

2.1 Injunction by Labor Arbiter

May a labor arbiter issue an injunction or a restraining order? Under
the Guidelines Governing Labor Relations (October 1987), this power was
reserved specifically to the Commission proper. T h e Rules of Procedure (1990)
of the NLRC, on the other hand, provided that the ancillary power of issuing
preliminary injunction or a restraining order "may be exercised by the Labor
Arbiters only as an incident to the cases pending before them in order to preserve
the rights of the parties during the pendency of the cases but excluding labor
disputes involving strike or lockout."
This power of the labor arbiter was recognized in the last sentence, Section
1, Rule XI of the NLRC Rules of 1990. But it must be noted that that statement no
longer appears in the 2002 and 2005 NLRC Rules. Indeed, NLRC Commissioner
[now CA Justice] Vicente S.E. Veloso HI has argued that Article 218 limits the

'Urbanes, Jr. vs. Court of Appeals, Social Security System, G.R. No. 117964,
March 28, 2001.
^The Hongkong and Shanghai Banking Corporation Employees Union vs.
National Labor Relations Commission and the Hongkong and Shanghai Banking
Corp., G.R. No. 113541, November 22, 2001.
3
Reyes vs. Tan, 52 Off. Gaz. 6187; Allied Free Workers' Union vs. Apostol, 54
Off. Gaz. 981; and Associated Watchmen and Security Union vs. United States Lines,
54 Off. Gaz. 7397.
71
 ARTS. 218-219 LABOR RELATIONS

grant of injunctive power to the "Commission" meaning the Commission en banc

or any of its divisions. The labor arbiter is "excluded statutorily," hence no NLRC
1
Rules can grant him that power.
2.2 Requisites for Issuance of Restraining Order or Injunction
As a rule, restraining orders or injunctions do not issue ex parte and only
after compliance with the following requisites, to wit
a) a hearing held "after due and personal notice thereof has been served,
in such manner as the Commission shall direct, to all known persons against
whom relief is sought, and also to the Chief Executive and other public officials
of the province or city within which the unlawful acts have been threatened or
committed charged with the duty to protect complainant's property";
b) reception at the hearing of "testimony of witnesses, with opportunity
for cross-examination, in support of the allegations of a complaint made under
oath," as well as "testimony in opposition thereto, if offered x x";
c) "a finding of fact by the Commission, to the effect: (1) T h a t
prohibited or unlawful acts have been threatened and will be committed and
will be continued unless restrained, but no injunction or temporary restraining
order shall be issued on account of any threat, prohibited or unlawful act, except
against the person or persons, association or organization making the threat or
committing the prohibited or unlawful act or actually authorizing or ratifying
the same after actual knowledge thereof; (2) That substantial and irreparable
injury to complainant's property will follow; (3) That as to each item of relief to
be granted, greater injury will be inflicted upon complainant by the denial of
relief than will be inflicted upon defendants by the granting of relief; (4) That
complainant has no adequate remedy at law; and (5) That the public officers
charged with the duty to protect complainant's property are unable or unwilling
2
to furnish adequate protection."

2.3 Conditions for Issuance Ex Parte of a Temporary Restraining Order

(TRO)
A temporary restraining order (valid only for 20 days) may be issued ex
parte under the following conditions:
a) the complainant "shall also allege that, unless a temporary restraining
order shall be issued without notice, a substantial and irreparable injury to
complainant's property will be unavoidable";
b) there is "testimony under oath, sufficient, if sustained, to justify the
Commission in issuing a temporary injunction upon hearing after notice";
c) the "complainant shall first file an undertaking with adequate security
in an amount to be fixed by the Commission sufficient to recompense those

•PMAP Labor Relations Update, Q3 and Q4, p. 2.

2
Ilaw at Buklod ng Manggagawa vs. NLRC, G.R. No. 91980, June 27, 1991.
72
 POWERS AND DUTIES ARTS. 218-219
(Part 2. Powers)

enjoined for any loss, expense or damage caused by the improvident or erroneous
issuance of such order or injunction, including all reasonable costs, together
with a reasonable attorney's fee, and expense of defense against the order or
against the granting of any injunctive relief sought in the same proceeding and
subsequently denied by the Commission"; and
d) the "temporary restraining order shall be effective for no longer than
1
twenty (20) days and shall become void at the expiration of said twenty (20) days."
To be sure, the issuance of an ex parte temporary restraining order in a labor
dispute is not per se prohibited. Its issuance, however, should be characterized by
care and caution for the law requires that it be clearly justified by considerations
of extreme necessity, i.e., when the commission of unlawful acts is causing
substantial and irreparable injury to company properties and the company is,
2
for the moment, bereft of an adequate remedy at law.
An injury is considered irreparable if it is of such constant and frequent
recurrence that no fair and reasonable redress can be had therefor in a court of
law or where there is no standard by which their amount can be measured with
reasonable accuracy, that is, it is not susceptible of mathematical computation.
It is considered irreparable injury when it cannot be adequately compensated
in damages due to the nature of the injury itself or the nature of the right or
property injured or when there exists no certain pecuniary standard for the
3
measurement of damages.
"Property" includes not only tangible property but also the right to use
such property. Where the evidence showed mass picketing by strikers, obstruction
of entrances to plaintiffs plant, intimidation of and unlawful conduct toward
nonstrikers, and interference with automobiles hired by plaintiff to convey
nonstrikers, resulting in the closing of the plaintiffs plant, it was held that there
4
was injury to "property" within this provision.
5
"Public officers" means local law enforcing officers.
Injunction cannot issue against unlawful acts, unless the local authorities
whose duty is to keep the peace have first been resorted to and have either advised
that they could not or would not keep it, or advising that they could and would
6
have failed through inability or unwillingness to do so.

'Haw at Buklod ng Manggagawa vs. NLRC, G.R. No. 91980, June 27, 1991.
2
Bisig ng Manggagawa sa Concrete Aggregates, Inc. vs. NLRC, Labor Arbiter
Ernilo Peñalosa and Concrete Aggregates Corp., G.R. No. 105090, September 16,
1993.
Philippine Airlines vs. NLRC, et al, G.R. No. 120567, March 20, 1998.
4
Knapp-Monarch Co. vs. Anderson, 7 F. Supp 332; Tri-Plex Shoe Co. vs. Cantor,
25 F. Supp. 996.
5
Cupples Co. vs. American Fed. of Labor, 20 F. Supp. 894.
6
Carter vs. Herrin Motor Freight Lines, 131 F. 2d 557.

73
 ARTS. 218-219 LABOR RELATIONS

The "protection" contemplated is that which would enable the employer to

1
proceed with the work.
In view of this requirement, the employer may not seek by injunction protection
from losses which the exercise of the powers of the police could not be calculated
2
to prevent.
The intent of this requirement is to take the executive function of law
enforcement out of the court and leave it to the appropriate executive officers, unless
3
they fail to function. The reason is that the preservation of order and the protection
4
of property are primarily police and executive, rather than judicial problems.
For this reason, these public officers should be served the notice of hearing
of the application for injunction.
2.4 No Adequate Remedy
In addition to the other requirements which the complainant must satisfy
in order to obtain injunctive relief under the Act, the complainant must show
that "he has no adequate remedy at law."
An adequate remedy at law has been defined as one "that affords relief with
reference to the matter in controversy, and which is appropriate to the particular
5
circumstances of the case."
It is well settled that the existence of a remedy at law does not necessarily
preclude injunctive relief. In order to have that effect, a remedy at law must,
in the first place, be plain and not doubtful or obscure. Secondly, it must be
6
complete.
It has been held that one who closes down his business in consequence of
labor difficulties may not thereafter successfully sue to enjoin a sit-down strike
called by the plaintiff's former employees for the purpose of preventing removal
of the machinery and liquidation of the plant, because an action of ejectment
7
will furnish an adequate legal remedy.
2.5 Cash Bond
Under the NLRC Rules of 2005, no temporary restraining order or writ of
preliminary injunction shall be issued except on the condition that petitioner
shall first file an undertaking to answer for the damages and post a cash bond in
the amount of Fifty Thousand Pesos (P50,000.00), or such higher amount as may
be determined by the Commission. T h e purpose of the bond is to recompense

'Cater Const. Co. vs. Nischwitz, 11 F 2 971.

^Wilson 8c Co. vs. Birl, 105 F 2d 948.
3
United Packing House Workers of America vs. Wilson Co., 80 F. Supp 563.
4
Heintz Mfg. Co. vs. Local No. 515 of United Automobile Workers, 20 F Supp.
116.
5
Mt. Vermon vs. Borman, 100 Ohio St. 2, 75,125 NE 116 [1919].
t e l l e r , Labor Disputes and Collective Bargaining, Vol. 1, p. 628.
7
Oswald vs. Leader, 20 F. Supp. 876 [DC ED Pa. 1937].

74
 POWERS AND DUTIES ARTS. 218-219
(Part 2. Powers)

those enjoined for any loss, expense or damage caused by the improvident
or erroneous issuance of such order or injunction, including all reasonable
costs, together with a reasonable attorney's fee, and expense of defense against
the order or against the granting of any injunctive relief sought in the same
proceeding and subsequently denied by the Commission.

2.6 Scope
As to the scope of an injunction issued under the Act, both the Act itself and
the cases restrict the operation of such injunctions not only to the specific acts
complained of in the pleadings and proven at trial as wrongful, but further, limits
the injunction to only those alleged and proven guilty of actual participation,
1
authorization or ratification of such acts.
The power of the NLRC to enjoin or restrain the commission of any or all
prohibited or unlawful acts as provided in Article 218 of the Labor Code, can
only be exercised in a labor dispute. In one case it was held that the company's
demand for payment of the [employees'] amortizations on their car loans, or, in
the alternative, the return of the cars to the company, is not a labor, but a civil
dispute. It involves debtor-creditor relations, rather than employee-employer
relations, x x x. T h e NLRC gravely abused its discretion and exceeded its
jurisdiction by issuing the writ of injunction to stop the company from enforcing
the civil obligation of the [employees] under the car loan agreements and from
protecting its interest in the cars which, by the terms of those agreements, belong
to it (the company) until their purchase price shall have been fully paid by the
employee. T h e terms of the car loan agreements are not an issue in the labor
case. The rights and obligations of the parties under those contracts may be
2
enforced by a separate civil action in the regular courts, not in the NLRC.
2.7 Reception of Evidence
The reception of evidence "for the application of a writ of injunction may
be delegated by the Commission to any of its Labor Arbiters who shall conduct
such hearings in such places as he may determine to be accessible to the parties
and their witnesses and shall submit thereafter his recommendation to the
Commission."
"Labor Arbiter" in the preceding sentence may now refer to "Commission
Attorney," a position created by R.A. No. 9347 (July 27, 2006) to assist the
Commission and its divisions in their appellate and adjudicatory functions. Note
further this provision in R.A. No. 9347: "No Labor Arbiter shall be assigned to
perform the functions of the Commission Attorney nor detailed to the office of
any Commissioner."

1
Rothenberg on Labor Relations, p. 213.
*Nestle Philippines, Inc. vs. NLRC, G.R. No. 85197, March 18, 1991.

75
 ARTS. 218-219 LABOR RELATIONS

2.8 Twenty-day Life of TRO

A temporary restraining order ( T R O ) , if issued at all in a petition for
injunction, is valid only for twenty (20) days and becomes void ipso facto at the
end of that period.
1
The TRO takes effect upon its issuance and not upon receipt of the parties.
In computing the effectivity of a T R O , Saturday, Sunday, and holidays are
not excluded. The maximum period of 20 days includes Saturdays, Sundays, and
2
holidays.
2.9 Illustrative Case: Issuance of T R O
A petition for injunction and T R O may be filed with the NLRC where the
complaint filed with the labor arbiter against slowdown by petitioner's employees
has not yielded adequate relief.
Haw at Buklod Ng Mangggawa vs. NLRC and San Miguel Corporation, G.R. No.
91980, June 27, 1991 —
Facts: On December 8, 1989, claiming that its action in the Arbitration
Branch had as yet "yielded no relief," San Miguel Corporation (SMC) filed
another complaint against the Union and members thereof directly with the
National Labor Relations Commission, "to enjoin and restrain illegal slowdown
and for damages, with prayer for the issuance of a cease-and-desist and temporary
restraining orders." T h e NLRC's First Division directed SMC to present evidence
in support of the application before a commissioner. On December 19,1989, the
First Division promulgated a Resolution on the basis of "the allegations of the
petitioner (SMC) and the evidence adduced ex partem support of their petition."
The Resolution —
1) authorized the issuance of "a Temporary Restraining Order for a
period of twenty (20) days x x x upon x x x a cash or surety bond in the amount
of P50,000.00 x x x DIRECTING the respondents to CEASE and DESIST from
further committing the acts complained about particularly their not complying
with the work schedule."
The Union filed the petition which commenced the special civil action of
certiorari and prohibition. It asserted that the NLRC, as an essentially appellate
body, had no jurisdiction to act on the plea for injunction in the first instance.
Ruling: The Court finds that the respondent Commission has acted entirely
in accord with applicable provisions of the Labor Code.
T h e record reveals that the Commission exercised the power directly and
plainly granted to it by sub-paragraph ( e ) , Article 217 in relation to Article 254

'SC Administrative Circular 20-95, par. 3; Manotoc vs. Agcaoili, AM. No. RTJ-
98-1405, April 12, 2000.
Ibid.

76
 POWERS AND DUTIES ARTS. 218-219
(Part 2. Powers)

of the Code, and that it faithfully observed the procedure and complied with
the conditions for the exercise of that power prescribed in said sub-paragraph
( e ) . It acted on SMC's application for immediate issuance of a temporary
restraining order ex parte on the ground that substantial and irreparable injury
to its property would transpire before the matter could be heard on notice; it,
however, first directed NLRC Labor Arbiter Carmen Talusan to receive SMC's
testimonial evidence in support of the application and thereafter submit her
recommendation thereon; it found SMC's evidence adequate and issued the
temporary restraining order upon bond. No irregularity may thus be imputed
to the respondent Commission in the issuance of that order.

In another case the labor arbiter, in recommending the award in the

original decision, raised the amount from P98,883.80 to PI,372,452.55. This fact
alone, the Court held, is justification enough for the NLRC to issue a temporary
restraining order, following usual procedure. T h e judgment creditors, anyway,
are protected by the supersedeas bond put up by the employer in the amount
1
of the recomputed award.

2.10 Injunction from NLRC Not the Proper Remedy Against Employee's
Dismissal
In the preceding case involving slowdown at San Miguel Corporation, the
employer petitioned for an injunction after it had commenced an action at the
arbiter's level, and the High Court held that it was proper for NLRC to entertain
and act on the petition for injunction. But in the PAL case given below involving
employee dismissal no case had yet been filed with the labor arbiter when the
petition for injunction was filed with the NLRC. T h e High Court invalidated
the injunction issued by NLRC. Petition for injunction is not the way to halt an
employee's dismissal.
Philippine Airlines, Inc. vs. NLRC, et al, G.R. No. 120567, March 20, 1998 —
Facts: PAL dismissed two flight stewards for their alleged involvement in
smuggling some 2.5 million Philippine pesos in Hongkong airport. The employees,
instead of filing an illegal dismissal complaint before a labor arbiter, directly petitioned
the NLRC for injunction, with prayer for a TRO, to prohibit Philippine Airlines
from effecting their dismissal and, after hearing, to reinstate them to their jobs, with
backwages and damages. The NLRC, citing its injunctive power under Article 218(e)
of the Labor Code, issued the injunction. PAL disputed the legality of the issuance,
contending that injunction or restraining order under Article 218(e) may be issued
by NLRC only if the case involves or arises from labor disputes. Debunked by NLRC,
PAL management took recourse to the High Court.

1
Abbot, et al. vs. National Labor Relations Commission, et al, G.R. No. 65173,
October 27, 1986.
77
 LABOR RELATIONS
ARTS. 218-219

Ruling: The power of the NLRC to issue an injunctive writ originates from
"any labor dispute" upon application by a party thereof, which application if not
granted "may cause grave or irreparable damage to any party or render ineffectual
any decision in favor of such party."
It is an essential requirement that there must first be a labor dispute between
the contending parties before the labor arbiter. In the present case, there is no labor
dispute between the petitioner [employer] and private respondents [the dismissed
employees] as there has yet been no complaint for illegal dismissal filed with the
labor arbiter by the private respondents against the petitioner.
The petition for injunction directly filed before the NLRC is in reality an action
for illegal dismissal. This is clear from the allegations in the petition which prays for
reinstatement of private respondents; award of full backwages, moral and exemplary
damages, and attorney's fees. As such, the petition should have been filed with the
labor arbiter who has the original and exclusive jurisdiction to hear and decide the
1
following cases...
On the other hand, the NLRC shall have exclusive appellate jurisdiction over
all cases decided by labor arbiters as provided in Article 217(b) of the Labor Code.
In short, the jurisdiction of the NLRC in illegal dismissal cases is appellate in nature
and, therefore, it cannot entertain the private respondents' petition for injunction
which challenges the dismissal orders of petitioner. Article 218(e) of the Labor Code
does not provide blanket authority to the NLRC or any of its divisions to issue writs
of injunction, considering that Section 1 of Rule XI of the New Rules of Procedure
of the NLRC makes injunction only an ancillary remedy in ordinary labor disputes.
Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order
granting private respondents' petition for injunction and ordering the petitioner to
reinstate private respondents.

•See Article 217.

78
 Chapter II
POWERS AND DUTIES (cont'd.)
[Part 3. PROCEDURE]

Overview/Key Questions: Box 5

1. Technical rules are not strictly followed in proceedings
before the NLRC and the Labor Arbiter. How is this
rule reconciled with the requirement of procedural
due process?
2. How are compulsory arbitration cases heard and
decided?

ART. 2 2 1 . TECHNICAL RULES NOT BINDING AND PRIOR RESORT TO

AMICABLE SETTLEMENT
I n any p r o c e e d i n g b e f o r e the Commission o r any o f the L a b o r
Arbiters, the rules of evidence prevailing in courts of law or equity shall
not be controlling and it is the spirit and intention of this Code that the
Commission and its members and the L a b o r Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively
and without regard to technicalities of law or procedure, all in the interest of
due process. In any proceeding before the Commission or any Labor Arbiter,
the parties may be represented by legal counsel but it shall be the duty of
the Chairman, any Presiding Commissioner or commissioner or any Labor
Arbiter to exercise complete control of the proceedings at all stages.
Any provision of law to the contrary notwithstanding, the Labor Arbiter
shall exert all efforts towards the amicable settlement of a labor dispute
within his jurisdiction on or before the first hearing. The same rule shall
apply to the Commission in the exercise of its original jurisdiction.
COMMENTS AND CASES
1. PROCEEDINGS BEFORE LABOR ARBITER OR THE COMMISSION;
TECHNICAL RULES NOT APPLICABLE
Administrative and quasi-judicial bodies, like the National Labor
Relations Commission, are not bound by the technical rules of procedure in
1
the adjudication of cases.
!
Ford Philippines Salaried Employees Association vs. National Labor Relations
Commission, G.R. No. 75347, December 11, 1987.
79
 ART. 221 LABOR RELATIONS

Simplification of procedure, without regard to technicalities of law or

procedure and without sacrificing the fundamental requisites of due process,
is mandated to insure speedy administration of justice. The Supreme Court
construed Article 221 of the Labor Code so as to allow the National Labor
Relations Commission or a labor arbiter to decide a case on the basis of position
papers and other documents submitted without resorting to technical rules of
1
evidence as observed in the regular courts of justice.
Although the affiants have not been presented to affirm the contents of
their affidavits and be cross-examined, their affidavits may be given evidentiary
value. The argument that such affidavits were hearsay is not persuasive. Rules of
evidence are not strictly observed in proceedings before administrative bodies
2
like the NLRC.
1.1 Modicum of Admissibility; Substantial Evidence
It is true that administrative quasi-judicial bodies like the NLRC are not
bound by the technical rules of procedure in the adjudication of cases. However,
this procedural rule should not be construed as a license to disregard certain
fundamental evidentiary rules. While the rules of evidence prevailing in the
courts of law or equity are not controlling in proceedings before the NLRC, the
evidence presented before it must at least have a modicum of admissibility for it
to be given some probative value. For instance, the Statement of Profit and Losses
submitted by Crispa, Inc. to prove its alleged losses, without the accompanying
signature of a certified public accountant or audited by an independent auditor,
are nothing but self-serving documents which ought to be treated as a mere scrap
of paper devoid of any probative value. For sure, this is not the kind of sufficient
and convincing evidence necessary to discharge the burden of proof required
of petitioners to establish the alleged losses suffered by Crispa, Inc. in the years
immediately preceding 1990 that would justify the retrenchment of respondent
3
employees.
Not only must there be some evidence to support a finding or conclusion,
but evidence must be substantial. Substantial evidence is more than a mere
scintilla. It means such relevant evidence as a reasonable mind might accept as
4
adequate to support a conclusion.

1.2 Cardinal Rights in Quasi-Judicial Proceedings

There are cardinal primary rights which must be respected in administrative
or quasi-judicial proceedings. Not the least among them are those which refer

1Robusta Agro Marine Products, Inc. vs. Gorombalem, G.R. No. 80500, July 5,
1989; Sevillana vs. I.T. Corp., et al, G.R. No. 99047, April 16, 2001.
2
Bantolino, et al vs. Coca-Cola Bottlers Phils., G.R. No. 153660, June 10, 2003.
3
Uichico, et al vs. NLRC, G.R. No. 121434,June 2, 1997.
4
Gelmart Industries [Phils.], Inc. vs. Leogardo, Jr., G.R. No. 70544, November
5, 1987.

80
 POWERS AND DUTIES ART. 221
(Part 3. Procedure)

to the evidence required to support a decision. While the duty to deliberate

does not impose the obligation to decide rightly, it does imply a necessity which
cannot be disregarded, namely, that of having something to support the decision.
A decision with absolutely nothing to support it is a nullity, at least, when directly
1
attacked.
It would be in keeping with the directive of Article 221 of the Labor Code
(which provides that the rules of evidence prevailing in courts of law or equity
shall not be controlling) for the Minister of Labor to take into account the
evidence sought to be presented by the employer regarding its financial reverses,
especially if the Bureau Director did not conduct a full-blown hearing, because
said evidence, when accorded its due weight, would indubitably show that the
2
employer had a just cause for terminating the employees' employment.
Where the complaint is for the recovery of unused vacation leave and
sick leave, it is palpable and prejudicial error to grant the employees complete
payment for all the vacation and sick leaves, without receiving evidence on and
determining the exact number of days thereof which may not have been used
or availed of by the employees and which would be the proper subject of any
3
claim on their part.
Ang may vs. OR, 69 Phil. 335, February 27, 1940 —
Facts: The Solicitor General in behalf of CIR filed a motion for reconsideration,
while respondent National Labor Union, Inc. prayed for a new trial and vacation of
the judgment of the majority of this Court. This concerns the laying off of employees
of Ang Tibay belonging to the NLU, Inc.
Issue: Whether there was due process observed in the CIR proceedings.
Held: The CIR is a special court whose functions are specifically stated in the
law of its creation. It is more of an administrative board than a part of the integrated
judicial system of the nation. It is not narrowly constrained by technical rules of
procedure. However, this does not mean that it can entirely ignore or disregard the
fundamental and essential requirements of due process in trials and investigations
of an administrative character.
There are cardinal primary rights which must be respected even in proceedings
of this character:
1) right to a hearing;
2) tribunal must consider the evidence presented;
3) decision must be supported by something (evidence);

^ l m a r t Industries [Phils.], Inc. vs. Leogardo,Jr., G.R. No. 70544, November

5, 1989.
2
Columbia Development Corporation vs. Minister of Labor, G.R. No. 5769,
December 29, 1986.
3
Rural Bank of San Miguel [Bohol], Inc. vs. National Labor Relations
Commission, G.R. No. 82144, March 8, 1989.
81
 LABOR RELATIONS
ART. 221

4) supporting evidence must be substantial;

5) decision must be rendered on the evidence presented or at least
contained in the record and disclosed to the parties affected;
6) the body or CIR or any of its judges must act on his own independent
consideration of the law and facts, and not simply accept the views of the subordinate
in arriving at a decision; and
7) decide in such manner that parties can know the various issues involved
and the reason for the decision.

1.3 Verification
A pleading is verified by an affidavit that the affiant has read the pleading
and that the allegations therein are true and correct of his knowledge and belief.
Verification is intended to assure that the allegations in the pleading have been
prepared in good faith or are true and correct, not mere speculations. Generally,
lack of verification is merely a format defect that is neither jurisdictional nor
fatal. The court may order the correction of the pleading or act on the unverified
pleading if the attending circumstances are such that strict compliance with the
rule may be dispensed with in order to serve the ends of justice.
T h e purpose of verification was served where the verification of the
petition was done by an Employment Specialist of petitioner Pfizer, Inc.,
[employer] who "coordinated and actually took part in the investigation" of
the administrative charges against respondent. As such, she was in a position to
1
verify the truthfulness and correctness of the allegations in the petition.
In another case, the petitioner claims that out of the sixty-five complainants
only twenty-one of them signed the verification. Hence, petitioner infers that
only the twenty-one signatories have the legal personality to prosecute the case.
As for the rest of the complainants, petitioner insists that the complaint was
dismissible.
T h e Supreme Court does not agree. T h e complainants therein were being
represented by their counsel of choice. In addition, in the verification attached to
the complaint, it is manifested that the twenty-one complainant-signatories were
not only signing in their own behalf but also in behalf of the other complainants.
Surely, the signing of the verification is a matter of procedure which did not in
any way diminish nor weaken the claim of the other complainants. No special
power of attorney was needed considering that no compromise agreement was
being entered into. Besides, petitioner did not offer any objection when each of
2
the complainants presented evidence pertaining to his or her monetary claim.

'Pfizer Inc., et al vs. Galan, G.R. No. 143389, May 25, 2001.
2
Food Terminal, Inc. vs. NLRC, et al, G.R. No. 143352, April 27, 2001.

82
 POWERS AND DUTIES
(Part 3. Procedure)
ART. 221

1.4 Party Respondent

In a complaint for underpayment of wages and other money claims filed
by employees of a single proprietorship business, the respondent should be the
business owner. This is not necessarily the person in whose name the business
is registered.
Mayan Hotel & Restaurant, et al vs. Adana, et al., G.R. No. 157634, May 16,
2005 —
Facts: Mayon Hotel & Restaurant is a single proprietor business registered in the
name of petitioner Pacita O. Po, whose mother, Josefa, manages the establishment. On
various dates of April and May 1997, the 16 employees of the hotel filed complaints
for underpayment of wages and other money claims against petitioners. The Labor
Arbiter awarded substantially all of the employees' money claims. The Labor Arbiter
also held that based on the evidence presented, Josefa Po Lam was the owner/
proprietor of Mayon Hotel 8c Restaurant even though the registered owner was Pacita,
the daughter. Was it correct to hold Josefa Po Lam liable as the owner of Mayon Hotel
& Restaurant, and the proper respondent in the case?
Petitioners insist that it was error for the Labor Arbiter and the CA to have
ruled that petitioner Josefa Po Lam is the owner of the Mayon Hotel & Restaurant.
They contend that petitioner Josefa Po Lam's participation was limited to merely (a)
being the overseer; (b) receiving the month-to-month and/or year-to-year financial
reports and (c) visitation of the premises.
Ruling: The claim that petitioner Josefa Po Lam is merely the overseer is not
borne out by the evidence.
First. Only Josefa Po Lam appeared in the proceedings with the Labor Arbiter.
It was only on appeal with the NLRC that Pacita Po signed the pleading. The apathy
shown by petitioner Pacita Po is contrary to human experience as one would think
that the owner of the establishment would naturally be concerned when ALL her
employees file complaints against her.
Second. The records belie Josefa Po Lam's claim that she is merely an overseer.
The findings of the Labor Arbiter were based on credible, component and substantial
evidence. We quote:
Mayon Hotel and Restaurant is a [business name] of an enterprise.
While Josefa Po Lam claims that it is her daughter, Pacita Po, who owns
the hotel and restaurant, Josefa failed to submit the document of sale. .
. [Respondents] testified that it was Josefa who exercises all the acts and
manifestation of ownership of the hotel and restaurant like transferring
employees. It is Josefa to whom the employees submits reports, draws money
for payment of payables and for marketing, attending (sic) to Labor Inspectors
during ocular inspections. Except for documents whereby Pacita Po appears
as the owner of Mayon Hotel and Restaurant, nothing in the record shows
any circumstance or manifestation that Pacita Po is the owner. The least that
can be said is that it is absurd for a person to purchase a hotel and restaurant
in the very heart of the City of Legazpi verbally. Assuming this to be true,

83
 LABOR RELATIONS
ART. 221

when [petitoners], particularly Josefa, was directed to submit evidence as to

the ownership of Pacita, Josefa should [have] submitted the lease contract
between the owner of the building where the Mayon Hotel and Restaurant
was located and Pacita Po to clearly establish ownership by the latter of said
enterprise. Josefa failed.
Petitioners' reliance on the rules of evidence, i.e., the certificate of registration
being the best proof of ownership, is misplaced. Notwithstanding the certificate of
registration, doubts were cast as to the true nature of petitioner Josefa Po Lam's
involvement in the enterprise, and the Labor Arbiter had the authority to resolve
this issue.
Article 221 of the Labor Code is clear: technical rules are not binding, and the
application of technical rules of procedure may be relaxed in labor cases to serve the
demand of substantial justice. But more significantly, we sustain the Labor Arbiter
and the CA because even when the case was on appeal with the NLRC, nothing was
submitted to negate the Labor Arbiter's finding that Pacita Po is not the real owner
of the subject hotel and restaurant. Indeed, no such evidence was submitted in the
proceedings with the CA nor with this court. Thus, we find that there is substantial
evidence to rule that petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel
& Restaurant.

1.5 Prohibited Pleadings and Motions

Emphasizing the avoidance of legal technicalities, the NLRC 2005 Rules
(in Rule III, Section 4) does not allow the following motions or pleadings:
a. Motion to dismiss the complaint except on the ground of lack of
jurisdiction over the subject matter, improper venue, res judicata, prescription
and forum shopping;
b. Motion for a Bill of Particulars;
c. Motion for new trial;
d. Petition for r e l i e f from j u d g m e n t when filed with the L a b o r
Arbiter;
e. Petition for Certiorari, Mandamus, or Prohibition;
f. Motion to declare respondent in default;
g. Motion for Reconsideration or appeal from any interlocutory order
of the Labor Arbiter.

2. MANDATORY CONCILIATION AND MEDIATION CONFERENCE;

COMPROMISE ENCOURAGED
Nature of Proceedings.

T h e proceedings before the Labor Arbiter shall be non-litigious in

nature. Subject to the requirements of due process, the technicalities of law
and procedure and the rules obtaining in the courts of law shall not strictly

84
 POWERS AND DUTIES
(Part 3. Procedure)
ART. 221

apply thereto. T h e Labor Arbiter may avail himself of all reasonable means to
ascertain the facts of the controversy speedily, including ocular inspection and
1
examination of well-informed persons.
Mandatory Conciliation and Mediation Conference

a) T h e mandatory conciliation and mediation conference shall be

called for the purpose of (1) amicably settling the case upon a fair compromise;
(2) determining the real parties in interest; (3) determining the necessity of
amending the complaint and including all causes of action; (4) defining and
simplifying the issues in the case; (5) entering into admissions or stipulation of
facts; and (6) threshing out all other preliminary matters. T h e Labor Arbiter
shall preside and take full control of the proceedings.
(b) Conciliation and mediation efforts shall be exerted by the Labor
Arbiter all throughout the proceedings. Should the parties arrive at any
agreement as to the whole or any part of the dispute, the same shall be reduced
to writing and signed by the parties and their respective counsel or authorized
representative, if any, before the Labor Arbiter.
(c) In any case, the compromise agreement shall be approved by the
Labor Arbiter, if after explaining to the parties, particularly to the complainants,
the terms, conditions and consequences thereof, he is satisfied that they
understand the agreement, that the same was entered into freely and voluntarily
by them, and that it is not contrary to law, morals, and public policy.
(d) A compromise agreement duly entered into in accordance with this
section shall be final and binding upon the parties and shall have the force and
effect of judgment rendered by the Labor Arbiter.
(e) T h e mandatory conciliation and mediation conference shall, except
for justifiable grounds, be terminated within thirty (30) calendar days from the
date of the first conference.
(f) No motion for postponement shall be entertained except on
2
meritorious grounds.
Effect of failure of conciliation and mediation
Should the parties fail to agree upon an amicable settlement, either in
whole or in part, during the mandatory conciliation and mediation conference,
the Labor Arbiter shall terminate the conciliation and mediation stage and
proceed to pursue the other purposes of the said conference as enumerated in
the immediately preceding section. Thereafter, the Labor arbiter shall direct
the parties to simultaneously file their respective position papers on the issues
3
agreed upon by the parties and as reflected in the minutes of the proceedings.

^ e c . 2, Rule V, NLRC, Revised Rules of Procedure, 2005.

2
Section 3, Ibid.
3
85
Section 4, Ibid.
 LABOR RELATIONS
ART. 221

Non-appearance of parties
The non-appearance of the complainant or petitioner during the two (2)
settings for mandatory conciliation and mediation conference scheduled in the
summons, despite due notice thereof, shall be a ground for the dismissal of the
1
case without prejudice.
In case of non-appearance by the respondent during the first scheduled
conference, the second conference shall proceed as scheduled in the summons.
If the respondent still fails to appear at the second conference despite being
duly served with summons, the Labor Arbiter shall immediately terminate the
mandatory conciliation and mediation conference. The Labor Arbiter shall
thereafter allow the complainant or petitioner to file his verified position paper
and submit evidence in support of his cause of action, and thereupon render
2
his decision on the basis of the evidence on record.
Under these rules, it is incumbent upon the Labor Arbiter not only to
persuade the parties to settle amicably, but equally to ensure that the compromise
agreement entered into by them is a fair one and that the same was forged [i.e.,
agreed upon] freely, voluntarily and with a full understanding of the terms and
conditions as well as the consequences. T h e latter onus devolving upon the
Labor Arbiter gains significance when taken in conjunction with Article 222 of
the Labor Code of the Philippines, which allows non-lawyers to appear before
3
the labor tribunal in representation of their own selves.
It is true that a compromise agreement once approved by the court
has the effect of res judicata between the parties and should not be disturbed
except for vices of consent and forgery. However, the National Labor Relations
Commission may disregard technical rules of procedure in order to give life to
the constitutional mandate affording protection to labor and to conform to the
need of protecting the working class whose inferiority against the employer has
4
always been earmarked by disadvantage.

2.1 Binding Effect of Compromise Agreement

Generally, a judgment on a compromise agreement puts an end to a
litigation and is immediately executory. However, the Rules of Court requires
a special authority before an attorney can compromise the litigation of his
clients. The authority to compromise cannot lightly be presumed and should
be established by evidence. Section 9, Rule III of the NLRC Rules of Procedure
states: "Attorneys and other representatives of parties shall have authority to

'Section 5, Rule V, NLRC Revised Rules of Procedure, 2005.

2
Ibid.
Santiago vs. De Guzman, G.R. No. 84578, September 7, 1989.
4
Principe vs. Philippine-Singapore Transport Services, Inc., G.R. No. 80918,
August 26, 1989.

86
 POWERS AND DUTIES
(Part 3. Procedure)
ART. 221

bind their clients in all matters of procedure, but they cannot, without a special
power of attorney or express consent, enter into a compromise agreement with
the opposing party in full or partial discharge of a client's claim."
Also not to be overlooked is Section 3 (c and d) of the NLRC 2005
Rules of Procedure quoted above. It requires the Labor Arbiter's approval of a
compromise agreement over a case pending before the Labor Arbiter.
General Rubber and Footwear Corporation vs. Drilon, G.R. No. 76988, January
31, 1989 —
Facts: In 1984, Wage Order No. 6 was issued increasing the statutory minimum
wage rate. General Rubber applied for exemption, but the Wage Council denied the
application. Some members of the Union declared a strike against General Rubber.
Three days later, General Rubber and Sto. Domingo, purporting to represent the
striking workers, entered into a return-to-work agreement, where the Union agreed
not to demand the differential pay arising from the wage order. Some 268 members of
the Union ratified the document, but some 100 members, who viewed the Council's
order as final, refused to ratify it. These minority members sought a writ of execution
of the Council's order.
The Ministry of Labor directed the issuance of a writ of execution and required
General Rubber to pay the minority members their claim for differential pay.
Issue: Is the waiver agreement binding upon all the members of the union,
even those who did not sign it?
Ruling: The minority members cannot be bound by the return-to-work
agreement. The waiver of the money claims is a personal right, i.e., a right that must
be personally exercised. For a waiver thereof to be legally effective, the individual
consent or ratification of the workers or employees involved must be shown. Neither
the officers nor the majority of the union had any authority to waive the accrued
rights pertaining to the dissenting minority members.
This does not mean that the accrued money claims can never be waived.
However, in the present case, the minority members never waived their claims to
accrued differential pay. Since Article 4 of the return-to-work agreement was not
enforceable against the nonconsenting union members, the order of the National
Wages Council must be regarded as having become final and executory insofar as the
nonconsenting union members were concerned. Enforcement by writ of execution
of that order was therefore proper.

2.2 Quitclaim and Waivers

Olacao, et al. vs. NLRC, et al, G.R. No. 81390, August 29, 1989 —
Facts: In 1977, the complainants (employees) filed a complaint for unpaid
wages and living allowances against their employer. One of the issues was whether the
documents each signed individually by complainants denominated as "Receipts and
Release" were legally binding. The documents showed that each of the complainants
received the specified amounts from respondents representing full and final payment

87
 ART. 221 LABOR RELATIONS

of their "past salaries, wages, termination pay, overtime pay and other privileges* and
that they forever released and discharged the respondents and its successors of any
claims and liabilities. Based on these documents the Labor Arbiter dismissed the
complaint for lack of merit and for being moot and academic.
In 1978, complainants filed another complaint, this time for illegal dismissal,
praying for reinstatement with full backwages. The Labor Arbiter dismissed the charge
of illegal dismissal but ordered the company to pay complainants separation pay. The
employer appealed to the NLRC the grant of the separation pay.
The NLRC reversed the labor arbiter, saying that the issue of termination pay
was already resolved in the previous case and was barred by prior judgment. The
employees went up to the Supreme Court to pursue their claim for separation pay,
contending that NLRC abused its discretion.
Ruling: No grave abuse of discretion can be attributed to the NLRC for
concluding that the issue of termination pay had already been passed upon and
resolved; in other words, a clear case of 'res judicata* or bar by former judgment. The
NLRC found that complainants had already been paid their several money claims
including their termination pay. Parties ought not to be permitted to litigate an issue
more than once. The Decisions in the "Unpaid Wages Case" legally and finally settled
the question of separation pay of petitioners.
But petitioners claim that the causes of action in the two cases were different
— in the "Unpaid Wages Case," money claims were involved; in the "Illegal Dismissal
Case," petitioners challenged their termination from employment. The difference,
however, appears only on the surface. In essence, because petitioners claimed that
they had been illegally dismissed, they prayed "for backwages from the date of illegal
dismissal."
Petitioners further contend that their acceptance of separation pay does
not operate as a waiver of their claims in the "Illegal Dismissal Case." Indeed,
jurisprudence exists to the effect that a deed of release or quitclaim cannot bar an
employee from demanding benefits to which he is legally entitled; that quitclaims
and/or complete releases executed by the employees do not estop them from
pursuing their claim arising from the unfair labor practice of the employer; and that
employees who received their separation pay are not barred from contesting the
legality of their dismissal, and that acceptance of those benefits would not amount
to estoppel.
A telling difference from the cited cases, however, is the fact that the issue of
the validity of the releases, executed by petitioners under oath, was squarely raised
and resolved in [the] Decision in the "Unpaid Wages Case," which found categorically
that:
'The document relieved absolutely and forever released and discharged
the Eastcoast Development Enterprises, Inc., its successors and assigns, of any
and all claims and liabilities whatsoever insofar as their past salaries, termination
pay, overtime pay and other privileges accorded them by law." (Italics ours)

88
 POWERS AND DUTIES
(Part 3. Procedure)
ART. 221

2.2a Final and Executory Judgment Cannot be Negotiated

Although compromise agreements are encouraged, this general rule does
not apply to decisions that have become final and executory. In a labor case the
employer, after receiving an unfavorable decision, managed to secure a "release
and quitclaim" from the complainants but this "release" became itself a subject of
litigation between them, thereby dragging the main dispute for 18 years. Ruling
on the appeal by the employer, the Supreme Court, sounding exasperated,
declared:
In the present case, the judgment of the Court of Industrial Relations
had long become final and executory. A final and executory judgment can
no longer be altered. As we held in a recent case, "(t) he judgment may
no longer be modified in any respect, even if the modification is meant
to correct what is perceived to be an erroneous conclusion of fact or law,
and regardless of whether the modification is attempted to be made by the
court rendering it or by the highest court of the land." Moreover, a final
and executory judgment cannot be negotiated, hence, any act to subvert
it is contemptuous. T h e NLRC was correct in setting aside the order of the
Labor Arbiter dated 31 October 1984, as the same was void. It rendered
the very decision of this Court meaningless, and showed disrespect for
the administration of justice. This should not be sanctioned. (Alba Patio
de Makati vs. NLRC, G.R No. 85393, September 5, 1991, quoting Philippine
Apparel Workers Union vs. NLRC, 125 SCRA 393 [1983].)
Note: See also Veloso vs. DOLE, cited under Article 227 and the recent
definitive summation in Magbanua vs. Dy.

3. MOTION TO DISMISS
In 1989, the Supreme Court ruled that the Labor Code and the NLRC Rules
1
did not provide for a specific period within which to file a motion to dismiss.
But this Pepsi-Cola ruling is deemed obsolete. The NLRC Rules of 2005
state:
On or before the date set for the mandatory conciliation and
mediation conference, the respondent may file a motion to dismiss. Any
motion to dismiss on the ground of lack of jurisdiction, improper venue, or
that the cause of action is barred by prior judgment, prescription or forum
shopping, shall be immediately resolved by the Labor Arbiter through
a written order. An order denying the motion to dismiss or suspending
its resolution until the final determination of the case is not appealable.
(Section 6, Rule V.)

'Pepsi Cola Bottling Company vs. Guanzon, et al., G.R. No. 81162, April 19,
1989.
89
 ART. 221 LABOR RELATIONS

3.1 Motu Propio Dismissal of Complaint Based on Prescription

Even if the technical rules of procedure obtaining in ordinary civil actions
is applied (i.e., the motion to dismiss must be filed within 10 days from receipt
of the complaint), the dismissal of the employee's complaint for illegal dismissal
and reinstatement is still proper, where it is apparent from its face that the action
has prescribed. The complainant himself alleged in the complaint that he was
unlawfully dismissed in 1979. The complaint was filed only on November 14,
1984. The rule on waiver of defenses by failure to plead in the answer or motion
to dismiss does not apply when the plaintiff's own allegations in the complaint
shows clearly that the action has prescribed. In such a case, the court may motu
proprio dismiss the case, on the ground of prescription. Thus, even assuming
that the employer's motion to dismiss was filed out of time, there was nothing
to prevent the labor arbiter from dismissing the complaint on the ground of
1
prescription.

3.2 Res Judicata as Reason to Dismiss Complaint

Delfin, et al. vs. Inciong, et al., G.R. No. 50661, December 10, 1990 —
Rulings: (1) Requisites for prior judgment to constitute a bar to a subsequent case. —
For a prior judgment to constitute a bar to a subsequent case, the following requisites
must concur: (a) it must be a final judgment or order; (b) the court rendering the
same must have jurisdiction over the subject matter and over the parties; (c) it must
be a judgment or order on the merits; and (d) there must be between the two cases
2
identity of parties, subject matter, and cause of action.
(2) First three requisites. —There is no question that the first three requisites
are present in this case. First, the decision in the first complaint had already become
final and executory. The motion for reconsideration filed by the union in that case
was denied by the Court of Industrial Relations (CIR) and no petition questioning
the denial was brought to this court. The fact of its finality was admitted by the
petitioners in their second complaint. Second, the CIR which rendered the decision
had jurisdiction over the subject matter and over the parties. Third, the judgment
rendered therein was a judgment on the merits of the case after the parties presented
their evidence, oral and documentary.
(3) Fourth requisite. —There is, between the first and the second complaints,
identity of causes of action, subject matter and parties.
There is an identity of cause of action in the two cases, that is, the unfair labor
practices committed by Atlantic [the previous corporation] against its employees
during its existence. The obligations of Atlantic arising from the acts of unfair labor
practices committed against its employees during the former's existence were already
settled in the first case. It is clear that whatever cause of action individual petitioners

'Pepsi Cola Bottling Company vs. Guanzon, et al, G.R. No. 81162, April 19,
1989.
2
Ibabao vs. IAC, G.R. No. 74848, May 20, 1987, 150 SCRA 76.

90
 POWERS AND DUTIES ART. 221
(Part 3. Procedure)

had against Atlantic for violations of the CBA constituting an unfair labor practice
act had already been heard in the first case.
(4) Union should not be allowed to split causes of action. —We have already held
that when a labor union accuses an employer of acts of unfair labor practice allegedly
committed during a given period of time, the charges should include all acts of unfair
labor practice committed against any and all members of the union during that period.
The union should not, upon dismissal of the charges first proferred, be allowed
to split its cause of action and harass the employer with subsequent charges based
1
upon acts committed during the same period of time. The underlying philosophy
of the doctrine of res judicata is that parties ought not to be permitted to litigate the
same issue more than once; that when a right, or fact, has been judicially tried and
determined by a court of competent jurisdiction, or an opportunity for such a trial
has been given, the judgment of the court, so long as it remains unreversed, should
be conclusive upon the parties and those in privity with them. It is to the interest
of the public that there should be an end to litigation by the same parties and their
privies over a subject once fully and fairly adjudicated. Interest republicae ut sit finis
litium.

3.3 No Dismissal of Complaint Despite Death

Petitioner claims that the present labor cases do not survive, considering
that on January 13,1979 the proprietor of the company died intestate. It is alleged
that as a result of his death, the labor case was automatically extinguished. The
Court does not agree.
T h e present case was not extinguished because of the death of the
proprietor. T h e case is one for reinstatement of the dismissed employees from
their work. It was not a money claim, not to say it involved purely employer-
employee relationship, which falls under the exclusive authority of the labor
officials to hear and resolve. While it combined a claim for backwages and the
like, the entitlement of individual employees thereto solely depended on their
right to reinstatement. T h e proprietor died long before the application for
clearance to terminate was filed. This case falls under the jurisdiction of the
2
Ministry of Labor [read NLRC] and not the civil courts.
3.4 Revival or Refiling of Dismissed Case
A dismissed case is not necessarily dead.
A party may file a motion to revive or re-open a case dismissed without
prejudice, within ten (10) calendar days from receipt of notice of the order
dismissing the same; otherwise, his only remedy shall be to refile the case in the

1Dionela vs. CIR, 8 SCRA 832, 837.

2
Camara Shoes vs. Kapisanan ng mga Manggagawa sa Camara Shoes, G.R.
632084)9, May 5, 1989.
91
 ART. 221 LABOR RELATIONS

1
arbitration branch of origin. A complaint dismissed "without prejudice" simply
means a tentative or temporary dismissal — the complaint may be revived through
an appropriate motion.
4. SUBMISSION OF POSITION PAPERS AND REPLY
4.1 Determination of Necessity of Hearing or Clarificatory Conference
Immediately after the submission by the parties of their position paper
or reply, as the case may be, the Labor Arbiter shall, motu proprio, determine
whether there is a need for a hearing or clarificatory conference. At this stage,
he may, at his discretion and for the purpose of making such determination,
ask clarificatory questions to further elicit facts or information, including but
not limited to the subpoena of relevant documentary evidence, if any, from any
2
party or witness.

4.2 Role of the Labor Arbiter in Hearing and Clarificatory Conference —

a) The Labor Arbiter shall take full control and personally conduct the
hearing or clarificatory conference. Unless otherwise provided by law, the Labor
Arbiter shall determine the order of presentation of evidence by the parties,
subject to the requirements of due process. He shall examine the parties and
their witnesses with respect to the matters at issue; and ask questions only for
the purpose of clarifying points of law or fact involved in the case. He shall limit
the presentation of evidence to matters relevant to the issue before him and
3
necessary for a just and speedy disposition of the case.
b) In the cross-examination of witnesses, only relevant, pertinent and
4
material questions necessary to enlighten the Labor Arbiter shall be allowed.
c) T h e Labor Arbiter shall make a written summary of the proceedings,
including the substance of the evidence presented, in consultation with the
parties. T h e written summary shall be signed by the parties and shall form part
5
of the records.

4.3 N o n - a p p e a r a n c e o f P a r t i e s ; P o s t p o n e m e n t o f H e a r i n g and
Clarificatory Conferences
a) Non-appearance at a hearing or clarificatory conference by the
complainant or petitioner, who was duly notified thereof, may be sufficient cause
to dismiss the case without prejudice. Subject to Section 16 of this Rule, where
proper justification is shown by proper motion to warrant the re-opening of the
case, the Labor Arbiter shall call another hearing or clarificatory conference
and continue the proceedings until the case is finally decided. T h e dismissal

'Sec. 16, Rule V, NLRC Revised Rules of Procedure, 2005.

2
Sec. 8, Rule V, Ibid.
3
Sec. 9, Rule V, Ibid.
'Ibid.
b
Ibid.

92
 POWERS AND DUTIES ART. 221
(Part 3. Procedure)

of the case for the second time due to the unjustified non-appearance of the
complainant or petitioner, who was duly notified of the clarificatory hearing,
shall be with prejudice.
b) In case the respondent fails to appear during the hearing or
clarificatory conference despite due notice thereof, the complainant shall be
allowed to present evidence ex-parte, without prejudice to cross-examination at
the next hearing or conference. Two (2) successive non-appearances by the
respondent during his scheduled presentation of evidence or opportunity to
cross-examine witnesses, despite due notice thereof, shall be construed as a
waiver on his part to present evidence or conduct cross-examination.
c) T h e parties and their counsels appearing before the Labor Arbiter
shall be prepared for continuous hearing or clarificatory conference. No
postponement or continuance shall be allowed by the Labor Arbiter, except
upon meritorious grounds and subject always to the requirement of expeditious
disposition of cases. In any case, the hearing or clarificatory conference shall be
terminated within ninety (90) calendar days from the date of the initial hearing
or conference.
d) Paragraph (c) of this Section notwithstanding, in cases involving
overseas Filipino workers, the aggregate period for conducting the mandatory
conciliation and mediation conference, including hearing on the merits or
clarificatory conference, shall not exceed sixty (60) days, which shall be reckoned
from the date of acquisition of jurisdiction by the Labor Arbiter over the person
1
of the respondents.
5. SUBMISSION OF THE CASE FOR DECISION
Upon the submission by the parties of their position papers or replies, or
the lapse of the period to submit the same, the case shall be deemed submitted
for decision unless the Labor Arbiter calls for a hearing or clarificatory
conference in accordance with Section 8 of this Rule, in which case, notice of
hearing or clarificatory conference shall be immediately sent to the parties.
Upon termination of the said hearing or conference, the case shall be deemed
2
submitted for decision.
5.1 Position Papers as Basis of Decision
In the determination of whether or not the quantum of proof was satisfied
by a party contending for a particular proposition, the procedure by which issues
are resolved based only on position papers, affidavits or documentary evidence,
if agreed upon by the parties, may be availed of by the arbiter. It is not violative
of the due process clause. T h e affidavits in such case may take the place of their
direct testimony. The Labor Arbiter may choose, if he deems it necessary, to set the

'Sec. 10, Rule V, NLRC Revised Rules of Procedure, 2005.

2
Sec. 11, Ibid.
93
 ART. 221 LABOR RELATIONS

case for hearing on the merits where witnesses may be presented and examined
by the parties. In both instances, the burden of proving that the termination was
1
for valid or authorized cause rests on the employer.
If the employer filed no position paper despite adequate notice and in no
way justified the employee's dismissal, the labor arbiter is justified in deciding
2
the case based on the position papers on record.
5.2 Lack of Verification, Not Fatal
The lack of verification of the position paper-affidavit is a formal, rather
than a substantial, defect. It is not fatal. It could be easily corrected by requiring
3
an oath.
The lack of verification or oath in the appeal (the employee prosecuted
his appeal by himself) is not fatal. A pleading which is required by the Rules of
Court to be verified may be given due course even without a certification if the
4
circumstances warrant the suspension of the rules in the interest of justice.

5.3 Due Process: Opportunity To Be Heard

The Labor Arbiter should use every and all reasonable means to ascertain
the facts in the case, speedily and objectively and without regard to technicalities
of law or procedure, all in the interest of due process and for purposes of accuracy
5
and correctness in adjudicating the monetary awards.
Procedural due process means that a party to a case must be given sufficient
opportunity to be heard. Its very essence is to allow all parties opportunity to
6
present evidence.
There is denial of due process when a party is not accorded an opportunity
to be heard in the case filed against him. However, what the law prohibits is the
absolute lack of opportunity to be heard. There is no denial of due process where
the employer was duly represented by counsel and given sufficient opportunity
to be heard and present his evidence, nor where the employer's failure to be
heard was due to the various postponements granted to it or to his repeated
7
failure to appear during the hearings.

'Coca-Cola Bottlers Philippines, Inc. vs. National Labor Relations Commission,

G.R. No. 78787, December 18, 1989.
2
Gandara Mill Supply vs. NLRC, G.R. No. 126703, December 29, 1998.
3
Murillo vs. Sun Valley Realty, Inc., G.R. No. 67272, June 30, 1988.
Precision Electronics Corporation vs. National Labor Relations Commission,
G.R. No. 86657, October 23, 1989.
5
Rural Bank of San Miguel [Bohol], Inc. vs. National Labor Relations
Commission, G.R. No. 82144, March 8, 1989.
6
Robusta Agro Marine Products, Inc. vs. Gorombalem, G.R. No. 80500, July 5,
1989.
7
Marquez vs. Secretary of Labor, G.R. No. 80685, March 16, 1989.

94
 POWERS AND DUTIES
(Part 3. Procedure)
ART. 221

A formal or trial-type hearing is not at all times and in all instances

essential to due process, the requirements of which are satisfied where parties
are afforded fair and reasonable opportunity to explain their side of the
1
controversy at hand.
,
Thus, petitioners due process argument must fail where the records
show that in response to respondent's complaint and before the Labor Arbiter
rendered his decision, petitioners submitted a position paper, complete with
annexes where they set out and argued the factual as well as the legal basis of
their position. They do not claim that their submissions there were ignored or
disregarded altogether by the Labor Arbiter. Moreover, they were given additional
opportunity to argue their case on appeal before the National Labor Relations
Commission, in a memorandum and motion for reconsideration which pleadings
2
were likewise considered by that labor agency in the course of resolving the case.
Similarly, a party before the labor arbiter cannot claim denial of due process
where it had a chance to present its side during a period of more than two-and-
a-half months and despite repeated extensions of the time given to enable him
3
to present his position, failed to meet even the final deadline.
A plea of denial of procedural due process does not lie where a defect
consisting of an absence of notice of hearing was thereafter cured by the
alleged aggrieved party having had the opportunity to be heard on a motion for
4
reconsideration .

5.4 Inhibition
A Labor Arbiter may voluntarily inhibit himself from the resolution of a
case and shall so state in writing the legal justifications thereof. Upon motion
of a party, either on the ground of relationship within the fourth civil degree
of consanguinity or affinity with the adverse party or counsel, or on question
of impartiality, the Labor Arbiter may inhibit himself from further hearing
and deciding the case. Such motion shall be resolved within five (5) days from
the filing thereof. An order denying or granting a motion for inhibition is
5
inappealable.
5.5 Due Process Includes Impartiality of the Appeal Body
May an NLRC Commissioner review on appeal his own decision as a labor
arbiter? T h e Supreme Court answers this question in a 1997 case against PAL.

•Llora Motors, Inc. vs. Franklin Drilon, G.R. No. 82895, November 7, 1989.
Ibid.
3
Almoite vs. Pacific Architects and Engineers, Inc., et al., G.R. No. 73680, July
10,1986.
4
Magnolia Poultry Employees Union vs. Sanchez, G.R. Nos. 76227-28, November
5,1986.
5
Sec. 12, Rule V, NLRC Revised Rules of Procedure, 2005.

95
 ART. 221 LABOR RELATIONS

In the case of Ang Tibay vs. Court of Industrial Relations, [see above]
we laid down the requisites of procedural due process in administrative
proceedings x x x.
In addition, administrative due process includes (a) the right to
notice, be it actual or constructive, of the institution of the proceedings
that may affect a person's legal right; (b) reasonable opportunity to
appear and defend his rights and to introduce witnesses and relevant
evidence in his favor; (c) a tribunal so constituted as to give him
reasonable assurance of honesty and impartiality, and one of competent
jurisdiction; and (d) a finding or decision by that tribunal supported by
substantial evidence presented at the hearing or at least ascertained in
the records or disclosed to the parties. It is self-evident from the ruling
case law that the officer who reviews a case on appeal should not be the
same person whose decision is the subject of review. Thus, we have ruled
that "the reviewing officer must perforce be other than the officer whose
decision is under review."
In the case at bar, we hold that petitioner was denied due process
when Commissioner Aquino participated, as presiding commissioner of
the Second Division of the NLRC, in reviewing private respondent PAL's
appeal. He was reviewing his own decision as a former labor arbiter...
Prescinding from this premise, the May 19, 1995 resolution of the
respondent NLRC is void for the Division that handed it down was not
composed of three impartial commissioners. (Singson vs. NLRC and PAL,
G.R No. 122389, June 19, 1997.)
6. SUSPENSION OF PROCEEDINGS
Rubberworld (Phil) Inc. vs. NLRC, et al., G.R. No. 126773, April 14,1999 —
When a corporation, unable to pay its debts and liabilities, petitions the
SEC for a declaration of suspension of payments, the SEC may appoint a receiver
or a management committee tasked with the rehabilitation of the corporation.
Consequent to such appointment, according to PD 902-A, "all actions for claims
against such corporation x x x pending before any court, tribunal, board or body
shall be suspended accordingly."
Such suspension of proceedings applies even to complaints for illegal dismissal,
unfair labor practice, damages and payment of separation pay, retirement benefits,
13th month pay and service incentive leave which employees have filed with and were
awaiting resolution by a labor arbiter. To allow labor cases to proceed would clearly
defeat the purpose of the automatic stay and severely encumber the management
committee's time and resources. "The said committee would need to defend itself
against these suits, to the detriment of its primary and urgent duty to work towards
rehabilitating the corporation and making it viable again. To rule otherwise would
open the floodgates to other similarly situated claimants and forestall if not defeat the
rescue efforts. Besides, even if the NLRC awards the claims of private respondents,

96
 POWERS AND DUTIES
(Part 3. Procedure)
ART. 221

as it did, its ruling could not be enforced as long as the petitioner is under the
management committee."
In Chua vs. National Labor Relations Commission, we [the Supreme Court]
ruled that labor claims cannot proceed independently of a bankruptcy liquidation
proceeding, since these claims "would spawn needless controversy, delays, and
confusion." With more reason, allowing labor claims to continue in spite of a SEC
suspension order in a rehabilitation case would merely lead to such results.
The purpose of rehabilitation proceedings is precisely to enable the company
to gain a new lease on life and thereby allow creditors to be paid their claims from its
earnings. In insolvency proceedings, on the other hand, the company stops operating,
and the claims of creditors are satisfied from the assets of the insolvent corporation.
The present case involves the rehabilitation, not the liquidation, of petitioner-
corporation. Hence, the preference of credit granted to workers or employees under
Article 110 of the Labor Code is not applicable.

Accordingly, in another case where the employer company likewise

petitioned the SEC for a declaration of suspension of payments, the Supreme
Court ruled: "The labor arbiter, the NLRC as well as the CA should not have
proceeded to resolve [the employee's] complaint for illegal dismissal and should
instead have directed [the employee] to lodge her claim before the then duly-
1
appointed receiver..."
7. FILING AND SERVICE OF PLEADINGS AND DECISIONS
All pleadings in connection with the case shall be filed with the appropriate
docketing unit of the Regional Arbitration Branch of the Commission, as the
2
case maybe.
T h e party filing the pleading shall serve the opposing parties with a copy
thereof and its supporting documents in the manner provided in these Rules
3
with proof of service thereof.
7.1 Service of Notice and Resolutions
a) Notices or summons and copies of orders, shall be served on the
parties to the case personally by the Bailiff or duly authorized public officer
within three (3) days from receipt thereof or by registered mail; Provided that in
special circumstances, service of summons may be effected in accordance with
the pertinent provisions of the Rules of Court; Provided further, that in cases of
decisions and final awards, copies thereof shall be served on both parties and
their counsel or representative by registered mail; Provided further that in cases
where a party to a case or his counsel on record personally seeks service of the

'Clarion Printing House. Inc., et al. vs. NLRC, G.R. No. 148372, June 27, 2005.
2
Sec. 5, Rule III, NLRC Revised Rules of Procedure, 2005.
Ibid.

97
 ART. 221 LABOR RELATIONS

decision upon inquiry thereon, service to said party shall be deemed effected
upon actual receipt thereof; Provided finally, that where parties are so numerous,
service shall be made on counsel and upon such number of complainants, as
may be practicable, which shall be considered substantial compliance with Article
1
224(a) of the Labor Code, as amended.
For purposes of appeal, the period shall be counted from receipt of such
2
decisions, resolutions, or orders by the counsel or representative of record.
b) The Bailiff or officer serving the notice, order, resolution or decision
shall submit his return within two (2) days from date of service thereof, stating
legibly in his return his name, the names of persons served and the date of
receipt, which return shall be immediately attached to and shall form part of
the records of the case. In case of service by registered mail, the Bailiff or officer
shall write in the return, the names of persons served and the date of mailing
of the resolution or decision. If no service was effected, the service officer shall
3
state the reason thereof in the return.

7.2. Proof and Completeness of Service

The return is prima facie proof of facts indicated therein. Service by
registered mail is complete upon receipt by the addressee or his agent; but if the
addressee fails to claim his mail from the post office within five (5) days from the
4
date of first notice of the postmaster, service shall take effect after such time.
Section 4, Rule 13 of the Rules of Court, which is suppletory to the Rules
of the National Labor Relations Commission, provides: Service of the papers
may be made by delivering personally a copy to the party or his attorney, or by
leaving it in his office with his clerk or with a person having charge thereof. If
no person is found in his office, or his office is not known, then by leaving the
copy, between the hours of eight in the morning and six in the evening, at the
party's or attorney's residence, if known, with a person of sufficient discretion
5
to receive the same.
Under the foregoing rule, service of papers should be delivered personally
to the party or attorney or by leaving it at his office with his clerk or with a person
having charge thereof. The service of the court's order upon any person other
than the party's counsel is not legally effective.
Service of summons to a bookkeeper at the respondent's office is sufficient
compliance with the procedural requirement of proper notice. T h e j o b of a

'Sec. 6, Rule III, NLRC Revised Rules of Procedure, 2005.

2
Ibid.
3
Ibid.
4
Sec. 7, Rule III, Ibid.
5
Adamson Ozanam Educational Institution, Inc. vs. Adamson University Faculty,
etc., G.R No. 86819, November 9, 1989.

98
 POWERS AND DUTIES ART. 221
(Part 3. Procedure)

bookkeeper is so integrated with the corporation that his regular recording of

the corporation's "business accounts" and "essential facts about the transactions
of a business or enterprise" safeguards the corporation from possible fraud
being committed adverse to its own corporate interest... [T]here was substantial
1
compliance with the rule on service of summons.
Decisions emanating from administrative tribunals or officials like the
Minister of Labor should be served in accordance with law. In the absence
of specific provisions in the applicable laws like the Labor Code and its
implementing rules on the service of decisions or orders, the provisions of the
Rules of Court shall be applied in a suppletory character. Accordingly, when a
party is represented by counsel, notices should be made upon the counsel of
record at his given address, to which notices of all kinds emanating from the
2
court should be sent.
T h e Union insists that the procedure of serving a copy of the decision not
by official process servers but by authorized union officials to the employer is
not unusual in the Labor Ministry. This argument is untenable. In the absence
of any showing that such practice is sanctioned by the implementing rules of
the Ministry of Labor or by the Rules of Court, the party who takes advantage
of such irregular practice does so at its own risk and cannot be later heard to
3
complain.
Where the copy of the decision is served on a person who is neither a clerk
or one in charge of the attorney's office, such service is invalid and the decision
does not therefore become executory. T h e security guard of the building where
the attorney is holding office is neither the office clerk nor a person in charge
thereof as contemplated in the rules. T h e service of the decision at the ground
4
floor of a party's building when the office is at the 9th floor is not a valid service.
8. RESOLUTION OF DOUBT IN LAW OR EVIDENCE
It is now a familiar rule that doubt as to the interpretation of labor laws
and regulations has to be resolved in favor of labor. This precept is etched in
the Labor Code (Art. 4) and, in similar tenor, the Civil Code (Art. 1702).
But this precept is not limited to interpretation of legal provisions. It
extends likewise to doubts about the evidence of the disputants. This ruling is
rendered by the Supreme Court in Prangan vs. NLRC, G.R No. 126529, April 15,
1998 and is labelled a "well-settled doctrine" in Nicario vs. NLRC.

'Pabon, et al. vs. NLRC and Senior Marketing Corp., G.R. No. 120457,
September 24, 1998.
2
UERM Employees Union-FFW vs. Ministry of Labor, G.R. No. 75838, August
31, 1989.
3
See Ibid.
4
Adamson Ozanam Educational Institution, Inc. vs. Adamson University Faculty,
etc., G.R. No. 86819, November 9, 1989.
99
 LABOR RELATIONS
ART. 221

Nicario vs. NLRC, Mancao Supermarket, Inc., et al., G.R. No. 125340, September
17, 1998 —
Facts: In her claim for payment of overtime pay, petitioner [complainant
employee] alleged that during her period of employment, she worked twelve (12)
hours a day from 7:30 a.m. to 7:30 p.m., thus rendering overtime work for four hours
each day. The labor arbiter awarded overtime pay to petitioner by taking judicial
notice of the fact that all Mancao [the employer] establishments open at 8:00 a.m.
and close at 8:00 p.m.. Upon appeal, this particular finding was affirmed by the
Commission. However, when the employer filed a motion for reconsideration, the
NLRC modified its earlier ruling and deleted the award for overtime pay. The NLRC
instead gave credence to the daily time records (DTRs) presented by respondent
corporation showing that petitioner, throughout her employment from 1986 to 1989,
worked for only eight hours a day from 9:00 a.m. to 12:00 p.m. and 2:00 p.m. to 7:00
p.m. and did not render work on her rest days.
Rulings: The NLRC's reliance on the daily time records submitted by the
employer is misplaced. As aptly stated by the Solicitor General, the time records
presented by the company are unreliable based on the following observations:
"a) the originals thereof were not presented in evidence; petitioner's
allegation of forgery should have prompted respondent to submit the
same for inspection; evidence willfully suppressed would be adverse if
produced [Sec. 3(e), Rule 131, Rules of Court].
xxxxxxxxx
e) they would make it appear that petitioner has a two-hour rest period
from 12:00 to 2:00 p.m.; this is highly unusual for a store establishment
because employees should attend to customers almost every minute, as
well as contrary to the judicial notice that no noon break is observed.
f) petitioner never reported earlier or later than 9:00 a.m., likewise, she
never went home earlier or later than 8:00 p.m.; all entries are suspiciously
consistent."
While private respondent company submitted the daily time records of the
petitioner to show that she rendered work for only eight (8) hours a day, it did not
refute nor seek to disprove the judicial notice taken by the labor arbiter that Mancao
establishments, including the establishment where petitioner worked, is open twelve
hours a day, opening at 8:00 a.m. and closing at 8:00 p.m.
This Court, in previously evaluating the evidentiary value of daily time records,
especially those which show uniform entries with regard to the hours of work rendered
by an employee, has ruled that "such unvarying recording of a daily time record is
improbable and contrary to human experience. It is impossible for an employee
to arrive at the workplace and leave at exactly the same time, day in day out. The
uniformity and regularity of the entries are 'badges of untruthfulness and as such
indices of dubiety." The observations made by the Solicitor General regarding the
unreliability of the daily time records would therefore seem more convincing. On

100
 POWERS AND DUTIES
(Part 3. Procedure)
ART. 221

the other hand, respondent company failed to present substantial evidence, other
than the disputed DTRs, to prove that petitioner indeed worked for only eight hours
a day.
It is a well-settled doctrine that if doubts exist between the evidence presented
by the employer and the employee, the scales of justice must be tilted in favor of the
latter. It is a time-honored rule that in controversies between a laborer and his master,
doubts reasonably arising from the evidence, or in the interpretation of agreements and
writing should be resolved in the former's favor.

9. DECISION OF LABOR ARBITER

T h e Labor Arbiter shall render his decision within thirty (30) calendar
days, without extension, after submission of the case by the parties for decision,
even in the absence of stenographic notes. However, cases involving Overseas
Filipino Workers shall be decided within ninety (90) calendar days after the filing
of the complaint which shall commence to run upon acquisition by the Labor
1
Arbiter of jurisdiction over the respondents.

9.1 Contents of Decisions

The decisions and orders of the Labor Arbiter shall be clear and concise and
shall include a brief statement of the: a) facts of the case; b) issues involved; c)
applicable laws or rules; d) conclusions and the reasons therefor; and e) specific
remedy or relief granted. In cases involving monetary awards, the decisions or
2
orders of the Labor Arbiter shall contain the amount awarded.
In case the decision of the Labor Arbiter includes an order of reinstatement,
it shall likewise contain: a) a statement that the reinstatement aspect is
immediately executory; and b) a directive for the employer to submit a report
3
of compliance within ten (10) calendar days from receipt of the said decision.
9.2 No Motions for Reconsideration and Petitions for Relief from
Judgment
No motions for reconsideration or petitions for relief from judgment or
any decision, resolution or order of a Labor Arbiter shall be allowed. However,
when one such motion for reconsideration is filed, it shall be treated as an appeal
provided that it complies with the requirements for perfecting an appeal. In the
case of a petition for relief from judgment, the Labor Arbiter shall elevate the
4
case to the Commission for disposition.

'Sec. 13, Rule V, NLRC Revised Rules of Procedure, 2005.

2
Sec. 14, Rule V, Ibid.
Ibid.
4
Sec. 15, Rule V, Ibid.
101
 ART. 222 LABOR RELATIONS

N O T AUTOMATICALLY IN FAVOR OF LABOR

The law in protecting the rights of the laborer authorizes

neither oppression nor self-destruction of the employer. More
importantly, while the Constitution is committed to the policy of
social justice and the protection of the working class, it should
not be supposed that every labor dispute will automatically be
decided in favor of labor.

SUPREME COURT
Makati Haberdashery, Inc. vs. National Labor
Relations Commission, G.R. Nos. 83380-81, Nov. 15, 1989
Manila Electric Company vs. National
Labor Relations Commission, G.R. No. 78763, July 12,1989

ART. 222. APPEARANCES AND FEES

(a) Non-lawyers may appear before the Commission or any L a b o r
Arbiter only:
1. If they represent themselves; or
2. If they represent their organization or members thereof.
b) No attorney's fees, negotiation fees or similar charges of any
kind arising from any collective bargaining negotiations or conclusion of
the collective agreement shall be imposed on any individual m e m b e r of the
contracting union: Provided, however, That attorney's fees may be charged
against union funds in an amount to be agreed upon by the parties. Any
contract, agreement or arrangement of any sort to the contrary shall be null
and void.
C O M M E N T S AND CASES
1. APPEARANCE OF NON-LAWYERS
Under the NLRC Rules of 2 0 0 5 a nonlawyer may appear before the
Commission or Labor Arbiter only if:
(1) he represents himself as party to the case;
(2) he represents a legitimate labor organization, as defined under Article
212 and 242 of the Labor Code, as amended, which is a party to the
case: Provided, that he presents: (i) a certification from the Bureau
of Labor Relations (BLR) or Regional Office of the Department
of Labor and Employment attesting that the organization he
represents is duly registered and listed in the roster of legitimate
labor organizations; (ii) a verified certification issued by the secretary

102
 POWERS AND DUTIES ART. 222
(Part 3. Procedure)

and attested to by the president of the said organization stating that

he is authorized to represent the said organization in the said case;
and (iii) a copy of the resolution of the board of directors of the said
organization granting him such authority;
(3) he represents a member or members of a legitimate labor organization
that is existing within the employer's establishment, who are parties to
the case. Provided, that he presents: (i) a verified certification attesting
that he is authorized by such member or members to represent them
in the case; and (ii) a verified certification issued by the secretary
and attested to by the president of the said organization stating
that the person or persons he is representing are members of their
organization which is existing in the employer's establishment;
(4) he is a duly-accredited member of any legal aid office recognized
by the Department of Justice or Integrated Bar of the Philippines:
Provided, that he (i) presents proof of his accreditation; and (ii)
represents a party to the case;
(5) he is the owner or president of a corporation or establishment
which is a party to the case: Provided, that he presents: (i) a verified
certification attesting that he is authorized to represent said
corporation or establishment; and (ii) a copy of the resolution of the
board of directors of said corporation, or other similar resolution
or instrument issued by said establishment, granting him such
authority.
T h e appearance of labor federations and local unions as counsel in labor
proceedings has been given legal sanction and we need only cite Article 222
of the Labor Code which allows nonlawyers to represent their organization or
1
members thereof.
2. CHANGE OF LAWYER
The counsel who acted as such until a labor case reached its final conclusion
should be considered as the union's counsel in the execution of the decision.
There can be no valid substitution of counsel until the prescribed procedure is
followed. As underlined in the case of Aban vs. Enage, L-30666, promulgated on
February 25,1983, "no substitution of attorney will be allowed unless the following
requisites concur: (1) there must be filed a written application for substitution;
(2) there must be filed the written consent of the client to the substitution;
(3) there must be filed the written consent of the attorney to be substituted, if
such consent can be obtained; and (4) in case such written consent cannot be
procured, there must be filed with the application for substitution, proof of the

'Radio Communication of the Phils., Inc. vs. The Secretary of Labor and
Employment, 169 SCRA 38 [1989].

103
 LABOR RELATIONS
ART. 222

service of notice of such motion in the manner required by the rules, on the
1
attorney to be substituted."
We are aware of the time-honored principle that administrative and quasi-
judicial bodies like the National Labor Relations Commission are not bound by
the technical rules of procedure in the adjudication of cases. However, the rule
on substitution of counsel or employment of additional counsel is still observed
in labor cases. Thus, there can be no valid substitution of counsel until the
2
prescribed procedure is followed.
U n d e r the NLRC Rules any c h a n g e or withdrawal of counsel or
3
representative shall be made in accordance with the Rules of Court.
3. AUTHORITY TO BIND PARTY
Attorneys and other representatives of parties shall have authority to bind
their clients in all matters of procedure; but they cannot, without a special power
of attorney or express consent, enter into a compromise agreement with the
4
opposing party in full or partial discharge of a client's claim.
Kanlaon Construction Enterprises Co., Inc. vs. NLRC, et al., G.R. No. 126625,
September 18, 1997 —
Facts: The laborers of a construction company filed claims for wages and 13th
month pay. Made respondents were the company itself and the two engineers who
were the managers of the projects where the claimants worked. The engineers, both
nonlawyers, admitted the company's liability to the claimants and agreed to pay
the money claims. They also waived the company's right to file its position paper.
When the arbiter directed the company to pay the claims, the company refused to
do so and declared that the engineers had no authority to represent and bind the
corporation.
Ruling: The two Engineers were not lawyers, nor duly accredited members
of a legal aid office. Their appearance before the labor arbiters in their capacity as
parties to the cases was authorized under the first exception to the rule. However,
their appearance on behalf of the company required written proof of authorization.
This they did not have. It was incumbent upon the labor arbiters to ascertain this
authority especially since both engineers were named co-respondents.
Petitioner's liability arose from Engineer Estacio's alleged promise to pay. A
promise to pay amounts to an offer to compromise and requires a special power
of attorney or the express consent of petitioner. The authority to compromise
cannot be lightly presumed and should be duly established by evidence.

'Philippine Apparel Workers Union vs. National Labor Relations Commission,

125 SCRA 391 [1983].
2
Gudez vs. National Labor Relations Commission, 183 SCRA 644 [1990].
3
Sec. 8, Rule III, NLRC Revised Rules of Procedure, 2005.
4
Sec. 9, Rule III, Ibid.

104
 POWERS AND DUTIES ART. 222
(Part 3. Procedure)

Absent this authority, whatever statements and declarations Engineer Estacio

made before the labor arbiters could not bind the petitioner company.

4. ATTORNEY'S FEE
Article 222 of the Labor Code prohibits the payment of attorney's fees only
when it is effected through forced contributions from the workers from their own
funds as distinguished from the union funds. T h e purpose of the provision is to
prevent imposition on the workers of the duty to individually contribute their
respective shares in the fee to be paid the attorney for his services on behalf of
the union in its negotiations with the management. T h e obligation to pay the
attorney's fees belongs to the union and cannot be shunted to the workers as
1
their direct responsibility.
Neither the lawyer nor the union itself may require the individual workers
to assume the obligation to pay the attorney's fees from their own pockets. So
categorical is this intent that the law also makes it clear that any agreement to
2
the contrary shall be null and void ab initio.

4.1 Negotiation Fee

T h e 10% negotiation fee which covers attorney's fees, agency fee, and the
like is based on the amount of backwages receivable under the CBA which is
beyond what the law grants.
Cebu Institute of Technology (CIT) vs. Ople, 160 SCRA 503, April 15, 1988 —
Facts: The first matter raised for clarification in this case concerns the award
of ten percent (10%) of the backwages payable to all members of the bargaining unit
as negotiation fee which covers attorney's fees, agency fee and the like. This Court in
its December 18, 1987 decision affirmed this award with the modification that only
members of the bargaining unit should be made to pay this assessment.
The present source of ambiguity is the basis for computing the ten percent
(10%) negotiation fee. The employer school is of the opinion that the negotiation
fee of ten percent (10%) should not be charged against the sixty percent (60%)
incremental proceeds from tuition fee increases on the ground that this is not a
bargainable matter as it has already been fixed by law; hence, only thirty percent
(30%) should be subject to the computation of the ten percent (10%) negotiation
fee.
The faculty association takes the contrary view that the whole ninety percent
(90%) incremental proceeds from tuition fee increases should be the basis for
computing the ten percent (10%) negotiation fee. This is supported by its allegation
M
that ... were it not for the demand made by the union and subsequent notice of strike

'Bank of the Philippine Islands Employees' Union vs. National Labor Relations
Commission, et al., G.R. Nos. 69746-47 [and two companion cases], March 31, 1989.
Ibid.

105
 LABOR RELATIONS
ART. 222

that ensued arising from the nonimplementation of P.D. 451, the school would not
grant the benefits thereunder."
Ruling: There is merit in the School's argument. The whole ninety percent
(90%) economic package awarded by the NLRC cannot be the basis for computing
the negotiation fees. The law has already provided for the minimum percentage of
tuition fee increases to be allotted for teachers and other school personnel. This is
mandatory and cannot be diminished although it may be increased by collective
bargaining. It follows that only the amount beyond that mandated by law should be
subject to negotiation fees and attorney's fees for the simple reason that it is only
this which the employees had to bargain for. The sixty percent (60%) which the law
grants is not a negotiable issue and not obtained by negotiation.

4.2 For Services Rendered by Union Officers

Article 222(b) prohibits the imposition on any individual union member
of attorney's fees, negotiation fees and similar charges arising from negotiation
of a bargaining agreement. T h e collection of the special assessment partly for
the payment of services rendered by union officers, consultants and others may
not be in the category of "attorney's fees or negotiation fees." But there is no
question that it is an exaction which falls within the category of a "similar charge,"
and therefore, within the coverage of the prohibition in the aforementioned
1
article.
This matter of imposition of attorney's fee and negotiation fee should be
correlated with Article 241 (n and o ) , Article 2 3 9 ( h ) , and Article 2 4 9 ( e ) .

4.3 Attorney's Fee Collectible Only from Union Funds

Article 2 2 2 ( b ) allows attorney's fees to be charged against "union funds."
The economic benefits granted by a newly concluded CBA do not constitute
"union funds" when the employees have not received them yet.
In a case where the CBA granted a P42 million economic package to the
union members from which will be deducted P4.2 million to pay attorney's
fees, negotiation fees, and similar charges arising from the CBA, the deduction,
according to the Supreme Court, violates Article 2 2 2 ( b ) . T h e Court finds that
"the P42 million economic benefits package granted by the employer through
the CBA did not constitute union funds from where the P4.2 million could have
been validly deducted as attorney's fees. T h e P42 million was not intended for
the union but for the members of the bargaining unit represented by the union,
whether member or members of the union... T h e deduction of the P4.2 million,
as alleged attorney's/agency fees, from the P42 million economic package
effectively decreased the share from said package accruing to each member of
the collective bargaining unit." T h e Court further said that the union's argument

1Palacol vs. Ferrer-Calleja, 182 SCRA 710 [1990].

106
 POWERS AND DUTIES ART. 222
(Part 3. Procedure)

that the P4.2 Million became union fund after its deduction from the P42 million
package is "absurd." T h e union's reasoning is flawed since the attorney's fee may
only be paid from the "union funds" according to Article 2 2 2 ( b ) ; yet the amount
to be used in paying such fee does not become union funds until it is actually
deducted as attorney's fees from the benefits awarded to the employees. It is just
1
a roundabout argument.
For the reason explained above, the authorization to deduct, signed by
the members upon instruction of the union officers, was invalid. For another
reason, see comments under Article 241 (n and o ) .

'Marino, et al. vs. Gamilla, et al., G.R. No. 149763, July 7, 2009.
107
 Chapter III
APPEAL
Overview/Key Questions: Box 6
1. A labor arbiter's decision is appealable to the NLRC
and up to the CA/SC. On what grounds? When?
2. At each level of appeal what are the prerequisites? Is a
motion for reconsideration a prerequisite?
3. What are the limits to NLRC's appellate jurisdiction?
4. How is a final decision of the Labor Arbiter (or the
NLRC, etc.) executed?
5. May a regional trial court issue an injunction against
an NLRC decision?

ART. 2 2 3 . APPEAL
Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten ( 1 0 )
calendar days from receipt of such decisions, awards, or orders. Such appeal
may be entertained only on any of the following grounds:
(a) If there is prima fade evidence of abuse of discretion on the part
of the Labor Arbiter;
(b) If the decision, order or award was secured through fraud or
coercion, including graft and corruption;
(c) If made purely on questions of law; and
(d) If serious e r r o r s in the findings of facts are raised which would
cause grave or irreparable damage or injury to the appellant.
In case of a judgment involving a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the Commission
in the amount equivalent to the monetary award in the judgment appealed
from.
In any event, the decision of the L a b o r Arbiter reinstating a dismissed
or separated employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. T h e employee shall either
be admitted back to work under the same terms and conditions prevailing
prior to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. T h e posting of a bond by the employer shall not
stay the execution for reinstatement provided herein.

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 APPEAL ART. 223

To discourage frivolous or dilatory appeals, the Commission or the

L a b o r Arbiter shall impose reasonable penalty, including fines or censures,
upon the erring parties.
In all cases, the appellant shall furnish a copy of the memorandum
of appeal to the other party who shall file an answer not later than ten ( 1 0 )
calendar days from receipt thereof.
T h e Commission shall decide all cases within twenty ( 2 0 ) calendar days
from receipt of the answer of the appellee. T h e decision of the Commission
shall be final and e x e c u t o r y after ten ( 1 0 ) calendar days from receipt thereof
by the parties.
Any law enforcement agency may be deputized by the Secretary of
Labor and Employment or the Commission in the enforcement of decisions,
awards, or orders.
C O M M E N T S AND CASES
1. NO MOTION FOR RECONSIDERATION OF LABOR ARBITER'S DECISION
If any of the grounds mentioned in this Article exists, the losing party
may appeal the Labor Arbiter's decision to the NLRC within ten (10) days from
receipt of the decision. No motion for reconsideration need be filed; in fact,
the NLRC Rules of 2005 does not allow a motion for reconsideration of a labor
arbiter's decision. Rule V (Proceedings Before Labor Arbiters) states in part:
Sec. 15 Motions for Reconsideration and Petition for Relief from Judgment.
No motions for reconsideration or petitions for relief from judgment of any
decision, resolution or order of a Labor Arbiter shall be allowed. However,
when one such motion for reconsideration is filed, it shall be treated as an
appeal, provided, that it complies with the requirements for perfecting an
appeal. In the case of petition for relief from judgment, the Labor Arbiter
shall elevate the case to the Commission for disposition.
In stark contrast is the rule for appealing an NLRC decision. It may be
elevated to the Court of Appeals but a motion for reconsideration should first
be filed.
1.1 Final Decisions Cannot Be Amended
If not appealed on time, the Labor Arbiter's decision becomes final and
cannot be amended.
In Asuncion vs. NLRC (G.R. No. 109311, J u n e 17, 1997), the Court ruled
that perfection of an appeal within the statutory or reglementary period is not
only mandatory but also jurisdictional and failure to do so renders the questioned
decision final and executory, thus depriving the appellate court of jurisdiction
to alter the final judgment, much less to entertain the appeal. In the case of
Aboitiz Shipping Employees Association vs. Trajano (G.R. No. 112955, September 1,
1997), the Court pointed out that except for correction of clerical errors, or the

109
 LABOR RELATIONS
ART. 223

making of nunc pro tunc entries which cause no prejudice to any party, or where
the judgment is void, after the judgment has become final and executory, the same can
neither be amended nor altered even if the purpose is to correct a perceived conclusion of
fact or of law. This is true regardless of whether the modification is to be made by
the magistrate that rendered the judgment, or by the appellate magistrate that
reviewed the same. Indeed, all litigations must come to an end however unjust the
result of error may appear, otherwise, litigation would even be more intolerable
1
than the wrong or injustice it is designed to correct. (Italics supplied)
A decision that has become final and executory cannot be amended so
as to indicate in the writ of execution that the liability of the losing parties
is "solidary" where this kind of liability is not stated in the decision or in the
2
dispositive portion.
2. PERIOD TO APPEAL FROM LABOR ARBITER
2.1 Ten Calendar Days
Under Article 223 of the Labor Code, decisions, awards or orders of a labor
arbiter cannot be declared final and executory upon the mere issuance thereof.
A period of ten (10) days from receipt of any order is granted to either or to
both parties involved to appeal to the National Labor Relations Commission.
What does the "10 days" refer to? T h e Supreme Court says in the Vir-Jen
case:
After mature and careful deliberation, We have arrived at the
conclusion that the shortened period of ten (10) days fixed by Art. 223
contemplates calendar days and not working days. We are persuaded to
this conclusion, if only because We believe that it is precisely in the interest
of labor that the law has commanded that labor cases be promptly, if not
peremptorily, disposed of. (Vir-jen Shipping and Marine Services, Inc. vs. NLRC,
R. Bisula, et al, G.R Nos. 58011-12, July 20, 1982.)
Since the 10-day period provided in Article 223 of the Labor Code refers to
ten calendar days and not to ten working days, this means that Saturdays, Sundays
and Legal Holidays are not to be excluded, but included, in counting the 10-day
period. This is in line with the objective of the law for speedy disposition of labor
3
cases with the end in view of protecting the interests of the working men.

'Industrial and Transport Equipment, Inc. and/or A. Jarina vs. NLRC, et al,
G.R. No. 113592, January 15, 1998.
industrial Management International Development Corp. vs. NLRC, G.R. No.
101723, May 11,2000.
S
SM Agri and General Machineries vs. National Labor Relations Commission,
G.R. No. 74806, January 9,1989; John Clement Consultants, Inc. vs. National Labor
Relations Commission, G.R. No. 72096, January 29, 1988.

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 APPEAL ART. 223

2.2 Ten-Calendar-Day Rule Not Applicable Prior to Vir-Jen Case

T h e ruling in Vir-Jen cannot be applied to a case where the appeal to the
NLRC was filed prior to the promulgation of the Supreme Court's decision in
1
the Vir-Jen case on July 20, 1982.

2.3 Under the 2005 NLRC Rules of Procedure

(At this point, we shall examine in greater detail the appeal procedure from
the Labor Arbiter and the Regional Director [under Article 129] to the NLRC.
Later, we shall move on from the NLRC to the Court of Appeals and, finally, to
the Supreme Court.)
T h e 2005 Revised Rules of the NLRC reads:
Decisions, resolutions or orders of the Labor Arbiter shall be final
and executory unless appealed to the Commission by any or both parties
within ten (10) calendar days from receipt thereof; and in case of decisions,
resolutions or orders of the Regional Director of the Department of Labor
and Employment pursuant to Article 129 of the Labor Code, within five
(5) calendar days from receipt thereof. If the 10th or 5th day, as the case
may be, falls on a Saturday, Sunday or holiday, the last day to perfect the
appeal shall be the first working day following such Saturday, Sunday or
holiday. (Sec. 1, Rule VI.)

2.4 Date of Receipt by Mail

T h e rule is that service by registered mail is complete either upon actual
receipt by the addressee or at the end of five (5) days, if he does not claim it
2
within five (5) days from the first notice of the postmaster. The purpose is to
place the date of receipt of pleadings, judgments and processes beyond the
3
power of the party being served to determine at his pleasure.

2.5 Failure to Give Copy of Appeal to Adverse Party Within Ten Days
T h e failure to give copy of appeal to the appellee within ten (10) days is
not fatal if the appellee was not prejudiced by the delay in the service of said
4
copy of the appeal.
Rules of technicality must yield to the broader interests of substantial justice.
5
The dismissal of an appeal on purely technical grounds is frowned upon.
Labor law determinations should not only be secundum rationem but also
secundum caritatem. In appeals in labor cases, nonservice of the copy of the appeal
or appeal memorandum to the adverse party is not a jurisdictional defect, and

'Murillo vs. Sun Valley Realty, Inc., G.R. No. 67272, June 30, 1988.
2
Rule 13, Sec. 8, Rules of Court.
3
NIA Consult vs. NLRC, et al, G.R. No. 108278, January 2, 1997.
4
Modern Fishing Gear Labor Union vs. Noriel, G.R. No. 53907, May 6, 1988.
Ibid.
Ill
 LABOR RELATIONS
ART. 223

does not justify dismissal of the appeal. The dismissal of an employee's appeal
on a purely technical ground is inconsistent with the constitutional mandate on
1
protection to labor.
2.6 No Extension of Period
No motion or request for extension of the period within which to perfect
2
an appeal shall be allowed.
2.7. Periods Generally Mandatory
Rules of procedure and practice of the Ministry of Labor provide periods
within which to do certain acts such as to file a motion for reconsideration. Such
periods are imposed to prevent needless delays and to ensure the orderly and
speedy discharge of judicial business. Strict compliance with such rule is both
mandatory and imperative. Only strong consideration of equity will lead the
Supreme Court to allow an exception to the procedural rule in the interest of
3
substantial justice.
It is precisely in the interest of labor that the law has commanded that labor
cases be promptly if not peremptorily disposed of. Long periods for any acts to be
done by the contending parties can be taken advantage of more by management
than by labor. Most labor claims are decided in their favor and management
is generally the appellant. Delay in most instances gives the employers more
opportunity not only to prepare even ingenious defenses, what with well-paid
talented lawyers they can afford, but even to wear out the efforts and meager
resources of the workers, to the point that not infrequently the latter either gives
4
up or compromises for less than what is due.
3. GROUNDS OF APPEAL
The appeal may be entertained only on any of the following grounds:
a) If there is prima facie evidence of abuse of discretion on the part of
the Labor Arbiter or Regional Director;
b) If the decision, resolution or order was secured through fraud or
coercion, including graft and corruption;
c) If made purely on questions of law; a n d / o r
d) If serious errors in the findings of facts are raised which, if not
5
corrected, would cause grave or irreparable damage or injury to the appellant.

Modern Fishing Gear Labor Union vs. Noriel, G.R. No. 53907, May 6, 1988.
2
Sec. 1, Rule VI, NLRC Revised Rules of Procedure, 2005.
3
Lasam Trading, Inc. vs. Leogardo, Jr., G.R. No. 73245, September 20, 1986.
4
Narag vs. National Labor Relations Commission, G.R. No. 69628, October 28,
1989.
5
Sec. 2, Rule VI, NLRC Revised Rules of Procedure, 2005.

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 APPEAL ART. 223

4. WHERE TO FILE APPEAL

T h e appeal shall be filed with the Regional Arbitration Branch or Regional
1
Office where the case was heard and decided.
5. REQUISITES FOR PERFECTION OF APPEAL
a) T h e appeal shall be:
1) filed within the reglementary period provided in Section 1 of
this Rule; within 10 days
2) verified by the appellant himself in accordance with Section 4,
Rule 7 of the Rules of Court, as amended;
3) in the form of a memorandum of appeal which shall state the
grounds relied upon and the arguments in support thereof, the
relief prayed for, and with a statement of the date the appellant
received the appealed decision, resolution or order;
4) in three (3) legibly typewritten or printed copies; and
5) accompanied by i) proof of payment of the required appeal
fee; ii) posting of a cash or surety bond as provided in Section
6 of this Rule; iii) a certificate of non-forum shopping; and iv)
proof of service upon the other parties.
b) A m e r e n o t i c e of appeal without complying with the o t h e r
requisites aforestated shall not stop the running of the period for perfecting
an appeal.
c) T h e appellee may file with the Regional Arbitration Branch or
Regional Office where the appeal was filed, his answer or reply to appellant's
memorandum of appeal, not later than ten (10) calendar days from receipt
thereof. Failure on the part of the appellee who was properly furnished with
a copy of the appeal to file his answer or reply within the said period may be
construed as a waiver on his part to file the same.
d) Subject to the provisions of Article 218 of the Labor Code, once the
appeal is perfected in accordance with these Rules, the Commission shall limit
itself to reviewing and deciding only the specific issues that were elevated on
2
appeal.
6. FRIVOLOUS APPEAL
In a 1988 decision the Court noted that Section 5, Rule IX [later Section 11,
Rule VI] of the NLRC Rules of Procedure] empowers not only the Commission
but also the Labor Arbiter to impose reasonable penalties, including fines and
censures, upon a party for filing a frivolous appeal. "This implies that even when
appeal is still with the Labor Arbiter, and not yet transmitted to the Commission,

!
Sec. 3, Rule VI, NLRC Revised Rules of Procedure, 2005.
2
Sec. 4, Rule VI, Ibid.
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 ART. 223 LABOR RELATIONS

the former may already find it frivolous and, there and then, terminate the
appeal.
6.1 Unverified Letter Not Proper Appeal
Garcia vs. NLRC, et al, G.R. No. 110494, November 18, 1996 —
After receiving a copy of the decision, private respondent [employer] through
its president, wrote the labor arbiter (who rendered the decision) a letter expressing
dismay over the judgment. No appeal was taken therefrom within ten (10) days from
September 10, 1992, the date private respondent received a copy of such judgment.
Neither was a cash or surety bond posted by the private respondent.
Even assuming for the sake of argument that the letter is a valid notice of
appeal, the lack of a cash or surety bond is fatal to the appeal. The judgment in
question involves a monetary award, and in cases where the judgment involves a
monetary award, the second paragraph of Article 223 of the Labor Code, as amended
by R.A. 6715, provides that the appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the NLRC in the amount equivalent to the monetary award in the
judgment appealed from. [The letter was not under oath and it did not appear that
a copy thereof was sent to the employee petitioner.]
Clearly, respondent NLRC acted with grave abuse of discretion and in excess
of jurisdiction in treating the letter of private respondent's president as an appeal
from the judgment of the labor arbiter, x x x Perfection of an appeal in the manner
and within the period prescribed by law is not only mandatory but also jurisdictional.
Failure to conform with the rules regarding appeal will certainly render the judgment
final and executory, hence, unappealable.

7. PAYMENT OF APPEAL FEES

The appellant shall pay an appeal fee of One Hundred Fifty Pesos (PI50.00)
to the Regional Arbitration Branch or Regional Office of origin, and the official
2
receipt of such payment shall form part of the records of the case.
The failure to pay the appeal docketing fee confers a directory and not
a mandatory power to dismiss an appeal, and such power must be exercised
with a sound discretion and with a great deal of circumspection considering all
attendant circumstances. It is true that in Acda vs. Minister of Labor, 136 SCRA
669, the Supreme Court said that the payment of the appeal fee is by no means a
mere technicality but is an essential requirement in the perfection of an appeal.
However, where the fee had been paid belatedly, the broader interest of justice
and the desired objective in deciding the case on the merits demand that the
9
appeal be given due course. '

1Bongay vs. Martinez, G.R. No. 77188, March 14, 1988.

2
Sec. 5, Rule VI, NLRC Revised Rules of Procedure, 2005.
3
C.W. Tan Mfg. vs. National Labor Relations Commission, G.R. No. 79596,
February 10, 1989.

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 APPEAL ART. 223

A dismissed employee can well be considered as a pauper litigant whose

failure to pay the nominal docketing fee of P25 within the reglementary period
1
should be treated with understanding and compassion.
8. APPEAL BOND; FILING ON TIME; EXCEPTIONS
In case the decision of the Labor Arbiter or the Regional Director involves
a monetary award, an appeal by the employer may be perfected only upon the
posting of a bond, which shall either be in the form of cash deposit or surety
bond equivalent in amount to the monetary award, exclusive of damages and
2
attorney's fees.
In case of surety bond, the same shall be issued by a reputable bonding
company duly accredited by the Commission or the Supreme Court, and shall
be accompanied by original or certified true copies of the following:
a) a j o i n t declaration under oath by the employer, his counsel, and the
bonding company, attesting that the bond posted is genuine, and
shall be in effect until final disposition of the case.
b) an indemnity a g r e e m e n t between the employer-appellant and
bonding company;
c) proof of security deposit or collateral securing the bond: provided,
that a check shall not be considered as an acceptable security;
d) a certificate of authority from the Insurance Commission;
e) certificate of registration from the Securities and E x c h a n g e
Commission;
f) certificate of authority to transact surety business from the Office of
the President;
g) certificate of accreditation and authority from the Supreme Court;
and
h) notarized board resolution or secretary's certificate from the bonding
company showing its authorized signatories and their specimen
signatures.
A cash or surety bond shall be valid and effective from the date of deposit
or posting, until the case is finally decided, resolved or terminated, or the
award satisfied. This condition shall be deemed incorporated in the terms and
conditions of the surety bond, and shall be binding on the appellants and the
3
bonding company.
The appellant shall furnish the appellee with a certified true copy of the said
surety bond with all the above-mentioned supporting documents. The appellee
^ . W . Tan Mfg. vs. National Labor Relations Commission, G.R. No. 79596,
February 10, 1989.
2
Sec. 6, Rule VI, NLRC Revised Rules of Procedure, 2005.
Ibid.
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 LABOR RELATIONS
ART. 223

shall verify the regularity and genuineness thereof and immediately report any
1
irregularity to the Commission.
Upon verification by the Commission that the bond is irregular or not
genuine, the Commission shall cause the immediate dismissal of the appeal,
and censure or cite in contempt the responsible parties and their counsels, or
2
subject them to reasonable fine or penalty.
No motion to reduce bond shall be entertained except on meritorious
grounds, and only upon the posting of a bond in a reasonable amount in relation
3
to the monetary award.
The mere filing of a motion to reduce bond without complying with the
requisites in the preceding paragraphs shall not stop the running of the period
4
to perfect an appeal.
The bond is sine qua non to the perfection of appeal from the labor arbiter's
5
monetary award.
Indisputable is the legal doctrine that the appeal of a decision involving
a monetary award in labor cases may be perfected "only upon the posting of a
cash or surety bond." The lawmakers intended the posting of the bond to be an
6
indispensable requirement to perfect an employer's appeal.
The preceding Rosewood ruling, penned by Justice (later Chief Justice)
Panganiban, recalls that in Quiambao vs. National Labor Relations Commission
(254 SCRA 211, 216-217, March 4, 1 9 9 6 ) , the Court ruled that a relaxation of
the appeal bond requirement could be justified by substantial compliance with
the rule. Quiambao, in turn, had cited the cases of Rada vs. NLRC, 205 SCRA 69,
76-77, January 9, 1992, in which the bond was paid belatedly because the labor
arbiter's Decision did not state the amount awarded as backwages and overtime
pay; Blancaflor vs. NLRC, 218 SCRA 366, 371, February 2, 1993, in which the
failure to give a bond was in part due to the failure of the labor arbiter to state
the exact amount of backwages and separation pay due; and Your Bus Line vs.
NLRC, 190 SCRA 160, September 28, 1990, in which the failure to file a bond
was excused because petitioner was misled by the notice of the Decision which,
while stating the requirement for perfecting an appeal, did not mention that a
bond must be filed.
Back to the Rosewood case, the Court noted that the petitioner had filed,
together with its memorandum on appeal and notice of appeal, a motion to
reduce the appeal bond accompanied by a surety bond for fifty thousand pesos.

'Sec. 6, Rule VI, NLRC Revised Rules of Procedure, 2005.

2
Ibid.
Ibid.
"Ibid.
5
Catubay, et al. vs. NLRC, Ngo and Fishwealth, G.R. No. 119289, April 12,2000.
"Rosewood Processing, Inc. vs. NLRC, et al, G.R. Nos. 116476-84, May 21,1998.

116
 APPEAL ART. 223

But the judgment being appealed was for P789,154.39, so the Solicitor General
argued that it was defective as it was not "equivalent to the monetary award in
the judgment appealed from." T h e Court retorted:
We hold that petitioner's motion to reduce the bond is a substantial
compliance with the Labor Code. This holding is consistent with the norm
that letter-perfect rules must yield to the broader interest of substantial
justice, x x x A judicious reading of the memorandum of appeal would
have made it evident to Respondent Commission that the recourse was
meritorious.
It must be noted, however, that more recent Supreme Court decisions
require strict observance of the reglementary period.
Sameer Overseas Placement Agency Inc. vs. Levantino, et al, G.R. No. 153942,
June 29, 2005 —
Facts: The employee complained of illegal dismissal, underpayment of wages
and illegal deduction against the recruitment agency as representative of the principal
employer. The labor arbiter upheld the employee's dismissal but granted a monetary
award. Sameer, the agency, appealed to the NLRC but the appeal was dismissed for
lack of appeal bond. This is the point in dispute.
Having received a copy of the Labor Arbiter's decision on 17 October 1997,
Sameer had until 28 October 1997 to perfect the appeal, 27 October falling
on a Sunday. It filed its notice of appeal and a memorandum of appeal on 27
October 1997, along with a motion for extension of time to file a surety-appeal
bond, alleging that it was still arranging for the issuance of such with the bonding
company. It was only on 3 November 1997 that it filed the appeal bond. Thus,
the NLRC First Division, in an Order dated 16 June 1998, dismissed the appeal
for failure to perfect it within the ten (10)-day reglementary period. The Court
of Appeals Sixteenth Division affirmed the dismissal by the NLRC; hence, the
present petition.
Sameer argues that since it subsequently submitted die appeal bond, the filing
of the bond should retroact to die date of the filing of the motion for reduction, which
had been filed within the reglementary period to perfect the appeal. It characterizes
the appeal bond requirement as procedural, and urges that the case be decided on
the merits.
Ruling: Contrary to Sameer's suggestion, the appeal bond requirement is
not merely procedural but jurisdictional, for without it, the NLRC does not acquire
jurisdiction over the appeal. Applying the express provisions of the law, the NLRC did
not acquire jurisdiction over Sameer's appeal within the ten (10)-day reglementary
period to perfect die appeal, for the appeal bond was filed six (6) days after the lapse
of the reglementary period.
The Labor Code [Article 223] is explicit in providing that the appeal from a
decision of the Labor Arbiter must be perfected within ten (10) days, and that such
appeal is perfected only upon die posting of a cash or surety bond.

117
 LABOR RELATIONS
ART. 223

Even the NLRC Rules of Procedure plainly expects that the employer submit
the entire cash or surety bond within the reglementary period, even if there may be
cause for its subsequent reduction, to wit:
The Commission may, in justifiable cases and upon Motion of the
Appellant, reduce the amount of the bond. The filing of the motion to reduce
bond shall not stop the running of the period to perfect appeal. (Emphasis
supplied.)

8.1 Motion to Reduce Bond under NLRC Rules

A motion to reduce the amount of the bond may be entertained, but,
meantime, a bond in reasonable amount must be filed anyway. T h e NLRC Rules
of 2005 states:
"No motion to reduce b o n d shall be e n t e r t a i n e d e x c e p t on
meritorious grounds and only upon the posting of a bond in a reasonable
amount in relation to the monetary award.
"The mere filing of the motion to reduce bond without complying
with the requisites in the preceding paragraph shall not stop the running
of the period to perfect an appeal."

8.2 No Bond, No Appeal Perfected

In one of the three "appeal bond decisions" that Mr. Justice Tinga penned
in J u n e 2005 he explained the meaning of the rule under Article 223.
Borja Estate, et al vs. Spouses R. Ballad and R. Ballad, G.R. No. 152550, June
8, 2005 —
The intention of the lawmakers to make the bond an indispensable requisite
for the perfection of an appeal by the employer is underscored by the provision that
an appeal may be perfected "only upon the posting of a cash or surety bond." The
word "only" makes it perfectly clear that the L A W M A K E R S intended the posting
of a cash or surety bond by the employer to be the exclusive means by which an
employer's appeal may be considered completed. The law however does not require
its outright payment, but only the posting of a bond to ensure that the award will be
eventually paid should the appeal fail. What petitioners have to pay is a moderate
and reasonable sum for the premium of such bond.
The word "may" [in the phrase "may be perfected"], on the other hand, refers
to the perfection of an appeal as optional on the part of the defeated party, but not
to the posting of an appeal bond, if he desires to appeal.
Evidently, the posting of a cash or surety bond is mandatory. And the perfection
of an appeal in the manner and within the period prescribed by law is not only
mandatory but jurisdictional.
As there was no appeal bond filed together with the Appeal Memorandum
within the ten (10)-day period provided by law for the perfection of appeal, it
follows that no appeal from the decision of the Labor Arbiter had been perfected.

118
 APPEAL ART. 223

Accordingly, the Decision of the Labor Arbiter became final and executory upon
the expiration of the reglementary period.

8.2a Relaxing the Ten-day Period

In the same Borja Estate case, Mr. Justice Tinga summarizes the situations
where the Court allowed tardy appeals. We quote:
While it is true that this Court has relaxed the application of the rules on
appeal in labor cases, it has only done so where the failure to comply with the
requirements for perfection of appeal was justified or where there was substantial
compliance with the rules. Hence, the Supreme Court has allowed tardy appeals
injudicious cases, e.g.,
where the presence of any justifying circumstance recognized by law, such
as fraud, accident, mistake or excusable negligence, properly vested the
judge with discretion to approve or admit an appeal filed out of time;
where on equitable grounds, a belated appeal was allowed as the questioned
decision was served directly upon petitioner instead of her counsel of
record who at the time was already dead;
where the counsel relied on the footnote of the notice of the decision of
the labor arbiter that the aggrieved party may appeal. . . within ten (10)
working days;
in order to prevent a miscarriage of justice or unjust enrichment such as
where the tardy appeal is from a decision granting separation pay which
was already granted in an earlier final decision;
or where there are special circumstances in the case combined with its
legal merits or the amount and the issue involved.
8.3 No Distinction Between "Filing" and "Perfection" of Appeal; Star
Angel Decision, Not "Venerable"
In still another of the three "appeal bond decisions" that Mr. Justice Tinga
penned for the Court in J u n e 2005, the good Justice confronted and rectified the
confusion caused by the Star Angel ruling that the appeal must be filed within ten
(10) days but may be perfected after that period. That, the Court now says, was just
an obiter dictum. The Court declares: The Star Angel decision is not "venerable."
In other words, practicing lawyers are advised to forget, rather than invoke, Star
Angel
Computer Innovations Center, et al vs. NLRC, G.R. No. 152410, June 29, 2005 —
Petitioners invoke the holding in Star Angel Handicraft v. NLRC, G.R. No. 108914,
September 20,1994 that there is a distinction between the filing of an appeal within
the reglementary period and its perfection, and that the appeal may be perfected
after the said reglementary period. Indeed, Star Angel held that the filing of a motion
for reduction of an appeal bond necessarily stays the reglementary period for

119
 LABOR RELATIONS
ART. 223

appeal. However in this case, the motion for reduction of appeal bond, which was
incorporated in the appeal memorandum, was filed only on the tenth or final day
of the reglementary period. Under such circumstance, the motion for reduction of
appeal bond can no longer be deemed to have stayed the appeal, and the petitioner
faces the risk, as had happened in this case, of summary dismissal of the appeal for
non-perfection.
Moreover, the reference in Star Angel as to the distinction between the period
to file the appeal and to perfect the appeal has been pointedly made only once by
this Court in Gensoli v. NLRC; thus, it has not acquired the sheen of venerability
reserved for repeatedly-cited cases. The distinction, if any, is not particularly evident
or material in the Labor Code; hence, the reluctance of the Court to adopt such
doctrine. Moreover, the present provision in the NLRC Rules of Procedure, that "the
filing of a motion to reduce bond shall not stop the running of the period to perfect
appeal" flatly contradicts the notion expressed in Star Angel that there is a distinction
between filing an appeal and perfecting an appeal.

8.4 Amount of Appeal Bond Excludes Damages

An appeal is deemed perfected upon the posting of the bond equivalent
to the monetary award exclusive of moral and exemplary damages as well as attorney's
fees. This exclusionary rule of the NLRC does not conflict with Article 223 of the
Labor Code. The article lays down the requirement that an appeal bond should
be filed. T h e NLRC rule, on the other hand, explains how the appeal bond shall
1
be computed.

8.5 Is Property Bond Acceptable?

In one case the labor arbiter awarded more than P I 7 million to the
numerous complainant employees. Appealing to the NLRC, the employer hospital
posted as appeal bond a real estate bond consisting of land and improvements worth
more than P I 0 0 million. T h e employer manifested that it was not in a financial
position to post a cash bond or to pay an annual premium of P700,000.00 for a
surety bond. But the NLRC rejected the property bond and dismissed the appeal,
pointing out that the bond should either be "cash" or "surety" as specified in
Article 223 (second paragraph). T h e seasoned counsel petitioned the Supreme
Court for a certiorari, insisting that NLRC gravely abused its discretion.
The Court granted the petition by ruling that although the posting of a
bond is jurisdictional, the requirement should be given a liberal interpretation.
"We reiterate this policy," Mr. Justice Puno said for the Court, "which stresses
the importance of deciding cases on the basis of their substantive merit and not
on strict technical rules. In the case at bar, the judgment involved is more than
P I 7 million and its precipitate execution can adversely affect the existence of
petitioner medical center. Likewise, the issues involved are not insignificant and

Fernandez, et al. vs. NLRC, et al, G.R. No. 105892, January 28, 1998.

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 APPEAL ART. 223

they deserve a full discourse by our quasi-judicial and judicial authorities. We are
also confident that the real property bond posted by the petitioners sufficiently
protects the interests of private respondents should they finally prevail. It is not
disputed that the real property offered by petitioners is worth P102,345,650. The
1
judgment in favor of private respondent is only a little more than P17 million."

8.6 Bond Accepted Conditionally

If the bond filed by the [appellant] petitioner is accepted by the NLRC
subject to certain conditions (such as submission of a certified copy of the title),
the petitioner's failure to fulfill those conditions on time is tantamount to a failure
to post the bond required by law. For that reason the appeal is not perfected,
2
hence, may be dismissed.

8.7 Supersedeas Bond

Substantial justice demands that the employer fulfill its commitment to post
the bond in order to stay the execution of the judgment against him pending
resolution of the appeal therefrom. This consideration cannot be outweighed by
the claim that procedural errors were committed by the labor arbiter. There is no
procedural error that may be imputed to the arbiter in requiring the employer
to post supersedeas bond as a condition for the stay of immediate execution of
the judgment against it, after appeal had been taken from said judgment. Given
the undisputed fact that the motion for immediate execution was presented
within the period of appeal, it was perfectly legitimate and within the arbiter's
competence for him to consider the matter and resolve it even after the lapse
3
of the appeal period.

9. RECORDS AND TRANSMITTAL

T h e records of a case shall have a corresponding index of its contents
which shall include the following: a) the original copy of the complaint; b) other
pleadings and motions; c) minutes of the proceedings, notices, transcripts of
stenographic notes, if any; d) decisions, orders, and resolutions as well as proof
of service thereof, if available; e) the computation of the award; f) memorandum
of appeal and the reply or answer thereto, if any, and proof of service, if available;
4
g) official receipt of the appeal fee; and h) the appeal bond, if any.
5
T h e records shall be chronologically arranged and paged prominently.

'UERM-Memorial Medical Center vs. NLRC, et al, G.R. No. 110419, March 3,
1997.
2
Metro Transit vs. Piglas NFWU-KMU, et al, G.R. No. 175460, April 14, 2008.
3
Pan American Employees Association, etc. vs. National Labor Relations
Commission, et al, G.R. No. 74273, October 12, 1986.
4
Sec. 7, Rule VI, NLRC Revised Rules of Procedure, 2005.
b
Ibid.

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 ART. 223 LABOR RELATIONS

Within forty-eight (48) hours after the filing of the appeal, the records
of the case shall be transmitted by the Regional Arbitration Branch or office of
1
origin to the Commission.
10. EFFECT OF APPEAL OF ARBITER'S DECISION
Without prejudice to immediate reinstatement pending appeal under
Section 6 of Rule X I , once an appeal is filed, the Labor Arbiter loses jurisdiction
over the case. All pleadings and motions pertaining to the appealed case shall
2
thereafter be addressed to and filed with the Commission.

10.1 Execution or Reinstatement Pending Appeal

In case the decision includes an order of reinstatement, and the employer
disobeys the directive under the second paragraph of Section 14 of Rule V or
refuses to reinstate the dismissed employee, the Labor Arbiter shall immediately
issue writ of execution, even pending appeal, directing the employer to
immediately reinstate the dismissed employee either physically or in the payroll,
and to pay the accrued salaries as a consequence of such reinstatement at the
3
rate specified in the decision.
The Sheriff shall serve the writ of execution upon the employer or any
other person required by law to obey the same. If he disobeys the writ, such
4
employer or person may be cited for contempt in accordance with Rule I X .

10.2 Effect of Perfection of Appeal on Execution

T h e perfection of an appeal shall stay the execution of the decision of the
5
Labor Arbiter on appeal, except execution for reinstatement pending appeal.
(Automatic execution of reinstatement and the rationale of payroll
reinstatement are discussed in Book VI in this volume.)
11. FRIVOLOUS OR DILATORY APPEALS
No appeal from an interlocutory order shall be entertained. To discourage
frivolous or dilatory appeals, including those taken from interlocutory orders,
the Commission may censure or cite in contempt the erring parties and their
6
counsels, or subject them to reasonable fine or penalty.
12. APPEALS FROM DECISION OF OTHER AGENCIES
The Rules provided herein governing appeals from the decisions or orders
of Labor Arbiters shall apply to appeals to the Commission from decisions or

•Sec. 8, Rule VI, NLRC Revised Rules of Procedure, 2005.

2
Sec. 9, Rule VI, Ibid.
3
Sec. 6, Rule XI, Ibid.
4
Ibid.
5
Sec. 9, Rule XI.
6
Sec. 10, Rule VI, Ibid.

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 APPEAL ART. 223

orders of the other offices or agencies appealable to the Commission according

1
to law.
13. PROCEEDINGS BEFORE THE COMMISSION
[Note: As this edition went to press the "2005 Revised Rules of the NLRC, " from
which the following paragraphs were taken, have not yet been changed to conform to
R.A. No. 9347 which lapsed into law on July 27, 2006. This law, among other changes,
increased the NLRC divisions from five to eight, with three commissioners each division.]
Commission En Banc — The Commission shall sit en banc only for purposes
of promulgating rules and regulations governing the hearing and disposition
of cases before its Divisions and Regional Arbitration Branches, and for the
formulation of policies affecting its administration and operations. It may, on
temporary or emergency basis, allow cases within the jurisdiction of any Division
to be heard by any other Division whose docket allows the additional workload
2
and such transfer will not expose litigants to unnecessary additional expense.
Divisions. — Unless otherwise provided by law, the Commission shall
exercise its adjudicatory and all other powers, functions and duties through its
five (5) [now eight] Divisions. Each Division shall consist of one member from
the public sector who shall act as the Presiding Commissioner and one member
3
each from the workers and employers sectors, respectively.
T h e presence of at least two (2) Commissioners of a Division shall constitute
a quorum. T h e concurrence of two (2) Commissioners of a Division shall be
4
necessary for the pronouncement of a judgment or resolution.
Whenever the required membership in a Division is not complete and the
concurrence of two (2) Commissioners to arrive at a judgment or resolution
cannot be obtained, the Chairman shall designate such number of additional
Commissioners from the other Divisions as may be necessary from the same
5
sector.
Role of Chairman in the Division. — The Chairman of the Commission
may convene and preside over the session of any Division to consider any
case pending before it and participate in its deliberations, if in his judgment,
his presence therein will best serve the interests of labor justice. He shall not
however, participate in the voting by the Division, except when he is acting as
Presiding, Commissioner of the Division in the absence of the regular Presiding
6
Commissioner.

•Sec. 11, Rule VI, NLRC Revised Rules of Procedure, 2005.

2
Sec. 2, Rule VII, Ibid.
*Ibid.
4
Sec. 4, Rule VII, Ibid.
b
Ibid.
Ibid.
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 LABOR RELATIONS
ART. 223

13.1 Issues on Appeal

Under Section 4 ( c ) Rule VI of the NLRC Rules of Procedure, the
Commission shall, in cases of perfected appeals, limit itself to reviewing those
issues which are raised on appeal. Those which are not raised on appeal shall be
final and executory. The issues raised on appeal, however, shall be opened for
review and any action taken thereon by the Commission are within the parameters
1
of its jurisdiction.
13.2 Technical Rules Not Binding
The rules of procedure and evidence prevailing in courts of law and equity
shall not be controlling and the Commission shall use every and all reasonable
means to ascertain the facts in each case speedily and objectively, without regard
2
to technicalities of law or procedure, all in the interest of due process.
In any proceeding before the Commission, the parties may be represented
by legal counsel but it shall be the duty of the Chairman, any Presiding
Commissioner or Commissioner to exercise complete control of the proceedings
3
at all stages.

13.2a Evidence Submitted on Appeal to NLRC

The settled rule is that the NLRC is not precluded from receiving evidence
on appeal as technical rules of evidence are not binding in labor cases. In fact,
labor officials are mandated by the Labor Code to use every and all reasonable
means to ascertain the facts in each case speedily and objectively, without regard
4
to technicalities of law or procedure, all in the interest of due process.
T h e rules of evidence prevailing in courts of law or equity are not
controlling in proceedings before the Commission. T h e submission of additional
evidence in support of the employee's appeal does not prejudice the employer
5
since the latter could submit counter-evidence.
Philippine Telegraph And Telephone Corporation vs. National Labor Relations
Commission, et al., G.R. No. 80600, March 21, 1990 —
On appeal to respondent Commission, petitioner [employer] submitted
uncontradicted evidence showing payment to [the employee] of his holiday pay and
rest day pay, and die employee's nonentitlement to incentive leave pay due to his
enjoyment of vacation leave privileges, consistent with Article 95 of the Labor Code.
Such evidence was, however, rejected by respondent Commission on the ground that

'Roche Philippines vs. National Labor Relations Commission, G.R. No. 83335,
October 5, 1989.
2
Sec. 10, Rule VII, NLRC Revised Rules of Procedure, 2005.
Ibid.
4
Clarion Printing House, Inc., et al vs. NLRC, G.R. No. 148372, June 27, 2005.
Precision Electronics Corporation vs. National Labor Relations Commission,
G.R. No. 86657, October 23, 1989.

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 APPEAL ART. 223

it was not presented at the first opportunity, presumably when the case was pending
with the labor arbiter.
The belated presentation of the evidence notwithstanding, respondent
Commission should have considered them just the same. As correctly pointed out by
the Solicitor-General who has impartially taken a contrary view vis-a-vis that portion
of said decision of respondent commission which he is supposed to defend, technical
rules of evidence are not binding in labor cases. Labor officials should use every
reasonable means to ascertain the facts in each case speedily and objectively, without
regard to technicalities of law or procedure, all in the interest of due process.
Thus, even if the evidence was not submitted to the labor arbiter, the fact that
it was duly introduced on appeal to respondent Commission is enough basis for the
latter to have been more judicious in admitting the same, instead of falling back on
the mere technicality that said evidence can no longer be considered on appeal.
Certainly, the first course of action would be more consistent with equity and the
basic notions of fairness.

13.3 Conciliation/Mediation
Even when the case is elevated on appeal to the NLRC, the Commission
(i.e., the division handling the case) shall exert all efforts towards the amicable
settlement of a labor dispute. T h e settlement of cases on appeal, to be valid and
binding between the parties, shall be made before the Commissioner or his
1
authorized representative.

13.4 Consultation
T h e conclusions of a Division on any case or matter submitted to it for
decision shall be reached in consultation before the case is assigned to a member
for the writing of the opinion. It shall be mandatory for the Division to meet for
2
the purpose of the consultation ordained herein.
A certification to this effect signed by the Presiding Commissioner of the
Division shall be issued and a copy thereof attached to the record of the case
3
and served upon the parties.
13.5 Dissenting Opinion
Should any member of a Division indicate his intention to write a dissenting
opinion, he may file the same within the period prescribed for deciding or
resolving the appeal; otherwise, such written dissenting opinion shall not be
4
considered part of the records of the case.

'Sec. 11, Rule VII, NLRC Revised Rules of Procedure, 2005.

2
Sec. 5, Rule VII.
*Ibid.
4
Sec. 6, Rule VII, NLRC Revised Rules of Procedure, 2005.

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 LABOR RELATIONS
ART. 223

13.6 Inhibition
No motion to inhibit the entire Division of the Commission shall be enter-
tained. However, any Commissioner may inhibit himself from the consideration
and resolution of any case or matter before the Division and shall so state in writ-
ing the legal or justifiable grounds therefor. In the event that a member inhibits
himself, the case shall be raffled by the Executive Clerk or Deputy Executive Clerk
to either of the two (2) remaining Commissioners. In case two (2) Commission-
ers in a Division inhibit themselves in a case or matter before it, the Chairman
shall, as far as practicable, appoint two (2) Commissioners from other Divisions
1
representing the sector of the Commissioners who inhibited themselves.
14. FORM OF DECISION, RESOLUTION AND ORDER
The decision, resolution and order of the Commission shall state clearly
and distinctly the findings of facts, issues, and conclusions of law on which it is
based, and the relief granted, if any. If the decision, resolution or order involves
monetary awards, the same shall contain the specific amount awarded as of the
2
date the decision is rendered.
Under Article 223, the Commission shall decide all cases within twenty
calendar days from receipt of the answer of the appellee.
The decision of the Commission shall be final and executory after ten
calendar days from receipt thereof by the parties.
Any enforcement agency may be deputized by the Secretary of Labor or
the Commission in the enforcement of decision, awards or orders.

14.1 Reasoned Reversal

While it is within respondent Commission's competence, as an appellate
agency reviewing decisions of Labor Arbiters, to disagree with and set aside
the latter's findings, it stands to reason that it should state an acceptable cause
therefor. It would otherwise be a whimsical, capricious, oppressive, illogical,
unreasonable exercise of quasi-judicial prerogative, subject to invalidation by
the extraordinary writ of certiorari}
But that, regrettably, is precisely what respondent Commission appears to
have done. It overturned the Labor Arbiter's factual determination regarding
LIPERCON's being a legitimate independent contractor without stating the
reason therefor, without any explanation whatever as to why the Arbiter's
evidentiary premises were not worthy of credit, or why the inferences drawn
4
therefrom were unacceptable, as a matter of law or logic.

'Sec. 7, Rule VII, NLRC Revised Rules of Procedure, 2005.

2
Sec. 13, Rule VII, Ibid.
3
Cola-Cola Bottlers Phil., Inc. vs. Hingpit, et al, G.R. No. 127238, August 25,
1998.
4
Ibid.

126
 APPEAL ART. 223

14.2 Extended Meaning of "Appeal" under Article 223; NLRC May Issue
Writ of Certiorari
Triad Security & Allied Services, Inc. et al. vs. Ortega, et al, G.R. No. 160871,
February 6, 2006 —
It is a basic tenet of procedural rules that for a special civil action for a petition
for certiorari to prosper, the following requisites must concur: (1) the writ is directed
against a tribunal, a board or an officer exercising judicial or quasi-judicial functions;
(2) such tribunal, board or officer has acted without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is
no appeal or any plain, speedy and adequate remedy in the ordinary course of law.
In this case, petitioners insist that the NLRC is bereft of authority to rule on a
matter involving grave abuse of discretion that may be committed by a labor arbiter.
Such conclusion, however, proceeds from a limited understanding of the appellate
jurisdiction of the NLRC under Article 223 of the Labor Code which states:
Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. Such appeal
may be entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part
of the Labor Arbiter.
In the case of Air Services Cooperative v. Court of Appeals, we had the occasion to
explain the scope of said Article of the Labor Code to mean —
x x x Also, while the title of Article 223 seems to provide only for
the remedy of appeal as that term is understood in procedural law and as
distinguished from the office of certiorari, nonetheless, a closer reading thereof
reveals that it is not as limited as understood by the petitioners x x x .
xxx
Abuse of discretion is admittedly within the ambit of certiorari and its
grant thereof to the NLRC indicates the lawmakers' intention to broaden the
meaning of appeal as that term is used in the Code x x x .
Likewise, in the same case, this Court quoted with approval the following
observation of the Court of Appeals:
We do not see how appeal would have been inadequate or ineffectual
under the premises. On the other hand, being the administrative agency
especially tasked with the review of labor cases, [the NLRC] is in a far
better position to determine whether petitioners' grounds for certiorari are
meritorious. Neither is there any cause for worry that appeal to the Commission
would not be speedy as the Labor Code provides that the Commission shall
decide cases before it, within twenty (20) calendar days from receipt of the
Answer of Appellee x x x .
Given the foregoing, we hold that the Court of Appeals correctly dismissed
the petition for certiorari brought before it.

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 LABOR RELATIONS
ART. 223

15. FINALITY OF DECISION OF THE COMMISSION AND ENTRY OF

JUDGMENT
a) Finality of the Decisions, Resolutions or Orders of the Commission.
- Except as provided in Section 9 of Rule X, the decisions, resolution or orders
of the Commission shall become final and executory after ten (10) calendar
1
days from receipt thereof by the parties.
b) Entry of Judgment. - Upon the expiration of the ten (10) calendar
day period provided in paragraph (a) of this Section, the decision, resolution,
2
or order shall be entered in a book of entries of judgment.
The Executive Clerk or Deputy Executive Clerk shall consider the decision,
resolution or order as final and executory after sixty (60) calendar days from
date of mailing in the absence of return cards, certifications from the post office,
3
or other proof of service to parties.
16. MOTIONS FOR RECONSIDERATION
Motion for reconsideration of any decision, resolution or order of the
Commission shall not be entertained except when based on palpable or patent
errors; provided that the motion is under oath and filed within ten (10) calendar
days from receipt of decision, resolution or order, with proof of service that a
copy of the same has been furnished, within the reglementary period, the adverse
party, and provided further, that only one such motion from the same party shall
be entertained.
Should a motion for reconsideration be entertained pursuant to this
Section, the resolution shall be executory after ten (10) calendar days from
4
receipt thereof.
The NLRC Rules does not allow a second motion for reconsideration. T h e
NLRC abuses its discretion when it violates its own rules by entertaining such a
5
motion.
A supplemental motion for Reconsideration filed outside of the 10-day
6
appeal period cannot be entertained.

16.1 Party Who Failed to Appeal on Time From Decision of Labor Arbiter
May Still File Motion for Reconsideration of NLRC Decision
Sadol vs. Filipinos Kao, Inc., et al., G.R. No. 87530, June 13, 1990 —
Facts: Petitioner was recruited as a laborer by owners of Vega & Co., a private
recruitment agency, with assignment at respondent Pilipinas Kao, Inc. (PKI). On April

•Sec. 14, Rule VII, NLRC Revised Rules of Procedure, 2005.

2
Ibid.
Ibid.
4
Sec. 15, Rule VII,/ta*.
5
Jardin vs. NLRC and Goodman Taxi, G.R. No. 119268, February 23, 2000.
6
Favila vs. NLRC, G.R. No. 126768, June 16, 1999.

128
 APPEAL ART. 223

16,1984 he was allegedly summarily dismissed. He filed a complaint for reinstatement

and backwages. The labor arbiter rendered a decision ordering private respondents
to pay petitioner separation pay at one month for every year of service. Petitioner
appealed to die NLRC. Respondents also appealed but its appeal was filed out of
time.
The NLRC modified the appealed decision in that respondent PKI was ordered
to reinstate petitioner with full backwages and other accrued benefits and in case
reinstatement is impossible, payment of full backwages and separation pay. The
appeal of respondent PKI was dismissed for having been filed out of time.
Respondent PKI received a copy of the decision of the NLRC on September
13, 1988. A motion for reconsideration dated September 22, 1988 was filed by said
respondent. Petitioner opposed the motion.
On September 30,1988 the NLRC set aside its decision and dismissed the case
for lack of merit.
Hence, the herein petition for certiorari.
Ruling: Party who failed to appeal from a decision of the Labor Arbiter to the NLRC
can still participate in a separate appeal timely filed by the adverse party by a motion for
reconsideration of the decision of the NLRC on appeal. There is no question that private
respondents failed to file a timely appeal from the decision of the labor arbiter while
the petitioner was able to interpose his appeal within the reglementary period. It
is also an accepted postulate that issues not raised in the lower court or die labor
arbiter may not be raised for the first time on appeal.
Note is taken of the fact that even the Solicitor General refused to represent
the NLRC in this proceeding as it shares the view of petitioner that the decision of
the labor arbiter having become final by the failure of respondent PKI to appeal on
time, the NLRC may no longer amend, modify, much less set aside the same.
The posture is correct insofar as respondent PKI is concerned. However, as
petitioner had filed a timely appeal, the NLRC had jurisdiction to give due course to
his appeal and render the decision of August 28,1988, a copy of which was furnished
respondents. Having lost the right to appeal, can respondent PKI file a motion for
reconsideration of said decision? The Court resolves the question in the affirmative.
The rules of technicality must yield to the broader interest of justice. It is only by giving
due course to the motion for reconsideration that was timely filed that the NLRC may
be able to equitably evaluate the conflicting versions of facts presented by the parties.

17. CERTIFIED CASES

The proceedings before the Commission on cases certified to it under
Article 263(g) are explained under that article.
18. APPEAL FROM THE NATIONAL LABOR RELATIONS COMMISSION
18.1 Review by Certiorari by the Court of Appeals; The St. Martin case
On September 16,1998 the Supreme Court promulgated its epoch-making
ruling in St. Martin Funeral Homes vs. NLRC and B. Aricayos, G.R. No. 130866.

129
 LABOR RELATIONS
ART. 223

From the labor arbiter to the NLRC this illegal dismissal case reached the Highest
Court on the question of whether the complainant/respondent was or was not
an employee of the petitioner. The Court did not answer the question and ended
up referring it to the Court of Appeals. There lies the significance of this en banc
decision.
After quickly reviewing the NLRC's creation, the Court noted that present
laws provide no appeals from NLRC decisions. The Court painstakingly examined
the definitions of jurisdiction of the Court of Appeals under BP Big. 129 (Judiciary
Reorganization Act of 1980) in relation to the amendments made by R.A. No.
7902 (March 18, 1995). The Supreme Court noted "a somewhat perplexing
impasse"— some kind of a neither here nor there. The SC review of NLRC
decisions has always been through petition for certiorari under Rule 65 which is
limited to resolution of jurisdictional issues and grave abuse of discretion. And
yet, BP Big. 129, which defined the exclusive appelate jurisdiction of the CA,
excepted the cases falling under the appellate jurisdiction of the SC "in accordance
with the Labor Code." In other words, BP Big. 129 says that the CA shall not
entertain appeals that belong to the SC "in accordance with the Labor Code."
But the Labor Code itself does not provide for appeal to the Supreme Court.
Such "procedural gaffe," said the Court graciously, could not have been intended
by Congress.
R.A. No. 7902 transposed and did not delete the exception of "appellate
jurisdiction of the Supreme Court in accordance with the Labor Code." But the
Court is persuaded that "there may have been oversight in the course of the
deliberations [on R.A. No. 7902] or an imprecision in the terminology used
therein." Thus, the Court deduced that "Congress did intend to provide for judicial
review of the adjudications of the NLRC in labor cases by the Supreme Court, but there
was an inaccuracy in the term used for the intended mode of review"
Delving into the legislative deliberations, the Court pointed out that the
purpose of R.A. No. 7902 in amending BP Big. 129 was "to ease the workload
of the Supreme Court by the transfer of some of its burden of review of factual
issues to the Court of Appeals."
Pursuing this objective, the Court then made this epochal pronouncement:
T h e Court is, therefore, of the considered opinion that ever since
appeals from the NLRC to the Supreme Court were eliminated, the
legislative intendment was that the special civil action of certiorari was and
still is the proper vehicle for judicial review of decisions of the NLRC. T h e
use of the word "appeal" in relation thereto and in the instances we have
noted could have been a lapsus plumae because appeals by certiorari and the
original action for certiorari are both modes of judicial review addressed to
the appellate courts. T h e important distinction between them, however,
and with which the Court is particularly concerned here, is that the special
Civil action of certiorari is within the concurrent original jurisdiction of this

130
 APPEAL ART. 223

Court and the Court of Appeals; whereas to indulge in the assumption

that appeals by certiorari to the Supreme Court are allowed would not
subserve, but would subvert, the intention of Congress as expressed in the
sponsorship speech on Senate Bill No. 1495.
Therefore, all references in the amended Section 9 of B.P. No. 129
to supposed appeals from the NLRC to the Supreme Court are interpreted
and hereby declared to mean and refer to petitions for certiorari under Rule
65. Consequently, all such petitions should henceforth be initially filed in
the Court of Appeals in strict observance of the doctrine on the hierarchy
of courts as the appropriate forum for the relief desired.
In a nutshell, the St. Martin precedent states: (1) the way to review NLRC
decisions is through the special civil action of certiorari under Rule 65; (2) the
jurisdiction over such action belongs to both the Supreme Court and the Court
of Appeals; but (3) in line with the doctrine on hierarchy of courts, the petition
should be initially presented to the lower of the two courts, that is, the Court of
Appeals.

18.2 When and Where to File Petition

Under the 1997 Rules of Civil Procedure, effective July 1, 1997, the
petition for certiorari may be filed not later than sixty (60) days from notice of
the judgment, order, or resolution sought to be assailed in the Supreme Court
x x x. It may also be filed in the Court of Appeals whether or not the same is
in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its
1
jurisdiction.
But the same Section and Rule provide that "if the petition involves the
acts or omissions of a quasi-judicial agency, and unless otherwise provided by
law or the Rules, the petition shall be filed and cognizable only by the Court of
Appeals."
T h e Supreme Court amended Sec. 4, Rule 65, through AM No. 00-2-03SC
which took effect on September 1, 2000. The Rule now reads.
"Sec. 4. When and Where Petition Filed. — T h e petition shall be filed not later
than sixty (60) days from notice of the judgment, order or resolution. In case a
motion for reconsideration or new trial is timely filed, whether such motion is
required or not, the sixty (60) day period shall be counted from notice of the
denial of said motion."
T h e amendment is procedural or remedial in character. It is given
retroactive effect. It applies to a petition filed before September 1, 2000 on the
ground that rules regulating procedures should be made applicable to actions
2
pending and undetermined at the time of their passage.

•Sec. 4, Rule 65, Rules of Court.

Universal Robina Corp., et al. vs. CA, et al., G.R. No. 144978, January 15, 2002.

131
 LABOR RELATIONS
ART. 223

18.2a One Day Late

The 60-day period must be carefully observed. In a case where the Court
of Appeals dismissed the petition for certiorari because it was filed on March 18,
instead of March 17, the Supreme Court sustained the CA's action. Reglementary
periods, said the High Court, are indispensable interdictions against needless
delays. The Court stressed that incorrect computation of time by the petitioner's
counsel is "inexcusable neglect," and the client is bound by his counsel's conduct,
negligence and mistakes. The petitioners pleaded that the substantive issue - the
order to pay separation pay despite losses - was so significant that the one day
lateness of the petition may perhaps be glossed over. T h e Supreme Court denied
the plea. Even if the CA's dismissal of the petition was an error, the Court said
1
it was an error of judgment and not of jurisdiction.

18.2b Certified True Copy of NLRC Decision

Numerous decisions issued by the Court emphasize that in appeals under
Rule 45 and in original civil actions for certiorari under Rule 65 in relation to Rules
46 and 56, what is required to be certified is the copy of the questioned judgment,
final order or resolution. Since the Labor Arbiter's was not the questioned ruling,
2
it did not have to be certified. What had to be certified was the NLRC Decision.

18.3 Effect on NLRC's Decision

A petition for certiorari filed with the Court of Appeals or the Supreme
Court shall not stay the execution of the assailed decision of the NLRC unless a
temporary restraining order is issued by the Court of Appeals or the Supreme
3
Court.

18.4 Appeal to Labor Secretary Abolished

T h e Labor Code formerly granted, under Article 223, an aggrieved party
the remedy of appeal from a decision of the NLRC to the Secretary of Labor.
Presidential Decree No. 1391, however, amended Article 223 and abolished
appeals to the Secretary of Labor.

18.5 Grounds for Certiorari

A party may seasonably avail itself of the special civil action for certiorari,
where the tribunal, board or officer exercising judicial functions has acted without
or in excess of its jurisdiction, or with grave abuse of discretion, and praying
that judgment be rendered annulling or modifying the proceedings, as the law
4
requires, of such tribunal, board or officer.

'LTS Phil. Corp., et al. vs. Malimat, et al, G.R. No. 159024, January 14, 2005.
2
OSM Shipping Phil., Inc. vs. NLRC, G.R. No. 138193, March 5, 2003.
3
Sec. 6, Rule VIII, NLRC Revised Rules of Procedure, 2005.
4
Pure Foods Corporation vs. National Labor Relations Commission, G.R. No.
78591, March 21, 1989.

132
 APPEAL ART. 223

In spite of statutory provisions making 'final' the decisions of certain

administrative agencies, the Supreme Court [or Court of Appeals] using the
power of judicial review, has taken cognizance of petitions questioning the
decisions where want of jurisdiction, grave abuse of discretion, violation of due
process, denial of substantial justice, or erroneous interpretation of the law were
1
brought to its attention.
No law provides for an appeal from decisions of the National Labor
Relations Commission. Hence, there can be no review and reversal on appeal
by higher authority of its factual or legal conclusions. When, however, it decides
a case without or in excess of its jurisdiction, or with grave abuse of discretion,
the party thereby adversely affected may obtain a review and nullification of that
decision by the Supreme Court [or Court of Appeals] through the extraordinary
writ of certiorari. If it appears, for example, that the Commission had indeed acted
without jurisdiction and with grave abuse of discretion in taking cognizance
of a belated appeal sought to be taken from a decision of a labor arbiter and
thereafter reversing it, the writ of certiorari will issue to undo those acts, and do
2
justice to the aggrieved party. Note: See above the St. Martin case.

18.6 "Grave Abuse of Discretion"

In an action for certiorari, the petitioner must prove not merely reversible
error, but grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the public respondent. "By grave abuse of discretion is meant capricous
and whimsical exercise of judgment as is equivalent to lack of jurisdiction. Mere
abuse of discretion is not enough. It must be grave abuse of discretion as when
the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility, and must be so patent and so gross as to amount to an evasion
of a positive duty or to a virtual refusal to perform the duty enjoined or to act at
all in contemplation of law." In this case, petitioner failed to show grave abuse
3
of discretion on the part of Respondent Commission.

18.7 Sole Office of Certiorari

T h e appellate court's jurisdiction to review a decision of the NLRC in
a petition for certiorari is confined to issues of jurisdiction or grave abuse of
discretion. An extraordinary remedy, a petition for certiorari is available only and

Mantrade/FMMC Division Employees and Workers Union vs. Bacungan, G.R.

No. 48437, September 30, 1986.
2
John Clement Consultants, Inc. vs. National Labor Relations Commission,
G.R. No. 72096, January 29, 1988.
3
Solvic Industrial Corp., et al vs. NLRC and Lauz, G.R. No. 125548, September
25,1998, citing Tañada vs. Angara, G.R. No. 118295, May 2,1997, per Panganiban,/.
See also Zarate vs. Olegario, G.R. No. 90655, October 7,1996; San Sebastian College
vs. Court of Appeals, 197 SCRA 138, May 15,1991; Bustamante vs. Commissioner on
Audit, 216 SCRA 134, November 27, 1992.
133
 LABOR RELATIONS
ART. 223

restrictively in truly exceptional cases. The sole office of the writ of certiorari is
the correction of errors of jurisdiction including the commission of grave abuse
of discretion amounting to lack or excess of jurisdiction. It does not include
correction of the NLRC's evaluation of the evidence or of its factual findings.
Such findings are generally accorded not only respect but also finality. A party
assailing such findings bears the burden of showing that the tribunal acted
capriciously and whimsically or in total disregard of evidence material to the
1
controversy, in order that the extraordinary writ of certiorari will lie.
18.8 Not a Slave to Technical Rules
Reyes vs. NLRC, Coca-Cola Bottlers Phils., G.R. No. 180551, February 10,2009 —
Facts: The dismissed employee was ordered reinstated by the Labor Arbiter,
but the NLRC reversed this decision. Raising his appeal to the Court of Appeals, the
employee, unfortunately, failed to explain to the court why he did not personally
serve a copy of his petition to the adverse party (his employer), as required by Section
11, Rule 13 of the Revised Rules of Court. Thus, the Court of Appeals dismissed his
petition. The employee did not file a motion for reconsideration of the CA decision.
Despite this and the earlier failure to furnish the employer personally a copy of
the petition, the Supreme Court entertained and granted the employee's petition,
through the pen of Justice Chico-Nazario.
Ruling: In numerous cases, the Court has allowed liberal construction of Section
11, Rule 13 of the Revised Rules of Court when doing so would be in the service of
the demands of substantial justice and in the exercise of the equity jurisdiction of this
Court. In one such case, Fulgencio v. National Labor Relations Commission, this Court
provided the following justification for its non-insistence on a written explanation
as required by Section 11, Rule 13 of the Revised Rules of Court:
The rules of procedure are merely tools designed to facilitate the
attainment of justice. They were conceived and promulgated to effectively aid
the court in the dispensation of justice. Courts are not slaves to or robots of
technical rules, shorn of judicial discretion. In rendering justice, courts have
always been, as they ought to be, conscientiously guided by the norm that
on the balance, technicalities take a backseat against substantive rights, and
not the other way around. Thus, if the application of the Rules would tend to
frustrate rather than promote justice, it is always within our power to suspend
the rules, or except a particular case from its operation.
The basic general rule is that the negligence of counsel binds the client.
Hence, if counsel commits a mistake in the course of litigation, thereby resulting
in his losing the case, his client must perforce suffer the consequences of the
mistake. The reason for the rule is to avoid the possibility that every losing
party would raise the issue of negligence of his or her counsel to escape an
adverse decision of the court, to the detriment of our justice system, as no party
would ever accept a losing verdict. This general rule, however, pertains only

'Odango vs. NLRC, et al, G.R. No. 147420, June 10, 2004.

134
 APPEAL ART. 223

to simple negligence of the lawyer. Where the negligence of counsel is one

that is so gross, palpable, pervasive, reckless and inexcusable, then it does not
bind die client since, in such a case, the client is effectively deprived of his or
her day in court.
The circumstances of this case qualify it under the exception, rather than the
general rule. The negligence of petitioner's former counsel may be considered gross
since it invariably resulted to the foreclosure of remedies otherwise readily available
to the petitioner. Not only was petitioner deprived of the opportunity to bring his case
before the Court of Appeals with the outright dismissal of his Petition on a technicality,
but he was also robbed of the chance to seek reconsideration of the dismissal of his
petition. What further impel this Court to heed the call for substantial justice are
the pressing merits of this case which, if left overshadowed by technicalities, could
result in flagrant violations of the provisions of the Labor Code and of the categorical
mandate of the Constitution affording protection to labor.
Higher interest of justice and equity demand that petitioner should not be
denied his day in court and made him to suffer for his counsel's indiscretions. To
cling to the general rule in this case would only condone, rather than rectify, a serious
injustice to a party—whose only fault was to repose his faith and trust in his previous
counsel — and close our eyes to the glaring grave abuse of discretion committed by
the NLRC.

18.9 Appeal from OSEC to CA; St Martin Ruling Applies

Like NLRC decisions, rulings issued by the Office of the Secretary (OSEC)
of DOLE may be appealed to the Court of Appeals, not the Supreme Court,
1
pursuant to the ruling in St. Martin Funeral Homes vs. NLRC.
T h e instances of possible appeal to the CA from the DOLE Secretary are
the following:
1. Under the rules governing local employment, dated J u n e 5, 1997,
regarding the regional director's decisions on complaints of
employment agencies.
2. Under Article 128 and Sec. 2 in relation to Sec. 3a and Sec. 4, Rule X,
Book III, Implementing Rules regarding compliance order in labor
standards cases; under Sec. 1, Rule IV of the Rules on Disposition
of labor standard cases dated September 16, 1987; execution, on
occupational health and safety cases.
3. Under Article 236: denial of application for registration by BLR of
registration of federation, national or industry union, or trade union
center.

•Cited in National Federation of Labor vs. Laguesma, G.R. No. 123426, March
10, 1999.

135
 LABOR RELATIONS
ART. 223

4. Under Article 238: cancellation of registration by BLR or Regional

Office.
5. Under Article 2 5 9 : order of a med-arbiter on a petition for
certification election or as to the results of a certificate election.
6. Under Book V of the Implementing Rules: decision of the B L R
regarding administration of union funds;
1
7. Under Article 263: decisions in cases of assumption of jurisdiction.
18.10 Exhaustion of Administrative Remedies; Motion for Reconsideration
Required
The remedy of an aggrieved party in a decision or resolution of the Secretary
of the DOLE is to timely file a motion for reconsideration as a precondition for
any further or subsequent remedy, and then seasonably file a special civil action
for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
Petitioner's failure to file its motion for reconsideration seasonably is fatal
to its cause and in effect, renders final and executory the Resolution of the
2
Secretary of the DOLE.
A petition for certiorari should be preceded by exhaustion of administrative
remedies.
When an administrative remedy is provided by law, relief must be sought
by first exhausting that remedy before seeking judicial intervention. Failure to
3
do so is fatal.

18.10a Exceptions
NLRC rules require the filing of a motion for reconsideration before
the parties may pursue any further or subsequent remedy. How absolute is this
rule? In some cases elevated to it, the Supreme Court upheld the rule; in some
other cases, it did not. In Sunshine Transportation, Inc. vs. NLRC and R. Santos,
G.R. No. 116025, February 22, 1996, the NLRC affirmed the labor arbiter's
dismissal of the employee's complaint against his employer. T h e employee
forthwith elevated the case to the Supreme Court, charging the NLRC with
grave abuse of discretion. T h e Court dismissed the petition for certiorari, saying
that "in the light of the doctrine of exhaustion of administrative remedies, a

National Federation of Labor vs. Laguesma, G.R. No. 123426, March 10,1999.
2
See University of Immaculate Conception vs. Secretary of Labor, G.R. No.
143557, June 25, 2004; SMC Quarry 2 Workers Union - February Six Movement
Local Chapter No. 1564 vs. Titan Megabags Industrial Corporation, G.R. No. 150761,
May 19,2004; Also: Manila Pearl Corp. vs. Manila Pearl Independent Workers Union,
G.R. No. 142960, April 15, 2005.
3
National Labor Union vs. Secretary of Labor, G.R. No. 41459, December 18,
1987.

136
 APPEAL
ART. 223

motion for reconsideration must first be filed before the special civil action
for certiorari may be availed of."
Five months later, in another case of employee dismissal, the Supreme Court
entertained the petition although it noted that the petitioners had not filed with
die NLRC a motion for reconsideration. It clarified that the rule requiring a
motion for reconsideration before filing a petition for certiorari "admits of certain
exceptions, among which is the finding that under the circumstances of the case,
a motion for reconsideration would be useless." It explained: "In this case, the
NLRC had reversed the decision of the Labor Arbiter and no new issues were
raised in this appeal. We find it quite impossible for the NLRC to reverse itself
under the foregoing facts and so, a motion for reconsideration will be deemed
useless. Hence, by reason of justice and equity, we resolve to settle the issues on
1
the merits in order to avoid further delay."
Before 1996 ended the Court had occasion to summarize the exceptions
to the rule requiring a motion for reconsideration or the exhaustion of
administrative remedies. In Fe Alindao vs. Joson, et al, G.R. No. 114132, November
14, 1996, the Supreme Court summed up:
It has been held that the requirement of a motion for reconsideration
may be dispensed with in the following instances: (1) when the issue raised
is one or purely of law; (2) where public interest is involved; (3) in cases
of urgency; and (4) where special circumstances warrant immediate or
more direct action. On the other hand, among the accepted exceptions
to the rule on exhaustion of administrative remedies are: (1) where the
question in dispute is purely a legal one; and (2) where the controverted
act is patently illegal or was performed without jurisdiction or in excess of
jurisdiction."
T h e remedy of appeal from the Secretary of Labor to the Office of the
President is not a mandatory requirement before resort to courts can be had,
but an optional relief provided by law to parties seeking expeditious disposition
of their labor disputes. Failure to avail of such relief shall not in any way serve
as an impediment to judicial intervention. And where the issue is lack of power
or arbitrary or improvident exercise thereof, decisions of the Secretary of Labor
may be questioned in a certiorari proceeding without prior appeal to the President.
Since the instant petition raises the same issue of grave abuse of discretion of the
Secretary of Labor amounting to lack of or in excess of jurisdiction in deciding
the controversy, this Court can properly take cognizance of and resolve the issues
2
raised herein.

'Midas Touch Food Corp. vs. NLRC and Iris Fe Isaac, G.R. No. 111639, July 29,
1996.
^Tropical Hut Employee's Union-CGQ, et al. vs. Tropical Hut Food Market,
Inc., et al, G.R. Nos. L43495-99, January 20, 1990.

137
 LABOR RELATIONS
ART. 223

Another established exception to the rule on exhaustion of administrative

1
remedies is one where the issue involved is a question of law. Such "question-of-
law" exception includes a situation where petitioner is invoking the applicability
2
of a Supreme Court ruling to the case at hand. Whether or not a precedent
applies to a subsequent case is a question of law because Supreme Court rulings
3
form part of the country's legal system.
Nonetheless, it is obvious that the High Court does not relish skipping the
filing of a motion for reconsideration. Certiorari is not a shield from the adverse
consequences of an omission to file the required motion for reconsideration.
The petitioners may not arrogate to themselves the determination of whether
a motion for reconsideration is necessary or not. To dispense with a motion for
reconsideration, there must be a concrete, compelling and valid reason for the
4
failure to comply with the requirement.
Despite the jurisprudence insisting on exhaustion of administrative
remedies, the DOLE department order amending the rules implementing Book
V of the Code states in part: ' T h e decision of the Secretary shall become final
and executory after ten (10) days from receipt thereof by the parties. No motion
5
for reconsideration of the decision shall be entertained. "
19. CERTIFICATE OF NON-FORUM SHOPPING
Administrative remedies must be exhausted, but forum shopping cannot
be resorted to. Forum shopping is the act or attempt to present the same dispute
to different adjudicators in the hope of securing a favorable ruling. It is scouting
around for a most sympathetic ear. It is not allowed because it mocks the basic
tenet that one dispute ought to be litigated only once in only one forum.
In one case, for instance, the petition had to be dismissed because of forum
shopping. In failing to state the pendency of a civil case or even the action before
the CA, the petitioners were engaged in a deliberate act of forum shopping. T h e
issues and causes of action involved in both actions revolve around the legality of
their dismissal. From the very same act of termination, petitioners seek damages
either from herein respondent which they claim unlawfully fired them, or failing
that, from respondent's officers whom they claim terminated them without the
sanction of the company. Both claims are contradictory, which underscores their
attempt to canvass for a friendly forum, namely, that if their claim is defeated in
the regular court, then they would attempt to prevail in the labor tribunal, or
vice versa.

'Cambronero, et al vs. NLRC, G.R. Nos. 93787-93, December 19, 1990

Resolution.
Ibid.
3
Article 8, Civil Code.
4
Metro Transit Organization vs. CA, et al, G.R. No. 142133, November 19,2002.
5
Sec. 21, Rule VIII, D.O. No. 40-03.

138
 APPEAL ART. 223

Forum shopping is manifest whenever a party "repetitively avail [s] [itself]

of several judicial remedies in different courts, simultaneously or successively,
all substantially founded on the same transactions and the same essential facts
and circumstances, and all raising substantially the same issues either pending
in, or already resolved adversely by, some other court." It adversely affects the
efficient administration of justice since it clogs the court dockets, unduly burdens
the financial and human resources of the judiciary, and trifles with and mocks
judicial processes.
Failure to comply with the requirements concerning the certification against
forum shopping shall be cause for the dismissal of the case without prejudice,
unless otherwise provided, upon motion and after hearing. T h e submission
of a false certification or non-compliance with any of the undertakings shall
constitute indirect contempt of court, without prejudice to the corresponding
administrative and criminal actions. If the acts of the party or his counsel clearly
constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt, as well
1
as a cause for administrative sanctions.

19.1 Certification of Nonforum Shopping Must be Made by Petitioner

Santos, et al vs. CA, Pepsi Cola Products, et al, G.R. No. 141947, July 5, 2001 —
It is true that insofar as verification is concerned, we have held that there is
substantial compliance if the same is executed by an attorney, it being presumed
that facts alleged by him are true to his knowledge and belief. However, the same
does not apply as regards the requirement of a certification against forum shopping.
Section 3, Rule 46, of the 1997 Rules of Civil Procedure explicitly requires —
x x x x The petitioner shall also submit together with the petition a sworn
certification that he has not theretofore commenced any other action involving
the same issues in the Supreme Court, the Court of Appeals or different divisions
thereof, or any other tribunal or agency; if there is such other action or proceeding,
he must state the status of the same; and if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the Supreme Court, the
Court of Appeals, or different divisions thereof, or any other tribunal or agency, he
undertakes to promptly inform the aforesaid courts and other tribunal or agency
thereof within five (5) days therefrom x x x x
It is clear from the above-quoted provision that the certification must be made
by petitioner himself and not by counsel since it is petitioner who is in the best position to
know whether he has previously commenced any similar action involving the same
issues in any other tribunal or agency.
Petitioners argue that while it may be true that they are in the best position
to know whether they have commenced an action or not, this information may

^anuto, Jr. and De la Corte vs. National Labor Relations Commission and
Colgate Palmolive Philippines, Inc., G.R. No. 110914, June 28, 2001.

139
 ART. 223 LABOR RELATIONS

be divulged to their attorney and there is nothing anomalous or bizarre about

this disclosure. They further maintain that they executed a Special Power of Attorney
specifically to authorize their counsel to execute die certification on their behalf.
We are aware of our ruling in BA Savings Bank v. Sia that a certification against
forum shopping may be signed by an authorized lawyer who has personal knowledge
of the facts required to be disclosed in such document. However, BA Savings Bank
must be distinguished from the case at bar because in the former, die complainant
was a corporation, and hence, a juridical person. Therefore, that case made an
exception to the general rule that the certification must be made by the petitioner
himself since a corporation can only act through natural persons. In fact, physical
actions, e.g., signing and delivery of documents, may be performed on behalf of
the corporate entity only by specifically authorized individuals. In the instant case,
petitioners are all natural persons and there is no showing of any reasonable cause
to justify their failure to personally sign the certification.

20. DISPOSITION BY THE COURT OF APPEALS

The Supreme Court [or the Court of Appeals, per St. Martin case, discussed
above] is clothed with ample authority to review matters, even if they are not
assigned as errors in the appeal, if it finds that its consideration is necessary in
1
arriving at a just decision of the case.
20.1 Remand
Where the appraisal of the NLRC and the Labor Arbiter lacks precision,
giving rise to an ambiguity that lends plausibility to a petition for certiorari, and
there are matters regarding the quitclaim that still need to be clarified, equity calls
for a remand of the case to the NLRC for an ascertainment of greater detail of
the circumstances surrounding the execution of the quitclaim. It would be unfair
if the Supreme Court [or Court of Appeals] would disregard the quitclaim and
2
thus enable respondents to unjustly benefit if indeed they signed the quitclaim.

20.2 Dismissal of Appeal

Even if the appeal filed by respondents in the National Labor Relations
Commission is still pending, if the Supreme Court [or Court of Appeals] in a
petition for certiorari finds the facts on record substantially sufficient for it to rule
that the appeal was filed late and is patently dilatory and would serve no other
purpose except to delay and frustrate justice, it may be constrained under the
circumstances to order the National Labor Relations Commission to dismiss the
3
appeal of respondents.
!
Lim vs. National Labor Relations Commission, G.R. No. 79907; Sweet Lines
vs. National Labor Relations Commission, G.R. No. 79975, March 16, 1989.
industrial Timber Corporation vs. National Labor Relations Commission, G.R.
No. 83616, January 20, 1989.
3
Bongay vs. Martinez, G.R. No. 77188, March 14, 1988.

140
 APPEAL ART. 223

20.S Findings of Facts Generally Final

As a general rule, the findings of administrative agencies are accorded
not only respect but even finality. This is especially true with respect to the
Department of Labor, which performs not only a statutory function but carries
out a constitutional mandate as well. T h e Supreme Court's [Court of Appeals']
jurisdiction, as a rule, is confined to cases of grave abuse of discretion. But for
certiorari to lie, there must be such arbitrary and whimsical exercise of power, or
1
that discretion was exercised despotically.
T h e doctrine that the findings of facts of the National Labor Relations
Commission are binding on the Supreme Court [or Court of Appeals], if
supported by substantial evidence, is well established. However, in the same way
that the findings of facts unsupported by substantial and credible evidence do not
bind the Supreme Court [or Court of Appeals], neither will it uphold erroneous
conclusions of the National Labor Relations Commission when it finds that the
latter committed grave abuse of discretion in reversing the decision of the labor
arbiter, especially if the findings of NLRC based on practically the same facts
2
established in the hearings before the arbiter are speculative and conjectural.
Judicial review by the Supreme Court on labor cases do not go so far as
to evaluate the sufficiency of the evidence upon which the Deputy Minister and
the Regional Director based their determinations but are limited to issues of
3
jurisdiction or grave abuse of discretion.
The issue of existence of an employer-employee relationship between the
parties is a question of fact, and the finding of the Labor Arbiter on this point
4
is entitled not only to respect but also the stamp of finality.

20.4 Exceptions
The rule that the Supreme Court is not a trier of facts admits of exceptions.
As stated in Insular Life Assurance Company, Ltd. vs. CA, G.R. No. 126850, 28 April
2004:
[It] is a settled rule that in the exercise of the Supreme Court's power
of review, the Court is not a trier of facts and does not normally undertake
the re-examination of the evidence presented by the contending parties

l
Madrigal Company, Inc. vs. Zamora, G.R. No. 48237 and Madrigal & Company,
Inc. vs. Minister of Labor, G.R. No. 49023, June 30,1987; Manila Mandarin Employees
Union vs. National Labor Relations Commission, G.R. No. 76989, September 21,
1987.
2
Llobrera vs. National Labor Relations Commission, G.R. No. 76271, June 28,
1988.
Philippine Overseas Drilling and Oil Development Corporation vs. Minister
of Labor, G.R. No. 55702, November 27, 1986.
4
Murillo, et al. vs. Sun Valley Realty, Inc., et al, G.R. No. 67272, June 30, 1988.

141
 LABOR RELATIONS
ART. 223

during the trial of the case considering that the findings of facts of the
CA are conclusive and binding on the Court. However, the Court had
recognized several exceptions to this rule, to wit: (1) when the findings
are grounded entirely on speculation, surmises or conjectures; (2) when
the inference made is manifestly mistaken, absurd or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting;
(6) when in making its findings the Court of Appeals went beyond the
issues of the case, or its findings are contrary to the admissions of both
the appellant and the appellee; (7) when the findings are contrary to
the trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth
in the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondent; (10) when the findings of fact are premised
on the supposed absence of evidence and contradicted by the evidence on
record; and (11) when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly considered,
would justify a different conclusion. (See also: Grand Placement and General
Services Corporation vs. Court of Appeals, National Labor Relations Commission,
and Mary Ann Paragas, G.R No. 142358, January 31, 2006.)
Conflict between the findings of the NLRC and the labor arbiter necessitates
1
a review of such factual findings.

20.5 Examples: Some Findings of Facts Reversed

It is wrong and clearly in grave abuse of discretion for the National Labor
Relations Commission to fail or refuse to take into account the fact - clearly
shown by the record and to which its attention had already been drawn - that the
appeal taken by the employee from the decision of the labor arbiter, dismissing
his complaint, was late, because it was perfected 12 days after service on him of
notice of the decision. T h e reglementary period for appeal fixed by the Labor
2
Code is ten days.
In another case, the labor arbiter found the dismissal of the employee
justified, hence, the company discontinued the payment of the employee's
salary. The employee objected on the ground that the discontinuance violated an
earlier agreement that the employee would be kept in the payroll until the case
was finally resolved by arbitration. On appeal the NLRC affirmed the arbiter's
decision, but at the same time ordered the company to continue paying the
employee's salary since the arbitration case was not yet over.

'Nicario vs. NLRC, Mancao Supermarket, Inc., et al., G.R. No. 125340,
September 17, 1998.
2
MAI Philippines, Inc. vs. National Labor Relations Commission, et al, G.R.
No. 73662, June 18, 1987.

142
 APPEAL ART. 223

T h e NLRC order, ruled the Supreme Court, was an abuse of discretion.

The Court explained that the clause "pending final resolution of the case by
arbitration" should be limited only to the proceedings before the labor arbiter.
When the arbiter rendered his decision the case was considered finally resolved
by arbitration. T h e NLRC order was inconsistent with its affirmance of the labor
1
arbiter's decision upholding the validity of the employee's dismissal.
Similarly, it is grave abuse of discretion on the part of the National Labor
Relations Commission not to give weight to the claim that the petitioner is
an Adecor employee, in glossing over the fact that it is fully corroborated by
2
indubitable documents.
21. FROM CA TO SC: ONLY QUESTION OF LAW, RULE 45
To appeal to the Supreme Court a judgment, final order or resolution of
the Court of Appeals, the proper remedy is a petition for review under Rule 45 of
the Rules of Court. Such petition for review on certiorari can raise only questions
of law. It must be filed within fifteen (15) days from notice of the judgment or
final order or resolution appealed from, or of the denial of the petitioner's
motion for new trial or reconsideration.
Where the appealing party failed to file the petition under Rule 45 within
the said fifteen (15) days, the petition for certiorari, in the nature of special civil
action, is not available. T h e special civil action of certiorari under Rule 65 cannot
be used as a substitute for an appeal under Rule 45 that the petitioner already
lost.
Emphatically, the Court said:
"This Court has often enough reminded members of the bench and bar
that a special civil action for certiorari under Rule 65 lies only when there is no
appeal nor plain, speedy and adequate remedy in the ordinary course of law.
Certiorari is not allowed when a party to a case fails to appeal a judgment or final
order despite the availability of that remedy. The remedies of appeal and certiorari
3
are mutually exclusive and not alternative or successive.
With the promulgation of the St. Martin ruling, most of the appealed labor
cases end up at the Court of Appeals because the highest Court entertains only
questions of law.
For instance, in the Metro Transit case, the dismissed employee was ordered
reinstated by the Labor Arbiter, which decision was upheld both by the NLRC
and the Court of Appeals. The employer brought the case to the Supreme Court

Philippine Airlines, Inc. vs. NLRC, G.R. No. 55159, December 22, 1989.
2
Jose vs. National Labor Relations Commission, G.R. No. 72588, October 15,
1986.
'People of die Phil. vs. The Honorable Sandiganbayan, G.R. No. 156394, January
21,2005.

143
ART. 223 LABOR RELATIONS

through a petition for review on certiorari. The petitioner employer contended

that the CA decision had "no basis in fact" and "contrary to law." It argued that
the CA failed to consider the evidence the employer presented.

Faster Disposition of Appealed Cases

The good news is that the present Court recently promulgated a

1
decision that will scale down the filing of new judicial cases, because
judgment of the National Labor Relations Commission (NLRC) will now
be reviewable by the Court of Appeals, concurrently with the Supreme
2
Court. There are no available statistics, but by my own estimate, NLRC
cases constitute about 20 percent of the Court's docket. I therefore
expect that with this new doctrine, the number of new cases filed at the
court will be reduced by 20 percent. Thus, the Court will have a little
more time to attend to its backlog cases.
The labor sector may ask: Will the assumption by the CA of
jurisdiction over NLRC cases just unduly prolong their adjudication,
inasmuch as CA decisions are appealable to the SC anyway? No. First,
3
the CA, which is composed of 51 members divided into 17 Divisions
of 3 members each, can act on these cases much faster than the SC.
Second, not all CA decisions are actually brought to the SC by the parties.
Third, the SC places great persuasive value on CA decisions. There are
no statistics, but based on my own experience and observation, about
60 percent of all petitions from the CA judgments are denied through
minute resolutions of the SC in the First Round. Of balance, another
20 percent are thrown out during the Second Round. Thus only about
20 percent of appealed CA decisions mature to penned decisions in the
Third Round. And of these, about one half are affirmed and die other
half are reversed or modified. In other words, there is only a 10 percent
chance that CA decisions may be reversed or modified by the SC.

Justice Artemio V. Panganiban

"An Introduction to the Supreme Court"
The Lawyers Review
October 31,1998, p. 74

'St. Martin Funeral Homes vs. NLRC, G.R. No. 130866, September 16,1998,
per J. Regalado.
2
According to the hierarchy of courts, when two or more of them have
concurrent jurisdiction, the lower court shall have initial cognizance of the suit.
3
RA 8246, signed into law on December 21, 1996, created additional CA
Divisions, thereby increasing the number of CA justices to 69.
(Note: The footnotes, renumbered here, are in the original. — CAA)

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 APPEAL ART. 224

The Supreme Court, quoting Sec. 1, Rule 45, stressed that in a petition
for review on certiorari only questions of law may be raised. The court cannot
reexamine the probative value of the evidence, unless the appreciation of the
evidence is glaringly erroneous. T h e petitioner having failed to do this, the
petition on certiorari had to be dismissed. T h e Court (through Mr. Justice Carpio)
went on: ' T h e findings of the Labor Arbiter, when affirmed by the NLRC and
the Court of Appeals, are binding on this Court unless patently erroneous. In
the instant case, we find no patent error. It is not the function of this Court to
analyze or weigh all over again the evidence already considered in the proceeding
below. T h e jurisdiction of this Court is limited only to reviewing errors of law
that may have been committed by the lower courts.

ART. 2 2 4 . EXECUTION OF DECISIONS, ORDERS, OR AWARDS

T h e Secretary of L a b o r and Employment or any Regional Director, the
Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may,
motu proprio or on motion of any interested party, issue a writ of execution on
a judgment within five ( 5 ) years from the date it becomes final and executory,
requiring a sheriff or a duly deputized officer to execute or enforce final
decisions, orders or awards of the Secretary of L a b o r and Employment or
regional director, the Commission, the L a b o r Arbiter or med-arbiter, or
voluntary arbitrators. In any case, it shall be the duty of the responsible officer
to separately furnish immediately the counsels of record and the parties
with copies of said decisions, orders or awards. Failure to comply with the
duty prescribed herein shall subject such responsible officer to appropriate
administrative sanctions.
(b) T h e Secretary of Labor and Employment, and the Chairman of
the Commission may designate special sheriffs and take any measure under
existing laws to ensure compliance with their decisions, orders or awards and
those of Labor Arbiters and voluntary arbitrators, including the imposition
of administrative fines which shall not be less than P 5 0 0 . 0 0 nor more than
P10,000.00.
COMMENTS AND CASES
1. EXECUTION
A writ of "Execution" is an order to carry out, to implement, a final
judgment.
Under Article 224, a writ of execution may be issued by the following
officials for the final decisions, orders or awards promulgated by them:
a) Secretary of Labor and Employment;

'Metro Transit Orgn., Inc., et. al. vs. The Court of Appeals, et al., G.R. No.
142133, November 19, 2002.

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 LABOR RELATIONS
ART. 224

b) DOLE Regional Director;

c) NLRC;
d) Labor Arbiter;
e) Med-Arbiter;
f) Voluntary Arbitrator; or
g) Panel of Arbitrators.
The writ of execution on a judgment may be issued motu proprio or on
motion of any interested party within five (5) years from the date it becomes
final and executory.
Execution is done through the regular or special sheriff. But alternatively,
the Secretary, the Commission, any Labor Arbiter, the Regional Director or the
Director of the Bureau of Labor Relations in appropriate cases may deputize the
Philippine National Police or any law enforcement agencies in the enforcement
1
of final awards, orders or decisions.

1.1 Both Party and Counsel Should Be Notified

T h e present article, specifically pertaining to execution of judgment,
enjoins that decisions orders, or awards of the labor secretary, the regional
director, the NLRC or the labor arbiter are "to [be] separately furnish [ed]
immediately [to] the counsels of record and the parties x x x." This means
that in labor cases, both the party and its counsel must be duly served their
separate copies of the order, decision, or resolution, unlike in ordinary judicial
2
proceedings where notice to counsel is deemed notice to the party.

1.2 Article 224 is Execution, Not Appeal, Procedure

Article 224 of the Labor Code is about execution; it does not govern the
procedure for filing a petition for certiorari with the Court of Appeals from the
decision of the NLRC but rather, it refers to the execution of "final decisions,
orders or awards" and requires the sheriff or a duly deputized officer to furnish
both the parties and their counsel with copies of the decision or award for that
purpose. T h e period or manner of "appeal" from the NLRC to the Court of
Appeals is governed by Rule 65 [not this Article 224] pursuant to the ruling in
the case of St. Martin Funeral Homes vs. NLRC.

2. EXECUTION UPON FINALITY OF DECISION OR ORDER

a) A writ of execution may be issued moto proprio or on motion, upon a
decision that finally disposes of the action or proceedings after the parties and
their counsels or authorized representatives are furnished with copies of the
decision or order in accordance with these Rules, but only after the expiration

'Sec. 1, Rule XXIV, D.O. No. 40-03.

2
PNOC Dockyard and Engineering Corp. vs. NLRC, et al, G.R. No. 118223,
June 26, 1998.

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 APPEAL ART. 224

of the period to appeal if no appeal has been filed, as shown by the certificate
of finality. If an appeal has been filed, a writ of execution may be issued when
there is an entry of judgment as provided for in Section 14 of Rule VII.
b) No motion for execution shall be entertained nor a writ of execution
be issued unless the Labor Arbiter or the Commission is in possession of the
records of the case which shall include an entry of judgment if the case was
appealed; except that, as provided for in Section 14 of Rule V and Section 6 of
this Rule, and in those cases where partial execution is allowed by law, the Labor
Arbiter shall retain duplicate original copies of the decision to be implemented
1
and proof of services thereof for the purpose of immediate enforcement.
Pre-execution Conference. — Within two (2) working days from receipt
of a motion for the issuance of a writ of execution, and subject to Section 1,
paragraph (b) of this Rule, the Labor Arbiter shall schedule a pre-execution
conference or hearing to thresh out matters relevant to execution, including
2
the computation of the award.
Form and Contents of a Writ of Execution. — The writ of execution must be
issued in the name of the Republic of the Philippines signed by the Commission
or Labor Arbiter requiring the Sheriff to execute the decision, order, or award
of the Commission or Labor Arbiter, and must contain the dispositive portion
thereof, the amount, if any, to be demanded, and all lawful fees to be collected
3
from the losing party or any other person required by law to obey the same.
Computation During Execution. — Where further computation of the
award in the decision, resolution or order is necessary during the course of
the execution proceedings, no writ of execution shall be issued until after the
computation has been approved by the Labor Arbiter in an order issued after
4
the parties have been duly notified and heard on the matter.
Execution of Monetary Judgment.
a) Immediate payment on demand. — T h e Sheriff shall enforce a
monetary judgment by demanding the immediate payment of the full amount
stated in the writ of execution and all lawful fees from the losing party or any
other person required by law to obey the same.
b) In the event of failure or refusal of the losing party to pay the
judgment award, the Sheriff shall immediately proceed against the cash deposit
or surety bond posted by the losing party, if any;
c) If the bonding company refuses to comply with the writ of execution,
then its president and officers or authorized representatives shall be cited for

^ e c . 1, Rule XI, NLRC Revised Rules of Procedure, 2005.

2
Sec. 2, Ibid.
5
Sec. 3, Ibid.
4
Sec. 4, Ibid.

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 LABOR RELATIONS
ART. 224

contempt, and the bonding company shall be barred from transacting business
with the Commission;
d) Should the cash deposit or surety bond be insufficient, or in case
the surety bond cannot be proceeded against for any reason, the Sheriff shall,
within five (5) days from demand, execute the monetary judgment by levying on
the property, personal and real, of the losing party not exempt from execution,
sufficient to cover the judgment award, which may be disposed of for value at a
public auction to the highest bidder.
e) Proceeds of execution shall be deposited with the Cashier of the
concerned Division or Regional Arbitration Branch, or with an authorized
depositary bank. Where payment is made in the form of a check, the same shall
1
be payable to the Commission.
Enforcement of Writ of Execution. — In executing a decision, resolution
or order, the Sheriff, or other authorized officer acting as Sheriff of the
Commission, shall be guided strictly by these Rules, and by the Manual on
Execution of Judgment, which shall form part of these Rules. In the absence
of applicable rules, the Rules of Court, as amended, shall be applied in a
2
suppletory manner.
[Execution of an order to reinstate an illegally dismissed employee is taken up in the
comments under Article 282]
Execution by Motion or by Independent Action. — A decision or order may
be executed on motion within five (5) years from the date it becomes final and
executory. After the lapse of such period, the judgment shall become dormant,
and may only be enforced by an independent action within a period of ten (10)
3
years from date of its finality.
Effect of Petition for Certiorari on Execution. — A petition for certiorari
with the Court of Appeals or the Supreme Court shall not stay the execution of
the assailed decision unless a restraining order is issued by said courts.
Resolution of Motion to Quash. — T h e mere filing of a motion to quash
shall not stay execution proceedings. A motion to quash shall be resolved by the
Labor Arbiter within ten (10) working days from submission of said motion for
resolution.

3. APPEAL ON THE EXECUTION OF DECISION; SUPERVENING EVENTS

Generally, once a judgment becomes final and executory, it can no longer
be disturbed, altered or modified. T h e principle, however, admits of exceptions
as in cases where, because of supervening events, it becomes imperative, in the
higher interest of justice, to direct its modification in order to harmonize the

•Sec. 5, Rule XI, NLRC Revised Rules of Procedure, 2005.

2
Sec. 7, Ibid.
'Sec. 8, Ibid.

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 APPEAL ART. 224

disposition with the prevailing circumstances or whenever it is necessary to

1
accomplish the aims of justice.
Although the decision of the L a b o r Arbiter has b e c o m e final, the
correctness of the execution of the decision may be appealed to and reviewed
by the NLRC.
Abbott vs. National Labor Relations Commission, 145 SCRA 206, October 27,
1986 —
A judgment becomes final and executory by operation of law, not by judicial
declaration. Accordingly, finality of judgment becomes a fact upon the lapse of the
reglementary period of appeal if no appeal is perfected. In such a situation, the
prevailing party is entitled as a matter of right to a writ of execution, and issuance
thereof is a ministerial duty, compellable by mandamus.
In the instant case, however, what is sought to be reviewed is not the decision
itself but the manner of its execution. There is a big difference. While it is true that
the decision itself has become final and executory and so can no longer be challenged,
there is no question either that it must be enforced in accordance with its terms and
conditions. Any deviation therefrom can be the subject of a proper appeal.
The fact alone that the labor arbiter, in recomputing the award in the
original decision, raised it from the amount of P98,883.80 to the astonishing sum of
PI ,372,451.55 is justification enough for the respondent NLRC to issue the challenged
temporary restraining order. In the meantime anyway, the petitioners are protected
by the supersedeas bond put up by the respondent in the amount of the recomputed
award.
We hold therefore that the NLRC has the authority to look into the correctness
of the execution of the decision in this case and to consider die supervening events
that may affect such execution, like the possible off-set of the petitioners' advances
or debts against their total claim, their discontinuance from employment by
abandonment or resignation, and other relevant developments.
Pacific Mills, Inc. vs. National Labor Relations Commission, et al., G.R. No. 88864,
January 17, 1990 —
Facts: The case of Pacific Mills, Inc. vs. National Labor Relations Commission, et
al., G.R. No. 79535, was dismissed by the Supreme Court on August 3, 1988. The
entry of judgment having been effected, the NLRC in the process of execution of
the decision of the labor arbiter made a computation of the award to the private
respondents in the amount of P680,037.30 on April 28, 1989. On May 5, 1989 the
NLRC issued a partial writ of execution for P655,527.30.
On May 9, 1989 petitioner [employer] filed a motion to stay execution/
reconsideration citing supervening events that affect the computation of the award
as follows:

^alindez, et al. vs. Rural Bank of Llanera, Inc., et al, G.R. No. 84975; Rural
Bank of Llanera, Inc. vs. Department of Labor, etc., et al, July 5, 1989.

149
 LABOR RELATIONS
ART. 224

"1) The computation of separation pay did not consider the length of service
of each complainant as borne out from the records;
2) The computation did not consider the wage exemptions granted
petitioner-respondent company;
3) The computation included payment of awards to a respondent who had
already been recalled to active duty, one who was already paid in a case separately
filed, and another who was already paid regardless of the result of the case docketed
G.R. No. 79535;
4) Meanwhile, all the capital assets of the petitioner have already
been attached by Philippine Cotton Corp., and/or otherwise foreclosed by the
Development Bank of the Philippines in appropriate proceedings."
The NLRC did not stay execution of judgment and issued an order for
immediate implementation of the partial writ of execution without further delay.
Petitioner filed a petition before the Supreme Court.
Ruling: There can be no question that the supervening events cited by petitioner
would certainly affect the computation of the award in the decision of the NLRC.
It is the duty of the NLRC to consider the same and inquire into the correctness of
the execution, as such supervening events may affect such execution.
Of course, public respondent [NLRC] alleges that in several conferences had
with the petitioner, petitioner did not raise these objections and that the petition is
dilatory. Whatever it may be, the fact cannot be denied that such supervening events
as the length of service of the private respondents, the wage exemptions granted,
and payments already made on the award would certainly affect the computation of
the total award under the decision. Thus, a prompt and immediate determination
of these objections and a recomputation of the award should be made. A denial of
this opportunity to correct clear error in the execution of the judgment constitutes
a grave abuse of discretion.

4. GENERAL R U L E : R E G I O N A L T R I A L C O U R T CANNOT ISSUE

INJUNCTION AGAINST NLRC
A regular court has no jurisdiction to hear and decide questions which arise
and are incidental to the enforcement of decisions, orders or awards rendered
in labor cases by appropriate officers and tribunals of the Department of Labor
and Employment. Corollarily, any controversy in the execution of the judgment
shall be referred to the tribunal which issued the writ of execution since it has the
inherent power to control its own processes in order to enforce its judgments and
orders. True, an action for the damages lies within the jurisdiction of a regional
trial court. However, the regional trial court has no jurisdiction to issue a temporary
restraining order in labor cases. Indeed, the respondent Judge restrained the
1
execution of a final decision of the labor arbiter, which he cannot lawfully do.

'Nova vs. Judge Sancho Dames II, Regional Trial Court, Branch 38, Daet,
Camarines Norte, AM. No. RTJ-00-1574, March 28, 2001.

150
 APPEAL ART. 224

Precedents abound confirming the rule that said courts have no jurisdiction
to act on labor cases or various incidents arising therefrom, including the
execution of decisions, awards or order. Jurisdiction to try and adjudicate such
cases pertains exclusively to the proper labor official concerned under the
Department of Labor and Employment. To hold otherwise is to sanction split
1
jurisdiction which is obnoxious to the orderly administration of justice.
Petitioner failed to realize that by filing its third-party claim with the deputy
sheriff, it submitted itself to the jurisdiction of the Commission acting through
the Labor Arbiter. It failed to perceive the fact that what it is really controverting
is the decision of the Labor Arbiter and not that of the deputy sheriff in executing
2
said order issued as a consequence of the decision rendered.
Jurisdiction once acquired is not lost upon the instance of the parties
but continues until the case is terminated. Whatever irregularities attended
the issuance and execution of the alias writ of execution should be referred to
the same administrative tribunal which rendered the decision. This is because
any court which issued a writ of execution has the inherent power, for the
advancement of justice, to correct errors of its ministerial officers and to control
3
its own processes.

4.1 E x e c u t i o n Over P r o p e r t y Owned Only by Judgment Debtor;

Remedies of Third Party Claimant; the Yupangco Case
In a long line of cases, the Court has ruled that the power of the Court, or
the NLRC, for that matter, to execute its judgment extends only to properties
4
unquestionably belonging to the judgment debtor. Therefore, if the property
under levy does not belong to the judgment debtor in the NLRC case, it could not
be validly levied upon by the sheriff for the satisfaction of the judgment therein.
Even upon a mere prima facie showing of ownership by the third-party claimant, if
the third-party claim does not involve nor grows out of, a labor dispute, a separate
5
action for injunctive relief against such levy may be maintained in court.
Under the Revised Rules of the NLRC (Section 4, Rule I X ) [Sec. 7, Rule
VIII of the NLRC Rules, 2 0 0 2 ] , the sheriff of the Commission, or other officer
acting as such, must "... be guided strictly by the Sheriffs Manual which shall

^eltaventures Resources vs. Hon. Fernando Cabato, G.R. No. 118216, March
9, 2000.
Ibid.
Ibid.
4
Santos vs. Bayhon, 199 SCRA 525; Special Servicing Co. vs. Centro La Paz,
121 SCRA 748; New Owners/Management of TML Garments, Inc. vs. Zaragosa, 170
SCRA 563.
5
Penalosa vs. Villanueva, 177 SCRA 77, citing the case of National Mines and
Allied Workers' Union vs. Vera, 133 SCRA 259. Co Tuan, Samuel Ang, et al vs. NLRC
and CLUP, G.R. No. 117232, April 22, 1998.

151
 ART. 224 LABOR RELATIONS

form part of these Rules"; and under Sec. 2, Rule VI of the said Manual, when
a third party claims the property subject of the execution and files an affidavit
thereto, the Labor Arbiter shall "... conduct a hearing x x x and resolve the
1
validity of the claim..."
Indeed, there appears to be an inconsistency between the said rule and the
decided cases. However, such Rule prescribes only the procedure to be followed
by the sheriff (or the arbiter or officer of the Commission) if the levied property
is claimed by any person other than the losing party or his agent. It applies only
to the sheriff and such other officers; and only when the third-party claimant
chooses to file his claim with the Labor Arbiter or the NLRC. It does not limit
2
the procedure to be followed by the third-party claimant himself.
Yupangco Cotton Mills, Inc. vs. Court of Appeals et al., G.R. No. 126322, January
16, 2002 —
A third-party whose property has been levied upon by a sheriff to enforce a
decision against a judgment debtor is afforded with several alternative remedies
to protect its interests. The third party may avail himself of alternative remedies
cumulatively, and one will not preclude the third party from availing himself of the
other alternative remedies in the event he failed in the remedy first availed of.
Thus, a third party may avail himself of the following alternative remedies:
a) File a third-party claim with the sheriff or the Labor Arbiter, and
b) If the third-party claim is denied, the third party may appeal the
denial to the NLRC.
Even if a third party claim was denied, a third party may still file a proper action
with a competent court to recover ownership of the property illegally seized by the
sheriff. This finds support in Section 17 (now 16), Rule 39, Revised Rules of Court,
to wit:
"SEC. 17 (now 16), Proceedings where property claimed by third person.
— If property levied on is claimed by any person other than the judgment
debtor or his agent, and such person makes an affidavit of his title thereto or
right to the possession thereof, stating the grounds of such right or tide, and
serve the same upon the officer making the levy, and a copy thereof upon the
judgment creditor, the officer shall not be bound to keep the property, unless
such judgment creditor or his agent, on demand of the officer, indemnify the
officer against such claim by a bond in a sum not greater than the value of the
property levied on. In case of disagreement as to such value, the same shall be
determined by the court issuing the writ of execution.
"The officer is not liable for damages, for the taking or keeping of the
property, to any third-party claimant unless a claim is made by the latter and

^efialosa vs. Villanueva, 177 SCRA 77, citing the case of National Mines and
Allied Workers' Union vs. Vera, 133 SCRA 259. Co Tuan, Samuel Ang, et al vs. NLRC
and CLUP, G.R. No. 117232, April 22, 1998.
Ibid.

152
 APPEAL ART. 224

unless an action for damages is brought by him against die officer within one
hundred twenty (120) days from die date of the filing of the bond. But nothing
herein contained shall prevent such claimant or any third person from vindicating his
claim to the property by any proper action.
"When the party in whose favor the writ of execution runs, is the Republic
of the Philippines, or any officer duly representing it, the filing of such bond
shall not be required, and in case the sheriff or levying officer is sued for
damages as a result of the levy, he shall be represented by the Solicitor General
and if held liable therefore, the actual damages adjudged by the court shall be
paid by die National Treasurer out of such funds as may be appropriated for
the purpose." (Italics ours)
In Sy vs. Discaya, we ruled that:
"The right of a third-party claimant to file an independent action to
vindicate his claim of ownership over the properties seized is reserved by
Section 17 (now 16), Rule 39 of the Rules of Court, x x x :
"xxx xxx xxx
"As held in the case of Ong vs. Tating et al, construing the aforecited
rule, a third person whose property was seized by a sheriff to answer for the
obligation of a judgment debtor may invoke the supervisory power of the court
which authorized such execution. Upon due application by the third person and
after summary hearing, the court may command that the property be released
from the mistaken levy and restored to the rightful owner or possessor. What
said court do in these instances, however, is limited to a determination of whether the
sheriff has acted rightly or wrongly in the performance of his duties in the execution of
judgment, more specifically, if he has indeed taken hold of property not belonging to the
judgment debtor. The court does not and cannot pass upon the question of title
to the property, with any character of finality. It can treat of the matter only
insofar as may be necessary to decide if the sheriff has acted correctly or not.
It can require the sheriff to restore the property to the claimant's possession if
warranted by the evidence. However, if the claimant's proof do not persuade
die court of the validity of his title or right of possession thereto, the claim will
be denied.
"Independent of the above-stated recourse, a third-party claimant may
also avail of the remedy known as 'terceria,* provided in Section 17 (now 16),
Rule 39, by serving on the officer making the levy an affidavit of his tide and
a copy thereof upon the judgment creditor. The officer shall not be bound to
keep the property, unless such judgment creditor or his agent, on demand of
the officer, indemnifies die officer against such claim by a bond in a sum not
greater than the value of die property levied on. An action for damages may
be brought against die sheriff within one hundred twenty (120) days from the
filing of the bond.
"The aforesaid remedies are nevertheless without prejudice to 'any proper action'
that a third party claimant may deem suitable to vindicate his claim to the property. Such

153
 ART. 224 LABOR RELATIONS

a 'proper action' is, obviously, entirely distinct from that explicitly prescribed in
Section 17 of Rule 39, which is an action for damages brought by a third-party
claimant against the officer within one hundred twenty (120) days from the
date of the filing of the bond for the taking or keeping of the property subject
of the 'terceria.'
"Quite obviously, too, this 'proper action' would have for its object the recovery of
ownership or possession of the property seized by the sheriff as well as damages resulting
from the allegedly wrongful seizure and detention thereof despite the third-party claim; and
it may be brought against the sheriff and such other parties as may be alleged
to have colluded with him in the supposedly wrongful execution proceedings,
such as the judgment creditor himself. Such 'proper action, 'as above pointed out,
is and should be an entirely separate and distinct action from that in which execution
has issued, if instituted by a stranger to the latter suit.
'The remedies above mentioned are cumulative and may be resorted to
by a third-party claimant independent of or separately from and without need
of availing of the others. If a third-party claimant opted to file a proper action to
vindicate his claim of ownership, he must institute an action, distinct and separate from
that in which the judgment is being enforced, with the court of competent jurisdiction
even before or without need of filing a claim in the court which issued the writ, the latter
not being a condition sine qua non for the former. In such proper action, the validity
and sufficiency of the title of the third-party claimant will be resolved and a
writ of preliminary injunction against the sheriff may be issued." (Emphasis
and italics ours.)
In light of the above, the filing of a third-party claim with the Labor Arbiter
and the NLRC did not preclude the petitioner from filing a subsequent action for
recovery of property and damages with the Regional Trial Court. And, the institution
of such complaint will not make petitioner guilty of forum shopping.

4.2 RTC Injunction against Labor Arbiter or NLRC, When Allowed

In the same Yupangco case, the Court ruled that the regional trial court
where the reinvindicatory action is filed can issue an injunction or temporary
restraining order against the execution ordered by a labor arbiter or the NLRC.
Yupangco Cotton Mills, Inc. vs. Court of Appeals, et al, G.R. No. 126322, January
16, 2002 —
In Santos vs. Baylon, wherein Labor Arbiter Ceferina Diosana rendered a
decision in NLRC NCR Case No. 1-313-85 in favor of Kamapi, the NLRC affirmed
the decision. Thereafter, Kamapi obtained a writ of execution against the properties
of Poly-Plastic Products or Anthony Ching. However, respondent Priscilla Carrera
filed a third-party claim alleging that Anthony Ching had sold the property to her.
Nevertheless, upon posting by the judgment creditor of an indemnity bond, die NLRC
Sheriff proceeded with the public auction sale. Consequently, respondent Carrera
filed with Regional Trial Court, Manila an action to recover the levied property
and obtained a temporary restraining order against Labor Arbiter Diosana and the

154
 APPEAL ART. 224

NLRC Sheriff from issuing a certificate of sale over the levied property. Eventually,
Labor Arbiter Santos issued an order allowing the execution to proceed against the
property of Poly-Plastic Products. Also, Labor Arbiter Santos and the NLRC Sheriff
filed a motion to dismiss the civil case instituted by respondent Carrera on the
ground that the Regional Trial Court did not have jurisdiction over the labor case.
The trial court issued an order enjoining the enforcement of the writ of execution
over the properties claimed by respondent Carrera pending the determination of the
validity of the sale made in her favor by the judgment debtor Poly-Plastic Products
and Anthony Ching.
In dismissing the petition for certiorari filed by Labor Arbiter Santos, we ruled
that:
x x x . The power of the NLRC to execute its judgments extends only to
properties unquestionably belonging to the judgment debtor (Special Servicing
Corp. vs. Centra La Paz, 121 SCRA 748.)
"The general rule that no court has the power to interfere by injunction
with the judgments or decrees of another court with concurrent or coordinate
jurisdiction possessing equal power to grant injunctive relief, applies only when
no third-party claimant is involved (Traders Royal Bank vs. Intermediate Appellate
Court, 133 SCRA 141 [1984]). When a third-party, or a stranger to the action, asserts
a claim over the property levied upon, the claimant may vindicate his claim by an
independent action in the proper civil court which may stop the execution of the judgment
on property not belonging to the judgment debtor. " (Italics ours)
In Consolidated Bank and Trust Corp. vs. Court of Appeals, 193 SCRA 158 [1991],
we ruled that:
"The well-settled doctrine is that a 'proper levy' is indispensable to a valid
sale on execution. A sale unless preceded by a valid levy is void. Therefore,
since there was no sufficient levy on the execution in question, the private
respondent did not take any title to the properties sold thereunder x x x .
"A person other than the judgment debtor who claims ownership or right over the
levied properties is not precluded, however, from taking other legal remedies. " (Italics
ours)
Jurisprudence is likewise replete with rulings that since the third-party claimant
is not one of the parties to the action, he could not, strictly speaking, appeal from the
order denying his claim, but should file a separate reinvindicatory action against the
execution creditor or the purchaser of the property after the sale at public auction,
or a complaint for damages against the bond filed by the judgment creditor in favor
of the sheriff.
And in Lorenzana vs. Cayetano, we ruled that:
'The rights of a third-party claimant should not be decided in the action
where the third-party claim has been presented, but in a separate action to
be instituted by the third person. The appeal that should be interposed if the
term 'appeal' may properly be employed, is a separate reinvindicatory action
against the execution creditor or the purchaser of the property after die sale

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 ART. 224 LABOR RELATIONS

against the execution creditor or the purchaser of the property after the sale
at public auction, or complaint for damages to be charged against the bond
filed by the judgment creditor in favor of the sheriff. Such reinvindicatory action
is reserved to the third-party claimant."
A separate civil action for recovery of ownership of the property would
not constitute interference with the powers or processes of the Arbiter and the
NLRC which rendered the judgment to enforce and execute upon the levied
properties. The property levied upon being that of a stranger is not subject to
levy. Thus, a separate action for recovery, upon a claim and prima facie showing
of ownership by the petitioner, cannot be considered as interference.

4.3 Third Party Claim

The NLRC Rules of Procedure, revised in 2005, reads: "A third party claim
shall be filed within five (5) days from the last day of posting or publication of
the notice of execution sale; otherwise the claim shall be forever barred. T h e
third party claimant shall execute an affidavit stating his title to the property
or right to possession thereof with supporting evidence, and shall file the same
with the Sheriff and the Commission or Labor Arbiter who issued the writ of
execution. Upon receipt of the third party claim, all proceedings, with respect
to the execution of the property subject of such claim, shall automatically be
suspended. The Labor Arbiter who issued the writ may require the third party
claimant to adduce additional evidence in support of his third party claim and to
post a cash or surety bond equivalent to the amount of his claim, as provided for
in Section 6 of Rule VI, without prejudice to the posting by the prevailing party
of a supersedeas bond in an amount equivalent to that posted by the third party
claimant. T h e Labor Arbiter shall resolve the propriety of such third party claim
1
within ten (10) working days from submission of said claim for resolution."

4.4 Simulated Sale, Void Ab Initio

Tanongon vs. Samson, et al, G.R. No. 140889, May 9, 2002 —
Facts: Four employees won in their illegal dismissal case against their employer.
In due time the Labor Arbiter issued a writ of execution. When the sheriff levied
upon a tanker purportedly belonging to the employer, petitioner Tanongon filed a
third-party claim, alleging that he was the owner of the tanker because it had been
sold to her.
Can the execution proceed?
Ruling: The CA correctly ruled that the act of [employer] Olizon was a "cavalier
attempt to evade payment of the judgment debt." She obviously got word of die
issuance of the Writ and disposed of the tanker to prevent its sale on execution.
Despite knowledge of these antecedents, petitioner bought the tanker barely ten days
before it was levied upon on August 8,1997. It is not only the proximity in time that

•Sec. 12, Rule XI, NLRC Revised Rules of Procedure, 2005.

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 APPEAL ART. 225

supports this finding. It is also more than coincidental that the purchase price for the
tanker was PI, 100,000.00, while Olizon's judgment debt to respondents amounted
to PI,192,422.55. Under Article 1387 of the Civil Code, alienations by onerous title
are presumed to be fraudulent when done by persons against whom some judgment
has been rendered or some writ of attachment issued in any instance.
The appellate court ruled further that the disputed contract was not merely
rescissible; it was simulated or fictitious and, thus, void ab initio. We agree with the
Court of Appeals.
A third-party claim on a levied property does not automatically prevent
execution. When a third-party claim is filed, the sheriff is not bound to proceed with
the levy of the property unless the judgment creditor posts an indemnity bond. Where
the bond is filed, the remedy of the third-party claimant is to file an independent
reinvindicatory action against the judgment creditor or the purchaser of the property at
public auction. The NLRC should not have automatically lifted the levy and restrained
execution, just because a third-party claim had been filed.
Further, judicial rescission is not necessary in the case at bar. Petitioner's
claim of ownership over the disputed tanker is not supported by the evidence on
record. The Maritime Industry Authority (Marina) administrator wrote the parties
in two separate letters, which said that the registration of the disputed vessel under
petitioner's name had not been effected, and that the Certificates of Ownership and
Vessel Registry covering the motor tanker M/T Petron 7-CI had not been released.
Insofar as third persons like herein respondents were concerned, the ownership of
the disputed vessel remained with Olizon and CAYCO; thus, the CA correctly held
that the NLRC could proceed with the levy and the sale on execution.

ART. 2 2 5 . CONTEMPT POWERS OF THE SECRETARY OF LABOR

In the e x e r c i s e of his powers u n d e r this C o d e , the S e c r e t a r y of
Labor may hold any person in direct or indirect contempt and impose the
appropriate penalties therefor.

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 Title III
BUREAU OF LABOR RELATIONS'
Overview/Key Questions: Box 7
1. What kinds of cases fall within BLR's jurisdiction?
2. May labor standards violations be settled by compromise?
How is this done?
3. May such compromise be valid if the agreement sets
terms lower than the statutory standards?
4. Where, when, and how is a CBA registered?

ART. 2 2 6 . BUREAU OF LABOR RELATIONS

T h e Bureau of L a b o r Relations and the L a b o r Relations Divisions
in the regional offices of the Department of L a b o r shall have original and
exclusive authority to act, at their own initiative or upon request of either
or both parties, on all inter-union and intra-union conflicts, and all disputes,
grievances or problems arising from or affecting labor-management relations
in all workplaces whether agricultural or nonagricultural, e x c e p t those
arising from the implementation or interpretation of collective bargaining
agreements which shall be the subject of grievance p r o c e d u r e a n d / o r
voluntary arbitration.
T h e Bureau shall have fifteen ( 1 5 ) working days to act on labor cases
before it, subject to extension by agreement of the parties.
C O M M E N T S AND CASES
1. BLR JURISDICTION AND FUNCTIONS
Legislative changes have so overtaken Article 226 that its present wording
has become partly obsolete. T h e Bureau of Labor Relations ( B L R ) no longer
handles "all" labor-management disputes; rather, its functions and jurisdiction
are largely confined to union matters, collective bargaining registry, and
labor education. Such is the effect of Executive Order No. 251 of 1987 which
transferred to the then newly-created National Conciliation and Mediation
Board (NCMB) the mediation, conciliation, and arbitration functions of BLR.

*See Executive Order No. 251 creating a National Conciliation and Mediation
Board which absorbed the conciliation, mediation and voluntary arbitration functions
of BLR, and Executive Order No. 126.

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 BUREAU OF LABOR RELATIONS ART. 226

With similar effect, R.A. No. 6 7 1 5 , effective March 21, 1989, expanded and
enhanced the NLRC (including its labor arbiters) to make it the country's only
labor court, primarily responsible for settling labor-management disputes, as
already seen in the preceding chapter. T h e current functions and authority of
die BLR are those stated in Executive Order No. 292 or the 1987 Administrative
Code, as follows:
"Section 16. Bureau of Labor Relations. — T h e Bureau of Labor
Relations shall set policies, standards, and procedures on the registration
and supervision of legitimate labor union activities including denial,
cancellation and revocation of labor union permits. It shall also set policies,
standards, and procedures relating to collective bargaining agreements,
and the examination of financial records of accounts of labor organizations
to determine compliance with relevant laws. T h e Bureau shall also
provide proper orientation to workers on their schemes and projects for
improvement of the standards of living of workers and their families.''
2. ENTER-UNION AND INTRA-UNION DISPUTES; D.O. NO. 40-03
T h e B L R handles inter-and intra-union disputes.
"Inter-Union Dispute" refers to any conflict between and among legitimate
labor unions involving representation questions for purposes of collective
bargaining or to any other conflict or dispute between legitimate labor unions.
"Intra-Union Dispute" refers to any conflict between and among union
members, including grievances arising from any violation of the rights and
conditions of membership, violation of or disagreement over any provision
of the union's constitution and by-laws, or disputes arising from chartering or
affiliation of union.
Under Rule XI of D.O. No. 40-03 the long list of inter/intra-union disputes
include cancellation of union registration, audit of union funds, violation of
union members' rights and other disputes between unions or between a union
and its members. A complaint involving intra/inter-union dispute may be filed
by a legitimate labor organization (LLO) or its members. Where the issue,
however, involves the entire membership, the complaint shall be supported by
at least 3 0 % of the membership.
But D.O. No. 40-03 in the same Rule XI recognizes a second category called
"other related labor relations disputes" and these include any conflict between
a labor union and the employer or any individual, entity or group that is not a
labor organization or workers' association; such dispute include cancellation
of registration of a labor organization and interpleader. This category of labor
relations disputes, as the name suggests, is "related" to inter/intra union disputes
to differentiate it from other labor-management disputes, such as those under
Articles 128,129,217,261, or 263(g), which disputes are not handled by the BLR.
In inter/intra-union dispute the complaint may be filed by a union or union

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 ART. 226 LABOR RELATIONS

members; in a "related labor relations dispute" the complaint may be filed by a

party-in-interest who is not necessarily a union or union member.
Whether the dispute be of the first or the second category, the complaint
or petition, if it involves an independent union (explained under Article 234), a
chartered local, or a workers' association, shall be filed with the DOLE Regional
Office where the labor organization is registered. But if the complaint involves
a federation or an industry/national union, it shall be filed with the B L R itself.
The procedures governing the hearing, decision, appeal and execution of
"inter/intra-union" cases and "related labor relations" cases are detailed in Rule
XI of D.O. No. 40-03. These serve as standard or common procedures because
they apply as well to other, but related, disputes under D.O. No. 40-03, such as
those on election of union officers, examination of union funds, and cancellation
of registration.
2.1 D.O. No. 40-03
At this point we make further introductory notes to D.O. No. 40-03.
It replaced D.O. No. 9, series of 1997 and took effect on March 1 5 , 2 0 0 3 .
It covers the entire subject of labor relations, except NLRC, and comprises
the entire Implementing Rules for B o o k V of the Labor Code. Aside from
supplying details of implementation, it also introduces new concepts such
as union merger or consolidation and multi-employer bargaining. Without
saying so, the Order appears to aim at the following specific objectives:
1. to simplify the formation and registration of unions, especially
chartered locals
2. to simplify and expedite the holding of certification elections
3. to promote responsible unionism, particularly in administration of
union funds
4. to authorize union merger, consolidation, and change of name
5. to authorize deregistration of collective bargaining agreements
(For clear discussion, D.O. No. 40-03 will frequently be cited here although
it is reproduced entirely as part of the Implementing Rules in Part Two of this
volume.)

2.2 Effect of Pendency

Returning to the matter of inter/intra-union disputes, we note the provision
of D.O. No. 40-03 on status quo. It states:
Section 3. Effects of the filing/pendency of inter/intra-union and other related
labor relations disputes. — T h e rights, relationships and obligations of the
parties litigants against each other and other parties-in-interest prior to the
institution of the petition shall continue to remain during the pendency of
the petition and until the date of finality of the decision rendered therein.

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 BUREAU OF LABOR RELATIONS ART. 226

Thereafter, the rights, relationships and obligations of the parties litigants

against each other and other parties-in-interest shall be governed by the
decision so ordered.
T h e filing or pendency of any inter/intra-union dispute and other
related labor relations dispute is not a prejudicial question to any petition
for certification election and shall not be a ground for the dismissal of
a petition for certification election or suspension of proceedings for
certification election.

2.3 Appeal
Also noteworthy are the provisions on appeal.
Section 16. Appeal. — T h e decision of the Med-Arbiter and Regional
Director may be appealed to the Bureau by any of the parties within ten (10)
days from receipt thereof, copy furnished the opposing party. The decision
of the Bureau Director in the exercise of his/her original jurisdiction may
be appealed to the Office of the Secretary by any party within the same
period, copy furnished the opposing party.
T h e appeal shall be verified under oath and shall consist of a
memorandum of appeal specifically stating the grounds relied upon by
the appellant, with supporting arguments and evidence.
Section 17. Where to file appeal. — T h e memorandum of appeal
shall be filed in the Regional Office or Bureau where the complaint or
petition originated. Within twenty-four (24) hours from receipt of the
memorandum of appeal, the Bureau or Regional Director shall cause
the transmittal thereof together with the entire records of the case to the
Office of the Secretary or the Bureau, as the case may be.
Section 18. Finality of Decision. — Where no appeal is filed within the
ten-day period, the Bureau and Regional Director or Med-Arbiter, as the
case may be, shall enter the finality of the decision in the records of the
case and cause the immediate implementation thereof.
Section 19. Period to reply. — A reply to the appeal may be filed by any
party to the complaint or petition within ten (10) days from receipt of the
memorandum of appeal. T h e reply shall be filed directly with the Bureau
or the Office of the Secretary, as the case may be.
Section 20. Decision of the Bureau/Office of the Secretary. — The Bureau
Director or the Secretary, as the case may be, shall have twenty (20) days
from receipt of the entire records of the case within which to decide
the appeal. The filing of the memorandum of appeal from the decision
of the Med-Arbiter or Regional Director and Bureau Director stays the
implementation of the assailed decision.
The Bureau or Office of the Secretary may call the parties to a
clarificatory hearing in aid of its appellate jurisdiction.
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 ART. 226 LABOR RELATIONS

Section 21. Finality of Decision of Bureau/Office of the Secretary. — The

decision of the Bureau or the Office of the Secretary shall become final
and executory after ten (10) days from receipt thereof by the parties, unless
a motion for its reconsideration is filed by any party therein within the
same period. Only one (1) motion for reconsideration of the decision of
the Bureau or the Office of the Secretary in the exercise of their appellate
jurisdiction shall be allowed.
Section 22. Execution of decision. — The decision of the Med-Arbiter
and Regional Director shall automatically be stayed pending appeal with
the Bureau. The decision of the Bureau in the exercise of its appellate
jurisdiction shall be immediately executory upon issuance of entry of final
judgment.
The decision of the Bureau in the exercise of its original jurisdiction
shall automatically be stayed pending appeal with the Office of the
Secretary. The decision of the Office of the Secretary shall be immediately
executory upon issuance of entry of final judgment.
3. EXTENT OF BLR AUTHORITY
The BLR's authority has been described as broad and expansive. It was
ruled in a case that it may hold a referendum election among the members of a
union for the purpose of determining whether or not they desire to be affiliated
with a federation. "In the interest of industrial peace and for the promotion of
the salutary constitutional objective of social justice and protection to labor,
the competence of the governmental agencies entrusted with supervision over
disputes involving employers and employees as well as "inter-union and intra-
1
union conflicts," is broad and expansive. Such broad authority over union
conflicts includes holding a referendum.
But the BLR has no authority to order a referendum among union members
to decide whether to expel or suspend union officers.
"If herein union officers (also petitioners) were guilty of the alleged acts
imputed against them, said public respondent [BLR] pursuant to Article 242
of the New Labor Code and in the light of our ruling in Duyag vs. Inciong, 98
SCRA 522, should have meted out the appropriate penalty on them, i.e., to expel
them from the Union, as prayed for, and not call for a referendum to decide the
2
issue."
Neither does the B L R have authority to forward a case to the Trade
Union Congress of the Philippines for arbitration and decision. Certification
election is the fairest and most effective way of determining which labor

'Litex Employees Association vs. Eduvala, 79 SCRA 88 [1977].

2
Kapisanan ng Manggagawang Pinagyakap [KMP] vs. Trajano, 134 SCRA 236
[1985].

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 BUREAU OF LABOR RELATIONS ART. 227

organization can truly represent the working force. In the case at bar,
instead of ordering an election, respondent Director dismissed the appeal
of PLUM based on the decision of the TUCP, which the Court considers an
impairment of the freedom of the workers to voice out their choice of the
union to represent them.
"If there is any doubt as to the required number having been met, there
would be no better way than the holding of a certification election to ascertain
which union really commands the allegiance of the rank-and-file employees. If
the desired goal is for the execution of a collective bargaining contract to protect
the workers, then certification election is the most appropriate means to attain
1
said end."
4. KATARUNGANG PAMBARANGAY, NOT APPLICABLE TO LABOR
DISPUTES
Presidential Decree No. 1508 applies only to courts of justice and not to
labor relations commissions or labor arbitrators' offices.
Article 226 of the Labor Code grants original and exclusive jurisdiction
over the conciliation and mediation of disputes, grievances or problems in the
regional offices of the Department of Labor and Employment. It is the said
Bureau and its divisions and not the Barangay Lupong Tagapayapa which are
vested by law with original and exclusive authority to conduct conciliation and
mediation proceedings on labor controversies before their endorsement to the
2
appropriate labor arbiter for adjudication. Note: Conciliation-mediation is now
done by NCMB, not BLR.
Requiring conciliation of labor disputes before the barangay courts
would defeat the very salutary purposes of the law. Instead of simplifying
labor proceedings designed at expeditious settlement of or referral to the
proper court or office to decide it finally, barangay conciliation would only
duplicate the conciliation proceedings and unduly delay the disposition of
the labor case. T h e suggested procedure would destroy the salutary purposes
of Presidential Decree 1508 and of the Labor Code of the Philippines. Labor
would then be given another unnecessary obstacle to hurdle. It does violence
to the constitutionally mandated policy of the State to afford full protection
3
to labor.

ART. 227. COMPROMISE AGREEMENTS

Any compromise settlement, including those involving labor standard
laws, voluntarily agreed upon by the parties with the assistance of the Bureau
or the regional office of the Department of Labor, shall be final and binding

'Plum Fed. of Industrial and Agrarian Workers vs. Noriel, 119 SCRA 299 [1982].
2
Montoya vs. Escayo, G.R. Nos. 82211-12, March 21, 1989.
Ibid.

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 ART- 227 LABOR RELATIONS

upon the parties. The National Labor Relations Commission or any court
shall not assume jurisdiction over issues involved therein except in case of
noncompliance thereof or if there is prima fade evidence that the settlement
was obtained through fraud, misrepresentation, or coercion.
COMMENTS AND CASES
1. COMPROMISE AGREEMENTS
A fundamental policy of Philippine labor laws is to allow the parties to find
solutions to their own disputes. The Constitution, it may be recalled, commands
the State to promote the preferential use of voluntary modes in settling disputes
since the maintenance of industrial peace is a joint responsibility of workers and
1
employers. This is why the Constitution and the Code guarantee the right of
the parties to free bargaining and negotiations.
But between a j o b provider and a j o b seeker the playing field is starkly
uneven; thus, it is necessary for the law to provide workers the solidity of their own
organization and recourse to concerted action, if needed. Additional safeguard
is provided by DOLE's impartial and expert assistance.
T h e assistance of the B L R or the regional office of the D O L E in the
execution of a compromise settlement is generally a basic requirement; without it,
there can be no valid compromise settlement. Under Article 227, any compromise
settlement, even on labor standard matters, agreed to by the parties with the
assistance of the BLR or the regional office of the Department of Labor, is allowed.
The resulting agreement, if freely authored by them and not unconscionable or
otherwise unlawful, is legally binding. T h e NLRC or any court shall not assume
jurisdiction over issues involved therein, except:
a) in case of noncompliance with the compromise agreement, or
b) if there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.

Along the same line, the Court reiterated in 2005:

There are legitimate waivers that represent a voluntary and reasonable
settlement of a worker's claim which should be respected by the courts as
the law between the parties. Indeed, not all quitclaims are per se invalid or
against public policy, except (1) where there is clear proof that the waiver
was wangled from an unsuspecting or gullible person, or (2) where the
terms of settlement are unconscionable on their faces; in these cases, the
law will step in to annul the questionable transactions. Such quitclaims are
regarded as ineffective to bar the workers from claiming the full measure
of their legal rights. (Mindoro Lumber and Hardware vs. Baay, et al., G.R No.
158753, June 8, 2005.)

•Article XIII, Sec. 3.

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 BUREAU OF LABOR RELATIONS ART. 227

2. FORMAL REQUIREMENTS OF COMPROMISE AGREEMENT

Union of Filipino Workers (UFW) vs. NLRC, et al, G.R. No. 90519, March 23,
1992 —
Compromise agreements involving labor standards cases must be reduced to
writing and signed in the presence of the Regional Director or his duly authorized
1
representative. Section 8, Rule II of the Rules on the Disposition of Labor Standards
Cases in the Regional Offices provides:
Section 8. Compromise Agreement. — Should the parties arrive at an
agreement as to the whole or part of the dispute, said agreement shall be
reduced [in] 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.
Furthermore, Article 1878 of the Civil Code provides that a Special Power of
Attorney is required before an agent [including a legal counsel] can be authorized
to enter into a compromise. It reads:
Art. 1878. Special powers of attorney are necessary in the following cases:
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.

3. VALID COMPROMISE AND QUITCLAIM

Veloso and Liguaton vs. Department of Labor and Employment, Noahs Ark Sugar
Carriers, and Go, G.R. No. 87297, August 5, 1991 —
Facts: The complaint against the employer for unfair labor practices,
underpayment, and nonpayment of overtime, holiday, and other benefits was decided
in favor of the complainants.
The employer filed a motion for reconsideration and recomputation of the
amount awarded. While the motion was pending, Veloso (one of the complainants),
through his wife Connie, signed a Quitclaim and Release in consideration of
P25,000.00. His counsel manifested a "Satisfaction of Judgment." Petitioner Liguaton
filed also a motion to dismiss based on a Release and Quitclaim dated July 19, 1988,
in consideration of the sum of P20,000.00 which he acknowledged to have received
also from his employer.
But these releases were later impugned by the petitioners. They alleged that
they were constrained to sign the documents because of "extreme necessity."
They have come to the Supreme Court on certiorari to ask that the quitclaims
they signed be annulled.

'Atilano vs. De la Cruz, G.R. No. 82488, February 28, 1990.

165
 LABOR RELATIONS
ART. 227

Their petition is based primarily on Pampanga Sugar Development Co., Inc. vs.
Court of Industrial Relations (114 SCRA 725) where it was held:
x x x while rights may be waived, the same must not be contrary to law,
public order, public policy, morals or good customs or prejudicial to a third
person with a right recognized by law. (Article 6, New Civil Code) x x x .
x x x The above-quoted provision renders the quitclaim agreements
void ab initio in their entirety since they obligated the workers concerned to
forego their benefits, while at the same time, exempted the [employer] from
any liability that it may choose to reject. This runs counter to Art. 22 of the
new Civil Code which provides that no one shall be unjustly enriched at the
expense of another.
Ruling: The law looks with disfavor upon quitclaims and releases by employees
who are inveigled or pressured into signing them by unscrupulous employers seeking
to evade their legal responsibilities. On the other hand, there are legitimate waivers
that represent a voluntary settlement of a laborer's claims that should be respected
by the courts as the law between the parties.
In the case at bar, the petitioners claim that they were forced to sign their
respective releases in favor of their employer, the herein private respondent, by
reason of their dire necessity. The latter, for its part, insists that the petitioner entered
into the compromise agreement freely and with open eyes and should not now be
permitted to reject their solemn commitments.
The Court has deliberated on the issues and the arguments of the parties and
finds that the petition must fail. The exception and not the rule shall be applied in
this case.
The case cited is not apropos because the quitclaims therein invoked were
secured by the employer after it had already lost in the lower court and were
subsequently rejected by this Court when the employer invoked it in a petition for
certiorari. By contrast, the quitclaims in the case before us were signed by the petitioners
while the motion for reconsideration was still pending in the DOLE, which finally
denied it on March 7,1989. Furthermore, the quitclaims in the cited case were entered
into without leave of the lower court whereas in the case at bar, the quitclaims were
made with the knowledge and approval of the DOLE, which declared in its order of
December 16, 1988, that "the compromise agreement/settlements dated April 15,
1988 and July 19, 1988 are hereby approved."
"Dire necessity" is not an acceptable ground for annulling the releases, especially since
it has not been shown that the employees had been forced to execute them. It has not even been
proven that the considerations for the quitclaims were unconscionably low and that the petitioners
had been tricked into accepting them. While it is true that the writ of execution dated
November 24, 1987, called for the collection of the amount of P46,267.92 each for
the petitioners, that amount was still subject to recomputation and modification as
the private respondent's motion for reconsideration was still pending before the
DOLE. The fact that the petitioners accepted the lower amounts would suggest
that the original award was exorbitant and they were apprehensive that it would be
adjusted and reduced. In any event, no deception has been established on the part of the

166
 BUREAU OF LABOR RELATIONS ART. 227

private respondent that would justify the annulment of the petitioners' quitclaims. [Italics
supplied]
The applicable law is Article 227 of the Labor Code.
The petitioners cannot renege on their agreement simply because they may now
feel they made a mistake in not awaiting the resolution of the private respondent's
motion for reconsideration and recomputation. The possibility that the original
award might have been affirmed does not justify the invalidation of the perfectly
valid compromise agreements they had entered into in good faith and with full
voluntariness. In General Rubber and Footwear Corp. vs. Drilon (169 SCRA 808), We "made
clear that the Court is not saying that accrued money claims can never be effectively
waived by workers and employees." As we later declared in Periquet vs. NLRC (186
SCRA 724 [1990]):
Not all waivers and quitclaims are invalid as against public policy. If the agreement
was voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms
of settlement are unquestionable on its face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making the waiver did so voluntarily, with
fall understanding of what he was doing, and the consideration for quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking. As in this
case. [Italics supplied]

4. COMPROMISE SHOULD BE DULY AUTHORIZED

Jag & Haggar Jeans and Sportswear Corp. vs. NLRC, Lakas Manggagawa sa Jag,
et al., G.R. No. 105710, February 23,1995 —
The main issue to be resolved is whether or not the compromise agreement
entered into by petitioner and the Union (which constitute the majority) is binding
upon the other complainants (who constitute the minority).
Petitioner [employer] contends that the Compromise Agreement was deemed
ratified by the union members considering that 102 out of the 114 affected employees
already availed of and received the benefits under the said agreement and that private
respondents [employees] were represented in all stages of the proceedings without
them questioning the authority of their union officers and their counsel. Petitioner
cites the case of Betting Ushers Union (PLUM) vs.Jai-alai (101 Phil. 822 [1957]) wherein
we ruled that the "will of the majority should prevail over the minority" and which
ruling was reiterated in Dionela vs. Court of Industrial Relations Commission (190 SCRA
558 [1990].)
On the other hand, the complaining employees allege that for a compromise
agreement to be binding upon them, a special power of attorney or their express
consent was necessary for what was being waived or surrendered under the agreement
was their right to an employment.
The authority of attorneys to bind their clients is governed by Section 7, Rule
HI of the New Rules of Procedure of the National Labor Relations Commission,
which provides:
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 ART. 227 LABOR RELATIONS

Authority to bind party. — Attorneys and other representatives of parties shall

have authority to bind their clients in all matters of procedure; but they cannot,
without a special power of attorney or express consent, enter into a compromise agreement
with the opposing party in full or partial discharge of a client s claim. (Italics supplied).
It will be noted that the Compromise Agreement provides in paragraphs 2 and
3 thereof that:
2. The union Board Members and Shop Stewards may be dismissed
by [the Company] subject to the payment of separation pay equivalent to one-
half month for every year of service; and
3. The mere union members are directed to report for work within
10 days from receipt of this Decision and management is ordered to accept
them to their former or equivalent position.
The Decision dated May 8, 1990 ordered the reinstatement of the union
members to their former or equivalent position while in the case of the Union board
members and shop stewards, [the employer] was given the option to dismiss them
subject to the payment of separation pay. However, in the Compromise Agreement,
not only the union officers, board members and shop stewards were considered
dismissed from the service but also the union members subject to the payment of
separation pay and financial assistance.
The waiver of reinstatement, like waivers of money claims, must be regarded
as a personal right which must be exercised personally by the workers themselves.
"For a waiver thereof to be legally effective, the individual consent or ratification of
the workers or employees involved must be shown. Neither die officers nor the majority
of the union had any authority to waive ike accrued rights pertaining to the dissenting
minority members, x x x . The members of the union need the protective shield of this
doctrine not only vis-a-vis their employer but also, at times, vis-a-vis the management
of their own union, and at other times even against their own imprudence or
1
impecuniousness"
We have ruled that " x x x when it comes to individual benefits accruing to
members of a union from a favorable final judgment of any court, the members
themselves become the real parties in interest and it is for them, rather than for the
2
union, to accept or reject individually the fruits of litigation."
The authority to compromise cannot lightly be presumed and should be
3
duly established by evidence.

In another case, the Court pointed out that respondent Prado executed
the compromise agreement not only on his own b e h a l f but on b e h a l f of

'General Rubber and Footwear Corporation vs. Drilon, 169 SCRA 808 [1989].
2
Esso Philippines, Inc. vs. Malayang Manggagawa sa Esso [MME], 75 SCRA 73
[1977].
3
General Rubber and Footwear Corporation vs. Drilon, supra; Kaisahan ng mga
Manggagawa sa La Campana vs. Sarmiento, 133 SCRA 220 [1984].

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 BUREAU OF LABOR RELATIONS ART. 227

respondent Tuscano. T h e r e is, however, no showing that respondent Prado

was duly authorized by respondent Tuscano to waive a part of the award given
her.
Under Article 1878 of the Civil Code of the Philippines, a special power
of attorney is necessary;
xxx xxx xxx
(2) To effect novations which put an end to obligations already in
existence at the time the agency was constituted;
(3) T o compromise, x x x ;
(4) To waive any obligation gratuitously;
xxx xxx xxx
(15) Any other act of strict dominion.
Hence, being violative of existing law and jurisprudence, such settlement
1
cannot be given force and effect.
5. RULINGS ON COMPROMISE SETTLEMENTS SUMMARIZED
Labor, et al. vs. NLRC and Gold City Commercial Complex, Inc., and Uy, G.R. No.
110388, September 14, 1995 —
Even if the petitioners [employees] did enter into a compromise settlement
with Gold City, such agreement would be valid and binding only if, per Veloso vs.
DOLE (200 SCRA 201 [ 1991 ] ) , quoting Periquet vs. National Labor Relations Commission
(186 SCRA 724 [1990]) the agreement was voluntarily entered into and represents
a reasonable settlement of the claims. In this case, as in Fuentes vs. NLRC (167 SCRA
767 [1988]), the amounts purportedly received by the petitioners were unreasonably
lower than what they were legally entitled to.
Furthermore, like in Pampanga Sugar Development Co. vs. CIR (114 SCRA 725
[1982]), the "compromise settlements" with the petitioners were not executed with
the assistance of the Bureau of Labor Relations or the Regional Office of the DOLE
pursuant to Article 227 of the Labor Code. The records do not disclose that the
assistance of such office was ever solicited. What Gold City did was merely to file with
the Regional Office of the DOLE in Davao City the vouchers purporting to show
payments of the alleged considerations of the "compromise settlements." Such filing
can by no stretch of the imagination be considered as the requisite assistance in the
execution of compromise settlements.

Even when a compromise agreement is approved by a labor arbiter, the

judgment cannot have the effect of res judicata upon persons who are not parties
to the compromise agreement. Res judicata, to apply, requires identity [i.e.,
sameness] of the parties. A judgment upon a compromise agreement has the

•Loyola Security and Detective Agency vs. NLRC and Victor Prado and Matilde
Tuscano, G.R. No. 113287, May 9, 1995.

169
 LABOR RELATIONS
ART. 227

force and effect of any other judgment, but is conclusive only upon the parties
1
thereto and their privies.
6. WHEN TO EFFECT COMPROMISE: FINAL DECISION, NEGOTIABLE?
A compromise agreement may be effected at any stage of the proceedings
and even when there is already a final executory judgment. On this particular
point there was lingering doubt, but the doubt disappeared with the decision
in Magbanua vs. Uy> below.
The settlement of cases in court is authorized and even encouraged by
2
express provision of law. The law does not limit compromises to cases about to
be filed or cases already pending in courts. That a compromise may be effected
even after final judgment is impliedly authorized by Article 2040 (Civil Code).
There appears to be no limitation on the right to compromise, such as
the one claimed by petitioners to exist that there was already a final executory
judgment in favor of the petitioners. We can see no reason for limiting the right of
compromise to pending cases, excluding therefrom those already in the process
3
of execution.
In a 1991 decision, however, the Court rendered a contrary pronouncement.
After the court's decision ordering the reinstatement and payment of backwages
had become final and executory, the employees executed a release and quitclaim
in favor of the employer after receiving as backwages an amount much lesser
than the award. T h e Court voided the document even if it was approved by the
labor arbiter. Calling the approval "lamentable," the Court stressed that final
and executory judgment cannot be altered and neither can it be "negotiated."
Such act is contemptuous and if upheld, would render the very decision of the
Court meaningless. It manifested a willful disregard of the authority of the Court
4
as the final arbiter of cases brought to it.

6.1 T h e definitive Ruling: Magbanua vs. Uy

T h e Court faces squarely the question of compromise agreement over a
final judgment in Magbanua vs. Uy where the Labor Arbiter, the NLRC, and the
Court of Appeals held different opinions. Finally, the Supreme Court gives the
definitive answer: a compromise agreement covering a case pending trial, on
appeal, or with final judgment, is allowed and valid, except for vices of consent
or forgery.

'See: Golden Donuts vs. NLRC, G.R. No. 113666-68, January 19, 2000.
2
Articles 2028 and 2029, Civil Code; Republic of the Philippines vs. Villarosa,
103 Phil. 31; 54 Off. Gaz., [24] 6249.
3
Jesalva vs. Bautista, 105 Phil. 348, March 24, 1959.
4
Alba Patio de Makati vs. NLRC, G.R. No. 85393, September 5, 1991. We cited
this case to treat the same question under Article 221.

170
 BUREAU OF LABOR RELATIONS ART. 227

Magbanua, et al. vs. Uy, G.R. No. 161003, May 6, 2005 -

Facts: In September 1996 the Supreme Court affirmed an NLRC decision
awarding wage differentials, amounting to PI.4 million to eight complainant workers.
The decision having become final and executory, the employees on February 3,
1997 asked for a Writ of Execution of the decision. Before the Writ could be issued,
however, the parties apparently reached a compromise. Accordingly, both employer
and employees on May 19 filed a Manifestation, requesting that the case be terminated
"because the award had been complied with to the satisfaction of the complainants."
Attached to the Manifestation was a Joint Affidavit of the employer and the employees
affirming that each of the latter had received P40,000 from the employer.
Despite this signed affidavit, however, the employees on June 3 filed a Motion
for Issuance of a Writ of Execution of the September 1996 decision. Naturally, the
employer opposed the Motion. But the employees countered that they had received
only partial payment of the judgment award. Later in October 1997 six (6) of the
eight (8) complainants again filed a manifestation that they had received a total of
P320,000 from their employer for which reason they were requesting that their case
be considered closed.
On February 27, 1998 the Labor Arbiter, recognizing the compromise
agreement, denied the request for a writ of execution; instead he declared that the
cases were considered closed. But the employees did no* stop. They went up to the
NLRC which, in turn, sided with the employees, saying that a final and executory
judgment could no longer be altered and that quitclaims and releases are normally
frowned upon as contrary to public policy.
At the next level, the Court of Appeals reversed the NLRC. The CA
held that compromise agreements may be entered into even after a final
judgment. Thus, the employees' release of their employer's liability because
of the compromise agreement between them, was valid. This ruling, the
Supreme Court now says with finality, is correct, assuming that the agreement was
made knowingly and freely.
Ruling: Rights may be waived through a compromise agreement,
notwithstanding a final judgment that has already settled the rights of the contracting
parties. To be binding, the compromise must be shown to have been voluntarily, freely
and intelligently executed by the parties, who had full knowledge of the judgment.
Furthermore, it must not be contrary to law, morals, good customs and public policy.
A compromise agreement is a contract whereby the parties make reciprocal
concessions in order to resolve their differences and thus avoid or put an end
to a lawsuit. They adjust their difficulties in the manner they have agreed upon,
disregarding the possible gain in litigation and keeping in mind that such gain is
balanced by the danger of losing. Verily, the compromise may be either extrajudicial
(to prevent litigation) or judicial (to end a litigation).
There is no justification to disallow a compromise agreement, solely because
it was entered into after final judgment. The validity of the agreement is determined
by compliance with the requisites and principles of contracts, not by when it was
entered into. As provided by the law on contracts, a valid compromise must have

171
 ART. 227 LABOR RELATIONS

the following elements: (1) the consent of the parties to the compromise, (2) an
object certain that is the subject matter of the compromise, and (3) the cause of the
obligation that is established.
The issue involving the validity of a compromise agreement notwithstanding
a final judgment is not novel. Jesalva v. Bautista upheld a compromise agreement
that covered cases pending trial, on appeal, and with final judgment. The Court
noted that Article 2040 [Civil Code] impliedly allowed such agreements; there was
no limitation as to when these should be entered into.
In the present factual milieu, compliance with the elements of a valid contract
is not in issue. Petitioners [complainant workers] do not challenge the factual finding
that they entered into a compromise agreement with [their employer]. There are
no allegations of vitiated consent. Neither was there any proof that the agreement
was defective or could be characterized as rescissible, voidable, unenforceable, or
void. Instead, petitioners base their argument on the sole fact that the agreement
was executed despite a final judgment, which the Court had previously ruled to be
allowed by law.

6.2 Absence of Counsel Remedied

The labor arbiter's absence when the waivers were executed was remedied
upon compliance with the above procedure. T h e Court observes that the arbiter
made searching questions during the pre-execution conference to ascertain
whether petitioners had voluntarily and freely executed the waivers. Likewise,
there was evidence that they made an intelligent choice, considering that the
contents of the written waivers had been explained to them. T h e labor arbiter's
1
absence when those waivers were executed does not, therefore, invalidate them.
Even if contracted without the assistance of labor officials, compromise
agreements between workers and their employers remain valid and are still
2
considered desirable means of settling disputes.
6.3 Reiteration
Magbanua and other decisions are reiterated in later cases, such as Cosmos
of 2008:

The parties may execute a compromise agreement even after the finality
of this decision. They are not precluded from doing so. In a catena of cases,
the Court has consistently ruled that even final and executory judgments
may be compromised. In Northern Lines, Inc. v. Court of Tax Appeals, the Court
recognized the right to compromise final and executory judgments, as long
as such right was exercised by the proper party litigants.
In Gatchalian v. Arlegui, the Court upheld the right to compromise
prior to the execution of a final judgment. The Court held that the final

'Magbanua vs. Uy, G.R. No. 161003, May 6, 2005.

2
Eurotech Hair Systems, Inc, et al. vs. Go, G.R. No. 160913, August 31,2006.

172
 BUREAU OF LABOR RELATIONS ARTS. 228-229

judgment had been novated and superseded by a compromise agreement.

Palanca v. Court of Industrial Relations also sustained a compromise agreement,
notwithstanding a final judgment in which only the amount of backwages was
left to be determined. The Court found no evidence of fraud or of any showing
that the agreement was contrary to law, morals, good customs, public order,
or public policy. (Cosmos Bottling Corp. vs. Nagrama, G.R No. 164403, March 4,
2008. See also: J-Phil Marine, Inc. vs. NLRC, G.R No. 175366, August 11, 2008.)
7. OPTIONS WHEN COMPROMISE AGREEMENT IS VIOLATED
Under Article 2041 of the Civil Code, should a party fail or refuse to
comply with the terms of a compromise or amicable settlement, the other party
could either: (1) enforce the compromise by a writ of execution, or (2) regard
it as rescinded and so insist upon his original demand. Applying this law in a
case where the company failed to live up to the terms of an amicable settlement,
the court held that the complainant employees were within their right when
they insisted, after the company's noncompliance, that they be reinstated to
their j o b s , as they had originally demanded. T h e NLRC, the Court ruled, did
not abuse its discretion, when it accordingly ordered the reinstatement with
1
backwages.

I had learnt the true practice of law. I had learnt to find out the
better side of human nature and to enter men's hearts. I realized
that the true function of a lawyer was to unite parties riven asunder.
T h e lesson was so indelibly burnt into me that a large part of my
time during the twenty years of my practice as a lawyer was occupied
in bringing about compromises of hundreds of cases. I lost nothing
thereby - not even money, certainly not my soul.

M.K. Gandhi

ART. 2 2 8 . INDORSEMENT OF CASES TO LABOR ARBITERS (Repealed

by Batas Pambansa Big. 230)

ART. 2 2 9 . ISSUANCE OF SUBPOENAS

T h e Bureau shall have the power to require the appearance of any
person or the production of any paper, document or matter relevant to a
labor dispute under its jurisdiction either at the request of any interested
party or at its own initiative.

'Morales, et al. vs. NLRC and San Miguel Corp., G.R. No. 100133, February 6,
1995.

173
 LABOR RELATIONS
ARTS. 230-231

ART. 230. APPOINTMENT OF BUREAU PERSONNEL

The Secretary of Labor and Employment may appoint, in addition to
the present personnel of the Bureau and the Industrial Relations Divisions,
such number of examiners and other assistants as may be necessary to carry
out the purpose of this Code.
ART. 2 3 1 . REGISTRY OF UNIONS AND FILE OF COLLECTIVE
AGREEMENTS
The Bureau shall keep a registry of legitimate labor organizations. The
Bureau shall also maintain a file of all collective bargaining agreements and
other related agreements and records of settlement of labor disputes, and
copies of orders, and decisions of voluntary arbitrators. T h e file shall be
open and accessible to interested parties under conditions prescribed by the
Secretary of Labor and Employment, provided that no specific information
submitted in confidence shall be disclosed unless authorized by the Secretary,
or when it is at issue in any judicial litigation or when public interest or
national security so requires.
Within thirty ( 3 0 ) days from the execution of a Collective Bargaining
Agreement, the parties shall submit copies of the same directly to the Bureau
or the Regional Offices of the Department of L a b o r and Employment
for registration accompanied with verified proofs of its posting in two
conspicuous places in the place of work and ratification by the majority
of all the workers in the bargaining unit. T h e Bureau or Regional Offices
shall act upon the application for registration of such Collective Bargaining
Agreement within five ( 5 ) calendar days from receipt thereof. T h e Regional
Offices shall furnish the Bureau with a copy of the Collective Bargaining
Agreement within five (5) days from its submission.
T h e Bureau or Regional Office shall assess the employer for every
Collective Bargaining Agreement a registration fee of not less than one
thousand pesos ( P I , 0 0 0 . 0 0 ) or in any other amount as may be deemed
appropriate and necessary by the Secretary of L a b o r and Employment
for the effective and efficient administration of the Voluntary Arbitration
Program. Any amount collected under this provision shall a c c r u e to the
Special Voluntary Arbitration Fund.
T h e Bureau shall also maintain a file, and shall undertake or assist in
the publication, of all final decisions, orders and awards of the Secretary of
Labor and Employment, Regional Directors and the Commission.
C O M M E N T S AND CASES
REGISTRY OF UNIONS AND CBAs
T h e Bureau shall keep a registry of legitimate labor organizations. "Labor
organization" and "legitimate labor organization" are defined in Article 212.

174
 BUREAU OF LABOR RELATIONS ART. 232

Their registration, cancellation, rights and responsibilities are taken up in the

next Title.
T h e B u r e a u shall also maintain a file of all Collective Bargaining
Agreements (CBAs) and other related agreements.
T h e parties shall submit, within 30 days from execution, copies of their
CBA directly to the B L R or the Regional Offices of the DOLE for registration.
The registration of the CBA, however, is not a requisite for its validity.
T h e certification of the collective bargaining agreement by the Bureau
of Labor Relations is not required to put a stamp of validity to such contract.
Once it is duly entered into and signed by the parties, a collective bargaining
agreement becomes effective as between the parties regardless of whether or
1
not the same has been certified by the BLR.
But to the above ruling in the Liberty Flour Mills case, we must add that the
registration of the CBA is needed so that the contract-bar rule under Article 232
may come into play.

ART. 2 3 2 . PROHIBITION ON CERTIFICATION ELECTION

T h e Bureau shall not entertain any petition for certification election
or any other action which may disturb the administration of duly registered
existing collective bargaining agreements affecting the parties except under
Articles 2 5 3 , 253-A and 2 5 6 of this C o d e .
COMMENTS
THE CONTRACT-BAR RULE
Article 232 speaks of the contract-bar rule which means that while a valid
and registered CBA is subsisting, the Bureau is not allowed to hold an election
contesting the majority status of the incumbent union. T h e existence of the CBA
does not allow, that is, it bars, the holding of the inter-union electoral contest.
The election is legally allowed, says Article 256, only during the "freedom period"
which refers to the last 60 days of the fifth year of a CBA.
T h e objective of the rule, obviously, is to minimize union "politicking"
until the proper time comes.
In any case, it is the Med-Arbiters in the DOLE regional offices that hear
petitions for certification election (see Articles 256 and 257).
Other issues related to the contract-bar rule and the freedom period are
taken up in the chapters on collective bargaining and employee representation,
particularly Articles 253, 253-A, and 256, where this Article logically belongs.

'Liberty Flour Mills Employees vs. Liberty Flour Mills, Inc., 180 SCRA 668,
December 29, 1989.

175
 ART. 233 LABOR RELATIONS

ART. 233. PRIVILEGED COMMUNICATION

Information and statements made at conciliation proceedings shall
be treated as privileged communication and shall not be used as evidence
in the Commission. Conciliators and similar officials shall not testify in any
court or body regarding any matters taken up at conciliation proceedings
conducted by them.

176
 Title IV
LABOR ORGANIZATION
Chapter I
REGISTRATION AND CANCELLATION

Overview/Key Questions: Box 8

1. W h a t are the r e q u i r e m e n t s for o r g a n i z i n g and
registering a union?
2. What is a collective bargaining unit? How does it differ
from a union?
3. What is union affiliation and what are its implications?
May an affiliate disaffiliate?
4. How do unions merge or consolidate?
5. On what grounds and upon whose petition may a
union's registration be cancelled?

ART. 2 3 4 . REQUIREMENTS OF REGISTRATION

A federation, national union or industry or trade union center or an
independent union shall acquire legal personality and shall be entitled to the
rights and privileges granted by law to legitimate labor organizations upon
issuance of the certificate of registration based on the following require-
ments:
(a) Fifty pesos ( P 5 0 . 0 0 ) registration fee;
(b) T h e names of its officers, their addresses, the principal address
of the labor organization, the minutes of the organizational meetings and
the list of the workers who participated in such meetings;
( c ) In case the applicant is an independent union, the names of all
its members comprising at least twenty percent (20%) of all the employees
in the bargaining unit where it seeks to operate;
(d) If the applicant union has been in existence for one or more
years, copies of its annual financial reports; and
(e) Four (4) copies of the constitution and by-laws of the applicant
union, minutes of its adoption or ratification and the list of the members
who participated in it. (As amended by RA. No. 9481, effective June 14, 2007.)

177
 ARTS. 234-A-237 LABOR RELATIONS

ART. 234-A. CHARTERING AND CREATION O F A LOCAL CHAPTER

A duly registered federation or national union may directly create a local
chapter by issuing a charter certificate indicating the establishment of the
local chapter. The chapter shall acquire legal personality only for purposes
of filing a petition for certification election from the date it was issued a
charter certificate.
The chapter shall be entitled to all other rights and privileges of a
legitimate labor organization only upon the submission of the following
documents in addition to its charter certificate:
(a) The names of the chapter's officers, their addresses, and the
principal office of the chapter; and
(b) The chapter's constitution and by-laws: Provided, That where the
chapter's constitution and by-laws are the same as that of the federation or
the national union, this fact shall be indicated accordingly.
The additional supporting requirements shall be certified under oath by
the secretary or treasurer of the chapter and attested by its president. (This
article is inserted as an amendment by RA. No. 9481 effective June 14, 2007.)

ART. 2 3 5 . ACTION ON APPLICATION

The Bureau shall act on all applications for registration within thirty
( 3 0 ) days from filing.
All requisite documents and papers shall be certified under oath by
the secretary or the treasurer of the organization, as the case may be, and
attested to by its president.

ART. 2 3 6 . DENIAL OF REGISTRATION; APPEAL

T h e decision of the L a b o r Relations Division in the regional office
denying registration may be appealed by the applicant union to the Bureau
within ten ( 1 0 ) days from receipt of notice thereof.

ART. 2 3 7 . ADDITIONAL REQUIREMENTS FOR FEDERATIONS OR

NATIONAL UNIONS
Subject to Article 2 3 8 , if the applicant for registration is a federation
or a national union, it shall, in addition to the requirements of the preceding
Articles, submit the following:
(a) P r o o f of the affiliation of at least ten ( 1 0 ) locals or chapters,
each of which must be a duly recognized collective bargaining agent in the
establishment or industry in which it operates, supporting the registration
of such applicant federation or national union; and
(b) T h e n a m e s and addresses of the companies where the locals
or chapters o p e r a t e and the list of all the m e m b e r s in each c o m p a n y
involved.

178
 REGISTRATION AND CANCELLATION ARTS. 234-237

(ART. 2 3 8 . [Repealed by EO 111, December 2 4 , 1 9 8 6 ] Conditions for

registration of federation or national unions. — No federation or national
union shall be registered to engage in any organizational activity in more
than o n e industry in any area or region, and no federation or national union
shall be registered to engage in any organizational activity in m o r e than o n e
industry all over the country.
T h e federation or national union which meets the requirements and
conditions herein prescribed may organize and affiliate locals and chapters
without registering such locals or chapters with the Bureau.
Locals or chapters shall have the same rights and privileges as if they
were registered in the Bureau, provided that such federation or national
union organizes such locals or chapters within its assigned organizational
field of activity as may be prescribed by the Secretary of Labor.
T h e B u r e a u shall see to it that federations and national unions shall
only organize locals and chapters within a specific industry or region.)
C O M M E N T S AND CASES
1. LABOR ORGANIZATION; TWO BROAD PURPOSES
T h e workers' right to self-organization is guaranteed under Article XIII
of the 1987 Constitution, and such right, according to Article 246 of the Labor
Code, shall not be abridged. T h e right includes the right to form, join or assist
labor organization "for the purpose of collective bargaining." D.O. No. 40-03
carries these definitions:
"Labor Organization" refers to any union or association of employees in
the private sector which exists in whole or in part for the purpose of collective
bargaining, mutual aid, interest, cooperation, protection, or other lawful purposes.
"Legitimate Labor Organization" refers to any labor organization in the
private sector registered or reported with the Department in accordance with
Rule III and IV of these Rules.
"Union" refers to any labor organization in the private sector organized
for collective bargaining and for other legitimate purposes.
We should note that not every union is "legitimate"; only those properly
registered are considered L L O . But non-registration does not mean it is
"illegitimate"; it simply is unregistered and has no legal personality. It exists
legally but does not possess the rights of an LLO.
"Exclusive Bargaining Representative" refers to a legitimate labor union
duly recognized or certified as the sole and exclusive bargaining representative
or agent of all the employees in a bargaining unit.
"Workers' Association" refers to an association of workers organized for the
mutual aid and protection of its members or for any legitimate purpose other
than collective bargaining.

179
 ARTS. 234-237 LABOR RELATIONS

"Legitimate Workers' Association" refers to "an association of workers

organized for mutual aid and protection of its members or for any legitimate
purpose other than collective bargaining registered with the Department in
accordance with Rule III, Sections 2-C and 2-D of these Rules."
Gleaned from Article 212(g), a "labor organization" is not always a union; it
may be an "association of employees." And the purpose is not only nor necessarily
"collective bargaining" but also "dealing with employers concerning terms and
conditions of employment."
1.1 Distinction between "Collective Bargaining" and "Dealing with
Employer"
The purpose of a labor organization is to bargain collectively (as a group)
with the employer, a n d / o r some other lawful purpose.
The two purposes, i.e., collective bargaining and dealing with the employer,
are both concerned with terms and conditions of employment, but in labor
relations these two are not the same.
To bargain collectively is a right that may be acquired by a labor organization
after registering itself with the Department of Labor and Employment and after
being recognized or certified by DOLE as the exclusive bargaining representative
(EBR) of the employees.
Dealing with the employer, on the other hand, is a generic description of
interaction between employer and employees concerning grievances, wages, work
hours and other terms and conditions of employment, even if the employees'
group is not registered with the Department of Labor and Employment. As a
legitimate labor relations process, "dealing with the employer" explains why a
labor organization does not always have to be a labor union and why employer-
employee collective interactions are not always collective bargaining.
The phrase "dealing with the employer" is part also of the definition of
"labor organization" in the US National Labor Relations Act. T h e phrase has
been the subject of decisional interpretations by the NLRB and the Courts,
giving the phrase a broad application. T h e NLRB has ruled that "dealing with"
involves a bilateral mechanism that entails "a pattern or practice in which a group
of employees, over time, make proposals to management, and management
responds to those proposals by acceptance or rejection by word or deed. An
"in-house committee" was held to be "dealing with" the employer and therefore
a labor organization where the committee (formed upon suggestion of the
company president) raised employment issues and presented proposals. T h e
president discussed the proposals with the committee. T h e Sixth Circuit Court
noted that "all that was required to satisfy the definition of "dealing with" is that
1
the management respond to the proposals either by acceptance or rejection."
1
The Developing Labor Law, 2001 Cumulative Supplement, [BNA, Inc. 2001], p.

180
 REGISTRATION AND CANCELLATION ARTS. 234-237

Similarly, the employees' benefits and policy review committees, the safety
committee and "brainstorming" groups were held "dealing with" the employer
and may be considered as labor organizations whose ideas the management may
or may not adopt. T h e Board has reaffirmed the principle that there must be a
pattern or practice in which a group of employees makes proposals, overtime,
1
to management, and management responds to such proposals.
Along this line, the labor-management council envisioned in Article 255
(second paragraph) of this Code carries the character of a labor organization.
Because such groups or committees are regarded as labor organizations, the
protection under Articles 246, 247 and 248 covers them, although they cannot,
as such, demand collective bargaining under Article 250 or stage a strike under
Article 263.

1.2 Labor Organization Not Necessarily a Union

Instead of organizing a labor union, or side by side with an existing union,
workers may opt to form something shorn of the rigidity and formality of a labor
union: something they may call a labor-management committee. It may be a
works council or a body of any other name as a medium of employee-employer
interaction in the establishment through which problems or disputes, or potential
disputes, may be resolved by consensus, compromise or other constructive
voluntary mode.
Indeed, the richer the modes of labor-management interactions, the better.
This inclination is indicated by the broad definition and statement of purposes of
"labor organization" in Articles 212 and 246. It is likewise evident in Article 255,
second paragraph, which authorizes the creation of labor-management council,
and in Article 277(g) and (h) which advocate labor-management cooperation
programs as well as labor-management committees. Department Order No. 40,
series of 2003 (which implements this Book V of the Labor Code) allows the
formation of Workers' Association "for the mutual aid and protection of its
members or for any legitimate purpose other than collective bargaining."
2. CLASSIFICATION OF LABOR ORGANIZATIONS
2.1 At the National Level
91
"National Union/Federation means any labor organization with at least ten
locals/chapters or affiliates each of which must be a duly certified or recognized
2
collective bargaining agent. Example: Federation of Free Workers (FFW). D.O.
No. 40-03 defines "national union" or "federation" as a group of labor unions in
a private establishment organized for collective bargaining or for dealing with
employers concerning terms and conditions of employment for their member

'See The Developing Labor Law, 2001 Cumulative Supplement, [BNA, Inc.,
2001], pp. 74-75.
implementing Rules: Book V, Rule I, Sec. 1.
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 ARTS. 234-237 LABOR RELATIONS

unions or for participating in the formulation of social and employment policies,

standards and programs, registered with the Bureau (of Labor Relations) in
accordance with Rule III, Section 2-B of the Implementing Rules.
"Industry Union" means any group of legitimate labor organizations
operating within an identified industry, organized for collective bargaining or for
dealing with employers concerning terms and conditions of employment within
an industry, or for participating in the formulation of social and employment
policies, standards and programs in such industry, which is duly registered with
the Department. D.O. No. 40-03, however, does not carry this term and this
definition, although under Rule III, Section 2-B, "labor organizations operating
within an identified industry may also apply for registration as federation or
national union within the specified industry by submitting to the Bureau the
same set of documents (as required of federations and national unions.)"
"Trade Union Center"may refer to a group of national unions or federations
organized for the mutual aid and protection of its members, for assisting such
members in collective bargaining, or for participating in the formulation of
social and employment policies, standards and programs.
An alliance is an aggregation of unions existing in one line of industry, or
in a conglomerate, a group of franchisees, a geographical area, or an industrial
center. Different unions or different federations may form an alliance to help
one another in the attainment of a particular purpose. Each member union
retains its own organization, structure, and independence. An alliance, though,
cannot represent its member unions in CBA negotiations.
A company-union is a labor organization which, in whole or in part, is
employer-controlled or employer-dominated. Article 248(d) prohibits being a
company union.
A company-union must not be confused with a union which, although
comprised exclusively of the employees of a given employer or employers, is free
of employer-influence and thus a legitimate organization recognized by law as a
1
bona fide l a b o r union. Those unions are commonly described as "inside unions."
2.2 At the Enterprise Level
A labor union at the enterprise level is either "independent" if created
by independent registration or a "chapter" if created through chartering.
Independent registration is obtained by the union organizers in an enterprise
through their own action instead of through issuance of a charter by a federation
or national union. An independent union has a legal personality of its own not
derived from that of a federation. Thus, D.O. No. 40-03 defines an "independent
union" as "a labor organization operating at the enterprise level that acquired
legal personality through independent registration under Article 234 of the Labor

'Rothenberg on Labor Relations, pp. 41-42.

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 REGISTRATION AND CANCELLATION ARTS. 234-237

Code and Rule III, Section 2-A of these Rules." But an independent union may
affiliate with a federation or national union, in which case it may also be called
an affiliate.
Chartering, on the other hand, takes place when a duly registered federation
or national union issues a charter to a union in an enterprise and registers the
creation of the chapter with the Regional Office where the applicant operates.
The union recipient of the charter is called a chapter or local or chartered local.
Its legal personality is derived from the federation/national union but it may
subsequently register itself independently.

2.3 Recent Changes by R A . No. 9481

Article 234-A, which explicitly authorizes the creation of enterprise-level
unions, is one of the many changes R.A. No. 9481 introduced. This law, passed
on February 20, 2007 as a consolidation of H.B. No. 1351 and SB No. 2466,
lapsed into law without presidential signature on May 25, 2007. Published on
May 30, 2007 it took effect on J u n e 14, 2007. Titled "An Act Strengthening
the Workers' Constitutional Right to Self-organization" it amended six articles
(namely, 234, 2 3 8 , 239, 2 4 5 , 256, and 2 5 7 ) and added new ones after each of
those six Articles.
T h e changes this law makes are summarized as follows:
1. No required number.
T h e 20 percent registration requirement applies only to an
independent union. This makes a local chapter registerable even
if it its initial membership is less than 20 percent of the bargaining
unit. Hence, a company can be quickly unionized by a very small
1
number of employees.
2. Tentative Legal Personality.
A local chapter is created once a federation (same as a national
union) issues a charter certificate. Once issued a charter, the chapter
acquires legal personality to file a petition for CE. All other union
rights will be acquired by submitting the following in addition to the
charter certificate.
a) the names and addresses of the officers and members of
the union.
b) the chapter's constitution and by-laws which can be the
same as that of the federation.
These documents must be certified under oath by the Secretary
2
or Treasurer and attested by the president.

l
See Article 234 as amended.
2
See Article 234-A.

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ARTS. 234-237 LABOR RELATIONS

3. Specified Grounds of Cancellation.

The BLR may cancel a union registration based only on
1
grounds enumerated in Article 239 as amended.
4. PCE Proceeds Despite Petition to Cancel Union Registration.
A petition to cancel union registration does not prevent the
2
filing or the hearing of a petition for a CE.
5. Only Three Grounds to Cancel.
The grounds to cancel a union's registration are reduced from
ten to three namely: any falsehood about the CBL, or about the
3
election of officers, and voluntary dissolution.
6. Cancellation by Action of the Members.
At least two-thirds of the membership may vote to dissolve their
organization, but this action requires a subsequent "application to
cancel" to be submitted by the board of the organization, attested
4
by the president.
7. Reportorial Requirements:
Every legitimate labor organization has to submit to B L R four
documents:
a) adoption or amendments to constitution and by-laws
(CBL);
b) election of officers, with list of voters to be submitted in
30 days;
' c) annual financial reports within 30 days from close of
fiscal year;
d) annual list of members.
Non-submission of these reportorial requirements is no longer
a ground to cancel registration, but erring officer may be punished
5
even by expulsion.
8. Affiliation with Same Federation.
Supervisors' union and rank and file union in same company
6
may affiliate with same federation. This amendment renders obsolete
the prohibition laid down previously in a Supreme Court decision.

'See Article 238 as amended.

2
See Article 238-A.
3
See Article 239 as amended.
4
See Article 239-A.
5
See Article 242-A.
6
See Article 245 as amended.

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 REGISTRATION AND CANCELLATION ARTS. 234-237

9. Commingling.
Commingling of supervisors and rank and file in one union is
not a ground to cancel union registration. T h e excludible member
1
is "automatically deemed removed" from the list.
10. nondisclosure of Identity.
In an organized (unionized) enterprise the federation who files
a Petition for Certification Election (PCE) on behalf of a chapter
2
cannot be required to identify the chapter's officers and members.
T h e PCE does not have to be filed by the local officers.
11. Non-Disclosure even in Unionized Company.
T h e non-disclosure rule (in the preceding number) applies
also to a federation that files a PCE on behalf of its chapter in an
3
enterprise without yet a union as bargaining agent.
12. Employer, a Bystander.
In a PCE the employer is a bystander and has no right to oppose
the petition. His participation is limited to being informed about the
petition and to being required to submit the list of employees if a
4
CE will be held.
T h e Implementing Rules and Regulations (IRR) of R.A. No. 9481 were
issued as D.O. No. 40-F-03 on 30 October 2008 and are incorporated in the IRR
of Book V in this volume.
3. REGISTRATION RATIONALE
A labor organization may be registered or not. If registered with DOLE, it is
considered "legitimate labor organization" ("LLO"). But the reverse is not true,
that is, a labor organization is not "illegitimate" just because it is unregistered. It
is still a lawful organization and can deal with the employer, but it has no legal
personality to demand collective bargaining with the employer. It cannot petition
for a certification election and cannot hold a legal strike.
It is the fact of being registered with the Department of Labor and
Employment that makes a labor organization legitimate in the sense that it
is clothed with legal personality to claim the representational and bargaining
rights enumerated in Article 242 and Article 255 or to strike and picket under
Article 263.
The Supreme Court has upheld the legality of the requirement to register
labor unions. It said:

'See Article 245-A.

2
See Article 265 as amended.
3
See Article 257 as amended.
4
See Article 258-A as amended.

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 ARTS. 234-237 LABOR RELATIONS

The registration prescribed x x x is not a limitation to the right

of assembly or association which may be exercised with or without said
registration. The latter is merely a condition sine qua non for the acquisition
of legal personality by labor organizations, associations or unions and the
possession of the rights and privileges granted by law to legitimate labor
organizations. T h e Constitution does not guarantee these rights and
privileges, much less said personality, which are mere statutory creations,
for the possession and exercise of which registration is required to protect
both labor and the public against abuses, fraud, or impostors who pose as
organizers, although not truly accredited agents of the union they purport
to represent. Such requirement is a valid exercise of the police power,
because the activities in which labor organizations, associations and unions
of workers are engaged affect public interest, which should be protected,
x x x (PAFLU vs. Sec. of Labor, L-2222, February 27, 1969.)

3.1 Effect of Registration Under the Corporation Law

A labor organization may be organized under the Corporation Law as a
nonstock corporation and issued a certificate of incorporation by the Securities
and Exchange Commission. But such incorporation has only the effect of giving
to it juridical personality before regular courts of justice. Such incorporation
1
does not grant the rights and privileges of a legitimate labor organization.
4. WHERE TO REGISTER
Applications for registration of independent labor unions, chartered locals,
and workers' associations shall be filed with and acted upon by the Regional
Office where the applicant principally operates.
Applications for registration of federations, national unions or workers'
associations operating in more than one region shall be filed with the Bureau
or the Regional Offices, but shall be processed and acted upon by the Bureau
which has national jurisdiction unlike a regional office.

5. REGISTRATION REQUIREMENTS
Rule III of the Rules Implementing Book V (under D.O. No. 40-03) specifies
the registration requirements.

5.1 Federation or National Union

T h e application for registration of federations and national unions shall
be accompanied by the following documents:
1) a statement indicating the name of the applicant labor union,
its principal address, the name of its officers and their respective
addresses;

'See Phil. Land-Sea-Air Labor Union [PLASLU], Inc. vs. CIR, 93 Phil. 747
[1953]; see also: Cebu Seamen's Association vs. Ferrer-Calleja, 212 SCRA 50 [1992].

186
 REGISTRATION AND CANCELLATION ARTS. 234-237

2) the minutes of the organizational meeting(s) and the list of

employees who participated in the said meeting(s);
3) the annual financial reports if the applicant union has been in
existence for one or more years, unless it has not collected any
amount from the members, in which case a statement to this effect
shall be included in the application;
4) the applicant union's constitution and by-laws, minutes of
its adoption or ratification, and the list of the members who
participated in it. T h e list of ratifying members shall be dispensed
with where the constitution and by-laws was ratified or adopted
during the organization meeting (s). In such a case, the factual
circumstances of the ratification shall be recorded in the minutes
of the organizational meeting(s);
5) the resolution of affiliation of at least ten (10) legitimate labor
organizations, whether independent unions or chartered locals,
each of which must be a duly certified or recognized bargaining
agent in the establishment where it seeks to operate; and
6) the name and addresses of the companies where the affiliates
operate and the list of all the members in each company involved.
Labor organizations operating within an identified industry may also apply
for registration as a federation or national union within the specified industry
by submitting to the Bureau the same set of documents.

5.2 Independent Labor Union

T h e application for registration of an independent labor union shall be
accompanied by the following documents:
(1) the name of the applicant labor union, its principal address, the
name of its officers and their respective addresses, approximate
number of employees in the bargaining unit where it seeks to
operate, with a statement that it is not reported as a chartered local
of any federation or national union;
(2) the minutes of the organizational meetings(s) and the list of
employees who participated in the said meeting(s);
(3) the name of all its members comprising at least 20% of the
employees in the bargaining unit;
(4) the annual financial reports if the applicant has been in existence
for one or more years, unless it has not collected any amount from
the members, in which case a statement to this effect shall be
included in the application;
(5) the applicant's constitution and by-laws, minutes of its adoption
or ratification, and the list of the members who participated in

187
 ARTS. 234-237 LABOR RELATIONS

it. The list of ratifying members shall be dispensed with where

the constitution and by-laws was ratified or adopted during the
organizational meeting. In such a case, the factual circumstances of
the ratification shall be recorded in the minutes of the organizational
meeting(s).
5.3 Workers' Association
T h e application for registration of a workers' association shall be
accompanied by the following documents:
1) the name of the applicant association, its principal address, the
name of its officers and their respective addresses;
2) the minutes of the organizational meeting(s) and the list of
members who participated therein;
3) the financial reports of the applicant association if it has been in
existence for one or more years, unless it has not collected any
amount from the members, in which case a statement to this effect
shall be included in the application;
4) the applicant's constitution and by-laws to which must be attached the
names of ratifying members, the minutes of adoption or ratification
of the constitution and by-laws and the date when ratification was
made, unless ratification was done in the organizational meeting(s),
in which case such fact shall be reflected in the minutes of the
organizational meeting(s).
The application for registration of a workers' association operating in more
than one region shall be accompanied, in addition to the above requirements,
by a resolution of membership of each member association, duly approved by
its board of directors.

5.4 Chartered Local

As mentioned, a union at the enterprise level may be created either through
(1) independent registration or (2) chartering.
A union created through chartering is called a local, a chapter, or a
chartered local in the employer enterprise where the union officers and members
are employees.

5.4a Chartered Local has to be Registered; Requirements

A chartered local has to be registered, not just reported. T h e original
provision in D.O. No. 40-03 has been changed (or corrected) by D.O. No. 40-
B-03. Dated 16 February 2004, D.O. No. 40-B-03 redefines a "chartered local"
as a labor organization in the private sector operating at the enterprise level
that acquired legal personality through registration with the Regional Office in
accordance with Rule III, Section 2-E of these Rules. (The previous definition
read: "chartered local" refers to a labor organization in the private sector

188
 REGISTRATION AND CANCELLATION ARTS. 234-237

operating at the enterprise level that acquired legal personality, through the
issuance of a charter certificate by a duly registered federation or national union,
and reported to the Regional Office in accordance with Rule III, Section 2-E of
these Rules.)

Accordingly, Section 2-E, Rule HI has been amended and expanded

to require a duly registered federation or national union, directly creating a
chartered local, to submit to the Regional Office two (2) copies of the following:
(a) a charter certificate issued by the federation or national union
indicating the creation or establishment of the local/charter.
(b) the names of the local chapter's officers, their addresses, and the
principal office of the local/chapter; and
(c) the local/chapter's constitution and by-laws, provided that where
the local/chapter's constitution and by laws is the same as that
of the federation or national union, this fact shall be indicated
accordingly.
All the foregoing supporting requirements shall be certified under oath by
the Secretary or the Treasurer of the local/chapter and attested by its President.

5.4b Legal Personality only to File a P C E

T h e present Article 234-A, inserted by R.A. No. 9 4 8 1 , has a definitive
statement: a chapter acquires legal personality on "the date it was issued a charter
certificate" by its mother federation or national union. T h e acquisition of legal
personality seems to happen automatically, but "only for purposes of filing a
petition for a certification election."

5.4c Submission of Confirming Documents

T h e acquired personality, moreover, is tentative because it needs to be
confirmed by submission of additional documents, otherwise the chapter does
not become entitled to all other rights and privileges of an LLO. T h e article
does not fix a time limit for submitting those additional documents because,
presumably, a chapter that wants to become a bargaining agent will waste no
time to permanently legitimize its status.
In any case the Med Arbiter may dismiss the petition for certification
election if the union is not listed in DOLE'S registry of legitimate unions or if it
1
fails to attach to its petition a duly issued charter certificate.
5.4d A Trade Union Center Cannot Create a Chapter
Even before R.A. No. 9481 became publicly known the question was already
raised before the Supreme Court whether a trade union center could create
a local chapter. The Court said no, and the ruling conforms with new Article

'Sec. 14, Rule VIII, D.O. No. 40-F-03.

189
 ARTS. 234-237 LABOR RELATIONS

234-A under which only duly registered federations or national unions may create
1
chapters.
5.4e When does a Chapter Become an LLO?
Department Order No. 9 issued in 1997 contained this provision.
SEC. 3. Acquisition of legal personality by local/chapter. — A local/chapter
constituted in accordance with Section 1 of this Rule shall acquire legal
personality from the date of filing of the complete documents enumerated
therein. Upon compliance with all the documentary requirements, the
Regional Office or Bureau shall issue in favor of the local/chapter a
certificate indicating that it is included in the roster of legitimate labor
organizations.
In 1999 this writer assailed this provision. We commented that nowhere
in the Code was it declared that the union's personality as legitimate labor
organization (LLO) could be acquired by mere submission of documents and
that nowhere did the Code state as mandatory or ministerial the issuance of a
registration certificate. In other words, the acquisition of legal personality could
not be the date of filing of the documents. Section 3, we argued, was defeating the
very purpose of registration of unions which was to block off fly-by-night unions.
The assailed provision is now gone. D.O. No. 40-03, superseding D.O. No.
9, states: "The Labor union or workers' association shall be deemed registered
and vested with legal personality on the date of issuance of its certificate of
2
registration or certificate of creation of chartered local."

5.4f Recognition by B L R not a Ministerial Duty

The shift from date of submission of documents to date of issuance of certificate
of registration is in line with the court's ruling in 1997 that registering a union is
not a ministerial function.
Progressive Development Corp.-Pizza Hut vs. Laguesma, et al, G.R. No. 115077,
April 18, 1997 —
Facts: The union, Nagkakaisang Lakas ng Manggagawa (NLM)- Katipunan,
filed a petition for certification election with the Department of Labor in behalf of
the rank- and-file employees of the Progressive Development Corporation (Pizza
Hut).
Petitioner employer filed a Motion to Dismiss the petition, alleging fraud,
falsification and misrepresentation in the respondent Union's registration, making
it void and invalid. The motion specifically alleged that: a) respondent Union's
registration was tainted with false, forged, double or multiple signatures of those who
allegedly took part in the ratification of the respondent Union's constitution and

'See San Miguel Corp. Employees Union, et al. vs. San Miguel Packaging
Products Employees Union, etc., G.R. No. 171153, September 12, 2007.
2
Section 8, Rule IV.

190
 REGISTRATION AND CANCELLATION ARTS. 234-237

by-laws and in the election of its officers; x x x thus, there were serious falsities in the
dates of the issuance of the charter certification and the organization meeting of the
alleged chapter. Citing other instances of misrepresentation and fraud, petitioner
employer filed a Supplement to its Motion to Dismiss, claiming that: x x x voting was
not conducted by secret ballot in violation of Article 241, section (c) of the Labor
Code; and that the constitution and by-laws submitted in support of its petition were
not properly acknowledged and notarized.
Petitioner also filed a petition seeking the cancellation of the Union's
registration on the grounds of fraud and falsification. Petitioner also filed with the
Med-Arbiter a motion requesting suspension of proceedings in the certification
election case until after the prejudicial question of the Union's legal personality is
determined in the proceedings for cancellation of registration.
However, the Med-Arbiter directed the holding of a certification election among
petitioner's rank-and-file employees. An appeal to the office of the Secretary of Labor
was denied, as well as a motion for reconsideration. In the DOLE Resolution dated
December 29, 1993, the suggestion is made that once a labor organization has filed
the necessary documents and papers and the same have been certified under oath
and attested to, said organization necessarily becomes clothed with the character of
a legitimate labor organization. In other words, recognition by the Bureau of Labor
Relations becomes merely a ministerial function.
Ruling: We do not agree.
In the first place, the public respondent's views as expressed in his Resolution
miss the entire point behind the nature and purpose of proceedings leading to the
recognition of unions as legitimate labor organizations under Article 234 of the Labor
Code.
A more than cursory reading of the aforecited provisions clearly indicates that
the requirements embodied therein are intended as preventive measures against the
commission of fraud. After a labor organization had filed the necessary papers and
documents for registration, it becomes mandatory for the Bureau of Labor Relations
to check if the requirements under Article 234 have been sedulously complied with.
If its application for registration is vitiated by falsification and serious irregularities,
especially those appearing on the face of the application and the supporting
documents, a labor organization should be denied recognition as a legitimate labor
organization. And if a certificate of recognition has been issued, the propriety of the
labor organization's registration could be assailed directly through cancellation of
registration proceedings in accordance with Articles 238 and 239 of the Labor Code,
or indirectly, by challenging its petition for the issuance of an order for certification
election. [Collateral Attack is no longer allowed; see below. — CAA]
Furthermore, the Labor Code itself grants the Bureau of Labor Relations a
period of thirty (30) days within which to review all applications for registration under
Article 235.
The thirty-day period in the aforecited provision ensures that any action taken
by the Bureau of Labor Relations is made in consonance with the mandate of the
Labor Code, which, it bears emphasis, specifically requires that the basis for the

191
 ARTS. 234-237 LABOR RELATIONS

issuance of a certificate of registration should be compliance with the requirements

for recognition under Article 234. x x x Obviously, recognition of a labor union or
labor organization is not merely a ministerial function.

Note: Subsequent to the Progressive Development ruling, R.A. No. 9481, Article
258-A, no longer allows an employer to oppose a petition for CE.
5.4g Requirements Relaxed
The creation of a local does not need subscription by a minimum number
of members. The 20 percent initial membership mentioned in Article 2 3 4 ( c ) is
required to register an independent union but not a local. This makes it easier
to create a chapter than an independent union, thus expediting the growth of
federations or national unions. Such effect accords with the objective, stated in
Article 211, to foster a strong and unified labor movement.
In 1992 the Supreme Court, applying the Implementing Rules at that time,
declared that submission of books of account was required for a local union to
be properly registered, otherwise the local could not be considered a legitimate
1
labor organization.
But the 1997 Implementing Rules (D.O. No. 9) deleted the book-of-
accounts requirement. Expectedly, the Supreme Court held in 1999 that since
the Department Order no longer required the presentation of books of account,
2
a union could be registered without having to submit such books.
T h e current Implementing Rules (D.O. No. 40, issued in 2003) does not
revive the books-of-account requirement in registration.

5.5 Union's Legitimacy not Subject to Collateral Attack

After stating that the union acquires legal personality on the date its
registration certificate is issued, Section 8, Rule IV of D.O. 40-03 further states:
"Such legal personality may be questioned only through an independent petition
for cancellation of union registration in accordance with Rule XIV of these Rules,
and not by way of collateral attack in [the] petition for certification election
proceedings under Rule VIII."
This issue is taken-up in the topic certification election under Articles
256-259.

6. COLLECTIVE BARGAINING UNIT (CBU)

One of the requirements to register an independent union is that the
applicant should have a membership of at least 20 percent of the employees "in
the bargaining unit where it seeks to operate."

'Progressive Development Corporation vs. The Honorable Secretary of Labor,

G.R. No. 96425, February 4,1992; Protection Technology, Inc. vs. Secretary etc., G.R.
No. 117211, March 1, 1995.
2
Pagpalain Haulers, Inc. vs. Trajano, G.R. No. 133215, July 15, 1999.
192
 REGISTRATION AND CANCELLATION ARTS. 234-237

"Bargaining unit" refers to a group of employees sharing mutual interests

within a given employer unit, comprised of all or less than all of the entire body
of employees in the employer unit or any specific occupational or geographical
1
grouping within such employer unit.
T h e "bargaining unit" is always a group of employees. It may be all the
supervisors or all the rank-and-file in the company, but the law does not allow
supervisors and rank-and-file to belong to the same bargaining unit. Or the
unit may be an identifiable smaller group of supervisors or smaller group of
rank-and-file workers. In a manufacturing firm, for instance, the unit may be
all the rank-and-file factory personnel or all the rank-and-file sales force. In a
school, one CBU may include only the teachers, and another CBU only the non-
teaching staff. In every case the composition of the unit must be "appropriate,"
meaning the members share common concerns or common interests. This will
be explained further under Article 255.
T h e unit may be as numerous as thousands of employees or as few as less
than a hundred. T h e law fixes no minimum or maximum number. Whatever the
number, twenty percent thereof should be members of the independent union
applying for registration.
Obviously, therefore, the CBU is different from and bigger than a union.
Union members come from the CBU and there can be several rival unions
within a CBU. While officers lead and represent a union, a union represents a
CBU. T h e representative is the union; the group represented is the CBU. The
representative union, once determined, will represent even the members of other
unions as long as they are part of the CBU. This is why the representative union
(also called bargaining agent or majority union) is called "exclusive bargaining
representative" ( E B R ) .
T h e union selection process is taken up under Article 255.
7. CONSTITUTION, BY-LAWS, AND REGULATIONS
Another registration requirement is the submission of the constitution
and by-laws (CBL) of the applicant union.
Like other voluntary associations, labor unions have the right to adopt
constitutions, rules, and by-laws within the scope of the lawful purposes of the
union and bind their members thereby, provided they are reasonable, uniform,
and not discriminatory, and provided they are not contrary to public policy or
2
the law of the land.
The articles of agreement of a labor union, whether called a constitution,
charter, by-laws, or any other name, constitutes a contract between the members
which the courts will enforce, if not immoral or contrary to public policy or the

'Implementing Rules, Book V, Rule I, Section 1.

2
63 C.J., Sec. 10a, pp. 661-662.

193
 ARTS. 234-237 LABOR RELATIONS

law of the land. A rule of a labor union which violates the statute is, of course,
1
illegal.
A union's constitution and by-laws govern the relationship between and
among its members. As in the interpretation of contracts, if the terms are clear
and leave no doubt as to the intention of the parties, the literal meaning of the
stipulation shall control.
Johnson And Johnson Labor Union-FFW, et al. vs. Director of Labor Relations, G.R.
No. 76427, February 21, 1989 —
Facts: The union's constitution and by-laws, reads: "A member who has been
suspended or terminated without reasonable cause shall be extended a financial aid
from the compulsory contributions in the amount of seventy-five centavos (P0.75)
from each member weekly."
Oscar, a member of the union, was dismissed by his employer because in
his job application form he did not state that he had a relative in the company, in
violation of company policies. When the union refused to provide him the financial
aid mentioned in the union constitution, Oscar filed a complaint against the union.
When the BLR ordered the grant of financial aid, die union contended that the order
was tantamount to compelling the union to disburse its funds without the authority
of the general membership and to collect from its members without the required
individual authorizations.
Ruling: The nature of the said contribution being compulsory, and the fact
that the purpose as stated is for financial aid, clearly indicate that individual payroll
authorizations of the union members are not necessary. The union's constitution
and by-laws govern the relationship between and among its members. The union
can be ordered to release its funds intended for the promotion of mutual assistance
in favor of private respondent.
The union constitution is a covenant between the union and its members and
among the members. There is nothing in the constitution which leaves the legal
interpretation of its terms unilaterally to the union or its officers or even the general
membership.
The fact that the union officers — impleaded since the inception of the
case— acted in a representative capacity on behalf of the entire union's membership
substantially meets the requirements of due process with respect to the said union.
Moreover, the complaint filed against the union involves the interpretation of its
constitution favoring an aggrieved member. The members are bound by the terms
of their own constitution. A suit to enforce a union constitution does not have to
be brought against each individual member, especially if several thousand members
form the membership.

J
31 Am. Jur., Sec. 43, p. 856.

194
 REGISTRATION AND CANCELLATION
ARTS. 234-237

SOME REASONS FOR JOINING A UNION

1. Need to improve conditions. When the work condition, or some

part of it, is unsatisfactory, and going through channels fails to bring
any results, employees cannot be blamed if they listen to the voice of an
outsider who promises to intercede in their behalf.
2. Discontent with wages. If wages are below the community average
(and workers know) and the problem is not recognized or its solution is
not communicated, employees may actually seek someone to champion
their cause. This is especially true where factory workers earn more than
office employees, which is so often the case.
3. Inadequate benefits. Fringe benefits are expected to be
comprehensive. They should be known and understood by workers.
When a situation arises in their personal or family lives for which the
benefits seemed inadequate, workers may feel that management has
shortchanged them.
4. No feeling of justice. To whom do they go with their grievances
when there is no formal grievance procedure established? They will look
for someone to listen to their gripes.
5. Insecurity. T h e fear of automation, procedural changes,
management reorganization and similar changes, if left unanswered,
will send employees scurrying for j o b security measures, such as the
protective umbrella of seniority.
6. Poor supervision. Employees want supervisors whom they can
look up to and respect. If management leadership is missing, don't be
surprised if employees go elsewhere for the guidance they need.
7. Lack of communication. Companies talk about an "open door"
policy. But who walks in? In a union representation, there is always a
steward handy and eager to listen to employees. What's more, he can
get a quick answer from management to the employee's question or
problem.
More likely than not, employees join a union or do not join a union
because of little things. The big problem situations are either well-known
or soon become evident, and management generally responds with
dramatic and prompt action. It's the little things, ordinarily unrecognized
and therefore left unattended, which cause the problem. It doesn't
take any talent to spot the obvious, but it does call for real managerial
acumen to locate the potential trouble spots that are not apparent on
the surface.

Dartnell Personnel Administration Handbook

195
 ARTS. 234-237 LABOR RELATIONS

7.1 Limitation to By-laws

A statute providing that labor unions may devise and adopt ways and
means to make their rules, regulations, by-laws, and resolutions effective does
not sanction rules, regulations, by-laws or resolutions to commit wrong, nor does
1
it authorize interference with the constitutional rights of others.
Under Article 234(e) it is implied that the members are the ones to adopt
or ratify the union's constitution and by laws. It being a governing law of the
union, the CBL should be democratically ratified.
7.2 Amendments
A union's constitution and by-laws may be amended, modified and
extended by the duly constituted union authorities under the laws of the state.
In the absence of other requirements, and subject to vested rights, a union
constitution may be made, changed, unmade, or superseded by a majority vote
2
of the members or its constituent body.
Under Article 241 (d), major policy questions are to be deliberated upon
and decided by secret ballot by the members.
8. PROVISIONS COMMON TO THE REGISTRATION OF LABOR
ORGANIZATIONS AND WORKERS' ASSOCIATION
8.1 Attestation, Fee, Copies of Documents
The application for registration of labor unions and workers' associations,
notice for change of name, merger, consolidation and affiliation including all
the accompanying documents, shall be certified under oath by its Secretary or
Treasurer, as the case may be, and attested to by its President.
A labor union and worker's association shall be issued a certificate of
registration upon payment of the prescribed registration fee.
One (1) original copy and two (2) duplicate copies of all documents
accompanying the application or notice shall be submitted to the Regional Office
or the Bureau.

8.2 Action on the Application/Notices

T h e Regional Office or the Bureau, as the case may be, shall act on all
applications for registration or notice of change of name, affiliation, merger
and consolidation within ten (10) days from receipt either by: (a) approving
the application and issuing the certificate of registration/acknowledging the
notice/report; or (b) denying the application/notice for failure of the applicant
3
to comply with the requirements for registration/notice.

^ A m . J u r . 2d, Sec. 73.

2
48Am.Jur. 2d, Sec. 74.
3
Sec. 4, Rule IV, D.O. No. 40-03.

196
 REGISTRATION AND CANCELLATION ARTS. 234-237

8.3 Denial of Application/Return of Notice

Where the documents supporting the application for registration/notice
of change of name, affiliation, merger and consolidation are incomplete or do
not contain the required certification and attestation, the Regional Office or
the Bureau shall, within five (5) days from receipt of the application/notice,
notify the applicant/labor organization concerned in writing of the necessary
requirements and complete the same within thirty (30) days from receipt of
notice. Where the applicant/labor organization concerned fails to complete the
requirements within the time prescribed, the application for registration shall be
denied, or the notice of change of name, affiliation, merger and consolidation
returned, without prejudice to filing a new application or notice.
T h e order of the Regional Office or the Bureau denying the application
for registration/returning the notice of change of name, affiliation, merger or
consolidation shall be in writing, stating in clear terms the reasons for the denial
or return.

8.4 Appeal
T h e denial by the regional office may be appealed to the Bureau and then
to the Court of Appeals. But if the denial originated at the Bureau itself, the
appeal is to the Secretary of Labor. T h e appeal should be filed within ten (10)
days from receipt of such notice, on the ground of grave abuse of discretion or
violation of [the] Rules.
T h e memorandum of appeal shall be filed with the Regional Office or the
Bureau that issued the denial/return of notice. T h e memorandum of appeal
together with the complete records of the application registration/notice of
change of name, affiliation, merger or consolidation, shall be transmitted by the
Regional Office to the Bureau, or by the Bureau to the Office of the Secretary,
within twenty-four (24) hours from receipt of the memorandum of appeal.
T h e Bureau or the Office of the Secretary shall decide the appeal within
1
twenty (20) days from receipt of the records of the case.
9. AFFILIATION
An affiliate is an independently registered union that enters into an
agreement of affiliation with a federation or a national union. It also refers to
a chartered local which applies for and is granted an independent registration
but does not disaffiliate from its mother federation or national union.
A union, either an independent or a local, affiliates with a federation or
national union for a number of reasons. The most common ones are to secure
support or assistance particularly during the formative stage of unionization;
or to utilize expertise in preparing and pursuing bargaining proposals; or to

'Sections 6 and 7, Rule IV, D.O. No. 40-03.

197
 ARTS. 234-237 LABOR RELATIONS

marshal mind and manpower in the course of a group action such as a strike.
Whatever the reason, both the federation and the affiliate expect the affiliation
to be beneficial. The mother union shares in union dues collection as it extends
its helping hand, while the daughter draws support and guidance from the
mother's wealth of experience or legal advice.
A federation or national union ceases as such when it loses its locals.
According to Articles 237 and 238 a federation or national union, to be
registerable or to remain registered, should have as affiliates no less than ten
locals or chapters, each of which is a duly recognized bargaining agent in the
establishment where it operates.
The relationship between a local or chapter and the labor federation or
national union is generally understood to be that of agency, where the local is
1
the principal and the federation the agent.
Affiliation by a duly registered local union with a national union or
federation does not make the local union lose its legal personality. Despite
affiliation, the local union remains the basic unit free to serve the common
2
interest of all its members.

9.1 Report of Affiliation; Requirements

An independently registered union affiliating with a federation or national
union is required to report such affiliation. T h e report shall be filed with the
3
Regional Office that issued its certificate of registration.
The report of affiliation shall be accompanied by the following documents:
(a) resolution of the labor union's board of directors approving the
affiliation;
(b) minutes of the general membership meeting approving the
affiliation;
(c) the total number of members comprising the labor union and the
names of members who approved the affiliation;
(d) the certificate of affiliation issued by the federation in favor of the
independently registered labor union; and
(e) written notice to the employer concerned if the affiliating union is
the incumbent bargaining agent.

'Carmelo C. Noriel, "Union Schism and Disaffiliation: Problems and

Approaches" in Critical Areas in the Administration of Labor Justice [UP Labor
Center, 1980], p. 49.
2
Adamson & Adamson, Inc. vs. Court of Industrial Relations, 127 SCRA 268
[1984].
3
Sec. 16, Rule 111, D.O. No. 40-03.

198
 REGISTRATION AND CANCELLATION ARTS. 234-237

10. DISAFFILIATION
The right of a local union to disaffiliate from its mother union is well-
settled. It has been repeatedly held that a local union, being a separate and
voluntary association, is free to serve the interest of all its members including
the freedom to disaffiliate when circumstances warrant. This right is consistent
1
with the constitutional guarantee of freedom of association.
T h e sole essence of affiliation is to increase, by collective action, the
common bargaining power of local unions for the effective enhancement and
protection of their interests. Admittedly, there are times when without succor
and support local unions may find it hard, unaided by other support groups,
to secure justice for themselves. Yet the local unions remain the basic units of
association, free to serve their own interests subject to the restraints imposed by the
constitution and by-laws of the national federation, and free also to renounce the
affiliation upon the terms laid down in the agreement which brought such affiliation
2
into existence. In other words, to disaffiliate is a right, but to observe the terms
of affiliation is an obligation.
T h e Court noted, in the Skylanders case, that the local union was not ex-
pressly forbidden to disaffiliate from the federation nor were there any conditions
imposed for a valid breakaway. Significantly, the Court ruled that the pendency
of an election protest involving both the mother federation and the local union
did not constitute a bar to a valid disaffiliation. Neither was it disputed that 111
signatories out of the 120 members of the local union (or 9 2 . 5 % ) supported the
disaffiliation and had in fact disauthorized the federation from instituting any
complaint in their behalf. Thus, it was entirely reasonable for PSI [the employer]
to enter into a collective bargaining agreement with PSEA-NCW. As PSEA [the
local union] had validly disaffiated, it could validly affiliate with NCW [another
Federation] and enter into a collective bargaining agreement in behalf of its
members.
Neither is the disaffiliation from the federation, alleged as an act of dis-
loyalty, a sufficient ground for dismissal from employment. A local union which
has affiliated itself with a federation is free to sever such affiliation or declare
its autonomy from the federation to which it belongs when the circumstances
so warrant, in accordance with the constitutional guarantee of freedom of as-
sociation. It may sever its affiliation at any time and such disaffiliation cannot be
considered disloyalty in the absence of specific provisions in the federation's constitu-
tion prohibiting disaffiliation or the declaration of autonomy of a local union.
There is no provision in the federation's constitution, which prohibits disaffili-
ation or declaration of autonomy. There cannot be any valid dismissal because

!
Volkschel Labor Union vs. Bureau of Labor Relations, G.R. No. L-45824, June
19,1985.
2
Phil. Skylanders, et al vs. NLRC, et al, G.R. No. 127374, January 21, 2002.
199
 ARTS. 234-237 LABOR RELATIONS

Article II, Section 4 of the union security clause in the CBA limits the dismissal
to only three grounds, to wit: failure to maintain membership in the union (1)
for non-payment of union dues; (2) for resignation; and (3) for violation of the
1
union's Constitution and By-laws.
Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc., G.R. No. L-33987,
September 4, 1975 —
Facts: In their CBA the company recognized the local union, represented
by PAFLU, as the sole bargaining agent. While the CBA was still in force, 32 out
of 36 members of the union disaffiliated from PAFLU, the mother federation.
PAFLU, alleging the disaffiliation to be contrary to the union security clause,
requested the company to terminate the employment of the employees, which
the company did, and at the same time expelled them from membership in the
mother federation.
Ruling: The resolution of this case hinged on the status of the contract
between the local union and PAFLU, the mother federation. In the CBA, it appeared
that PAFLU had been recognized as the sole bargaining agent for all the employees
of the company except the supervisors and security guards. PAFLU, acting for and
in behalf of its affiliate, had the status of an agent while the local union remained
the basic unit of the association, free to secure the common interest of all its
members including the freedom to disaffiliate when the circumstances warrant.
This was clearly stated in its constitution and by-laws which provided that the local
union should remain an affiliate as long as 10 or more of the members evidence
their desire to continue the affiliation. As only 4 did not sign the resolution for
disaffiliation, the intent to disaffiliate was manifest. Hence, the dismissal from
employment was not justified.
As to the liability of the company, it was limited only to reinstatement of the
employees, the dismissal having been made at the instance of the national union.
The latter was liable for backwages x x x .
Tropical Hut Employees Union-CGW, et al. vs. Tropical Hut Food Market, Inc., et
al., G.R. Nos. L-43495-99, January 20, 1990 —
When the local union withdrew from the old federation to join a new federation,
it was merely exercising its primary right to self-organization for the effective
enhancement and protection of common interests. In the absence of enforceable provisions
in the federation s constitution preventing disaffiliation of a local union, a local may sever its
2
relationship with its parent.
There is nothing in the constitution of the NATU or in the constitution of
the THEU-NATU that the THEU was expressly forbidden to disaffiliate from the

*Malayang Samahan ng mga Manggagawa sa M. Greenfield (MSMG-UWP), et

al vs. Hon. Cresencio J. Ramos, et al, G.R. No. 113907, February 28, 2000.
2
See People's Industrial and Commercial Employees and Workers Organization
[FFW] vs. People's Industrial and Commercial Corporation, G.R. No. 37687, March,
15, 1982.

200
 REGISTRATION AND CANCELLATION ARTS. 234-237

federation. The alleged noncompliance of the local union with the provision in
the NATU constitution requiring the service of three months notice of intention to
withdraw did not produce die effect of nullifying the disaffiliation for the following
grounds: firstly, NATU was not even a legitimate labor organization, it appearing that
it was not registered at that time with the Department of Labor, and therefore did not
possess and acquire, in the first place, the legal personality to enforce its constitution
and laws, much less the right and privilege under the Labor Code to organize and
affiliate chapters or locals within its group, and secondly, the act of noncompliance
with the procedure on withdrawal is premised on purely technical grounds which
cannot rise above the fundamental right of self-organization.

10.1 Local Union Is the Principal; Federation, the Agent

T h e r e is no merit in the contention of the respondents that the act
of disaffiliation violated the union security clause of the CBA and that their
dismissal as a consequence thereof is valid. A perusal of the collective bargaining
agreements shows that the THEU-NATU, and not the NATU federation, was
recognized as the sole and exclusive collective bargaining agent for all its
workers and employees in all matters concerning wages, hours of work and
other terms and conditions of employment. Although NATU was designated as
the sole bargaining agent in the check-off authorization form attached to the
CBA, this simply means it was acting only for and in behalf of its affiliate. The
NATU possessed the status of an agent while the local union remained the basic
principal union which entered into contract with the respondent company. When
the T H E U disaffiliated from its mother federation, the former did not lose its
legal personality as the bargaining union under the CBA.
Disaffiliation of employees from their mother union and their formation
into a new union do not terminate their status as employees of the corporation,
as the employees and members of the local union did not form a new union but
merely exercised their right to register their local union. A local union when
1
circumstances so warranted is free to disaffiliate from its mother union.

10.2 When to Disaffiliate

While it is true that a local union is free to serve the interest of all its
members and enjoys the freedom to disaffiliate, such right to disaffiliate may be
exercised and is thus considered a protected labor activity only when warranted
by circumstances. Generally, a labor union may disaffiliate from the mother
union to form a local or independent union only during the 60-day freedom
2
period immediately preceding the expiration of the CBA.

•Elisco-Elirol Labor Union [NAFLU] vs. Noriel, G.R. No. L-41955, December
29, 1977.
2Tanduay Distillery Labor Union vs. National Labor Relations Commission, et
al, 149 SCRA 470 [1987].

201
 ARTS. 234-237 LABOR RELATIONS

The "freedom period" refers to the last 60 days of the fifth and last year of
1
a CBA.
But even before the onset of the freedom period (and despite the closed-
shop provision in the CBA between the mother union and management)
disaffiliation may still be carried out, but such disaffiliation must be effected by
2
a majority of the members in the bargaining unit.
This ruling, this writer believes, is true only if the contract of affiliation
does not specify the period for possible disaffiliation. If it does, the stipulation
must be observed.
10.3 Disaffiliation must be by Majority Decision
Article 241(d) applies to disaffiliation, thus, it has to be decided by the
entire membership through secret balloting.
Where it was shown that only eleven members out of around 2,000 members
3
decided to disaffiliate, it was ruled that the disaffiliation was not justified.
A member or any number of members may disaffiliate from their union
during the "freedom period." But disaffiliating the union itself from its mother
union must be supported by the majority of the members. If done by a minority,
even during the freedom period, the act may constitute disloyalty. T h e minority
members breaking away at the wrong time may be expelled from the union and,
because of union security clause, may be removed from their employment.
Villar, et al. vs. Inciong, etc., G.R. Nos. L50283-84, April 20, 1983 —
Petitioners [the disaffiliating union members] insist that their disaffiliation from
PAFLU and filing a petition for certification election are not acts of disloyalty but an
exercise of their right to self-organization. They contend that these acts were done
within the 60-day freedom period when questions of representation may freely be
raised. Under the peculiar facts of the case, We find petitioners' insistence untenable.
In the first place, had petitioners merely disaffiliated from the Amigo Employees
Union-PAFLU, there could be no legal objections thereto for it was their right to do so.
But what petitioners did by the very clear terms of their "Sama-Samang Kapasiyahan"
was to disaffiliate the Amigo Employees Union-PAFLU from PAFLU, an act which they
could not have done with any effective consequence because they constituted the
minority in the Amigo Employees Union-PAFLU.
Extant from the records is the fact that petitioners numbering ten (10), were
among the ninety-six (96) who signed the "Sama-Samang Kapasiyahan" whereas
1
Article 256.
2
Associated Workers Union-PTGWO vs. NLRC, Metro Post Service, Inc., et
al., G.R. Nos. 87266-69, July 30, 1990; Alliance of Nationalist and Genuine Labor
Organization [ANGLO-KMU] vs. Samahan ng mga Manggagawang Nagkakaisa sa
Manila Bay Spinning Mills at J.P. Coats, et al., G.R. No. 118562, July 5, 1996.
^Associated Workers Union-PTGWO vs. NLRC, G.R. Nos. 87266-69, July 30,
1990.

202
 REGISTRATION AND CANCELLATION ARTS. 234-237

there are two hundred thirty-four (234) union members in the Amigo Employees
Union-PAFLU. Hence, petitioners constituted a small minority for which reason they
could not have successfully disaffiliated the local union from PAFLU. Since only 96
wanted disaffiliation, it can be inferred that the majority wanted the union to remain
an affiliate of PAFLU and this is not denied or disputed by petitioners. The action of
the majority must, therefore, prevail over that of the minority members.
Neither is there merit to petitioners' contention that they had the right
to present representation issues within the 60-day freedom period. It is true, as
contended by petitioners, that under Article 257 [now 256] of the Labor Code and
Section 3, Rule 2, Book 2 [sic; now refers to Sec. 3, Rule XI, Book V as amended by D.O.
No. 9] of its Implementing Rules, questions of exclusive bargaining representation
are entertainable within the sixty (60) days prior to the expiry date of an existing
CBA, and that they did file a petition for certification election within that period.
But the petition was filed in the name of the Amigo Employees Union which had
not disaffiliated from PAFLU, the mother union. Petitioners being a mere minority
of the local union may not bind the majority members of the local union.
xxx
Correctly and legally, therefore, the PAFLU acted when, after proper
investigation and finding of guilt, it decided to remove the oppositors [petitioners
herein] from the list of members of the Amigo Employees Union-PAFLU, and
thereafter, recommended to the Amigo Manufacturing, Inc. the termination of the
employment of the oppositors.

10.4 Disaffiliation: Effect on Legal Status

When a union which is not independently registered disaffiliates from the
federation, it is not entitled to the rights and privileges granted to a legitimate
1
labor organization. It cannot file a petition for certification election.

10.5 Disaffiliation: Effect on Union Dues

T h e obligation of the employer to deduct and remit dues to the federation
is conditioned on the individual check-off authorization of the local union
members. T h e federation is entitled to receive the dues from the employer
only as long as the local union is affiliated with the federation. Without said
affiliation, the employer has no link to the mother union. The obligation of an
employee to pay union dues is coterminous with his affiliation or membership.
"The employees' check-off authorization, even if declared irrevocable, is good
2
only as long as they remain members of the union concerned."
A contract between an employer and the parent organization as bargaining
agent for the employees is terminated by the disaffiliation of the local of which

'Villar vs. Inciong, 121 SCRA 444, April 20, 1983.

2
Phil. Federation of Petroleum Workers vs. Court of Industrial Relations, 37
SCRA 711.

203
 ARTS. 234-237 LABOR RELATIONS

the employees are members. Respondent (employer) companies therefore were

wrong in continuing the check-off in favor of respondent federation since they
were duly notified of the disaffiliation and of members having already rescinded
1
their check-off authorization.
A local union which has validly withdrawn from its affiliation with the parent
association and which continues to represent the employees of an employer is
2
entitled to the check-off dues under a collective bargaining contract.
10.6 Disaffiliation; Effect on Existing CBA; the "Substitutionary" Doctrine
The CBA continues to bind the members of the new or disaffiliated and
3
independent union up to the CBA's expiration date.
The "substitutionary doctrine" provides that the employees cannot revoke
the validly executed collective bargaining contract with their employer by the
simple expedient of changing their bargaining agent. T h e new agent must respect
the contract. The employees, thru their new bargaining agent, cannot renege
on the collective bargaining contract, except to negotiate with management for
the shortening hereof.
This matter is taken up further in commentaries under Article 260.
11. REVOCATION OF CHARTER
A federation, national union or worker's association may revoke the charter
issued to a local/chapter or branch by serving on the latter a verified notice of
revocation, copy furnished the Bureau, on the ground of disloyalty or such other
grounds as may be specified in the constitution and by-laws of the federation,
national union or workers' association. T h e revocation shall divest the local/
chapter of its legal personality upon receipt of the notice by the Bureau, unless
in the meantime the local/chapter has acquired independent registration in
4
accordance with these Rules.

11.1 Effect of Cancellation of Registration of Federation or National

Union on Locals/Chapters
T h e cancellation of registration of a federation or national union
shall operate to divest its locals/chapters of their status as legitimate labor
organizations, unless the locals/chapters are covered by a duly registered
collective bargaining agreement. In the latter case, the locals/chapters shall be
allowed to register as independent unions, failing which they shall lose their
5
legitimate status upon the expiration of the collective bargaining agreement.

Volkschel Labor Union vs. BLR, et al, G.R. No. L45824, June 19, 1985.
Ibid.
'Associated Workers Union-PTGWO vs. NLRC, G.R. Nos. 87266-69, July 30,
1990.
implementing Rules: Book V, Rule VIII, Sec. 5.
implementing Rules: Book V, Rule VIII, Sec. 6.

204
 REGISTRATION AND CANCELLATION ARTS. 234-237

12. MERGER OR CONSOLIDATION

Together with multi-employer bargaining (see annotations under Article
250-251), union merger and consolidation is a new concept (in the Philippines)
introduced by D.O. No. 40-03.
"Merger" of labor organizations is the process where a labor organization
absorbs another, resulting in the cessation of the absorbed labor organization's
existence and the continued existence of the absorbing labor organization; that
is, if Union A absorbs Union B, Union A remains and union B disappears, or it
can be B absorbing A. Another name for merger is "absorption."
"Consolidation" of unions refers to the creation or formation of a new
union arising from the unification of two or more unions; that is, if union A and
union B consolidate themselves, both of them disappear and Union C is born.
Another name for consolidation is "amalgamation."
One effect of merger is to transfer to the absorbing organization all the
rights, interest and obligations of the absorbed organization. In consolidation the
newly created labor organization acquires all the rights interest and obligations
1
of the consolidating labor organizations.
Consolidation (amalgamation) usually occurs between two unions that
are approximately the same size, whereas merger (absorption) often involves a
2
larger union merging with a smaller union.
Why do unions merge? They merge for reasons similar to those behind
corporate mergers. First, a small union may merge with a larger union in order
to gain access to greater resources and expertise. By merging, a union may have
more personnel and money for organizing and may be able to offer its members
a wider range of services. Second, unions that have traditionally competed with
each other for members may merge in order to eliminate interorganizational
conflicts; resources that had been used to compete with a rival union could be
used for more constructive purposes once the rivals have merged. Third, unions
whose members' skills have been outmoded by technological and economic
changes may merge with a stronger union in order to maintain j o b security and
3
institutional survival.
Most union mergers benefit their respective memberships. However,
some mergers appear to be poorly conceived because they involve unions
whose jurisdictions, occupational and industry groupings served, and mode
of operations, are radically different. Union officials who desire to increase
their membership numbers, financial base, and personal power in the labor

Section 10, Rule IV, D.O. No. 40-03.

^Terry L. Leap, Collective Bargaining and Labor Relations, [Prentice-Hall: 1995], p.
203.
Ibid. pp. 203-204.
t

205
 ARTS. 234-237 LABOR RELATIONS

movement may be tempted to merge with unions with which they have little
1
in common.
Experience confirms that union merger/consolidation does not easily
happen. The first step, that is, identifying which of the unions will propose
the merger, is itself a delicate issue. Which union will be absorbed? Which
union is dominant? T h e answers are far-reaching as they will indicate the
likely consequences, such as which union will be retained, whose officers will
comprise the majority, or how the union dues will be divided. Political, no less
than the economic considerations, are central. Sensitive questions must further
be asked: who are the more effective negotiators? Who has the better CBA? If
such initial but weighty issues are resolved, a formalization of the agreement,
by way of "agreement in principle," will have to be prepared. But this requires
the officers* taking first the pulse of their respective members, for, indeed, it
is the members that will ultimately decide the merger/consolidation proposal.
They have to be convinced that the proposed move is necessary and that the
advantages outweigh the disadvantages. These settled, the formalities required
by DOLE will easily fall in place, such as the holding of a convention to ratify a
new or amended constitution and by-laws and the election of the new officers.
The politics of merger often realign the union posts.
But more hurdles remain. How will the employer react to the union
merger? What if the employer refuses to recognize the new (merged) union?
Can management oppose the redefinition of the bargaining unit? And what
happens if the merged unions have separate CBAs? Can the merger be done
anytime, or only during the freedom period? Freedom period of which CBA?
Indeed union merger/consolidation is a new device fraught with questions
which, understandably, have no precast answers.

12.1 Notice of Merger/Consolidation of Labor Organizations; Where to

File
Notice of merger or consolidation of independent labor unions, chartered
locals and workers' associations shall be filed with and recorded by the Regional
Office that issued the certificate of registration/certificate of creation of
chartered local of either the merging or consolidating labor organization. Notice
of merger or consolidation of federations or national unions shall be filed with
2
and recorded by the Bureau.

12.2 Requirements of Notice of Merger/Consolidation

T h e notice of merger/consolidation of labor organizations shall be
accompanied by the following documents:

•Terry L. Leap, Collective Bargaining and Labor Relations, [Prentice-Hall: 1995], p.

204.
2
Section 8, Rule HI, D.O. No. 40-03.

206
 REGISTRATION AND CANCELLATION ARTS. 238-238-A

(a) the minutes of merger/consolidation convention or general

membership meeting(s) of all the merging/consolidating labor
organizations, with the list of their respective members who
approved the same; and
(b) the amended constitution and by-laws and minutes of its ratifica-
tion, unless ratification transpired in the merger/consolidation
convention, which fact shall be indicated accordingly.

12.3 Certificate of Registration

T h e certificate of registration issued to merged labor organizations shall
bear the registration number of one of the merging labor organizations as agreed
upon by the parties.
The certificate of registration shall indicate the following: (a) the new name
of the merged/consolidated labor organization; (b) the fact that it is a merger/
consolidation of two or more labor organizations; (c) the name of the labor
organizations that were merged or consolidated; (d) its office or business address;
and (e) the date when each of the merging/consolidating labor organizations
acquired legitimate personality as stated in their respective original certificate
of registration.

13. CHANGE OF NAME

T h e notice for change of name of a registered labor organization shall
be filed with the Bureau or the Regional Office where the concerned labor
organization's certificate of registration or certificate of creation of a chartered
local was issued. T h e notice for change of name of a labor organization shall be
accompanied by the proof of approval or ratification of change of name; and
the amended constitution and by-laws.

13.1 Effect of Change of Name

T h e change of name of a labor organization shall not affect its legal per-
sonality. All the rights and obligations of a labor organization under its old name
shall continue to be exercised by the labor organization under its new name.

ART. 2 3 8 . CANCELLATION OF REGISTRATION

T h e certificate of registration of any legitimate labor organization,
whether national or local, shall be cancelled by the Bureau, after due hear-
ing, only on the grounds specified in Article 239 hereof. (As amended by RA.
No. 9481.)
ART. 238-A. EFFECT OF PETITION FOR CANCELLATION OF
REGISTRATION
A petition for cancellation of union registration shall not suspend
the proceedings on certification election nor shall it prevent the filing of a
petition for certification election.
207
 ART. 239 LABOR RELATIONS

In case of cancellation, nothing herein shall restrict the right of the

union to seek just and equitable remedies in the appropriate courts. (This
new article is an amendment inserted by RA. No. 9481, effective June 14, 2007.)
1
ART. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION
The following may constitute grounds for cancellation of union regis-
tration:
(a) Misrepresentation, false statement or fraud in connection with
the adoption or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification, and the list of members who took part
in the ratification;
(b) Misrepresentation, false statements or fraud in connection with
the election of officers, minutes of the election of officers, and the list of
voters;

•Before the amendments by RA. No. 9481, Article 239 read as follows:
ART. 239. Grounds for cancellation of union registration —
The following shall constitute grounds for cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with the
adoption or ratification of the constitution and by-laws or amendments thereto, the
minutes of ratification, and the list of members who took part in the ratification;
(b) Failure to submit the documents mentioned in the preceding paragraph
within thirty (30) days from adoption or ratification of the constitution and by-laws
or amendments thereto;
(c) Misrepresentation, false statements or fraud in connection with the
election of officers, minutes of the election of officers, the list of voters, or failure
to submit these documents together with the list of the newly-elected/appointed
officers and their postal addresses within thirty (30) days from election;
(d) Failure to submit the annual financial report to the Bureau within thirty
(30) days after the closing of every fiscal year and misrepresentation, false entries or
fraud in the preparation of the financial report itself;
(e) Acting as a labor contractor or engaging in the "cabo" system, or otherwise
engaging in any activity prohibited by law;
(f) Entering into collective bargaining agreements which provide terms and
conditions of employment below minimum standards established by law;
(g) Asking for or accepting attorney's fees or negotiation fees from
employers;
(h) Other than for mandatory activities under this Code, checking off special
assessments or any other fees without duly signed individual written authorizations
of the members;
(i) Failure to submit list of individual members to die Bureau once a year
or whenever required by the Bureau; and
(j) Failure to comply with requirements under Articles 237 and 238.

208
 REGISTRATION AND CANCELLATION ART. 239-A

(c) Voluntary dissolution by the members. (As amended by R.A. No.

9481, effective June 14, 2007.)

ART. 239-A. VOLUNTARY CANCELLATION OF REGISTRATION

T h e registration of a legitimate labor organization may be cancelled
by the organization itself, Provided, That at least two-thirds of its general
membership votes in a meeting duly called for that purpose to dissolve the
organization; Provided, further, That an application to cancel registration is
thereafter submitted by the board of the organization, attested to by the
president thereof. (As inserted by R.A. No. 9481, effective June 14, 2007.)
C O M M E N T S AND CASES
1. CANCELLATION OF REGISTRATION; GROUNDS
While registration is the act that converts a labor organization to a le-
gitimate labor organization, cancellation is the government's act that divests
the organization of that status. It thereby reverts to its character prior to the
registration. Although it does not cease to exist or b e c o m e an unlawful orga-
nization, its juridical personality as well as its statutory rights and privileges is
suspended. It therefore loses entitlement to the rights enumerated in Article
242 of the Labor Code. It cannot demand recognition by or bargaining with
the employer, cannot file a petition for certification election, and cannot
strike.
Through R.A. No. 9 4 8 1 , the ten grounds mentioned in the unamended
Article 239 have been reduced to three, and one of them is new. Two pertain
to misrepresentation about the union constitution or by-laws or about election
of officers. T h e third mode is by the desire of the union members themselves.
Regarding this third ground, four requisites must be met. First, the members'
desire to dissolve or cancel the registration of their union should have been voted
upon through secret balloting, applying the rule in Article 241 (d). Second, the
balloting should take place in a meeting duly called for the purpose of deciding
whether or not to dissolve the union. Third, the vote to dissolve should represent
two-thirds affirmative vote of the general membership, not just of the quorum.
Neither the law nor the rules require justification of the members' decision.
And fourth, the members' resolution should be followed by an application
for cancellation passed and submitted by the union's governing board, which
application must be attested to by the president.
The fourth requisite itself raises some questions. Can the decision of the
general membership be defeated by lack of action by the board? Is there no time
limit for the board to submit the application to cancel the registration?

1.1. Invalid Grounds

Having held an illegal strike is not reason to cancel a union's registration.
Holding an illegal strike has adverse consequences to the strikers particularly

209
 LABOR RELATIONS
ARTS. 238-239-A

the officers, but cancellation of their union registration is not one of those
1
consequences.
Along the same line, nonrenewal of registration/permit will not cause
dismissal of the case filed by the union, provided that when it filed the petition
it had juridical personality and the court had acquired jurisdiction over the case.
The case could be continued without need of substitution of parties, but the
decision to be rendered would bind only those union members who had not
2
withdrawn from the case before its trial and decision on the merits."

1.2. "Cabo" and other Grounds Deleted

Engaging in the "cabo" system was a cause for cancellation of a union's
registration under Article 239 prior to its deletion by R.A. No. 9481. "Cabo" refers
to a person or group of persons or to a labor group which, in the guise of a labor
organization, supplies workers to an employer, with or without any monetary or
other consideration whether in the capacity of an agent of the employer or as
3
an ostensible independent contractor.
Engaging in cabo as a cause of cancellation of union registration was also
included in Rule XIV of D.O. No. 40-03, the rules implementing Book V of the
Code. But because of R.A. No. 9481, many provisions of D.O. No. 40-03 had
to be amended or deleted, and one of them is Rule XIV, Section 3 which lists
"engaging in cabo" as a cause of union cancellation.
Also deleted is "sweetheart contract" or a CBA which provides for terms
and conditions of employment below minimum standards established by law.
Also jettisoned by Article 239 as amended is "asking for or accepting
attorney's fees or negotiation fees from the employer." But, this cause of union
cancellation still exists because the Labor Code itself in Article 249 prohibits it
as a ULP act. R.A. No. 9481 has spared Article 249.
What about violation of Article 241, the rights of members? This Article
(last paragraph) used to provide one of the causes of cancellation of union
registration, if 30 percent of the members support the petition.
Failure to submit annual documentary reports is taken-up under Article
242-A.
9
1.3 Administrative Cancellation; the "reportorial requirements '
Every legitimate labor union and worker association has the duty to
submit to the Regional Office or the Bureau, two copies of each of the following
documents:

1 Itogon-Suyoc Mines, Inc. vs. Sangilo-Itogon Workers' Union, 24 SCRA 873

[1968].
Philippine Land Air-Sea Labor Union [PLASLU], Inc. vs. Court of Industrial
Relations, 93 Phil. 47 [1953].
implementing Rules, Book V, Rule I, Section 1.

210
 REGISTRATION AND CANCELLATION ARTS. 238-239-A

(a) any amendment to its constitution and by-laws and the minutes of
adoption or ratification of such amendments, within thirty (30) days
from its adoption or ratification;
(b) annual financial reports within thirty (30) days after the close of
each fiscal year or calendar year;
(c) updated list of newly-elected officers, together with the appointive
officers or agents who are entrusted with the handling of funds,
within thirty (30) days after each regular or special election of
officers or from the occurrence of any change in the officers or
agents of the labor organization or workers association;
(d) updated list of individual members of chartered locals, independent
unions and workers' associations within thirty (30) days after the
close of each fiscal year; and
(e) updated list of its chartered locals and affiliates or member
organization, collective bargaining agreements executed and their
effectivity period, in the case of federations or national unions,
within thirty (30) days after the close of each fiscal year, as well
as the updated list of their authorized representatives, agents or
signatories in the different regions of the country.
T h e fiscal year of a labor organization shall coincide with the calendar
1
year, unless a different period is prescribed in the constitution and by-laws.
Failure of the labor organization to submit the reports mentioned above
for five (5) consecutive years authorizes the Bureau to institute cancellation
2
proceedings upon its own initiative or upon complaint by any party-in-interest.
2. WHO FILES PETITION FOR CANCELLATION
D.O. No. 40-03 (Rule XIV, Section 2) states: "Any party-in-interest may
commence a petition for cancellation of a union's registration, except in actions
involving violations of Article 241, which can only be commenced by members
of the labor organization concerned." (Note: T h e exception portion of this
statement has no more basis because violation of Article 241 is not one of the
only three grounds specified in Articles 238 and 239 of R.A. No. 9481. In fact,
this ground has been deleted from D.O. No. 40-03 itself by D.O. No. 40-F-03.)
The employer is a "party-in-interest," and jurisprudence reveals cases of
cancellation of union registration based on petitions filed by the employer.
An example is Progressive Development Corporation vs. Secretary of Labor (G.R. No.
96425, February 4 , 1 9 9 2 ) where the employer sought and won the cancellation
of the union's registration on the ground that it failed to submit the required
documents, such as books of accounts and the union by-laws, when it applied
!
Rule 5, D.O. No. 40-03.
2
Rule XIV, D.O. No. 40-03.

211
 LABOR RELATIONS
ART. 240

for registration. Another example is the case of Toyota Motor Philippine Corp. vs.
Toyota Motor Philippine Labor Union, G.R. No. 121084, February 19,1997 where the
employer questioned the inclusion of some supervisors in the rank-and-file union.
The petition filed by the employer led to the divestment of legal personality of
the union because its mixed membership makes it not a labor organization at
all. (Note: See Article 245-A.)
The petition to cancel shall be under oath and shall state clearly and
concisely the facts and grounds relied upon, accompanied by proof of service
to the respondent. But such petition, as already explained, should be a separate
action; it cannot be entertained in the petition for certification election filed by
the union.
3. WHERE TO FILE PETITION
Subject to the requirements of notice and due process, the registration of
any legitimate independent labor union, chartered local and workers' association
may be cancelled by the Regional Director, or in the case of federations, national
or industry unions and trade union centers, by the Bureau Director, upon the
1
filing of an independent complaint or petition for cancellation.
Cancellation orders issued by the Regional Director are appealable to the
BLR. The latter's decision is final and executory, hence, not appealable to the
DOLE Secretary but it may be elevated to the Court of Appeals by certiorari. B L R
decisions on cancellation cases that originated at the B L R itself may be appealed
2
to the Secretary and, again, by certiorari to the CA.
4. PROCEDURE
The rules of procedure in cancellation cases are those applicable to inter/
intra-union disputes in general which are already discussed under Article 226.
Additionally, however, certain procedural requirements apply particularly to
"delisting" due to failure to comply with "reportorial requirements." These
additional requirements, related to new Article 242-A, such as publication of
notices in newspapers, are detailed in Rule XV of D.O. No. 40-03 as amended
by D.O. No. 40-F-03.

ART. 2 4 0 . EQUITY OF THE INCUMBENT

All existing federations and national unions which meet the qualifications
of a legitimate labor organization and none of the grounds for cancellation
shall continue to maintain their existing affiliates regardless of the nature
of the industry and the location of the affiliates.

^ e c . 1, Rule XIV, D.O. No. 40-03.

2
Abbott Laboratories Phil. vs. Abbott Laboratories Employees Union, etc., G.R.
No. 131374, January 26, 2000; also: Section 16, Rule XI, D.O. No. 40-03; Section 15
as renumbered by D.O. No.40-F-03.

212
 Chapter II
RIGHTS AND CONDITIONS OF MEMBERSHIP

Overview/Key Questions Box 9

1. What are the rights of union members?
2. When, how, and by whom are union officers elected?
How may they be impeached or removed?
3. May a union m e m b e r seek the cancellation of his
union's registration?
4. What is check-off? When may it properly be done?
bill of rights of union members
ART. 2 4 1 . RIGHTS AND CONDITIONS OF MEMBERSHIP IN A LABOR
ORGANIZATION
T h e following are the rights and conditions of membership in a labor
organization:
( a ) No arbitrary or excessive initiation fees shall be required of the
members of a legitimate labor organization nor shall arbitrary, excessive or
oppressive fine and forfeiture be imposed;
(b) T h e members shall be entitled to full and detailed reports from
their officers and representatives of all financial transactions as provided
for in the constitution and by-laws of the organization;
( c ) T h e m e m b e r s shall directly elect their officers, including those
of the national union or federation, trade center or any similar aggrupa-
tion to which their union is affiliated, by secret ballot at intervals of five
( 5 ) years. No qualification requirements for candidacy to any position
shall be imposed other than membership in good standing in subject labor
organization. T h e secretary or any other responsible union officer shall
furnish the Secretary of L a b o r and Employment with a list of the newly-
elected officers, together with the appointive officers or agents who are
entrusted with the handling of funds within thirty ( 3 0 ) calendar days after
the election of officers or from the o c c u r r e n c e of any change in the list of
1
officers of the labor organization;
(d) T h e m e m b e r s shall d e t e r m i n e by s e c r e t ballot, after due
deliberation, any question of major policy affecting the entire membership
of the organization, unless the nature of the organization or force majeure

•As amended by Sec. 16, R.A. 6715.

213
 LABOR RELATIONS
ART. 241

renders such secret ballot impractical, in which case the board of directors of
the organization may make the decision in behalf of the general membership;
(e) No labor organization shall knowingly admit as m e m b e r or
continue in membership any individual who belongs to a subversive
organization or who is engaged directly or indirectly in any subversive activity;
(f) No person who has been convicted of a crime involving moral
turpitude shall be eligible for election as union officer or for appointment
to any position in the union;
(g) No officer, agent or member of a labor organization shall collect
any fees, dues, or other contributions in its behalf or make any disbursements
of its money or funds unless he is duly authorized pursuant to its constitution
and by-laws;
(h) Every payment of fees, dues or other contributions by a member
shall be evidenced by a receipt signed by the officer or agent making the
collection and entered into the record of the organization to be kept and
maintained for the purpose;
(i) The funds of the organization shall not be applied for any purpose
or object other than those expressly provided by its constitution and by-laws
or those expressly authorized by written resolution adopted by the majority
of the members at a general meeting duly called for the purpose;
(j) Every income or revenue of the organization shall be evidenced
by a record showing its source, and every expenditure of its funds shall
be evidenced by a receipt from the person to whom the payment is made,
which shall state the date, place and purpose of such payment. Such record
1
or receipt shall form part of the financial records of the organization;
Any action involving the funds of the organization shall prescribe after
three (3) years from the date of submission of the annual financial report to
the Department of Labor and Employment or from the date the same should
have been submitted as required by law, whichever comes earlier; Provided,
That this provision shall apply only to a legitimate labor organization which
has submitted the financial report requirements under this Code; Provided,
further, That failure of any labor organization to comply with the periodic
financial reports required by law and such rules and regulations promulgated
thereunder six (6) months after the effectivity of this Act shall automatically
2
result in the cancellation of union registration of such labor organization;
(k) T h e officers of any labor organization shall not be paid any
compensation other than the salaries and expenses due to their positions
as specifically provided for in its constitution and by-laws, or in a written

'As amended by Sec. 16, R.A. 6715.

2
Ibid

214
 RIGHTS AND CONDITIONS OF MEMBERSHIP
ART. 241

resolution duly authorized by a majority of all the members at a general

membership meeting duly called for the purpose. T h e minutes of the
meeting and the list of participants and ballots casts shall be subject to
inspection by the Secretary of L a b o r or his duly authorized representatives.
Any irregularities in the approval of the resolutions shall be a ground for
impeachment or expulsion from the organization;
(1) T h e treasurer of any labor organization and every officer thereof
who is responsible for the account of such organization for the collection,
management, disbursement, custody or control of the funds, moneys and
other properties of the organization, shall render to the organization and to
its members a true and c o r r e c t account of all moneys received and paid by
him since the last day on which he rendered such account, and of all bonds,
securities and other properties of the organization entrusted to bis custody
or under his control. T h e rendering of such account shall be made:
( 1 ) At least once a year within thirty ( 3 0 ) days after the close of
its fiscal year;
( 2 ) At such other times as may be required by a resolution of
the majority of the members of the organization; and
( 3 ) U p o n vacating his office.
T h e account shall be duly audited and verified by affidavit and a copy
thereof shall be furnished the Secretary of Labor.
(m) T h e books of accounts and other records of the financial activities
of any labor organization shall be open to inspection by any officer or member
thereof during office hours;
(n) No special assessment or other extraordinary fees may be levied
upon the members of a labor organization unless authorized by a written
resolution of a majority of all the members at a general membership meeting
duly called for the purpose. T h e secretary of the organization shall record
the minutes of the meeting including the list of all members present, the
votes cast, the purpose of the special assessment or fees and the recipient
of such assessment or fees. T h e record shall be attested to by the president;
(o) Other than for mandatory activities under the Code, no special
assessments, attorney's fees, negotiation fees or any other extraordinary
fees may be checked off from any amount due to an employee without
an individual written authorization duly signed by the employee. T h e
authorization should specifically state the amount, purpose and beneficiary
of the deduction; and
(p) It shall be the duty of any labor organization and its officers
to inform its members on the provisions of its constitution and by-laws,
collective bargaining agreement, the prevailing labor relations system and
all their rights and obligations under existing labor laws.
215
 ART. 241 LABOR RELATIONS

For this purpose, registered labor organizations may assess reasonable

dues to finance labor relations seminars and other labor education activities.
Any violation of the above rights and conditions of membership shall
be a ground for cancellation of union registration or expulsion of officer
from office, whichever is appropriate. At least thirty percent (30%) of all
the members of union or any member or members specially concerned may
report such violation to the Bureau. The Bureau shall have the power to hear
and decide any reported violation to mete the appropriate penalty.
COMMENTS AND CASES
1. DEMOCRATIZATION OF UNIONS
A fundamental paradox in democratically governed market economies is
the presence of democracy in the political sphere but its absence in the economic
setting. The people as voters elect the government leaders and, particularly
through their legislative representatives, indirectly control the making of laws.
But in the world of work it is totally different. T h e governing philosophy is
ownership of private property, not popular sovereignty, and the traditional norm
is superior-subordinate relationship, not egalitarianism. T h e workers, generally,
do not and cannot select their superiors, and neither do they decide policy
questions or control the making of rules.
This paradox, this inherent contradiction between political and economic
relations, germinates the seed of unionism. Workers, awakened to their political
power, aspire also for power in their workplace. Realizing that there is strength in
unity, they unionize to match somehow the power of their corporate superiors.
But, as unionism's aim is to install industrial democracy, the unions
themselves must be democratic. This is a rationale behind Article 241.
To democratize the unions, Article 241 requires that the union officers be
elected directly by the members through secret ballot and that the major policy
decisions, as a rule, be made by the union members, again, by secret ballot. As in
a republic where sovereignty resides in the people, the members of the union are
the keepers and dispensers of authority. T h e governing power is the members,
not the officers.

2. NATURE OF RELATIONSHIP BETWEEN UNION AND ITS MEMBERS

The union has been evolved as an organization of collective strength for the
protection of labor against the unjust exactions of capital, but equally important
is the requirement of fair dealing between the union and its members, which is
fiduciary in nature, and arises out of two factors: one is the degree of dependence
of the individual employee on the union organization; and the other, a corollary
of the first, is the comprehensive power vested in the union with respect to the
individual. T h e union may be considered but the agent of its members for the
purpose of securing for them fair and just wages and good working conditions.

216
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART. 241

As agent, the union is subject to the obligation of giving the members as its
1
principals all information relevant to union and labor matters entrusted to it.

2.1 Duty of Court to Protect Laborers from Unjust Exploitation by

Oppressive Employers and Union Leaders
Just as this Court has stricken down unjust exploitation of laborers by
oppressive employers, so will it strike down their unfair treatment by their own
unworthy leaders. Fair dealing is equally demanded of unions as well as of
employers in their dealings with employees. Where the union leadership as in
the case at bar was recreant in its duty towards the union members, the courts
2
must be vigilant to protect the individual interests of the union members.
T h e union officers cannot refuse to grant a benefit or assistance to which a
union member is entitled under the union constitution and by-laws. In this case
the union by-laws clearly shows that any member who is suspended or terminated
from employment without reasonable cause is entitled to financial assistance from
the union and its members. When the union officers refuse to grant such financial
assistance, it is not abuse of discretion for a labor arbiter, upon complaint of the
aggrieved member, to order such grant. T h e union constitution is a covenant
3
between the union and its members and among the members.

3. RIGHTS OF UNION MEMBERS

T h e rights and conditions of membership laid down in Article 241 may be
summarized as follows:
(1) Political right — the member's right to vote and be voted for, subject
to lawful provisions on qualifications and disqualifications.
(2) Deliberative and decision-making right — the member's right to
participate in deliberations on major policy questions and decide them by secret
ballot.
(3) Rights over money matters — the member's right against excessive fees;
the right against unauthorized collection of contributions or unauthorized
disbursements; the right to require adequate records of income and expenses and
the right of access to financial records; the right to vote on officers' compensation;
the right to vote on proposed special assessments and be deducted a special
assessment only with the member's written authorization.
(4) Right to information — the member's right to be informed about the
organization's constitution and by-laws and the collective bargaining agreement
and about labor laws.

•See Heirs of Teodolo M. Cruz vs. Court of Industrial Relations, 30 SCRA 917.
2
Ibid.
s
Johnson and Johnson Labor Union-FFW vs. Director of Labor Relations, G.R.
No. 76427, February 21, 1989.
217
 ART. 241 LABOR RELATIONS

Although not so denominated, Article 241 of the Labor Code carries the
character of a bill of rights of union members. At the same time, the union
members, as employees, retain the right to directly present grievances to the
employer at any time. This right is protected in Article 255, last sentence.
3.1 Eligibility for Membership
When, how, and under what conditions does an employee become a union
member? The answer depends on the union's constitution and by-laws inasmuch
as Article 249 gives a labor organization the right to prescribe its own rules for
acquisition or retention of membership. Nonetheless, under Article 277 an
employee is already qualified for union membership starting on his first day of
service.
An employee's membership in a union, however, does not necessarily
mean coverage by the collective bargaining agreement (CBA), if one exists. T h e
CBA defines its coverage as agreed by the parties. It may state that it covers only
regular employees, thus excluding probationary employees, and even among
regular employees, it may exclude certain positions or jobholders. Qualifying
for union membership therefore does not necessarily mean inclusion in the
coverage of the CBA. T h e reverse is equally true: membership in the CBU does
not automatically mean membership in the union. Members of certain religious
sects, for instance, do not join unions although they are members of a bargaining
unit. CBU members vote to select a bargaining union or to ratify a CBA. But only
union members can vote to elect union officers, to strike or not to strike, or to
decide major policy issues in the union.
To sum up: Inclusion in the CBU depends on the determination of its
appropriateness under Article 234 and Article 255. Inclusion or membership
in a union depends on the union's constitution and by laws, without prejudice
to Article 2 7 7 ( c ) . Inclusion or coverage in the CBA depends on the stipulations
in the CBA itself.

4. ELECTION OF UNION OFFICERS

The officers of the union are elected directly by the members in secret
ballot voting. The election takes place at intervals of five years which is the term
of office of the union officers including those of a national union, federation,
or trade union center.
What positions to fill up, where, and how the election should be done
are matters left by law to the union's constitution and by-laws or to agreement
among the members. Only in the absence thereof will the Implementing Rules
1
of Book V apply. T h e Implementing Rules require the incumbent president to
create an election committee within 60 days before expiration of the incumbent
officers' term. The Rules specify the composition as well as the powers and duties

•Rule XII, Section 1.

218
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART. 241

of the election committee, but its rules and actions cannot contradict the Labor
Code mandates. For instance, the Code wants untrammelled right of members
to become candidates, hence it states that no qualification requirements for
candidacy to any position shall be imposed other than membership in good
standing in the union. What is good standing should be defined beforehand in
the union constitution or by-laws.
If the officers with expired term do not call an election, the remedy,
according to Rule X I I , is for at least 3 0 % of the members to file a petition with
the DOLE Regional Office.
T h e members' frustration over the performance of the union officers,
as well as their fear of a "fraudulent" election to be held under the latter's
supervision, does not justify disregard of the union's constitution and by laws.
UST Faculty Union, et al. vs. Bitonio,Jr., et al, G.R. No. 131235, November 16,
1999 —
Facts: The petitioners, who are mostly disgruntled union members, claim that
the numerous anomalies allegedly committed by the union officers impelled diem
to elect a new set of USTFU officers before the end of die term of the incumbents.
They assert that such exercise was pursuant to their right to self-organization.
But die Med-Arbiter of DOLE declared die election null and void on the ground
that the election was initiated and conducted not in accordance with the union's
constitution and by-laws. On appeal, die BLR Director upheld the Med-Arbiter's
decision.
Ruling: Petitioners' frustration over the performance of [the incumbent union
officers], as well as their fears of a "fraudulent" election to be held under die latter's
supervision, could not justify the method they chose to impose their will on die union.
Director Bitonio aptly elucidated: "The constitutional right to self-organization is
better understood in die context of ILO Convention No. 97 (Freedom of Association
and Protection of Right to Organize), to which the Philippines is signatory. Article 3
of the Convention provides that worker's organizations shall have the right to draw
up their constitution and rules and to elect their representatives in full freedom,
free from any interference from public authorities. The freedom conferred by the
provision is expansive; the responsibility imposed on union members to respect the
constitution and rules they themselves draw up equally so. The point to be stressed is
that the union's CBL is the fundamental law that governs die relationship between
and among the members of die union. It is where die rights, duties and obligations,
powers, functions and authority of the officers as well as the members are defined. It
is the organic law that determines the validity of acts done by any officer or member
of the union. Without respect for die CBL, a union as a democratic institution
degenerates into nothing more than a group of individuals governed by mob rule."
M
We agree with the solicitor general's observation that the act of suspending
the constitution when the questioned election was held is an implied admission mat
the election held on mat date [October 4,1996] could not be considered valid under
the existing USTFU constitution x x x .
219
 LABOR RELATIONS
ART. 241

The ratification of the new CBA executed between the petitioners and the
University of Santo Tomas management did not validate the void October 4, 1996
election. Ratified were the terms of the new CBA, not the issue of union leadership—a
matter that should be decided only by union members in die proper forum at the
proper time and after observance of proper procedure.

4.1 Eligibility of Voters

1
Only members of the union can take part in the election of union officers.
Under U.S. Federal law, in any election required to be held by secret ballot,
every member in good standing must have the right to vote for or otherwise
support the candidate or candidates of his choice without being subject to penalty,
discipline or improper interference or reprisal of any kind by the union or any
2
member thereof. Every member in good standing is entitled to one vote.
A member in good standing is any person who has fulfilled the requirements
for membership in the union and who has neither voluntarily withdrawn from
membership nor been expelled or suspended from membership after appropriate
proceedings consistent with the lawful provisions of the union's constitution and
3
by-laws.
A labor organization may prescribe reasonable rules and regulations with
respect to voting eligibility. Thus, it may, in appropriate circumstances, defer
eligibility to vote by requiring a reasonable period of prior membership, such
as six months or a year. While the right to vote may thus be deferred within
4
reasonable limits, a union may not create special classes of nonvoting members.
A labor organization may condition the exercise of the right to vote on
5
the payment of dues, since paying dues is a basic obligation of membership.
However, this rule is subject to two qualifications in that (a) any rule denying
dues-delinquent members the right to vote must be applied uniformly; and (b)
members must be afforded a reasonable opportunity to pay dues, including a
6
grace period during which dues may be paid without any loss of rights.
In a Philippine case it was held that the question of eligibility to vote may
be determined through the use of the applicable payroll period and employee's
status during the applicable period — the payroll of the month next preceding
the labor dispute in case of regular employees and the payroll period at or near
7
the peak of operations in case of employees in seasonal industries.

'Article 241 [c], Labor Code.

2
48Am.Jur. 2d, Sec. 216.
Ibid.
4
48Am.Jur. 2d, Sec. 217.
5
48Am.Jur. 2d, Sec. 218.
Ibid.
7
Tancinco vs. Pura Ferrer-Calleja, G.R. No. 78131, January 20, 1988.

220
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART, 241

T h e Court has also held that if none of the contending unions insisted on
the use of the payroll period-list as voting list, the act of the nonunion employees
of joining the election by casting their votes is a clear manifestation of their
intention to j o i n a union. They must therefore be considered ipso facto union
members. Said employees having exercised their right to unionism, by joining
1
one of the unions, their decision is paramount.
Submission of the employees' name with the Bureau of Labor Relations
as qualified members of the union is not a condition sine qua non to enable said
2
members to vote in the election of the union's officers.
Voting and voters in a certification election are discussed in the chapter
on employee representation in collective bargaining.

4.2 Union Officer Must Be an Employee

T h e Implementing Rules used to contain this provision: "No person
who is not an employee or worker of the company or establishment where
an independently registered union, affiliate, local or chapter of a labor
federation or n a t i o n a l u n i o n o p e r a t e s shall h e n c e f o r t h be e l e c t e d or
3
appointed as an officer of such union, affiliate, local or chapter." In short,
one should be employed in the company to qualify as officer of a union in that
company. Although subsequent department orders deleted this provision, the
membership qualification remains because it is required in the Code itself, in
Article 2 4 1 ( c ) , second sentence.

4.3 Disqualification of Union Officers

No person who has been convicted of a crime involving moral turpitude
shall be eligible for election as a union officer or for appointment to any position
in the union. (Article 241, paragraph [f].) A crime involving moral turpitude is
one characterized by "an act of baseness, vileness or depravity in the private or
social duties which a man owes his fellowmen, or to society in general, contrary
to accepted and customary rule of right and duty between man and man, or
4
conduct contrary to justice, honesty, modesty, or good morals."
Article 241 (e) provides that "no labor organization shall knowingly admit as
member or continue in membership any individual who belongs to a subversive
organization or who is engaged directly or indirectly in any subversive activity."
This membership disqualification applies with equal force to candidates in
union elections; in other words, one who cannot even be a member cannot be
a candidate for an office.

'Tancinco vs. Pura Ferrer-Calleja, G.R. No. 78131, January 20, 1988.
Ibid.
'Implementing Rules, Book V, Rule II, Sec. 3[f].
*Tak vs. Republic, 106 Phil. 730.

221
 ART. 241 LABOR RELATIONS

4.4 Union Election Protest: Proclamation of Winners

A complaint or protest regarding election of union officers — a subject
not mentioned at all in the Code — is treated in the Implementing Rules as an
intra/inter-union dispute. Rule XI of D.O. No. 40-03 applies.
5. ACTION AGAINST UNION OFFICERS
A union officer, after his election, may not be expelled from the union for
past malfeasance or misfeasance. To do so would nullify the choice made by the
union members.

RIGHTS OF UNION MEMBERS

The vast majority of union officials endeavor honestly to safeguard
the rights and forward the interests of their members and to discharge
the duties of their office. Yet the reputation of the vast majority and of the
labor movement are imperiled by the dishonest, corrupt and unethical
practices of the few who betray their trust.
Union members who fail to exercise and practice their responsibili-
ties as union citizens likewise bear a high degree of accountability for
abridgement of their rights.
Most of the time — but not all of it, by any means — they do enjoy
their rights as members of democratic unions. Most of the time — but,
unfortunately, not enough of the time — they do exercise and practice
their responsibilities as union members.... What are the rights of a union
member vis-a-vis his union? I assume everyone interested in the subject
has his own list. This is mine:
1. The right to a democratic union.
2. T h e right to due process of law in union disciplinary
proceedings.
3. The right to a clean, honest union.
4. The right to an effective union.
5. The right to a union free from discrimination because of race,
creed or color.
6. The right to a responsible union — responsible not only to its
members and employees, but to the community and to the nation as
well.
Arthur J. Goldberg, "Rights and Responsibilities of Union Members, "in
E. Wight Bakke (ed.) Union, Management and the Public (Harcourt,
New York, 1967), p. 180.

T h e remedy against erring union officers is not referendum but union

expulsion. If the union officers were guilty of the alleged acts imputed against

222
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART. 241

them, the public respondent [the D O L E Secretary], pursuant to Article 242 of

the New Labor Code and in the light of Our ruling in Duyag vs. Inciong (98 SCRA
5 2 2 ) , should have meted out the appropriate penalty on them, i.e., to expel
them from the Union, as prayed for, and not call for a referendum to decide
the issue. By and large, the holding of the referendum in question has become
moot and academic. This is in line with Our ruling in Pascua vs. Provincial Board
of Nueva Ecija (106 Phil. 4 7 1 ) , which We quote: "The Court should never remove
a public officer for acts done prior to his present term of office. To do otherwise
would be to deprive the people of their right to elect their officers. When the
people have elected a man to office, it must be assumed that they did this with
knowledge of his life and character, and that they disregarded or forgave his faults
or misconduct, if he had been guilty of any. It is not for the court, by reason of
1
such faults or misconduct, to practically overrule the will of the people."
It is the better part of conventional or pragmatic solutions, absent
overriding considerations to the contrary, to respect the will of the majority of
the workers who voted in the elections. Although decreed under a different
setting, it is apropos to recall the ruling that where the people have elected a
man to office, it must be assumed that they did this with knowledge of his life
and character and that they disregarded or forgave his faults or misconduct if
2
he had been guilty of any.
Moreover, even if the disqualification could be justified, the candidates of
petitioner cannot be declared as the winners in the disputed election. The mere
fact that they obtained the second highest number of votes does not mean that
they will thereby be considered as the elected officers if the true winners are
3
disqualified.
6. DUE PROCESS IN IMPEACHMENT
Litton Mills Employees Association-kapatiran vs. Ferrer-CaUeja, L-78061, November
24, 1988 —
As to the impeachment of a union officer, Section 2, Article XV of the petitioner-
union's constitution and by-laws provides the procedures to be followed, to wit: (1)
Impeachment should be initiated by petition signed by at least 30% of all bona fide
members of the union, and addressed to the Chairman of the Executive Board; (b) A
general membership meeting shall be convened by the Board Chairman to consider
the impeachment of an officer; (c) Before any impeachment vote is finally taken,
the union officer against whom impeachment charges have been filed shall be given
ample opportunity to defend himself; and (d) A majority of all the members of the
union shall be required to impeach or recall union officers.

'Kapisanan ng Manggagawang Pinagyakap [KMP] vs. Trajano, 134 SCRA 236

[1985].
2
Manalad vs. Trajano, G.R. Nos. 72772-73, June 28, 1989.
Ibid.
223
 ART- 241 LABOR RELATIONS

It clearly appears that the above cited procedure was not followed by the peti-
tioners when they impeached Umali. To be sure, there was difficulty on the part of the
petitioners in complying with the required procedure for impeachment considering
mat the petition to impeach had to be addressed to the Chairman of the Executive
Board of the Union, and that the majority membership which would decide on the
impeachment had to be convened only upon call of the Chairman of the Executive
Board who, in the case at bar, happened to be respondent Umali himself.
Nevertheless, despite the practical difficulties in complying with the said
procedure, petitioners should have shown substantial compliance with said
impeachment procedure, by giving Umali ample opportunity to defend himself, as
contrasted to an outright impeachment, right after he failed to appear before die
first and only investigation scheduled on August 25, 1986 in the Litton Canteen.

7. EXPULSION OF MEMBER
Just as an officer is entitled to due process, so does a member. In a case,
the Court explicitly ruled that a member of a labor union may be expelled only
for a valid cause and by following the procedure outlined in the constitution
1
and by-laws of the union.
Ferrer, et al vs. NLRC, G.R. No. 100898, July 5,1993 —
Facts: In May 1989, petitioner Ferrer and companions filed with the Department
of Labor a complaint seeking the expulsion from SAMAHAN of its officers headed
by president Capitle allegedly because the officers failed to attend to the economic
demands of the workers. Subsequently, Ferrer and companions elected a new set of
officers, an election which was objected to by FFW, the federation. Nonetheless, the
Ferrer group of officers tried to dissuade the OFC [employer] from remitting union
dues to the officers led by Capitle.
As a result, the union officials headed by Capitle expelled Ferrer, et al, from
the union and demanded from the company the termination of their employment.
At the time they were dismissed, they had been regular OFC employees for about
ten years.
Ferrer and his four companions turned to the Federation of Democratic Labor
Unions (FEDLU) and requested that they be represented ("katawanin") by said
federation before the DOLE in the complaint which they intended to file against
the union (SAMAHAN), the FFW, and the company.
On various dates, Ferrer and companions wrote the Company to profess
innocence of the "disloyalty" and other charges levelled against them by the
SAMAHAN and the FFW and to plead that they be reinstated. Eliciting no response,
they, through the FEDLU, filed a complaint for illegal dismissal and unfair labor
practice before the NLRC against OFC, the FFW, and the SAMAHAN officers headed
by Capitle.

'Kapisanan ng mga Manggagawa sa Manila Railroad Co., et al vs. Bugay and

CIR, 101 Phil. Reports 18.

224
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART. 241

Ruling: In the first place, the union has a specific provision for the permanent or
temporary "expulsion" of its erring members in its constitution and by-laws ("saligang
batas at alituntunin"). Under die heading membership and removal ("pag-aanib at
pagtitiwalag"), it states:
SEC. 4. Ang sinumang kasapi ay maaring itwalag (sic) ng Samahan pangsamantala o
tuluyan sa pamamgitan (sic) ng tatlo't ikaapat (3/4) na bahagi ng dami ng bilang ng Pamunu-
ang Tagapapaganap. Pagkaraan lamang sa pandinig sa kanyang kaso. Batay sa sumusunod:
(a) Sinumang gumawa ng mga bagay bagay na labag at lihis sa patakaran ng
Samahan.
(b) Sinumang gumawa ng mga bagay na maaring ikabuwag ng Samahan.
(c) Hindi paghuhulog ng butaw sa loob ng tatlong buwan na walang sakit
o Doctor's Certificate.
(d) Hindi pagbibigay ng abuloy na itinatadhana ng Samahan.
(e) Sinumang kasapi na natanggal sa kapisanan at gustong sumapi uli ay
magpapanibago ng bilang, mula sa taon ng kanyang pagsapi uli sa Samahan.
No hearing ("pandinig") was ever conducted by the SAMAHAN to look into
petitioners' explanation of their moves to oust the union leadership under Capitle,
or their subsequent affiliation with FEDLU. While it is true that petitioners' actions
might have precipitated divisiveness and, later, showed disloyalty to the union, still,
the SAMAHAN should have observed its own constitution and by-laws by giving
petitioners an opportunity to air their side and explain their moves. If, after an
investigation the petitioners were found to have violated union rules, then and only
then should they be subjected to proper disciplinary measures.
What aggravated the situation in this case is the fact that OFC [the employer]
itself took for granted that die SAMAHAN had actually conducted an inquiry and
considered the CBA provision for the closed shop as self-operating that, upon receipt
of a notice that some members of the SAMAHAN had failed to maintain their
membership in good standing in accordance with the CBA, it summarily dismissed
petitioners. To make matters worse, the labor arbiter and the NLRC shared die
same view in holding that "(t)he matter or question, therefore, of determining why
and how did complainants fail to retain membership in good standing is not for die
company to inquire via formal investigation."
Petitioners' alleged act of sowing disunity among the members of the
SAMAHAN could have been ventilated and threshed out through a grievance
procedure within the union itself. But resort to such procedure was not pursued.
What actually happened in this case was that some members, including petitioners,
dried to unseat the SAMAHAN leadership headed by Capitle due to the latter's
alleged inattention to petitioners' demands for the implementation of the P25-wage
increase which took effect on July 1,1989. The intraunion controversy was such that
petitioners even requested the FFW to intervene to facilitate die enforcement of the
said wage increase.
Petitioners sought the help of the FEDLU only after they had learned of
the termination of their employment upon the recommendation of Capitle. Their

225
ART. 241 LABOR RELATIONS

alleged application with federations other than the FFW can hardly be considered
as disloyalty to the SAMAHAN, nor may the filing of such applications denote that
petitioners failed to maintain in good standing their membership in the SAMAHAN.
The SAMAHAN is a different entity from FFW, the federation to which it belonged.
Neither may it be inferred that petitioners sought disaffiliation from the FFW, for
petitioners had not formed a union distinct from that of the SAMAHAN.
Hence, while petitioner's act of holding a special election to oust Capitle, et
al. may be considered as an act of sowing disunity among the SAMAHAN members,
and, perhaps, disloyalty to the union officials, which could have been dealt with by
the union as a disciplinary matter, it certainly cannot be considered as constituting
disloyalty to the union.

Expulsion of a member for arbitrary or impetuous reason may amount

to unfair labor practice by the union. This matter is taken up in the chapter on
ULP, particularly Article 249.
8. RELIEF WITHIN THE UNION
Generally, redress must first be sought within the union itself in accordance
1
with its constitution and by-laws.
In o n e case the union vice-president filed a c o m p l a i n t of illegal
disbursement of funds against the president and treasurer of two unions. T h e
complaint, instead of being presented to the national convention as required
by the union by-laws, was filed directly with DOLE. T h e action was premature,
ruled the Court, with this explanation:
When the Constitution and by-laws of both unions dictated the
remedy for intra-union dispute, this should be resorted to not only
to give the grievance machinery or appeals' body of the union the
opportunity to decide the matter by itself, but also to prevent unnecessary
and premature resort to administrative or judicial bodies. Thus, a party
with an administrative remedy must not merely initiate the prescribed
administrative procedure to obtain relief, but also pursue it to its
appropriate conclusion before seeking judicial intervention. This rule
clearly applies to the instant case. T h e underlying principle of the rule
on exhaustion of administrative remedies rests on the presumption that
when the administrative body, or grievance machinery, as in this case,
is afforded a chance to pass upon the matter, it will decide the same
correctly. Petitioner's premature invocation of public respondent's
intervention is fatal to his cause of action. (Diamonon vs. Department of
Labor etc., et al., G.R No. 108951, March 7, 2000.)
If intra-union remedies have failed to correct any violations of
the internal labor organization procedures, a case can be filed with the

*Kapisanan ng mga Manggagawa sa MRR vs. Hernandez, 20 SCRA 109.

226
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART. 241

Bureau of Labor Relations, which is authorized to hear and decide cases

of this nature.
8.1 Exceptions
In an earlier case, however, the Court had ruled that where exhaustion of
remedies within the union itself would practically amount to a denial of justice,
it would not be insisted upon, as a condition to the right to invoke the aid of
a court. In Kapisanan ng mga Manggagawa sa MRR vs. Hernandez, 20 SCRA 109,
decided in 1967, the Court held:

"In the case at bar, noteworthy is the fact that the complaint was filed
against the union and its incumbent officers, some of whom were members
of the board of directors. T h e constitution and by-laws of the union provide
that charges for any violations thereof shall be filed before the said board.
But as explained by the lower court, if the complainants had done so the
board of directors would in effect be acting as respondent investigator and
judge at the same time. To follow the procedure indicated would be a farce
under the circumstances, where exhaustion of remedies within the union
itself would practically amount to a denial of justice or would be illusory
or vain, it will not be insisted upon, particularly where property rights of
the members are involved, as a condition to the right to invoke the aid of
a court."

Similarly, in another case, the Court said:

"One of the instances when the rule of exhaustion of administrative
remedies may be disregarded is when there is a violation of due process.
In this case, the respondents [union members] have chronicled from the
very beginning that they were indefinitely suspended without the benefit
of a formal charge sufficient in form and substance. Therefore, the rule
on exhaustion of administrative remedies cannot squarely apply to them."
(Verceles, et al. vs. Bureau of Labor Relations, G.R No. 152322, February 15,
2005.)
9. CONSEQUENCE OF VIOLATION OF RIGHTS
If the conditions of membership, or the rights of the members, are violated,
the violation may result in the cancellation of the union registration or the
expulsion of the culpable officers. Such consequence is categorically stated in
the last paragraph of the present article.
Under D.O. No. 40-03 (Rule XIII, Sec. 4) any complaint or petition with
allegations of mishandling, misappropriation or non-accounting of funds in
violation of Article 241 shall be treated as an intra-union dispute. It shall be
heard and resolved by the Med-Arbiter pursuant to the provisions of Rule XI
(regarding inter/intra-union disputes).

227
ART. 241 LABOR RELATIONS

9.1 Exception: When 30% Not Required

Ordinarily Section 17 of Republic Act No. 875 [now Article 241] requires
ten [now 30] percent of the members to report a violation of the labor
1
organization procedures. Nevertheless, when such violation directly affects only
one or two members, then only one or two members would be enough to report
such violation.
In a 2005 decision the Supreme Court ruled:
On the matter concerning the 3 0 % support requirement needed to
report violations of rights and conditions of union membership, as found
in the last paragraph of Article 241 of the Labor Code, we likewise cannot
sanction the petitioners. We have already made our pronouncement in the
case of Rodriguez v. Director, Bureau of Labor Relations, G.R. Nos. L-75579-82
and L-80504,31 August 1988, that the 3 0 % requirement is not mandatory.
In this case, the Court, speaking through Chief Justice Andres R. Narvasa,
held in part:
The respondent Director's ruling, however, that the assent of 3 0 %
of the union membership, mentioned in Article 242 of the Labor Code,
was mandatory and essential to the filing of a complaint for any violation
of rights and conditions of membership in a labor organization (such
as the arbitrary and oppressive increase of union dues here complained
of), cannot be affirmed and will be reversed. T h e very article relied upon
militates against the proposition. It states that a report of a violation of
rights and conditions of membership in a labor organization may be made
by "(a)t least thirty percent ( 3 0 % ) of all the members of a union or any
member or members specially concerned" T h e use of the permissive "may" in
the provision at once negates the notion that the assent of 3 0 % of all the
members is mandatory. More decisive is the fact that the provision expressly
u
declares that the report may be made, alternatively by any member or members
specially concerned" And further confirmation that the assent of 3 0 % of
the union members is not a factor in the acquisition of jurisdiction by the
Bureau of Labor Relations is furnished by Article 226 of the same Labor
Code, which grants original and exclusive jurisdiction to the Bureau, and
the Labor Relations Division in the Regional Offices of the Department of
u
Labor, over all inter^union and intra-union conflicts, and all disputes, grievances
or problems arising from or affecting labor management relations" making no
reference whatsoever to any such 30%-support requirement. Indeed, the
officials mentioned are given the power to act "on all inter-union and
intra-union conflicts (1) "upon request of either or both parties" as well as (2)
"at their own initiative" (Verceles, et al. vs. Bureau of Labor Relations, G.R. No.
152322, February 15, 2005.)

'Philippine Association of Free Labor Unions [PAFLU] vs. Bognot, 10 SCRA

195 [1964].

228
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART. 241

(Note: In view of Articles 238 and 239 [as amended] that limit to only
three the grounds for cancellation of union registration, and violation of Article
241 is not one of the three, the thirty percent requirement is now of doubtful
relevance to the particular issue of union cancellation.)
10. VISITORIAL POWER
Article 2 7 4 authorizes the Secretary of Labor and Employment or his duly
authorized representative to inquire into the financial activities of any labor
organization on the basis of a complaint under oath, supported by 20 percent
of the membership in order to determine compliance or noncompliance with
the laws and to aid in the prosecution of any violation thereof.

11. CHECK-OFFS AND ASSESSMENTS

A check-off is a method of deducting from an employee's pay at prescribed
period, the amounts due the union for fees, fines, or assessments. T h e right of
a union to collect union dues is recognized under Article 2 7 7 ( a ) .
Under Article 113, one of the lawful deductions from employee's wage is
"for union dues, in cases where the right of the worker or his union to check-off
has been recognized by the employer or authorized in writing by the individual
worker concerned." But the amount of union dues should be reasonable; Article
241 prohibits the imposition of excessive or arbitrary fees. And while payment of
union dues may be a basis of acquisition or retention of membership as authorized
under Article 2 4 9 ( a ) , it must be recalled that under Article 241 (d) "any question
of major policy affecting the entire membership" has to be determined by the
members themselves by secret ballot. T h e amount and collection of union dues
are questions that affect the entire membership, hence, they have to be approved
by the members themselves.

11.1 Assessments, like Dues, may also be Checked Off

Dues are defined as payments to meet the union's general and current
obligations. T h e payment must be regular, periodic, and uniform. Payments used
for a special purpose, especially if required only for a limited time, are regarded
1
as assessment.
Under Article 241 "other than for mandatory activities under the Code, no
special assessment, attorney's fees, negotiation fees or any other extraordinary
fees may be checked off from any amount due an employee without individual
written authorization duly signed by the employee. The authorization should
specifically state the amount, purpose and beneficiary of the deduction."
Attorney's fees may not be deducted or checked off from any amount due
to an employee without his written consent, except for mandatory activities under
2
the Code.
'Bruce S. Feldacker, Labor Guide to Labor Law, Prentice Hall, 2000, p. 434.
2 Vengco vs. Trajano, G.R. No. 74453, May 5, 1989.
229
 ART. 241 LABOR RELATIONS

A mandatory activity is a judicial process of settling dispute laid down by

the law. An amicable settlement entered into by the management and the union
is not a mandatory activity under the Code. Moreover, the law explicitly requires
the individual written authorization of each employee concerned, to make the
1
deduction of attorney's fees valid.
Deductions for union service fee are authorized by law and do not require
2
individual check-off authorizations.
However, the benefits awarded to the employees formed part of the
collective bargaining negotiations although placed under compulsory arbitration.
Notwithstanding its "compulsory" nature, "compulsory arbitration" is not the
"mandatory activity" under the Code which dispenses with individual written
authorizations for check-offs. It is a judicial process of settling disputes laid
down by law. Besides, Article 222(b) does not except a CBA later placed under
3
compulsory arbitration, from the ambit of its prohibition. In other words,
individual written authorizations are needed to deduct from members' salary
the attorney's fee for concluding a collective bargaining agreement through
compulsory arbitration.
Special Assessment may be checked off, but Article 241 should be carefully
complied with.
Palacol, et al. vs. Pura Ferrer-CaUeja, et al., G.R. No. 85333, February 26,1990 —
Facts: The union president submitted to the company die ratification by the
union members of the newly concluded CBA. He also submitted an authorization
for the company to deduct union dues of P10.00 every pay day and, in addition, 10%
as special assessment, from the CBA lump sum pay granted to the union members.
Originally, 672 members authorized the 10% special assessment, while 173
opposed it. Subsequently, however, a total of528 members submitted documents to the
company stating that although they had ratified the new CBA, they were withdrawing
or disauthorizing the deduction of any amount from their CBA lump sum.
They assailed the 10% special assessment as a violation of Article 241 (o) in
relation to Article 222(b) of the Labor Code. As authority for their contention, they
cited Galvadores vs. Trajano (144 SCRA 138).
Rulings: (1) Requirements. — The failure of the Union to comply strictly with
the requirements set out by the law invalidates the questioned special assessment.
Substantial compliance is not enough in view of die fact that die special assessment
will diminish the compensation of the union members. Their express consent is
required, and this consent must be obtained in accordance with the steps outlined
by law, which must be followed to the letter. No shortcuts allowed.

•Vengco vs. Trajano, G.R. No. 74453, May 5, 1989.

2
Radio Communications of the Philippines, Inc. vs. Secretary of Labor, G.R.
No. 77959, January 9, 1989.
3
Galvadores, et al. vs. Trajano, G.R. No. 70067, September 15, 1986.

230
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART. 241

The applicable provisions are clear. The Union itself admits that both
paragraphs (n) and (o) of Article 241 apply. Paragraph (n) refers to "levy" while
paragraph (o) refers to "check-off of a special assessment. Both provisions must
be complied with. Under paragraph (n), the Union must submit to the Company a
written resolution of a majority of all the members at a general membership meeting
duly called for the purpose. In addition, the secretary of the organization must record
the minutes of the meeting which, in turn, must include, among others, the list of
all the members present as well as the votes cast.
The Union obviously failed to comply with the requirements of paragraph (n).
It held local membership meetings on separate occasions, on different dates and at
various venues, contrary to the express requirement that there must be a general
membership meeting. The contention of the Union that "the local membership
meetings are precisely the very general meetings required by law" is untenable because
the law would not have specified a general membership meeting had the legislative
intent been to allow local meetings in lieu of the latter.
It submitted only minutes of the local membership meetings when what is
required is a written resolution adopted at the general meeting. Worse still, the
minutes of three of those local meetings held were recorded by a union director and
not by the union secretary. The minutes submitted to the Company contained no list
of the members present and no record of the votes cast. Since it is quite evident that
the Union did not comply with the law at every turn, the only conclusion that may
be made therefrom is that there was no valid levy of the special assessment pursuant
to paragraph (n) of Article 241 of the Labor Code.
(2) Effects of withdrawal of authorizations. — Paragraph (o), on the other hand,
requires an individual written authorization duly signed by every employee in order
that a special assessment may be validly checked off. Even assuming that the special
assessment was validly levied pursuant to paragraph (n), and granting that individual
written authorizations were obtained by the Union, nevertheless there can be no valid
check-off considering that the majority of the union members had already withdrawn
their individual authorizations. The withdrawal of the authorization is equivalent to
no authorization at all.
(3) Forms of disauthorizations. — The Union points out, however, that said
disauthorizations are not valid for being collective in form. The contention deserves
no merit for die simple reason that the documents containing the disauthorizations
have the signatures of the union members. The Court finds these retractions to be
valid. There is nothing in die law which requires that the disauthorizations must be
in individual form.
(4) Purpose of the special assessment. — Of the stated purposes of the special
assessment, as embodied in die board resolution of the Union, only the collection
of a special fund for labor and education research is mandated. The two other
purposes, namely, the purchase of vehicles and other items for the benefits of the
union officers and die general membership, and the payment of services rendered
by union officers, consultants and others, should be supported by the regular union
dues, there being no showing that the latter are not sufficient to cover the same.

231
 ART. 241 LABOR RELATIONS

(5) Article 222(b) of the Labor Code, "similar charge. "—The last stated purpose
is contended by petitioners to fall under the coverage of Article 222(b) of the Labor
Code. The contention is impressed with merit. Article 222(b) prohibits attorney's
fees, negotiation fees and similar charges arising out of the conclusion of a collective
bargaining agreement from being imposed on any individual union member. The
collection of die special assessment partly for the payment services rendered by
union officers, consultants and others may not be in the category of "attorney's
fees or negotiation fees." But there is no question that it is an exaction which falls
within the category of a "similar charge," and, therefore, within the coverage of the
prohibition in the aforementioned article.
(6) Unlimited discretion of union president, disallowed. — There is an additional
proviso giving the Union President unlimited discretion to allocate the proceeds of
the special assessment. Such a provision may open the door to abuse by the officers
of the union considering that the total amount of the special assessment is quite
considerable — PI,027,694.33 collected from those union members who originally
authorized the deduction, and PI,267,863.39 from those who did not authorize the
same, or subsequently retracted their authorizations.
The Court, therefore, strikes down the questioned special assessment for being
a violation of Article 241, paragraphs (n) and (o), and Article 222(b) of the Labor
Code.

11.2 Three Requisites to Collect Special Assessment

Article 241 speaks of three requisites that must be complied with in order
that the special assessment for Union's incidental expenses, attorney's fees and
representation expenses, may be valid, namely: 1) authorization by a written
resolution of the majority of all the members at the general membership
meeting duly called for the purpose; (2) secretary's record of the minutes of
the meeting; and (3) individual written authorization for check-off duly signed
1
by the employee concerned.
11.2a Article 241 (n and o): Authorization Should Proceed from Free Consent
In another case, the union officers who negotiated the CBA, which grants
P42 million economic benefits package, required the union members to sign a
document embodying (1) the ratification of the CBA and (2) an authorization
for the deduction or check-off of P4.2 million (from the P42 million package)
as payment for attorney's fees.
Such authorization is invalid as it does not conform with Article 241 ( n ) .
T h e authorization, embodied in the ratification of the employer-union memo
of agreement, is a vitiated authorization because it could be assumed that the
union members felt it difficult to turn down the substantial and lucrative award

1
ABS-CBN Supervisors Employees Union Members vs. ABS-CBN Corp., et al.,
G.R. No. 106518, March 11,1999.

232
 RIGHTS AND CONDITIONS OF MEMBERSHIP ART. 241

of P42 million economic package. They had no free choice: they had to sign the
ratification which also embodies the authorization for the deduction of union
dues and special assessments. Such a situation militated against the legitimacy
1
or genuine consent that should characterize the authorization.

11.3 Check-off of Agency Fee

Another allowable deduction from employee's wage is agency fee. This is
an amount, equivalent to union dues, which a nonunion member pays to the
union because he benefits from the CBA negotiated by the union. In negotiating
the CBA the union served as the employees' agent. Check-off of agency fee is
allowed under Article 2 4 8 ( e ) .

11.4 Illegal Check-off Ground for Cancellation

Violation of the law on check-off of special assessments was one of the
grounds for cancellation of union registration, as stated in Article 239(h) before
the article was amended by R.A. No. 9 4 8 1 .
On the part of the employer, illegal check-off may give rise to a charge of
illegal deduction, in violation of Article 113.

11.5 Employer's Liability in Check-off Arrangement

No provision of law makes the employer directly liable for the payment to
the labor organization of union dues and assessments that the former fails to
deduct from its employees' salaries and wages pursuant to a check-off stipulation.
The employer's failure to make the requisite deductions may constitute a violation
of a contractual commitment for which it may incur liability for unfair labor
practice. But the employer does not, by that omission, incur liability to the union
for the aggregate of dues or assessments uncollected from the union members,
2
or agency fees for non-union employees.
Check-offs in truth impose an extra burden on the employer in the form
of additional administrative and bookkeeping costs. It is a burden assumed
by management at the instance of the union and for its benefit, in order to
facilitate the collection of dues necessary for the latter's life and sustenance.
But the obligation to pay union dues and agency fees obviously devolves not
upon the employer, but the individual employee. It is a personal obligation
not demandable from the employer upon default or refusal of the employee to
consent to a check-off. T h e only obligation of the employer under a check-off
3
is to effect the deductions and remit the collections to the union.

'Marino, Jr., et al vs. Gamilla, et al, G.R. No. 149763, July 7, 2009.
2
Holy Cross of Davao College vs. Joaquin, et al, G.R. No. 11007, October 18,
1996.
Ibid.

233
 ART. 241 LABOR RELATIONS

11.6 Jurisdiction Over Check-off Disputes

The Regional Director of DOLE, not the labor arbiter, has jurisdiction
over check-off disputes. Under Article 241 of the Labor Code, the Bureau of
Labor Relations has jurisdiction over cases of violations thereof and to mete
the appropriate penalty. T h e complaint of union members against a union
resolution checking off 10% of their CBA benefits is not a money claim against
the employers, even if the employer is named as respondent. T h e complaint is
1
against the union over which the labor arbiter has no jurisdiction.

Philippine National Construction Corp. vs. Ferrer-Calleja, 167 SCRA 294,

November 11, 1988.

234
 Chapter III
RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS

Overview/Key Questions Box 10

1. What are the rights of a legitimate labor organization?
2. May a union, as representative, settle by compromise
its members' money claims?

1
ART. 2 4 2 . RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS
A legitimate labor organization shall have the right:
(a) To act as the representative of its members for the purpose of
collective bargaining;
(b) To be certified as the exclusive representative of all the employees
in an appropriate collective bargaining unit for purposes of collective
bargaining;
(c) To be furnished by the employer, upon written request, with the
annual audited financial statements, including the balance sheet and the
profit and loss statement, within thirty ( 3 0 ) calendar days from the date
of receipt of the request, after the union has been duly recognized by the
employer or certified as the sole and exclusive bargaining representatives
of the employees in the bargaining unit, or within sixty (60) calendar days
before the expiration of the existing collective bargaining agreement, or
during the collective bargaining negotiation;
(d) To own property, real or personal, for the use and benefit of the
labor organization and its members;
(e) To sue and be sued in its registered name; and
(f) To u n d e r t a k e all o t h e r activities designed to benefit the
organization and its members, including cooperative, housing welfare and
other projects not contrary to law.
Notwithstanding any provision of a general or special law to the
contrary, the income and the properties of legitimate labor organizations,
including grants, endowments, gifts, donations and contributions they may
receive from fraternal and similar organizations, local or foreign, which are
actually, directly and exclusively used for their lawful purposes, shall be free

•As amended by Sec. 17, R.A. 6715.

235
 ART. 242 LABOR RELATIONS

from taxes, duties and other assessments. The exemptions provided herein
may be withdrawn only by a special law expressly repealing this provision.
COMMENTS AND CASES
1. NOT ANY L.L.O.
The first three rights mentioned in this article do not pertain to just
about any union but only to the union that has been selected as the bargaining
representative of the employees in the bargaining unit. This article must be read
in relation to Article 255.
The union whose demand for collective bargaining was rebuffed by the
employer, because the union was not the certified bargaining agent, has no
right to stage a strike. T h e strike is illegal. Such illegality is reason enough for
1
the NLRC to declare that the union officers have lost their employment status.
2. RIGHT OF UNION TO REPRESENT ITS MEMBERS
It is the function of a labor union to represent its members against the
employer's unfair labor practices. It can file an action in their behalf without
the cumbersome procedure of joining each and every member as a separate
2
party.
A labor union has the requisite personality to sue on behalf of its members
for their individual money claims. It would be an unwarranted impairment of
the right to self-organization if such collective entities would be barred from
3
instituting action in their representative capacity.
Even if it is not clear from the record that the union is a registered
organization, but considering that it filed a petition for certification election
and such petition was granted on appeal by the Labor Undersecretary, such
a union has the requisite personality to sue in its own name to challenge the
ULP acts committed by the employer. Such union may institute the action in its
4
representative capacity.
T h e union and its attorney should be allowed to participate in making
compromise settlements with employees who are union members. In one
case, the company was adjudged to have acted with evident bad faith and
malice when it secured the 53 quitclaim agreements individually with the
complainant workers without the intervention of court and without involving
the union. This subterfuge is tantamount to a sabotage of the interest of the
association. Needless to say, the means employed by the employer in dealing

1
Philippine Diamond Hotel, etc. vs. Manila Diamond Hotel Employees Union,
G.R. No. 158075, June 30, 2006.
2
Davao Free Workers Front vs. CIR, 60 SCRA 408 [1974].
3
La Carlota Sugar Central vs. Court of Industrial Relations, 64 SCRA 78 [1975].
4
Me-Shurn Corp. vs. Me-Shurn Workers' Union-FSM, G.R. No. 156292, January
11,2005.

236
 RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS

with the workers individually, instead of collectively through the union and its
counsel, violates good morals as they undermine the unity of the union and
fuels industrial disputes, contrary to the declared policy in the Industrial Peace
1
Act.

2.1 Members Doubting Their Union

T h e authority of a union under Article 242 to act as representative of
its members for the purposes of collective bargaining includes the power to
represent its members for the purpose of enforcing the provisions of the CBA.
When a union files a case "for and in behalf of its members," a member or
several members of that union will not be permitted to file in the same case a
complaint-in-intervention even if it alleges that the union was not pursuing the
case diligently. Such complaint, together with the motion for intervention, will
have to be denied upon a finding that those members are already well repre-
sented by their union. T h e intervention may be allowed, however, when there is
a suggestion of fraud or collusion or that the representative will not act in good
faith for the protection of all interests represented by [the union]. In this case
the members who desire to intervene have not shown fraud, collusion, or lack
2
of good faith on the part of their union. Their motion for intervention has to
be denied.

3. COMPROMISE BINDING UPON MINORITY MEMBERS OF UNION;

EXCEPTION
A compromise agreement between the Union and the Company, pursuant
to which the complaint in an unfair labor practice case had been withdrawn and
dismissed, is binding upon the minority members of the union. T h e action taken
by said minority members in disauthorizing the counsel of record and filing
another unfair labor practice case against the company is contrary to the policy of
the Magna Carta of Labor, which promotes the settlement of differences between
management and labor by mutual agreement. If said action were tolerated, no
employer would ever enter into any compromise agreement, for the minority
members of the union will always dishonor the terms of the agreement and
3
demand their better terms.
T h e court, however, reached a different conclusion in a case where 257
out of 262 complainants agreed to drop their criminal and ULP complaints
against their employer as well as their claim for reinstatement in exchange of
separation pay. T h e union, said the court, had no authority to compromise
the individual claims of members who did not consent to such settlement. Not
having authorized their union to enter into such compromise, those members

'Pampanga Sugar Development Co. Inc. vs. CIR, 114 SCRA 725 [1982].
2
Acedera, et al. vs. International Container Terminal Services, Inc., et al., G.R.
No. 146073, January 13, 2003.
3
See Dionela vs. Court of Industrial Relations, 8 SCRA 832 [1963].
237
 ART. 242 LABOR RELATIONS

are not bound by the terms of the settlement; hence, they can still pursue their
1
individual claims for reinstatement and backwages.
4. COMPROMISE OF MONEY CLAIMS
Money claims due to laborers cannot be the object of settlement or
compromise effected by a union or counsel without the specific individual consent
of each laborer concerned. The beneficiaries are the individual complainants
themselves. The union to which they belong can only assist them but cannot
decide for them. Awards in favor of laborers after long years of litigation must
be attended to with mutual openness and in the best of faith. Only thus can we
really give meaning to the constitutional mandate of giving laborers maximum
protection and security.
,
The union officers authority to compromise must be presented in evidence.
A judgment based on a compromise agreement authorized by the members
does not bind the individual members or complainants who are not parties
2
thereto nor signatories therein.
Under the philosophy of collective responsibility, an employer who bargains
in good faith should be entitled to rely upon the promises and agreements of the
union representatives with whom he must deal under the compulsion of law and
contract. The collective bargaining process should be carried on between parties
who can mutually respect and rely upon the authority of each other. Where,
however, collective bargaining process is not involved, and what is at stake are
backwages already earned by the individual workers byway of overtime, premium
and differential pay, and final judgment has been rendered in their favor, as in
the present case, the real parties in interest with direct material interest, as against
the union which has only served as a vehicle for collective action to enforce their
just claims, are the individual workers themselves. Authority of the union to waive
or quitclaim all or part of the judgment award in favor of the individual workers
cannot be lightly presumed but must be expressly granted, and the employer,
as judgment debtor, must deal in all good faith with the union as the agent of
the individual workers. T h e court in turn should certainly verify and assure
itself the fact and extent of the authority of the union leadership to execute any
compromise or settlement of the judgment on behalf of the individual workers
3
who are the real judgment creditors.
In another case, the Court noted that the complainant union members
had not ratified the Return-to-Work Agreement. It follows that they cannot be
held bound by the Return-to-Work Agreement. T h e waiver of money claims,

^ l d e n Donuts vs. NLRC, et al, G.R. Nos. 113666-68, January 19, 2000.
2
Kaisahan ng mga Manggagawa sa La Campana vs. Sarmiento, 133 SCRA 220
[1984].
3
Heirs of Teodolo M. Cruz vs. Court of Industrial Relations, 30 SCRA 917
[1969].

238
 RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS ART. 242-A

which in this case were accrued money claims, by workers and employees must
be regarded as a personal right, that is, a right that must be personally exercised.
For a waiver thereof to be legally effective, the individual consent or ratification
of the workers or employees involved must be shown. Neither the officers nor the
majority of the union had any authority to waive the accrued rights pertaining to
the dissenting minority members, even under a collective bargaining agreement
which provided for a "union shop." The same consideration of public policy which
impelled the Court to reach the conclusion it did in Manggagawa sa La Campana
vs. Sarmiento (133 SCRA 220) are equally compelling in the present case. The
members of the union need the protective shield of this doctrine not only vis-a-vis
their employer but also, at times, vis-a-vis the management of their own union,
1
and at other times even against their own imprudence or impecuniousness.
5. RIGHT TO BE FURNISHED WITH FINANCIAL STATEMENT
To better equip the union in preparing for or in negotiating with the
employer, the law (Article 212 [c]) gives it the right to be furnished with the
employer's audited financial statements. There are four points in time when
the union may ask in writing for these statements:
(1) after the union has been recognized by the employer as sole
bargaining representative of the employees in the bargaining unit; or
(2) after the union is certified by DOLE as such sole bargaining
representative; or
(3) within the last 60 days of the life of a CBA; or
(4) during the collective bargaining negotiation.
The audited financial statements, including the balance sheet and the profit
and loss statement, should be provided by the employer within 30 calendar days
after receipt of the union's request.
6. RIGHT TO COLLECT DUES
T h e right of a union to collect union dues is already mentioned under the
topic of check-off in the comments under Article 241. Such right is explicitly
recognized in Article 2 7 7 ( a ) .

ART. 242-A. REPORTORIAL REQUIREMENTS

T h e following are documents required to be submitted to the Bureau
by the legitimate labor organization concerned.
(a) Its constitution and by-laws, or amendments thereto, the minutes
of ratification, and the list of members who took part in the ratification of the
constitution and by-laws within thirty ( 3 0 ) days from adoption or ratification
of the constitution and by-laws or amendments thereto;

^ n e r a l Rubber and Footwear Corp. vs. Drilon, 169 SCRA 808 [1989].

239
 ART. 242-A LABOR RELATIONS

(b) Its list of officers, minutes of the election of officers, and list of
voters within thirty (30) days from election;
(c) Its annual financial report within ( 3 0 ) days after the close of every
fiscal year; and
(d) Its list of members at least once a year or whenever required by
the Bureau.
Failure to comply with the above requirements shall not be a ground
for cancellation of union registration but shall subject the erring officers or
members to suspension, expulsion from membership, or any appropriate
penalty. (This article is inserted by RA. No. 9481, effective June 14, 2007.)
COMMENTS
Before R.A. No. 9481 became law in May 2007 the failure to submit the
periodic documentary requirements was reason enough to cancel the registration
of the delinquent labor organization. Now, under the amendments as stated in
Article 242-A, last sentence, such cancellation is no longer allowed. Nevertheless,
the implementing rules, both before and after R.A. No. 9 4 8 1 , prescribes the
procedure to "delist" a labor organization that does not comply for five years with
the reportorial duty. That is, while the new Article 242-A withholds cancellation,
the implementing rules proceed with delisting. Apparently, the implementing
rules consider delisting as different from cancellation even if they both lead to
loss of the union's legal personality.

240
 Title V
COVERAGE

Overview/Key Questions Box 11

1. In the private and public sectors, who are the persons
allowed and not allowed to form or j o i n labor organiza-
tions?
2. What law governs labor relations in the public sector?
3. May government employees hold protest actions? May
they go on strike — legally?
4. In the private sector how does a manager differ from a
supervisor?
5. Supervisors and rank-and-file employees cannot j o i n
the same union. What happens if they do?
6. Who are considered confidential employees? May they
j o i n unions?

9
ART. 243. COVERAGE AND EMPLOYEES RIGHT TO SELF-
ORGANIZATION
All p e r s o n s employed in c o m m e r c i a l , industrial and agricultural
enterprises and in religious, charitable, medical or educational institutions
whether operating for profit or not, shall have the right to self-organization
and to form, join, or assist labor organizations of their own choosing for
purposes of collective bargaining. Ambulant, intermittent and itinerant
workers, self-employed people, rural workers and those without any definite
employers may form labor organizations for their mutual aid and protection.
COMMENTS AND CASES
1. ORGANIZING IN GENERAL
T h e rights to organize and to bargain, in a general sense, are given not
exclusively to employees. Even workers who are not employees of any particular
employer may form their organizations to protect their interests. Movie actors
and actresses, for instance, have their organization although most of them, as
independent individual "talents," have no particular employer; young presidents
as well as retired generals have their organizations too. The organization enjoys
protection under the Bill of Rights.
Under Article 243 of this Code, the right to organize refers also to forming,
joining or assisting a labor organization. Connected to Article 246 this right

241
 LABOR RELATIONS
ART. 243

carries with it the right to engage in group action, provided it is peaceful, to

support the organization's objective which is not necessarily collective bargaining
but, simply, to aid and protect its members. But this kind of group action must
be differentiated from strike which, because it is work stoppage, must observe
certain regulations; otherwise, the strike may be declared illegal and its leaders
may be thrown out of their jobs.
1.1 Coverage of the Right to Organize; Exceptions
The right to form, join or assist a labor organization is granted to all kinds
of employees of all kinds of employers — public or private, profit or nonprofit,
commercial or religious. Their usual form of organization is a union and the
usual purpose is collective bargaining with their employers.
Consistent with the constitutional mandate, Article 243 of the Code allows
"all persons employed in commercial, industrial and agricultural enterprises"
to form, join or assist labor organizations of their own choosing for purposes
of collective bargaining. T h e right is extended even to those employed in
traditionally nonprofit organizations like religious, charitable, medical or
educational institutions. This extension of the right departs from the policy
under the old Industrial Peace Act (R.A. No. 875) which withheld the right to
organize from employees of nonprofit firms.
But the seemingly all-inclusive coverage of "all persons" in Article 243
actually admits of exceptions. Under Article 2 4 5 , for instance, managerial
employees, regardless of the kind of organization where they are employed, may
not join, assist or form any labor organization, meaning a labor union.
Accordingly, managerial employees cannot, in the absence of an agreement
to the contrary, be allowed to share in the concessions obtained by the labor
union through collective negotiation. Otherwise, they would be exposed to the
temptation of colluding with the union during the negotiations to the detriment
of the employer. However, there is nothing to prevent the employer from granting
benefits to managerial employees equal to or higher than those afforded to union
1
members.
Supervisors are allowed to organize, but they cannot form, j o i n or assist a
rank-and-file union.
More exceptions to the right to organize can be found in court decisions,
as we will see shortly.

2. RIGHT TO ORGANIZE CANNOT BE BARGAINED AWAY

Southern Philippines Federation of Labor (SPFL) vs. Calleja, G.R. No. 80882.
April 24, 1989 —
Said the Supreme Court: "Although we have upheld the validity of die CBA as

'Martinez vs. NLRC, GMCR, Inc. and M.A.Javier, G.R. No. 118743, October
12,1998.

242
 COVERAGE ART. 243

1
the law among the parties, its provisions cannot override what is expressly provided
by law that only managerial employees are ineligible to join, assist or form any labor
2
organization. Therefore, regardless of the challenged employees' designations,
whether they are employed as supervisors or in the confidential payrolls, if the
nature of their j o b does not fall under the definition of "managerial" as defined in
the Labor Code, they are eligible to be members of the bargaining unit and to vote
in the certification election. Their right to self-organization must be upheld in the
absence of an express provision of law to the contrary. It cannot be curtailed by a
collective bargaining agreement."

With regard to confidential employees, however, more recent rulings need

to be examined under Article 245.
3. EMPLOYEES OF NONPROFIT INSTITUTIONS
Under Article 243 of the Labor Code, the rank-and-file employees of
nonprofit medical institutions are permitted to form, organize or join labor
unions of their choice for purposes of collective bargaining. If the union has
complied with the requisites provided by law for calling a certification election, it
is incumbent upon the [DOLE Regional] Director to conduct such certification
3
election to ascertain the bargaining representative of the hospital employees.
4. EXCEPTION: EMPLOYEE-MEMBERS OF A COOPERATIVE
San Jose Electric Service Cooperative, Inc. vs. Ministry of Labor, G.R. No. 77231,
May 31,1989 —
A cooperative is by its nature different from an ordinary business concern being
run either by persons, partnerships, or corporations. Its owners and/or members
are the ones who run and operate the business while the others are its employees.
Irrespective of the number of shares owned by its members they are entitled to cast
one vote each in deciding upon the affair of the cooperative. Their share capital
earn limited interests. They enjoy special privileges as exemption from income tax
and sales taxes, preferential right to supply their products to State agencies and even
exemption from minimum wage laws.
An employee of such a cooperative who is a member and co-owner thereof
cannot invoke the right to collective bargaining, for certainly an owner cannot bargain
with himself or his co-owners.
However, insofar as it involves cooperatives with employees who are not
members or co-owners thereof, such employees are entitled to exercise the rights
of all workers to organization, collective bargaining negotiations and others as are
enshrined in the Constitution and existing laws of the country.

l
See Planters Products, Inc. vs. NLRC, et al, G.R. No. 78524, January 24, 1989.
2
See Article 245, Labor Code.
S
FEU-Dr. Nicanor Reyes Medical Foundation, Inc. vs. Trajano, G.R. No. 76273,
July 31, 1987.
243
 ART. 243 LABOR RELATIONS

A Fundamental Human Right

The rights of persons to come together are independent of

any positive law. The right to unionize has jurisprudential roots in
natural law, transcending any secular legal conventions. The right to
unionize, when understood as an aspect of the right to associate, is
certainly a fundamental human right. Unionization is the social and
political manifestation by workers of a most indispensable human
right. Individuals yearn to join in community.
When persons decide to come together in union, they move
from personal private life into the participatory political life of
community. The right to unionize builds upon the human right of
association and thus transforms initial pre-political individual choice.
Because the act of unionization incorporates aspects of community
and moves necessarily and deliberately into the realm of public
political life, it is also a civil, as well as a human, right. Community
is a compelling image and it can become a powerful reality. Workers
seeking to act in concert have long appreciated the truth of the
semantics; one cannot spell "community" without "unity" — and
one cannot spell "unity" without **you" and "I". The effectuation of
the fundamental human and civil right to unionize is an especially
profound workplace empowerment of this truth.

DAVID L. GREGORY
Labor Law
(New York University Press, 1993)

In another case, the court clarified that it is the fact of ownership of the
cooperative, and not involvement in the management thereof, which disqualifies
a member from joining any labor organization within the cooperative. Thus,
irrespective of the degree of their participation in the actual management of the
cooperative, all members thereof cannot form, assist or join a labor organization
1
for the purpose of collective bargaining.
But member-employees of a cooperative may withdraw as members of
the cooperative in order to join a labor union. Membership in a cooperative is
2
voluntary; inherent in it is the right not to join.

•Benguet Electric Cooperative, Inc. vs. Ferrer-Odleja, G.R. No. 79025, December
29,1989.
2
Central Negros Electric Corp. vs. Sec. of Labor, et al, G.R. No. 94045,
September 13, 1991.

244
 COVERAGE ART. 243

4.1. Exception to Exception: Association, not Union

While the members of a cooperative who are also its employees cannot
unionize for bargaining purposes, the law does not prohibit them from forming
an association for their mutual aid and protection as employees.
D.O. No. 40-03 allows and defines a ^workers' association" as one which is
organized for the mutual aid and protection of its members or for any legitimate
purpose other than collective bargaining. T h e right to self-organize, says Article
246, cannot be abridged by any person. In a case where the employer was a
cooperative, some employees were compulsorily retired and some officers of the
employees' association were singled out for early retirement. T h e association
filed a complaint with the NLRC against the cooperative. T h e court upheld the
complainants, declared them to have been illegally dismissed, and awarded them
damages — all upon representation of the employees' Association (not union)
1
against the cooperative.
5. EXCEPTION: INTERNATIONAL ORGANIZATIONS
A certification e l e c t i o n c a n n o t be c o n d u c t e d in an international
organization which the Philippine Government has granted immunity from local
jurisdiction. Examples of such organizations are the International Rice Research
Institute (IRRI) and the International Catholic Migration Commission (ICMC).
T h e grant of such immunity is a political question whose resolution by the
executive branch of government is conclusive upon the courts.
International Catholic Migration Commission vs. Hon. Pura Calleja, etc., et al., G.R.
No. 85750; Kapisanan Ng Manggagawa at TAC Sa IRRI-OIAUA vs. Secretary of
Labor, et al., G.R. No. 89331, September 28,1990 —
(1) "International Organization" and "Specialized Agencies."— The term
"international organization'' is generally used to describe an organization set up
by agreement between two or more states. Under contemporary international law,
such organizations are endowed with some degree of international legal personality
such that they are capable of exercising specific rights, duties and powers. They
are organized mainly as a means for conducting general international business in
which die member states have an interest. The United Nations, for instance, is an
international organization dedicated to the propagation of world peace. "Specialized
agencies" are international organizations having functions in particular fields. The
term appears in Articles 57 and 63 of die Charter of the United Nations.
(2) Principles Underlying the Grant of International Immunities to International
Organizations. — There are basically three propositions underlying the grant of
international immunities to international organizations. These principles, contained
in the ILO Memorandum, are stated thus: 1) international institutions should have a
status which protects them against control or interference by any one government in

*Nueva Ecija Coop., Inc. (NEECO) Employees Association vs. NLRC, et al., G.R.
No. 116066, January 24, 2000.

245
 LABOR RELATIONS
ART. 243

the performance of functions for the effective discharge of which they are responsible
to democratically constituted international bodies in which all the nations concerned
are represented; 2) no country should derive any national financial advantage by
levying fiscal charges on common international funds; and 3) the international
organization should, as a collectivity of States members, be accorded the facilities for
the conduct of its official business customarily extended to each other by its individual
member states. The theory behind all three propositions is said to be essentially
institutional in character. "It is not concerned with the status, dignity or privileges
of individuals, but with the elements of functional independence necessary to free
international institutions from national control and to enable them to discharge
their responsibilities impartially on behalf of all their members." The raison d'etre for
these immunities is the assurance of unimpeded performance of their functions by
the agencies concerned.
(3) Labors Basic Rights Remain. —The immunity of the International Catholic
Migration Commission (ICMC) and the International Rice Research Institution
(IRRI) from local jurisdiction by no means deprives labor of its basic rights, which are
guaranteed by Article II, Section 18, Article III, Section 8, and Article XIII, Section 3,
of the 1987 Constitution; and implemented by Articles 243 and 246 of the Labor Code.
(4) Certification Election Barred by Immunity. — The immunity granted being
"from every form of legal process except insofar as in any particular case they have
expressly waived their immunity," it is inaccurate to state that a certification election
is beyond the scope of that immunity for the reason that it is not a suit against ICMC.
A certification election cannot be viewed as an independent or isolated process. It
could trigger off a series of events in the collective bargaining process together with
related incidents and/or concerted activities, which could inevitably involve ICMC in
the "legal process," which includes "any penal, civil and administrative proceedings."
The eventuality of Court litigation is neither remote and from which international
organizations are precisely shielded to safeguard them from the disruption of their
functions. Clauses on jurisdictional immunity are said to be standard provisions in the
constitutions of international organizations. "The immunity covers the organizations
concerned, its property and its assets...."

5.1 Waiver of Immunity

Waiver of its immunity is discretionary to IRRI. Without such express waiver
the NLRC or its labor arbiters have no jurisdiction over IRRI even in cases of
1
alleged illegal dismissal of any of its employees.
5.2 Foreign Workers
Foreigners, whether natural or juridical, as well as foreign corporations,
are strictly prohibited from engaging directly or indirectly in all forms of trade
union activities. However, aliens working in the country with valid work permits

^allado vs. International Rice Research Institute, G.R. No. 106483, May 22,
1995.

246
 COVERAGE ART. 243

may exercise the right of self-organization if they are nationals of a country that
1
grants the same or similar right to Filipino workers.
6. EXCEPTION: RELIGIOUS OBJECTORS; IGLESIA NI CRISTO MEMBERS
Under the Industrial Peace Act (1953) which preceded the Labor Code
(and even under the present Code) the employer and the union could enter
into a "closed shop" a g r e e m e n t which would compel employees to b e c o m e
union workers as a condition of continued employment. But in 1961 R.A. No.
3 3 5 0 was passed to e x e m p t from such compulsory union membership the
followers of any religious sect (such as the Iglesia ni Cristo) whose teachings
forbid membership in labor unions. T h e constitutionality of R.A. No. 3 3 5 0
was upheld by the Supreme Court in Victoriano vs. Elizalde.
Victoriano vs. Elizalde Rope Workers' Union, et al., G.R. No. L-25246, September
12,1974 —
What the exception provides, therefore, is that members of said religious
sects cannot be compelled or coerced to join labor unions even when said unions
have closed shop agreements with the employers; that in spite of any closed shop
agreement, members of said religious sectors cannot be refused employment or
dismissed from their jobs on the sole ground that they are not members of the
collective bargaining union.
It may not be amiss to point out here that the free exercise of religious
profession or belief is superior to contract rights. In case of conflicts, the latter must,
therefore, yield to the former. The Supreme Court of the United States has also
declared on several occasions that the rights in the First Amendment, which include
freedom of religion, enjoy a preferred position in the constitutional system. Religious
freedom, although not unlimited, is a fundamental personal right and liberty, and
has a preferred position in the hierarchy of values. Contractual rights, therefore,
must yield to freedom of religion. It is only where unavoidably necessary to prevent
an immediate and grave danger to the security and welfare of the community that
infringement of religious freedom may be justified, and only to the smallest extent
necessary to avoid the danger.
Appellant bewails that while Republic Act No. 3350 protects members of
certain religious sects, it leaves no right to, and is silent as to the protection of,
labor organizations. The purpose of Republic Act No. 3350 was not to grant rights
to labor unions. The rights of labor unions are amply provided for in Republic Act
No. 875 [the Industrial Peace Act] and the new Labor Code. As to the lamented
silence of the Act regarding the rights and protection of labor unions, suffice it
to say, first, that the validity of a statute is determined by its provisions, not by its
silence; and, second, the fact that the law may work hardship does not render it
unconstitutional.
The fear is entertained by appellant that unless the Act is declared
unconstitutional, employers will prefer employing members of religious sects mat

'Article 269.
247
 ART. 243 LABOR RELATIONS

prohibit their members from joining labor unions, and thus be a fatal blow to
unionism. We do not agree. The threat to unionism will depend on the number
of employees who are members of the religious sects that control the demands of
die labor market. But there is really no occasion now to go further and anticipate
problems. We cannot judge with the material now before us.

6.1 Does the Exemption Still Stand?

The provision of the Industrial Peace Act allowing employer and union
to enter into a "union security" agreement is carried over into Article 248(e) of
the Labor Code. But left out is the exemption granted in 1961 by R.A. 3350 to
"religious objectors."
Since the Code repealed the Industrial Peace Act (as indicated in Article
302 of the Code and in Book VII, Rule III, Section 1 of the Implementing Rules)
and since R.A. 3350 was merely a part of R.A. 875, then it is logical to conclude
that the repeal of R.A. 875 carries with it the repeal of R.A. 3350.
The question therefore arises: Does the exemption of religious objectors
from compulsory union membership still stand? T h e question has not been
squarely answered, but four points must be noted:
Firstly, the decision in Victoriano vs. Elizalde was promulgated on September
12, 1974. At that time the new Labor Code was already issued, and although
the Code did not carry the exemption under R.A. No. 3 3 5 0 , the Court cited
"the new Labor Code" in rejecting the arguments assailing the validity of R.A.
No. 3350. T h e sense is that the Labor Code and R.A. No. 3350 do not repel
each other.
Secondly, the constitutionalist Fr. Joaquin Bernas, S.J., writing in 1987 in his
"Commentary to the (1987) Philippine Constitution," cited the Victoriano ruling
as an illustration of the right to free exercise of one's religion. In other words,
even if the exemption under R.A. 3350 is not found in the Labor Code, still the
exemption can be invoked under the freedom of religion clause in the present
Constitution's Bill of Rights.
Thirdly, in the decision rendered in 1988 in Kapatiran vs. Calleja (see
below) the court refused to compel the INK members to j o i n the incumbent
union.
Fourthly, in the case of Ebralinag vs. Division Superintendent of Cebu, G.R.
No. 95770, March 1, 1993, the Court, in exempting Jehovah's Witnesses from
compulsory participation in flag ceremonies, cited the religious objectors' similar
exemption from compulsory union membership. Clearly, as recent as 1993, the
Supreme Court acknowledges the existence or justification of the exemption
granted by R.A. 3350 in 1961.

248
 COVERAGE ART. 244

6.2 Iglesia ni Kristo Members May Form and Join Own Union
Kapatiran Sa Meat And Canning Division (Tupas Local Chapter No. 1027) vs. The
Honorable BLR Director Pura Ferrer-CaUeja, et al, G.R. No. L-82914, June 20,
1988 —
This Court's decision in Victoriano vs. Elizalde Rope Workers* Union (59 SCRA 54)
upholding the right of members of the Iglesia ni Kristo sect not to join a labor union
for being contrary to their religious beliefs, does not bar the members of that sect
from forming their own union. The public respondent correctly observed that the
"recognition of die tenets of the sect x x x should not infringe on the basic right of self-
organization granted by the Constitution to workers, regardless of religious affiliation."
The fact that TUPAS was able to negotiate a new CBA with ROBINA within the
60-day freedom period of the existing CBA, does not foreclose the right of the rival
union, NEW ULO, to challenge TUPAS* claim to majority status, by filing a timely
petition for certification election on October 13, 1987 before TUPAS' old CBA
expired on November 15,1987 and before it signed a new CBA with the company on
December 3,1987. As pointed out by Med-Arbiter Abdulla, a "certification election is
the best forum in ascertaining the majority status of the contending unions wherein
the workers themselves can freely choose their bargaining representative thru secret
ballot." Since it has not been shown that this order is tainted with unfairness, this
Court will not thwart the holding of a certification election.'

Note: In a J u n e 1992 decision the Supreme Court held that INK members
have the right to vote in a certification election. See Reyes vs. Trajano in the
chapter on employee representation in collective bargaining.

ART. 2 4 4 . RIGHT OF EMPLOYEES IN THE PUBLIC SERVICE

E m p l o y e e s o f g o v e r n m e n t c o r p o r a t i o n s established u n d e r the
Corporation Code shall have the right to organize and to bargain collectively
with their respective employers. All other employees in the civil service shall
have the right to form associations for purposes not contrary to law.
see art. 276 COMMENTS AND CASES
1. GOVERNMENT EMPLOYEES' RIGHT TO ORGANIZE; LIMITATIONS
T h e highest law of the land guarantees to government employees the right
to organize and to negotiate, but not the right to strike.
T h e Supreme Court, through Justice (later C h i e f Justice) Narvasa
summarizes the laws covering the government employees' right to self-organize
in the Arizala case.
Arizala, et al. vs. Court of Appeals, et al, G.R. Nos. L-43633-34, September 14,
1990 —
(1) Presidential Decree No. 807

'Associated Trade Unions [ATU] vs. Noriel, 88 SCRA 96.

249
 ART. 244 LABOR RELATIONS

The Civil Service Decree of the Philippines, Presidential Decree No. 807
(effective October 6,1975) superseded the Civil Service Law of 1959 (R.A. 2260) and
repealed or modified "all laws, rules and regulations or parts thereof inconsistent
with the provisions thereof." The Decree categorically described the scope and
coverage of the "Civil Service" as embracing "every branch, agency, supervision,
and instrumentality of the government, including every government-owned or -controlled
corporation whether performing governmental or proprietary function." The effect was
seemingly to prohibit government employees (including those "employed in
proprietary functions of the Government") to "strike for the purpose of securing
changes of their terms and conditions of employment," something which they were
allowed to do under the Civil Service Act of 1959.
(2) The 1987 Constitution
The provisions of the present Constitution on the matter appear to be somewhat
more extensive. They declare that the "right to self-organization shall not be denied
to government employees"; that the State "shall guarantee the rights of all workers
to self-organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law"; and that said workers
"shall be entitled to security of tenure, humane conditions of work, and a living wage,
x x x " (and) also participate in policy and decision-making processes affecting their
rights and benefits as may be provided by law."
(3) CSC Memorandum Circular No. 6
Memorandum Circular No. 6 of the Civil Service Commission, issued on April
21, 1987, enjoins strikes by government officials and employees, to wit:
" x x x prior to the enactment by Congress of applicable laws concerning
strike by government employees, and considering that there are existing laws
which prohibit government officials and employees from resorting to strike, the
Commission enjoins, under pain of administrative sanctions, all government
officers and employees from staging strikes, demonstrations, mass leaves, walk-
outs and other forms of mass action which will result in temporary stoppage or
disruption of public services. To allow otherwise is to undermine or prejudice
the government system."
(4) Executive Order No. 180
The scope of the constitutional right to self-organization of "government
employees" above-mentioned, was defined and delineated in Executive Order No.
180 (effective June 1, 1987). According to this Executive Order, the right of self-
organization does indeed pertain to all "employees of all branches, subdivisions,
instrumentalities and agencies of the Government, including government-owned
or -controlled corporations with original charters', such employees "shall not be
discriminated against in respect of their employment by reason of their membership in
employees' organizations or participation in the normal activities of their organization
x x x (and their) employment shall not be subject to the condition that they shall
not join or shall relinquish their membership in the employees' organizations."

250
 COVERAGE ART. 244

Executive Order No. 180 established the Public Sector Labor-Management

Council (PSLMC) to implement the executive order. T h e Council has formulated
and issued the Implementing Rules and Regulations of E.O. No. 180, dated
September 28, 2004.
1.1 Limited Purpose
,
T h e extent of the government employees right of self-organization differs
significantly from that of employees in the private sector. T h e latter's right of
self-organization, i.e., "to form, j o i n or assist labor organizations for purposes of
collective bargaining," admittedly includes the right to deal and negotiate with their
respective employers in order to fix the terms and conditions of employment and
also, to engage in concerted activities for the attainment of their objectives, such
as strikes, picketing, boycotts. But the right of government employees to "form,
join or assist employees' organizations of their own choosing" under Executive
Order No. 180 is not regarded as existing or available for "purposes of collective
1
bargaining," but simply "for the furtherance and protection of their interests."
In other words, the right of Government employees to deal and negotiate
with their respective employers is not quite as extensive as that of private
employees. Excluded from negotiation by government employees are the "terms
and conditions of employment x x x that are fixed by law" it being only those
terms and conditions not otherwise fixed by law that "may be subject of negotiation
between the duly recognized employees' organizations and appropriate
government authorities." Declared to be "not negotiable" are matters "that
require appropriation of funds e.g., increase in salary emoluments and other
allowances, car plan, special hospitalization, medical and dental services, increase
2
in retirement benefits, and those "that involve the exercise of management
prerogatives e.g., appointment, promotion, assignment/detail, penalties as a
result of disciplinary action, etc? Considered negotiable are such matters as
schedule of vacation and other leaves, work assignment of pregnant women;
4
recreational, social, athletic, and cultural activities and facilities, etc.

1.2 No Signing Bonus

Employees and officers of SSS are not entitled to the signing bonus
provided for in collective negotiation agreement because the process of collective
negotiations in the public sector does not encompass terms and conditions of
5
employment requiring the appropriation of public funds. The Court reminds
the Social Security Commission officials that the SSS fund is not their money.

'Arizala, et al. vs. CA, et al, above.

2
Sec. 3, Rule VIII, Rules and Regulations Implementing E.O. No. 180.
3
Sec. 4, id.
•Sec. 2, id., Ibid.
5
SSS vs. Commission on Audit, G.R. No. 149240, July 11, 2000.
251
 LABOR RELATIONS
ART. 244

'This Court has been very consistent in characterizing the funds being
administered by SSS as a trust fund for the welfare and benefit of workers and
employees in the private sector. In United Christian Missionary vs. Social Security
Commissions were unequivocal in declaring the funds contributed to the Social
Security System by compulsion of law as funds belonging to the members which
were merely held in trust by the government, and resolutely imposed the duty
upon the trustee to desist from any and all acts which would diminish the property
rights of owners and beneficiaries of the trust fund.
"We do not find the signing bonus to be a truly reasonable compensation.
The gratuity was of course the SSC's gesture of good will and benevolence for
the conclusion of collective negotiations between SSC and ACCESS, as the CNA
would itself state, but for what objective? Agitation and propaganda which are
so commonly practiced in private sector labor-management relations have no
place in the bureaucracy and that only a standard collective negotiation which
is concluded within a reasonable time must be the standard for interaction in
the public sector. This desired conduct among civil servants should not come,
we must stress, with a price tag which is what the signing bonus appears to be."
1.3 Excepted Employees
Excepted from the application of Executive Order 180, however, are
"members of the Armed Forces of the Philippines, including police officers,
policemen, firemen and jail guards." (Sec. 4.) For reasons of security and safety,
they are not allowed to unionize.
Executive Order No. 180 also declares that "high level employees whose
functions are normally considered as policy making or managerial, or whose
duties are of a highly confidential nature shall not be eligible to j o i n the
organization of rank-and-file government employees. A "high level employee" is
one "whose functions are normally considered policy determining, managerial
or one whose duties are highly confidential in nature. A managerial function
refers to the exercise of powers such as: (1) to effectively recommend such
managerial actions; (2) to formulate or execute management policies and
decisions; or (3) to hire, transfer, suspend, lay-off, recall, dismiss, assign or
discipline employees."
Noticeably, in the private sector the three levels of positions, for purposes
of unionization, are managerial, supervisory, and rank and file. T h e latter two
can unionize. In government, the levels are only two: high level and rank-and-
file. The "high level" employees cannot unionize.
1.3a Professors as Rank-and-File Employees
Professors at the University of the Philippines who are not exercising
managerial or highly confidential functions are rank-and-file employees and
may unionize separately from the non-academic personnel.

252
 COVERAGE
ART. 244

University of the Philippines vs. Ferrer-Calleja, G.R. No. 96189, July 14, 1992. —
Facts: The University of the Philippines seeks the nullification of the Order of
the director of the Bureau of Labor Relations holding that "professors of the University
of the Philippines are rank-and-file employees and that, consequently, they should be
represented by only one labor organization together with the so-called non-academic
employees.
Issues: 1) Whether or not professors, associate professors and assistant
professors are "high-lever or "rank and file" employees; 2) Whether or not, they,
and other employees performing academic functions, should comprise a bargaining
unit distinct from that of the non-academic employees.
Ruling: [First issue:] In the light of Executive Order No. 180 and its
implementing rules, as well as the University's charter and relevant regulations,
the professors, associate professors and assistant professors (thereafter simply
referred to as professors) cannot be considered as exercising such managerial or
highly confidential functions as would justify their being categorized as "high-level
employees" of the institution.
It is the University Academic Personnel Committee, composed of deans,
the assistant for academic affairs and the chief of personnel, which formulates the
policies, rules and standards respecting selection, compensation and promotion of
members of the academic staff. The departmental and college academic personnel
committees' functions are purely recommendatory in nature, subject to review and
evaluation by the University Academic Personnel Board.
Neither can membership in the University Council elevate the professors to
the status of high-level employees. It is readily apparent that the policy-determining
functions of the University Council are subject to review, evaluation and final approval
by die Board of Regents. The Council's power of discipline is likewise circumscribed
by the limits imposed by the Board of Regents.
Also, the policy determining functions of the University Council refer to
academic matters, i.e., those governing the relationship between the University and
its students, and not the University as an employer and the professors as employees.
It is thus evident that no conflict of interest results in the professors' being members
of the University Council and being classified as rank-and-file employees.
[Second Issue:] Be that as it may, does it follow, as public respondent would
propose, that all rank-and-file employees of the university are to be organized into
a single collective bargaining unit?
The "community or mutuality of interests" test has provided the standard in
determining the proper constituency of a collective bargaining unit.
In the case at bar, the University employees may, as already suggested,
quite easily be categorized into two general classes: one, die group composed of
employees whose functions are non-academic, i.e., janitors, messengers, typists,
clerks, receptionists, carpenters, electricians, ground-keepers, chauffeurs, mechanics,
plumbers and, two, die group made up of those performing academic functions,
i.e., full professors, associate professors, assistant professors, instructors — who may

253
 LABOR RELATIONS
ART. 244

be judges or government executives — and research, extensions and professional

staff. Not much reflection is needed to perceive that the community or mutuality of
interests which justifies the formation of a single collective bargaining unit is wanting
between the academic and non-academic personnel of the University.

In short, the professors, associate professors and assistant professors of the

University of the Philippines are rank-and-file employees. The full professors,
associate professors, assistant professors, instructors and the research, extension
and professional staff may, if so minded, organize themselves into a separate
collective bargaining unit.
1.4 Right to Strike
E.O. No. 180 also concedes to government employees, like their counterparts
in the private sector, the right to engage in concerted activities, including the
right to strike. But the executive order quickly adds that those activities must be
exercised in accordance with law, i.e., subject both to "Civil Service Law and rules"
and "any legislation that may be enacted by Congress." It further states that "the
resolution of complaints, grievances and cases involving government employees"
is not ordinarily left to collective bargaining or other related concerted activities,
but to "Civil Service Law and labor laws and procedures whenever applicable."
In case "any dispute remains unresolved after exhausting all available remedies
under existing laws and procedures, the parties may jointly refer the dispute
to the (Public Sector Labor-Management) Council for appropriate action;"
What is more, the Rules and Regulations implementing Executive Order No.
180 explicitly provide that since the "terms and conditions of employment in
the government, including any political subdivision or instrumentality thereof
and government-owned and -controlled corporations with original charters,
are governed by law, the employees therein shall not strike for the purpose of
1
securing changes thereof."
See further discussion in the topic Strike and Lockout.
2. REGISTRATION
Government employees' organizations shall register with the Civil Service
Commission and the Department of Labor and Employment. T h e application
shall be filed with the Bureau of Labor Relations of the Department which shall
process the same in accordance with the provisions of the Labor Code of the
Philippines, as amended. Applications may also be filed with the Regional Offices
of the Department of Labor and employment which shall immediately transmit
the said applications to the Bureau of Labor Relations within three (3) days from
2
receipt thereof.

'Arizala, et al. vs. CA, et al, G.R. Nos. L43633-34, September 14, 1990.
2
Sec. 7, E.O. No. 180.

254
 COVERAGE ART. 244

Upon approval of the application, a registration certificate shall be issued to

the organization recognizing it as a legitimate employees' organization with the
right to represent its members and undertake activities to further and defend its
interests. T h e corresponding certificates of registration shall be jointly approved
by the Chairman of the Civil Service Commission and Secretary of Labor and
1
Employment.

3. CERTIFICATION ELECTION IN GOVERNMENT CORPORATION

A certification election to choose the union that will represent the
employees may be conducted by the Bureau of Labor Relations in a government
2
corporation, whether governed by the Labor Code or the Civil Service rules.
Trade Unions of the Philippines and Allied Services vs. National Housing Corporation,
G.R. No. 49677, May 4, 1989 —
Facts: Respondent National Housing Corporation is a corporation organized in
1959 under Executive Order No. 399, known as the Uniform Charter of Government
Corporations, dated January 1, 1951. Its shares of stock are and have been one
hundred percent owned by the Government from its incorporation under Act No.
459, the former corporation law.
Ruling: The 1987 Constitution declares that "the civil service embraces all
branches, subdivisions, instrumentalities and agencies of the government, including
government-owned or -controlled corporations with original charters."
Consequently, the civil service now covers only government-owned or
-controlled corporations with original or legislative charters, that is, those created
by an act of Congress or by special law, and not those incorporated under and
pursuant to a general legislation.
There is, therefore, no impediment to the holding of a certification election
among the workers of NHC for it is clear that they are covered by the Labor Code,
the NHC being a government-owned and/or -controlled corporation without an
original charter.
Whether the employees of NHC are covered by the Labor Code or by the civil
service laws, a certification election may be conducted.

3.1 Election of Officers in Government Unions

Does the B L R have jurisdiction to call for and conduct the election of
officers of an employee's association in the public sector such as that at the
MWSS?
The authority of the B L R in assuming jurisdiction over a certification
election, or any inter-union or intra-union conflicts, is found in Article 226 of
the Labor Code of the Philippines, which reads: x x x

'Sec. 8, E.O. No. 180.

2
University of Life Foundation vs. Bureau of Labor Relations, G.R. No. 85050,
April 12, 1989.
255
 ART. 244 LABOR RELATIONS

It is quite clear from this provision that BLR has the original and exclusive
jurisdiction on all inter-union and intra-union conflicts. The subject of the case
at bar, which is the election of the officers and members of the board of KMKK-
MWSS, is, clearly, an intra-union conflict, being within or inside a labor union.
1
It is well within the powers of the BLR to act upon.
4. WHEN PSLMC MAY RULE ON LEGALITY OF DISMISSAL
The Public Sector Labor-Management Council, created by Executive Order
No. 180 (June 1, 1987) has jurisdiction to hear charges of unfair labor practice
filed by government employees against their employer, e.g., the Pamantasan ng
Lungsod ng Maynila. In deciding the ULP charge the PSLMC may also rule
on the complainants' dismissal if the two issues — ULP and dismissal — are
unavoidably interlinked.
The Civil Service Commission may adopt the findings of the PSLMC and
2
order the employer to reinstate the dismissed employees.
5. UNION-BUSTING IN A GOVERNMENT AGENCY, U.L.P.
In the above-cited case of Pamantasan, the Civil Service Commission
adopted the findings and conclusion of the Public Sector Labor-Management
Council. The CSC's resolution described union busting in a government office
and the Supreme Court sustained it.
In the arbitration proceedings, the PSLMC found that PLM
committed unfair labor practice (U.L.P.) 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 a n d / o r
members of the PLMFO [Pamantasan ng Lungsod ng Maynila Faculty
Organization], and had their qualifications, training, experience and
performance rating not been impressive, the Commission would have
agreed that the termination or nonrenewal of the contracts of complainants
does not constitute unfair labor practice. But the records reveal otherwise.
(Pamantasan ng Lungsod ng Maynila vs. Civil Service Commission, et al., G.R.
No. 107590, February 21, 1995.)

'Bautista vs. Hon. Court of Appeals, et al., G.R. No. 123375, February 28, 2005.
2
Pamantasan ng Lungsod ng Maynila vs. Civil Service Commission, et al., G.R.
No. 107590, February 21, 1995.

256
 COVERAGE ARTS. 245-245-A

5.1 Even Temporary Employees May Organize

Even temporary employees enjoy the 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
1
choice but to declare it as a grave abuse of discretion.
Under Article 277(c) of the Labor Code, "any employee, whether employed
for a definite period or not, shall beginning on his first day of service, be
2
considered an employee for purposes of membership in any labor union."

ART. 2 4 5 . INELIGIBILITY OF MANAGERIAL EMPLOYEES TO JOIN ANY

LABOR ORGANIZATION; RIGHT OF SUPERVISORY EMPLOYEES
Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership
in the collective bargaining unit of the rank-and-file employees but may join,
assist or form separate collective bargaining units a n d / o r legitimate labor
organizations of their own. T h e rank-and-file union and the supervisors'
union operating within the same establishment may join the same federation
or national union.
(Note: T h e last sentence of this article was added by Sec. 8 of R A . No.
9 4 8 1 , effective J u n e 14, 2 0 0 7 . )
ART. 245-A. EFFECT OF INCLUSION AS MEMBERS OF EMPLOYEES
OUTSIDE THE BARGAINING UNIT
T h e inclusion as union members of employees outside the bargaining
unit shall not be a ground for the cancellation of the registration of the
union. Said employees are automatically deemed removed from the list of
membership of said union.
(Note: This amendatory article was inserted by R A . No. 9481, effective
June 14, 2 0 0 7 . )

'Pamantasan ng Lungsod ng Maynila vs. Civil Service Commission, et al., G.R.

No. 107590, February 21, 1995.
'Ibid.
257
 ARTS. 245-245-A LABOR RELATIONS

COMMENTS AND CASES

1. CATEGORIES OF EMPLOYEES
Early in Book V, in Article 212, the Code classifies and defines the three
categories of employees for purposes of applying the law on labor relations. They
are managerial, supervisory, and rank-and-file.
This three-tiered classification is made by R.A. No. 6715 (popularized as
Herrera-Veloso law). This law, which took effect on March 2 1 , 1989 (15 days
after its publication in the Philippine Daily Inquirer), provides that although
"supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees," they may, however "join, assist or
1
form separate labor organization of their own."
2. INELIGIBILITY OF MANAGERS
Who are the managers prohibited from forming, joining, or assisting labor
unions? Is this prohibition constitutional? These fundamental questions are
tackled en banc by the Supreme Court in United Pepsi-Cola Supervisory Union vs.
Laguesma and Pepsi-Cola Products, Phils., Inc., G.R. No. 122226, March 25, 1998.
The Court upholds the constitutionality of the prohibition through the erudite
pen of Justice Mendoza. The learned Justice has to tread the field of management
to identify and classify the managerial positions that the law refers to.

2.1 Types of Managerial Employees

The term "manager," the Court explains, generally refers to "anyone who
is responsible for subordinates and other organizational resources." As a class,
managers constitute three levels of pyramid, namely, top management, middle
management, and first-line management which is also called supervisor. Below
this third level are the operatives or operating employees who, we may add, are
also called rank-and-file.
First-line Managers — T h e lowest level in an organization at which
individuals are responsible for the work of others is called first-line or first-
level management. First-line managers direct operating employees only;
they do not supervise other managers. Examples of first-line managers
are the "foreman" or production supervisor in a manufacturing plant, the
technical supervisor in a research department, and the clerical supervisor
in a large office. First-level managers are often called supervisors.
Middle Managers — T h e term middle manager can refer to more
than one level in an organization. Middle managers direct the activities
of other managers and sometimes also those of operating employees.
Middle managers' principal responsibilities are to direct the activities that

^amboanga Wood Products, Inc. vs. National Labor Relations Commission,

G.R. No. 82088, October 15, 1989.

258
 COVERAGE
ARTS. 245-245-A

implement their organizations' policies and to balance the demands of

their superiors with the capacities of their subordinates. A plant manager
in an electronics firm is an example of a middle manager.
Top Managers — Composed of a comparatively small group of
executives, top management is responsible for the overall management of the
organization. It establishes operating policies and guides the organization's
interactions with its environment. Typical titles of top managers are "chief
executive officer," "president," and "senior vice-president." Actual titles
vary from one organization to another and are not always a reliable guide
to membership in the highest management classification.
As can be seen from this description, a distinction exists between [1]
those who have the authority to devise, implement and control strategic and
operational policies (top and middle managers); and [2] those whose task is
simply to ensure that such policies are carried out by the rank-and-file employees
of an organization (first-level managers/supervisors). What distinguishes them
from the rank-and-file employees is that they act in the interest of the employer
in supervising such rank-and-file employees.
"Managerial employees" may therefore be said to fall into two distinct
categories: the "managers" per se, who compose the former group described
above, and the "supervisors" who form the latter group. Whether they belong
to the first or the second category, managers, vis-a-vis employers, are, likewise,
employees.
After classifying managers, the Court (in this case of United Pepsi-Cola
Supervisory Union) examines the position description of route managers prepared
and submitted by the employer. It states that the basic purpose of a route manager
is "to meet the sales plan" and that this objective is to be achieved "through the
skillful management of your j o b and the management of your people." The
position description, reproduced lengthily in the decision, details the route
manager's principal accountabilities. From these the Court deduced:
Unlike supervisors who basically merely direct operating employees
in line with set tasks assigned to them, route managers are responsible for
the success of the company's main line of business through management
of their respective sales teams. Such management necessarily involves the
planning, direction, operation and evaluation of their individual teams
and areas which the work of supervisors does not entail.
T h e route managers cannot thus possibly be classified as mere
supervisors because their work does not only involve, but goes far
beyond, the simple direction or supervision of operating employees
to accomplish objectives set by those above them. They are not mere
functionaries with simple oversight functions but business administrators
in their own right.

259
 ARTS. 245-245-A LABOR RELATIONS

Thus, the Court confirms the ruling of the med-arbiter and the Secretary
of Labor that the route managers of Pepsi-Cola are managerial employees who are
ineligible for union membership according to the first sentence of Article 245.
The Court turns next to the question of constitutionality.
2.2 Constitutionality of the Prohibition
The question is whether the first sentence of Article 245 of the Labor Code,
prohibiting managerial employees from forming, assisting or joining any labor
organization, is constitutional in light of Article III, Sec. 8 of the Constitution
which provides:
The right of the people, including those employed in the public
and private sectors, to form unions, associations, or societies for purposes
not contrary to law shall not be abridged.
United Pepsi-cola Supervisory Union vs. Laguesma and Pepsi-cola Products Phils.,
Inc., G.R. No. 122226, March 25, 1998 —
The present Article 245 is the result of the amendment of the Labor Code
in 1989 by R.A. No. 6715, otherwise known as the Herrera-Veloso Law. Unlike the
Industrial Peace Act or the provisions of the Labor Code which it superseded, R.A.
No. 6715 provides separate definitions of the terms "managerial" and "supervisory
1
employees."
Although the definition of "supervisory employees" seems to have been unduly
restricted to the last phrase of the definition in the Industrial Peace Act, the legal
significance given to the phrase "effectively recommends" remains the same. In fact,
the distinction between top and middle managers, who set management policy, and
front-line supervisors, who are merely responsible for ensuring that such policies
2
are carried out by the rank-and-file, is articulated in the present definition. When
read in relation to this definition in Article 212(m), it will be seen that Article 245
faithfully carries out the intent of the Constitutional Commission in framing Article
III, Sec. 8 of the fundamental law.
Nor is the guarantee of organizational right in Article HI, Sec. 8 infringed by a
ban against managerial employees forming a union. The right guaranteed in Article
III, Sec. 8 is subject to the condition that its exercise should be for purposes "not
contrary to law." In the case of Article 245, there is a rational basis for prohibiting
managerial employees from forming or joining labor organizations.
In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, this Court elaborated
on this rationale, thus:
"... 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

•See Article 212[m].

2
Azucena, The Labor Code with Comments and Cases, 172-173; 1996.

260
 COVERAGE ARTS. 245-245-A

conflict of interests. The Union can also become company-dominated with the
presence of managerial employees in Union membership." (Id. at 347-348.)
To be sure, the Court in Philips Industrial was dealing with the right of
confidential employees to organize. But the same reason for denying them the right
to organize justifies even more the ban on managerial employees from forming
unions. After all, those who qualify as top or middle managers are executives who
receive from their employers information that not only is confidential but also is not
generally available to the public, or to their competitors, or to other employees.

2.2a Other Opinions

T h e Court has spoken but there has to be a postscript. T h e Court's decision
is unreservedly concurred in by six other justices, but the Chief Justice [Mr.
Davide, Jr.] — himself a member of the 1986 Constitutional Commission — has
a different opinion. While he agrees that the route managers are managerial
employees, he believes, citing C o n c o m deliberations, that Article 245 is
unconstitutional, as it abridges Sec. 8, Art. Ill of the 1987 Constitution.
But this opinion is refuted by Mr. Justice Puno. He believes that "debates
and proceedings of the Constitutional Convention are never of binding force.
They may be valuable but are not necessarily decisive."
Mr. Puno's concurring opinion also clarifies that Article 245 does not
absolutely disqualify managerial employees from exercising their right of
association. What it prohibits is merely the right to j o i n labor organizations.
Managerial employees may form associations or organizations so long as they
are not labor organizations [as defined in Article 212(g) of the Labor Code].
T h e freedom of association guaranteed under the Constitution remains and has
not been totally abrogated by Article 245.
Justice Puno further airs a warning. "To declare Article 245 of the Labor
Code unconstitutional cuts deep into our existing industrial life and will open
the floodgates to unionization at all levels of the industrial hierarchy. Such a
ruling will wreak havoc on the existing set-up between management and labor.
If all managerial employees will be allowed to unionize, then all who are in the
payroll of the company, starting from the president, vice-president, general
managers and everyone, with the exception of the directors, may go on strike
or picket the employer. Company officers will join forces with the supervisors
and rank-and-file."
Still a fourth shade of opinion is that of Mr. Justice Vitug. He partially agrees
with the majority and with Mr. Puno that Article 245 is not unconstitutional.
But to his mind the route managers are not managerial employees; they are
supervisors.
The questions raised in the Pepsi-Cola case are evidently fundamental and
contentious — a fact heightened by the variations in the opinions of the justices.

261
 ARTS. 245-245-A LABOR RELATIONS

The majority opinion fortunately puts to rest the issue of constitutionality. But,
this writer thinks, the problem of drawing the line between a manager and a
supervisor will persist. The dividing line is still too unshapen and too situational
to serve as an effective standing formula to avert disputes.
3. EVOLUTION OF SUPERVISORS' RIGHT TO ORGANIZE
Unlike managers, supervisors can unionize. This right is now established
after evolving through three periods searching for definitions.
3.1 First Period: Under the Industrial Peace Act
The first period is from 1953 under the Industrial Peace Act up until
1974 when the Labor Code took effect. During that period supervisors could
unionize separately from rank-and-file workers. T h e term "supervisor" was
defined as 'any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline
other employees, or responsibly to direct them, and to adjust their grievances,
or effectively to recommend such acts if, in connection with the foregoing, the
exercise of such authority is not of a merely routinary or clerical nature but
1
requires the use of independent judgment.'"
Upholding the supervisors' right to organize, the Court ruled in Fibril
Refinery Corp. vs. Filoil Supervisory and Confidential Employees Association and CIR
(46 SCRA 522) in August 1972:
Indeed, it is well settled that "in relation to his employer," a foreman
or supervisor "is an employee within the meaning of the Act." x x x For
this reason, supervisors are entitled to engage in union activities and any
discrimination against them by reason thereof constitutes an unfair labor
practice.
T h e problem was that although the Industrial Peace Act defined a
"supervisor," it failed to define a "manager" or "managerial employee." So the
question arose: Did the word "supervisor" include "manager"? Could managers
also unionize? In a case involving Caltex managers (decided only one month
after Filoil), the Court answered affirmatively, thus:
Ordinarily there should be identity of interest between the managerial
staff and the employing firm, especially if the dispute is between management
and the rank-and-file. Yet, conflict is possible between the managerial staff
and the corporation — what the group's welfare requires may be different
from what the firm is willing to grant. (Caltex Filipino Managers and Supervisors
Association vs. CIR, 47 SCRA 112.)
T h e Caltex ruling in effect included managers in the term "supervisor,"
thus allowing the managers to unionize. T h e ruling naturally disturbed the
businessmen.

•Section 2[k] of R.A. No. 875.

262
 COVERAGE ARTS. 245-245-A

3.2 Second Period: Under the Labor Code Before Amendment by R A .

No. 6715
The second period in the evolution of the supervisors' right to organize is
from the effectivity of the Labor Code in 1974 until March 21, 1989 when R.A.
No. 6715 (known as the Herrera-Veloso amendments) came into force.
T h e Labor Code as issued in 1974 dropped the old term "supervisor" but
replaced it with "managerial employee." Managerial employees were not allowed
to unionize. T h e Code defined a "managerial employee" as "one who is vested
with power or prerogative to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees,
or to effectively recommend such managerial actions. All employees not falling
within this definition are considered rank-and-file employees for purposes of
1
this Book."
This time the question was: Did "managerial employee" include "supervisor"?
Were supervisors also banned from unionizing? Yes. T h e prohibition was applied
to supervisors in the case of Bulletin Publishing Corp. vs. Sanchez, 144 SCRA 428,
decided on October 7, 1986:
Said the Court:
T h e supervisory employees of petitioner firm may not, under the
law, form a supervisors' union, separate and distinct from the existing
bargaining unit composed of the rank-and-file employees. It is distinctly
stated in Sec. 11, Rule II, of the Omnibus Rules Implementing the Labor
Code that supervisory unions are presently no longer recognized nor
allowed to exist and operate as such.
T h e Bulletin ruling in effect included "supervisors" among "managerial
employees" who could not unionize. This time it was the labor groups that rose
in protest.
3.3 Third Period: Under the Labor Code as Amended by R A . 6715
Apparently, the labor sector could not bear losing a right it had enjoyed for
more than twenty years prior to the Labor Code; hence, it sought its restoration
through the Herrera-Veloso amendments. Taking effect on March 21, 1989,
R.A. No. 6715 marks the third stage in the evolution of the supervisors' right to
organize.
R.A. No. 6715 presents a compromise formula: retain the ineligibility
of managerial employees but revive the right of supervisory employees to
unionize.
Now, under the aegis of R.A. No. 6715, the Supreme Court sighs in relief:
"Thus, the right of supervisory employees to organize under the Industrial

•Article 246.

263
 ARTS. 245-245-A LABOR RELATIONS

Peace Act is once more recognized under the present amendments to the
1
Labor Code."
4. DEFINITIONS OF MANAGER AND SUPERVISOR
It is now settled that to avoid the mix-up that "managerial employee"
includes "supervisor" and "supervisor" includes "manager," R.A. No. 6715 has
to separate the definitions of the two terms. They should be loaded, as it were,
in two separate boats. The definitions are in Article 212(m) after amendments
by R A . 6715.
Unlike in the Industrial Peace Act and the Labor Code before such
amendment, the power to decide on managerial acts is now separated from
the power to recommend those managerial acts, such as laying down policy,
hiring or dismissing employees, etc. A supervisor has the power only to
recommend while a managerial employee has the power to decide and do
those acts.
But to make one a supervisor, the power to recommend must not be merely
routinary or clerical in nature but requires the use of independent judgment.
In other words, the recommendation is (1) discretionary or judgmental (not
clerical), (2) independent (not a dictation of someone else), and (3) effective
(given particular weight in making the management decision). If these qualities
are lacking or, worse, if the power to recommend is absent, then the person is
not really a supervisor but a rank-and-file employee and therefore belongs or
should belong to a rank-and-file organization.
Similarly, a so-called manager, no matter how his position is titled, is
not really a manager in the eyes of the law if he does not possess managerial
powers (to lay down and execute management policies a n d / o r to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees). If he can only
recommend the exercise of any of these powers, he is only a supervisor, hence,
may join, assist or form a supervisors' organization. Worse, if he cannot even
recommend those acts, he is not even a supervisor but a rank-and-file employee,
regardless of position title, perquisites, or seniority.
An employee is not managerial if he does not take part in policy making
but is given ready policies to execute and standard practices to observe, thus
2
having little freedom of action.
In short, a manager makes policy decisions or people decisions or both; a
supervisor recommends those decisions. O n e is a decision maker, the other, a
recommender.
In one case, the petitioner's motion for reconsideration outlined the

'Pagkakaisa ng mga Manggagawa sa Triumph International vs. Pura Ferrer-

Calleja, G.R. No. 85915, January 17, 1990.
2
Franklin Baker Company vs. Trajano, G.R. No. 75039, January 28, 1988.

264
 COVERAGE ARTS. 245-245-A

j o b description of Supervisors. In the category of Supervisory II, the "General

Summary" provides:
"Assist the Foreman in the effective dispatching/distribution of
manpower and equipment to carry out approved work." While the first
duty enumerated in the position of Supervisor III states:
1. Executes and coordinates work plans emanating from his
supervisors.
T h e Court said that it was clear from the above provisions that
the functions of the questioned positions were not managerial because
they only executed approved and established policies leaving little or
no discretion at all whether to implement the policies or not. (Southern
Philippines Federation of Labor vs. Calleja, 172 SCRA 676 [1989]. See also: Paper
Industries Corp. vs. Laguesma, G.R No. 101738, April 12, 2000.)
5. TEST OF SUPERVISORY STATUS
T h e test of "supervisory" or "managerial status" depends on whether
a person possesses authority to act in the interest of his employer in the
matter specified in Article 2 1 2 ( m ) of the Labor Code and Section l ( m ) of its
Implementing Rules [now Sec. l ( t ) ] and whether such authority is not merely
routinary or clerical in nature, but requires the use of independent judgment.
Thus, where such recommendatory powers are subject to evaluation, review
and final action by the department heads and other higher executives of the
company, the same, although present, are not effective and not an exercise of
1
independent judgment as required by law.
T h e fact alone that a supervisor makes recommendations as to what
managerial actions to take in disciplinary cases by itself does not make one a
managerial employee. It is more a question of how effective the recommendation
2
is.
If the supervisory power enjoyed by the members of a union consists merely
in recommending as to what managerial actions to take in disciplinary cases,
such members are not prohibited from forming their own collective bargaining
unit. Their responsibilities do not inherently require the exercise of discretion
and independent judgment as supervisors or vested with power and authority
3
to lay down or execute management policies.
It is the nature of an employee's functions and not the nomenclature or tide
given to his j o b which determines whether he has a rank-and-file or managerial
status. Among the characteristics of managerial rank are: 1) he is not subject to

•Franklin Baker Company vs. Trajano, G.R. No. 75039, January 28, 1988.
2
General Rubber and Footwear Corporation vs. Bureau of Labor Relations,
G.R. No. 74262, October 29, 1987.
Ibid.

265
 ARTS. 245-245-A LABOR RELATIONS

the rigid observance of regular office hours; 2) his work requires the consistent
exercise of discretion and judgment in its performance; 3) the output produced
or the result accomplished cannot be standardized in relation to a given period of
time; 4) he manages a customarily recognized department or subdivision of the
establishment, customarily and regularly directing the work of other employees
there; 5) he either has the authority to hire or discharge other employees or his
suggestions and recommendations as to hiring and discharging, advancement
and promotion or other change of status of other employees are given particular
weight; and 6) as a rule, he is not paid hourly wages nor subjected to maximum
1
hours of work.
A person who occupies the position of assistant electrical and signal
superintendent in the Manila Railroad Company has around 60 men under
his supervision; can recommend the promotion and the disciplining of his
subordinates; assign and direct their work and acts as superintendent in the
absence of the latter. Therefore, such person is a supervisor within the meaning
of Sec. 2, clause (k) of R.A. 875. As such he is ineligible for membership in a
2
labor organization of employees under his supervision.

5.1 The Power to Recommend

The power to recommend, in order to qualify an employee as a supervisor,
must not only be effective but should require the use of independent judgment.
It should not be merely of a routinary or clerical nature. In the case at bar, it
appears in the first place that, as found by the trial court, there are no clear
appointments in favor of the employees in question including the alleged power
to recommend, and while the Personnel Manager of the petitioner company,
declared that these employees as section heads could recommend the hiring,
expulsion, or dismissal of the workers under their respective shops, the fact
remains that, as admitted by him, no such recommendations have ever been
made by them. There is also evidence that other employees have been appointed,
transferred, or discharged and laid-off without any recommendation of the
employees involved in these proceedings. Furthermore, such recommendatory
powers are subject to evaluation, review, and final action by the department
heads and other higher executives of the company. It, therefore, appears that the
conclusion of the trial court that the authority to recommend, even if present, is
not effective and not an exercise of independent judgment as required by law,
3
is not incorrect.

•Engineering Equipment, Inc. vs. NLRC, 133 SCRA 752 [1984].

2
Kapisanan ng mga Manggagawa vs. CIR, 106 Phil. 607, November 28, 1959.
3
National Merchandising Corp. vs. CIR, et al., G.R. No. H 8 7 1 0 , March 30,
1963.

266
 COVERAGE ARTS. 245-245-A

5.2 Examples of Ineffective or Clerical Recommendation

T h e assistant principal and g e n e r a l supervisor admitted that the
recommendations of the area supervisors are subject to evaluation, review
and final approval by the principal, as "x x x most recommendations of area
supervisors are considered with a grain of salt." It is established by the evidence
that even as the efficiency ratings given by an area supervisor are based on his own
observations of the teachers under him, he was prevailed upon by the principal
to change them, which he did, and that his remarks and observations of some
of the teachers under him were deleted in the copy furnished the Bureau of
Private Education. In the case of area supervisor Neri, as was admitted by the
assistant principal and general supervisor, his recommendations, indeed, are
considered with a grain of salt. Neri's testimony is not denied that when he
recommended a teacher to teach biology, his recommendation was rejected and
when he assigned a teacher to teach Science, without so much as notifying him,
the teacher was given Arithmetic. T h e preparation of program of supervision
by area supervisors is, likewise, not indicative that they are supervisors, for, as
testified by Lainez, which testimony is not rebutted, it is nothing more than the
enumerations of activities in the area, many of them merely routinary, as for
instance, the checking of the formal themes, notebooks, survey of textbooks,
and regulating the number of students in a class. For all the foregoing reasons,
it is believed that Lainez, Belen, Neri, Briones, Cortez, Sr., Torres, Pisigan, and
1
Almanzor are not supervisors."

5.3 Managers or Supervisors: Under the ILO Convention

It is not necessarily incompatible with the [ILO Convention on Freedom of
Association] to deny managerial or supervisory employees the right to belong to
the same trade union as other workers, [provided] that two conditions are met:
First, that such workers have the right to form their own association to
defend their interest, and
Second, that the categories of such staff are not defined so broadly as
to weaken the organization of other workers in the enterprise or branch of
activity by depriving them of a substantial portion of their present or potential
2
membership.
6. SEGREGATION OF RANK-AND-FILE AND SUPERVISORS
Article 245 allows supervisory employees to form, join, or assist separate
labor organizations of their own, but they are not eligible for membership in a
labor organization of the rank-and-file employees. Neither may a rank-and-file
join a union of supervisors.

1 Laguna Colleges vs. Court of Industrial Relations, 25 SCRA 173.

2
Neville Rubin [ed.]., Code of International Labor Law, Cambridge [2005], pp.
130-131.

267
 ARTS. 245-245-A LABOR RELATIONS

This policy of segregating the supervisors' union from that of the rank-and-
file is founded on fairness to the employer and the employees themselves. It will
be doubly detrimental to the employer if the supervisors and the rank-and-file, as
members of only one union, could take a common stand against the employer.
The Court has noted that a company foreman, while in the performance
of supervisory functions, may be the extension or alter ego of the management.
Adversely, the foreman, by his actuation, may influence the workers under his
supervision to engage in slowdown or similar activities detrimental to the policy,
1
interest or business objectives of the company or corporation.
In another case, the list of monthly paid employees submitted by the
petitioner company contains the names of about twenty-seven (27) supervisory
employees, six (6) Managerial employees, one (1) confidential employee and
twenty-six (26) office and technical employees holding various positions. T h e
list reveals that the positions occupied by the twenty-six (26) office and technical
employees are in fact rank-and-file positions, i.e., A / C mechanic, draftsmen,
storemen, motorpool mechanic, secretaries, accounts clerk, company nurses,
industrial mechanic, boiler men, laboratory technicians, payroll clerk, welder,
purchasing clerk, company drivers and electricians. It is fairly obvious that
these positions cannot be considered as supervisory positions for they do not
carry the authority to act in the interest of the employer or to recommend
managerial actions. It is not decisive that these employees are monthly paid
employees. Their mode of compensation is usually a matter of convenience
2
and does not necessarily determine the nature and character of their j o b .

6.1 Effects of Having Mixed Membership

To enforce the segregation of supervisors and rank-and-file employees,
the High Court had ruled that a union with commingled membership was not
a legitimate labor organization. Such a union should not have been registered
at all. But this ruling is rendered merely historical by the amendment made by
R.A. No. 9481 in 2007. As stated in Article 245-A the employees that should not
have been included in membership are automatically deemed removed from
the list of membership.
The reader who is interested in those past rulings may look up the cases
of: Toyota Motor Phil. Corp. vs. Toyota Motor Phil. Labor Union, G.R. No. 121084,
February 19,1997; San Miguel Corp. vs. Mandaue Packing Products Plant, Inc., etc.,
G.R. No. 152356, August 16, 2005; Negros Oriental Electric Cooperative vs. Secretary,
etc., G.R. No. 143615, May 9, 2001; Tagaytay Highlands, etc. vs. Tagaytay Highlands
Employees Union, G.R. No. 14200, January 22, 2003.

'Golden Farms, Inc. vs. Calleja, G.R. No. 78755, July 19, 1989.
2
Dunlop Slazenger (Phil.), Inc. vs. Hon. Secretary of Labor and Employment
and Dunlop Slazenger Staff Association-APSOTEU, G.R. No. 131248, December
11, 1998.

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 COVERAGE ARTS. 245-245-A

6.2 Affiliation of Supervisors and Rank-and-File Unions

Aside from the rule on segregation, R.A. No. 9481 has also made changes
regarding affiliation of supervisors' union and rank and file union. Previously,
these unions in the same enterprise could not affiliate with the same federation
because to allow it would be an indirect violation of the segregation rule
(mentioned above).
Again, this ruling no longer holds because the last sentence added to
Article 245 by R.A. No. 9481 allows it.
T h e superseded rulings are in Atlas Lithographic Services vs. Undersecretary
Laguesma, G.R. No. 96566, January 6 , 1 9 9 2 and De la Salle University Medical Center
vs. Laguesma, G.R. No. 102084, August 12, 1998.
7. CONFIDENTIAL EMPLOYEES
Article 245 does not mention confidential employees at all; under said
article, therefore, confidential employees do not constitute a distinct category
of employees for purposes of the right to self-organize. This is understandable
because confidentiality may attach to a managerial, supervisory, or even rank-
and-file j o b . Confidentiality is not a matter of official rank, it is a matter of j o b
content and authority. It is not measured by closeness to or distance from top
management but by the significance of the jobholder's role in the pursuit of
corporate objectives and strategy. In principle, every managerial position is
confidential — one does not become a manager without having gained the
confidence of the appointing authority. But not every confidential employee
is managerial; he may be a supervisory or even a rank-and-file employee.
Confidentiality, in other words, cuts across the pyramid of j o b s from the base to
the apex, from messengerial to managerial.
For this reason the confidential employees' inclusion in or exclusion from
a union, either of supervisors or of rank-and-file, is a recurrent contentious issue.
And the court rulings have not been easy to track down. They have swung back
and forth, like a pendulum, from unhindered inclusion to outright exclusion to
limited inclusion. It will be helpful to review the evolution (or the back and
forth swings) of the rulings, ending up with Metrolab (1996) which seems to have
settled the question, at last.
7.1 First Swing: Inclusion Among Rank-and-File
In an April 1989 case, the Court upheld the union's argument that
confidential rank-and-file employees should be included in the bargaining unit.
The Court inter alia said: if the confidential employees are not managers, they
can unionize and no CBA provision can take away that right. The words of the
Court —
As regards the employees in the confidential payroll, the petitioner
has not shown that the nature of their jobs is classified as managerial except

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for its allegation that they are considered by management as occupying

managerial positions and highly confidential. Neither can payment or
nonpayment of union dues be the determining factor of whether the
challenged employees should be excluded from the bargaining unit since
the union shop provision in the CBA applies only to newly hired employees
but not to members of the bargaining unit who were not members of the
union at the time of the signing of the CBA. It is, therefore, not impossible
for employees to be members of the bargaining unit even though they
are non-union members or not paying union dues. {Southern Philippines
Federation of Labor vs. Calleja, G.R No. 80882, April 24, 1989.)

7.2 Second Swing: Exclusion from Rank-and-File

Just three months later in Golden Farms case the Court upheld the validity
of the agreement of the parties excluding confidential employees from the CBA
coverage. The Court observed that confidential employees such as accounting
personnel, radio and telegraph operators, having access to confidential
information, may become the source of undue advantage. Said employees may
act as spies of either party to a collective bargaining agreement. Thus, it was
held that 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 the confidential employees, by nature of their functions/
1
positions are expressly excluded.
In a 1992 decision, in Philips Industrial Development vs. NLRC (G.R. No.
88957, J u n e 25, 1992), the court again sustained the exclusion of confidential
rank-and-file employees from the rank-and-file union.
In this leading case, the company had a history of five collective bargaining
agreements since 1971, where confidential employees, along with others, were
excluded. During negotiations for the sixth CBA, the question of exclusion of
confidential employees, among others, was submitted for arbitration. T h e Labor
Arbiter affirmed the exclusion, but the NLRC reversed this, so the employer
went up to the Supreme Court. T h e Court excluded the confidential employees
and justified the decision by saying:
By the 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. [Emphasis supplied]

7.3 Third Swing: Inclusion Among Supervisors

T h e outright disqualification enunciated in Philips was not adopted in the
1994 decision in Phil. Phosphate Fertilizer Corp. vs. Torres and Philphos Movement

'Golden Farms, Inc. vs. Calleja, G.R. No. 78755, July 19, 1989.

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 COVERAGE ARTS. 245-245-A

for Progress, Inc. (G.R. No. 98050, March 17, 1994). In this case, the petitioner
employer raised the question whether its professional/technical and confidential
employees may validly j o i n respondent PMPI union which was composed of
supervisors.
Based mainly on the testimony of the Personnel Officer, the Supreme
Court ruled for the exclusion of the professional/technical but did not stop the
inclusion of the confidential employees. T h e Court said:
T h e certification of Personnel Officer Duhaylungsod that its
professional/technical employees occupy positions that are nonsupervisory is
evidence that said employees belong to the rank-and-file. Quite obviously,
these professional/technical employees cannot effectively recommend
managerial actions with the use of independent judgment because they
are under the supervision of superintendents and supervisors.
As to the confidential employees of the petitioner, the latter has not
shown any proof or compelling reason to exclude them from joining
respondent PMPI and from participating in the certification election,
unless these confidential employees are the same professional/technical
employees whom we find to be occupying rank-and-file positions.
In short, the Court allowed the confidential, if they are not managers or
rank-and-file, to j o i n the supervisor's union.

7.4 Fourth Swing: Inclusion Among Monthly Paid Rank-and-File

T h e Golden Farms case of 1989 had a sequel in 1994. In the case of Golden
Farms, Inc. vs. Secretary of Labor and Progressive Federation of Labor (G.R. No. 102130,
July 26, 1 9 9 4 ) , the sole issue for resolution was whether or not petitioner's
monthly-paid rank-and-file employees can constitute a bargaining unit separate
from the existing bargaining unit of its daily-paid rank-and-file employees.
T h e Court essentially said yes without excluding the monthly-paid confidential
employees.
Our decision in Golden Farms, Inc. vs. Honorable Pura Ferrer-Calleja
(G.R. No. 78755, July 19, 1989) does not pose any obstacle in holding
a certification election among petitioner's monthly-paid rank-and-file
employees. The issue brought to fore in that case was totally different, i.e.,
whether or not petitioner's confidential employees, considering the nature
of their work, should be included in the bargaining unit of the daily-paid
rank-and-file employees. In the case at bench, the monthly-paid rank-and-
file employees of petitioners are being separated as bargaining unit from its
daily-paid rank-and-file employees, on the ground that they have different
interest to protect. The principle of res judicata is, therefore, inapplicable.
Under this decision, the confidential employees (who, in 1989, were
ordered excluded from the daily-paid rank-and-file) were allowed to be included
in the union of the monthly-paid rank-and-filers.

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 ARTS. 245-245-A LABOR RELATIONS

7.4a Limited Exclusion; Doctrine of Necessary Implication

Up to this point, the rulings have not given definitive answer to die question
of whether confidential employees may join unions.
A definitive answer seems to have emerged, however, from more recent
decisions. In a December 1994 case of Republic Planters Bank and in the February
1995 ruling in Pier 8 Arrastre, the Supreme Court reiterated the Philips ruling
that confidential personnel, like managers, cannot join unions.
In National Association of Trade Unions (NATU) - Republic Planters Bank
Supervisors Chapter vs. Hon. Ruben Torres (G.R. No. 93468, December 29, 1994,)
the Court declared that the Bank branch managers/cashiers, controllers are
not managers but only supervisors. At the same time they are confidential
employees. 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. The Court noted that "While Article 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."
The doctrine of necessary implication means that what is implied in a
statute is as much a part thereof as that which is expressed.
The Court took pains to list down the reasons for disqualifying managerial
[and confidential] employees, then the Court concluded: "Inasmuch as the
Branch Managers/OICs, Controllers and Cashiers of the Bank were shown to be
confidential employees, they are disqualified from joining or assisting the union
of supervisors, or joining, assisting or forming any other labor organization."
After arriving at this conclusion, however, the Court made this ambivalent
reservation:
But this ruling should be understood to apply only to the present case
based on the evidence of the parties, as well as to those similarly situated.
It should not be understood in any way to apply to banks in general.
T h e ineligibility of confidential employees, first enunciated in Philips
and ambivalently reiterated in Republic Planters Bank is further repeated in the
1995 case of Pier 8 Arrastre vs. Confessor and General Maritime and Stevedores Union
(G.R. No. 110854, February 1 3 , 1 9 9 5 ) . Here, the Court observed that foremen,
in modern industrial plants, are links in the chain of command between
management and labor; they are supervisory employees and cannot be part
of rank-and-file unions. But legal secretaries, though neither managers nor
supervisors, are confidential employees. "Thus, to them applies our holding in
n
the case of Philips Industrial Dev., Inc. vs. NLRC (210 SCRA 339 [ 1 9 9 2 ] ) .
These reiterations of the Philips ruling lead to the conclusion that
confidential employees, like managers, are not eligible to form, join, or assist
labor organizations.

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 COVERAGE ARTS. 245-245-A

7.4b T h e Metrolab and Meralco Summations: Exclusion from bargaining

unit and Closed-shop Clause
The issue appears to have been put to rest by the Court's ruling in Metrolab,
given below. Confidential employees should be exempted not only from the
closed-shop provision of the CBA but also from membership in the rank-and-file
bargaining unit.
Metrolab Industries, Inc. vs. Hon. Nieves Roldan-Confesor and Metro Drug Corp.
Employees Assn.-FFW, G.R. No. 108855, February 28, 1996 —
Facts: Metro Drug Corporation Employees Association-Federation of Free
Workers (the Union) represents the rank-and-file employees of petitioner Metrolab
Industries, Inc. (Metrolab/Mil) and of Metro Drug, Inc.
On December 31, 1990, the CBA between Metrolab and the Union expired.
The negotiations for a new CBA started, but was caught in a deadlock. The Union
filed a notice of strike.
The Secretary of Labor took over the dispute, enjoined the strike, and directed
the parties to submit their position papers and evidence on the deadlocked issues.
Subsequently, the Secretary resolved all disputed items in the CBA and ordered
the parties to execute a new CBA. But Metrolab laid off 167 rank- and-file employees
on ground of redundancy due to lack of work, which dismissal the new Secretary of
Labor nullified. She also ruled that executive secretaries were part of the bargaining
unit of rank-and-file employees..
On February 4, 1993, the Union filed a motion for execution which Metrolab
opposed.
Metrolab argued 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 were all members of the company's Management
Committee, should not only be exempted from the closed-shop provision but should
also be excluded from membership in the bargaining unit of the rank-and-file
employees because those executive secretaries were confidential employees, having
access to "vital labor information."
Ruling: We concur with Metrolab.
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.
The rationale behind the exclusion of confidential employees from the
bargaining unit of the rank-and-file employees and their qualification to join
any labor organization was succinctly discussed in Philips Industrial Development
vs. NLRC:

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 ARTS. 245-245-A LABOR RELATIONS

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

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 COVERAGE ARTS. 245-245-A

T h e Metrolab ruling that confidential employees are not members of the

rank-and-file bargaining unit is reiterated in Manila Electric Co. vs. Hon. Secretary
of Labor and Meralco Employees and Workers Association (MEWA), G.R. No. 127598,
January 2 7 , 1 9 9 9 .
Citing Metrolab, the Supreme Court in 2008 declared: ' T h e disqualification
of managerial and confidential employees from joining a bargaining unit for
1
rank-and-file employees is already well-entrenched in jurisprudence."
Whether or not the employees sought to be excluded from the appropriate
bargaining unit are confidential employees is a question of fact, which is not a
2
proper issue in a petition for review under Rule 45 of the Rules of Court.
T h e union insisting that the employees in question are not confidential
employees should buttress its claim. If the union fails to substantiate its claim,
then the confidential employees are rightfully excluded from the bargaining
3
unit.
7.4c Who Are Confidential Employees?
It is now settled that confidential employees cannot form, join or assist
rank-and-file unions; they cannot even be made to pay agency fees or be subjected
to union security clause since they are not part of the bargaining unit. But who,
precisely, is a confidential employee?
T h e definition in Philips says:
Confidential employees 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. (Philips Industrial Development vs. NLRC, G.R. No.
88957, June 25, 1992.)
T h e definition in Metrolab states: Confidential employees are 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. It also states: "By the
very nature of their functions, they assist in a confidential capacity to, or
have access of confidential matters of, persons who exercise managerial
functions in the field of labor relations." (Metrolab Industries vs. Confesor, et
al., G.R No. 108855, February 28, 1996.)

•Standard Chartered Bank Employees Union vs. Standard Chartered Bank, et

al, G.R. No. 161933, April 22, 2008.
Ibid.
Ibid.

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 ARTS. 245-245-A LABOR RELATIONS

7.4d The Labor Nexus

The phrase "in the field of labor relations" is important. It stresses labor
nexus, that is, the confidentiality of the position should relate to labor relations
matters.
Citing US authorities and speaking through Mme. Justice Romero, the
Court elaborates on the definition.
San Miguel Corp. Supervisors and Exempt Union, et al vs. Hon. Laguesma, et al.,
G.R. No. 110399, August 15, 1997 —
Confidential employees are those who (1) assist or act in a confidential
capacity, (2) to persons who formulate, determine, and effectuate management
policies in the field of labor relations. The two criteria are cumulative, and both
must be met if an employee is to be considered a confidential employee— that is,
the confidential relationship must exist between the employee and his supervisor,
and the supervisor must handle the prescribed responsibilities relating to labor
relations.
The exclusion from bargaining units of employees who, in the normal
course of their duties, become aware of management policies relating to labor
relations is a principal objective sought to be accomplished by the "confidential
employee rule." The broad rationale behind this rule is that employees should not be
placed in a position involving a potential conflict of interest. "Management should
not be required to handle labor relations matters through employees who are
represented by the union with which the company is required to deal and who
in the normal performance of their duties may obtain advance information of
the company's position with regard to contract negotiations, the disposition of
grievances, or other labor relations matters."
An important element of the "confidential employee rule" is the employee's
need to use labor relations information. Thus, in determining the confidentiality
of certain employees, a key question frequently considered is the employees'
necessary access to confidential labor relations information.
Granting arguendo that an employee has access to confidential labor
relations information but such is merely incidental to his duties and knowledge
thereof is not necessary in the performance of such duties, said access does not
render the employee a confidential employee. " I f access to confidential labor
relations information is to be a factor in the determination of an employee's
confidential status, such information must relate to the employer's labor
relations policies. Thus, an employee of a labor union, or of a management
association, must have access to confidential labor relations information
with respect to his employer, the union, or the association, to be regarded
a confidential employee, and knowledge of labor relations information
pertaining to the companies with which the union deals, or which the
association represents, will not cause an employee to be excluded from the

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bargaining unit representing employees of the union or association." "Access

to information which is regarded by the employer to be confidential from the
business standpoint, such as financial information or technical trade secrets,
will not render an employee a confidential employee."

T h e following paragraph may well summarize the confidential-employee

rule:
Article 245 of the Labor Code does not directly prohibit confidential
employees from engaging in union activities. However, under the doctrine
of necessary implication, the disqualification of managerial employees
equally applies to confidential employees. T h e confidential-employee
rule justifies exclusion of confidential employees because in the normal
course of their duties they become aware of management policies relating
to labor relations. It must be stressed, however, that when the employee
does not have access to confidential labor relations information, there is no
legal prohibition against confidential employees from forming, assisting,
or joining a union. (Sugbuanon Rural Bank vs. Laguesma, G.R. No. 116194,
February 2, 2000.)

7.4e New CBA may Include Employees Excluded from Old CBA; Expired
CBA may be Modified, not just Renewed
Regardless of the swinging court rulings, the employer and the union in
an enterprise may negotiate and agree whom to cover in their CBA. And they
are free to change their agreement: people excluded before may be included
now, or vice-versa.
T h e Supreme Court agrees with the Solicitor General that the express
exclusion of the computer operators and discipline officers from the bargaining
unit of rank-and-file employees in the 1986 collective bargaining agreement does
not bar any renegotiation for the future inclusion of the said employees in the
bargaining unit. During the freedom period, the parties may not only renew
the existing collective bargaining agreement but may also propose and discuss
modifications or amendments thereto. With regard to the alleged confidential
nature of the said employees' functions, after a careful consideration of the
pleadings filed before this Court, we rule that the said computer operators and
discipline officers are not confidential employees. As carefully examined by the
Solicitor General, the service record of a computer operator reveals that his
duties are basically clerical and non-confidential in nature. As to the discipline
officers, we agree with the voluntary arbitrator that based on the nature of their
duties, they are not confidential employees and should therefore be included
1
in the bargaining unit of rank-and-file employees.

*De la Salle University vs. DLSUEA, G.R. No. 109002, April 12, 2000.

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 ARTS, 245-245-A LABOR RELATIONS

The Court also affirms the findings of the voluntary arbitrator that the
employees of the College of St. Benilde should be excluded from the bargaining
unit of the rank-and-file employees of De la Salle University, because the two
educational institutions have their own separate juridical personality and no
sufficient evidence was shown to justify the piercing of the veil of corporate
1
fiction.
The ruling that a CBA may be modified, and not merely renewed, is
explained further under Article 253.
8. SECURITY GUARDS MAY JOIN RANK-AND-FILE OR SUPERVISORS
UNION
Under the old rules, security guards were barred from joining a labor
organization of the rank-and-file. Under R.A. 6715, they may now freely join
a labor organization of the rank-and-file or that of the supervisory union,
2
depending on their rank.
Aware of risks, the Court further said:
We are aware however of possible consequences in the implementation
of the law in allowing security personnel to join labor unions within the
company they serve. T h e law is apt to produce divided loyalties in the
faithful performance of their duties. Economic reasons would present
the employees concerned with the temptation to subordinate their duties
to the allegiance they owe the union of which they are members, aware
as they are that it is usually union action that obtains for them increased
pecuniary benefits. (Manila Electric Co. vs. Secretary of Labor and Employment,
G.R No. 91902, May 20, 1991.)
Thus, in the event of a strike declared by their union, security
personnel may neglect or outrightly abandon their duties, such as pro-
tection of property of their employer and the persons of its officials
and employees, the control of access to the employer's premises, and
the maintenance of order in the event of emergencies and untoward
incidents. (Ibid.)
It is hoped that the corresponding amendatory a n d / o r suppletory
laws be passed by Congress to avoid possible conflict of interest in security
personnel. (Ibid.)

9. WORKERS IN EXPORT PROCESSING ZONES

Export processing zones, anywhere in the Philippines, are part of Philippine
territory which is subject to its sovereignty and laws. To them therefore applies
with undiminished force the Philippine Constitution that guarantees the workers'

*De la Salle University vs. DLSUEA, G.R. No. 109002, April 12, 2000.
2
Manila Electric Co. vs. Secretary of Labor and Employment, G.R. No. 91902,
May 20, 1991.

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 COVERAGE ART. 246

rights to organize, to strike and so forth. T h e zone workers cannot be denied

these constitutional rights. Moreover, the model corporate code of conduct
issued in 1977 by ILO titled Tripartite Declaration of Principles Concerning
Multinational Enterprises and Social Policy states:
"Where governments of host countries offer special incentives
to attract foreign investments, these incentives should not include any
limitations on the workers' freedom of association or the right to organize
and bargain collectively." (Neville Rubin, [ed.], Code of International Labor Law
[Cambridge, 2005], p. 130. See also: John W. Budd, Labor Relations: Striking a
Balance [McGraw-Hill, 2008], p. 450.)

ART. 2 4 6 . NON-ABRIDGMENT OF RIGHT TO SELF-ORGANIZATION

It shall be unlawful for any person to restrain, c o e r c e , discriminate
against or unduly interfere with employees and workers in their exercise of
the right to self-organization. Such right shall include the right to form, join,
or assist labor organizations for the purpose of collective bargaining through
representatives of their own choosing and to engage in lawful concerted
activities for the same purpose or for their mutual aid and protection, subject
to the provisions of Article 2 6 4 of this Code.
COMMENTS
1. CONCEPT OF THE RIGHT TO SELF-ORGANIZATION
This is a key article that offers an inclusionary definition of the right to
self-organization (S.O.) by saying not what it is but what it includes. It includes
at least two rights: (1) the right to form, j o i n or assist labor organizations, and
(2) the right to engage in lawful concerted activities. The "labor organization"
may be a union or association of employees, as mentioned in Article 212(g). Its
purposes may be collective bargaining or dealing with the employer.
T h e right to form labor organization is twin to the right to engage in
concerted activity. Such group action, which should be held peacefully to remain
lawful, can similarly be for collective bargaining purpose, but it can simply be
for aid and protection of the members. T h e latter purpose implies that a group
action, such as protest action (kilos protesta), can be held even if the group is
not involved in collective bargaining. Such peaceful group action, according to
rulings, is an exercise of the right to freedom of speech under the Bill of Rights.
The group action is not necessarily a work stoppage or strike because it may be
done during off-hours. If it is a strike, the restrictions in Article 264 should be
observed.
T h e labor organization entitled to protection does not have to be a
registered organization. And it does not have to be the bargaining union.
But, if unregistered, does it have a right to represent its members? No, because
it is not a legal person. Thus, it cannot claim the rights under Article 242.

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 ART. 246 LABOR RELATIONS

It is worth noting, finally, that the right to self-organization is granted

not only to employees but to "workers," whether employed or not. In fact,
constitutionally speaking, the right to form associations or societies is a right of
the "people," whether workers or not.
No "person"—inside or outside of government, employer or non-employer,
unionist or non-unionist—may abridge these rights. If abridged in the workplace,
the abridgement is termed ULP (unfair labor practice).
Article 246 is both (in mixed metaphors) the conceptual mother and the
formidable fortress of the prohibited ULP acts expounded in the next three
articles.

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 Title VI
UNFAIR LABOR PRACTICES
Chapter I
CONCEPT

Overview/Key Questions Box 12

1. Unfair labor practice is an act of abridgment which
Article 246 prohibits. Is it ULP to stop a "protest action"
by ununionized employees?
2. Under Article 247, ULP is both civil and criminal
offense. Why?
3. What are the elements of ULP as an offense?

ART. 247. CONCEPT OF UNFAIR LABOR PRACTICE AND PROCEDURE

FOR PROSECUTION THEREOF
Unfair labor practices violate the constitutional right of workers and
employees to self-organization, are inimical to the legitimate interests of
both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual
respect, disrupt industrial peace and binder the promotion of healthy and
stable labor-management relations.
Consequently, unfair labor practices are not only violations of the civil
rights of both labor and management but are also criminal offenses against
the State which shall be subject to prosecution and punishment as herein
provided.
Subject to the exercise by the President or by the Secretary of Labor
and Employment of the powers vested in them by Articles 263 and 264 of this
Code, the civil aspects of all cases involving unfair labor practices, which may
include claims for actual, moral, exemplary and other forms of damages,
attorney's fees and other affirmative relief, shall be under the jurisdiction
of the Labor Arbiters. The Labor Arbiters shall give utmost priority to the
hearing and resolution of all cases involving unfair labor practices. They
shall resolve such cases within thirty (30) calendar days from the time they
are submitted for decision.

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 LABOR RELATIONS
ART. 247

Recovery of civil liability in the administrative proceedings shall bar

recovery under the Civil Code.
No criminal prosecution under this title
Tide may be instituted without a
final judgment, finding that an unfair labor practice was committed, having
been first obtained in the preceding paragraph. During the pendency of such
administrative proceedings, the running of the period of prescription of the
criminal offense herein penalized shall be considered interrupted: Provided,
however, That the final judgment in the administrative proceedings shall not
be binding in the criminal case nor be considered as evidence of guilt but
merely as proof of compliance of the requirements herein set forth.
COMMENTS AND CASES
1. CONCEPT OF UNFAIR LABOR PRACTICE
As noted at the start of Book V a major aim of labor relations policy is
industrial democracy whose realization is most felt in free collective bargaining
or negotiation over terms and conditions of employment. But for bargaining or
negotiation to be true and meaningful, the employees, first of all, must organize
themselves. Because self-organization is a prerequisite — the lifeblood — of
industrial democracy, the right to self-organize has been enshrined in the
Constitution, and any act intended to weaken or defeat the right is regarded by
law as an offense. The offense is technically called "unfair labor practice" (ULP).
Literally, it does not mean an unfair practice by labor but a practice unfair to
labor, although the offender may either be an employer or a labor organization.
As already noted, Article 246 is the conceptual mother of unfair labor
practice. It declares that it is unlawful for any person to restrain, coerce,
discriminate against or unduly interfere with the exercise of the right to self-
organization.
The victim of the offense is not just the workers as a body and the well-
meaning employers who value industrial peace, but the State as well. Thus, the
attack to this constitutional right is considered a crime which therefore carries
both civil and criminal liabilities.
Even prior to the Labor Code, ULP was a criminal act, and the Court
explained thus — "A consideration of the entire law on the matter clearly discloses
the intention of the lawmaker to consider acts which are alleged to constitute
unfair labor practices as violations of the law or offenses, to be prosecuted in
the same manner as a criminal offense. T h e reason for this provisions is that
the commission of an unfair labor practice is an offense against a public right
or interest and should be prosecuted in the same manner as a public offense.
The reason for the distinction between an unfair labor practice case and a mere
violation of an employer of its contractual obligation towards an employee is, x
x x that unfair labor practice cases involve violation of public right or policy, to
be prosecuted like criminal offenses, whereas a breach of an obligation of the

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 CONCEPT ART. 247

employer to his employees is only a contractual breach to be redressed like an

1
ordinary contract or obligation.

1.1 Elements
Commission of unfair labor practice at the enterprise level needs the
presence of certain elements: first, there is employer-employee relationship
between the offender and the offended; and second, the act done is expressly
defined in the Code as an act of unfair labor practice. T h e first element is required
because ULP is negation of, a counteraction to, the right to organize which is
available only to employees in relation to their employer. No organizational
right can be negated or assailed if employer-employee relationship is absent in
the first place.
T h e second element is that the act done is prohibited by the Code,
specifically in Articles 2 4 8 and 261 for an employer and Article 249 for a labor
organization. Article 2 1 2 ( k ) emphatically defines "unfair labor practice" as "any
unfair labor practice as expressly defined by this Code." Article 261 amplifies
Article 248(i) by stating that violation of a CBA is unfair labor practice only if
the violation is gross in character.
T h e prohibited acts, it should be stressed, are all related to the workers' self-
organizational right and to the observance of a collective bargaining agreement
(CBA). T h e only possible exception is Article 248(f) referring to dismissing or
prejudicing an employee for giving testimony under this Code [regardless of
the subject of the testimony].
Because ULP is and has to be related to the right to self-organization and
to the observance of the CBA, it follows that not every unfair act is "unfair labor
practice." A businessman, for instance, who eases out his loyal partner so that he
alone can amass the profits, may be unfair and ungrateful to his partner, but he
is not committing ULP. T h e partner is not an employee and removing him has
nothing to do with workers' right to organize. Similarly, if a manager promotes
an employee on the basis of personal acquaintance and not of qualifications and
performance, he may be unfair to the better qualified employees, but is not guilty
of ULP. Promoting an employee not on the basis of merits may be bad human
2
resource management but does not amount to ULP.
ULP, therefore, has a limited, technical meaning because it is a labor
relations concept with a statutory definition. It refers only to acts opposed to
workers' right to organize. Without that element, the act, no matter how unfair,
is not unfair labor practice as legally defined.

'National Labor Union vs. Insular-Yebana Tobacco Corporation, G.R. No.

H 5 3 6 3 , J u l y 3 1 , 1961.
2
See Philcom Employees Union vs. Philippine Global Communications, et al,
G.R. No. 144315, July 17, 2006.

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 ART. 247 LABOR RELATIONS

Stripped of legalese, unfair labor practice, when committed by the

employer, commonly connotes anti-unionism.
1.2 Prejudice to Public Interest not an Element of U.L.P.
The SOLE (Secretary of Labor and Employment) dismissed the charges
of ULP of both the Union and the Bank, explaining that both parties failed to
substantiate their claims. Citing National Labor Union v. Insular-Yebana Tobacco
Corporation, 2 SCRA 9 2 4 (1961) the S O L E stated that ULP charges would
prosper only if shown to have directly prejudiced the public interest. On this,
the Supreme Court disagreed. A showing of prejudice to public interest is not
a requisite for ULP charges to prosper. But still it cannot be concluded that
the SOLE gravely abused her discretion. Grave abuse of discretion implies
such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or where the power is exercised in an arbitrary or despotic manner
by reason of passion or personal hostility which must be so patent and gross as
to amount to an invasion of positive duty or to a virtual refusal to perform the
duty enjoined or to act at all in contemplation of law. Mere abuse of discretion
1
is not enough.

2. PROSECUTION OF U.L.P.
Under Article 247 ULP has civil as well as criminal aspects. T h e civil aspect
may include liability for damages and these may be passed upon by a labor arbiter.
To prosecute ULP as criminal offense is not possible until after finality
of judgment in the labor case, finding that the respondent indeed committed
unfair labor practice. But such judgment will not serve as evidence of ULP in
the criminal case; the criminal charge must be proved independently from the
labor case. Moreover, while only substantial evidence is required in the labor
case in the NLRC, proof beyond reasonable doubt is needed to convict in the
criminal case of ULP.
T h e criminal charge, states Article 2 8 8 , falls under the concurrent
jurisdiction of the Municipal or Regional Trial Court. T h e same article defines
the penalty of fine a n d / o r imprisonment.
Under Article 289, the penalty shall be imposed upon the guilty officers
of a corporation, partnership, association or entity. If the ULP is committed by
a labor organization the parties liable are those mentioned in Article 249.
2
T h e offense prescribes in one year.

'Standard Chartered Bank Employees Union (NUBE) vs. Hon. N.R. Confessor,
G.R. No. 114974, June 16, 2004.
2
Article 290.

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 CONCEPT ART. 247

RIGHT CULTURE
INSTEAD OF ANTI-UNIONISM

"... [C]ulture is the key factor influencing any organization's

effectiveness and efficiency. T h e reason is that culture determines
how people in any organization behave and interact. Culture defines
values, so it determines such things as the redefinition of success, how
success is recognized, what constitutes a problem, and how problems
are handled. Culture also determines how people communicate
with one another, including how open they will be and whether bad
news is shared as freely as is good news. In fact, the culture of an
organization defines every aspect of the way in which the people in
that organization interact with one another.
"As business leaders, we have to deal with culture, and this can
only be done in one of two ways. We, as leaders, can create the culture
which we want in our organization or we can simply accept whatever
culture develops naturally. Obviously, this latter approach is very risky
and is likely to compromise the effectiveness of our people.
"Even though leading an organization through culture was not
really formally recognized until the early 80s, the practice has existed
for a long time. This is evident in some of industry's biggest and oldest
success stories. IBM to this day lives off the culture established by their
founder, Thomas Watson. He developed a powerful organization
based on core principles such as "Respect for the Individual" and
"IBM Means Service." In Procter & Gamble, our core cultural belief is
that "the interest of our employees and our company are inseparable.
What is good for the people is good for the company; what is good
for the company is good for the people."

WALKER JAMES WALLACE

Speech in receiving PMAP's
"Employer of the Year" Award for
Procter 8c Gamble Phil., Inc., Dec. 21, 1987

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 Chapter II
UNFAIR LABOR PRACTICES OF EMPLOYERS

Overview/Key Questions Box 13

1. What acts are considered unfair labor practice by an
employer?
2. What is discrimination that may constitute ULP?
3. Is it ULP for an employer to contract out jobs being
done by union members?
4. Is it ULP for an employer to favor a particular union?
5. Is it lawful to compel an employee to join a union?

ART. 2 4 8 . UNFAIR LABOR PRACTICES OF EMPLOYERS

It shall be unlawful for an employer to commit any of the following
unfair labor practices:
(a) To interfere with, restrain or c o e r c e employees in the exercise
of their right to self-organization;
(b) To require as a condition of employment that a person or an
employee shall not join a labor organization or shall withdraw from one to
which he belongs;
(c) To contract out services or functions being p e r f o r m e d by union
members when such will interfere with, restrain or c o e r c e employees in the
exercise of their right to self-organization;
(d) To initiate, dominate, assist or otherwise interfere with the
formation or administration of any labor organization, including the giving
of financial or other support to it or its organizers or supporters;
(e) To discriminate in regard to wages, hours of work, and other
terms and conditions of employment in o r d e r to encourage or discourage
membership in any labor organization. Nothing in this C o d e or in any other
law shall stop the parties from requiring membership in a recognized collec-
tive bargaining agent as a condition of employment, except those employees
who are already members of another union at the time of the signing of the
collective bargaining agreement. Employees of an appropriate collective
bargaining unit who are not members of the recognized collective bargaining
agent may be assessed a reasonable fee equivalent to the dues and other fees
paid by members of the recognized collective bargaining agent, if such non-

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 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

union members accept the benefits under the collective agreement. Provided,
That the individual authorization required under Article 242, paragraph (o)
of this Code shall not apply to the nonmembers of the recognized collective
bargaining agent;
(f) To dismiss, discharge, or otherwise prejudice or discriminate
against an employee for having given or being about to give testimony under
this Code;
(g) To violate the duty to bargain collectively as prescribed by this
Code; art 251, 252 and 253.
(h) To pay negotiation or attorney's fees to the union or its officers
or agents as p a r t of the settlement of any issue in collective bargaining or
any other dispute; or
(i) To violate a collective bargaining agreement.
T h e provisions of the preceding paragraph notwithstanding, only the
officers and agents of corporations, associations or partnerships who have
actually participated in, authorized or ratified unfair labor practices shall
be held criminally liable.
COMMENTS AND CASES
1. CONDITIONS PRECEDENT TO U.L.P. CHARGE
Before an employee may be considered aggrieved by an alleged unfair labor
practice (ULP) by an employer, it must be demonstrated, firstly, that the injured
party comes within the definition of "employee" as that term is defined by the
Code, and secondly, the act charged as ULP must fall under the prohibitions of
Article 248 (acts of the employer) or 249 (acts of the union).
Mariano vs. Royal Interocean Lines, G.R. No. H 2 4 2 9 , February 27, 1961—
Facts: Ms. Mariano, a stenographer-typist in Royal Interocean Lines sent a
letter to the managing directors of the company in Hong Kong, coursed through
its Philippine manager, complaining about the latter's "inconsiderate and untactful
attitude" towards the employees and clients of the company.
Subsequently, the manager advised Ms. Mariano that in view of the contents
and tenor of her letter, the managing directors believed with the manager that it was
impossible to maintain her further in the service of the company. She was dismissed.
The employee filed a complaint charging the employer with "unfair labor
practice" for having dismissed her from the service "for the reason that she wrote a
letter to the Managing Directors in Hong Kong."
Ruling: Considering that the employee's dismissal, because of charges against
the manager "is not connected with or necessarily arising from union activities," the
dismissal did not constitute ULP. Despite the employees' right to self-organization,
the employer still retains his inherent right to discipline his employees, "his normal
prerogative to hire or dismiss them."

287
 ART. 248 LABOR RELATIONS

Nevertheless, the dismissal of the appellee was without cause, because her
inefficiency as the ground or reason of her dismissal as claimed by the appellants is
belied by the successive increases of her compensation.

In other words, the Court ruled that the dismissal of the employee was
unjustified, but that the employer did not commit ULP because the act has no
union connection.
1.1 Historical Evidence of the Link
The link between the term "unfair labor practice" and the workers' right
to organize is easily verifiable from the legislative history of labor relations laws
in the US after which was patterned the Philippine law on the matter (R.A. No.
875, succeeded by the Labor Code). Earlier, there was no U.S. law allowing
the formation of labor unions; in fact, workers' groups were judicially labeled
as violations of anti-trust laws or as unlawful "combinations or conspiracies of
workers." But in 1914, the Clayton Act was passed granting workers the right to
organize for purposes of "mutual assistance" and stating that such organizations
shall not be considered as conspiracies. Firmly resisting the formation and
legalization of unions, the employers continued vigorously the use of fellow-dog"
contracts by which employees promised not to form or j o i n unions. To enforce
such contracts, the employers would obtain court injunctions to force unions
to respect the "yellow dog" commitments.
Strongly reacting, organized labor secured passage in 1932 of the Norris-
La Guardia Act which stopped courts from issuing injunctions in labor disputes.
This was quickly followed in 1933 by the National Industrial Recovery Act (NIRA)
which advanced the labor cause by affirming the workers' right not only to
organize but also "to bargain collectively" with their employer. Those rights,
NIRA further stated, must be "free from the interference, restrain or coercion of
employers." But, on May 2 7 , 1 9 3 5 , the Court declared the NIRA unconstitutional.
Senator Robert Wagner, - who was also chairman of a National Labor Board
and of the New York Factory Investigating Commission and was instrumental
in the passage of the NIRA - rebounded to take up the cudgels for labor. He
sponsored a stronger NIRA - National Industrial Relations Act - which Wagner's
fellow New Yorker, President Roosevelt, approved on July 5, 1935.
Shortly after its passage, the Wagner Law was the subject of heated reactions
from the business community, culminating in numerous modifications by the
Taft-Hardey Law "to balance" the interests of labor and capital.
The Taft-Hardey amendments affirm in its Section 7 the Wagner Act's grant
of the employees' rights to organize for collective bargaining and mutual aid and
protection as well as to engage in concerted activities. Section 8(a) confirms that it
is "an unfair labor practice" for an employer to interfere with, restrain or coerce
employees "in the exercise of the rights guaranteed in Section 7;" in the same

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 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

breath Section 8 ( b ) declares it "an unfair labor practice" for a labor organization
to restrain or coerce employees "in the exercise of the rights guaranteed in
Section 7." Clearly, the three provisions — Section 7, Section 8 ( a ) , and Section
8 ( b ) — are interconnected. O n e gives rise to the other: Section 7 recognizes
the employees' organizational rights; Section 8(a) protects those rights from
employer's assault or evasion; and Section 8 ( b ) shields those rights from misuse
or abuse by the labor organization. ULP in Section 8, a and b, was conceived
1
because of and in particular relation to the Section 7 organizational right.
Nonetheless, specific denomination of the objectionable act is not necessary
to prosecute ULP. In resolving the question of whether or not an employer
committed the act charged in the complaint, it is of no consequence, either
as a matter of procedure or of substantive law, how the act is denominated —
whether as a restraint, interference or coercion, or as discriminatory discharge,
or as a refusal to bargain, or even as a combination of any or all of these. For
however the employer's conduct may be characterized, what is important is that
2
it constituted an unfair labor practice.
T h e Code enumerates the acts or categories of acts considered as ULP. The
enumeration does not mean an exhaustive listing of ULP incidents. The Court
says: "The Labor Code does not undertake the impossible task of specifying in
precise and unmistakeable language each incident which constitutes an unfair
labor practice. Rather, it leaves to the court the work of applying the law's general
prohibitory language in light of infinite combinations of events which may be
3
charged as violative of its terms."
2. ILO CONVENTION NO. 98
Without using the term "unfair labor practice," Convention No. 98 of the
International Labor Organization frowns upon anti-union discrimination and
interference. Its pertinent provisions state:
Article 1.1 Workers shall enjoy adequate protection against acts of anti-union
discrimination in respect of their employment.
2. Such protection shall apply more particularly in respect of acts
calculated to —
(a) make the employment of a worker subject to the condition that he
shall not join a union or shall relinquish trade union membership;

1 See: John W, Budd, Labor Relations: Striking a Balance [McGraw-Hill Irwin,

2008], p. 172-179; Dale Yoder, Labor Economics and Labor Problems [McGraw-Hill, 1939],
pp. 540-551.
2
Republic Savings Bank vs. Court of Industrial Relations, 21 SCRA 661, October
3,1967.
'The Hongkong and Shanghai Banking Corp. Employees Union vs. NLRC,
G.R. No. 125038, November 6, 1997.

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 LABOR RELATIONS
ART. 248

(b) cause the dismissal of or otherwise prejudice a worker by reason of

union membership or because of participation in union activities outside working
hours or, with the consent of the employer, within working hours.
Article 2.1 Workers' and employers' organizations shall enjoy adequate
protection against any acts of interference by each other or each other's agent
or members in their establishment, functioning or administration.
2. In particular, acts which are designed to promote the establishment
of workers' organizations under the domination of employers' organizations, or
to support workers' organizations by financial or other means, with the object
of placing such organizations under the control of employers or employers'
organizations, shall be deemed to constitute acts of interference within the
meaning of this Article.
3. NO U.L.P: ILLUSTRATIVE INSTANCES OF VALID EXERCISE OF
MANAGEMENT RIGHTS
The law on "unfair labor practices" is not intended to deprive the employer of
his fundamental right to prescribe and enforce such rules as he honestly believes to
be necessary to the proper, productive, and profitable operation of his business. Nor
are his rights of selection and discharge of his employees wrested from him by the
Act. Rothenberg stresses that an employer, subject to the provisions of his contract
with his employees, has the same full measure of control over his business as he
had prior to the enactment of the Wagner Act and undiminished by the amended
Act. The only condition imposed upon this control is that it must not be exercised
1
so as to effect a violation of the Act and its several prohibitions.
Where, however, an employer does violate the Act and is found guilty of
the commission of an "unfair labor practice," it is no excuse that his conduct
2
was unintentional and innocent.

3.1 Personnel Movements

As a rule, it is the prerogative of the company to promote, transfer or
even demote its employees to other position when the interests of the company
reasonably demand it. Unless there are instances which directly point to
interference by the company with the employee's rights to self-organization,
the transfer of an employee should be considered as within the bounds allowed
by law, e.g., where despite his transfer to a lower position, his original rank and
3
salary remained undiminished.
Similarly, the management does not commit unfair labor practice if it
exercises the option given to it in the Collective Bargaining Agreement to retire

'See Rothenberg on Labor Relations, p. 366. See also Philcom Employees

Union vs. Phil. Global Communications, G.R. No. 144315, July 17, 2006.
2
See Rothenberg on Labor Relations, p. 367.
3
Rubberworld [Phils.], Inc., et al. vs. NLRC, G.R. No. 75704, July 19, 1989.

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 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

an employee who either has rendered 25 years of service or reached the age of
1
60.
It is likewise the company's prerogative to promote its employees to
managerial positions. Managerial positions are offices which can only be held by
persons who have the trust of the corporation and its officers. They should not
be prevented from doing so. A promotion which is manifestly beneficial to an
employee should not give rise to a gratuitous speculation that such a promotion
was made simply to deprive the union of the membership of the promoted
2
employee.
In another illustrative case the employee was not promoted, so he cried
ULP. He charged his employer with having discriminated against him in the
giving of promotions because he was not a member of any labor organization.
T h e Court of Industrial Relations dismissed the charge, finding that the alleged
discriminatory acts against the employee did not arise from union membership
or activity because he was not in fact a union member. On appeal, the Supreme
Court ruled that the employee's allegation that he was discriminated against to
force him to join a labor organization is unconvincing since no specific union was
mentioned in his complaint. It is unbelievable that the employer would harass
and oppress him to force him to j o i n any labor union, for it cannot be seen how
3
that can possibly be advantageous to the employer.

3.2 Acceptance of Mass Resignation

Acceptance of a voluntary resignation is not ULP. In a Philippine Airlines
case the court said that the pilots' "protest retirement/resignation" was not a
concerted activity which was protected by law. They did not assume the status
of strikers. They cannot, therefore, validly claim that the company committed
unfair labor practice. When the pilots voluntarily terminated their employment
4
relationship with the company, they cannot claim that they were dismissed.
A legitimate concerted activity cannot be used to circumvent judicial orders
or be tossed around like a plaything. Definitely, neither employers nor employees
should be allowed to make of judicial authority a now-you've-got-it-now-you-don't
affair. T h e courts cannot hopefully effectuate and vindicate the sound policies
of the Industrial Peace Act and all our labor laws if employees, particularly those
who on account of their highly advanced technical background and relatively
better life status are far above the general working class, will be permitted to
defy and invoke the jurisdiction of the courts whenever the alternative chosen
5
will serve to feather their pure and simple economic demands.

bulletin Publishing Corporation vs. Sanchez, G.R. No. 74425, October 7,1986.
i
Ibid.
s
Bondoc vs. Court of Industrial Relations, G.R. No. 33955, January 26, 1989.
4
Enriquez vs. Zamora, G.R. No. 51382, December 29, 1986.
Ibid.
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 ART. 248 LABOR RELATIONS

3.3 Grant of Profit-Sharing Benefits to Non-Union Members

Management has the prerogative to regulate, according to its discretion
and judgment, all aspects of employment. This flows from the established
rule that labor law does not authorize the substitution of the judgment of the
employer in the conduct of its business. Such management prerogative may
be availed of without fear of any liability so long as it is exercised in good faith
for the advancement of the employers' interest and not for the purpose of
defeating or circumventing the rights of employees under special laws or valid
agreement and are not exercised in a malicious, harsh, oppressive, vindictive or
1
wanton manner or out of malice or spite.
Wise and Co., Inc. vs. Wise & Co., Inc. Employees Union, G.R. No. 87672, October
13, 1989 —
Facts: When the management introduced a profit-sharing scheme for its
managers and supervisors, the Union wrote the management to ask that the union
members be allowed to participate in the profit-sharing program. The management
denied the request on the ground that such participation was not provided in the
collective bargaining agreement.
Later, when renegotiation of the CBA was approaching, the management
wrote the union that it was willing to consider including the union members in the
profit-sharing scheme if the negotiations would be concluded before December
1987.
On March 30, 1988, the company distributed the profit-sharing benefit
not only to managers and supervisors but also to all rank-and-file employees not
covered by the CBA because they were excluded from their agreed definition of
bargaining unit, such as the regular rank-and-file employees in the office of the
president, vice-president, security office, corporate affairs office, accounting and
treasury department.
Issue: Whether the grant by management of profit-sharing benefits to its
employees who are non-union members is discriminatory against die union members.
Is the act discriminatory amounting to ULP?
Ruling: There can be no discrimination committed by the employer as die
situation of the union employees is different from that of die nonunion employees.
Discrimination per se is not unlawful. There can be no discrimination where die
employees concerned are not similarly situated.
The grant by the employer of profit-sharing benefits to die employees outside
the "bargaining unit" falls under die ambit of its managerial prerogative. It appears
to have been done in good faith and without ulterior motive. More so when as in this
case there is a clause in the CBA where the employees are classified into those who
are members of the union and those who are not. In die case of die union members,
they derive their benefits from the terms and conditions of the CBA which constitutes

'Wise and Co., Inc. vs. Wise 8c Co., Inc. Employees Union, G.R. No. 87672,
October 13, 1989.

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 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

the law between the contracting parties. Both the employer and the union members
are bound by such agreement.
However, the Court serves notice that it will not hesitate to strike down any act
of the employer that tends to be discriminatory against union members. It is only
because of the peculiar circumstances of this case showing there is no such intention
that this court has ruled otherwise.

3.4 Forced Vacation Leave

Where the vacation leave without pay, which the employer requires
employees to take in view of the economic crisis, is neither malicious, oppressive
or vindictive, ULP is not committed.

Philippine Graphic Arts, Inc. vs. NLRC, et al., No. Lr80737, September 29,1988 —
Facts: In October 1984, the petitioner corporation was forced by economic
circumstances to require its workers to go on mandatory vacation leave in batches
of seven or nine for periods ranging from 15, 30, to 45 days. The workers were paid
while on leave but the pay was charged against their respective earned leaves.
The affected employees filed complaints for unfair labor practice and
discrimination.
Ruling: The Court is convinced from the records now before it that there was no
unfair labor practice. As found by the NLRC, the private respondents themselves never
questioned the existence of an economic crisis but, in fact, admitted its existence.
There is basis for the petitioner's contentions that the reduction of work schedule was
temporary, that it was taken only after notice and consultations with the workers and
supervisors, that a consensus was reached on how to deal with deteriorating economic
conditions and reduced sales and that the temporary reduction of working days was
a more humane solution instead of a retrenchment and reduction of personnel. The
petitioner further points out that this is in consonance with the CBA between the
employer and its employees.
Likewise, the forced leave was enforced neither in a malicious, harsh,
oppressive, vindictive nor wanton manner, or out of malice or spite. Apart from private
respondents' concurrence that the forced leave was implemented due to economic
crisis, what only 'hurts' them 'is that said management's plan was not even discussed
in the grievance procedure so that the Union members thereof may well be apprised
of the reason therefor.'
The decision to resort to forced leaves was, under the circumstances, a
management prerogative. The workers' claim of non-resort to the grievance
machinery is negated by their failure to initiate steps for its employment.

3.5 Issuance of Rules or Policy

In San Miguel Brewery Sales Farce Union (PTGWO) vs. Ople and SMC, G.R. No.
53515, February 8, 1989, the facts show that in September 1979, the company
introduced a marketing scheme known as the 'Complementary distribution

293
 ART. 248 LABOR RELATIONS

system' (CDS) whereby its beer products were offered for sale directly to
wholesalers through San Miguel's sales offices.
The labor union (petitioner) filed a complaint for unfair labor practice,
with a notice of strike, on the ground that the CDS was contrary to the existing
marketing scheme whereby the route salesmen sold their stocks of beer within
assigned specific territories and the wholesalers had to buy beer products from
them, not from the sale offices. It was alleged that the new marketing scheme
violated the collective bargaining agreement because the CDS would reduce the
take-home pay of the salesmen and their truck helpers, for the company would
be unfairly competing with them.
The Labor Minister found nothing to suggest that the employer's unilateral
action of inaugurating a new sales scheme "was designed to discourage union
organization or diminish its influence"; that on the contrary, it was "part of its
overall plan to improve efficiency and economy and at the same time gain profit to
the highest"; that the union's conjecture that the new plan will sow dissatisfaction
from its ranks is already a prejudgment of the plan's viability and effectiveness,
x x x like saying that the plan will not work out to the workers' (benefit) and
therefore management must adopt a new system of marketing. T h e Minister
accordingly dismissed the strike notice, although he ordered a slight revision of
the CDS, which the employer evidently found acceptable.
The Court approved of the Minister's findings, and declared correct his
holding that the CDS was "a valid exercise of management prerogatives."
The Court then closed its decision with the following pronouncements:
Every business enterprise endeavors to increase its profits. In the
process, it may adopt or devise means designed towards that goal. In Abbott
Laboratories vs. NLRC, 154 SCRA 713, We ruled:
x x x Even as the law is solicitous of the welfare of the employees,
it must also protect the right of an employer to exercise what are clearly
management prerogatives. T h e free will of management to conduct its
own business affairs to achieve its purpose cannot be denied.
3.6 Taking Action Against Slowdown
Employees have the right to strike, but they have no right to continue
working on their own terms while rejecting the standards desired by their
employer. Hence, an employer does not commit an unfair labor practice by
discharging employees who engage in a slowdown, even if their object is a pay
increase which is lawful. Moreover, an employer does not violate the act by
discharging only some of the employees who participate in the slowdown where
he discharges them to serve as an "example" to stop the slowdown and not for
1
discriminatory reasons.

!
4 8 A m J u r 2d 937.

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 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

4. DETERMINATION OF VALIDITY
Necessarily, determining the validity of an employer's act involves an
appraisal of his motives. In these cases motivations are seldom expressly avowed,
and avowals are not always candid. Thus, there must be a measure of reliance
on the administrative agency. It is for the CIR [NLRC now], in the first instance,
to weigh the employer's expressed motive in determining the effect on the
1
employees of management's otherwise equivocal act.
An employer may treat freely with an employee and is not obliged to
support his actions with a reason or purpose. However, where the attendant
circumstances, the history of the employer's past conduct and like considerations,
coupled with an intimate connection between the employer's action and the
union affiliations or activities of the particular employee or employees taken as a
whole raise a suspicion as to the motivation for the employer's action, the failure
of the employer to ascribe a valid reason therefor may justify an inference that
his unexplained conduct in respect of the particular employee or employees was
2
inspired by the latter's union membership or activities.
While the presence of this mere suspicion neither takes the place of
evidence that the employer's conduct was improperly motivated nor dispenses
with the requirement of proof of the fact, such suspicion, when coupled with
other facts which in themselves, might have been inadequate to support an
adverse finding against the employer, may suffice to sustain a finding that the
3
employer's action violated the prohibition of the Act.
5. FIRST U.L.P: INTERFERENCE (ARTICLE 248[a])
In summarized form, the nine U.L.P. acts of an employer under Article
248 are: (1) interference, (2) f e l l o w dog" condition, (3) contracting out, (4)
company unionism, (5) discrimination for or against union membership, (6)
discrimination because of testimony, (7) violation of duty to bargain, (8) paid
negotiation, and (9) violation of CBA. These are discussed below in this sequence.
Outright and unconcealed intimidation is, of course, the most obvious form
of "interference." Needless to say, such conduct on the employer's part, even
if only on one occasion, constitutes an unfair labor practice and will support a
"cease and desist" order by the Board. However, to say the least, it is quite unusual
to find an "interference" which is practiced with such forthright and candor. In
the great preponderance of cases, the employer's efforts are much more covert
4
and are generally disguised to escape detection.

Republic Savings Bank vs. CIR, 21 SCRA 226, 236, citing NLRB vs. M 8c B
Headwear Co., 349 F2 170.
2
AHS/Philippines Employees Union vs. National Labor Relations Commission,
G.R. No. 73721, March 30, 1987.
Ibid.
4
Rothenberg on Labor Relations, p. 367.

295
 ART. 248 LABOR RELATIONS

Interference with employee organizational rights was found where the

superintendent of the employer threatened the employees with cutting their pay,
increasing rent of the company houses, or closing the plant if they supported
the union and where the employer encouraged the employees to sign a petition
1
repudiating the union.
Dabuet, et al. vs. Roche Pharmaceuticals, Inc., No. L-45402, April 30, 1987 —
Facts: The individual petitioners, who were all officers of the Roche Products
Labor Union, wrote the company expressing the grievances of the union and seeking
a formal conference with management regarding the previous dismissal of the union's
president and vice-president. At the meeting, the company's general manager, instead
of discussing the problems affecting the labor union and management, allegedly
berated the petitioners for writing that letter and called the letter and the person
who prepared it "stupid."
Feeling that he was the one alluded to, since he had prepared the letter, the
counsel for the labor union filed a case for grave slander against the general manager.
The charge was based on the affidavit executed by the petitioners. The company and
the manager, in turn, filed a complaint for perjury against petitioners alleging that
their affidavit contained false statements.
The respondent company, furthermore, construed the execution by petitioners
of the affidavit as an act of breach of trust and confidence and inimical to the interest
of the company, for which they were suspended and later on dismissed.
Ruling: The respondent company had committed unfair labor practice in
dismissing the petitioners without just and valid cause.
In Republic Savings Bank vs. CIR, where the dismissed employees had written a
letter decried by the Bank as patently libelous for alleging immorality, nepotism and
favoritism on the part of the Bank president, thus amounting to behavior necessitating
their dismissal, the Court declared the dismissal illegal as the letter was a concerted
activity protected by R.A. 875.
Where, as in this case, the letter written by and for the union addressed to
management referred to employee grievances and/or labor-management issues and
the employees concerned were all officers of the union, then seeking a renegotiation
of the collective bargaining agreement, a fact which respondent company does not
deny, there should, all the more, be a recognition of such letter as an act for the
mutual aid, protection and benefit of the employees concerned. This recognition, in
turn, should extend to petitioners' execution of an affidavit in support of the charge
of slander against private respondent, for calling the union's lawyer, who prepared
the letter, and the contents thereof as "stupid."
Breach of trust and confidence, the grounds alleged for petitioners' dismissal,
must not be indiscriminately used as a shield to dismiss an employee arbitrarily.
We, thus, hold that respondent company's act in dismissing the petitioners, who
then constituted the remaining and entire officialdom of the Roche Products Labor
]
NLRB vs. Briton, 52 LC 23, 735.

296
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

Union, after the union's president and vice-president had been earlier dismissed,
and when the collective bargaining agreement in the company was about to be
renegotiated, was an unfair labor practice under Sec. 4(a) (1) of the Industrial Peace
Act. Their dismissal, under the circumstances, amounted to interference with, and
restraint or coercion of, the petitioners in the exercise of their right to engage in
concerted activities for their mutual aid and protection.

5.1 Interrogation
Persistent interrogation of employees to elicit information as to what had
happened at union meetings and the identity of the active union employees was
1
held as violative of organizational rights of employees.
In order that the questioning of an employee concerning his union activities
would not be deemed coercive, the employer must communicate to the employee
the purpose of the questioning, assure him that no reprisal would take place,
and obtain his participation on a voluntary basis. In addition, questioning must
also occur in a context free from employer hostility to union organization and
2
must not itself be coercive in nature.
Interrogating an employee as to his union affiliation is not perse ULP but
3
circumstances may make it as such.

5.2 U.L.P. Even Before Union is Registered

In one case the petitioner employer claimed that it could not have
committed unfair labor practice in dismissing some of its employees allegedly
due to their union activities because the dismissal took place more than four
months before the union's organizational meeting and more than a year before its
registration. In short, management contended that it could not commit ULP
while there was no union yet.
T h e contention, ruled the Court, is without merit. Under Article 248(a)
of the Labor Code of the Philippines, "to interfere with, restrain, or coerce
employees in their exercise of the right to self-organization" is an unfair
labor practice on the part of the employer. Paragraph (d) of said Article also
considers it an unfair labor practice for an employer "to initiate, dominate,
assist or otherwise interfere with the formation or administration of any labor
organization, including the giving of financial "or other support to it." In this
particular case, the private respondents were dismissed, or their services were
terminated, because they were soliciting signatures in order to form a union
within the plant.

!
NLRB vs. Associated Naval Architects, 355 F 2d 788.
Johnnie's Poultry Co., 146 NLRB 776; International Union of Operating
Engineers vs. NLRB, 353 F 2d 852.
3
Phil. Steam Navigation vs. Phil. Marine Officers Guild, 15 SCRA 174.
297
 ART. 248 LABOR RELATIONS

T o r sure, the petitioner corporation is guilty of unfair labor practice

in interfering with the formation of a labor union and retaliating against the
1
employees' exercise of their right to self-organization." In short, an employer
who interfered with the right to self-organization before the union is registered
2
can be held guilty of ULP.
5.3 Prohibiting Organizing Activities
A rule prohibiting solicitation of union membership in company property
3
is unlawful if it applies to non-working time as well as to working time.
Where majority of the employees live on the premises of the employer
and cannot be reached by any means or procedures practically available to
union organizers, the employer may be required to permit non-employee union
4
organizers to come within its premises, in order to solicit employees.
It is an unfair labor practice to discharge a supervisor because he refuses to
5
commit unfair labor practices or because of the union activities of an employee,
6
who happens to be the wife of the supervisor.
However, in the absence of showing that the illegal dismissal was dictated
by anti-union motives, the same does not constitute an unfair labor practice as
would be a valid ground for strike. T h e remedy is an action for reinstatement
7
with backwages and damages.
T h e following are further examples of unlawful acts to discourage
membership in a labor organization: (1) dismissal of union members upon their
refusal to give up their membership, under the pretext of retrenchment due
8
to reduced dollar allocations; (2) refusal over a period of years to give salary
adjustments according to the improved salary scales in the collective bargaining
9
agreements; (3) dismissal of an old employee allegedly for inefficiency, on account
10
of her having joined a union and engaging in union activities.

'Judric Canning Corporation vs. Inciong, No. 1^51494, August 19,1982.

2
Samahan ng mga Manggagawa sa Bandolino-LMLC, et al vs. NLRC, Bandolino
Shoe Corp., et al., G.R. No. 125195, July 17,1997.
3
Remington Rand Corp., 141 NLRB 1052; Mathews and Co. vs. NLRB, 52 LC
24, 024.
4
Fafnir Bearing Co. vs. NLRB, 362 F 2d7 16; NLRB vs. S 8c H Grossinger's, 54
LC 18, 183.
5
Jackson Tile Mfg. Co., 12 NLRB 764.
6
Golub Bros., 140 NLRB 120.
7
AHS/Philippine Employees Union vs. National Labor Relations Commission,
G.R. No. 87321, March 31,1987.
8
Manila Pencil Co. vs. CIR, 14 SCRA 953.
9
Benguet Consolidated vs. BCI Employees and Workers Union, 22 SCRA 129.
,0
East Asiatic Co. vs. CIR, 16 SCRA 820.

298
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

CLLG E.G. Gochangco Workers Union vs. NLRC, No. L-67158, etc., May 30,
1988 —
It is no coincidence that at the time said respondent issued its suspension
and termination orders, the petitioners were in the midst of a certification election
preliminary to a labor-management conference, purportedly, "to normalize employer-
employee relations." It was within the legal right of the petitioners to do so, the
exercise of which was their sole prerogative, and in which management may not as
a rule interfere.
In this connection, the respondent company deserves our strongest
condemnation for ignoring the petitioners' request for permission for some time
out to attend to the hearing of their petition before the med-arbiter. It is not only
an act of arrogance, but a brazen interference as well, with the employees' right to
self-organization, contrary to the prohibition of the Labor Code against unfair labor
practices.
But as if to add insult to injury, the company suspended the petitioners on
the ground of "abandonment of work" on February 27, 1980, the date on which,
apparently, the pre-election conference had been scheduled. (The petitioners sought
permission on February 26,1980 while the suspension order was issued on February
28,1980.) What unfolds here is a clear effort by management to punish the petitioners
for their union activities.
We have held that unfair labor practice cases are not, in view of the public
interest involved, subject to compromises.

5.4 Violence or Intimidation

An employer unlawfully coerced employees by directing two individuals to
his office at gun point on the day of representation election after the individuals
had informed the employer that they were on the premises to vote in the election
1
and they did in fact vote.
Violations have been found where the employer threatened employees
2
favoring the union with force or violence, as warning them against getting
3
caught with a union leaflet.
An employer who asked the union's recruiter to surrender the union
4
affiliation forms, threatening him with bodily harm, committed ULP.
In another case, two employees were dismissed for violation of a company
rule against fights in the premises or during working hours. It appears, however,
that said employees, who were union officers, were provoked into a fight by two
recently hired employees. It was shown that they were provoked to fight because

1 Holly Hill Lumber Co. vs. NLRB, 56 LC 19, 513.

2 NLRB vs. Bibb Mfg. Co., 188 F. 2d 825.
3 NLRB vs. Eastern Die Co., 340 F. 2d 607.
4 Velez vs. Watchmen's Union, 107 Phil. 689.

299
 ART. 248 LABOR RELATIONS

the company wanted to create an apparently lawful cause for their dismissal.
The dismissed employees, in fact, had not figured in similar incidents before or
violated company rules in their many years with the company. This "strategy* of
1
the company the Court said, is unfair labor practice.
5.5 Espionage and Surveillance
One form of "pressure" which some over-eager employers sometimes use
is the practice of spying upon employees. This device consists of using one or
a small group of employees, or other agents, inspired by profit, opportunism,
vengeance or some kindred human frailty to use his or their access to employees'
quarters and affairs for the purpose of spying upon fellow employees and
reporting back to the employer. It is plainly evident that such conduct on the
employer's part, however subtly it may be accomplished, constitutes interference
with the employees' exercise of their rights. Inasmuch as the "pressure" results
more from the employees' apprehension than from the employer's purpose in
spying and the use of its results, it has been held to be no answer to a charge of
2
unfair labor practice that the fruits of the espionage were not used.
When an employer engages in surveillance or takes steps leading his
employees to believe it is going on, a violation results because the employees
3
come under threat of economic coercion or retaliation for their union activities.
Unlawful surveillance was properly found where supervisors were present near
the place where union meeting was being held to check the names of employees
4
leaving the meeting.

5.6 Economic Inducements

A violation results from an employer's announcement of benefits prior to
a representation election, where it is intended to induce the employees to vote
5
against the union.
It is a well-settled rule that while a representation election is pending,
the conferral of employee benefits for the purpose of inducing the employees
6
to vote against a union is unlawful.

5.7 Employer's Expression of Opinion; Totality of Conduct Doctrine

T h e US National Labor Relations Board, with the US Supreme Court's
subsequent approval, has enunciated a principle of determination, subsequently

^isayan Bicycle Manufacturing Co., Inc. vs. National Labor Union and Court
of Industrial Relations, No. L-19997, May 19, 1965.
2
Rothenberg, p. 367.
3
Henriz Mfg. Co. vs. NLRB, 321 F 2d 00.
4
Mathews and Co. vs. NLRB, 52 LC 24-024.
6
Re: Hancock Fabric Outlet, 175 NLRB No. 42; Re: Louisiana Plastics, Inc. 173
NLRB No. 218.
6
NLRB vs. Exchange Parts. Co., 375 U.S. 405.

300
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

recognized as the "totality of conduct doctrine." T h e doctrine holds that the

culpability of employer's remarks was to be evaluated not only on the basis of their
implications, but against the background of and in conjunction with collateral
circumstances. Under this "doctrine," expressions of opinion by an employer,
though innocent in themselves, frequently were held to be culpable because of
the circumstances under which they were uttered, the history of the particular
employer's labor relations or anti-union bias or because of their connection with
an established collateral plan of coercion or interference. Under this doctrine it
was held, as previously observed, that an expression which might be permissibly
uttered by one employer, might, in the mouth of a more hostile employer, be
deemed improper and consequently actionable as an unfair labor practice.
As can be seen in the following illustrative case, the Philippine Supreme
Court has adopted the totality of conduct doctrine.
The Insular Life Assurance Co., Ltd., Employees Association-ATU, et al. vs. The Insular
Life Assurance Co., Ltd., G.R. No. 1^25291, January 30, 1971 —
The company president sent individual letters to the striking employees
urging them to abandon their strike with a promise of free coffee and movies and
paid overtime. He also warned them that if they failed to return to work by a certain
date, they might be replaced in their jobs. Aside from this, company-hired men broke
into the picket line, resulting in violence and the filing of criminal charges against
some union officers and members. When the strike was over, the company refused
to readmit the unionists facing criminal charges. The Court ruled:
(1) Letter to individual employees. — It is an act of interference for the
employer to send letters to all employees notifying them to return to work at a time
specified therein, otherwise new employees would be engaged to perform their jobs.
Individual solicitation of the employees or visiting their homes, with the employer
or his representative urging the employees to cease union activity or cease striking,
constitutes unfair labor practice. All the above-detailed activities are unfair practices
because they tend to undermine the concerted activity of the employees, an activity
to which they are entitled, free from the employer's molestation.
(2) Strike-breaking. — When the respondent company offered reinstatement
and attempted to "bribe" the strikers with "comfortable cots, free coffee, and
occasional movies," "overtime" pay for "work performed in excess of eight hours,"
and "arrangements" for their families, so they would abandon the strike and return
to work, it was guilty of strike-breaking and/or union-busting and, consequently, of
unfair labor practice.
(3) Acts violative of right to organize. — Violative of the right to organize are
the following acts: the offer of a Christmas bonus to all "loyal" employees shortly after
the union requested to bargain with the employer; the giving of wage increases so as
to mollify the employees after the employer has refused to bargain with the union, or
to induce the striking employees to return to work; the promise of benefits in return
for the strikers' abandonment of their strike; and the employer's statement, made
after the strike started, that if the strikers would return to work, they would receive

301
 LABOR RELATIONS
ART. 248

new benefits in the form of hospitalization, accident insurance, profit-sharing, and

a new building to work in.
(4) Test of interference or coercion. — The test of whether an employer has
interfered with and coerced employees is whether the employer has engaged in
conduct which it may reasonably be said tends to interfere with the free exercise of
employees' right. It is not necessary that there be direct evidence that any employee
was in fact intimidated or coerced by statements of threats of the employer if there
is a reasonable inference that the anti-union conduct of the employer does have an
adverse effect on self-organization and collective bargaining.
(5) The "totality of conduct** doctrine. — The letters of the company president
to the individual strikers should not be considered by themselves alone but should be
read in the light of the preceding and subsequent circumstances. The letter should
be interpreted according to the "totality of conduct doctrine," whereby the culpability
of an employer's remarks has to be evaluated not only on the basis of their implicit
implications, but in conjunction with collateral circumstances.

5.8 Mass Layoff Amounting to U.L.P.

A company's capital reduction efforts, to camouflage the fact that it has been
making profits, and to justify the mass lay-off of its employees especially union
members, were an unfair labor practice which can neither be countenanced nor
condoned.
Madrigal & Company, Inc. vs. Zamora, G.R. No. L 4 8 2 3 , June 30, 1987 —
Facts: In December 1973, the Madrigal Central Office Employees Union sought
renewal of its CBA with the petitioner Madrigal & Co., which was due to expire. It
proposed a wage increase of P200.00 a month, an allowance of P100.00 a month,
and other economic benefits.
In July 1974, by an alleged resolution of its stockholders, the petitioner reduced
its capital stock from 765,00 shares to 267,366 shares. This was effected through the
distribution of the marketable securities owned by the petitioner to its stockholders
in exchange for their shares in an equivalent amount in the corporation.
Ruling: The petitioner's capital reduction efforts were, to begin with, a
subterfuge, a deception as it were, to camouflage the fact that it had been making
profits, and consequently, to justify the mass layoff in its employee ranks, especially
of union members. They were nothing but a premature and plain distribution of
corporate assets to obviate a just sharing to labor of the vast profits obtained by its
joint efforts with capital through the years. Surely, we can neither countenance nor
condone this. It is an unfair labor practice.

In another case, the Court ruled that the employer (school) committed
unfair labor practice by dismissing the teachers despite their permanent
status, because the president of the school feared that if their contracts were
renewed there would be a strike in the school the following semester. This is

302
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

an unwarranted interference with the rights of workers to self-organization

and to engage in concerted activities. An apprehension that there might be a
future strike in the school is not a ground for dismissal of the workers. While a
strike may result in hardships or prejudice to the school and the studentry, the
employer is not without recourse. If the employer feels that the action is tainted
with illegality, the law provides the employer with ample remedies to protect his
interests. Decidedly, dismissal of employees in anticipation of an exercise of a
1
constitutionally protected right is not one of them.

5.9 Lockout or Closure Amounting to U.L.P.

A lockout, actual or threatened, as a means of dissuading the employees
from exercising their rights under the Act is clearly an unfair labor practice.
However, to hold an employer who actually or who threatens to lock out his
employees guilty of a violation of the Act, the evidence must establish that the
purpose thereof was to interfere with the employees' exercise of their rights.
An honest closing of one's plant is not a violation of the Act. However,
cessation of operations, actual or threatened, does constitute an unfair labor
practice, if it is, directly or indirectly, expressly or by innuendo, calculated or
employed to interfere with the employees' rights under the Act. Proof of the
employer's state of mind, unless it is expressed, is often very difficult. However,
2
it may be proven by circumstantial evidence.
T h e rule is that it is unlawful for the employer to threaten its employees
with moving or shutting down the plant and consequent loss of employment, as
3
the result of their support for the union.
An employer which closed its business to put an end to a union's activities,
and which made no effort to allow the employees' attempt to exercise their
right to self-organization and collective bargaining, and even threatening the
employees that they would lose their j o b s if they did not cease affiliation with
4
the union, commits unfair labor practice.
Threats of discharge and closing of the plant made by supervisors during
a union campaign justified a finding of unlawful interference by the employer,
despite the lack of any express employer sanction or the absence of an organized
5
program of coercion.

!
Rizal Memorial Colleges Faculty Union, et al vs. National Labor Relations
Commission, G.R. Nos. 59012-13, October 12, 1989.
2
Rothenberg, p. 369.
3
NLRB vs. Louisiana Mfg. Co., 376 F 2d 696; NLRB vs. Byrds Mfg. Corp., 324
F 2d 329; Marshfield Steel Co. vs. NLRB, 324 F 2d 333.
4
Sy Chie Junk Shop vs. Federacion Obrero de la Industria, G.R. No. 30964,
May 9, 1988.
5
Irving Air Chute Co. vs. NLRB, 52 LC 23, 406.

303
 ART. 248 LABOR RELATIONS

5.9a Sale in Bad Faith

9
Moncada Bijon Factory vs. CIR And Moncada United Workers Union, G.R. No.
L-18065, March 30, 1962 —
Facts: Kim, owner of the factory, called the workers, members of MUWU, to a
meeting. He requested them to resign from the union, revert to their working hours,
and withdraw the overtime claims they filed before the CIR three years earlier. These
requests were rejected. Four days later, the factory suspended its operations. Eleven
days later, Kim executed a deed purporting to convey the factory to Yu Guat. When
the factory reopened, the members of MUWU were not readmitted, though those
who left the union were allowed to work. MUWU filed a complaint for ULP against
the company, Kim, and Yu.
Ruling: The CIR upheld the contention of the union that the sale of the factory
to Yu Guat, a former agent of Kim, was simulated and a device resorted merely to
get rid of the employees who were members of the union. A conclusion, reached by
the lower court, supported by competent evidence and involving a question of fact,
is beyond the power of review by the Supreme Court.
Cruz vs. PAFLU, G.R. No. 1^26519, October 29,1971 —
Facts: The workers in the factory formed a union which they duly registered
with the Department of Labor. The company claimed to have an existing CBA with
another union (PTGWO), a claim which resulted in holding a certification election
where PAFLU won. Thereafter, PAFLU proposed the finalization of a CBA with
Management. In less than a month, however, the factory was sold to Carlos Cruz. As
a result of this sale, employee members of the PAFLU were dismissed prompting the
PAFLU to file a case for ULP.
Ruling: The sale of a business enterprise to avoid the legal consequences of
an unfair labor practice is necessarily attended with bad faith and both the vendor
and the vendee continue to be liable to the affected workers.
Where the sale of a business enterprise was attended with bad faith, there is no
need to consider the applicability of the rule that labor contracts being in personam
are not enforceable against the transferee. The latter is in the position of tort-feasor,
having been a party likewise responsible for die damage inflicted on the members
of the aggrieved union and therefor cannot justly escape liability.
The defense of petitioner Cruz that he was not informed cannot be given
credence. Anyway, he is a successor-in-interest of die vendor and becomes responsible
for all the rights and obligations of his predecessor.

It is irrational to suppose that a purchaser of a manufacturing enterprise

1
is not aware of the labor-management situation in the firm he bought.

National Labor Union vs. Court of Industrial Relations, 116SCRA417 [1982].

304
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

5.9b Assumption of Obligations by New Company

Philippine Land-Air-Sea Labor Union (Plaslu) vs. Sy Indong Rice and Corn
Mill, G.R. No. H 8 4 7 6 , May 30, 1964 —
Facts: PLASLU and seven other persons filed with the CIR a ULP case against
Sy Indong and Tubod Labor Union (TLU), together with its president and vice-
president. Complainants alleged that one Sambrano, as vice-president of TLU, and
other members of same union had restrained and coerced members of PLASLU by
threatening them with bodily harm unless they gave up their jobs as workers of Sy
Indong. They also alleged that Sy Indong discriminated against them by refusing to
admit them to work when they reported for duty, on account of their affiliation with
PLASLU. Complainants prayed for reinstatement with backwages.
While the case was pending in the CIR, Sy Indong sold its assets to Sen Chiong
Rice and Corn Mill which was organized on the very same day of the sale. The new
company had the same managing partner as that of defendant company and a
common partner too. Alleging that Sy Indong and Sen Chiong were one and the
same entity, complainants amended their complaint so as to include Sen Chiong and
its manager, Ang Han Tiong, as respondents.
The CIR ruled for the complainants, finding respondents Sy Indong and Chiong
guilty of committing ULP. It ordered the employees' reinstatement and payments of
backwages.
Ruling: The allegation of Sy Indong of bankruptcy so as to justify the sale of
its assets to Sen Chiong is untenable. And it is clear from the facts proven that Sen
Chiong was organized on the very same day on which the assignment of the assets of
Sy Indong took place, and that Ang Han Tiong, the managing partner of Sy Indong,
is the same managing partner of Sen Chiong, not to mention the presence of three
common partners in both companies.
These circumstances, when considered in relation to the fact that the ULP
case had been pending in the CIR for about 18 months, lead to no other conclusion
than that the organizers of Sen Chiong were aware of said case when they established
the company and acquired the assets of Sy Indong, and that they either organized
Sen Chiong in an attempt to relieve Sy Indong of the consequences or effects of the
present litigation or acquired such assets assuming the risk of having to bear the
liabilities or part thereof that said litigation may eventually entail. And as such, the
judge in either case was justified in rendering judgment against the new company.

5.10 Successor Employer; Piercing the Corporate Veil

Closure is likewise not legal and the employees cannot be separated if, in
fact, there is no closure because the "closed" department or company reappeared
although under a new name. If the "new" company is, for instance, engaging
in the same business as the closed company or department, or is owned by the
same people, and the "closure" is calculated to defeat the workers' organizational
right, then, the closure may be declared a "subterfuge" and the doctrine of
successor employer will be applied, that is, the new company will be treated

305
 LABOR RELATIONS
ART. 248

as a continuation or successor of the one that closed. If such be the case, the
separated employees will have to be employed in the "new" firm because in the
first place they should not have been separated at all.
The "successor employer" ruling is an enforcement of the legal recourse
called "piercing the veil of corporate entity."
Under the doctrine of piercing the veil of corporate entity, when valid
grounds therefor exist, the legal fiction that a corporation is an entity with a
juridical personality separate and distinct from its members or stockholders
may be disregarded. In such cases, the corporation will be considered as a
mere association of persons. T h e members or stockholders of the corporation
will be considered as the corporation, that is, liability will attach directly to
the officers and stockholders. T h e doctrine applies when the corporate fiction
is used to defeat public convenience, justify wrong, protect fraud, or defend
crime, or when it is made as a shield to confuse the legitimate issues, or where
a corporation is the mere alter ego or business conduit of a person, or where
the corporation is so organized and controlled and its affairs are so conducted
as to make it merely an instrumentality, agency, conduit or adjunct of another
1
corporation.
H. Aronson Co., Inc. vs. Associated Labor Union, G.R. No. L-23010, July 9,1971 —
Facts: The labor union proposed a collective bargaining agreement (CBA)
with the management. The management refused, so the labor union staged a strike
which left the management with no choice but to grant them their demands. Angered
by what the labor union did, the management decided to dissolve the corporation,
thereby terminating the employment of all the employees. Immediately afterwards,
the management formed two new corporations with the same corporate purposes
and capitalization as the old corporation. Only the non-union member-employees
were rehired. The union member employees who were not rehired filed this case
for unfair labor practice.
Ruling: The facts established by evidence lead to no other conclusion than that
the dissolution of the petitioner corporation and the subsequent incorporation of
the two new corporations were part and parcel of a plan to accomplish the dismissal
of the individual respondents. The Supreme Court considered the following facts
and circumstances:
Firstly, the capitalization and corporate functions of the petitioner corporation
and the new corporations are exactly the same.
Secondly, the new corporation started business a day after the dissolution of
the petitioner corporation and they made use of the office equipment, stores and
bodegas of the later corporation.
Thirdly, the members of the family of the controlling stockholders hold the same
position in the new corporation that they used to hold in the previous corporation

'Umali, et al. vs. Court of Appeals, G.R. No. 89561, September 13, 1990.

306
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

and, lastly, only the employees who were non-union members were rehired by the
new corporations. Such actions of the petitioner amount to unfair labor practice.

See related discussion of "ULP in Bargaining" in the next chapter.

6. SECOND U.L.P.: "YELLOW DOG" CONDITION (ARTICLE 248[b])
Contract provisions whereby an employee agrees that during the period
of his employment he will not become a member of a labor union have been
outlawed in the United States, by legislation in some states, as well as by Federal
1
legislation.
T h e ^yellow dog" contract is a promise exacted from workers as a condition
of employment that they are not to belong to, or attempt to foster, a union during
their period of employment.
An American s c h e m e , the typical yellow dog c o n t r a c t is an at-will
employment agreement which contains, in addition to the usual provisions for
employment, the following three provisions: (1) a representation by the employee
that he is not a member of a labor union; (2) a promise by the employee not
to join a labor union; (3) a promise by the employee that, upon joining a labor
2
union, he will quit his employment. T h e exacting of such written promise was
known in England as "signing the document," and in the United States as the
"iron clad" at first, and after 1917 as the "yellow dog contract." Only a yellow
dog, cried the unionists, would sign such a contract.
Labor's successful designation of this arrangement as a yellow dog
contract was a very effective piece of public relations, for the term itself has an
3
odious connotation. T h e unions' objection culminated in the passage of the
Norris-La Guardia Act in 1932. It severely controlled the issuance of injunctions
in labor disputes and effectively stopped employers from using the yellow dog
contracts to support their petitions against unionization activities.
In the Philippines, such a contract is considered an unfair labor practice
4
by express provision of the law.
7. THIRD U.L.P.: CONTRACTING OUT (ARTICLE 248[c])
Article 2 4 8 ( c ) considers it ULP for an employer to contract out services or
functions being performed by union members when such act will interfere with,
restrain, or coerce employees in the exercise of their right to self-organization.
5
Contracting out, itself, is not ULP; it is the ill intention that makes it so.

'31 Am. Jur., Sec. 62, p. 863.

teller, Law Governing Labor Disputes and Collective Bargaining, pp. 118-119.
'Philip Taft, Economics and Problems of Labor, Stackpole 8c Heck [New York, 1948],
p. 561.
4
Article 248 [b].
5
See related discussion under Article 106, Volume I.

307
 LABOR RELATIONS
ART. 248

An employer's contracting out of work is itself an unfair labor practice

where motivated by a desire to prevent his employees from organizing and
selecting a collective bargaining representative, rid himself of union men, or
escape his statutory duty to bargain collectively with his employees' bargaining
1
representative.
On the other hand, an employer is not guilty of an unfair labor practice
in contracting work out for business reasons such as decline in business, the
inadequacy of his equipment, or the need to reduce cost, even if the employer's
estimate of his cost is based on a projected increase attributable to unionization.
In such a case the real issue is not whether the employer's business reasons are
good or bad, but whether they actually motivated the contracting out. The NLRB
cannot substitute its business judgement for that of the employer in determining whether
2
the contracting out was illegally motivated.
In Manila Electric Company vs. Quisumbing and MEWA, G.R. No. 127598,
January 27, 1999, the Secretary of Labor imposed upon the management the
duty to consult the union before implementing a j o b contracting out that
would last for six months or more. T h e Court invalidated the imposition while
noting that contracting out is subject to specific legal limitations. T h e Court
explained:
As we have previously held, the company can determine in its best
business judgment whether it should contract out the performance of some
of its work for as long as the employer is motivated by good faith, and the
contracting out must not have been resorted to to circumvent the law or
must not have been the result of malicious or arbitrary action. De Ocampo
vs. NLRC, 213 SCRA 652 [1992]. T h e Labor Code and its implementing
rules also contain specific rules governing contracting out.
Given these realities, we recognize that a balance already exists in
the parties' relationship with respect to contracting out; MERALCO has
its legally defined and protected management prerogatives while workers
are guaranteed their own protection through specific labor provisions
and the recognition of limits to the exercise of management prerogatives.
From these premises, we can only conclude that the Secretary's added
requirement only introduces an imbalance in the parties' collective
bargaining relationship on a matter that the law already sufficiently
regulates. Hence, we rule that the Secretary's added requirement, being
unreasonable, restrictive and potentially disruptive should be struck
down.

1 48 Am. Jur. 2d 1101.

2
Ibid. See: Philcom Employees Union vs. Philippine Global Communications,
et al., G.R. No. 144315,July 17, 2006.

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 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

7.1 Contracting Out Restricted by CBA

9
Shell Oil Workers Union vs. Shell Company of the Philippines, Ltd., G.R. No.
1^28607, May 31,1971 —
Facts: Shell Company dissolved its security guard section and replaced it with an
outside agency, claiming that such act was a valid exercise management prerogative.
The Union argued otherwise, relying on the CBA provision which assured the
continued existence of a security guard section at least during the lifetime of the
collective agreement.
The crucial question thus is whether the then existing collective bargaining
contract running for three years from August 1, 1966 to December 31, 1969
constituted a bar to such a decision reached by management.
Ruling: The answer must be in the affirmative. As correctly stressed in the
brief for the petitioner union, there was specific coverage concerning the security
guard section in the collective bargaining contract. It is found not only in the body
thereof but in the two appendices concerning the wage schedules as well as the
premium pay and the night compensation to which the personnel in such section
were entitled. It was thus an assurance of security of tenure, at least, during the
lifetime of the agreement. Nor is it a sufficient answer, as set forth in the decision of
respondent Court, that while such a section would be abolished, the guards would not
be unemployed as they would be transferred to another position with an increase in
pay and with a transfer bonus. For what is involved is the integrity of the agreement
reached, the terms of which should be binding on both parties. One of them may
be released, but only with the consent of the other. The right to object belongs to
the latter, and if exercised, must be respected. Such a state of affairs should continue
during the existence of the contract. Only thus may there be compliance with and
fulfillment of the covenants in a valid subsisting agreement.
What renders the stand of Shell Company even more vulnerable is the fact that
as set forth in its brief and as found by respondent Court as far back as 1964, it had
already been studying the matter of dissolving the security guard section and contracting
out such service to an outside agency. Apparently, it had reached a decision to that
effect for implementation the next year. In July 1966, there was a joint consultation
between it and the Union on the matter. Nonetheless on August 26,1966, a collective
bargaining contract was entered into which, as indicated above, did assure the continued
existence of the security guard section. The Shell Company did not have to agree to
such a stipulation. Or it could have reserved the right to effect a dissolution and reassign the
guards. It did not do so. Instead, when it decided to take such a step resulting in the strike,
it would rely primarily on provisions in die collective bargaining contract couched in
general terms, merely declaratory of certain management prerogatives. Considering
the circumstances of records, there can be no justification then for Shell Company's
insistence on pushing through its project of such dissolution without thereby incurring
a violation of the collective bargaining agreement.
Accordingly, the unfair labor practice strike called by the Union did have die
impress of validity.

309
 LABOR RELATIONS
ART. 248

Note: The Court's rulings on the legality of the strike and the dismissal of
the striking guards will be taken up in the chapter on strike and lockout regarding
use of violence.
7.2 Runaway Shop
Resorting to a runaway shop is ULP. A "runaway shop" is defined as an
industrial plant moved by its owners from one location to another to escape
union labor regulations or state laws, but the term is also used to describe a
plant removed to a new location in order to discriminate against employees at
the old plant because of their union activities. Moreover, it has been held that
where a plant removal is for business reasons but the relocation is hastened
by anti-union motivation, the early removal is an unfair labor practice. It is
immaterial that the relocation is accompanied by a transfer of title to a new
1
employer who is an alter ego of the original employer.
On the other hand, an employer may legitimately blunt the effectiveness of
an anticipated strike by stockpiling inventories, readjusting contract schedules,
or transferring work from one plant to another, even though he thereby makes
2
himself virtually strikeproof.
Runaway shop refers to business relocation animated by anti-union animus.
Sameness of business is not reason enough to show run-away shop to pierce the
veil of separate corporate entity.
Complex Electronics Employees Association vs. NLRC, et al., G.R. No. 121315, July
19, 1999 and companion case —
Complex Electronics Corporation was a subcontractor of electronic products
where its customers gave their j o b orders, sent their own material and consigned their
equipment to it. The customers were foreign-based companies with different product
lines requiring the employment of workers with specific skills for each product line.
Thus, there was the AMS Line for the Adaptive Micro System, Inc., the Heril Line
for Heril Co., Ltd., the Lite-On Line for the Lite-On Philippines Electronics Co., etc.
The rank and file workers of Complex comprised the union known as the
Complex Electronics Employees Association.
On March 4, 1992, Complex received a message from Lite-On Philippines
Electronics Co., requiring it to lower its price by 10%.
Complex informed its Lite-On personnel that lowering its selling price by 10%
was not feasible as they were already incurring losses, hence, Complex informed the
employees that it had to close down the operations of the Lite-On Line. Nonetheless,
the company promised that it would follow the law by giving one month notice and
retrenchment pay, i.e., half-month pay for every year of service.
The Union, on the other hand, demanded a retrenchment pay of one (1)
month salary for every year of service, which Complex refused.

^ A m . J u r . 2d, Sec. 1104.

2
Ibid.

310
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

On March 13, 1992. Complex filed a notice of closure of the Lite-On Line and
die retrenchment of the ninety-seven (97) affected employees.
The Union filed a notice of strike and conducted a strike vote which resulted
in a "yes" vote.
In the evening of April 6,1992, the machinery, equipment and materials being
used for production at Complex were pulled out from the company premises and
transferred to the premises of Ionics Circuit, Inc. (Ionics) at Cabuyao, Laguna. The
following day, Complex totally closed its operation.
The union filed a complaint for unfair labor practice, illegal closure/illegal
lockout and money claims. The Union alleged that the pull-out of the machinery,
equipment and materials from the company premises, which resulted to the sudden
closure of the company, violated the Labor Code and the existing CBA. Ionics was
impleaded as a party defendant because the officers and management personnel of
Complex were also holding office at Ionics.
The Union anchors its position on the fact that Complex and Ionics have the
same president and Board of Directors. It claims that business has not ceased at
Complex but was merely transferred to Ionics, a runaway shop. To prove that Ionics
was just a runaway shop, petitioner asserts that out of the 80,000 shares comprising
the increased capital stock of Ionics, Complex owns majority of the shares.
Ruling: The Union's contentions are untenable.
A "runaway shop" is defined as an industrial plant moved by its owners from
one location to another to escape union labor regulations, or state laws, but the term
is also used to describe a plant removed to a new location in order to discriminate
against employees at the old plant because of their union activities. It is one wherein
the employer moves its business to another location or it temporarily closes its business
for anti-union purposes. A "runaway shop" in this sense, is a relocation motivated by
anti-union animus rather than for business reasons. In this case, however, Ionics was
not set up merely for the purpose of transferring the business of Complex. At the time
the labor dispute arose at Complex, Ionics was already existing as an independent
company. It has been in existence since July 5,1984. It cannot, therefore, be said that
the temporary closure in Complex and its subsequent transfer of business to Ionics
was for anti-union purposes. The Union failed to show that the primary reason for
the closure of the establishment was due to the union activities of the employees.
The mere fact that one or more corporations are owned or controlled by
the same or single stockholder is not sufficient ground for disregarding separate
corporate personalities. Thus, in Indophil Textile Mill Workers Union vs. Calica, we
ruled that:
The fact that the business of private respondent and Acrylic are related,
that some of the employees of the private respondent are the same persons
manning and providing for auxiliary services to the units of Acrylic, and that
the physical plants, offices and facilities are situated in the same compound,
it is our considered opinion that these facts are not sufficient to justify the
piercing of the corporate veil of Acrylic.

311
 LABOR RELATIONS
ART. 248

Likewise, in Del Rosario vs. National Labor Relations Commission, the Court
stated that substantial identity of the incorporators of two corporations does
not necessarily imply that there was fraud committed to justify piercing the
veil of corporate fiction.
In the recent case of Santos vs. National Labor Relations Commission, we
also ruled that:
The basic rule is still that which can be deduced from the Court's
pronouncement in Sunio vs. National Labor Relations Commission, thus:
xxx. Mere ownership by a single stockholder or by another corporation
of all or nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personality.
Ionics may be engaged in the same business as that of Complex, but this fact
alone is not enough reason to pierce the veil of corporate fiction of the corporation.
Well-settled is the rule that a corporation has a personality separate and distinct from
that of its officers and stockholders. This fiction of corporate entity can only be dis-
regarded in certain cases such as when it is used to defeat public convenience, justify
wrong, protect fraud, or defend crime. To disregard said separate juridical personality
of a corporation, the wrongdoing must be clearly and convincingly established.
We, likewise, disagree with the Union that there was in this case an illegal
lockout/illegal dismissal. Lockout is the temporary refusal of employer to furnish work
as a result of an industrial or labor dispute. It may be manifested by the employer's
1
act of excluding employees who are union members.
In the present case, there was a complete cessation of the business operations
at Complex not because of the labor dispute. It should be recalled that before the
labor dispute, Complex had already informed the employees that they would be
closing the Lite-On Line. The employees, however, demanded for a separation pay
equivalent to one (1) month salary for every year of service which Complex refused
to give. When Complex filed a notice of closure of its Lite-On Line, the employees
filed a notice of strike which greatly alarmed the customers of Complex and this led
to the pull-out of their equipment, machinery and materials from Complex. Thus,
without the much needed equipment, Complex was unable to continue its business.
It was left with no other choice except to shut down the entire business. The closure,
therefore, was not motivated by the union activities of the employees, but rather by
necessity since it can no longer engage in production without the much needed
materials, equipment and machinery.

8. FOURTH U.L.P.: COMPANY-DOMINATION OF UNION (ARTICLE 248[d])

Domination of a labor union usually manifests in the following forms:
(a) Initiation of the company union idea. This may further occur in three
styles: (1) outright formation by the employer or his representatives;

'Sta. Mesa Slipway 8c Engineering Co. vs. CIR, 48 O.G. 3353, as cited in II CA.
Azucena, The Labor Code With Comments and Cases, Revised 1993 Ed., p. 296.

312
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

(2) employee formation on outright demand or influence by

employer; and (3) managerially motivated formation by employees.
(b) Financial support to the union. An employer commits unfair labor
practice if he defrays the union expenses or pays the attorney's
fees to the attorney who drafted the constitution and by-laws of the
union.
(c) Employer encouragement and assistance. Immediately granting the union
exclusive recognition as a bargaining agent without determining
whether the union represents the majority of employees is an illegal
form of assistance amounting to unfair labor practice.
(d) Supervisory assistance. This takes the form of soliciting membership,
permitting union activities during working time or coercing
1
employees to j o i n the union by threats of dismissal or demotion.
An employer was held to have unlawfully aided a union by assisting its
attempt to secure authorization cards from employees and by executing a contract
2
with such union when it was not the authorized representative of the employees.
A labor union is company-dominated where it appears that key officials
of the company have been forcing employees belonging to a rival labor union
to j o i n the former under pain of dismissal should they refuse to do so; that key
officials of the company, as well as its legal counsel, have attended the election of
officers of the former union; that officers and members of the rival union were
dismissed allegedly pursuant to a retrenchment policy of the company, after they
had presented demands for the improvement of the working conditions despite
its alleged retrenchment policy; and that, after dismissal of the aforesaid officers
3
of the rival labor union, the company engages the services of new laborers.
Progressive Development Corp. vs. OR, No. L-39546, November 29, 1977 —
Facts: In September 1962, the Araneta Coliseum Employees Association
(ACEA), in behalf of forty-eight members, filed a ULP case against Progressive
Development Corporation (PDC), its officers, and the Progressive Employees Union
(PEU).
The complainants alleged that they were dismissed because they refused to
resign from die ACEA and to affiliate with die PEU which was being aided and abetted
by PDC.
The assertion of PDC and its officials that they had nothing to do with the
formation of PEU was not supported by the facts of record.
While the PEU was allegedly organized on June 26, 1962, it was only on July
11, 1962 that its existence was publicly announced when the management of PDC
'Philippine American Cigar 8c Cigarette Factory Workers Union vs. Philippine
American Cigar 8c Cigarette Mfg. Co., Inc., 7 SCRA 375.
2
NLRB vs. Getlan Iron Works, 55 LC 19, 115.
'Oceanic Air Products, Inc. vs. CIR, G.R. No. H 8 7 0 4 , January 31, 1963.
313
 ART. 248 LABOR RELATIONS

refused to meet with the ACEA. PEU never collected dues from its members and
all members were made regular employees and were retained in the construction
unit of PDC. There was evidence that the PEU became inactive after the death of
Atty. ["R"], the former counsel of PEU. This showed that die PEU was organized to
camouflage the PDC's dislike for the ACEA and to stave of the latter's recognition.
It was also a fact that the PEU, after exerting efforts to win in the certification
election case, did not conclude and enter into a CBA with die management.
Ruling: The dismissal of employees because of union activities and not because
of die company's alleged losses was adequately proven. The employer's act constituted
ULP.

9. FIFTH U.L.P.: DISCRIMINATION (ARTICLE 248[e])

What the law prohibits is discrimination to encourage or discourage
membership in a labor organization. Where the purpose is to influence the
union activity of employees, the discrimination is unlawful. But discrimination
is not the same as differentiation or classification. For instance, it is common
management practice to classify j o b s and grant them varying levels of pay or
benefits package. These are valid differentiations that recognize differences
in j o b requirements or contributions. They are not necessarily discrimination
classifiable as ULP. In the case of Wise and Co., Inc., cited earlier in this chapter,
the Court allowed the giving of profit-sharing benefits to employees excluding
the union members because the latter are CBA-covered unlike the others.
Under the Industrial Peace Act [as under the present Labor C o d e ] ,
to constitute an unfair labor practice, the discrimination committed by the
employer must be in regard to the 'hire or tenure of employment or any
term or condition of employment to encourage or discourage membership
in any labor organization.' T h e exaction by the Company, from the strikers
returning to work, of a promise not to destroy company property and not to
commit acts of reprisal against the Union members who did not participate
in the strike, cannot be considered as intended to encourage or discourage
Union membership. Taking the circumstances surrounding the prescribing
of that condition, the requirement by the Company is actually an act of self-
preservation and designed to insure the maintenance of peace and order in
1
the Company premises.
There is no evidence that the management of Marcelo group of companies
was guilty of ULP in asking the returning strikers to fill up forms to indicate the
2
date they are available for work.

'Pagkakaisang Itinataguyod Ng Mga Manggagawa Sa Ang Tibay, et al vs. Ang

Tibay, et al., 1^22273, May 16, 1967.
2
Lakas ng Manggagawang Makabayan vs. Marcelo Enterprises, 118 SCRA 422
[1982].

314
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

Discouraging membership in a labor organization includes not only

discouraging adhesion to union membership but also discouraging participation
1
in union activities such as a legitimate strike.

9.1 Discrimination in Work Quota

In one case, the pharmaceutical company increased the sales quota of the
union president and vice-president to 4 0 0 % and 3 0 0 % , respectively, unlike those
of the other field representatives whose sales quota the company increased by
an average of 9 8 % only. T h e company could not give valid explanation for such
marked difference.
Considered in the light of the anti-union attitude exhibited by the company
in transferring the union president from the main office in Manila to Cebu
when the union was still being organized, and which act was found by the NLRC
as constituting unfair labor practice and union busting in connection with the
application for clearance to terminate the union president filed by the company,
it was held that the uneven application of its marketing plan by the company
is patently an act of discrimination, considered as unfair labor practice under
2
Article 2 4 8 ( e ) of the Labor Code.

9.2 Discrimination in Bonus Allocation or Salary Adjustments

Where a company, contrary to previous practice of dividing equally to all
employees a certain percentage of its net profits as Christmas bonus, allocated
5 0 % thereof only to its Manila Hotel employees, some of whom were granted
year-end bonus, while its Pines Hotel employees, where there exists a labor
union, did not receive any year-end bonus; where only 5% of said percentage of
net profits was distributed to its Pines Hotel employees and 2 5 % to its Taal Vista
Lodge employees, these circumstances constitute a clear case of discrimination,
it appearing that there is no union at the Manila Hotel.
T h e r e is unfair and unjust discrimination in the granting of salary
adjustments where the evidence shows that (a) the management paid the
employees of the unionized branch; (b) where salary adjustments were granted
to employees of one of its nonunionized branches although it was losing in its
operations; and (c) the total salary adjustments given every ten of its unionized
employees would not even equal the salary adjustments given one employee in
3
the nonunionized branch.
 LABOR RELATIONS
ART. 248

9.3 Discrimination in Layoff or Dismissal

Even where business conditions justified a layoff of employees, unfair
labor practices in the form of discriminatory dismissal were found where only
unionists were permanently dismissed while nonunionists were not. The CIR
findings of unfair labor practice through discriminatory dismissal were sustained
where the records showed that the owner of the enterprise demanded of eleven
employees that they resign from the union and when they refused, dismissed
1
them permanently.
Bataan Shipyard and Engineering Co., Inc. vs. NLRC, G.R. No. Lr78604, May 9,
1988 —
Facts: The National Federation of Labor Unions (NAFLU) is a labor
organization in petitioner BASECO duly registered with the Department of Labor
and Employment. The Company has around a thousand employees in its payroll and
more than a hundred of them belong to the said labor organization.
Sometime before 1984, the Company filed with the NLRC an application for
the retrenchment of 285 of its employees on the ground that the firm had been
incurring heavy losses since the end of 1979. In the meantime, some employees who
had been on sick leave earlier were considered retrenched. All of those so retrenched
happened to be officers and members of the NAFLU.
Ruling: It is not disputed that the retrenchment undertaken by the Company
is valid. However, the manner in which the prerogative is exercised should not be
tainted with abuse of discretion. Labor is a person's means of livelihood. He cannot
be deprived of his labor or work without due process of law. Retrenchment strikes
at the very heart of one's employment. While the right of an employer to dismiss
an employee is conceded in a valid retrenchment, the right differs from and should
not be confused with the manner in which such right is exercised. It should not be
oppressive and abusive since it affects one's person and property. Due process of law
demands nothing less.
The Company had indeed been discriminatory in selecting the employees who
were to be retrenched. All of the retrenched employees are officers and members
of the NAFLU. The record of the case is bereft of any satisfactory explanation from
the Company regarding this situation. As such, the action taken by the firm becomes
highly suspect. It leads Us to conclude that the firm had been discriminating against
membership in the NAFLU, an act which amounts to interference in the employee's
exercise of their right of self-organization. Under Article 249 [now 248] of the Labor
Code of the Philippines, such interference is considered an act of unfair labor practice
on the part of the Company.

9.4 Discrimination in Regularization

T h e complainants are pre-war employees and notwithstanding their length
of service without any indication that they had committed any improper act or

'Manila Pencil Co. vs. CIR, G.R. No. L-16903, August 31, 1965, 14 SCRA 955.

316
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

behavior, have never been given any permanent status while others who entered
the service in 1957 or 1959 in the same capacity as bus workers or truck helpers
were readily given the status. T h e Company claims that the complainants could
not be extended permanent appointments because of the absence of vacant
positions commensurate with their qualifications, yet, during the period of 1957
to 1959, four new employees were taken in as bus workers or truck helpers and
right from the start were given permanent appointments.
It was held that the only reason that can be advanced for such indifferent
attitude towards complainants is the fact that they are affiliated with the
complainant union which apparently does not have the sympathy of their
1
employer.

9.5 Discrimination by Blacklisting

A blacklist has been defined as "a list of persons marked out for special
avoidance, antagonism or enmity on the part of those who prepare the list, or
those among whom it is intended to circulate, as where a trade union 'blacklists'
workmen who refuse to conform to its rules, or where a list of insolvent or
untrustworthy persons is published by a commercial agency or mercantile
association." (Black's Law Dictionary.)
When it is resorted to by a combination of employers to prevent employment
of employees for union activities, it may constitute unfair labor practice. Aside
from constituting an unfair labor practice, it may give rise to a right of action for
damages by the employees prejudiced under Article 28 of the new Civil Code.
In its broad sense, however, that is, in the sense of the employer's
circulating a list of former employees of notorious laziness or negligence in
the performance of their duties or of incorrigible propensity to create trouble
in the place of employment, it may be a proper measure for the protection of
employers. Thus, it has been held that unless the action of the employers in
combining or in passing communications among themselves for the purpose of
excluding unwanted workers from employment, constitutes a libel or a slander
(and according to some decisions the defamation, to be actionable, must be
malicious), the excluded employee possesses no right of action because the
employers' community of interest acts both to justify the combination and to
2
privilege the communication.

'Manila Railroad Co., et al. vs. Kapisanan ng mga Manggagawa sa Manila

Railroad Co., et al, L-19728, July 30, 1964.
2
See Wilner vs. Silverman, 109 Md 341, A 962 [1902]; Bacon vs. Michigan C.R.
Co., 66 Mich. 166, NW 181 [1887]; Mattisinus vs. Lake Shore &: M.S.R. Co., 3 Ohio
NP 190 [1896]; Keith vs. Behee, 2 Tex. Civ App. 107, 21 SW384 [1887]; Brown vs.
Norfolk & W.R. Co., 100 Va. 619, 42 SE 664 [1902].

317
 LABOR RELATIONS
ART. 248

9.6 Indirect Discrimination

Sec. 4(a)(5) of Republic Act No. 875 [now Article 248(f) of the Code]
provides that it shall be unfair labor practice for an employer to dismiss or
discriminate against an employee for having filed charges or for having given or
being about to give testimony under said Act. Although this section would seem to
refer only to the one who preferred charges against the company as constituting
unfair labor practice, the legislative intent is to assure absolute freedom of the
employees to establish labor organizations and unions, as well as to proper
charges for violations of the labor laws. Now, if the dismissal of an employee due
to the filing by him of said charges would be and is an undue restraint upon
said freedom, the dismissal of his brother owing to the nonwithdrawal of the
charges of the former, would be and constitute as much, in fact a greater and
more effective, restraint upon the same freedom. What is prohibited to be done
1
directly shall not be allowed to be accomplished indirectly.
Thus, the following acts have been held unfair labor practices: (1) the
2
dismissal of a laborer on account of union activities of his brother; (2) the
3
discharge of an employee due to the union activities of the wife; and (3) the
4
discharge of a wife due to the union activities of the husband.
9.7 Test of Discrimination
For the purpose of determining whether or not a discharge is discriminatory,
it is necessary that the underlying reason for the discharge be established. T h e
fact that a lawful cause for discharge is available is not a defense where the
employee is actually discharged because of his union activities. If the discharge
is actually motivated by a lawful reason, the fact that the employee is engaged
in union activities at the time will not lie against the employer and prevent him
5
from the exercise of his business judgment to discharge an employee for cause.
In a fairly recent Philippine case, the NLRB vs. Ace Comb ruling cited above
was used by a union in charging with ULP an employer who retired the union's
president and vice-president because they had completed 20 years of service.
Despite the CBA's categorical provision allowing such retirement, the Court of
Appeals upheld the union's contention that the employer committed ULP. On
review, however, the Supreme Court reexamined the citation by the union and
observed that the cited ruling, NLRB vs. Ace Comb, runs counter to the union's
position, for while the union wants to invalidate the employer's action, the US

^hil. Am. Cigar & Cigarette Factory Workers Independent Union vs. Phil. Am.
8c Cigar Cigarette Manufacturing Co., G.R. No. L-18364, February 28, 1963.
2
Matter of Quidnick Dye Works, 2 NLRB 963.
3
In the matter of the Ford Motor Co., 26 NLRB 322.
4
Union Asbestos and Rubber Co., 98 NLRB 1055; see Teller on Labor Disputes
and Collective Bargaining, Vol. 2, p. 859.
5
NLRB vs. Ace Comb Co., 342 F. 2 841.

318
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

Court in NLRC vs. Ace Comb in fact upheld it. T h e cited case, in other words,
does not support the union's argument. Thus, the Supreme Court observed:
What the Court of Appeals did instead was to favorably consider
the claim of the Union that the real purpose behind the retirement of
Llagas and Javier was to "bust" the union, they being its president and vice-
president, respectively. To that end, the appellate court favorably adopted
the citation by the Union of the American case of NLRB v. Ace Comb, Co.,
which in turn was taken from a popular local labor law textbook. The
citation stated that "[f]or the purpose of determining whether or not a
discharge is discriminatory, it is necessary that the underlying reason for
the discharge be established. T h e fact that a lawful cause for discharge is
available is not a defense where the employee is actually discharged because
of his union activities."
Reliance on NLRB v. Ace Comb, Co. was grossly inapropos. The case did
not involve an employee sought to be retired, but one who cited [sic] for
termination from employment for cause, particularly for violating Section
8 ( a ) ( 3 ) of the National Labor Relations Act, or for insubordination.
Moreover, the United States Court of Appeals Eight Circuit, which decided
the case, ultimately concluded that "here the evidence abounds that there
was a justifiable cause for [the employee's] discharge," his union activities
notwithstanding. Certainly, the Union and the Court of Appeals would have
been better off citing a case wherein the decision actually concluded that the
employee was invalidly dismissed for union activities despite the ostensible
existence of a valid cause for termination. (Cainta Catholic School, et al. vs.
Cainta Catholic School Employees Union, G.R No. 151021, May 4, 2006.)
In another case, discharged employee complained that his discharge was
a reprisal for his frequent and persistent filing and processing of grievances.
On the other hand, the employer contended that the employee was actually
discharged for absenteeism and lateness based on prior sufficient warnings
against violation of company rules requiring each employee to give timely
notice of inability to report for work. T h e claim of improper motivation was
supported solely by the uncorroborated statement of the employee. On the
other hand, the employer presented witnesses on the cause of the discharge.
Held: T h e more substantial evidence establishes that the discharge was made
1
with the proper motive.
Where circumstances establish a discriminatory motive on the part of the
employer, the assignment of a just cause will be unavailing, x x x if it can be
established that the true and basic inspiration for the employer's act is derived
from the employees' union affiliations or activities, the assignment by the
employer of another reason, whatever its semblance of validity, is unavailing.

l
DC International vs. NLRB, 56 LC 20, 227.

319
 ART. 248 LABOR RELATIONS

Thus, it has been held that the facts disclosed that the employer's acts in
discharging the employees were actually prompted by the employer's improper
interest in the affected employees' union affiliations and activities, even though
the employer urged that his acts were predicated on economic necessity, desire
to give employment to more needy persons, lack of work, cessation of operations,
refusal to work overtime, refusal of nonunion employees to work with union
employees, seasonal layoff, libelous remarks against management, violation of
1
company rules.
An inference that the discharge of an employee was motivated by his
union activity must be based upon evidence, direct or circumstantial, not upon
2
mere suspicion.
9.8 Constructive Discharge
Where the employer prohibits employees from exercising their rights
under the Act, on pain of discharge, and the employee quits as a result of the
prohibition, a constructive discharge occurs, which may be remedied in an unfair
3
labor practice proceeding.
An employee was held to be constructively discharged when she quit her
j o b because of discriminatory assignment requiring heavy lifting work which the
4
employer knew she was physically unable to perform.

9.9 Discharge Due to Union Activity, A Question of Fact

The question of whether an employee was discharged because of his union
activities is essentially a question of fact as to which the findings of the Court
of Industrial Relations are conclusive and binding if supported by substantial
evidence considering the record as a whole. This is so because the Industrial
Court is governed by the rule of substantial evidence, rather than by the rule of
preponderance of evidence as in any ordinary civil cases. Substantial evidence
has been defined as such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion. It means such evidence which affords a
5
substantial basis from which the fact in issue can be reasonably inferred.

9.10 Valid Discrimination: Union Security Clause

There is a form of encouragement of union membership which is not
considered ULP. This is where Management and Union enter into a collective
bargaining agreement containing a union security clause. Despite variations and

•Rothenberg on Labor Relations, pp. 400-401; Visayan Bicycle Manufacturing

Co., Inc. vs. National Labor Union, et al, G.R. No. 1^19997, May 19, 1965.
2
NLRB vs. South Rambler Co., 324 F 2d 447.
3
Rarich Mfg. Co., 12 NLRB 503; Montgomery Ward Co. vs. NLRB, 377 F2d
452.)
4
NLRB vs. Vacuum Platers, 54 LC 18, 289.
Philippine Metal Foundries, Inc. vs. CIR, G.R. Nos. L-34948-49, May 15,1979.

320
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

limitations, a union security clause essentially requires membership in the union

so that an employee may retain his j o b and the union's existence is assured.
"Union security" is a generic term which is applied to and comprehends
"closed shop," "union shop," "maintenance of membership" or any other form
of agreement which imposes upon employees the obligation to acquire or retain
union membership as a condition affecting employment. It is indeed compulsory
union membership whose objective is to assure continued existence of the union.
In a sense, there is discrimination when certain employees are obliged to join a
particular union. But it is discrimination favoring unionism; it is a valid kind of
"discrimination."
T h e employer is not guilty of unfair labor practice if it merely complies in
good faith with the request of the certified union for the dismissal of employees
expelled from the union pursuant to the union security clause in the collective
1
bargaining agreement.

9.10a Kinds of Union Security Agreements

T h e following are the union security provisions commonly found in
collective agreements at the enterprise level:
Closed-shop: Only union members can be hired by the company and they
must remain as union members to retain employment in the company.
Union Shop: Nonmembers may be hired, but to retain employment must
become union members after a certain period. T h e requirement applies to
present and future employees.
Modified Union Shop: Employees who are not union members at the time
of signing the contract need not join the union, but all workers hired thereafter
2
must join.
Maintenance of Membership Shop: No employee is compelled to join the
union, but all present or future members must, as a condition of employment,
remain in good standing in the union.
Exclusive Bargaining Shop: T h e union is recognized as the exclusive
bargaining agent for all employees in the bargaining unit, whether union
members or not.
Bargaining for Members Only: T h e union is recognized as the bargaining
3
agent only for its own members. But see Philippine Diamond Hotel case cited
under Article 242.

•Soriano vs. Atienza, G.R. No. 68619, March 16,1989; Tanduay Distillery Labor-
Union vs. NLRC, 249 SCRA 470 [1987].
2
Union Security, AFL-CIO, 1958 in E. Wight Bakke [ed.], Union Management
and die Public [Harcourt; New York: 1967], p. 127.
3
Rothenberg on Labor Relations, p. 410.

321
 LABOR RELATIONS
ART. 248

Agency Shop: An agreement whereby employees must either join the union
or pay to the union as exclusive bargaining agent a sum equal to that paid by the
members. This is directed against "free rider" employees who benefit from union
activities without contributing financially to union support. It prevents a situation
1
where nonunion members enrich themselves at the expense of union members.
Another term for agency shop agreement is "maintenance of treasury shop"
The above variations are opposite of open shop, an arrangement which does
not require union membership as a condition of employment.
9.10b Validity of Closed-Shop Agreement
It is true that disaffiliation from a labor union is not open to legal objection.
It is implicit in the freedom of association ordained by the Constitution. But a
closed shop is a valid form of union security, and such provision in a collective
bargaining agreement is not a restriction of the right of freedom of association
2
guaranteed by the Constitution.
It is the policy of the State to promote unionism to enable the workers to
negotiate with management on the same level and with more persuasiveness than
if they were to individually and independently bargain for the improvement of
their respective conditions. To this end, the Constitution guarantees to them
the rights to self-organization, collective bargaining and negotiations and
peaceful concerted actions, including the right to strike in accordance with law.
These purposes could be thwarted if every worker were to choose to go his own
separate way instead of joining his co-employees in planning collective action and
presenting a united front when they sit down to bargain with their employers.
For this reason, the law has sanctioned stipulations for the union shop and the
closed-shop as a means of encouraging the workers to j o i n and support the labor
union of their own choice as their representative in the negotiation of their
3
demands and the protection of their interests vis-a-vis the employer.
A closed-shop agreement is one whereby an employer binds himself to hire
only members of the contracting union who must continue to remain members in
good standing to keep their jobs. It is "the most prized achievement of unionism."
It adds membership and compulsory dues. By holding out to loyal members a
promise of employment in the closed-shop, it wields group solidarity. It is a very
4
effective form of union security agreement.

•See Article 248[e].

Millar vs. Inciong, Nos. L-50283-84, April 20,1983; Manila Mandarin Employees
Union vs. National Labor Relations Commission, G.R. No. 76989, September 29,
1987.
3
Liberty Flour Mills Employees, et al vs. Liberty Flour Mills, Inc., G.R. Nos.
58768-70, December 29, 1989.
4
Manila Mandarin Employees Union vs. National Labor Relations Commission,
G.R. No. 76989, September 29,1987. See also: National Labor Union vs. Aguinaldo's

322
 UNFAIR LABOR PRACTICES OF EMPLOYERS
ART. 248

Another reason for enforcing the closed-shop agreement is the principle

of sanctity or inviolability of contracts guaranteed by the Constitution. As a
matter of principle, the provision of the Industrial Peace Act granting freedom
to employees to organize themselves and select their representative for entering
into bargaining agreements, should be subordinated to the constitutional
provision protecting the sanctity of contracts. We cannot conceive how freedom
to contract, which should be allowed to be exercised without limitation, may be
subordinated to the freedom of laborers to choose the organization they desire
to represent them. And even if the legislature had intended to do so and made
such freedom of the laborer paramount to the sanctity of obligation of contracts,
such attempt to override the constitutional provision would necessarily and ipso
1
facto be null and void.
Even before the Labor Code era, the Supreme Court has already ruled that
while there are arguments in favor of, and against, the closed-shop agreement,
Congress, in the exercise of its policy-making power, has approved the closed-
2
shop, in Section 4 of Republic Act No. 8 7 5 . T h e labor court's opinion therefore
that the stipulation on closed-shop agreement in the present case constitutes
unfair labor practice by having the effect of forcing the employees to become
or remain a member of a labor organization on pain of losing her employment,
3
is without merit.

9.10c Advantages and Disadvantages of Closed-Shop Agreement

A closed-shop agreement is advantageous because it —
a. Increases the strength and bargaining power of labor organiza-
tions.
b. Prevents non-union workers from sharing in the benefits of the
union's activities without also sharing its obligations.
c. Prevents the weakening of labor organizations by discrimination
against union members.
d. Eliminates the lowering of standards caused by competition with
nonunion workers.
e. Enables labor organizations effectively to enforce collective agree-
ments.

Echague, Inc., No. L-7358, May 31, 1955; Ang Malayang Manggagawa ng Ang Tibay
Ent. vs. Ang Tibay, No. L-8259, December 23, 1957.
•Victorias Milling Co., Inc. vs. Victorias-Manapla Workers Organization-PAFLU,
G.R. No. L-18467, September 30, 1963.
National Labor Union vs. Aguinaldo's Echague, Inc., 51 O.G., No. 6, p. 2899.
3
Bacolod-Murcia Milling Co., Inc., et al. vs. National Employees Workers Security
Union, G.R. No. L-9003, December 22, 1956, 53 Off. Gaz. 615; Tolentino, et al. vs.
Angeles, et al., G.R. No. L-8150, May 30, 1956, 52 Off. Gaz. 4262.
323
 ART. 248 LABOR RELATIONS

f. Facilitates the collection of dues and the enforcement of union rules.

1
g. Creates harmonious relations between the employer and employee.
But it is disadvantageous as it —
a. Results in monopolistic domination of employment by labor
organizations.
b. Interferes with the freedom of contract and personal liberty of the
individual worker.
c. Compels employers to discharge all nonunion workers regardless
of efficiency, length of service, etc.
d. Facilitates the use of labor organizations by unscrupulous union
leaders for the purpose of extortion, restraint of trade, etc.
e. Denies to nonunion workers equal opportunity for employment.
2
f. Enables union to charge exorbitant dues and initiation fees.
In its country of origin — the U.S. — a clause on compulsory union
membership is being subjected to effective restrictions. For instance, dismissal
from the j o b is legal only if the discharge from the union is because of failure to
pay the union dues. Another restriction is the permission for union members
to conduct an election (or referendum) to decide by majority vote whether the
compulsory membership should be discontinued. T h e effect of these restrictions
is to create a form of compulsory "agency shop," i.e., payment of an amount
equal to the union dues is required but not union membership itself. Aptly, the
M
U.S. Supreme Court observed: [m]embership as a condition of employment is
3
whittled down to its financial core."

9.10d Valid Dismissal Because of Application of Union Security Clause

In the country that copied it — the Philippines — a clause requiring
compulsory union membership has not weakened a whit.
Union security clauses in collective bargaining agreements, if freely and
voluntarily entered into, are valid and binding. Thus, the dismissal of an employee
by the company pursuant to a labor union's demand in accordance with a union
4
security agreement does not constitute unfair labor practice.
Even if the union members were unaware of the closed-shop stipulation in
the CBA, they are bound by it. Neither their ignorance of, nor their dissatisfaction
with its terms and conditions would justify breach thereof or the formation

•NLU vs. Aguinaldo's Echague, Inc., 51 O.G. 2898.

2
Ibid.
3
P. Hardin and J . E . Higgins, Jr., The Developing Labor Law (Washington DC:
BNA Books, 2001), pp. 1968-69.
4
Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos, G.R.
No. 113907, February 28, 2000.

324
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

by them of a union of their own. This is so because a union member who is

employed under an agreement between the union and his employer is bound
by the provisions thereof since it is a j o i n t and several contract of the members
1
of the union entered into by the union as their agent.
Union members, although entitled to disaffiliate from their union and to
form a new organization of their own, must suffer the consequences of their
separation from the union under the security clause of a collective bargaining
agreement, as shown below.

Tanduay Distillery Labor Union vs. National Labor Relations Commission, No.
1^75037, April 30,1987 —
Facts: On March 11,1980, Tanduay Distillery, Inc. (TDI) and Tanduay Distillery
Labor Union (TDLU) entered into a Collective Bargaining Agreement (CBA) for
three (3) years from July 1,1979 to June 30,1982. The CBA contained a union security
clause, which provided: "All workers who are or may during the effectivity of this
Contract, become members of the union in accordance with its Constitution and
By-Laws shall, as a condition of their continued employment, maintain membership
in good standing in the union for the duration of the agreement."
In October 1980, while the CBA was still in effect, a number of TDLU members
joined another union, the Kaisahan ng Manggagawang Pilipino (KAMPIL) and
organized its local chapter in TDI. Soon thereafter, KAMPIL filed a petition for
certification election to determine union representation in TDI.
TDLU required those who disaffiliated to explain why TDLU should not be
punished for "disloyalty" to the TDLU. At the same time TDLU created a committee
to investigate its erring members. All of the latter were given a chance to explain
their side. Thereafter, the TDLU, upon recommendation of the Committee, expelled
the disaffiliating members from TDLU and demanded that TDI terminate their
employment since they had lost their membership with TDLU.
Acting on said request, TDI terminated the employment of the disaffiliating
union members.
Issue: Whether or not TDI was justified in terminating private respondent's
employment based on TDLU's demand to enforce the union security clause of the CBA
Ruling: The employer did nothing but to put in force their agreement when
it separated the disaffiliating union members upon the recommendation of the
union. Such a stipulation is not only necessary to maintain loyalty and preserve the
integrity of the union but is allowed by the Magna Carta of Labor when it provided
mat while it is recognized that an employee shall have the right to self-organization,
it is at the same time postulated that such rights shall not injure the right of the labor
organization to prescribe its own rules with respect to the acquisition or retention
2
of membership therein.

Manalang, et al. vs. Artex Development Co., et al, No. L-20432, October 30,
1967.
2
Section 41 [b], par. 11, Republic Act 875; [now in Article 249, (a)].
325
 ART. 248 LABOR RELATIONS

This provision is an indirect restriction on the right of an employee to self-

organization. It is a solemn pronouncement of a policy that while an employee is
given the right to join a labor organization, such right should only be asserted in a
manner that will not spell the destruction of the same organization. The law requires
loyalty to the union on the part of its members in order to obtain to the full extent its
cohesion and integrity. There is nothing improper in the disputed provisions of the
collective bargaining agreement entered into between the parties. Having ratified
that CBA and being then members of the TDLU, the private respondents owe fealty
and are required under the Union Security clause to maintain their membership
in good standing with it during the term thereof, a requirement which ceases to be
binding only during the 60-day freedom period immediately preceding the expiration
of the CBA.
In Villar vs. Indong (121 SCRA 444), we held that "petitioners, although entitled
to disaffiliation from their union and to form a new organization of their own, must,
however, suffer the consequences of their separation from the union under the
security clause of the CBA."

9.10e Dismissal Pursuant to Closed-Shop Clause Must Clearly Appear in

Contract
In order to validly dismiss an employee by force of the union security clause,
there should be a clear and unequivocal statement that the loss of the status of a
member of good standing in the union shall be a cause for dismissal. There is
absolutely nothing in the union-shop clause herein involved to show that such
was the intention of the parties. It merely provides that in the hiring of unskilled
employees, the members of the CAPAWA would have temporary status; that before
they could be considered regular employees, they have to become members
of the CAPAWA within 30 days from the date of their employment; and if they
refuse to be affiliated with the union, they would be immediately dismissed. As
may be seen, the clause refers to future or new employees. Nothing is provided
with respect to old employees already in the employ of the Central, whether
members of the CAPAWA or not. There is, likewise, no requirement whatsoever
on union members to remain as such under pain of being dismissed. Petitioners
1
are therefore ordered reinstated to their former positions in the Central.
Where the union security clause in the collective bargaining agreement
merely provided that the employer shall have in its employ and continue to
employ members in good standing of the union and that it will not employ nor
hire any new employee or laborer unless he is a member of good standing in
the union, such clause does not reflect a closed-shop agreement, for the reason
that it does not expressly and unequivocably require membership in the union
as a condition for continuance in employment. T h e terms "employ" as well as

^ndustrial-Commercial-Agricultural Workers Organization [ICAYO], et al. vs.

Central Azucarera De Pilar, et al, G.R. No. L-17422, February 28, 1962.

326
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

"have in its employ" cannot be read as requiring the employer to retain in the
1
service only members of union in good standing.
Union shop, as with closed-shop provisions, should be strictly construed
against the existence of union shop. Sometimes harsh and onerous, such
provisions should not be extended beyond the explicit coverage of their terms,
and will not be deemed to authorize by implication any dismissal of employees
2
already working before the agreement was made.

9.10f Due Process Required in Enforcing Union Security Clause; Intra-

union Matter becomes Termination Dispute with Employer
In the case under scrutiny, petitioner union officers were expelled by the
federation for allegedly committing acts of disloyalty a n d / o r acts inimical to
the interest of ULGWP and in violation of its Constitution and By-Laws. Upon
demand of the federation, the company terminated the petitioners without
conducting a separate and independent investigation. Respondent company did
not inquire into the cause of the expulsion and whether or not the federation
had sufficient grounds to effect the same. Relying merely upon the federation's
allegations, respondent company terminated petitioners from employment when
a separate inquiry could have revealed if the federation had acted arbitrarily and
capriciously in expelling the union officers. Respondent company's allegation
that petitioners were accorded due process is belied by the termination letters
received by the petitioners which state that the dismissal shall be immediately
3
effective.
Although a union security clause in a CBA may be validly enforced
and dismissal pursuant thereto may likewise be valid, this does not erode the
fundamental requirement of due process. T h e reason behind the enforcement
of union security clauses which is the sanctity and inviolability of contracts cannot
4
override one's right to due process.
In its decision, the NLRC also declared that if complainant employees
(herein petitioners) have any recourse in law, their right of action is against the
federation and not against the company or its officers, relying on the findings
of the Labor Secretary that the issue of expulsion of petitioner union officers
by the federation is a purely intra-union matter. Again, such a contention is
untenable. While it is true that the issue of expulsion of the local union officers
is originally between the local union and the federation, hence, intra-union in

•Rizal Labor Unions vs. Rizal Cement Company, G.R. No. L-19779, July 30,
1966.
2
See Confederated Sons of Labor vs. Anakan Lumber Company, G.R. No.
U12503, April 29,1960.
3
Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos, G.R.
No. 113907, February 28, 2000.
Ibid.
327
 ART. 248 LABOR RELATIONS

character, the issue was later on converted into a termination dispute when the
company dismissed the petitioners from work without the benefit of a separate
notice and hearing. As a matter of fact, the records reveal that the termination
was effective on the same day that the termination notice was served on the
petitioners, x x x Thus, notwithstanding the fact that the dismissal was at the
instance of the federation and that it undertook to hold the company free from
any liability resulting from such a dismissal, the company may still be held liable
if it was remiss in its duty to accord the would-be dismissed employees their right
1
to be heard on the matter.
In another case, still with regard to the process of suspension or dismissal,
the Court finds that it was hastily and summarily done. T h e respondent
company sent a letter to petitioners herein, advising them of NATU/Dilag's
recommendation of their dismissal and at the same time giving them forty-
eight (48) hours within which to comment. When petitioners failed to do so,
respondent company immediately suspended them and thereafter effected their
dismissal. This is certainly not in fulfillment of the mandate of due process, which
2
is to afford the employee to be dismissed an opportunity to be heard.

Note: The procedure to terminate employment when the union security

clause is invoked is explained further in Book VI.

9.10g Liability of Union to Pay Wages and Fringe Benefits of Illegally

Dismissed Employee
Where the employer compelled the employee to go on forced leave
upon recommendation of the union for alleged violation by the employee
of the closed-shop agreement, the National Labor Relations Commission
correctly ordered the reinstatement of the employee and directed the union
to pay the wages and fringe benefits which the employee failed to receive as
a result of her forced leave and to pay attorney's fees. T h e employer would
not have compelled the employee to go on forced leave were it not for the
union's insistence and demand to the extent that because of the failure of
the employer to dismiss the employee as requested, the union filed a notice
of strike on the issue of unfair labor practice. Moreover, under the collective
bargaining agreement between the union and the employer, the union holds
the company free and blameless from any liabilities that may arise should the
3
employee question the dismissal.

!
Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos, G.R.
No. 113907, February 28, 2000.
t r o p i c a l Hut Employees' Union-CGW, et al vs. Tropical Hut Food Market,
Inc., G.R. Nos. L-43495-99, January 20, 1990.
3
Manila Mandarin Employees Union vs. National Labor Relations Commission,
G.R. No. 76989, September 29, 1987.

328
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

9.1 Oh Employer in Good Faith Not Liable

Where the employer dismissed his employees in the belief in good faith
that such dismissal was required by the closed-shop provisions of the collective
bargaining contract with the union, he may not be ordered to pay back
1
compensations to such employees although their dismissal is found to be illegal.

9.10i Closed-Shop, To Whom Not Applicable

All employees in the bargaining unit covered by a closed-shop agreement
are subject to its terms, except the following: (1) any employee who at the time the
closed shop agreement takes effect is a bona fide member of religious organization
which prohibits its members from joining labor unions on religious grounds;
(2) employees already in the service and already members of a labor union or
unions other than the majority union at the time the closed-shop agreement
2
took effect; (3) Confidential employees who are excluded from the rank-and-file
3
bargaining unit; and (4) employees excluded from the closed shop by express
terms of the agreement.
It is well-settled in this jurisdiction that, in the absence of a manifest intent to
the contrary, "closed-shop" provisions in a collective bargaining agreement apply
only to persons to be hired or to employees who are not yet members of any labor
organization and that said provisions of the agreement are not applicable to those
already in the service at the time of its execution. To hold that the employees in a
company who are members of a minority union may be compelled to disaffiliate
from their union and j o i n the majority or contracting union, would render
nugatory the right of all employees to self-organization and to form, join or assist
labor organizations of their own choosing, a right guaranteed by the Industrial
4
Peace Act (Sec. 3, Rep. Act No. 875) as well as by the Constitution.
If the company and the union intended, by the closed-shop clause, to
authorize the dismissal of persons already in the service but belonging to another
labor organization, and who failed to quit from the latter and join the union,
5
then such stipulation would be null and void.

Confederated Sons of Labor vs. Anakan Lumber Co., et al, G.R. No. L-12503,
April 29, 1960; National Labor Union vs. Zip Venetian Blind, et al, G.R. Nos. 15827-
28, May 31, 1961.
2
Freemen Shirt Mfg. Co. vs. CTR, No. L-l6561, January 28, 1961; Sta. Cecilia
Sawmills vs. CIR, L-19273, February 29, 1964.
3
Metrolab Industries, Inc. vs. Confesor, et al, G.R. No. 108855, February 28,1996.
4
Article III, Sec.l[6]. Kapisanan ng mga Manggagawa ng Alak [NAFLU] vs.
Hamilton Distillery Co., et al, G.R. No. L-18112, October 30, 1962.
5
Findlay Millar Timber Co. vs. PLASLU, G.R. Nos. L-18217 and L-18222,
September 29,1962; Kapisanan ng mga Manggagawa ng Alak vs. Hamilton Distillery
Co., et al, G.R. No. H 8 1 1 2 , October 30, 1962.
329
 ART. 248 LABOR RELATIONS

9.10] Agency Fee Instead of Union Membership

The employees who are benefitting from the CBA, without being members
of the bargaining union, may be required to pay an agency fee. T h e collection of
agency fees in an amount equivalent to union dues and fees is recognized in Article
248(e). A written authorization from the non-union employee is not required.
The employee's acceptance of benefits from a collective bargaining agreement
justifies the deduction of agency fees from his pay and the union's entitlement
thereto. In this aspect, the legal basis of the union's right to agency fees is neither
contractual nor statutory, but quasi-contractual, deriving from the established
principle that non-union employees may not unjustly enrich themselves by
1
benefiting from employment conditions negotiated by the bargaining union.
The justification of collecting agency fee is the union's accomplishment
in having negotiated a CBA in behalf of the employees. T h e union served as
agent of the employees, and the agency fee is recognition of the agent's efforts.
The fee is collectible only from employees deriving economic benefits from the
union-negotiated CBA.
Under the agency-shop clause of a CBA, an employee is not required to join
the union as a condition of continued employment, but must pay the union a
service fee (usually equivalent to union dues and initiation fees). Since the union
is required by statute (29 USC Sec. 159 a) to act as the bargaining representative
of all employees, both union and nonunion, within the bargaining unit, the
justification for the clause is that the nonmember should contribute toward
the cost of collective bargaining and should not be allowed to benefit from
2
the collective bargaining process without supporting it financially. T h e law, in
other words, does not permit "free riders." Aptly, another name for the clause
is "treasury shop."

10. SIXTH U.L.P.: DISCRIMINATION BECAUSE OF TESTIMONY (ARTICLE

248[f])
T h e law protects not only the employees' right to form, j o i n , or assist labor
organizations but also their right to testify on matters covered by the Code. If this
right is not protected, the right to self-organization will be indirectly defeated
because the employees will fear their employer's reprisal. By protecting the
employee's right to testify, the law therefore shields the workers' right to self-
organization from indirect assault by the employer. Thus, it is ULP "to dismiss,
discharge, or otherwise prejudice or discriminate against an employee for having
given or being about to give testimony under this Code."
Employer's reprisal against a testifying employee is U L P because,
furthermore, it violates the right to engage in concerted activity, a right included

'Holy Cross of Davao College, Inc. vs. Joaquin, et al, G.R. No. 11007, October
18, 1996.
2
Retail Clerks vs. Schermerhorn, 11 L ed 2d 179.

330
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

in the right to self-organize (Article 246) and reiterated in Article 2 6 3 ( b ) .

Concerted activity does not always require a number of people acting in unison.
An employee acting alone in pursuing a group interest may be said to be doing
1
a concerted activity which the employer may not curtail.
In one case, it was proved that at the time respondent employee was given
notice of separation from the service, there was pending before the Court of
Industrial Relations a certification election case which involved the employees
of the company. It also appeared that the employee had brought his case to
the grievance committee and to the management with a view to securing his
reinstatement. An officer of the company asked him not to testify in the hearing
of the certification election case so that he would be reinstated to his j o b . Inspite
of such request, the employee testified adversely against the company. Thereafter,
his case was dropped by the grievance committee and he was never reinstated.
2
T h e Court held that the employer had committed unfair labor practice.

10.1 Refusal to Testify

Article 248(f) mentions giving of testimony. Does it apply too to a situation
where the employer retaliates against an employee who refused to testify in favor
of the employer? T h e Mabeza case, below, declares the employer's retaliation as
ULP because it is analogous to the prohibition under Article 248(f).
Mabeza vs. NLRC, G.R. No. 118506, April 18, 1997 —
Facts: The employer told the employee to sign a statement that she and the
other employees were receiving the legal minimum wage and other labor standards.
The employee signed but she refused to follow the employer's instruction to go to the
City Prosecutor's office to swear to the truth of her statement. Her refusal displeased
the employer. Thereafter, she was ordered to turn over the keys to her living quarters.
Subsequently, she was charged with abandonment of j o b and stealing of company
property; finally, she was dismissed for loss of confidence. It does not appear that she
was organizing a union at the time of dismissal. Did the employer commit ULP?
Ruling: Clearly, the efforts to justify petitioner's dismissal — on top of the
private respondent's scheme of inducing his employees to sign an affidavit absolving
him from possible violations of the Labor Code — taints with evident bad faith and
deliberate malice petitioner's summary termination from employment, x x x The
pivotal question in any case where unfair labor practice on the part of the employer
is alleged is whether or not the employer has exerted pressure, in the form of
restraint, interference or coercion, against his employee's right to institute concerted
action for better terms and conditions of employment. Without doubt, the act of
compelling employees to sign an instrument indicating that the employer observed
labor standards provisions of law when he might have not, together with the act of

•See topic "Concerted Activity" in the law on strike, Articles 263-265.

2
Itogon-Suyoc Mines, Inc. vs. Baldo, et al., G.R. No. L-17739, December 24,
1964.
331
 ART. 248 LABOR RELATIONS

terminating or coercing those who refuse to cooperate with the employer's scheme,
constitutes unfair labor practice. The first act clearly preempts the right of the hotel's
workers to seek better terms and conditions of employment through concerted action.
We agree with the Solicitor General's observation in his manifestation that
M
[t]his actuation is analogous to the situation envisaged in paragraph (£) of Article
248 of the Labor Code" which distinctly makes it an unfair labor practice "to dismiss,
discharge or otherwise prejudice or discriminate against an employee for having
given or being about to give testimony" under the Labor Code.

10.2 Labor Standards Violation May Lead to a Strike

Article 248(f) is unlike Article 118 where the complaint or testimony is
about wages. It reads:
"Article 118. Retaliatory Measures. — It shall be unlawful for an employer
to refuse to pay or reduce the wages and benefits, discharge or in any manner
discriminate against any employee who has filed any complaint or instituted any
proceedings under this Title ["Wages"] or has testified or is about to testify in
such proceedings."
And yet, Articles 118 and 248 are related. They both speak of employee's
filing a complaint or giving of testimony. But the subject of complaint or testimony
under Article 118 is limited to matters about wages, the subject of Tide I of Book
III. Under Article 248, on the other hand, the subject testified to is any issue
covered by the Code. Both articles likewise speak of retaliation by the employer.
Retaliation is wrong, and more than that, Article 248 considers it an unfair labor
practice which, under Article 263, is a legal reason for employees to hold a strike.
If labor standards are violated and the employer does not retaliate against
the employees who reported the violations, there are no ULP and no strikeable
situation. In that case, the enforcement-visitorial function of the D O L E Regional
Office (Article 128), or the adjudicatory power of that office or of the NLRC will
operate.
But if the employer retaliates, ULP is committed, creating thereby a
strikeable situation.
It is plausible therefore that a strike can be traced proximately to labor
standards violation. To say that labor standards violation is not strikeable is true
only if there is no retaliation from the employer that amounts to ULP under Article
248(f).

11. SEVENTH U.L.P.: VIOLATION OF THE DUTY TO BARGAIN (ARTICLE

248[g])
T h e seventh ULP act under Article 248 refers to violating the duty to
bargain. Quite obviously, the content and implications of the duty to bargain
should be discussed first before we may know its violations that are considered
U.L.P. Since "duty to bargain" is defined in Articles 252 and 253 in the next

332
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

chapter, ULP by violating the duty to bargain is therefore taken up under those
articles.
12. EIGHTH U.L.P.: PAID NEGOTIATION (ARTICLE 248[h])
Self-organization and collective bargaining are treasured rights of workers.
T h e law zealously shields them from corruption. It is a punishable act of U.L.P.
for the employer to pay the union or any of its officers or agents any negotiation
fee or attorney's fee as part of settlement in collective bargaining or any labor
dispute. To do so is not only unlawful. It is ethically reprehensible.
Correspondingly, Article 249 prohibits union officers or agents from asking
for or accepting such payments.

13. NINTH U.L.P.: VIOLATION OF THE CBA (ARTICLE 248[i])

After a CBA is concluded, its implementation follows. Implementation is still
part of the bargaining process which, it should be recalled, rests on the parties'
"duty to bargain." T h e duty to bargain, it should also be recalled, requires good
faith. And good faith implies faithful observance of what has been agreed upon.
It logically follows that noncompliance with the agreement is non-observance of
good faith in bargaining; therefore, the noncompliance amounts to ULP.
But such violation, to constitute ULP, must be "gross," according to Article
261.
14. RELIEF IN U.L.P. CASES
14.1 Cease and Desist Order
If the Court after investigation finds that the person named in the complaint
has engaged or is engaging in any unfair labor practice, then the Court shall
state its findings of fact and shall issue or cause to be served upon such person
an order requiring him to cease and desist from such unfair labor practice and
take such affirmative action as will effectuate the policies of the Act including
(but not limited to) the reinstatement of employees with or without back pay
1
and including rights of employees prior to dismissal, including seniority.
To support a cease and desist order, the record must show that the restrained
misconduct was an issue in the case; that there was a finding of fact of said
misconduct and such finding of fact was supported by evidence. The Court is not
authorized to issue blank cease and desist orders, but must confine its injunction
orders to specific act or acts which are related to past misconduct. A cease and
desist order is not invalidated because the act complained of was voluntarily
discontinued prior to or during the course of the proceedings. But if the act
complained of happened so long a time that there is no longer any threat or
2
probability of a recurrence, a cease and desist order will not be justified.

l
Rothenberg on Labor Relations, p. 587.
Ibid.
333
 ART. 248 LABOR RELATIONS

14.2 Affirmative Order

The Court does not only have the power to issue negative or prohibitive
orders but also affirmative or positive orders. Thus, where the employer dismissed,
discharged or otherwise prejudiced or discriminated against an employee for
having filed against or for having given or about to give testimony under the
Industrial Peace Act, the Court, in addition to a cease and desist order may
issue an affirmative order to the respondent to reinstate the said employee with
back pay from the date of the discrimination. T h e order may usually direct the
full reinstatement of the discharged employees to their substantially equivalent
position without prejudice to their seniority and other rights and privileges. If
other laborers have been hired, the affirmative order shall direct the respondent
1
to dismiss these hired laborers to make room for the returning employee.

14.3 Order to Bargain; Mandated CBA

Likewise, when an employer has failed or refused to bargain with the
proper bargaining agent of his employees, the Court may, in addition to the
usual cease and desist orders, issue an affirmative order to compel the respondent
to "bargain" with the bargaining agent.
In a Philippine case, the Supreme Court has upheld the ruling imposing
a collective bargaining contract upon an employer who refused to bargain with
the union of its employees. This is taken up in the topic "CBA Imposed on
Employer" in the chapter on collective bargaining.

14.4 Disestablishment
Where the employer had initiated, dominated or assisted in or interfered
with the formation or establishment of any labor organization or contributed
financial or other support to it, the Court may issue, in addition to a cease and
desist order, an order directing the employer to withdraw all recognition from
the dominated labor union and to disestablish the same.
An order requiring an employer to disestablish a company-dominated
union does not necessarily impose upon the employer the duty of dissolving and
liquidating the structure and organization of the objectionable union. Rather,
an order for disestablishment comprehends and ordains the withdrawal of
recognition of such labor organization as the employees' bargaining agent and
a bona fide and sufficient communication to the employees of such withdrawal
of recognition of such organization by the employer. T h e technical form of
disestablishment is not important. What is important is that the employees were
protected in rights under the Act; that the employees are publicly assured by the
2
employer in giving good faith or his neutrality and impartiality.

'Teller, Labor Disputes and Collective Bargaining, Vol. II, pp. 984-985.
2
Rothenberg on Labor Relations, p. 589.

334
 UNFAIR LABOR PRACTICES OF EMPLOYERS ART. 248

15. U.L.P. NOT SUBJECT TO COMPROMISE

Unfair labor practice cases are not, in view of the public interest involved,
subject to compromises. T h e relation between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts must
1
yield to the common good.
But in 1997 the Court affixed the stamp of approval to a compromise
settling a ULP-based strike. It explained: "While we do not abandon the rule that
unfair labor practice acts are beyond and outside the sphere of compromises;
the agreement herein was voluntarily entered into and represents a reasonable
2
settlement; this, it binds the parties."

16. U.L.P. IN A GIVEN PERIOD SHOULD BE INCLUDED IN SINGLE CHARGE

When a labor union accuses an employer of acts of unfair labor practice
allegedly committed during a given period of time, the charges should include all
acts of unfair labor practice committed against any and all members of the union
during that period. T h e union should not, upon the dismissal of the charges
first preferred, be allowed to split its cause of action and harass the employer
with subsequent charges, based upon acts committed during the same period
3
of time.
17. EMPLOYER'S RESPONSIBILITY FOR U.L.P. ACTS BY SUBORDINATE
OFFICIALS
On the question of how and by whom an employer might be bound to
responsibility for unfair labor practices, the subject was one in which the reported
cases were often in sharp conflict.
All the authorities agreed that if the violations were traceable back to the
employer, either byway of authorization or ratification, the employer, despite the
fact that he himself was not the actual actor, was held to be responsible for such
violations. However, the difficulty arose when, as in many cases, it was impossible
to prove either authorization, participation or ratification on the employer's
pArticle It was in such cases that there existed a disconcerting lack of judicial
4
harmony.
In a great measure the peculiar circumstances of each case were
considered as controlling. What had in one case been held to be binding upon
the employer might in another case and because of distinguishing facts be held

1 CLLC E.G. Gochangco Workers Union, et al vs. National Labor Relations

Commission, G.R. No. 67158, May, 1988.
Reformist Union of R.B. Liner, Inc. vs. NLRC, G.R. No. 120482, January 27,
1997.
3
Dionela, et al vs. Court of Industrial Relations, et al, G.R. No. H 8 3 3 4 , August
31, 1963.
4
Rothenberg on Labor Relations, pp. 378-381.
335
 ART. 248 LABOR RELATIONS

inadequate to accomplish that end. Where the facts in the case made doubtful
the propriety or equity of imputing to the employer responsibility for the acts
of a particular employee, the following considerations were often employed in
deciding the issue:
Knowledge by the employer of the employees improper acts: Where it was
established that the employer was aware of the employee's wrongdoing,
his failure to prevent continuation of the course of conduct or his failure
to renounce any connection or affinity therewith, invited the imputation
of fault and responsibility to the employer.
Continuity of improper conduct by employee: A single utterance by
a supervisory employee, whether improvident or deliberate on the
employee's part, was not ordinarily and in absence of proof of actual
authority held to be sufficient to convict an employer of an unfair labor
practice; however, continued, repeated or widespread activities by such
supervisory employee in affront of the rights of the body of employees
was deemed ample justification for ascribing knowledge and blame to the
employer.
Employer s past policy and attitude: It has been held that, among other
things, the similarity between the past attitude or policy of the employer
and that of the offending supervisory employee might, in certain cases,
be indicative of a concert of effort between the two. (Rothenberg on Labor
Relations, pp. 378-381.)

336
 Chapter I I I
UNFAIR L A B O R PRACTICES OF LABOR
ORGANIZATIONS

O v e r v i e w / K e y Questions Box 14
1. What acts are considered U L P by a labor organization?
2. May a union charge with U L P another union in the
same enterprise?
3. May a union m e m b e r charge with U L P his own union?
4. What is featherbedding? Is it featherbedding to object
to the abolition of certain j o b s or positions in the
company?

A R T . 249. UNFAIR LABOR PRACTICES OF LABOR ORGANIZATIONS

It shall be unfair labor practice f o r a labor organization, its officers,
agents or representatives:
( a ) To restrain or coerce employees in the exercise of their right
to self-organization. H o w e v e r , a l a b o r organization shall have the right
to prescribe its own rules with respect to the acquisition or retention of
membership;
( b ) To cause or attempt to cause an employer to discriminate against
an employee, including discrimination against an employee with respect to
w h o m membership in such organization has b e e n denied or to terminate an
employee on any g r o u n d other than the usual terms and conditions under
which membership or continuation of membership is made available to other
members;
( c ) To violate the duty, or refuse to bargain collectively with the
employer, provided it is the representative of the employees;
( d ) To cause or attempt to cause an employer to pay or deliver or
agree to pay or deliver any money or other things of value, in the nature of
an exaction, for services which are not p e r f o r m e d or not to be performed,
including the d e m a n d for fee for union negotiations;
( e ) To ask f o r or accept negotiations or attorney's fees f r o m
employers as part of the settlement of any issue in collective bargaining or
any other dispute; or
(f) To violate a collective bargaining agreement.

337
 LABOR RELATIONS
ART. 249

T h e provisions of the preceding paragraph notwithstanding, only the

officers, members of governing boards, representatives or agents or members
of labor associations or organizations who have actually participated in,
authorized or ratified unfair labor practices shall be held criminally liable.
C O M M E N T S A N D CASES
1. RESTRAINT OR COERCION BY LABOR ORGANIZATION; INTERFERENCE
BY U N I O N IS N O T U L P
U n d e r the preceding article, an employer commits U L P through "IRC"
- interference, restraint or coercion. But in this Article 249 on U L P by a labor
organization, "interference" is left out. This deliberate omission is "the equivalent
of license of labor organization to engage in those practices which, at the hands
of an employer, would constitute actionable unfair labor practices by way of
"interference."' In other words, "interference" by a labor organization is not U L P .
A labor organization may interfere in the employees' right to self-organization
as long as the interference does not amount to restraint or coercion. A c c o r d i n g
to N L R B (in applying a counterpart US provision), the congressional concern
is with means, not ends, and the intention is to fix the rules of the g a m e and
to insure that strikes and other union organizational activities are conducted
peaceably by persuasion and propaganda and not by physical force, threats of
2
force, or threats of e c o n o m i c reprisal.
Interference by a labor organization is n o t U L P because interfering
in the exercise of the right to organize is itself a function of self-organizing.
For instance, a union campaigns for m e m b e r s h i p even a m o n g members of
another union. A union, at the appropriate time, files a petition to dislodge
an i n c u m b e n t b a r g a i n i n g u n i o n . A b a r g a i n i n g u n i o n , t h r o u g h a u n i o n
security clause, requires an i n c o m i n g e m p l o y e e to j o i n the union, or, when
the occasion arises, persuades non-striking employees to j o i n a strike. T h e s e
are acts of interference but they are not considered as U L P . T h e y are, instead,
manifestations of union dynamics and democracy whose ultimate beneficiaries
presumably will be the workers themselves.

1.1 Coercing Participation in Strike

T h e provision is violated by a union's restraining or coercing an employee in
the exercise of his right to refuse to participate in or recognize a strike. Similarly,
violation is committed when a union threatens employees with bodily harm in
order to force them to strike. A union violates (the law) when, to restrain or
coerce nonstrikers from working during a strike, it assaults or threatens to assault
them, threatens them with loss of their j o b s , blocks their ingress to and egress
from the plant, damages nonstrikers' automobiles or forces them o f f the highway,

'Rothenberg on Labor Relations, pp. 449-450.

2
48 Am.Jur 2d Sec. 1129.

338
 UNFAIR LABOR PRACTICES OF LABOR
ORGANIZATIONS
ART. 249

physically prevents them from working, or sabotages the employer's property in

their presence, thereby creating a general atmosphere of fear of violence and
threatening the nonstrikers'jobs. A union has also been held guilty of violating
the counterpart US law by demonstrating loudly in front of a nonstriker's
residence with signs and shouts accusing the nonstriker of "scabbing," holding
the nonstriker up to ridicule, and seeking public condemnation of him. However,
verbally accusing nonstrikers, such as by calling them "scabs," has been held not
to violate (the law) unless the verbal abuse occurs under such circumstances as
1
to imply a threat of violence in the words.
Strikers' approach to non-strikers is taken up further in the chapter about
strike.

2. UNION-INDUCED DISCRIMINATION
T h e law forbids as U L P union attempts to cause an employer to grant
advantages for union members over nonmembers, for union members in g o o d
standing over suspended or e x p e l l e d members, for union members over permit
holders, for members of the union executive board over m o r e senior employees,
for members of o n e union over members of another union, or for members of
2
o n e local over members of another local.
T h e forbidden discrimination may refer to terms of hiring or firing, in
3
layoff, in seniority, or in benefits.

2.1 Arbitrary U s e of Union Security Clause

T h e broad rule is that the union has the right to determine its membership
and to prescribe the conditions for the acquisition and retention thereof.
Consequently, admission to m e m b e r s h i p may not be c o m p e l l e d . This rule,
however, is qualified in the case of labor unions h o l d i n g a m o n o p o l y in the
supply of labor, either in a given locality, or as regards a particular employer by
reason of a closed-shop or similar agreements. In such case, qualified applicants
may not be arbitrarily e x c l u d e d f r o m m e m b e r s h i p and their admission may
4
not be barred by unreasonable rules.
Just as the Court has stricken down unjust exploitation of laborers by
oppressive employers, so will it strike down their unfair treatment by their own
unworthy leaders. T h e Constitution enjoins the State to afford protection to
labor. Fair dealing is equally d e m a n d e d of unions as well as of employers in their
5
dealings with employees.

'48 A m . Jur. 2d, Sec. 1144.

2
48 Am. Jur. 2d, Sec. 1182, p. 939.
3
48 Am. Jur. 2d, Sec. 1181, p. 938.
4
Salunga vs. CIR, 21 SCRA 216, 223.
5
Heirs of Cruz vs. CIR, et al, G.R. Nos. L-23331-32, December 27, 1969.

339
 LABOR RELATIONS
ART. 249

Salunga vs. Court of Industrial Relations, 21 SCRA 216 (1967) —

Facts: F. Salunga resigned from the union out of disappointment over the
inaction of union officials on his grievances and alleged illegal disbursement of union
funds. As soon as Salunga resigned, the union requested the company to dismiss
Salunga pursuant to the closed-shop provision of the CBA. The company deferred
action on the union's request but informed Salunga of the possible effects of his
resignation from the union. Salunga, upon learning that his service to the company
would be terminated, tried to revoke or withdraw his resignation. But the union
denied the withdrawal and instead reiterated its request to the company to implement
the closed-shop agreement, i.e., to dismiss Salunga. Hesitantly, the company finally
acceded to the union's demand. Salunga complained of illegal dismissal.
Rulings: [Union may not arbitrarily exclude qualified applicants for membership or
deny readmission] — It is well-settled that labor unions are not entitled to arbitrarily
exclude qualified applicants for membership, and a closed-shop provision would
not justify the employer in discharging, or a union in insisting upon the discharge
of, an employee whom the union thus refuses to admit to membership, without any
reasonable ground therefor. Needless to say, if said union may be compelled to admit
new members who have the requisite qualifications, with more reason may the law
and the courts exercise the coercive power when the employee involved is a long
standing union member who, owing to provocations of union officers, was impelled
to tender his resignation, which he forthwith withdrew or revoked. Surely, he may
at least invoke the right of those who seek admission for the first time, and cannot
arbitrarily be denied readmission.
[When company was not guilty of unfair labor practice] — In the case at bar,
the company was reluctant — if not unwilling — to discharge petitioner. When
the union first informed of petitioner's resignation and urged implementation
of Section 3 of the bargaining contract, the company advised petitioner of its
provisions, thereby intimating that he had to withdraw his resignation in order to
keep his employment. Besides, the company notified the union that it would not
take any action on the case and would consider petitioner still a member of the
union. When the latter, thereafter, insisted on petitioner's discharge, the company
still demurred and explained that it was not taking sides, that its stand was prompted
merely by "humane" considerations, springing from the belief that petitioner had
resigned from the union without realizing its effect upon his employment. And,
as the union reiterated its demand, the company notified petitioner that it had no
other alternative but to terminate his employment, and dismissed him from the
service, although with "regret." Under the circumstances, the company was not
"unfair" to petitioner.
[Right of employee dismissed from service due to unfair labor practice; union, at
fault, should shoulder the backwages] — Having been dismissed from the service
owing to an unfair labor practice on the part of the union, petitioner is entitled
to reinstatement as m e m b e r of the union and to his former or substantially
equivalent position in the company, without prejudice to his seniority a n d / o r
rights and privileges, and with back pay, which back pay shall be borne exclusively

340
 UNFAIR LABOR PRACTICES OF LABOR
ORGANIZATIONS
ART. 249

by the union. In the exercise of its sound j u d g m e n t and discretion, the lower
court may, however, take such measures as it may d e e m best, including the power
to authorize the company to make deductions for petitioner's benefit, from the
sums due to the union by way of check-off or otherwise.

Manila Mandarin Employees Union vs. NLRC, 154 SCRA 369 (1987)
Facts: Melba C. Beloncio, assistant head waitress, was expelled from the
petitioner Manila Mandarin Employees Union for acts allegedly inimical to the
interests of the union. T h e charge against Melba arose from her emotional remark to
a waiter who happened to be a union steward, "Wala akong tiwala sa Union ninyo. "She
made the remark in a heated discussion when she urged the other waiter to adopt a
better attitude toward his work. Told of the incident, the union demanded Melba's
dismissal from employment on the basis of the union security clause in the collective
bargaining agreement T h e hotel acceded by placing her on forced leave.
Melba filed a complaint for unfair labor practice and illegal dismissal against
herein petitioner-union and Manila Mandarin Hotel, Inc.
T h e Labor Arbiter held that the union was guilty of unfair labor practice and
ordered the union to pay all the wages and fringe benefits due to Melba, aside from
exemplary damages, and attorney's fees. He dismissed the charge against the hotel.
Ruling: We find no error in the questioned decision.
T h e Hotel would not have compelled Beloncio to go on forced leave were it
not for the union's insistence and demand to the extent that because of the failure
of the hotel to dismiss Beloncio as requested, the union filed a notice of strike on
the issue of unfair labor practice. T h e hotel was then compelled to put Beloncio on
forced leave and to stop payment of her salary.
Furthermore, as provided for in the collective bargaining agreement between
the petitioner Union and the Manila Mandarin Hotel, "the Union shall hold the
Company free and blameless from any and all liabilities that may arise" should the
employee question the dismissal, as has happened in the case at bar.
T h e collective bargaining agreement in this case contains a union security
clause — a closed-shop agreement.
T h e Court stresses that union security clauses are also governed by law and
by principles of justice, fair play, and legality. Union security clauses cannot be used
by union officials against an employer, much less their own members, except with a
high sense of responsibility, fairness, prudence, and judiciousness.
A union member may not be expelled from her union, and consequently from
her j o b , for personal or impetuous reasons or for causes foreign to the closed-shop
agreement and in a manner characterized by arbitrariness and whimsicality.
This is particularly true in this case where Ms. Beloncio was trying her best
to make a hotel bus boy do his work promptly and courteously so as to serve hotel
customers in the coffee shop expeditiously and cheerfully. Union membership does
not entitle waiters, janitors, and other workers to be sloppy in their work, inattentive
to customers, and disrespectful to supervisors. The Union should have disciplined its

341
 LABOR RELATIONS
ART. 249

erring and troublesome members instead of causing so much hardship to a member

who was only doing her work for the best interests of the employer, all its employees,
and the general public whom they serve.

2.2 Not Disloyalty to Ask H e l p from Another Union

Ranee, et al. vs. NLRC, Polybag Manufacturing Corp., Polybag Workers' Union, et
al., G.R. N o . 68147, June 30, 1988 —
Facts: Petitioners were among the members of Polybag Worker's Union who
were expelled by the latter for disloyalty because they allegedly joined the N A F L U ,
another federation. Because of the expulsion, petitioners were dismissed by the
Corporation upon the union's demand. Both the labor arbiter and the N L R C
found the collective bargaining agreement and the union security clause valid and
considered the termination of petitioners justified. However, petitioners claimed
that their expulsion from the union and consequent dismissal had no factual basis,
because they did not affiliate with the N A F L U . They denounced connivance between
the company and their union.
Ruling: T h e mere act of seeking help from N A F L U cannot constitute disloyalty
as contemplated in the Collective Bargaining Agreement. At most it was an act of
self-preservation of workers who, driven to desperation, found shelter in the N A F L U
who took the cudgels for them.
Petitioners were denied due process. There was no impartial tribunal or body
vested with authority to conduct disciplinary proceeding under the constitution and
by-laws and the complainants were not furnished notice of the charge against them
nor timely notices of the hearing on the same. Petitioners had no idea that they were
charged with disloyalty. Those who came were not only threatened with persecution
but also made to write the answers to questions as dictated to them by the Union and
company representatives.
Even if petitioners appeared in the supposed investigation proceedings to
answer the charge of disloyalty against them, it could not have altered the fact that
the proceedings violated the rule of fair play. T h e Board of Directors of the union
acted as prosecutor, investigator, and judge at the same time. T h e proceedings would
have been a farce. T h e absence of a full-blown investigation of the expelled members
of the union by an impartial body provided no basis for the union's accusation of
disloyalty. Employees are entitled to due process before they may be expelled from
the union on charge of disloyalty.

3. REFUSAL TO BARGAIN
U L P under Article 249(c) is intended to insure that unions approach the
bargaining table with the same attitude of willingness to agree as the A c t requires
1
of management x x x.

'48 Am. Jur. 2d 1200, p. 954.

342
 UNFAIR LABOR PRACTICES OF LABOR
ORGANIZATIONS ART. 249

A union violates its duty to bargain collectively by entering negotiations

1
with a fixed purpose of not reaching an agreement or signing a contract.

4. FEATHERBEDDING A N D MAKE-WORK ARRANGEMENTS

A r t i c l e 2 4 9 ( d ) refers to "featherbedding," a term given to e m p l o y e e
practices which create or spread e m p l o y m e n t by "unnecessarily" maintaining or
increasing the number of employees used, or the amount of time consumed, to
work on a particular j o b .
Most of these practices stem from a desire on the part of employees for j o b
security in the face of technological improvements or in the face of employer
subcontracting.
In spite of e m p l o y e e assertions that these so-called featherbedding [or
"make-work"] practices are directly related to j o b security, or health and safety,
most courts at c o m m o n law found these practices to be economically wasteful
2
and without any legitimate e m p l o y e e justification.

5. CBA DEAL W I T H E M P L O Y E R
Asking for or accepting some "fee" from the employer as part of C B A or
dispute settlement is considered U L P by the union under paragraph ( e ) of this
article. In fact, such act is m o r e than U L P — it is a reprehensible betrayal of
trust that deserves condemnation of the highest order. Thus, under unamended
Article 2 3 9 ( g ) this act was listed as a ground for cancellation of union registration.
But, regrettably and strangely, Republic A c t N o . 9481 of 2007 deleted this act
from the list in Article 239 as a m e n d e d .
T h e reason of the deletion has not b e e n explained by the authors of R . A .
N o . 9481. N e i t h e r the C o n f e r e n c e C o m m i t t e e R e p o r t nor the Joint Explanatory
Statement of the C o n f e r e n c e C o m m i t t e e on S.B. N o . 2466 and H . B . N o . 1351,
which became R . A . N o . 9481, defends the deletion.

featherbedding. (1921) A union practice designed to increase

employment and guarantee job security by requiring employers to hire
or retain more employees than are needed. ● The practice stems from
employees' desire for job security in the face of technological
improvement. Featherbedding is restricted by federal law but is an
unfair labor practice only if, for example, a union exacts pay from
an employer for services not performed or not to be performed

'48 Am. Jur. 2d 1200, p. 954.

2
Archibald Cox, Derek C. Bok, Robert A. German, Cases and Materials on
Labor Law, New York, 1977, p. 919.
343
 Title VII
COLLECTIVE BARGAINING AND
ADMINISTRATION OF AGREEMENT
[Part 1. COLLECTIVE BARGAINING CONCEPT
AND PROCEDURE]
O v e r v i e w / K e y Qualities B o x 15
1. H o w is collective bargaining done? May the parties
devise their own procedure?
2. T h e prevailing practice is single enterprise bargaining.
Is multi-employer bargaining allowed?
3. What are the elements of the duty to bargain, violation
of which may constitute U L P ?
4. W h a t are the c o m p u l s o r y and optional subjects of
bargaining?
5. W h a t are the requirements of valid ratification of a
CBA?
6. W h e n does a C B A take effect? Up to when is it effective?
May its life be e x t e n d e d by non-renewal or by mutual
agreement?

ART. 250. PROCEDURE IN COLLECTIVE BARGAINING

T h e following procedures shall be o b s e r v e d in collective bargaining:
( a ) W h e n a party desires to negotiate an agreement, it shall serve a
written notice u p o n the other party with a statement of its proposals. T h e
other party shall make a reply thereto not later than ten (10) calendar days
from receipt of such notice;
( b ) Should differences arise on the basis of such notice and reply,
either party may request f o r a conference which shall begin not later than
ten (10) calendar days f r o m the date of request;
( c ) If the dispute is not settled, the B o a r d shall intervene u p o n
request of either or both parties or at its own initiative and immediately call
the parties to conciliation meetings. T h e B o a r d shall have the p o w e r to issue
subpoenas requiring the attendance of the parties to such meetings. It shall
be the duty of the parties to participate fully and promptly in the conciliation
meetings the B o a r d may call;

344
 COLLECTIVE BARGAINING A N D
ADMINISTRATION OF AGREEMENT
ART. 251
[Part 1. Collective Bargaining Concept and Procedure]

( d ) During the conciliation proceedings in the Board, the parties

are prohibited f r o m doing any act which may disrupt or impede the early
settlement of the disputes; and
(e) T h e B o a r d shall exert all efforts to settle disputes amicably and
encourage the parties to submit their case to a voluntary arbitrator.

A R T . 251. DUTY TO BARGAIN COLLECTIVELY IN THE ABSENCE OF

COLLECTIVE BARGAINING AGREEMENTS
In the absence of an agreement or other voluntary arrangement
providing f o r a m o r e expeditious manner of collective bargaining, it shall
be the duty of employer and the representatives of the employees to bargain
collectively in accordance with the provisions of this C o d e .
C O M M E N T S A N D CASES
1. N A T U R E OF COLLECTIVE B A R G A I N I N G
1.1 Definition
Collective bargaining or negotiations towards collective agreement is a
democratic framework to stabilize the relation between labor and management to
create a climate of sound and stable industrial peace. It is a mutual responsibility
1
of the employer and the union and is their legal obligation.
Collective bargaining includes four related but distinguishable processes:
( 1 ) negotiation between representatives of the management and the union
over "wages, hours, and other terms . . . of employment"; ( 2 ) the execution of
a written contract e m b o d y i n g the terms agreed upon; ( 3 ) negotiation of any
question arising as to the interpretation or application of the contract; and ( 4 )
negotiation over the terms of a new contract or proposed modifications, when
2
an existing agreement is validly o p e n e d for negotiations.
Collective bargaining is a system made up of a set of continuous processes; it
is customary and helpful to distinguish negotiation of contracts (the "legislative"
phase of the union-employer relationship), administration of contracts (the
"executive" phase), and interpretation or application of contracts (the "judicial"
3
phase).
In c o m m o n usage as well as in legal terminology, collective bargaining
denotes negotiations l o o k i n g forward to a collective agreement. However, it
does not e n d with the execution of an agreement. It is a continuous process.

'Loy vs. N L R C , G.R. N o . 54334, January 22, 1986.

2
Edwin E. Witte, Collective Bargaining and the Democratic Process in E. Wight Bakke,
Clark Kerr, and Charles Anrod, Unions, Management and the Public [Harcourt, New York,
1967], p. 295.
3
H a r o l d Davey, Mario F. Bognanno and David Estenson, Contemporary
Collective Bargaining [Prentice-Hall, New Jersey, 1982], p. 3.
345
 LABOR RELATIONS
ARTS. 250-251

It requires both parties, the e m p l o y e r and duly authorized representatives of

employees, to deal with each other with o p e n and fair minds and sincerely
endeavor to fight the obstacles in the process to stabilize employer-employee
1
relationship.

1.1a C B A Denned
A collective bargaining agreement ( C B A ) , as used in Article 252 o f the
Labor C o d e , refers to a contract executed upon request of either the employer
or the exclusive bargaining representative of the employees incorporating the
agreement reached after negotiations with respect to wages, hours of work and
all other terms and conditions of employment, including proposals for adjusting
2
any grievances or questions under such agreement.
A C B A is m o r e than a contract; it is a generalized c o d e to govern a myriad
of cases which the draftsmen cannot wholly anticipate. It covers the w h o l e
employment relationship and prescribes the rights and duties of the parties. It
is a system of industrial self-government with the grievance machinery at the
very heart of the system. T h e parties solve their problems by m o l d i n g a system of
private law for all the problems which may arise and to provide for their solution
in a way which will generally accord with the variant needs and desires of the
parties.

1.2 Rationale
Although collective bargaining on a wide scale is a comparatively new social
and economic institution, it lies at the very heart of "labor-management" relations.
Direct g o v e r n m e n t regulation of wages and hours, workmen's compensation,
health and safety, and social insurance, w h i l e i m p o r t a n t , hits o n l y at the
extremes. T h e rules which most vitally affect workers in their daily lives remain
to be made for each industrial establishment either by the employer's fiat or by
collective agreements negotiated and administered jointly by the employer and
3
its employees as a g r o u p .
With the d e v e l o p m e n t of labor unions, workers have secured a m o r e
effective voice in arranging the terms and conditions of their e m p l o y m e n t and,
perhaps m o r e important, have been enabled to participate increasingly in the
government of their industrial work... By "collective bargaining" the e m p l o y e e
shares through his chosen representatives in fixing the conditions under which
he works, and a rule of law is substituted for absolute authority. W i t h these roots
in the ideals of self-rule and g o v e r n m e n t according to law, the institution seems

'PAMBUSCO vs. PAMBUSCO Employees Union, 68 Phil. 451.

2
Davao Integrated Port Stevedoring Services vs. Abarquez, G.R. N o . 102132,
March 19, 1993.
3
Cox, Some Aspects of Labor-Management Relations Act, L X I Harvard Law Review,
p. 1.

346
 COLLECTIVE BARGAINING A N D
ADMINISTRATION OF AGREEMENT
ARTS. 250-251
[Part 1. Collective Bargaining Concept and Procedure]

certain to grow, at least as long as there survives the political democracy on whose
1
achievement it has followed.
Collective bargaining as a technique of the rise of a new class is quite
different from the class struggle of the Marxians.... It is pragmatic and concrete
instead of idealist and abstract. It is much less concerned with algebraic formula
summing up basic economic trends than with the problems of building discipline
in organization and of training leadership. It derives its emotional impetus not
from the desire to displace or "abolish" the "old ruling class," but from the wish
to bring one's own class abreast of the superior class; to gain equal rights as a
class and equal consideration for the members of that class with the members
of that other class; to acquire an exclusive jurisdiction in that sphere where the
most immediate interests, both material and spiritual, are determined, and a
2
shared jurisdiction with the older class or classes in all the other spheres.

1.3 Strength of the Collective Bargaining Method

Collective bargaining is also a means of ensuring workers' participation in
decision-making. T h e notion that workers are entitled to participate in setting
the terms under which they are to work is inherent in collective bargaining;
even the most rudimentary f o r m of collective bargaining involves a transfer of
certain issues, be it only wages, from the area of unilateral to the area of bilateral
decision-making. Clearly, the scope of collective bargaining is broadening very
rapidly, and an increasing number of questions are c o m i n g within its range. In
this sense, collective bargaining represents a diminution of absolute management
power in fields which employers in the past considered to be exclusively within
their own domain. In this sense, too, collective bargaining introduces democratic
practices into paid employment, virtually all forms of which used to be organized
3
along authoritarian lines.
C o n f l i c t i n g a n d j o i n t interests are simultaneously i n h e r e n t in an
e m p l o y m e n t relationship. Collective bargaining cannot negate the conflict in
the relationship, since the conflict is based on the existence of different goals,
needs and aspirations; but it does p r o v i d e an opportunity for the exchange
of information tending to enhance the understanding of the parties for each
other problems and objectives, both w h e r e they differ and where they are
4
identical.

'Cox, Some Aspects of Labor-Management Relations Act, L X I Harvard Law Review,

p.l.
2
Selig Perlman, The Principle of Collective Bargaining in E. Wight Bakke (ed.), The
Union, Management and the Public [Harcourt, New York, 1967], pp. 47-48.
3
See I L O , Collective Bargaining in Industrialized Market Economies [Geneva, 1973],
pp. 12-15.
Ibid.
347
 LABOR RELATIONS
ARTS. 250-251

Moreover — and this is very important — it provides an orderly procedure

by which each side can seek to present to the other the best possible case for
the satisfaction of its particular demands. T h e r e is no guarantee of an agreed
outcome, but the process of negotiation creates at least the possibility that each
side may move closer to the attainment of its own separate objectives while
1
contributing to the attainment of those that are shared with the other side.
A n o t h e r significant source of strength of collective bargaining lies in the
fact that it elicits the consent of those w h o will have to live under the terms of
any agreement derived from the bargaining process. Stability is an important
element in employment, and "consent assures stability because parties w h o have
accepted an agreement will live by its terms." To the extent to which notions
of democracy can be applied to employment, as i n d e e d they have been on an
increasing scale, collective bargaining helps to substitute freely given consent
2
for grudging or blind o b e d i e n c e .
Finally, and without trying to give an exhaustive list of the advantages of
collective bargaining, mention should be made of its potential usefulness for
solving problems. T h e conventional view of collective bargaining emphasizes its
function as a means of resolving conflicts of interest in situations characterized
essentially by scarce resources. In purely distributive bargaining, what o n e party
gains, the other loses; however, another view of the possibilities inherent in
collective bargaining emphasizes its use as an "integrative" or "creative" process
from which both parties can derive benefit.

2. EMERGENCE OF COLLECTIVE B A R G A I N I N G
T h e emergence of collective bargaining is intimately linked to the economic
and social c o n s e q u e n c e s o f that c o m p l e x constellation o f t e c h n o l o g i c a l ,
demographic, ideological and other developments which took place in the last
[18th] century. T h e insecurities and disturbances ensuing from the profound
changes occurring during that p e r i o d had a particularly unsettling effect on the
traditional relations of employers and workers. First in Great Britain, but not
much later in other countries, working m e n sought to protect themselves against
the harsh effects of new machines, new methods of production, new divisions
of labor and new intensities of competition by f o r m i n g organizations capable
3
of representing their interests as a g r o u p vis-a-vis employers and the State.
T h e resistance of many employers to engaging in j o i n t dealings with their
workers was powerfully reinforced by public policy, which in several countries
derived its philosophical justification from the anti-combination principles of

'See I L O , Collective Bargaining in Industrialized Market Economies [Geneva, 1973],

pp. 12-15.
2
Ibid.
3
I L O , Collective Bargaining in Industrialized Market Economies [Geneva, 1973], pp.

348
 COLLECTIVE BARGAINING A N D ARTS 2 5 0 951
ADMINISTRATION OF AGREEMENT I
[Part 1. Collective Bargaining Concept and Procedure]

economic liberalism. Restrictive legislation and the disabling judgments of

courts, seeking to uphold the sanctity of the individual contract of employment,
tended to weaken the unions, especially outside the crafts, and to retard the
development of collective bargaining. However, in some countries by the turn
of the century, and in most of the rest during the 1920s and 1930s, public policy
had swung around to at least a benevolent tolerance of collective bargaining, and
increasingly even to its active promotion. To be sure, the development was not an
even o n e in all countries. In some, employer resistance was deeply entrenched;
in others, severe weaknesses and divisions a m o n g the unions slowed down the
1
pace of development.
T h e r e can be little question about the broad acceptance which collective
bargaining has gained in most industrialized countries. Speaking quite generally,
one might say that collective bargaining has b e c o m e so firmly established in the
past three to four decades that it is sometimes regarded as synonymous with, or
2
as constituting the essence of, the prevailing system of industrial relations.

2.1 Originator
T h e practice of collective bargaining itself had existed well before the name
came into existence, some early forms of collective bargaining being known as
arbitration or conciliation even though no neutral third parties took part in the
proceedings. T h e credit for coining the expression belongs to Beatrice Webb, who
first used it in 1891 in her study on "The Cooperative Movement in Great Britain. "It
took some time for the term to be absorbed into the everyday language of Great
Britain, the U n i t e d States and other English-speaking countries.
In non-English speaking countries, particularly on the European continent,
where the process of collective bargaining has an equally long history, the emphasis
was placed on the term "collective agreement" because during the early period the
workers aimed not so much at establishing the procedure of bargaining itself as at
3
having such agreements recognized and enforced as legally binding contracts."

2.2 Adoption in the Philippines

In the Philippines the idea of collective bargaining first gained formal
and official recognition through C o m m o n w e a l t h A c t N o . 213, approved by
Pres. Manuel L. Q u e z o n on N o v e m b e r 21, 1936. Entitled "An A c t to Define
and Regulate Legitimate Labor Organization," C.A. N o . 213 states that a duly
registered labor organization "shall have the right to collective bargaining with
employers for the purpose of seeking better working and living conditions, fair
wages, and shorter working hours for laborers, and, in general, to promote the
material, social and moral well-being of their members."

' I L O , Collective Bargaining in Industrialized Market Economies [Geneva,

1973], pp. 8-9.
Ibid.
Ibid.
349
 LABOR RELATIONS
ARTS. 250-251

But it is the Industrial Peace A c t ( R . A . N o . 875, approved by President

Elpidio Quirino on June 17, 1953), that defined collective bargaining and
outlined its procedure. This law, modelled after the Labor-Management Relations
Act of 1947 of the United States (also known as the Taft-Hartley A c t ) , is the first
comprehensive industrial relations law of the country. It is popularly called the
"Magna Carta of Labor."
Section 13 of the Industrial Peace A c t , defining the duty to bargain
collectively, is almost a verbatim copy of Section 8 ( d ) of the US m o d e l . In turn,
Section 13 of the IPA is substantially reproduced as the present Articles 252 and
253 of the Labor C o d e .

THE STATUS OF FREE MEN

While organized labor has grave faults, weaknesses and limitations, the
labor union movement is in essence a demand for democracy on the part
of wage earners.
In the long run democracy in labor relations will also prove to be the
only guarantee of the highest possible efficiency in industry.
For there are but two natural psychological reactions to autocratic
control, whether political or industrial. Those living under autocracy tend
either to "take it lying down," to "keep their mouths shut and do as they are
told," or to rebel. Autocratic control inevitably tends to produce in workers
either the mind of the slave or the mind of the rebel. Neither of these states
of mind is conducive to efficiency. Servile workers adopt the "don't care"
attitude, do their work just well enough to "get by," and are responsible for
huge unseen wastes and lack of efficiency in production. Rebel-minded
workers, on the other hand, are secretly resentful, prone to sabotage and
looking for a chance to "get even" with the company. Neither the slave nor
the rebel can be counted on for the highest possible industrial efficiency.
Instead of complaining about the "lack of interest in their work" on
the part of servile employees, or condemning the "trouble maker" rebels
among the workers, management is more scientific if it recognizes and
removes the principal cause of such attitudes. When you give a worker
a sense of self-respect and a new status of dignity as an industrial citizen,
you have abolished both the slave and the rebel mind and prepared the
ground for the efficiency and interest in their work which can be expected
only from free men who enjoy both the privileges and the responsibilities
of democracy.
In order to assure progress and permanence in a political democracy,
the whole of our national life must be democratic through and through.

JAMES MYERS
Do You Know Labor?
^ ^ ^ ^ ^ (John Day Co., New York, 1943), pp. 1-7

350
 COLLECTIVE BARGAINING A N D ARTS 95ft 9K1
ADMINISTRATION OF AGREEMENT 1
[Part 1. Collective Bargaining Concept and Procedure]
T h e Administrative C o d e of 1987 mandates the Department of Labor and
Employment to uphold the right of workers and employers to organize and
to promote free collective bargaining as the foundation of the labor relations
system.

3. PARTIES TO COLLECTIVE B A R G A I N I N G
T h e duty to bargain collectively arises only between the "employer" and
its "employees." W h e r e neither party is an "employer" nor an "employee" of
the other, no such duty would exist. Needless to add, where there is no duty to
1
bargain collectively, the refusal to bargain violates no right.
T h e parties, then, to collective bargaining as traditionally understood, are
the employer and the employees represented by their labor union.
Both parties negotiate through their representatives. T h e employees'
"bargaining representative" (defined in Article 212 [ j ] ) refers to "a legitimate
labor organization or any officer or agent of such organization, whether or not
e m p l o y e d by the employer." U n d e r this definition the officer or agent may be a
total stranger to the employer, may be a counsel or president of a mother union.
T h e only requirement is that he is duly authorized to negotiate by the employees
through the union that he represents.
But the I m p l e m e n t i n g Rules of B o o k V, as amended by D . O . N o . 09 and
further by D . O . 40-03, has d r o p p e d "officer or agent." It defines "Exclusive
Bargaining Representative" as "any legitimate labor organization duly recognized
or certified as the sole and exclusive bargaining agent of all the employees in a
bargaining unit." T h e bargaining representative of the employees is an entity —
the union — and not the officers of the union. T h e entity remains though the
officers are changed.
T h e representative union should have been selected or designated directly
by the employees under the procedure prescribed in Article 255, et seq. Only then
will bargaining follow.

[This being the sequence, it is logical at (his point to take up Articles 255-259 about
selection of employees 'representive before the topics below about bargaining procedure. J

4. JURISDICTIONAL P R E C O N D I T I O N S OF COLLECTIVE BARGAINING

Back to enterprise l e v e l , the e m p l o y e r is not u n d e r any legal duty
t o initiate contract n e g o t i a t i o n . T h e mechanics o f c o l l e c t i v e bargaining
are set in m o t i o n only w h e n the f o l l o w i n g jurisdictional preconditions are
present, namely: ( 1 ) possession of the status of majority representation
of the e m p l o y e e s ' representative in accordance with any of the means of

'Allied Free Workers Union vs. Compania Maritima, G.R. N o . L-22951, January
31, 1967.

351
 LABOR RELATIONS
ARTS. 250-251

selection or designation provided for by the L a b o r C o d e ; ( 2 ) p r o o f of majority

representation; and ( 3 ) a d e m a n d to bargain u n d e r A r t i c l e 250, par. ( a ) of
1
the N e w L a b o r C o d e .
An e m p l o y e r ' s duty to r e c o g n i z e and bargain collectively with a union
as the collective bargaining representative of his e m p l o y e e s does n o t arise
until after the union requests the e m p l o y e r to bargain. H e n c e , an e m p l o y e r
is not in default respecting the duty to bargain until a request therefor has
been made.
Regarding the issue of representation and the right of the employer to
demand reasonable p r o o f of majority representation on the part of the supposed
or putative bargaining agent, the c o m m e n t a r i e s of R o t h e n b e r g in "Labor
Relations, "pp. 429-431, are forceful and persuasive, thus:
It is essential to the right of a putative bargaining agent to represent
the employees that it be the delegate of a majority of the employees and,
conversely, an employer is under duty to bargain collectively only when
the bargaining agent is representative of the majority of the employees. A
natural consequence of these principles is that the employer has the right
to demand of the asserted bargaining agent p r o o f of its representation
of its employees. Having the right to demonstration of this fact, it is not
an 'unfair labor practice' for an e m p l o y e r to refuse to negotiate until the
asserted bargaining agent has presented reasonable p r o o f of majority
representation. It is necessary, however, that such d e m a n d be m a d e in
g o o d faith and not merely as a pretext or device for delay or evasion. T h e
employer's right, however, is to reasonable proof.
x x x A l t h o u g h an e m p l o y e r has the undoubted right to bargain
with a bargaining agent whose authority has b e e n established, without the
requirement that the bargaining agent be officially certified by the National
L a b o r Relations B o a r d as such, if the informally presented e v i d e n c e
leaves a real doubt as to the issue, the employer has a right to d e m a n d a
certification and to refuse to negotiate until such official certification is
presented. (Quoted with approval in Lakas ng Manggagawang Makabayan vs.
Marcelo Enterprises, 118 SCRA 422 [1982].)

4.1 Bargaining with Minority Union, U L P

W h e r e a majority representative has b e e n designated, it is an unfair labor
practice, [for the e m p l o y e r ] as a refusal of collective bargaining, to deal and
negotiate with the minority representative to the exclusion of the majority
representative. A n d even though no majority representative has been designated,
o n e w h o bargains with a minority representative does so at his peril since
the subsequent appearance of a properly designated majority representative

'Kiok Loy vs. N L R C , G.R. N o . 54334, January 22, 1986.

352
 COLLECTIVE BARGAINING A N D ARTS 250 251
ADMINISTRATION OF AGREEMENT *
[Part 1. Collective Bargaining Concept and Procedure]

may oblige the employer to negotiate with the latter despite the antecedent
1
negotiations with or commitments to the minority representative.
On the union side, where there exists a legitimate issue as to which of
several unions is the legitimate representative of employees, it is U L P for one of
the unions to stage a strike and demand that the employer sit down with it for
collective bargaining.

Lakas ng Manggagaivang Makabayan vs. Marcelo Enterprises, G.R. N o . 38258,

November 12, 1982 —
T h e clear facts of the case indisputably show that a legitimate representation
issue confronted the respondent Marcelo Companies. In the face of these facts and
in conformity with the existing jurisprudence, We hold that there existed no duty
to bargain collectively with the complainant LAKAS on the part of said companies.
And proceeding from this basis, it follows that all acts instigated by complainant
LAKAS such as the filing o f the Notice o f Strike on June 13, 1967 (although later
withdrawn) and the two strikes of September 4, 1967 and November 7, 1967 were
calculated, designed and intended to compel the respondent Marcelo Companies
to recognize or bargain with it notwithstanding that it was an uncertified union, or
in the case of respondent Marcelo Tire and Rubber Corporation, to bargain with it
despite the fact that the M U E W A of Paulino Lazaro was already certified as the sole
bargaining agent in said respondent company.
These concerted activities, executed and carried into effect at the instigation
and motivation of L A K A S , are all illegal and violative of the employer's basic right
to bargain collectively only with the representative supported by the majority of its
employees in each of the bargaining units.

5. W H E N BARGAINING SHOULD BEGIN

If the three jurisdictional p r e c o n d i t i o n s are present, (see p r e c e d i n g
topic), the collective bargaining should begin within the 12 months following
the determination and certification of the e m p l o y e e s ' exclusive bargaining
representative. This p e r i o d is known as the "certification year."
T h e employer's duty to bargain during the certification year has been
2
held to extend throughout the entire year. Absent unusual circumstances, an
employer commits an unfair labor practice by refusing to bargain with the union
during its certification year, notwithstanding the repudiation of the union by
a majority of its employees before the expiration of the one-year period. T h e
rule is the same whether the union lost its majority as a result of the employer's
3
unfair labor practices or through no fault of the employer.

'Rothenberg on Labor Relations, p. 431.

2
48Am.Jur. 2d 991.
*Ibid.

353
 LABOR RELATIONS
ARTS. 250-251

A union which has been certified by the N L R B as a bargaining representative

for a particular unit enjoys an irrefutable presumption of a majority status for
one year, absent special circumstances. Following the expiration of the one-year
certification period, there continues to be a presumption in favor of a union
majority, though the presumption is rebuttable. Employee turnover does not
1
constitute "unusual circumstances" shortening the period.

6. S I N G L E E N T E R P R I S E B A R G A I N I N G P R O C E D U R E B R O A D L Y DE-
SCRIED
2
T h e law gives primacy to free collective bargaining and allows the parties to
3
devise their bargaining rules. This is the basic reason the bargaining procedure
is governed primarily by agreement of the parties. T h e parties m e e t to set the
ground rules before tackling in earnest the C B A proposals of either party.
T h e agreed rules are the procedural law for the parties as l o n g as they respect
the parties' bargaining right and provide for a m o r e expeditious manner of
collective bargaining than the Labor C o d e does. In the presence of validly agreed
procedure, the Labor C o d e procedure applies suppletorily only.
D . O . N o . 40-03 supplements the codal provisions:
T h e recognized or certified labor union and its employer may adopt
such procedures and processes they may d e e m appropriate and necessary
for the early termination of their negotiations. T h e y shall name their
respective representatives to the negotiation, schedule the number and
frequency of meetings, and agree on wages, benefits and other terms and
conditions of work for all employees covered in the bargaining unit. (Section
4, Rule XVI, D.O. No. 40-03.)

7. MULTI-EMPLOYER B A R G A I N I N G
C o l l e c t i v e b a r g a i n i n g may take p l a c e at the n a t i o n a l , industry, or
enterprise level. Centralized or national level negotiations were, until the 1980s,
the distinguishing feature of Scandivanian countries and Austria, while most
European countries have traditionally o p t e d for industry-wide bargaining on pay
issues. Canada, U S A , and Japan (excepting the maritime industry) have generally
4
used enterprise or plant-level bargaining.
T h e Philippines so far has tried only enterprise-level, or decentralized
bargaining. T h e Labor C o d e , when originally issued as P.D. 442 in 1974, carried
provisions for one-industry one-union organizations, envisioning national or
industry bargaining. But for causes not officially acknowledged the idea did not

'48 Am. Jur. 2d 991.

2
Article 211.
3
Article 251.
4
R. Blanpain and C. Engels ( e d . ) , Comparative Labor Law and Industrial Relations
in Industrialized Market Economies (Kluwer, 1993), p. 357.

354
 COLLECTIVE BARGAINING A N D ARTS 250.951
4 a V < J ) 1
ADMINISTRATION OF AGREEMENT "
[Part 1. Collective Bargaining Concept and Procedure]

take off. In 1986 Executive O r d e r N o . I l l repealed the provision that alluded

to it.
D . O . N o . 40-03 introduces multi-employer bargaining but does not even
list or define an "industry union."

7.1 Rationale of Multi-employer Bargaining

W h e n a n u m b e r o f e m p l o y e r s j o i n forces for purposes o f collective
bargaining, the unit structure is described as a multi-employer bargaining unit.
T h e structure may consist of an association representing employers, or even a
whole industry, or it may be c o m p o s e d of only a few employers w h o bargain
as a group, or through an association. Sometimes agreements negotiated by a
few large employers are signed without negotiations by smaller employers in
the industry. Multi-employer bargaining may take place within many different
geographical subdivisions. These may cover a metropolitan area, a region, or the
whole country. Some of these arrangements may embrace the whole industry
within a particular geographical area, others may cover only a portion of such
1
an industry.
C o m p e t i t i v e pressures are the d o m i n a n t forces that encourage both
unions and employers to enter into multi-employer or industry-wide bargaining
relationships. Small employers in highly competitive and labor-intensive fields
may find it easier to operate with uniformity of labor cost. T h e unionized
employer subjected to intensive competition from the nonunionized sector may
be highly supportive of multi-employer bargaining units, particularly if such
units could affect the nonunionized employers w h o use substandard wages to
2
undercut prices in the product market.
T h e multi-employer unit is particularly advantageous to both sides
in industries c o m p o s e d of many small, financially weak employers. In such
industries, there are bargainable issues such as health and pension plans, which
may be difficult to negotiate and implement through single-employer bargaining.
A small employer, apart from the fact that he may not have the professional
personnel necessary for negotiation of c o m p l e x fringe benefit programs, may
also be c o n c e r n e d with the cost and competitive implications of introducing
such programs. T h e fear of increased costs, to which the firms' competitors
would not be subjected, would be a strong deterrent against the introduction
of major benefit programs. Thus, in some industries, multi-employer bargaining
undoubtedly overcomes a major stumbling block in negotiation of fringe benefit
3
programs.

'E. Edward Herman, A. Kuhn, R.L. Seeber, Collective Bargaining and Labor
Relations, 1987 ed. p. 154.
Ibid.
Ibid.

355
ARTS. 250-251 LABOR RELATIONS

Multi-employer b a r g a i n i n g p r o v i d e s b o t h m a n a g e m e n t and unions

with significant cost savings in negotiation of labor agreements. It is cheaper
to negotiate o n e master multi-employer agreement than a number of single-
1
employer agreements.
T h e r e are, however, o t h e r considerations than costs, such as intra-
organizational issues, that the parties take into account before opting for multi-
employer units. Multi-employer bargaining may not only overlook the needs of
various employee groups, but also ignore particular requirements of individual
employers. In some cases, bargaining may b e c o m e m o r e intensive a m o n g the
various employers within the e x t e n d e d g r o u p than between the employers'
group and the union. Production costs and organizational structure of firms
are not uniform. Thus, what may be readily acceptable to o n e employer may be
considered as financially disastrous by another. T h e marginal firm in the multi-
employer unit is m o r e vulnerable under such an arrangement than it would have
2
been had it bargained on its o w n .
To arrive at multi-employer agreements is much m o r e difficult than to arrive
at single-employer contracts. T h e e x p a n d e d size of the unit c o m p o s e d of many
heterogeneous groups leads to intensive intraorganizational bargaining both
on the union's and on the employer's side. At times, these intra-organizational
pressures may lead to lengthy delays in negotiations and even to breakdown of
bargaining. A uniform master contract covering the employees of a number of
firms may overlook the requirements of its c o m p o n e n t units. T h e desires and
needs of employees within a bargaining unit are not h o m o g e n e o u s . H e r e , as in
other organizations, the larger the unit, the greater the diversity that has to be
suppressed for purposes of uniformity. In some multi-employer units, to protect
the aspirations of different groups of employees, master contracts cover only
such items as wages and major fringe benefits. O t h e r issues are negotiated on a
3
local level.

7.2 Multi-employer Bargaining Procedure

A legitimate labor union (s) and employers may agree in writing to c o m e
together for the purpose of collective bargaining, provided:
(a) only legitimate labor unions w h o are incumbent exclusive
bargaining agents may participate and negotiate in multi-employer
bargaining;
(b) only employers with counterpart legitimate labor unions w h o are
incumbent bargaining agents may participate and negotiate in
multi-employer bargaining; and

1
E. Edward Herman, A. Kuhn, R.L. Seeber, Collective Bargaining and Labor
Relations, 1987 ed. p. 154.
Ibid.
Ibid.

356
 COLLECTIVE BARGAINING A N D ARTS 2 5 0 951
ADMINISTRATION OF AGREEMENT 1
[Part 1. Collective Bargaining Concept and Procedure]

(c) only those legitimate labor unions w h o pertain to employer units

w h o consent to multi-employer bargaining may participate in multi-
1
employer bargaining.
Multi-employer bargaining may be initiated by the labor unions or by the
employers.
(a) Legitimate labor unions w h o desire to negotiate with their
employers collectively shall execute a written agreement among
themselves, which shall contain the following in order to avail of
multi-employer bargaining;
1) the names of the labor unions w h o desire to avail of multi-
e m p l o y e r bargaining;
2) each labor union in the employer unit;
3) the fact that each of the labor unions are the incumbent
exclusive bargaining agents for their respective employer units;
4) the d u r a t i o n o f the c o l l e c t i v e b a r g a i n i n g a g r e e m e n t s , i f
any, entered into by each labor union with their respective
employers.
Legitimate labor unions w h o are members of the same
registered federation, national, or industry union are e x e m p t from
execution of this written agreement.
(b) T h e legitimate labor unions w h o desire to bargain with multi-
employers shall send a written notice to this effect to each employer
c o n c e r n e d . T h e written agreement stated in the preceding
paragraph, or the certificates of registration of the federation,
national, or industry union, shall accompany said notice.
Employers w h o agree to g r o u p themselves or use their existing
associations to engage in multi-employer bargaining shall send a
written notice to each of their counterpart legitimate labor unions
indicating their desire to engage in multi-employer bargaining.
Said notice shall indicate the following:
1) the names of the employers w h o desire to avail of multi-
e m p l o y e r bargaining;
2) their corresponding legitimate labor organizations;
3) the fact that each corresponding legitimate union is an
incumbent exclusive bargaining agent;
4) the duration of the current collective bargaining agreement,
if any, entered into by each employer with the counterpart
legitimate labor union.

'Section 5, Rule X V I , D.O. N o . 40-03.

357
 LABOR RELATIONS
ARTS. 250-251

(c) Each employer or concerned labor union shall express its

willingness or refusal to participate in multi-employer bargaining in
writing, addressed to its corresponding exclusive bargaining agent
or employer. Negotiations may c o m m e n c e only with regard to
respective employers and labor unions w h o consent to participate
in multi-employer bargaining;
(d) During the course of negotiations, consenting employers and the
corresponding legitimate labor unions shall discuss and agree on
the following:
1) the manner by which negotiations shall proceed;
2) the scope and coverage of the negotiations and the agreement;
and
3) where appropriate, the effect of the negotiations on current
agreements or conditions of e m p l o y m e n t a m o n g the parties.
T w o ( 2 ) signed c o p i e s o f c o l l e c t i v e b a r g a i n i n g a g r e e m e n t r e a c h e d
through multi-employer bargaining shall be posted for at least five ( 5 ) days
in two conspicuous areas in each workplace of the employer units concerned.
Said collective bargaining agreement shall affect only those employees in the
1
bargaining units w h o have ratified it.
T h e same collective bargaining agreement shall be registered with the
Department in accordance with Rule X V I I of D . O . N o . 40-03.

7.3 Unfavorable to Consumers?

O n e of the consequences of multi-employer bargaining is the uniformity
of contract terms that accompany such frameworks. T h e r e is opposition to such
structures on the grounds that such standardization may be detrimental to
the public interest. Some scholars claim that multi-employer bargaining could
strengthen monopolistic forces in the e c o n o m y and lessen competition. This in
turn could lead to lower levels of output and higher prices, easier to pass on to
the consumer. Professors Chambelain and Kuhn point out that the uniformity of
contract terms in such units "squeeze out marginal firms, discourage the entry
of new small firms, and allow, if not encourage collusion between union and
2
management leaders at the expense of the public."

7.4 Optional
Under D . O . N o . 40-03 multi employer bargaining is purely optional for
employers and unions. Conformably, Leap's comments are instructive:

'Section 7, Rule X V I , D.O. N o . 40-03.

2
E. Edward Herman, A. Kuhn, R.L. Seeber, Collective Bargaining and Labor
Relations, 1987 ed. p. 154.

358
 COLLECTIVE BARGAINING A N D ARTS 252-253
ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure]

Unlike other bargaining units, the multi-employer unit is based

primarily on the consent of the firms involved. Companies that elect to
j o i n a multi-employer unit must adhere to the terms and conditions of the
bargaining agreement regardless of the impact that such an agreement
may have on o n e firm. If, for example, a financially weak firm is part of a
multi-employer unit and cannot meet the wage obligations imposed by the
collective bargaining agreement, it is not relieved of these obligations and
may be forced into insolvency. What if a majority of the employees of a single
firm in the unit no longer desire to be represented by the union? Does this
relieve the firm of its bargaining obligations in the multi-employer unit?
T h e answer to this question is usually no. Thus, a company's participation in
a multi-employer unit should be considered carefully. However, employers
may opt to sever relations with a multi-employer unit after the collective
bargaining agreement has expired." (Terry L. Leap, Collective Bargaining and
Labor Relations [1995 ed.], p. 118.)
K n o w n writers in industrial relations, e.g., H e r m a n , K o c h a n and Katz
in the U S , G u n d e r s o n in Canada, and Matsuda in Japan invariably report
that the direction in their respective countries is towards proliferation and
p r o m i n e n c e , rather than lessening, of decentralized bargaining. T h e trend, as
they see it, is m o r e of enterprise-level bargaining and less of multi-employer
bargaining.

ART. 252. MEANING OF DUTY TO BARGAIN COLLECTIVELY

The duty to bargain collectively means the performance of a mutual
obligation to meet and convene promptly and expeditiously in good faith
for the purpose of negotiating an agreement with respect to wages, hours of
work and all other terms and conditions of employment including proposals
for adjusting any grievances or questions arising under such agreement and
executing a contract incorporating such agreements if requested by either
parry but such duty does not compel any party to agree to a proposal or to
make any concession.

ART. 253. DUTY TO BARGAIN COLLECTIVELY WHEN THERE EXISTS

A COLLECTIVE BARGAINING AGREEMENT
When there is a collective bargaining agreement, the duty to bargain
collectively shall also mean that neither party shall terminate nor modify
such agreement during its lifetime. However, either party can serve a written
notice to terminate or modify the agreement at least sixty (60) days prior
to its expiration date. It shall be the duty of both parties to keep the status
quo and to continue in full force and effect the terms and conditions of the
existing agreement during the 60-day period and/or until a new agreement
is reached by the parties.

359
 LABOR RELATIONS
ARTS. 252-253

C O M M E N T S A N D CASES
1. D U T Y TO BARGAIN DEFINED
It should be recalled that under Article 2 4 8 ( g ) o n e form of unfair labor
practice is "to violate the duty to bargain collectively as prescribed by this C o d e . "
It is necessary to analyze the "duty to bargain" to see what is d e e m e d a violation
amounting to U L P .
T h e law contemplates and defines two situations when the duty to bargain
1
exists: Situation one, where there is yet no collective bargaining agreement, and
2
Situation two, where a C B A exists).
For Situation O n e , the duty to bargain means in essence the mutual
obligation of the employer and the employees' majority union to m e e t and
convene.
T h e purposes of the meeting and convening are:
(1) to negotiate an agreement on the subjects of:
( a ) wages, ( b ) hours of work, and ( c ) all other terms and conditions of
employment including proposals for adjusting grievances or questions arising
under such agreement; and
( 2 ) to execute a contract incorporating such agreement if requested by
either party.
T h e kind of compliance required is prompt, expeditious, and in g o o d faith.
T h e limitations or reservations of the duty are that it does not c o m p e l any
party to agree to a proposal or to make a concession. Thus, no violation and no
U L P is committed when a party in g o o d faith turns down a proposal.
For Situation T w o , the duty to bargain means all of the above and,
additionally, the obligation not to terminate or modify the C B A during its lifetime.
But 60 days before the C B A expires, either party may notify the other in writing
that it desires to terminate or modify the agreement. During the 60-day p e r i o d
and until a new agreement is reached, the C B A remains in full force and effect;
the parties are duty-bound to keep the status q u o . T h e law therefore provides
for automatic renewal or extension of the C B A . This 60-day p e r i o d under Article
253 refers to submission of proposal to renegotiate the nonrepresentational
provisions of the C B A . It does n o t always c o i n c i d e with the 60-day p e r i o d
mentioned in Articles 253-A and 256 pertaining to "freedom p e r i o d " to resolve
representation contest between unions.

1.1 Four Forms of U L P in Bargaining

T h e next topics e x p o u n d on the four forms of violation of the duty to
bargain, namely: ( 1 ) failure or refusal to m e e t and convene; ( 2 ) evading the

'Article 251.
2
Article 253.

360
 COLLECTIVE BARGAINING A N D ARTS 959 9 K «
ADMINISTRATION OF AGREEMENT 434-456
[Part 1. Collective Bargaining Concept and Procedure]

mandatory subjects of bargaining; ( 3 ) bad faith in bargaining, including failure or

refusal to execute the collective agreement, if requested; and ( 4 ) gross violation
of the C B A . Each of these four ways of violating the duty to bargain amounts to
ULP.

2. FIRST U.L.P. IN BARGAINING: FAILURE OR REFUSAL TO MEET A N D

CONVENE
An employer is guilty of an unfair labor practice in refusing to bargain
with the representative of a majority of his employees. To bargain in g o o d faith,
an employer must not only m e e t and confer with the union which represents
his employees, but also must recognize the union for the purpose of collective
bargaining. In a d d i t i o n , he must r e c o g n i z e the u n i o n as the bargaining
representative of all the employees in the appropriate bargaining unit, even if
1
they are not all members of the union.
T h e duty to bargain extends beyond the p e r i o d of contract negotiations,
and applies to labor-management relations during the term of the agreement.
Since a collective bargaining a g r e e m e n t does not define all the rights and
obligations of the e m p l o y e r and his employees, negotiation of grievances is part
2
and parcel of the bargaining process.
T h e failure or refusal of an e m p l o y e r to bargain collectively with his
employees constitutes an enjoinable unfair labor practice not only under the
subdivision of the A c t dealing expressly with "collective bargaining," but also
under the subsection making it an "unfair labor practice" to: "interfere with,
restrain or coerce employees in the exercise" of their guaranteed rights, on the
theory that refusal by an e m p l o y e r to bargain collectively with his employees
3
constitutes "interference" with the latter's right of self-organization.
A union was found guilty of refusal to bargain collectively by insisting that
an employer agree to union demands that he make retroactive payments of
pension benefits and submit to an audit of his books, before the union would
4
execute a bargaining agreement.

2.1 Unresolved Petition for Union Cancellation

Capitol Medical Center vs. Irajano, et al, G.R. N o . 155690, June 30, 2005 —
Facts: Petitioner [employer] contends that its petition for the cancellation
of the registration of respondent union which has been certified as the bargaining
representative of the employees, involves a prejudicial question that should first be
settled before the Secretary of Labor could order the parties to bargain collectively.
Ruling: We are not persuaded.

'48 A m . Jur. 2d 966, pp. 784-785.

Ibid.
Ibid.
4
N L R B vs. Bricklayers and Masons Union, 56 LC 19, 588.

361
 LABOR RELATIONS
ARTS. 252-253

As aptly stated by the Solicitor General in his comment on the petition, the
Secretary of Labor correctly ruled that the pendency of a petition for cancellation
of union registration does not preclude collective bargaining, thus:
"That there is a p e n d i n g cancellation p r o c e e d i n g s against the
respondent Union is not a bar to set in motion the mechanics of collective
bargaining. If a certification election may still be ordered despite the pendency
of a petition to cancel the union's registration certification, (National Union
of Bank Employees vs. Minister of Labor, 110 SCRA 274.) more so should
the collective bargaining process continue despite its pendency. We must
emphasize that the majority status of the respondent Union is not affected
by the pendency of the Petition for Cancellation pending against it. Unless
its certificate of registration and its status as the certified bargaining agent
are revoked, the Hospital is, by express provision of the law, duty bound to
collectively bargain with the Union.

2.2 Selling the Company

If an employer is guilty of unfair labor practice when he directly discharged
his employees to forestall a demand for collective bargaining, he certainly should
not be allowed to evade responsibility if he indirectly causes that discharge by
selling to a company that he knows is unwilling to accept his employees. In the
case at bar, the Angat Transportation does not challenge the court's rejection
of its claim of operational losses, and the only motive for the sale of its business
is the desire to avoid a collective bargaining negotiation, which is in violation of
the law. H e n c e , it could not evade responsibility on the plea that it is no l o n g e r
1
in a position to reinstate them.
T h e basic rule is that if the transfer of assets and employees from o n e
employer to another leaves intact the identity of the employing enterprise, the
transferor's duty to recognize and bargain with an incumbent union devolves
upon the transferee as "successor employer." T h a t means that an acquiring
employer is a successor to the bargaining obligations of his predecessor if there
is a continuity in the business operation. O n l y a high d e g r e e of enterprise
continuity will justify imposing obligations under a contract with the union to
2
which the new employer was not a party.
A mere change in ownership of a business is insufficient to alter a union's
status as bargaining representative. If the transfer of assets and employees from
one employer to another leaves intact the identity of the employing enterprises, the o l d
employer's duty to recognize and bargain with an incumbent union devolves on
the new employer as successor employer. A n d if, because of essential similarity
of operations, a subsequent employer can properly be regarded as the successor
of a previous employer, the absence of p r o o f of majority status at the time of

'Fernando vs. Angat Labor Union, G.R. N o . L-17896, May 30, 1962.
2
48 Am. Jur. 2d 967, pp. 786-787.

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 COLLECTIVE BARGAINING A N D ARTS 252 25*1 J
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[Part 1. Collective Bargaining Concept and Procedure]

the bargaining d e m a n d upon the subsequent e m p l o y e r does not excuse the

subsequent e m p l o y e r ' s failure to bargain unless the subsequent employer can
offer reasonable grounds for believing that the union lost its majority status.
An e m p l o y e r n e e d not bargain over his decision to sell part of his business.
However, the e m p l o y e r must bargain over the effects on employees of his
1
decision to sell.

2.3 Successor Employer: Continuity and Identity

In making the determination as to whether an employer is successor, the
N L R B looks to the totality of circumstances to determine whether there has
been a substantial and material alteration in the employing enterprise. If there
is a substantial and material alteration in the employing enterprise, the new
2
employer n e e d not bargain with the incumbent union.
T h e N L R B will consider whether there has been a substantial continuity
of the same operations; the new e m p l o y e r uses the same plant; he has the same
or substantially the same workforce; the same j o b s exist under the same working
conditions; he employs the same supervisors; he uses the same machinery,
equipment, and methods of production; and he manufactures the same product
or offers the same services. However, there must be a substantial continuity
of identity in the business enterprise before and after a change of ownership,
and this continuity of identity in the business enterprise necessarily includes
a substantial continuity in the identity of the workforce across the change in
3
ownership.
T h e buyer of the business cannot avoid the rule by the simple expedient of
having the seller notify the employees that they are discharged as of the sale date.
If the buyer's motive in securing the employees' discharge is to avoid bargaining
with the union, he is guilty of two unfair labor practices: discrimination against
employees because of union membership or activities, in violation of 29 USCS
158(a) ( 3 ) [Article 248, L a b o r C o d e ] and refusal to bargain, in violation of 29
4
USCS 158(a) ( 5 ) [Article 252, L a b o r C o d e ] .
The rule is different, however, where the buyer makes substantial nondiscriminatory
personnel changes and changes in the operational structure of the business. In such a
case, he is not a successor employer and need not recognize or bargain with the incumbent
union. A subsequent e m p l o y e r w h o is not a successor of a previous employer is
not bound by the previous employer's duty to bargain with a union and does
not violate the A c t by passing and failing to bargain with the union. W h e n an
employer w h o has not yet c o m m e n c e d operations announces new terms prior
to or simultaneously with his invitation to the previous work force to accept

'48 Am. Jur. 2d 967, p. 906.

Ibid.
3
48 Am. Jur. 2d 1796, p. 251.
4
48 Am. Jur. 2d 967, p. 787.
363
ARTS. 252-253 LABOR RELATIONS

employment under those terms, he does not have an obligation to consult with
1
the incumbent union before setting initial terms and conditions of employment.

2.4 Conversion to Independent Franchise or Operation

A decision to withdraw capital from a company-operated facility and
relinquish the operating control to an independent dealership lies very much
at the core of entrepreneurial control, and hence is not a mandatory subject of
bargaining.
For instance, a decision by a milk distributor to eliminate route salesmen
and distribute all products through independent contractors has been held not
a required subject of collective bargaining and not to constitute an unfair labor
practice, even though all members of the union were thus eliminated, where the
employer had no anti-union motivation and took such steps solely for business
reasons. On the other hand, it has been held that an employer violated 29 USCS
158(a) (5) by rejecting the majority union's request for recognition and refusing
to bargain with the union about changing from a system of driver-salesman to one
of independent distributorships, since although the issue was under continuing
consideration, its i m p l e m e n t a t i o n was a m a n d a t o r y subject of bargaining,
especially where the employer failed to make an offer to the driver-salesman and
made no effort to meet and bargain with the union on its final decision on the
distributorships. An employer was also held guilty of an unlawful refusal to bargain
when it failed even to inform the union that disposition of its sales distribution
routes to another was under active consideration and was imminent, the employer's
failure in this regard demonstrating evasion and engaged in surface bargaining with
2
the intention of keeping the union on a string until its deal was consummated.

2.5 Do Economic Exigencies Justify Refusal to Bargain?

Section 158(d) of 29 USCS [Article 252 of the L a b o r C o d e ] expressly
provides that the duty to bargain collectively "does not c o m p e l either party to
agree to a proposal or require the making of a concession." An employer has
been held not guilty of a refusal to bargain by adamantly rejecting the union's
economic demands where he is operating at a loss, on a low profit margin, or
in a depressed industry, as long as he continues to negotiate. But financial hardship
constitutes no excuse for refusing to bargain collectively. A n d , the N L R B has held
that an employer is guilty of a refusal to bargain when he refuses even to discuss
a union's economic demands on the g r o u n d that in his very serious financial
condition it would be impractical to negotiate or that he is financially unable
to accept a contract negotiated by the union with the employers' association of
which he is a member. Likewise, an employer's refusal to enter into a collective
bargaining agreement for a definite period with respect to wages, hours, or other

'48 Am. Jur. 2d 967, p. 787.

2
48 Am. Jur. 2d 1127, pp. 905-906.

364
 COLLECTIVE BARGAINING A N D ARTS 959
ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure]

conditions of work cannot be justified on the ground that it is necessary to keep

wage schedules flexible in order to meet exigencies arising out of competition
in the trade. On the other hand, the Fifth Circuit has held that a frozen citrus
concentrate manufacturer's refusal to discuss e c o n o m i c issues with the union is
not an unfair labor practice where severe freezes of his citrus groves confront
1
him with a "struggle for survival."

2.6 Acts not Deemed Refusal to Bargain

T h e duty to bargain is not violated by:
2
( 1 ) a d o p t i o n o f a n a d a m a n t b a r g a i n i n g p o s i t i o n i n g o o d faith,
3
particularly where the company is operating at a loss;
(2) refusal to bargain over demands for commission of unfair labor
4
practices;
5
(3) refusal to bargain during p e r i o d of illegal strike.
If a union engages in an illegal strike, the employer has no obligation to
bargain until he is notified that the illegal strike has been terminated. H e n c e ,
an employer is under no obligation to bargain with a union which is striking in
violation of a no-strike clause in the applicable collective bargaining agreement
or in violation of the statutory notice requirement of 29 USCS Sec. 1 5 8 ( d ) . As
soon as the union voluntarily terminates the strike and the strikers return to
6
work, the employer's duty to bargain becomes operative again.
T h e r e was no refusal to bargain collectively, where a firm facing serious
business loss defers its answer to demands relating to the renewal of a collective
bargaining agreement, until its board of directors has decided on the question
of whether or not to continue its movie production.
It was entirely reasonable for the L V N to hold in abeyance its answers to the
proposals because whether or not it would still enter into a collective bargaining
agreement with the E W A and the L P C U would d e p e n d on the consensus that
would be arrived at by the stockholders. T h e r e would be neither rhyme nor
reason for a collective bargaining agreement if the company would decide — as
it did decide — to stop producing moving pictures, because the resultant events
proved the prudence of the action taken by the L V N . W h e n the stockholders
decided to stop movie production as of May 31, 1961, the L V N was compelled
to dismiss its employees because there was no m o r e work for them. H a d the
L V N agreed to enter into collective bargaining agreement with the two unions

'48 A m . Jur. 2d 976, pp. 795-796.

2
N L R B vs. Almeida Bus Lines, 333 F2d 729; N L R B vs. Cegg, 304 F2d 168.
3
Amalgamated Asso. of Street Elec. R. and Motor Coach Employees vs. NLRB,
294 F2d 264.
4
N L R B vs. General Motors, 10 L ed 2d 670.
5
United Electrical, Radio and Machine Workers vs. N L R B , 100 L ed 850.
6
48 Am. Jur. 2d 986, p. 802.
365
 LABOR RELATIONS
ARTS. 252-253

without awaiting the result of the stockholders' meeting, the contracts would
1
have become inutile anyway because it was closing shop.
Suspecting that the e m p l o y e r was transferring the plant, the union
demanded information concerning the removal of equipment and machinery
from the factory. T h e e m p l o y e r refused. Was there a refusal to bargain
collectively? T h e r e was no violation of statutory duty to bargain since the removal
of equipment and machinery from the plant had no relevance to a possible
grievance or to contract administration and did not relate to wages, hours, and
2
other terms and conditions of employment.
W h e r e , pursuant to an honest d o u b t , the e m p l o y e r has d e m a n d e d
additional proof or the acquisition of an official certification of bargaining agency,
there is no obligation or duty on the employer's part to enter into negotiations
until the demanded p r o o f is presented pending the certification proceedings,
unless it can be established that the d e m a n d lacks in g o o d faith and is intended
3
as an obstruction to negotiations.
Neither is the duty to bargain violated where:
4
(1) there is no request for bargaining;
5
(2) the union seeks recognition for an inappropriately large unit;
( 3 ) the union seeks to represent some persons w h o are excluded
6
from the Act;
( 4 ) the rank-and-file unit includes supervisors or inappropriate
7
otherwise;
( 5 ) the d e m a n d for recognition and bargaining is m a d e within
the year following a certification election in which the clear choice was no
8
union and no ad interim significant change has taken place in the unit;
9
( 6 ) the union makes unlawful bargaining demands. But a union's
demand for reinstatement of justifiably discharged strikers, which was not
presented as an unconditional d e m a n d but rather as a bargainable issue,
10
was held not to excuse an employer from its duty to bargain with the union.

"LVN Pictures Employees and Workers Association vs. L V N Pictures, Inc., G.R.
Nos. L-23495 and L-26432, September 30, 1970.
2
Acme Industrial Co. vs. N L R B , 52 LC 23, 630.
3
N L R B vs. National Seal Corp., 127 F. [2nd] 776.
4
Makela Welding, Inc. vs. N L R B , 387 F2d 40; N L R B vs. Spun-lee Corp., 385 F
2d 379.
5
Clorecraft Mfg. Co. vs. N L R B , 385 F 2d 998.
6
N L R B vs. Kelly Bros. Nurseries, Inc., 341 F2d 433.
7
Deaton Truck Line vs. N L R B , 337 F 2d 687.
8
Re Morse Chain Co., 175 N L R B N o . 98.
9
N L R B vs. General Motors Corp., 10 L ed 2d 670.
10
48 Am. Jur. 2d 983, p. 800.

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 COLLECTIVE BARGAINING A N D ARTS 259 25*
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[Part 1. Collective Bargaining Concept and Procedure]

2.7 Alleged Interference in the Selection of the Union's Negotiating Panel

Standard Chartered Bank Employees Union (NUBE) vs. Hon. Nieves Confesor, G.R.
N o . 114974, June 16, 2004—
Facts: T h e [union] asserts that the [employer] committed ULP, when the
Bank's Human Resource Manager suggested to the union that the president of the
federation be excluded from the union's negotiating panel. In support of its claim, the
union president executed an affidavit stating where and how the alleged interference
allegedly took place. T h e union president also narrated that during the first meeting,
the HR manager stated that the negotiation should be kept a "family affair."
Citing the cases of U.S. Postal Service and Harley Davidson Motor Co., Inc., AMF,
the Union claims that interference in the choice of the Union's bargaining panel is
tantamount to ULP.
Ruling: T h e contention is bereft of merit.
... [ I ] f an employer interferes in the selection of union negotiators or coerces
the Union to exclude from its panel of negotiators a representative of the Union, and
if it can be inferred that the employer adopted the said act to yield adverse effects
on the free exercise of the right to self-organization or on the right to collective
bargaining of the employees, U L P under Article 248(a) in connection with Article
243 of the Labor Code is committed.
In order to show that the employer committed U L P under the Labor Code,
substantial evidence is required to support the claim. Substantial evidence has been
defined as such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion. In the case at bar, the Union bases its claim of interference on
the alleged suggestions of [the HR manager] to exclude [the federation president]
from the Union's negotiating panel.
T h e circumstances that occurred during the negotiating do not show that the
suggestion made is an anti-union conduct from which it can be inferred that the
Bank [employer] consciously adopted such act to yield adverse effects on the free
exercise of the right to self-organization and collective bargaining of the employees,
especially considering that such was undertaken previous to the commencement of
the negotiation and simultaneously with [the union president's] suggestion that the
bank lawyers be excluded from its negotiating panel.
T h e records show that after the initiation of the collective bargaining process,
with the inclusion of [the federation president] in the Union's negotiating panel,
the negotiations pushed through.
If at all, the suggestion should be construed as part of the normal relations
and innocent communications, which are all part of the friendly relations between
the Union and the Bank.

2.8 Non-reply to Proposal; CBA Imposed on Employer

Kiok Lay vs. NLRC And Kilusan, N o . L-54334, January 22, 1986 —
Facts: T h e Pambansang Kilusan ng Paggawa (union) was certified as the sole
and exclusive bargaining agent of the employees of Sweden Ice Cream (Kiok Loy).

367
 LABOR RELATIONS
ARTS. 252-253

Thereafter the union furnished Kiok Loy with two copies of its proposed CBA and
requested the company its counter proposals. When it elicited no reply, the union
again wrote the company reiterating its request. Both requests were ignored.
The union filed a notice of strike on the ground of unresolved economic issues
in collective bargaining.
Conciliating proceedings followed but failed. The case was certified to the N L R C
for compulsory arbitration, but the company kept on postponing the case, thus, the
N L R C rendered its decision declaring the company guilty of unjustified refusal to
bargain. The N L R C also ordered that the CBA proposed by the union be considered
adopted as the CBA that would govern the relationship between the parties.
The company filed a petition for certiorari with the Supreme Court to annul
the decision of the N L R C .
Ruling; Collective bargaining, designed to stabilize the relations between labor
and management for the purpose of industrial peace, is a mutual responsibility
between labor and management. It is a legal obligation, so much so that Article 249
[now 248] of the Labor Code makes it unfair labor practice for an employer to refuse
to meet and convene promptly and expeditiously in g o o d faith for the purpose of
negotiating an agreement for wages, hours of work, and other terms of employment.
T h e union complied with the jurisdictional preconditions of collective
bargaining, namely: (1) possession of majority representation; (2) proof of majority
representation; and (3) demand to bargain.
From the overall conduct of the company, it is indubitably shown that it
disregarded its obligation to bargain in g o o d faith.
We agree with the pronouncement that it is not obligatory upon either side
of a labor controversy to precipitately accept or agree to the proposals of the other.
But an erring party should not be tolerated and allowed with impunity to resort to
schemes feigning negotiations by going through empty gestures. More so, as in the
instant case, where the intervention of the National Labor Relations Commission
was properly sought for after conciliation efforts . . . failed. T h e instant case being
a certified one, it must be resolved by the N L R C pursuant to the mandate of P.D.
873, as amended, which authorizes the said body to determine the reasonableness
of the terms and conditions of employment embodied in any Collective Bargaining
Agreement. To that extent, utmost deference to its findings of reasonableness of any
Collective Bargaining Agreement as the governing agreement by the employees and
management must be accorded due respect by this Court.

2.8a Repetition in Divine Word University

T h e Supreme C o u r t decision in Kiok Loy, which i m p o s e d a C B A upon
an employer, is repeated in the case of Divine Word University of Tacloban vs.
Secretary of Labor, G.R. N o . 91915, d e c i d e d on S e p t e m b e r 11, 1992. A f t e r
reviewing the facts, the C o u r t o v e r r u l e d the University's c o n t e n t i o n that
the union's proposals may not be unilaterally i m p o s e d on it on the g r o u n d
that a collective bargaining a g r e e m e n t is a contract w h e r e i n the consent of

368
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ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure]

both parties is indispensable. T h i s c o n t e n t i o n , the Court ruled, is "devoid

o f merit." T h e C o u r t went o n :
A similar argument had already been disregarded in the case o f Kiok
Loy vs. NLRC ( G . R . N o . 54334, January 22, 1986, 141 S C R A 179) where we
upheld the order of the N L R C declaring the union's draft C B A proposal
as the collective agreement which should govern the relationship between
the parties. Kiok Loy vs. NLRC is applicable in the instant case considering
that the facts therein have also been indubitably established in this case.
T h e s e factors are: ( a ) the union is the duly certified bargaining agent; ( b )
it made a definite request to bargain and submitted its collective bargaining
proposals; and ( c ) the University made no counter proposal whatsoever.
As we said in Kiok Loy, " [ a ] company's refusal to make counter proposal if
considered in relation to the entire bargaining process, may indicate bad
faith and this is especially true where the U n i o n ' s request for a counter
proposal is left unanswered." M o r e o v e r , the Court added in the same
case that "it is not obligatory upon either side of a labor controversy to
precipitately accept or agree to the proposals of the other. But an erring
party should n o t be tolerated and allowed with impunity to resort to
schemes feigning negotiation by g o i n g through empty gestures."

3. SECOND U.L.P. IN BARGAINING: EVADING THE MANDATORY SUBJECTS

It is the obligation of the e m p l o y e r and the employees' representative
to bargain with each other with respect to "wages, hours, and other terms and
conditions of employment." T h e y are statutory or "mandatory" proposals. An
employer's refusal to negotiate a mandatory subject of bargaining is an unfair
labor practice although the e m p l o y e r has every desire to reach agreement and
earnestly and in all g o o d faith bargains to that end. On the other hand, an
employer's duty to bargain is limited to the mandatory bargaining subjects; as
1
to other matters, he is free to bargain or not to bargain.
A m e r e r e m o t e , direct, or incidental impact is insufficient to render a
subject a mandatory subject of bargaining; in order for a matter to be subject
to mandatory collective bargaining, it must materially or significantly affect the
terms or conditions of employment. However, conditions of employment include
not only what an employer has already granted, but also what it has announced
it intends to grant. W h e t h e r the agreement concerns a mandatory subject of
2
bargaining depends not on its form, but on its practical effect.

3.1 Wages and Employment Conditions

T h e term "wages," as used in 29 USCS Sec. 1 5 8 ( d ) , has been held to
include not only compensation but also other emoluments of value furnished

'48 Am. Jur. 2d 998, p. 812.

Ibid.
369
ARTS. 252-253 LABOR RELATIONS

by the employer to his employees. U n d e r our Labor C o d e , "wage" refers to

remuneration or earnings, however designated, capable of being expressed in
1
terms of money, etc.
T h e effect of automation on a bargaining unit has been held a mandatory
2
subject of collective bargaining.
Pension and insurance benefits for active employees are mandatory subjects
3
of bargaining, but benefits accorded retirees are not a mandatory subject.
It is noteworthy that the subject matter for bargaining is described as wages,
hours, and other terms and conditions of employment." Significantly, the law
specifies "terms and conditions of employment," not "working conditions." In the
Labor-Management Conference of 1945, management indicated willingness to
bargain about "working conditions," but "terms and conditions of employment"
is clearly much m o r e inclusive. Since passage of the Taft-Hardey Act, the National
Labor Relations Board has held that industrial pensions, g r o u p insurance, and
merit increases all are matters about which employers must bargain collectively.
All these decisions have been upheld by the Supreme Court. T h e r e doubtless
are some "management rights" which do not involve "terms and conditions of
employment," but just about all matters which unions have in fact brought up
in collective bargaining anywhere seem to be covered by the broad definition
4
in the law.
T h e following are examples of matters considered as mandatory subjects
of bargaining:
5
( 1 ) Wages and o t h e r types o f c o m p e n s a t i o n , including merit
6
increases;
7
(2) Working hours and working days, including work shifts;
8
(3) Vacations and holidays;
9
(4) Bonuses;
10
(5) Pensions and retirement plans;

'See definition and discussion in Article 97, Volume I of the present work.
2
48Am.Jur. 2d 998, p. 813.
Ibid., p. 816.
4
Edwin E . Witte, "Collective Bargaining and the Democratic Process" in E. Wight
Bakke [ e d . ] , Union, Management and the Public [Harcourt, New York: 1967], p.
294.
5
12 A L R 2d 269.
6
3 A L R 2d 997.
7
1 2 A L R 2d 271.
Ibid.
9
3 L e d 1730.
, 0
3 L e d 2d 1729.

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 COLLECTIVE BARGAINING A N D ARTS 259 95*
ADMINISTRATION OF AGREEMENT 434-433
[Part 1. Collective Bargaining Concept and Procedure]
1
(6) Seniority;
2
(7) Transfer;
3
(8) Lay-offs;
4
(9) Employee workloads;
5
( 1 0 ) W o r k rules and regulations;
6
(11) Rent of company houses;
7
(12) U n i o n security arrangements.

3.1a Wage Factors; "Solomonic" Approach

W h i l e we [the Supreme Court through Justice Martinez] do no seek to
enumerate in this decision the factors that should affect wage determination,
we must emphasize that a collective bargaining dispute such as this o n e requires
due consideration and p r o p e r balancing of the interest of the parties to the
dispute and of those w h o might be affected by the dispute. To our mind, the
best way in approaching this task holistically is to consider the available objective
facts, including, where applicable, factors such as the bargaining history of the
company, the trends and amounts of arbitrated and agreed wage awards and the
company's previous CBAs, and industry trends in general. As a rule, affordability
or capacity to pay should be taken into account but cannot be the sole yardstick
in determining the wage award, especially in a public utility like M E R A L C O . In
considering a public utility, the decision maker must always take into account
the "public interest" aspects of the case; M E R A L C O s income and the amount of
m o n e y available for operating expenses — including labor costs — are subject
to state regulation. We must also keep in mind that high operating costs will
certainly and eventually be passed on to the consuming public as M E R A L C O
8
has bluntly warned in its pleadings.
We take note of the "middle g r o u n d " approach e m p l o y e d by the Secretary
in this case which we do not necessarily find to be the best m e t h o d of resolving
a wage dispute. Merely finding the midway point between the demands of the
company and the union, and "splitting the difference" is a simplistic solution
that fails to recognize that the parties may already be at the limits of the wage

'Oneita Knitting Mills vs. N L R B , 375 F2d 385.

2
N L R B vs. Laney & Duke Storage Warehouse Co., 369 F 2d 859.
3
N L R B vs. Frontier Homes Corp., 371 F2d 974.
4
Gallenkamp Stores Co. vs. N L R B , 402 F2d 525.
5
Gallenkamp Stores Co. vs. N L R B , 402 F2d 525; N L R B vs. Miller Brewing Co.,
408 F2d 12.
'American Smelting & Refining Co. vs. N L R B , 406 F2d 552.
^ L R B vs. T o m Joyce Floors, Inc., 353 F 2d 768.
"Manila Electric Co. vs. Hon. Secretary of Labor and MEWA, G.R. N o . 127598,
January 27, 1999.

371
 LABOR RELATIONS
ARTS. 252-253

levels they can afford. It may lead to the danger too that neither of the parties
will e n g a g e in p r i n c i p l e d bargaining; the c o m p a n y may k e e p its position
artificially low while the union presents an artificially high position, on the fear
that a "Solomonic" solution cannot be avoided. Thus, rather than encourage
agreement, a "middle ground approach" instead promotes a "play safe" attitude
1
that leads to more deadlocks than to successfully negotiated CBAs.

3.2 Workloads and Work Rules

Employee workloads are a mandatory subject of bargaining. Employer
rules concerning coffee breaks, lunch periods, smoking, e m p l o y e e discipline,
and dress are also mandatory subjects of bargaining, as are plant safety rules
and general regulations. An e m p l o y e r violates 29 U S C S Sec. 158(a) ( 5 ) by
unilaterally instituting a written disciplinary warning system to replace a system
of oral reprimands or by instituting penalty provisions in a newly adopted c o d e
of ethics providing that any violation would result in suspension and multiple
infractions would result in discharge. A management functions clause providing
that "all management functions are reserved to the Company, subject to the
other provisions" of the agreement, was held to be no excuse for the employer's
2
failure to bargain over new work rules dealing with absences and tardiness.
Company rules relating to safety and work practices c o m e within the
meaning of the phrase "other terms and conditions of e m p l o y m e n t " as used in
3
the Act and, therefore, constitute a mandatory subject of collective bargaining.

3.2a Code of Conduct

Work rules and regulations are c o m m o n l y c o m p i l e d into a booklet usually
called "Code of Discipline" or "Code of Conduct." Such do's and don'ts for
employees of the enterprise are work rules, forming part of terms and conditions
of employment, that are p r o p e r subjects of collective bargaining. Hardly may
the employer contend that they are "non-negotiable" matters.

3.3 Management Prerogatives Clause

An employer does not c o m m i t an unfair labor practice by insisting, to the
point of a bargaining impasse, on the inclusion in the contract of a management
prerogatives clause, even though some of the matters covered by the clause are
"conditions of employment" which are mandatory subjects of bargaining under
29 USCS Sec. 1 5 8 ( d ) . Thus, an employer's insistence that its decisions regarding
hiring and tenure of employment should not be reviewable by arbitration is not
a refusal to bargain.

'Manila Electric Co. vs. Hon. Secretary of Labor and MEWA, G.R. N o . 127598,
January 27, 1999.
2
48 Am. Jur. 2d 1006, p. 818.
3
N L R B vs. Gulf Power Co., 56 LC 20, 158.

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[Part 1. Collective Bargaining Concept and Procedure]

3.4 Union Discipline Clause

An employer may bargain to an impasse over his proposal that the union
eliminate a piecework ceiling imposed by a union rule which subjects members to
discipline for exceeding the production quota. However, an employer's insistence
to the point of a bargaining impasse on the union's withdrawal of fines imposed
on member-employees w h o crossed a picket line around the employer's plant is
an unlawful refusal to bargain, since the right not to withdraw fines is an internal
union affairs, a matter involving relations between employees and their unions,
1
and therefore not a mandatory bargaining item.

3.5 Arbitration, Strike-Vote, or No-Strike Clauses

An employer may lawfully bargain to an impasse over his proposal that the
collective bargaining agreement include an arbitration clause or a no-strike clause
2
which prohibits the employees from striking during the life of the agreement.

3.6 No-Lockout Clause; Clause Fixing Contractual Term

An employer's statutory duty to bargain requires him to negotiate over the
union's proposal that their agreement include a clause binding him not to lock
out the employees. An employer's refusal to bargain over the duration of the
contract to be entered into is also an unfair labor practice. But an employer's
obligation to enter into a collective bargaining agreement does not require that
the employer enter into an unalterable obligation for an extended period of
time, and many collective bargaining agreements contain a clause permitting
3
termination or modification by either party upon prescribed notice.

3.7 Signing Bonus

Signing bonus is a grant motivated by the goodwill created when a C B A is
successfully negotiated and signed between the employer and the union. W h e r e
goodwill does not exist, why ask for a signing bonus?
T h e Supreme Court explains: "In contractual terms, a signing bonus is
justified by and is the consideration paid for the goodwill that existed in the
negotiations that culminated in the signing of a C B A . Without the goodwill, the
payment of a signing bonus cannot be justified and any order for such payment,
to our mind, constitutes grave abuse of discretion. This is m o r e so where the
4
signing bonus is in the not insignificant total amount of P I 6 Million."
In short, if the reason behind a signing bonus is absent, no signing bonus
need be given. This also happened in Caltex.

'48 A m Jur. 2d, p. 825.

Ibid., p. 825. See Chapter on strike,
Ibid., p. 821.
4
Manila Electric Co. vs. Hon. Secretary of Labor and MEWA, G.R. N o . 127598,
January 27, 1999.

373
 LABOR RELATIONS
ARTS. 252-253

Although proposed by petitioner [ u n i o n ] , the signing bonus was not

accepted by private respondent [ e m p l o y e r ] . Besides, a signing bonus is not a
benefit which may be demanded under the law. Rather, it is now claimed by
petitioner under the principle of "maintenance of existing benefits" of the
old CBA. However, as clearly explained by private respondent, a signing bonus
may not be demanded as a matter of right. If it is not agreed upon by the
parties or unilaterally offered as an additional incentive by private respondent,
the condition for awarding it must be duly satisfied. In the present case, the
condition sine qua non for its grants — a non-strike — was not c o m p l i e d with.
In fact, private respondent categorically stated in its counter-proposal — to the
exclusion of those agreed upon before — that the new collective bargaining
agreement would constitute the only agreement between the parties. (Caltex
Refinery Employees Association vs. Brillantes and Caltex [Phil.], Inc., G.R No. 123782,
September 16, 1997.)

3.8 Voluntary Benefits

Employment benefits are either "statutory" if required by law or "voluntary"
if granted by the employer although not required by law. Service incentive leave,
for instance, is statutory benefit; vacation leave, or bonus,or fourteenth month
pay is voluntary. In negotiating a C B A , may the union d e m a n d that an existing
voluntary benefit be discussed and included in the CBA? In o n e , the employer
manifested its desire to keep a voluntary benefit - the company's retirement
program - under management's exclusive control, and therefore refused to
include the retirement policy in the C B A bargaining agenda. T h e union reacted
by charging the company with U L P by way of bargaining in bad faith, and
proceeded to file a notice of strike.
T h e Court refused to impute bad faith on the employer's refusal to include
the retirement program in the C B A negotiation. But the Court upheld the
1
inclusion of the voluntary benefit as a p r o p e r subject of bargaining.

3.9 No Duty to Agree Even on Mandatory Subjects

T h e A c t does not c o m p e l agreements between employers and employees,
and neither party is legally obligated to yield even on a mandatory bargaining
subject. W h e r e the subject of the dispute is a mandatory bargaining subject,
either party may bargain to an impasse as l o n g as he bargains in g o o d faith. T h e
duty to bargain does not obligate a party to make concessions or yield a position
fairly held. H e n c e , an employer's adamant insistence on a bargaining position
2
is not necessarily a refusal to bargain in g o o d faith.

'Union of Filipro Employees, etc. vs. Nestle Phil., Inc., G.R. N o . 158930-31,
March 3, 2008.
2
48 Am. Jur. 2d 1033, p. 831.

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 COLLECTIVE BARGAINING A N D A R T S 252 25*
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[Part 1. Collective Bargaining Concept and Procedure]

Even if the negotiating party thumbs down the other party's proposals,
there is no violation of the duty to bargain — hence, no U L P — as long as the
negative reply can be explained in g o o d faith.

3.10 Non-mandatory Subjects

An employer cannot insist, to the point of creating a bargaining impasse,
on the inclusion of a provision outside the scope of the statutory bargaining
subjects, even if he acts in g o o d faith. On the other hand, it is lawful to insist on
the inclusion of a provision in a collective bargaining agreement if the provision
1
is within the scope of a statutory subject of bargaining.
An e m p l o y e r bargains to an impasse over a non-mandatory bargaining
subject when he refuses to reach any agreement with the union unless the union
capitulates to him on that subject. However, it has been held that a bargaining
impasse may be reached over a non-mandatory bargaining subject although
that subject is not the sole cause for the parties' failure to agree. W h e n a subject
under discussion is not mandatory, it may be discussed if both parties agree, but
2
a strike or lockout may not be used to c o m p e l negotiation or agreement.
W h i l e most matters that m i g h t be discussed or proposed in collective
bargaining are likely to bear some relation, even if tenuous, to "wages, hours,
and other terms and conditions of employment," not all proposals that somehow
respond to a p r o b l e m that is customarily bargained about may themselves be
insisted upon to impasse. By o n c e bargaining and agreeing on a permissive
subject of bargaining, the parties do not make the subject a mandatory topic of
3
future bargaining.

3.11 Bargaining to the Point of Impasse: N o t Necessarily Bad Faith

T h e adamant insistence on a bargaining position to the point where the
negotiations reach an impasse does not establish bad faith. Neither can bad faith
be inferred from a party's insistence on the inclusion of a particular substantive
provision unless it concerns trivial matters or is obviously intolerable.
" T h e question as to what are m a n d a t o r y and what are merely
permissive subjects of collective bargaining is of significance on the right
of a party to insist on his position to the point of stalemate. A party may
refuse to enter into a collective bargaining contract unless it includes a
desired provision as to a matter which is a mandatory subject of collective
bargaining; but a refusal to contract unless the agreement covers a matter
which is not a mandatory subject is in substance a refusal to bargain about
matters which are mandatory subjects of collective bargaining; and it is no
answer to the charge of refusal to bargain in g o o d faith that the insistence

^ 8 Am. Jur. 2d 1017, p. 822.

Ibid., p. 823.
Ibid.

375
 LABOR RELATIONS
ARTS. 252-253

on the disputed clause was not the sole cause of the failure to agree or
that agreement was not reach [sic] with respect to other disputed clauses.
(Samahang Manggagawa sa Top Form Manufacturing-United Workers of the
Philippines (SMTFM-UWP) vs. NLRC, et al, G.R No. 113856, September 7, 1998,
citing Divine Word University of Tacloban vs. Secretary of Labor and Employment,
G.R No. 91915, September 11, 1992, 213 SCRA 759, 773.)
Stated in another way, the ruling means that bargaining to the point of
deadlock may or may not amount to bargaining in bad faith d e p e n d i n g on
whether the insistence refers to a mandatory or a non-mandatory subject of
bargaining.
Over a mandatory subject a party may insist on bargaining, even to the
point of deadlock, and his insistence will not be construed as bargaining in bad
faith. T h e reason is that the duty to bargain requires meeting and convening on
terms and conditions of e m p l o y m e n t but does not require assent to the other
party's proposals.
Over a non-mandatory subject, on the other hand, a party may not insist
on bargaining to the point of impasse, otherwise his insistence can be construed
as bargaining in bad faith. It may be construed as evasion of the duty to bargain;
such evasion is U L P .
A US precedent has held that insistence on non-mandatory subject as a
condition to bargaining on mandatory subject indicates absence of g o o d faith
1
in bargaining. In other words, if Party A insists on first settling a non-mandatory
subject before tackling a mandatory subject, Party B may complain that Party
A's posture is just an excuse to avoid bargaining on the mandatory subjects of
bargaining; hence, Party B can charge that Party A is bargaining in bad faith or
is evading bargaining on terms and conditions of e m p l o y m e n t — in short, Party
A is committing U L P .
To illustrate in m o r e concrete terms: T h e employer's insistence that the
union should change its negotiator ( o r o n e of its negotiators) before bargaining
can p r o c e e d to the employees' wage and benefits is an instance of bad-faith
bargaining because the composition of the negotiating panel is not a mandatory
2
subject of bargaining. Similarly, removal of a certain supervisor ( o r manager)
is a non-mandatory subject of bargaining. If the union insists to the point of
impasse on such a demand, the employer can charge the union with bargaining
3
in bad faith.
T h e above rulings do not mean that non-mandatory subjects cannot be
proposed or that the p r o p o n e n t cannot d e m a n d serious discussion of such

'NLRB vs. Woorster Division of Borg-Warner Corp., 78 Sup. Ct. 718, 356 US
342, 2 L Ed 2d 823.
2
See N L R B vs. Roscoe Skipper, Inc., 213 F 2d 793.
3
See N L R B vs. Aladdin Industries, Inc., 125 F 2d 377.

376
 COLLECTIVE BARGAINING A N D ARTS 252 25*
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[Part 1. Collective Bargaining Concept and Procedure]

proposal. What the rulings forbid is the posture of making settlement on a non-
mandatory subject a precondition to the discussion or settlement of a mandatory
subject. If a non-mandatory subject is proposed and agreed upon, the agreeing,
by itself, is binding.

3.12 When Is There Deadlock or Impasse?

W h e t h e r the subject is m a n d a t o r y or non-mandatory that caused a
bargaining deadlock, the union may file a notice of strike or the employer a
notice of lockout. But what is deadlock? W h e n is there a bargaining deadlock?
A bargaining impasse over an issue exists where g o o d faith bargaining on
the part of the parties has failed to resolve the issue and there are no definite
1
plans for further efforts to break the deadlock.
"Impasse," within the meaning of the federal labor laws, presupposes a
reasonable effort at good-faith bargaining which, despite noble intentions, does
not conclude in an agreement between the parties. In the N L R B ' s view, whether
a bargaining impasse exists is a matter of j u d g m e n t d e p e n d e n t on such factors
as the bargaining history, the parties' g o o d faith in negotiations, the length
of the negotiations, the importance of the issue or issues as to which there is
disagreement, and the contemporaneous understanding of the parties as to the
2
state of negotiations.
A substantial change in the bargaining position of o n e party is necessary to
break an existing impasse so as to render unlawful the other party's subsequent
refusal to m e e t and bargain. No valid bargaining impasse can be said to occur
when the bargaining deadlock is caused by the failure of o n e of the parties to
bargain in g o o d faith. Thus, an employer's refusal to discuss non-economic issues
unless the union agreed to accept the employer's economic proposal constituted
a refusal to bargain in g o o d faith, since the parties had not bargained to an
impasse even as to e c o n o m i c terms in the absence of an indication on the part
of the union that its revised e c o n o m i c proposal was its final offer or that it was
unwilling to make further concessions, and the negotiations had not reached the
point where there was no realistic possibility that a continuation of the discussion
3
would have been fruitful.

3.12a Duty to Bargain When There Is Deadlock or Impasse

Deadlock does not mean the e n d of bargaining. It signals rather the need
to continue the bargaining with the assistance of a third party as conciliator or
arbitrator whose first aim is to get the parties back to the negotiating table and
help them craft a win-win solution.

'American Shipbuilding Co. vs. N L R B , 380 U.S. 300.

2
48 Am. Jur. 2d, 984, p. 801.
Ibid.
377
 LABOR RELATIONS
ARTS. 252-253

While it has been held that a member of a multi-employer unit may withdraw
from the unit when an impasse is reached in negotiations, an employer's duty to
bargain does not end when contract negotiations b e c o m e deadlocked. Although
negotiations reach a deadlock, the employer must resume negotiations where
changed conditions indicate that an agreement may be possible. Even after the
union and the employer reach a genuine bargaining impasse, the employer
commits an unfair labor practice by cancelling a scheduled bargaining meeting
1
because the union filed unfair labor practice charges against the employer.
However, an employer cannot be held to have violated the obligation to
bargain collectively with representatives of its employees where the negotiations
with the union had resulted in a deadlock, causing the employer to shut down
the plant, and the union made no request for further negotiations until after the
plant had reopened with a new set of employees operating under an agreement
2
with another labor organization.

3.12b Strike or Lockout in Case of Deadlock

Bargaining may proceed smoothly—and this is the wish of most negotiation
panels — but it may also be marred by insinuations, misunderstandings, and
apparently irreconcilable bargaining positions. D e a d l o c k develops. In fact,
deadlock may occur anytime for various reasons such as unacceptability of a
proposal or counter proposal, grandstanding of a negotiator, autocratic or
arrogant stance, or imprecise w o r d i n g of a stipulation.
T h e law (Article 263) recognizes bargaining deadlock as a valid reason to
declare a strike or lockout. Strike/lockout presents a major deviation from the
preferred smooth route of bargaining. At this point of the bargaining scenario,
strike/lockout is supposed to be a m e t h o d of resolving an impasse, a device to
constrain the parties to end an impasse and go back to the negotiation table.
But strike/lockout, while meant to be a solution, frequently becomes a p r o b l e m
in itself.
Well-intentioned bargaining usually avoids a deadlock and if it does occur,
a third-party intercession may b e c o m e necessary to avert a strike or lockout.
May a bargaining deadlock be resolved through arbitration by a L a b o r
Arbiter?

Manila Central Line Corp. vs. Manila Central Line Free Workers Union-NFL, G.R.
N o . 109383, June 15, 1998 —
After the Board [ N C M B ] failed to resolve the bargaining deadlock between
the parties, the union filed a petition for compulsory arbitration in the Arbitration
Branch of the N L R C . Petitioner [employer] joined the petition and the case was
submitted for decision.

'48 Am. Jur. 2d 984, p. 800.

Ibid.

378
 COLLECTIVE BARGAINING A N D A R T S 252 25*
ADMINISTRATION OF AGREEMENT * *&4rA33
[Part 1. Collective Bargaining Concept and Procedure]

Although the union's petition was for "compulsory arbitration," the subsequent
agreement of petitioner to submit the matter for arbitration in effect made the
arbitration a voluntary one. T h e essence of voluntary arbitration, after all, is that it is
by agreement of the parties, rather than compulsion of law, that a matter is submitted
for arbitration. It does not matter that the person chosen as arbitrator is a labor
arbiter who, under Article 217 of the Labor Code, is charged with the compulsory
arbitration of certain labor cases. There is nothing in the law that prohibits these
labor arbiters from also acting as voluntary arbitrators as long as the parties agree to
have him hear and decide their dispute.

4. T H I R D U.L.P. IN B A R G A I N I N G : BAD FAITH

Bargaining deadlock may be precipitated not only by hard-line positions
on mandatory or non-mandatory subjects. It may also arise because of lack of
g o o d faith in bargaining.
Good-faith bargaining demands m o r e than sterile and repetitive discussion
of formalities precluding actual negotiation, m o r e than formal replies which
constitute in effect a refusal to treat with the union, and m o r e than a willingness
to enter upon a sterile discussion of union-management differences. It requires
a sincere effort to reach agreement, although it does not require agreement
itself. Moreover, the duty to bargain does not e n d with the negotiation of the
agreement. Inviting employees to disregard and by-pass the union in seeking
redress of their grievances, notwithstanding the establishment of a grievance
procedure in the collective bargaining agreement, has been held a violation of
the duty to bargain in g o o d faith.
T h e duty to bargain collectively may be violated without a general failure
of subjective g o o d faith, and there is no occasion to consider the issue of g o o d
faith if a party refuses even to negotiate in fact about any of the mandatory
subjects. An e m p l o y e r cannot be guilty of a refusal to bargain if the union is not
1
itself bargaining in g o o d faith.

4.1 Determination of G o o d Faith

T h e crucial question whether a party has met his statutory duty to bargain
in g o o d faith typically turns on the facts of the individual case. T h e r e is no per
se test of g o o d faith in bargaining. G o o d faith or bad faith is an inference to be
drawn from the facts and is largely a matter for the N L R B ' s expertise. To some
degree, the question of g o o d faith may be a question of credibility. [Note: This
U.S. source is quoted by our Supreme Court in Hongkong and Shanghai Banking
Corp. Employees Union vs. NLRC, G.R. N o . 125038, N o v e m b e r 6, 1997.]
In the Nestle case where the union charge the employer with bargaining in
bad faith because it refused to negotiate over the company's retirement program,

48 A m . Jur. 2d 2027, p. 828.

379
 LABOR RELATIONS
ARTS. 252-253

the court did not construe the company's refusal as bad faith bargaining. T h e
court reiterates that there is no per se test of g o o d faith in bargaining.
An employer's steadfast insistence to exclude a particular substantive
provision is no different from a bargaining representative's perseverance
to include o n e that they d e e m of absolute necessity... It is but natural that
at negotiations, management and labor adopt positions or make demands
and offer proposals and counter-proposals and counter-proposals. (Union
of Filipro Employees, etc. vs. Nestle Philippines, Inc., G.R. No. 158930-31, March 3,
2008.)
A finding of g o o d faith in bargaining cannot be based upon whether
a particular provision of a contract seems reasonable or unreasonable to the
N L R B , or whether the N L R B thinks the provision should be agreed to, but it
must be based entirely upon a consideration of the negotiations as a whole. By the
same token, the effect of an employer's actions individually is not the test of
good-faith bargaining, but the impact of all such occasions or actions, considered
as a whole, and the inferences fairly drawn therefrom collectively, may offer a
basis for the finding of the N L R B . An employer's entire course of conduct or
the totality of circumstances may show a lack of g o o d faith in violation of 29
USCS Sec. 158(a) ( 5 ) , although n o n e of its specific acts amount to the prescribed
conduct. If an employer's activities away from the bargaining table with respect to
its employees are directed toward undermining the bargaining representative of
those employees, bad faith and a 29 USCS Sec. 158(a) ( 5 ) violation are established
even though overt evidence of bad faith does not appear at the bargaining table
1
itself.
A fair criterion of g o o d faith in collective bargaining requires that the
parties involved deal with each other with o p e n and fair m i n d and sincerely
endeavor to o v e r c o m e obstacles or difficulties existing between them to the e n d
that e m p l o y m e n t relations may be established and obstruction to the free flow
of c o m m e r c e prevented. M e r e p r e t e n d e d bargaining will not suffice; neither
must the mind be hermetically sealed against the thought of entering into
an agreement. To do less than is required by the standards of g o o d faith and
conduct is a refusal to bargain collectively and violates the spirit and intent of
2
the A c t .

4.2 When Can Bargaining in Bad Faith Occur?

Bargaining in bad faith is considered U L P under Article 248 ( g ) . But if o n e
will be charged with bargaining in bad faith, the charge should be raised while
the bargaining is in progress. W h e n the bargaining is finished and the C B A has
been executed voluntarily by the parties, a charge of bargaining in bad faith is
too late and untenable.

'48 Am. Jur. 2d 1028,829.

^ e r n e , The Law on Labor Relations, pp. 249-250.

380
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J ^ 0
ADMINISTRATION O F AGREEMENT " * "
[Part 1. Collective Bargaining Concept and Procedure]

In Samahang Manggagawa sa Top Form Manufacturing-United Workers of the

Philippines (SMTFM-UWP) vs. NLRC, et al, G.R. N o . 113856, September 7, 1998,
the Supreme Court through Justice R o m e r o said:
W i t h the execution of the C B A , bad faith bargaining can no longer
be imputed upon any of the parties thereto. A l l provisions in the C B A are
supposed to have been jointly and voluntarily incorporated therein by the
parties. This is not a case where private respondent exhibited an indifferent
attitude towards collective bargaining because the negotiations were not
the unilateral activity of petitioner union. T h e C B A is p r o o f enough that
private respondent exerted "reasonable effort of g o o d faith bargaining."
On account of the importance of the e c o n o m i c issue [across-the-
board wage increase] proposed by petitioner union, it could have refused
to bargain and to enter into a C B A with private respondent. On the other
hand, private respondent's firm stand against the proposal did not mean
that it was bargaining in bad faith. It had the right "to insist on (its) position
to the point of stalemate." On the part of petitioner union, the importance
of its proposal dawned on it only after the wage orders were issued after the
C B A had been entered into. I n d e e d , from the facts of this case, the charge
of bad faith bargaining on the part of private respondent was nothing but
a belated reaction to the implementation of the wage orders that private
respondent made in accordance with law. In other words, petitioner union
harbored the notion that its members and the other employees could have
had a better deal in terms of wage increases had it relentlessly pursued the
incorporation in the C B A of its proposal. T h e inevitable conclusion is that
private respondent did not c o m m i t the unfair labor practices of bargaining
in bad faith and discriminating against its employees for implementing
the wage orders pursuant to law. {Ibid.)
T h e union's proposal, not being part of the signed contract, cannot
serve as basis of holding the management guilty of bad faith in bargaining
or in implementing their contract as signed. (This case is further considered
under Article 260.)

4.3 Instances of B a d Faith: Delay of, or Imposing Time Limit on,

Negotiations
An unwarranted delay in the negotiations may be evidence of bad faith
on the part of the employer. However, an employer has been held not guilty of
bad faith for failing to complete a collective bargaining contract during a 3-year
period, where many conferences had been held during the period, even though
the employer had insisted on a no-strike clause and had raised wages during
1
negotiations for the purpose of meeting competition.

48 A m . Jur. 21039, p. 835.

381
 LABOR RELATIONS
ARTS. 252-253

Clearly, an employer's refusal to bargain with a union is not in g o o d

faith, if motivated by a desire to gain time so as to be able to u n d e r m i n e the
union. In cases involving delay in negotiations, it has been h e l d that there
was a refusal to bargain collectively in g o o d faith within the meaning of the
statute where an employer imposed a 7-month bargaining hiatus because of
the unavailability of its negotiators; where the e m p l o y e r p o s t p o n e d several
meetings and made no attempt to reach an a g r e e m e n t when meetings took
place; where the e m p l o y e r ' s negotiator frequently interrupted bargaining
sessions with time-consuming discussions, and no new areas of a g r e e m e n t
were reached in spite of some counter proposals o f f e r e d by the union and its
often-indicated willingness to listen to other offers by the employer, and the
employer subsequently retreated from previously a g r e e d items; and where the
employer pursued a pattern of tactics designed to delay negotiations as l o n g as
possible, to make it impossible for the union to reach a collective bargaining
agreement without virtually surrendering its right to represent the employees in
disputes over working conditions, and to make it appear to the e m p l o y e e s that
they would be worse o f f with a union representative and a collective bargaining
1
agreement than if they had neither.
W h e r e an employer refused to bind himself contractually as to wage rates,
hours of work, holidays, vacations and bonuses, insisting upon the right to
grant such conditions of e m p l o y m e n t as gratuities, and rejected a clause against
lockouts, he has demonstrated his bad faith and his refusal to bargain. This is so,
because the employer cannot insist upon withdrawing these matters from the
sphere of collective bargaining. N o r can he insist upon reserving to himself the
right to alter, at his discretion, existing practices with respect to these matters
for collective bargaining. Such an attitude shows a total want of g o o d faith and
2
makes genuine collective bargaining impossible.
T h e National L a b o r Relations Board of the U n i t e d States reported that
"lack of g o o d faith is indicated where the e m p l o y e r engages in unfair labor
practices while bargaining with the union; where it engages in dilatory tactics
during negotiations; or where it institutes a wage cut by unilateral action and
3
without consulting the majority representative."
T h e e m p l o y e r commits an unfair labor practice by failing to vest its
negotiators with sufficient authority to make agreements on their own initiative,
or to accept tentatively commitments which would have any reasonable likelihood
4
of final acceptance by its Board of Directors.

'48 Am. Jur. 21039, p. 835.

^ e r n e , The Law on Labor Relations, pp. 249-250.
3
N L R B Fifth Annual Report [1941].
4
Pioneer Astro Metallics, 156 N L R B 2468; Miami Sweet Products, 145 N L R B
1348.

382
 COLLECTIVE BARGAINING A N D ARTS 252-253
ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure]

It has also been said that the employer's duty to accept in g o o d faith the
procedure of collective bargaining as historically practiced includes an obligation
to have his representatives available for conferences with the union at reasonable
times and places. Thus, in Matter of Manville, Jenckes Corporation and Woonsocket
Rayon Co., the employer was found to have failed in this duty because of the
departure of its president for Europe in the midst of the bargaining negotiations,
without leaving anyone with authority to continue the negotiations. Similarly,
the Board found a refusal to bargain in Matter of Webster Mfg. Inc., because the
employer conducted the negotiations through a succession of company officials,
each of w h o m in turn disclaimed authority to conclude a collective bargaining
1
agreement.
Nonetheless, the prior adjudication of bad faith on an earlier occasion is
2
not itself substantial evidence of present bad faith.
T h e employer committed U L P (bargaining in bad faith) when o n e month
after union's submission of proposals the employer has not made any counter
proposal. In this case, Colegio De San Juan De Letran vs. Association of Employees and
Faculty of Letran and E. Ambas, G.R. N o . 141471, September 18, 2000, the court
observed:
M o r e than a month after the proposals were submitted by the union,
petitioner [ e m p l o y e r ] still had not made any counter-proposals. Petitioner
could only offer a feeble explanation that the Board of Trustees had not
yet c o n v e n e d to discuss the matter as its excuse for failing to file its reply.
This is a clear violation of Article 250.
As the Court held in the case of Kiok Loy vs. NLRC (141 S C R A 179,
186 [ 1 9 8 6 ] ) , the company's refusal to make counter-proposal to the union's
proposed C B A is an indication of bad faith.
Moreover, the series of events that transpired after the filing of the
first notice of strike in January 1996 show petitioner's resort to delaying
tactics to ensure that negotiation w o u l d not push through. Thus, on
February 15, 1996, or barely a few days after the union proposals for the
new C B A were submitted, the union president was informed by her superior
that her work schedule was being changed from Mondays to Fridays to
Tuesdays to Saturdays. A request from the union president that the issue be
submitted to a grievance machinery was subsequently denied. Thereafter,
the petitioner and the union met on March 27,1996 to discuss the ground
rules for negotiation. However, just two days later, or on March 29, 1996,
petitioner dismissed the union president for alleged insubordination. In
its final attempt to thwart the bargaining process, petitioner suspended
the negotiation on the g r o u n d that it allegedly received information that

' N L R B Sixth Annual Report [1942].

2
N L R B vs. Southern Transport, 355 F 2d 978.
383
 LABOR RELATIONS
ARTS. 252-253

a new group of employees called the Association of C o n c e r n e d Employees

of Colegio ( A C E C ) had filed a petition for certification election. Clearly,
petitioner tried to evade its duty to bargain collectively.
Petitioner claims that the suspension of negotiation was proper since
the authority of the union to negotiate on behalf of the employees was
challenged when a rival union filed a petition for certification election.
T h e m e r e filing of a petition for certification election does not
ipso facto justify the suspension of negotiation by the employer. T h e
petition must first comply with the provisions of the Labor C o d e and its
Implementing Rules.

4.3a Bad Faith: Surface Bargaining; Shifting Bargaining Positions; Blue

Sky Bargaining
"Surface bargaining," which means a sophisticated pretense in the f o r m of
apparent bargaining, does not satisfy the statutory duty to bargain. T h e duty is
not discharged by merely meeting together or simply manifesting a willingness
to talk. It requires m o r e than a willingness to enter upon a sterile discussion of
union-management differences. Collective bargaining is not simply an occasion
for purely formal meetings between management and labor while each maintains
an attitude of "take it or leave it," but presupposes a desire to reach an ultimate
agreement to enter into a collective bargaining contract. An employer's proposals
which could not be offered with any reasonable expectation that they would be
1
accepted by the union constitute surface bargaining.
R e p e a t e d shifts in position and attitude on the part of an e m p l o y e r
whenever a tentative agreement is reached are evidence of a refusal to bargain
collectively in g o o d faith. It has also been held that an employer cannot reject
a union's acceptance of the employer's counter offer on the g r o u n d that the
2
union had earlier rejected the offer.
W h e r e the employer completely repudiated the agreement reached by its
negotiators at the bargaining table and subsequently m a d e an offer which was
inferior to its initial proposals to the union, the company was held guilty of bad
3
faith bargaining.
An employer was found to have entered negotiations with the intention
of not reaching an agreement, where the evidence showed that he had harassed
and discharged union leaders, stated that he would not sign a contract, proposed
terms that were obviously unacceptable to the union, and brought in non-union
4
employees from other office to accompany the employees during the work day.

'48 Am. Jur. 2d 1041, p. 837.

2
Ibid.
3
Cf. Texas Coca-Cola Bottling Co., 146 N L R B 420.
4
N L R B vs. Orkin Exterminating Co., 56 LC 19, 468.

384
 COLLECTIVE BARGAINING A N D ARTS 259 25*
ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure)

Surface bargaining is not easy to determine. It hovers between bargaining

in bad faith and m e r e hard bargaining. T h e former is U L P , the latter is not.

Standard Chartered Bank Employees Union (NUBE) vs. Hon. Nieves Confesor, et al. t

G.R. N o . 114974, June 16, 2004 —

Facts: T h e Union alleged that the Bank violated its duty to bargain, hence,
committed U L P under Article 248(g), when it engaged in surface bargaining without
any intent of reaching an agreement, as evident in the Bank's counter-proposals. It
explained that of the 34 economic provisions it presented, the Bank made only 6
economic counterproposals. Further, as borne by the minutes of the meetings, the
Bank, after indicating the economic provisions it had rejected, accepted, retained
or were open for discussion, refused to make a list of items it agreed to include in
the economic package.
Ruling: Surface bargaining is defined as "going through the motions of
negotiating without any legal intent to reach an agreement." T h e resolution of surface
bargaining allegations never presents an easy issue. T h e determination of whether
a party has engaged in unlawful surface bargaining is usually a difficult one because
it involves, at bottom, a question of the intent of the party in question, and usually
such intent can only be inferred from the totality of the challenged party's conduct
both at and away from the bargaining table. It involves the question of whether an
employer's conduct demonstrates an unwillingness to bargain in good faith or is
merely hard bargaining.
T h e minutes of meetings from March 12,1993 to June 15,1993 do not show that
the Bank had any intention of violating its duty to bargain with the Union. Records
show that after the Union sent its proposal to the Bank on February 17, 1993, the
latter replied with a list of its counter-proposals on February 24, 1993. Thereafter,
meetings were set for the settlement of their differences. T h e minutes of the meetings
show that both the Bank and the Union exchanged economic and non-economic
proposals and counter-proposals.
T h e Union has not been able to show that the Bank had done acts, both at
and away from the bargaining table, which tend to show that it did not want to reach
an agreement with the Union or to settle the differences between it and the Union.
Admittedly, the parties were not able to agree and reached a deadlock. However, it is
herein emphasized that the duty to bargain "does not compel either party to agree to
a proposal or require the making of a concession." Hence, the parties' failure to agree
did not amount to U L P under Article 248(g) for violation of the duty to bargain.
We, likewise, find that the Union failed to substantiate its claim that the Bank
refused to furnish the information it needed.
While the refusal to furnish requested information is in itself an unfair labor
practice, and also supports the inference of surface bargaining, in the case at bar,
Umali, [the federation president] in a meeting dated May 18, 1993, requested the
Bank to validate its guestimates on the data of the rank and file. However, Umali
failed to put his request in writing as provided for in Article 242(c) of the Labor
Code: x x x

385
 LABOR RELATIONS
ARTS. 252-253

The Union, did not, as the Labor Code requires, send a written request for the
issuance of a copy of the data about the Bank's rank and file employees. Moreover,
as alleged by the Union, the fact that the Bank made use of the aforesaid guestimates,
amounts to a validation of the data it had used in its presentation.
[Blue-Sky Bargaining]
We, likewise, do not agree that the Union is guilty of U L P for engaging in
blue-sky bargaining or making exaggerated or unreasonable proposals. T h e Bank
failed to show that the economic demands made by the Union were exaggerated or
unreasonable. The minutes of the meeting show that the union based its economic
proposals on data of rank and file employees and the prevailing economic benefits
received by bank employees from other foreign banks doing business in the
Philippines and other branches of the Bank in the Asian region.

4.3b Bad Faith: Inflexible Demands; Strike Amid Negotiation

Lakas ng Manggagawang Makabayan vs. Marcelo Enterprises, G.R. Nos. L-38258
and 38260, November 19, 1982 —
It is ... evident from the records that the charge of bargaining in bad faith
imputed to the respondent companies, is hardly credible. In fact, such charge is valid
as only against the complainant LAKAS. T h e parties had a total of five (5) conferences
for purposes of collective bargaining. It is worth considering that the first strike of
September 4,1967 was staged less than a week after the fourth CBA conference and
without any benefit of any previous strike notice. In this connection, it must be stated
that the notice of strike filed on June 13,1967 could not have been the strike notice
for the first strike because it was already withdrawn on July 14, 1967. Thus, from
these stated facts can be seen that the first strike was held while the parties were in
the process of negotiating.
Nor can it be sustained that the respondent Marcelo Companies bargained in
bad faith since there were proposals offered by them, but the complainant L A K A S
stood pat on its position that all of their economic demands should be met and that
all of these demands should be granted in all of the respondent Marcelo Companies.
The companies' refusal to accede to the demands of L A K A S appears to be justified
since there is no showing that these companies were in the same state of financial
and economic affairs.
There is reason to believe that the first strike was staged only for the purpose of
compelling the respondent Marcelo Companies to accede to the inflexible demands
of the complainant LAKAS. T h e records further establish that after the resumption
of normal operations following the first strike and the consequent Return-to-Work
Agreement, the striking unions led by complainant LAKAS and the management
of the respondent Marcelo Companies resumed their bargaining negotiations. And
that on October 13, 1967, complainant LAKAS sent the final drafts of the collective
bargaining proposals for MFWU and U N W U .
The second strike of November 7, 1967 was then staged immediately after,
which strike, as before, was again lacking of a strike notice.

386
 COLLECTIVE BARGAINING A N D ARTS 959 9
ADMINISTRATION OF AGREEMENT *»4-4D3
[Part 1. Collective Bargaining Concept and Procedure]

All of these facts show that it was complainant LAKAS, and not the respondent
Marcelo Companies, which refused to negotiate in the pending collective bargaining
process. All that the facts show is that the bargaining position of complainant LAKAS
was inflexible and that it was in line with this uncompromising attitude that the strikes
were declared, significantly after notice that management did not or could not meet
all of their 17-point demand.

4.3c Bad Faith: Boulwarism; Take-It-or-Leave-It Bargaining

NLRB vs. General Electric Co. United States Court of Appeals-Second Circuit, 418
F 2 d 736 (1970) —
We are called upon to determine whether an employer may be guilty of bad
faith bargaining, though he reaches an agreement with the union, albeit on the
company's terms.
After a strike in 1946 which resulted in a settlement which the General Electric
Company regarded as extremely costly, it developed a new bargaining policy referred
to as Boulwarism (named after a vice president for personnel relations). The new
plan was threefold. As negotiations approached, the Company would use its local
management personnel to help determine the desires of the workforce on the type
and level of economic benefits; these were translated by the Company into specific
proposals, whose cost and effectiveness were researched in order to determine an
attractive bargaining offer within the Company's means; the Company then attempted
to "sell" its proposals to its employees and the general public through a publicity
campaign in plant newspapers, bulletins, letters, television and radio announcements
and personal contacts. T h e Company announced in negotiations that it rejected the
usual "horse trading" approach to bargaining, with each side eventually compromising
initial unreasonable positions; it advertised its initial proposals as "fair" and "firm."
Though willing to accept Union suggestions based on facts it might have overlooked,
General Electric refused to change its position simply because the Union disagreed
with it. T h e Company also pursued a policy of guaranteeing uniform terms among
its several unions and between union and non-union workers.
T h e Board x x x chose to find an overall failure of good faith bargaining
in GE's conduct. Specifically, the Board found that GE's bargaining stance and
conduct, considered as a whole, were designed to derogate the Union in the eyes of
its members and the public at large. This plan had two major facets: first, a take-it-
or-leave-it approach (firm, fair offer) to negotiations in general which emphasized
both the powerlessness and uselessness of the Union to its members, and second,
a communications program that pictured the Company as the true defender of
the employees' interests, further denigrating the Union, and sharply curbing the
Company's ability to change its own position.
We have already indicated that one of the central tenets of "the Boulware
approach" is that the "product" or "firm, fair offer" must be marketed vigorously
to the "consumers" or employees, to convince them that the Company, and not
the Union, is their true representative. GE, the Trial Examiner found, chose to
rely "entirely" on its communications program to the virtual exclusion of genuine

387
 LABOR RELATIONS
ARTS. 252-253

negotiations, which it sought to evade by any means possible. By-passing the national
negotiators in favor of direct settlement dealings with employees and local officials
forms another consistent thread in this pattern. T h e aim, in a word, was to deal
with the Union through the employees, rather than with the employees through
the Union.
The Company's refusal to withhold publicizing its offer until the Union had an
opportunity to propose suggested modifications is indicative of this attitude. Here,
two interests diverged. T h e command of the Boulware approach was clear: employees
and the general public must be barraged with communications that emphasized the
generosity of the offer, and restated the firmness of GE's position. A genuine desire
to reach a mutual accommodation might, on the other hand, have called for GE
to wait Union comments before taking a stand from which it would be difficult to
retreat. GE hardly hesitated. It released the offer the next day, without waiting for
Union comments on specific portions.
Congress has ordered the Board — and this court — to effectuate its policy of
encouraging good faith bargaining, and not to avoid it because the mandate is difficult
to apply. T h e Board has done just that. And, on the basis of substantial evidence we
agree.

4.4 Not Bad Faith to Propose Modifications to the Expiring C B A

W h e n a C B A is about to expire, it is not bad-faith bargaining when a party
proposes modifications to it. T h e second sentence of Article 253 explicitly refers
to serving a written notice "to terminate or modify" the agreement. Modification
may mean addition to, subtraction from, or other ways of changing the contents
or phraseology of contents of the expiring C.B.A. It does not connote a one-
direction upward movement; it may even mean scaling down the C B A . This is
not bad faith bargaining. But whichever way it is proposed to g o , the proposed
changes require honest justification.
Because the C B A is r e o p e n e d for renegotiation, a party can propose to
remove, reduce or otherwise modify the renegotiable provisions in the C B A ,
including economic provisions. A n d since the modification is to be d o n e through
negotiation rather than by management's sole decision, the prohibition under
Article 100 on nondiminution of benefits does not apply.
N o t e , incidentally, that the modification or renegotiation of the C B A is
covered in Article 253. T h e renegotiation is p r e c e d e d by a 60-day notice. This
period should not be mistaken for the sixty-day p e r i o d to file a petition for
certification election under Article 256.

4.5 Giving of Information

Part of good-faith bargaining, and a m e t h o d to e x p e d i t e the process,
is supplying of information to the other party, as required by law. It should
be recalled that under A r t i c l e 242 o n e of the rights of a legitimate labor
organization which is certified as the exclusive bargaining agent, is to ask for

388
 COLLECTIVE BARGAINING A N D ARTS 252 25*
ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure]

and be furnished with the employer's annual audited financial statements,

including the balance sheet and the profit and loss statement. Such information
is crucial in bargaining.
An employer is under a duty, upon request of the bargaining representative,
1
to provide information relevant to the issues at the bargaining table. Refusal to
provide relevant information after the same has been requested constitutes per
2
se violation of the duty to bargain. Relevant information or data may include
information concerning the employees in the bargaining unit, such as their
names, addresses, and seniority standing, or concerning the financial status of
3
the employer, especially where n e e d e d to substantiate claims of inability to pay,
4
or concerning j o b and production data.
In o r d e r to assure that financial statements submitted by the employer
may be d e e m e d to fairly reflect the company's financial condition, the company
accountant may be required to disclose the existence of factors that would distort
the accuracy of the statements as well as their net effect upon the financial
statements. Such disclosure w o u l d not require the employer to sacrifice the
5
confidentiality of his records.
A l t h o u g h it is c o m m o n for collective bargaining agreements to have
provisions requiring disclosure of relevant information during the contract term,
the duty to furnish information is a statutory obligation that exists independent
of any agreement between the parties. However, the union's right to disclosure of
relevant and necessary data can be waived by the union in a collective bargaining
agreement. But even where the union has made such a waiver in the agreement,
the e m p l o y e r must furnish, at an appropriate time, information that is relevant
to the negotiation of a new agreement.
An employer's duty to supply the bargaining representative with information
does not arise until the union makes a request or a demand that the information
be furnished. T h e duty to furnish information is not an obligation imposed on
6
employers alone; a similar duty is o w e d by unions.

•NLRB vs. Acme Industrial Co., 17 L ed 2d 495.

2
Puerto Rico Tel. Co. vs. N L R B , 359 F 2d 983; Curtiss-Wright Corp- vs. NLRB,
347 F 2d 61.
3
N L R B vs. John Seift Co., 302 F 2d 342; N L R B vs. Gulf Atlantic Warehouse Co.,
291 F2d 475, or concerning wages and related data; United Furniture Workers vs.
N L R B , 388 F2d 880; General Electric Co. vs. N L R B , 400 F2d 713; N L R B vs. Frontier
Homes Corp., 371 F2d 974.
4
2 A L R 2d 880.
5
Metlox Mfg. Co. vs. N L R B , 54 LC 18, 262.
6
Patrick Hardin and John Higgins [ e d . ] , The Developing Labor Law, [BNA, Inc.,
2001], pp. 858-859; 860-861; citations omitted.

389
 LABOR RELATIONS
ARTS. 252-253

5. F O U R T H U.L.P. IN B A R G A I N I N G : GROSS V I O L A T I O N OF T H E
CONTRACT
T h e fourth and last m o d e of committing unfair labor practice relating to
bargaining occurs when the collective contract is already in place. At this stage,
the negotiations are over; the document has been signed; sealed, and delivered.
Implementation should follow. But at this stage the collective bargaining process
is not yet over, and the duty to bargain is still operative because such duty further
requires faithful adherence to the contractual provisions. Violation of the contract
amounts to ULP, if the violation is "gross." This form of U L P is taken up in Article
261.
W e will return t o the subject o f i m p l e m e n t a t i o n o f the C B A after
examining the remaining steps of bargaining, namely: ratification, execution,
and registration.

6. RATIFICATION BY THE CBU; M A N D A T O R Y REQUIREMENTS

T h e agreement negotiated by the employees' bargaining agent should be
ratified or approved by the majority of all the workers in the bargaining unit.
This requirement is found not in Article 250 but Article 231 and restated in Book
V, Rule X V I I , Section 2 of the Implementing Rules.
T h e proper ratifying group is not just the majority union but the majority
of all the workers in the bargaining unit represented in the negotiation.
T h e ratification and the manner of d o i n g it are mandatory, as held in the
cases cited below.
T h e Implementing Rules require posting of the C B A in two conspicuous
places for five days. In o n e case, the C B A was not posted for at least five days
in two conspicuous places in the establishment before ratification, to enable
the workers to clearly inform themselves of its provisions. Moreover, the C B A
submitted to the M O L E did not carry the sworn statement of the union secretary,
attested by the union president, that the C B A had been duly posted and ratified,
as required by... the Implementing Rules and Regulations. T h e court ruled that
these requirements being mandatory, non-compliance therewith rendered the
1
said C B A ineffective.

6.1 Invalid Ratification

Associated Labor Union (ALU) vs. Ferrer-Calleja, G.R. N o . 77282, May 5,1989 —
An additional infirmity of the collective bargaining agreement involved was the
failure to post the same in at least two (2) conspicuous places in the establishment
at least five days before its ratification.
Petitioner's rationalization was that "(b)ecause of the real existence of the
illegal strike staged by SPFL in all the stores of G A W Trading, Inc. it had become
impossible to comply with the posting requirement insofar as the realization of its

'Associated Trade Unions [ A T U ] vs. Trajano, G.R. N o . L-75321,June 20,1988.

390
 COLLECTIVE BARGAINING A N D ARTS 252-253
ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure]

purpose is concerned as there were no impartial members of the unit who could be
apprised of the CBA's contents." This justification is puerile and unacceptable.
In the first place, the posting of copies of the collective bargaining agreement
is the responsibility of the employer which can easily comply with the requirement
through a mere mechanical act. T h e fact that there were "no impartial members
of the unit" is immaterial. T h e purpose of the requirement is precisely to inform
the employees in the bargaining unit of the contents of said agreement so that they
intelligently decide whether to accept the same or not.
Another potent reason for annulling the disputed collective bargaining
agreement is the finding of respondent director that one hundred eighty-one (181)
of the two hundred eighty-one (281) workers who "ratified" the same now "strongly
and vehemently deny a n d / o r repudiate the alleged negotiation and ratification
of the CBA." Although petitioner claims that only seven (7) of the repudiating
group of workers belong to the total number who allegedly ratified the agreement,
nevertheless such unsubstantiated contention, weighed against the factual findings
of the respondent director, cannot negate the fact that the controverted contract
will not promote industrial stability. T h e Court has long since declared that:
Basic to the contract bar rule is the proposition that the delay of the
right to select representatives can be justified only where stability is deemed
paramount. Excepted from the contract bar rule are certain types of contracts
which do not foster industrial stability, such as contracts where the identity
of the representative is in doubt. Any stability derived from such contracts
must be subordinated to the employees' freedom of choice because it does
not establish the type of industrial peace contemplated by the law.

6.2 When Ratification Not Needed

Ratification of the C B A by the e m p l o y e e s in the bargaining unit is
not n e e d e d when the C B A is a product of an arbitral award by appropriate
g o v e r n m e n t authority or by a voluntary arbitrator. T h e arbitral award may result
from voluntary arbitration under Article 262 or from the secretary's assumption
of jurisdiction or certification of the dispute to the N L R C , under Article 263(g)
In any of those situations the C B A still needs to be posted in two conspicuous
places in the workplace, but the posting is for the information of, and not
ratification by, the employees affected. Moreover, the C B A has to be registered
with the D O L E regional office.
To require ratification of the C B A in case of arbitral awards will be
inconsistent with the nature of arbitration as a dispute-settlement device.
Arbitration, either compulsory or voluntary, entails submission to the judgment
of an impartial third person. T h e settlement device would be circuitous and the
very nature of arbitration would be contradicted if the arbitrator's decision, would
be dependent on the employees' acceptance. If that would be so, arbitration
should not have begun at all.

391
 LABOR RELATIONS
ARTS. 252-253

T h e preceding comment, however, does not mean that the arbitral award
is beyond question. Certiorari on proper grounds is available.

6.3 Ratified but Unsigned

It has been held that a collective bargaining agreement was effective on
ratification by union members, even without signature by the union president
or union secretary-treasurer, notwithstanding a contractual provision that the
agreement "is not valid unless so countersigned," because lack of the purely
ministerial act of signing the formal contract did not obviate the fact that there
1
was a binding contract.

6.4 Unratified but Implemented

T h e parties to a collective agreement are required to furnish copies to
the appropriate Regional Office with accompanying p r o o f of ratification by
the majority of all the workers in the bargaining unit. This was not d o n e in
the case at bar. We do not declare the C B A invalid or v o i d considering that the
employees have enjoyed benefits from it. T h e y cannot receive benefits under the
provisions favorable to them and later insist that the C B A is v o i d simply because
other provisions turn out not to the liking of certain employees. It is iniquitous
2
to receive benefits from a C B A and later on disclaim its validity.

7. E X E C U T I O N OF C O N T R A C T
Which comes first: the ratification or the execution? T h e L a b o r C o d e
does not specify, or at least Article 231 is not clear on the matter. In practice,
the sequence usually depends on the likelihood of ratification as j u d g e d by the
union. If the union strongly feels there will be no ratification problem, the C B A is
finalized, signed by the parties, and posted. If there is no such certainty, the C B A
is drafted, initialed by the parties, and this "clean draft" is posted. If and when
ratified, the C B A is finalized and formal signing follows. T h e parties indicate
the date of execution and the effectivity date. In any case, the important thing
is the ratification, not the sequence of the steps.
A party to a collective bargaining may be required to sign a contract where
the agreement has been reached by the parties and only o n e party's refusal to
execute a contract is preventing its being carried into effect. Such refusal is an
3
unfair labor practice.
W h i l e an employer may be required to sign a written contract o n c e he
reaches an agreement with the labor organization, no signing would be required
nor any contract be enforced, if the facts reveal that the discussions of provisions

'48A Am. Jur. 2d 1798, p. 254.

^Planters Products, Inc. vs. National Labor Relations Commission, G.R. N o .
78524, January 20, 1989.
3
Roadway Express vs. General Teamsters, 320 F 2d 859.

392
 COLLECTIVE BARGAINING A N D A R T S 252 25*
ADMINISTRATION OF AGREEMENT "
[Part 1. Collective Bargaining Concept and Procedure]

prior to a signing are merely preliminary expressions not constituting a contract

and that the parties do not intend the agreement to be operative before the
1
execution of the writing.

7.1 Unwritten or Unsigned Agreement

American courts have held that a collective bargaining agreement is valid
though not reduced to writing or signed, if neither party requests a written
2
instrument. Even if it was originally contemplated that the signature of both
parties would be required for there to be an effective contract, this requirement
3
can be waived.
It may be recalled in this regard that Article 252 in defining "duty to
bargain" states that the duty includes "... executing a contract incorporating
such agreements if requested by either party ..." (Italics supplied).

7.2 Effect of Signing on Other Disputes

In o n e case, the complaints of the union, including alleged underpayment
of accrued leaves of the employees, provoked a labor dispute which was certified
to the C I R for compulsory arbitration. Subsequently, a collective bargaining
agreement was executed. O n e provision of the bargaining contract declared that
it settled all matters, questions and disputes between the parties. T h e question
was whether the alleged underpayment of accrued leaves of the employees, which
was p e n d i n g an examination by an examiner of the court at the time that the
contract was executed, was also settled upon the execution of the bargaining
contract.
T h e Supreme Court held that "considering that the evident purpose of
the collective agreement is to restore industrial peace by settling all previous
controversies and that such purpose would be aborted if the union were allowed
to preserve the dispute on accrued vacation leaves and considering that the
right to payment of accrued vacation leaves is waivable, the union claim for
such payment of accrued vacation leaves should be d e e m e d validly and actually
4
renounced by it under its collective bargaining agreement with employer."
See the "Zipper Clause" in comments under Article 260.

8. REGISTRATION OF C B A .
T h e collective a g r e e m e n t , having been p r o p e r l y ratified, should be
registered with the D O L E R e g i o n a l O f f i c e w h e r e the bargaining union is
registered or where it principally operates. Article 231 requires the registration

'Teamsters Local 110 vs. Clearfield Cheese Co., 54 LC 18, 240.

2
48 Am. Jur. 2d Sec. 1798, p. 253.
Ibid. f
4
Bachrach Transportation Company vs. Rural Transit Employees Ass'n., L-21768,
August 23 i 1966.
393
 LABOR RELATIONS
ARTS. 252-253

within thirty (30) calendar days from execution of the agreement. Multi-employer
collective bargaining agreements shall be filed with the Bureau.
It is believed that failure to register the C B A does not make it invalid
or unenforceable. Its nonregistration, however, renders the contract-bar rule
inoperative.

MANAGEMENT'S N E G O T I A T I O N STRATEGY

Volumes have been written on the subject of management strategy in

negotiations and it is not the purpose of the authors of this article to over-simplify
the task. We do believe, however, that the negotiators will be most effective if they
are careful to observe several guides. These are not rules or policies so much as
they are suggestions which almost any experienced negotiator would follow.
1. Management strategy should be reduced to writing prior to negotiations
and each member of the negotiating team should have a written copy and an
understanding of the strategy.
2. Since the agreement reached must be lived with and administered by
the operating organization, always have operating or "line" personnel on the
negotiating team.
3. It is preferable that only one member of the negotiating team be vested
with authority to make management decisions for the company. His authority
should be sufficient so he may, if the need arises, make decisions at the bargaining
table.
4. The negotiating team should conduct itself in such manner that union
negotiators will feel they are being treated as equals.
5. Do not adopt positions or demands, even for the purpose of maneuver-
ing or trading, which you do not believe to be reasonable and morally defensible.
6. Simple language is the best vehicle in negotiation. Formal, legalistic
expressions may create suspicion as to management intent, but agreement once
made should be reduced to writing by counsel.
7. Less emotion and more reason increase the quality of negotiations.
Both sides have a job to do which is not a question of personality.
8. Prepare a factual basis for refusing any union demand and give
illustrations, if possible.
9. Prepare a factual basis for each demand and give illustrations if possible.
10. Don't agree if you don't mean to carry through.
11. Don't agree on any part of the agreement separately. Agree tentatively
as you go along with the understanding that nothing is binding until the entire
agreement is reached.
12. Reduce any tentative agreement to writing immediately. Postponement
is likely to lead to additional disputes.
13. Positions labeled by the negotiators as final must be meant and
maintained.

WILLIAM G. CAPLES 8c ROBERT A. GRANEY

"The Technique of Labor-Management Negotiations "
University of Illinois Law Forum
Summer 1955, p. 293

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 COLLECTIVE BARGAINING A N D ARTS 259 25*
ADMINISTRATION O F AGREEMENT * ™ °
[Part 1. Collective Bargaining Concept and Procedure]

Neither is the certification of the collective bargaining agreement by the

Bureau of L a b o r Relations required to put a stamp of validity to such contract.
O n c e it is duly entered into and signed by the parties, a collective bargaining
agreement becomes effective as between the parties regardless of whether the
1
same has been certified by the B L R .

8.1 Registration Requirements

T h e application for C B A registration shall be accompanied by the original
and two ( 2 ) duplicate copies of the following documents which must be certified
under oath by the representative(s) of the e m p l o y e r ( s ) and labor union(s)
concerned
(a) the collective bargaining agreement;
(b) a statement that the collective bargaining agreement was posted
in at least two ( 2 ) conspicuous places in the establishment or
establishments c o n c e r n e d for at least five ( 5 ) days before its
ratification; and
(c) a statement that the collective bargaining agreement was ratified
by the majority of the employees in the bargaining unit of the
e m p l o y e r or employers c o n c e r n e d .
No other d o c u m e n t shall be required in the registration of collective
2
bargaining agreement.
T h e application may be denied if the supporting documents are incomplete
or not verified under oath. T h e denial, if by the Regional office, is appealable to
the Bureau within ten (10) days or to the Secretary if the denial is by the Bureau.

9. IMPLEMENTATION, THEN RENEGOTIATION

I m p l e m e n t a t i o n f o l l o w s e x e c u t i o n a n d r e g i s t r a t i o n o f the C B A .
Frequently, i m p l e m e n t a t i o n starts e v e n b e f o r e the contract is registered
indicating that registration is a formal step in the collective bargaining process
but not a prerequisite to its validity and enforceability. Implementation itself
is p r e c e d e d often by m e e t i n g s a m o n g m a n a g e m e n t and union groups to
brief the implementors about the C B A provisions, particularly the changes.
Implementation is not taken lightly because it is still part of the duty to bargain.
Neglecting, deviating from or violating the terms of the C B A is considered an
unfair labor practice under Article 248 in relation to Article 261.
Appropriately, therefore, this Article 253 emphasizes faithful adherence
to the contract as a continuation of the duty to bargain. Furthermore, part of
that duty is the obligation to renegotiate the C B A when it is about to expire.

'Liberty Flour Mills Employees vs. Liberty Flour Mills, Inc., 180 SCRA 668
[1989].
2
Sec.2, D.O. N o . 40-03.

395
ARTS. 252-253 LABOR RELATIONS

Renegotiation applies only to the r e n e g o t i a t e provisions, that is, those that do

not pertain to the identity and political status of the bargaining union. (Such
political matter is not taken up with the employer but with the union membership
according to Article 256.) A l l non political nonrepresentational issues may be
reopened and renegotiated.
What was excluded from the old C B A may be proposed for inclusion in the
forthcoming C B A , or vice-versa. Negotiation precisely contemplates proposals
and counter-proposals. Thus, on an issue of coverage of the C B A , the court rules
as follows:
T h e Court agrees with the Solicitor General that the express exclusion
of the computer operators and discipline officers from the bargaining unit
of rank-and-file employees in the 1986 collective bargaining agreement
does not bar any re-negotiation for the future inclusion of the said employees
in the bargaining unit. During the freedom p e r i o d [ i . e . , the notice period
under Article 253], the parties may not only renew the existing collective
bargaining agreement but may also propose and discuss modifications or
amendments thereto. (Dela Salle University vs. Dela Salle University Employment
Association, G.R No. 109002, April 12, 2000.)

10. A U T O M A T I C RENEWAL OF CBA

T h e last sentence of Article 253 refers to the so-called "automatic renewal"
of a C B A . T h e parties shall continue the C B A in "full force and effect" until they
reach a new agreement. What exactly does this mean? In o n e case the employer
and the union had a C B A for the years 1981 through 1984. T h e y failed to renew
the C B A because of a pending case between them. Is there a C B A for 1985? That
is, should the employees be given wage increase and other C B A benefits in 1985
and subsequent years? A r e employees hired after 1984 entitled to such C B A wage
increase and other monetary benefits? But how much should the wage increase
be? Should it be the amount given in C B A year o n e , or year two, or year three?
T h e court does not specify in New Pacific Timber, a ruling that deserves close
attention.

New Pacific limber & Supply Company, Inc., Petitioner vs. National Labor Relations
Commission, et al., National Federation of Labor, M. Ability and 350 Others,
Respondents, G.R. N o . 124224, March 17, 2000 —
Facts: The National Federation of Labor ( N F L ) was the sole and exclusive
bargaining representative of all the regular rank-and-file employees of New Pacific
Timber & Supply Co. N F L started to negotiate with the employer for better terms
and conditions of employment. However, due to stiff resistance by the Company,
NFL was prompted to file a complaint [Case N o . RAB-IX-0334-82] for unfair labor
practice ( U L P ) on the ground of refusal to bargain.
The Executive Labor Arbiter issued an order declaring (a) that the Company
was guilty of ULP; and (b) that the CBA proposals submitted by the NFL be considered

396
 COLLECTIVE BARGAINING A N D ARTS 252 95*
3
ADMINISTRATION O F AGREEMENT ™
[Part 1. Collective Bargaining Concept and Procedure]

as the CBA between the regular rank-and-file employees in the bargaining unit and
the Company.
T h e Company appealed to the N L R C which dismissed the appeal for lack of
merit T h e records of the case were remanded to the arbitration branch of origin
for execution.
Following a series of conferences to thresh out the details of computation, Labor
Arbiter Villena issued an Order, dated October 18, 1993, directing the Company
to pay the 142 employees entitled to the aforesaid benefits the amounts due diem
under the CBA. Petitioner Company complied, and the corresponding quitclaims
were executed. T h e case was considered closed following NFL's manifestation that
it would no longer appeal the October 18, 1993 Order of Labor Arbiter Villena.
However, notwithstanding such manifestation, a "Petition for Relief" was filed
on May 12,1994 in behalf of 186 of the private respondents "Mariano J. Akilit and 350
others." They claimed that they were wrongfully excluded from enjoying the benefits
under the CBA since the agreement with N F L and the Company limited the CBA's
implementation to only the 142 rank-and-file employees enumerated. They claimed
that NFL's misrepresentations had precluded them from appealing their exclusion.
Treating the petition for relief as an appeal, the N L R C entertained the
petition. On August 4, 1994, the Commission issued a resolution declaring that the
186 excluded employees "form part and parcel of the then existing rank-and-file
bargaining unit" and were, therefore, entitled to the benefits under the CBA.
In this petition, assailing the N L R C decision, the company argues that the
claimant employees are not entitled to the benefits under the CBA because employees
hired after the term of a CBA are not parties to the agreement, and therefore, may
not claim benefits thereunder, even if they subsequently become members of the
bargaining unit.
As for the term of the CBA, petitioner company maintains that Article 253 of
the Labor Code refers to the continuation in full force and effect of the previous
CBA's terms and conditions. By necessity, it could not possibly refer to terms and
conditions which, as expressly stipulated, ceased to have force and effect.
According to petitioner, the provision on wage increase in the 1981 to 1984
CBA between petitioner Company and N F L provided for yearly increases. Logically,
these provisions ended in the year 1984 — the last year that economic provisions of
the CBA were, pursuant to contract and law, effective. Petitioner claims that therefore,
there is no contractual basis for the grant of CBA benefits such as wage increases in
1985 and subsequent years, since the CBA stipulates only the increases for the years
1981 to 1984.
Moreover, petitioner alleges that it was through no fault of theirs that no new
CBA was entered pending appeal of the decision in N L R C Case N o . RAB-IX-0334-82.
Ruling: Petitioner's contentions are untenable.
Article 253 of the Labor Code explicitly provides: x x x
It is clear from the above provision of law that until a new Collective Bargaining
Agreement has been executed by and between the parties, they are duty-bound to

397
 LABOR RELATIONS
ARTS. 252-253

keep the status quo and to continue in full force and effect the terms and conditions of
the existing agreement. The law does not provide for any exception nor qualification
as to which of the economic provisions of the existing agreement are to retain force
and effect, therefore, it must be understood as encompassing all the terms and
conditions in the said agreement.
In the case a bar, no new agreement was entered into by and between petitioner
Company and NFL pending appeal of the decision in N L R C Case N o . RAB-IX-0334-82;
nor were any of the economic provisions and/or terms and conditions pertaining
to monetary benefits in the existing agreement modified or altered. Therefore, the
existing CBA in its entirety continues to have legal effect.
It is the duty of both parties to the CBA to keep the status quo, and to continue
in full force and effect the terms and conditions of the existing agreement during
the 60-day period and/or until a new agreement is reached by the parties.
To rule otherwise, i.e., that the economic provisions of the existing CBA in the
instant case ceased to have force and effect in the year 1984, would be to create a gap
during which no agreement would govern, from the time the old contract expired to
the time a new agreement shall have been entered into. For if, as contended by the
petitioner, the economic provisions of the existing CBA were to have no legal effect,
what agreement as to wage increases and other monetary benefits would govern
at all? None, it would seem, if we are to follow the logic of petitioner Company.
consequently, the employees from the year 1985 onwards would be deprived of a
substantial amount of monetary benefits which they could have enjoyed had the
terms and conditions of the CBA remained in force and effect. Such a situation runs
contrary to the very intent and purpose of Article 253 and 253-A of the Labor Code
which is to curb labor unrest and to promote industrial peace, x x x
Having established that the C B A between petitioner Company and N F L
remained in full force and effect even beyond the stipulated term, in the absence of
a new agreement, and, therefore, that the economic provisions such as wage increases
continued to have legal effect, we are now faced with the question of who are entitled
to the benefits provided thereunder.
Petitioner Company insists that the rank-and-file employees hired after the term
of the CBA inspite of their subsequent membership in the bargaining unit, are not
parties to the agreement, and certainly may not claim the benefits thereunder.
We do not agree. In a long line of cases, this Court has held that when a collective
bargaining contract is entered into by the union representing the employees and
the employer, even the non-member employees are entitled to the benefits of the
contract. To accord its benefits only to members of the union without any valid reason
would constitute undue discrimination against non-members. It is even conceded
that a laborer can claim benefits from a CBA entered into between the company and
the union of which he is a member at the time of the conclusion of the agreement,
after he has resigned from said union.
In the same vein, the benefits under the CBA in the instant case should be
extended to those employees who only became such after the year 1984. To exclude them
would constitute undue discrimination and deprive them of monetary benefits they

398
 COLLECTIVE BARGAINING A N D ART 25*_A
4 A
ADMINISTRATION OF AGREEMENT *
[Part 1. Collective Bargaining Concept and Procedure]

would otherwise be entitled to under a new collective bargaining contract to which

they would have been parties. Since in this particular case, no new agreement had
been entered into after the CBA's stipulated term, it is only fair and just that the
employees hired thereafter be included in the existing CBA. This is in consonance
with our ruling that the terms and conditions of a collective bargaining agreement
continue to have force and effect beyond the stipulated term when no new agreement
is executed by and between the parties to avoid or prevent the situation where no
collective bargaining agreement at all would govern between the employer company
and its employees.

ART. 253-A. TERMS OF A COLLECTIVE BARGAINING AGREEMENT'

Any Collective Bargaining Agreement that the parties may enter into
shall insofar as the representation aspect is concerned, be for a term of
five (5) years. No petition questioning the majority status of the incumbent
bargaining agent shall be entertained and no certification election shall be
conducted by the Department of Labor and Employment outside of the sixty-
day period immediately before the date of expiry of such five-year term of
the Collective Bargaining Agreement. All other provisions of the Collective
Bargaining Agreement shall be renegotiated not later than three (3) years
after its execution.
Any agreement on such other provisions of the Collective Bargaining
Agreement entered into within six (6) months from the date of expiry of
the term of such other provisions as fixed in such Collective Bargaining
Agreement, shall retroact to the day immediately following such date. If any
such agreement is entered into beyond six months, the parties shall agree on
the duration of retroactivity thereof. In case of a deadlock in the renegotiation
of the collective bargaining agreement, the parties may exercise their rights
under this Code.
C O M M E N T S A N D CASES
This article deals with two things: the effectivity date and the duration or
life span of a C B A . T h e effectivity date depends on whether the C B A is the first
C B A or a renegotiated C B A . A n d the duration depends on whether the subject
provision is representational or non-representational.

1. EFFECTIVITY A N D RETROACTIVITY
If the C B A is the first ever in the bargaining unit, the effectivity date is
whatever date the parties agree on - perhaps the date the negotiation started,
or ended, or whatever. T h e date is important particularly in relation to wage
increase ( i f any) because a long retroaction period will mean sizeable backpay
to employees. If the C B A is a renegotiated C B A to replace the expired one, this

'Added by Sec. 21, R.A. 6715.

399
 LABOR RELATIONS
ART. 253-A

Article provides the answer: If the renegotiation is finished and the new C B A is
concluded within six months from the expiry date of the o l d o n e , then the new
C B A starts to take effect on the date following such expiry date. If no new C B A
was completed within that six-month period, the new C B A , when d o n e , will not
automatically retroact. If it will retroact at all, the retroaction date will have to be
agreed upon by the negotiating panels. Thus,if the C B A expired on D e c e m b e r
31 and the new o n e is concluded on, say, March 31, its effectivity date is January
1. If, on the other hand, the new agreement is concluded after June 30, then the
matter of retroaction and the possible retroactive date are left to the parties.
W h e n , precisely, is the date an agreement is "concluded" or "entered into"?
T h e determining point is the date the parties agreed, not the date they
signed. Article 253-A refers merely to an "agreement" which, according to Black's
Law Dictionary is "a c o m i n g together of minds; the c o m i n g together in accord
of two minds on a given proposition." This is similar to Article 1305 of the Civil
Code's definition of "contract" as a meeting of minds between two "persons. " T h e
two terms, "agreement" and "contract" are i n d e e d similar, although the former
is broader than the latter because an agreement may not have all the elements
of a contract. As in the case of contracts, however, agreements may be oral or
written. H e n c e , even without any written evidence of the Collective Bargaining
A g r e e m e n t made by the parties, a valid agreement existed in this case from the
m o m e n t the minds of the parties met on all matters they set out to discuss, as
1
provided under Article 1315 of the Civil C o d e .

1.1 Effectivity of C B A Concluded After Six Months from Expiration of

Old CBA
Significantly, the law does not specifically cover the situation where six
months have elapsed but the parties have reached no agreement with respect
to effectivity. In this eventuality, we h o l d that any provision of law should then
2
apply, for the law abhors a vacuum.
O n e such provision is the principle of h o l d over, i.e., that in the absence
of a new C B A , the parties must maintain the status quo and must continue in full
force and effect the terms and conditions of the existing agreement until a new
agreement is reached. In this manner, the law prevents the existence of a gap in
the relationship between the collective bargaining parties. A n o t h e r legal principle
that should apply is that in the absence of an agreement between the parties, then,
an arbitrated C B A takes on the nature of any judicial or quasi-judicial award; it
operates and may be executed only respectively [sic; read prospectively] unless
3
there are legal justifications for its retroactive application.

•Mindanao Terminal vs. Confesor and ALU-TUCP, G.R. N o . 111809, May 5,1997.
2
Manila Electric Co. vs. Quisumbing and MEWA, G.R. N o . 127598, January 27,
1999.
Ibid.

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 COLLECTIVE BARGAINING A N D A R T 25*-A
ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure]

In the above Manila Electric case, the company moved for reconsideration
and the Court, partly granting the motion, ruled that "CBA arbitral awards
granted after six months from the expiration of the last C B A shall retroact to
such time agreed upon by both employer and the employees or their union.
Absent such an agreement as to retroactivity, die award shall retroact to the first
day after the six-month p e r i o d following the expiration of the last day of C B A
should there be o n e . [Thus, for a C B A that expired on December 31, the next
six months is January 1 to June 30, hence July 1 is the effectivity day of an award
issued, say, on August 1.] In the absence of a C B A the Secretary's determination
of the date of retroactivity as part of his discretionary powers over arbitral awards
1
shall control."
In Union of Filipro Employees vs. NLRC and Nestle Phil., Inc. (G.R. N o . 91025,
D e c e m b e r 19,1990), the assailed N L R C resolution which incorporated the C B A
to be signed by the parties was promulgated on June 5, 1989, which was outside
the six-month p e r i o d from June 30,1987, the expiry date of the past C B A . Based
on the provision of Article 253-A, its retroaction should be agreed upon by the
parties. But since n o agreement to that effect was made, the N L R C gave the CBA
a prospective effect. T h e action of the N L R C , according to the Supreme Court, is
within its authority vested by existing laws.
In another case, the parties again could not agree on the effectivity date of
their C B A . T h e matter was arbitrated by the Secretary of Labor but his arbitral
award came after six months from the expiration of the previous C B A . Can the
new C B A be made retroactive? T h e Court resolved the question in the affirmative.
This is an arbitral award, not a negotiation concluded by the parties themselves.
Article 253-A, which leaves to the parties the determination of retroactivity,
refers to negotiation concluded by the parties beyond six months, but it does
2
not restrict the effectivity date of arbitral awards by the Secretary of Labor.

2. D U R A T I O N OF A C.B.A.
R . A . N o . 6715 (March 21, 1989) has introduced through Article 253-A a
significant change in setting the durations or terms of a C B A at five years for the
"representation aspect" and not m o r e than three years for "all other provisions."
T h e "representation aspect" refers to the identity and majority status of the union
that negotiated the C B A as the exclusive representative of the bargaining unit.
"All other provisions" simply refers to the rest of the C B A , economic as well as
non-economic other than representational.
Senate Bill 530 and House Bill 11524 which eventually became Republic
Act N o . 6715 were the subjects of meetings of a bicameral conference committee

'Manila Electric Co. vs. Quisumbing, et al., G.R. N o . 127598, February 22,2000
and August 1, 2000.
2
ST. Luke's Medical Center, Inc. vs. Hon. Ruben O. Torres, et al, G.R N o . 99395,
June 29, 1993.
401
 LABOR RELATIONS
A R T . 253-A

of Congress. T h e s e , particularly those of D e c e m b e r 14 and 15, 1988, are

enlightening on the rationale and intentions of the amendment.
Senator Ernesto F. Herrera, principal author of the Senate bill, argued
against the then prevailing three-year term of a C B A in its entirety. T h e first
year, he said, was largely spent in the C B A negotiation and the third year
in preparations and campaign for a certification election to d i s l o d g e the
incumbent union. T h e year in-between was, therefore, the only p e r i o d of
effective industrial peace. T h e situation discouraged investors and stifled
union growth because union funds w e r e dissipated in politics rather than
in service to members. T h e senator wanted "to create a legal framework to
promote industrial peace and to develop responsible and fair labor movement."
( D e c e m b e r 15, 1988 conference, p. 62.) He therefore p r o p o s e d a five-year
term for the representation provision of a C B A so that any "outside union"
could not disturb the political situation in the enterprise e x c e p t in the last 60
days of the fifth year. T h e five-year term w o u l d also train the m e m b e r s to be
careful in choosing their union. H e expressed the view that within the five-
year p e r i o d ( e x c e p t during its last 60 days), the union that n e g o t i a t e d the C B A
could not be replaced. But the union officers could be c h a n g e d because after
all, he said, the m e m b e r s ' p r o b l e m was usually m o r e the union officers than
the union itself. ( D e c e m b e r 15,1988 c o n f e r e n c e , p. 58.) T h e bargaining agent
is the union itself, not the union officers; h e n c e , the bargaining agent is not
necessarily changed by changing its officers.
T h e conference agreed to make the "terms and conditions" or "economic"
provisions of the C B A g o o d only for three years so as to protect the e c o n o m i c
gains of the workers.
Why not synchronize the two terms? T h e lawmakers believed that three
years was too short for the representation aspect while five years was t o o l o n g
for the economic provisions.
T h e economic provisions, therefore, should lapse not later than three
years and be renegotiated before the e n d of the third year. ( D e c e m b e r 15,1988
conference, p. 60.)
U p o n expiry of the three-year e c o n o m i c provisions, for how many years
should the renegotiated provisions be? T h a t is, what is the term of the new
economic provisions — is it two years or three? This particular question was not
squarely raised in the committee deliberations; consequently the conference
did not take a categorical stand. But Senator Herrera explained that if a new
union won in the certification election held towards the end of the five-year
representation term, then the new union would have "to administer the contract
for one year." ( H e was assuming, therefore, that the expired economic provisions
should have been renegotiated for another three years.) This would be g o o d , he
said, because it would give the new union enough time to "know" and establish
rapport with the employer. (Ibid.)

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 COLLECTIVE BARGAINING A N D A R T 25*-A
ADMINISTRATION OF AGREEMENT '
[Part 1. Collective Bargaining Concept and Procedure]

In sum, the bicameral conference committee deliberations reveal the

thinking or assumption of the author of the amendment that the three-year
e c o n o m i c provisions may be renegotiated for another three years; if upon
expiration of the five-year representation provision, a new union wins, then
the new union will have to administer the C B A for its remaining o n e year, after
which the new union may negotiate with the employer for a new C B A . T h e r e is
no mandate, although there is the expectation, that the renegotiated economic
provisions should again last for three years. Neither is there a prohibition to
make it g o o d only for two years to make it coincide with the expiration on the
fifth year of the representation provision.
T h e choice between two or three years will be influenced by situational
factors, including e c o n o m i c and political conditions affecting the parties.
In the situation presented in the San Miguel case, below, the Court sustained
the Secretary of L a b o r in ordering that the renegotiated non-representational
provisions of the C B A in the company should run for three years.

San Miguel Corp. Employees Union-PTGWO, etc. vs. Confesor, San Miguel
Corporation, Magnolia Corp. and San Miguel Foods, Inc., G.R. N o . 111262,
September 19, 1996 —
Facts: On June 28,1990, petitioner-union San Miguel Corporation Employees
Union-PTGWO concluded a Collective Bargaining Agreement ( C B A ) with private
respondent San Miguel Corporation ( S M C ) to take effect upon the expiration of
the previous CBA on June 30,1989.
This CBA provided that the agreement shall remain in force until June 30,
1992 but that in accordance with Article 253-A of the Labor Code as amended, the
term of the Agreement, insofar as the representation aspect is concerned, shall be
for five ( 5 ) years from July 1, 1989 to June 30, 1994.
In keeping with its vision and long term strategy for business expansion, SMC
management informed its employees in a letter dated August 13, 1991 that the
company would undergo a restructuring. Effective October 1,1991, the Magnolia and
the Feeds and Livestock Divisions were spun-off and became two separate and distinct
corporations. Notwithstanding the spin-offs, the CBA remained in force and effect.
T h e CBA renegotiation started in July 1992. During the negotiations, the
petitioner-union insisted that the bargaining unit of SMC should still include the
employees of the spun-off corporations, Magnolia and SMFI, and that the renegotiated
terms of the CBA shall be effective only for the remaining period of two years or until
June 30,1994. SMC, on the other hand, contended that the members/employees who
had moved to Magnolia and SMFI automatically ceased to be part of the bargaining
unit at the SMC, and that, the CBA should be effective for three years in accordance
with Article 253-A of the Labor Code.
Issues:
1) Whether the duration of the renegotiated terms of the CBA is three
years or two; and

403
 LABOR RELATIONS
ART. 253-A

2) Whether the bargaining unit of SMC includes also the employees of

Magnolia and SMFI (San Miguel Foods, Inc.)
Pertinent to the first issue is Article 253-A of the Labor Code, as amended. T h e
Supreme Court, quoting a textbook, defines the two classes of CBA provisions.
The "representation aspect" refers to the identity and majority status of the
union that negotiated the CBA as the exclusive bargaining representative of the
appropriate bargaining unit concerned. "All other provisions" simply refers to the rest
of the CBA, economic as well as non-economic provisions, other than representational.
Then the Court explains the reason for the three-and five-year term.
Rulings: Obviously, the framers of the law wanted to maintain industrial peace
and stability by having both management and labor work harmoniously together
without any disturbance. Thus, no outside union can enter the establishment within
five (5) years and challenge the status of the incumbent union as the exclusive
bargaining agent. Likewise, the terms and conditions of employment (economic and
non-economic) can not be questioned by the employers or employees during the
period of effectivity of the CBA. T h e CBA is a contract between the parties and the
parties must respect the terms and conditions of the agreement. Notably, the framers
of the law did not give a fixed term as to the effectivity of the terms and conditions
of employment. It can be gleaned from their discussions that it was left to the parties
to fix the period.
T h e issue as to the term of the non-representation provisions of the CBA need
not be belabored especially when we take note of the Memorandum of the Secretary
of Labor dated February 24,1994. In the said memorandum, the Secretary of Labor
had occasion to clarify the term of the renegotiated terms of the CBA vis-a-vis the
term of the bargaining agent, to wit:
As a matter of policy the parties are encourage [ d ] to enter into a renegotiated
CBA with a term which would coincide (sic) with the aforesaid five (5)-year term of
the bargaining representative.
In the event however, that the parties, by mutual agreement, enter into a
renegotiated contract with a term of three (3)-years or one which does not coincide
with the said five (5)-year term, and said agreement is ratified by majority of the
members in the bargaining unit, the subject contract is valid and legal and therefore,
binds the contracting parties. T h e same will however not adversely affect the right
of another union to challenge the majority status of the incumbent bargaining
agent within sixty (60) days before the lapse of the original five (5)-year term of
the CBA.
Thus, we do not find any grave abuse of discretion on the part of the Secretary
of Labor in ruling that the effectivity of the renegotiated terms of the CBA shall be
for three (3) years.

Considering the above decision, does it follow that all renegotiated non-
representation provisions of a C B A should be for a term of three years? N o .
Particular note should be taken of the Secretary of Labor's memorandum, quoted

404
 COLLECTIVE BARGAINING A N D A R T 253-A
ADMINISTRATION OF AGREEMENT
[Part 1. Collective Bargaining Concept and Procedure]

with approval by the Court. T h e memorandum does not require either two or
three years; rather, it recognizes the primacy of "mutual agreement" between the
parties. T h e parties have to agree clearly whether those renegotiated provisions
are to last for two years or three.
T h e issue about the bargaining unit - whether to include the employees
of the spun-off M a g n o l i a and S M F I - is taken up in annotations to Article
255.

3. EXTENSION O F EFFECTIVITY OF C B A . , W H E N VALID

T h e public respondent's ( B L R Director's) view that the one-year extension
of the C B A was null and void is not quite correct. T h e extension was approved by
the U n i o n in a referendum which was properly supervised by the Department of
Labor. It was accepted by the Bank which gave a "signing bonus" to the employees
w h o voted for it. Since the holding of the referendum was within the authority
of the Interim Board "to administer the C B A and operate the union," and the
extension was acceptable to both parties to the agreement and did not violate
1
any law, it is valid and binding on them.

3.1 Ten-Year Suspension of C B A

Rivera, et al. vs. Espiritu, et al., G.R. N o . 135547, January 23, 2002 —
Facts: On June 5,1998, PAL pilots affiliated with the Airline Pilots Association
of the Philippines went on a three-week strike, causing serious losses to the financially
beleaguered flag carrier. PAL, faced with bankruptcy, adopted a rehabilitation plan
and downsized its labor force by more than one-third.
On July 22,1998, PALEA, another union in PAL, went on strike to protest the
retrenchment measures adopted by the airline, which affected 1899 union members.
PAL offered a plan to transfer some shares of stock to employees. T h e union board,
pressured by the members, rejected the offer. PAL announced cessation of operations
and sent termination notices to employees.
On September 27, 1998, the PALEA proposed some terms and conditions,
subject to ratification by the general membership, including a 10-year suspension of
the CBA and entitlement to three seats in the PAL board. PAL management accepted
this proposal. In the referendum 61% were in favor of accepting the PAL-PALEA
agreement, while 34% rejected it. Five days later, PAL resumed domestic operations.
On that same day, seven officers and members of PALEA filed this petition to annul
the PAL-PALEA agreement.
Is the 10-year suspension of the CBA unconstitutional and contrary to public
policy?
Ruling: The assailed PAL-PALEA agreement was the result of voluntary collective
bargaining negotiations undertaken in the light of the severe financial situations faced
by the employer, with the peculiar and unique intention of not merely promoting
industrial peace at PAL, but preventing the latter's closure. We find no conflict

'Cruz, et al. vs. Hon. Pura Ferrer-Calleja, et al, G.R. N o . 87332, August 13,1990.
405
 LABOR RELATIONS
ART. 253-A

between said agreement and Article 253-A of the Labor Code. Article 253-A has a two-
fold purpose. One is to promote industrial stability and predictability. Inasmuch as the
agreement sought to promote industrial peace at PAL during its rehabilitation, said
agreement satisfies the first purpose of Article 253-A. T h e other is to assign specific
timetables wherein negotiations become a matter of right and requirement. Nothing
in Article 253-A, prohibits the parties from waiving or suspending the mandatory
timetables and agreeing on the remedies to enforce the same.
It was PALEA, as the exclusive bargaining agent of PAL's ground employees,
that voluntarily entered into the CBA with PAL. It was also PALEA that voluntarily
opted for the 10-year suspension of the CBA. Either case was the union's exercise
of its right to collective bargaining. T h e right to free collective bargaining, after all,
includes the right to suspend it.
Petitioners, further allege that the 10-year suspension of the CBA under the
PAL-PALEA agreement virtually installed PALEA as a company union for said period,
amounting to unfair labor practice, in violation of Article 253-A of the Labor Code
mandating that an exclusive bargaining agent serves for five years only.
T h e questioned proviso of the agreement reads:
a. PAL shall continue recognizing P A L E A as the duly certified bar-
gaining agent of the regular rank-and-file ground employees of the Company;
Said proviso cannot be construed alone.
b. T h e union shop/maintenance of membership' provision under
the PAL-PALEA CBA shall be respected.
T h e aforesaid provisions, taken together, clearly show the intent of the parties
to maintain "union security" during the period of the suspension of the CBA. Its
objective is to assure the continued existence of PALEA during the said period. We
are unable to declare the objective of union security an unfair labor practice. It is State
policy to promote unionism to enable workers to negotiate with management on an
even playing field and with more persuasiveness than if they were to individually and
separately bargain with the employer. For this reason, the law has allowed stipulations
for "union shop" and "closed shop" as means of encouraging workers to join and
support the union of their choice in the protection of their rights and interests vis-
a-vis the employer.
Petitioners' contention that the agreement installs PALEA as a virtual company
union is also untenable. Under Article 248(d) of the Labor Code, a company union
exists when the employer acts " [ t ] o initiate, dominate, assist or otherwise interfere
with the formation or administration of any labor organization, including the giving
of financial or other support to it or its organizers or supporters." T h e case records
are bare of any showing of such acts by PAL.
We also do not agree that the agreement violates the five-year representation
limit mandated by Article 253-A. Under said article, the representation limit for the
exclusive bargaining agent applies only when there is an extant CBA in full force
and effect. In the instant case, the parties agreed to suspend the CBA and put in
abeyance the limit on the representation period.

406
 COLLECTIVE BARGAINING A N D
ADMINISTRATION OF AGREEMENT
ART. 254
[Part 1. Collective Bargaining Concept and Procedure]

In sum, we are of the view that the PAL-PALEA agreement dated September 27,
1998, is valid exercise of the freedom to contract. Under the principle of inviolability
of contracts guaranteed by the Constitution, the contract must be upheld.

ART. 254. INJUNCTION PROHIBITED

No temporary or permanent injunction or restraining order in any case
involving or growing out of labor disputes shall be issued by any court or other
entity, except as otherwise provided in Articles 218 and 264 of this Code.
C O M M E N T S A N D CASES
1. NO-INJUNCTION POLICY
An injunction may require or restrain the d o i n g of an act.
Article 254 announces the policy that labor disputes are generally not
subject to injunction. If the rule w e r e o t h e r w i s e , it w o u l d contradict the
declared policy, under Article 2 1 1 ( a ) , "to p r o m o t e and emphasize the primacy
of free collective bargaining and negotiations, including voluntary arbitration,
mediation and conciliation, as m o d e s of settling labor or industrial disputes."
T h e policy, basically, is f r e e d o m at the workplace. T h e law, true to the
tenets of free enterprise system, allows management and labor to fashion the
contents and incidents of their relationship. If there is dispute between the
parties, the responsibility to solve it devolves upon them primarily, not upon
the g o v e r n m e n t . G o v e r n m e n t intervention is the exception rather than the
rule. This anti-injunction policy applies even as regards wage-fixing by the wage
1
commission or regional wage boards.
Moreover, any injunctive order in "non-national interest" disputes (i.e., not
falling under Article 263 [ g ] ) can be directed only against the illegal acts being
committed in connection with the labor dispute; it cannot be directed against the
dispute itself. "An injunction is valid when it was issued not against the strike or
picketing itself but against acts of violence and intimidation committed against
2
officials of the employer and nonstriking employees." A n d if an injunction is
called for, the issuance has to pass through a rigorous route defined in Article
218(e).
In o n e case the Supreme Court echoes the opinion that "injunctions or
restraining orders are frowned upon as a matter of labor relations policy." T h e
Court adds this general reminder:
T h e r e is no power the exercise of which is m o r e delicate which
requires greater caution, deliberation, and sound discretion, or (which
is) m o r e dangerous in a doubtful case than the issuing of an injunction.

'Article 126.
2
Meralco Workers' Union vs. Yatco, G.R. N o . L-l9785, January 29, 1967.

407
 LABOR RELATIONS
ART. 254

It is the strong arm of equity that never ought to be extended unless to

cases of great injury, where courts of law cannot afford an adequate or
commensurate remedy in damages. T h e right must be clear, the injury
impending or threatened, so as to be averted only by the protecting
preventive process of injunction. (Dinio, et al. vs. Laguesma, et al., G.R No.
108475, June 9, 1997.)
T h e D O L E Guidelines on L a b o r Relations (1987) carries this directive:
Petitions for injunctions or restraining orders shall be handled or
resolved with extreme care and caution. A l l efforts to conciliate or settle
amicably the issues in the main dispute and those involved in petitions
for injunctions must be exhausted. Injunctions and restraining orders
therefore may be issued only in case of extreme necessity based on legal
grounds clearly established, after due consultations or hearing and when
all efforts at conciliation are exhausted.
In short, labor injunction is not favored. It contradicts the constitutional
preference for voluntary modes of dispute settlement.
However, the protective force of law will be applied w h e n prohibited
or unlawful acts are being or about to be committed that will cause grave or
irreparable damage to the complaining party. Article 254 itself indicates that
where Article 264, regarding prohibited acts, is being violated, the anti-injunction
policy will be brushed aside and a writ of injunction or restraining o r d e r will
issue in accordance with Article 2 1 8 ( e ) .

1.1 Reason of the No-Injunction Policy

T h e labor injunction is an employer's most effective remedy in a labor
dispute. H o w e v e r narrow its scope and f o r m , the issuance of an injunction for
any purpose in a labor dispute will generally tip the scales of the controversy.
T h e issuance of an injunction in the early phases of a strike can critically sway
the balance of the e c o n o m i c struggle against the union. Enforced by the court's
contempt powers, even a preliminary injunction is an effectual strike-breaking
weapon because so much time ordinarily elapses between the issuance of a
preliminary injunction and the time when a final decree can be reviewed on
1
appeal.
Labor injunctions have the deceptive appeal of the quick and easy solution,
and therein lies their danger, for disputes between workers and employers, now
often complicated by internecine disputes a m o n g workers themselves, are not
always of a comparable simplicity. consequently, injunctions have generally not
2
proved to be an effective means of settling labor disputes.

•48 Am. Jur. 2d, 2071, p. 437.

2
Ibid.

408
 COLLECTIVE BARGAINING A N D ART 95J.
4 M
ADMINISTRATION O F AGREEMENT '
[Part 1. Collective Bargaining Concept and Procedure]

1.2 Injunction Issued by Regular Court, When Proper

Regular courts are without authority to issue injunction orders in cases
involving or originating from labor disputes even if the complaint was filed by
nonstriking employees and the employer was also made a respondent to the
1 2
action or even if the complainant is a customer of the strike-bound employer
or a sister company of the strike-bound employer, whose premises were picketed
3
by the strikers.
W h e r e the issue in an action filed in the Court of First Instance [now
Regional Trial Court] was tied up with an unfair labor practice case pending
in the Court of Industrial Relations [ n o w N L R C ] , the action was outside the
jurisdiction of the regular courts even if acts of violence, intimidation and
coercion were imputed to the U n i o n . T h e injunction should have been obtained
from the industrial court which was e m p o w e r e d to restrain such acts under the
4
Industrial Peace Act. That rule obviates multiplicity of suits.
However, a regular court may issue injunction to protect the interest of
neutral employers in c o m m o n situs picketing, as shown in the following case.

Republic Flour Mill Workers Association vs. Reyes, G.R. N o . L-21378, November
28, 1966 —
T h e members of the petitioner Unions declared a strike against their employers
and picketed the premises, preventing the peaceful passing of other persons not
connected with their employers, one of which was the respondent Company, a lessee
of a parcel of land owned by the strike-bound employer. An injunction issued by
the CFI ordered the petitioner Unions to desist from preventing the employees of
respondent Company from entering its premises.
T h e validity of the injunction was upheld by the Supreme Court which
declared:
We agree with the findings of the trial court that respondent A I A Flour Mills,
Inc. is a separate and distinct entity from the Republic Flour Mills, Inc., including
the business in which it engaged and the picketing by the petitioner Unions has no
connection whatsoever with respondent A I A Flour Mills, Inc. We find that there is no
labor dispute between petitioners and respondent A I A Flour Mills, Inc. and neither
is there an employer-employee relation between them. We declare, therefore, that
the writ of preliminary injunction issued by the respondent Judge is not a labor
injunction that is provided for in Section 9 paragraph ( d ) of Republic Act 875. The
court may issue an injunction, whether temporary or permanent, as provided for in
said Section of Republic Act 875, only in a case involving or growing out of a labor
dispute. As we have stated, we find that no labor dispute existed between petitioner

'Lakas ng Manggagawang Makabayan vs. De los Angeles, 64 SCRA 262.

2
Associated Labor Union vs. Gomez, 96 SCRA 551.
3
Cyphil Employees Association-Natu vs. Pharmaceutical Industries, Inc., 77
SCRA 135.
4
Maria Cristina Fertilizer Plant Employees Association vs. Tandayag, 83 SCRA 56.
409
 LABOR RELATIONS
ART. 254

Unions and respondent A I A Flour Mills, Inc. T h e preliminary injunction issued by

respondent judge was, therefore, one that was within its jurisdiction to issue pursuant
to the provisions of Rule 60 of the Rules of Court.
Moreover, the writ of preliminary injunction issued by respondent Judge did
not in any way curtail the right of petitioner Unions to picket because the writ simply
and clearly commanded the petitioner Unions 'to desist from preventing petitioners
(herein respondent A I A Flour Mills, Inc.) employees from entering the premises.'
The writ did not prevent petitioner unions from picketing against the employer, the
Republic Flour Mills, Inc. T h e record shows that respondent Judge issued the writ
of preliminary injunction after a hearing. T h e respondent Judge, therefore, had not
acted in a manner that was in violation of the law or with grave abuse of discretion
when he issued the writ of preliminary injunction in question.

Note: See also Phil. Association of Free Labor Unions vs. Cloribel and Liwayway
Publications, Inc. vs. Permanent Concrete Workers Union in the discussion of picketing
in the comments to Articles 263-264.

Social Dumping/Concession Bargaining

With the advent of global economy and free trade, facilitated by advances
in information and communications technology, opportunities to manufacture
products at different locations have increased. It becomes increasingly obvious that
manufacturing does not have to be done in locations where labor is expensive or
where infrastructures are inadequate or inefficient. Cheap labor in other locations
can be availed of. Capital can run away from expensive workforce.
The international relocation of employment and the phenomenon known
as "social dumping" come hand in. Social dumping occurs when companies
transfer their production activities and employment in order to exploit lower
wages and inferior working conditions in peripheral countries, thereby putting
wages and working conditions in the original production countries under pressure.
Employees in countries that offer a greater measure of social protection often have
no other choice than to agree to the plans for reorganization put forward and to
accept the downward adjustment of their employment terms and conditions.
When a decrease in the level of protection is negotiated with the trade
unions, this known as concession bargaining (Sengeberger, 1992: 146-147).
In the case of social dumping, competition focuses on differences in terms
and conditions of employment and working conditions. By relocating production
activities, companies hope to achieve a sharp reduction in expenditure, including
the cost of labour. We should mention here that it is not only MNC's that apply
this type of cost-reducing strategy. The increasing liberalization of world trade
makes it possible for every business to decide to produce in countries where
circumstances are most favourable from the perspective of production.
International Human Resources Management, Ed. Anne-Wil Harzing & Jori Van
Ruysseveldt [Sage Publication, 1995], p. 327.

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 Title VII
COLLECTIVE BARGAINING AND
ADMINISTRATION OF AGREEMENT (cont'd.)
[Part 2. EMPLOYEE PARTICIPATION
AND REPRESENTATION]

O v e r v i e w / K e y Questions Box 16
1. W h a t are the methods of selecting the union that will
bargain with the employer?
2. What is certification election (C.E.) ? W h o can petition
for a C.E.?
3. On what grounds may a petition for C.E. be denied?
4. W h o votes in a C.E.? W h o wins?
5. Is the e m p l o y e r a party to a C.E.?
6. What is meant by "duty of fair representation?"

ART. 255. EXCLUSIVE BARGAINING REPRESENTATION AND

1
WORKERS'PARTICIPATION IN POLICY AND DECISION-MAKING
T h e labor organization designated or selected by the majority of the
employees in an appropriate collective bargaining unit shall be the exclusive
representative of the employees in such unit for the purpose of collective
bargaining. However, an individual employee or g r o u p of employees shall
have the right at any time to present grievances to their employer.
A n y provision of law to the contrary notwithstanding, workers shall
have the right, subject to such rules and regulations as the Secretary of L a b o r
and Employment may promulgate, to participate in policy and decision-
making processes of the establishment where they are employed insofar as
said processes will directly affect their rights, benefits and welfare. For this
p u r p o s e , workers and employers may f o r m labor-management councils:
Provided, That the representatives of the workers in such labor management
councils shall be elected by at least the majority of all employees in said
establishment.

'As amended by R . A 6715.

411
 LABOR RELATIONS
ART. 255

C O M M E N T S A N D CASES
1. WORKERS' PARTICIPATORY RIGHT: ITS C O N S T I T U T I O N A L M E A N I N G
As initially mentioned under Article 211, the right of workers to participate
in policy and decision-making processes was written for the first time in the
Philippine Constitution in 1986. To operationalize the right it was made part of
the Labor C o d e in 1989.
T h e crucial question is: what is the meaning or extent of the workers' right
to participate in policy and decision-making?
Enlightening in this regard are the deliberations of the 1986 Constitutional
Commission. T h e y reveal that the intention was to refer to participation in
grievance procedures and voluntary m o d e s of settling disputes and not to
formulation of corporate programs or policies. T h e following transpired in the
Commission's session on August 6, 1986:
M R . R E G A L A D O . Madam President, may I ask the C o m m i t t e e just
what is meant by that last phrase which reads: "participation in policy and
decision-making processes affecting their interests?" I am particularly
concerned with the situation where the e m p l o y e r is a corporation, and
policy- and decision-making processes are, of course, handled by a board
of directors. Does it mean to say that the employees must also have a seat
in the board of directors so that they can participate, or is there a grievance
mechanism whereby they can also participate in the deliberations of the
board of directors which happens to be their employer?
M R . O P L E . Madam President, if authorized by the Committee, I
would like to shed some light on the principle of workers' participation at
the level of the enterprise which is, m o r e or less, the official j a r g o n used in
the International Labor Organization and other labor-related international
bodies.
MS. A Q U I N O . Madam President, we will reserve our right to agree
or disagree d e p e n d i n g on what Commissioner O p l e will say.
M R . O P L E . Yes.
[European Work Councils]
In most European jurisdictions, especially in n o r t h e r n E u r o p e ,
they have established highly successful work councils at the level of the
enterprise where largely non-adversarial issues are taken up so that before
they can mature into adversarial issues, labor and management, in that
atmosphere of cooperation through a work council, are able to c o m e to an
early agreement, which both sides consider helpful not only for industrial
peace but also for productivity. A n d so, when I look at this and when I cast
my vote in favor of Section 3 ( b ) , that is what I would have in mind, that such
fora within companies or work councils will precisely give both workers and
employers the opportunity to consider matters of mutual interest. This is

412
 COLLECTIVE BARGAINING A N D ART 9**
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

also a recognition that the productivity and profitability of a company are

a vital concern of the workers and if that is so, then the expectation is now
given a forum, like a work council. T h e y have something to contribute and
they can participate in policies that redound to the mutual benefit and to
the c o m m o n g o o d of the enterprise.
T h a t is h o w I view this particular phrase c o n c e r n i n g workers'
participation, Madam President.
MS. Q U E S A D A . M a d a m President.
T H E P R E S I D E N T . Commissioner Quesada is recognized.
[Three Levels of Employee Participation]
MS. Q U E S A D A . Could I just add to what Commissioner O p l e already
explained about workers' participation in the light of the questions of
Commissioner Regalado? Perhaps, it would be g o o d for him to know that
there are three levels in which employees could influence management in
their decision-making, and o n e would be at the corporate level. This would
refer to strategic policies pertaining to the mergers, acquisitions, pricing
and marketing policies, disposition of profits and the like. T h e second level
would be the plant or department level. It is here where administrative
decisions are made. Decisions made in this level may refer to hiring, firing,
and promotion of employees, cost and quality control, resource allocations,
achievement of target quotas, et cetera. A n d the third will be the shop-floor
level. It is here where the so-called operating decisions are made. Decisions
made in this level usually refer to scheduling of work, safety regulations,
work methods, training of new employees. So, these are the different levels
in which we h o p e there would be this democratic participation of workers
in vital issues that affect both management and the workers.
X X x
[Intended meaning of the Provision]
MS. A Q U I N O . M a d a m President, let me define and reiterate the
parameters covered b y the phrase " T O P A R T I C I P A T E I N P O L I C Y A N D
D E C I S I O N - M A K I N G PROCESSES A F F E C T I N G T H E I R I N T E R E S T S . "
We begin from the basic premise that at the barest basic minimum,
the workers are consulted on matters pertaining to their interests, and
the parameters would be references to the negotiations in the collective
bargaining agreement and its terms. T h o s e would cover the processes
of grievance machineries; likewise, these would pertain to the voluntary
modes of settling labor disputes and the conciliation proceedings which
can be initiated and mediated by the Ministry of Labor.
M R . M O N S O D . May I ask Commissioner A q u i n o to restate the Article
and to make an explanation of the issue we had discussed before the Chair
suspended the session.

413
 LABOR RELATIONS
ART. 255

T H E PRESIDENT. Commissioner A q u i n o is recognized.

MS. A Q U I N O . First, we shall address the clarification of the position
of the Committee on the matter of participation in policy and decision-
making. Some of the Commissioners may have perceived a measure of
difference and conflict in the interpretation of the Committee, so this
now will be our submission in interpreting the phrase 'participation in
policy and decision-making processes affecting their interests.' W h a t is it?
What it is in terms of processes has been previously defined in response to
the query of Commissioner R o m u l o . We were referring to the grievance
procedures, conciliation proceedings, voluntary modes of settling labor
disputes and negotiations in free collective bargaining agreement. What
it is, pertaining to the scope and substance, would now be the rights and
benefits of workers. In other words, the focus of participation is now
introverted to the rights and benefits of the workers. What it is not refers to
the practice in the industrialized nations in Europe and in Japan referring
to codetermination which pertains to charting of corporate programs and
policies.
However, the other matters m e n t i o n e d by Commissioner Quesada
which she just read for purposes of i n f o r m i n g the C o m m i s s i o n are
already rightfully covered in the negotiations of the collective bargaining
agreement. So just to eliminate the confusion, these are the parameters
contemplated by "participation in policy and decision-making processes."
T h e C o m m i t t e e is proposing an a m e n d m e n t to delete the w o r d
"interest" o n the first p a g e and substitute the w o r d s R I G H T S A N D
B E N E F I T S if only to clarify the intention of the C o m m i t t e e on this matter.
T h e s e d e l i b e r a t i o n s disclose the t h i n k i n g of the constitutional
commissioners when they crafted the workers' right to participate: T h e y did not
mean participation in charting corporate programs and policies. But does this
thinking at the floor of the Constitutional Commission resonate in the halls of
the Supreme Court? W h e n the Court was asked whether employees may demand
participation in making the company's c o d e of discipline, the Court replied
yes. T h e Court differentiated m a n a g e m e n t prerogatives regarding business
operations and those which affect the employees' rights. To the latter category
belongs the making of a c o d e of conduct; in formulating such c o d e , therefore,
the employees have the right to participate. This is the Court's ruling in the
PAL case given below. But, precisely, what level of "participation" — discussion?
consultation? information? or approval/disapproval? T h e Court declared that
employees possess the "right to participate in the deliberation of matters which
may affect their rights and the formulation of policies relative thereto." "One such
matter is the formulation of a c o d e of discipline." "Formulation" (by dictionary
definition) includes "to devise, to invent" — in this context, to make or create
a policy.

414
 COLLECTIVE BARGAINING A N D ART 255
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

1.1 Employees' Participation in Formulating the Code of Discipline

Philippine Airlines, Inc. (PAL) vs. National Labor Relations Commission, et al, G.R.
N o . 85985, August 13, 1993 —
Facts: In March 1985, the Philippine Airlines, Inc. ( P A L ) completely revised
its Code of Discipline, and circulated it among the employees for immediate
implementation. Subsequently, some employees were subjected to disciplinary
measures for alleged violations of the revised code.
T h e Philippine Airlines Employees Association ( P A L E A ) filed a complaint
before the N L R C for unfair labor practice with the following remarks: "ULP with
arbitrary implementation of PAL's Code of Discipline without notice and prior
discussion with Union by Management."
PAL filed a motion to dismiss the complaint, asserting its prerogative to
prescribe rules and regulations regarding employees' conduct in carrying out their
duties and functions, x x x
T h e Labor Arbiter found no bad faith on the part of PAL in adopting the Code
and ruled that no unfair labor practice had been committed. However, the arbiter
held that PAL was "not totally fault-free."
She ordered PAL to:
1. Furnish all employees with the new Code of Discipline;
2. Reconsider the cases of employees meted with penalties under the New
Code of Discipline; and
3. Discuss with P A L E A the objectionable provisions specifically tackled in
the body of the decision.
On appeal by PAL, the N L R C found no evidence of unfair labor practice by
PAL and affirmed the dismissal of PALEA's charge. Nonetheless, the N L R C made
the following observations:
Indeed, failure of management to discuss the provisions of a contem-
plated code of discipline which shall govern the conduct of its employees
would result in the erosion and deterioration of an otherwise harmonious and
smooth relationship between them as did happen in the instant case. There is
no dispute that adoption of rules of conduct or discipline is a prerogative of
management and is imperative and essential if an industry has to survive in
a competitive world. But labor climate has progressed, too. In the Philippine
scene, at no time in our contemporary history is the need for a cooperative,
supportive and smooth relationship between labor and management more
keenly felt if we are to survive economically. Management can no longer
exclude labor in the deliberation and adoption of rules and regulations that
will affect them.
T h e N L R C ruled that the New Code of Discipline should be reviewed and
discussed with complainant union, particularly the disputed provisions and that the
pending cases against the employees be reconsidered by Philippine Airlines.
PAL. filed a petition for certiorari charging the N L R C with grave abuse of
discretion in: (a) directing PAL "to share its management prerogative of formulating

415
 LABOR RELATIONS
ART. 255

a Code of Discipline"; ( b ) engaging in quasi-judicial legislation in ordering PAL to

share said prerogative with the union, x x x
PAL asserts that when it revised its Code on March 15, 1985, there was no
law which mandated the sharing of responsibility therefor between employer and
employee.
Ruling: T h e Court upheld the union's right.
Indeed, it was only on March 21, 1989, with the approval of Republic Act N o .
6715, amending Article 211 of the Labor Code, that the law explicitly considered it a
State policy " ( t ) o ensure the participation of workers in decision and policy-making
processes affecting their rights, duties and welfare." However, even in the absence
of said clear provision of law, 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.
In San Miguel Brewery Sales Farce Union (PTGWO) vs. Ople (170 SCRA 25 [1989]),
we upheld the company's right to implement a new system of distributing its products,
but gave the following caveat
So long as a company's management prerogatives are exercised in g o o d
faith for the advancement of the employer's interest and not for the purpose
of defeating or circumventing the rights of the employees under special laws
or under valid agreements, this Court will uphold them.
A close scrutiny of the objectionable provisions of the Code reveals that they
are not purely business-oriented nor do they concern the management aspect of the
business of the company as in the San Miguel case. T h e provisions of the Code clearly
have repercussions on the employees' right to security of tenure. T h e implementation
of the provisions may result in the deprivation of an employee's means of livelihood
1
which, as correctly pointed out by the N L R C , is a property right.
Verily, a line must be drawn between management prerogatives regarding
business operations per se and those which affect the rights of the employees. In
treating the latter, management should see to it that its employees are at least properly
informed of its decisions or modes of action. P A L asserts that all its employees have
been furnished copies of the Code. Public respondents found to the contrary, which
finding, to say the least, is entitled to great respect.
P A L posits the view that by signing the 1989-1991 collective bargaining
agreement, on June 27, 1990, PALEA in effect recognized PAL's "exclusive right
to make and enforce company rules and regulations to carry out the functions of
management without having to discuss the same with PALEA and much less, obtain
the latter's conformity thereto."
T h e collective bargaining agreement may not be interpreted as cession of
employees' right to participate in the deliberation of matters which may affect their
rights and the formulation of policies relative thereto. A n d one such matter is the
formulation of a code of discipline.

'Callanta vs. Carnation Philippines, Inc., 145 SCRA 268 [1986].

416
 COLLECTIVE BARGAINING A N D A R T . 255
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

T h e above ruling should be contrasted with those in San Miguel Brewery

Sales Force Union (PTGWO) vs. Ople and SMC ( G . R . N o . 53515, February 8,1989),
and in GTE Directories Corp. vs. Sanchez ( G . R . N o . 76219, May 27, 1991). In both
cases the authority and power of the employer to make policy, without employees'
parti ci pa don, is recognized and upheld. Disobeying the policy is recognized as
a valid reason to dismiss the disobedient employees. But in those two cases, the
subject of the policy is sales operation while in the above PAL case the subject is
employees' conduct and discipline. T h e subject affects the employees' tenure;
1
hence, employees' participation is required in shaping the policy.
Participation does n o t mean co-management of the business. In o n e
decision, Justice Martinez, speaking for the Court, observes:
It is worthwhile to note that all the U n i o n demands and what the
Secretary's o r d e r granted is that the U n i o n be allowed to participate in
policy formulation and decision-making process on matters affecting the
U n i o n members' rights, duties and welfare as required in Article 211 ( A ) ( g )
of the L a b o r C o d e . A n d this can only be d o n e when the U n i o n is allowed
to have representatives in the Safety Committee, Uniform Committee and other
committees of a similar nature. Certainly, such participation by the U n i o n in
the said committees is not in the nature of a co-management control of the
business of M E R A L C O . W h a t is granted by the Secretary is participation
and r e p r e s e n t a t i o n . T h u s , t h e r e i s n o i m p a i r m e n t o f m a n a g e m e n t
prerogatives. (Manila Electric Co. vs. Quisumbing and MEWA, G.R. No. 127598,
January 27, 1999.)

2. WORKERS' PARTICIPATION AS T H E REAL OBJECTIVE; T H E LMC

Article 255 deals with the crucial concept of e m p l o y e e participation. T h e
law, while p r o m o t i n g collective bargaining, really aims at employee participation
in policy and decision-making. Collective Bargaining is just o n e of the forms
of e m p l o y e e participation. Despite so much interest in and p r o m o t i o n of
collective bargaining, it is incorrect to say that the device which secures industrial
democracy is collective bargaining and no other. A n d it is equally misleading
to say that collective bargaining is the end-goal of employee representation.
Rather, the real aim is e m p l o y e e participation in whatever form it may appear
— bargaining or no bargaining, union or no union.
This is why Article 255, second sentence, reserves the right of an individual
employee or group of employees (unionized or ununionized, or inside or outside
a union) to present grievances to their employer at any time. Effectively voicing
one's grievance is reserved and hallowed by law, with or without collective
bargaining.

'See San Miguel case in comments to Article 248, and the GTE case under Article
263.

417
 LABOR RELATIONS
ART. 255

But individual representation in dealing or bargaining with the employer is

weak. For this reason the law provides another forum — the labor-management
council aside from or instead of a union. An L M C is versatile. It can exist where
there is no union or co-exist with a union. O n e thing it cannot and must not do is
to replace a union. W h i l e a labor union is hamstrung by such legal prescriptions
as formal registration, limited bargaining unit, majority status, mandatory and
nonmandatory subjects, etc., an L M C n e e d not be held back by any of these. It
can represent employees across the enterprise, present grievances regardless of
the grievant's rank, and proffer proposals unhindered by formalities. It can also
handle projects and programs whoever is the proponent, f o r m committees for
myriad purposes, instill discipline and improve productivity. All these activities the
L M C may do without having to face internecine strifes arising from periodic inter-
union contests for supremacy. T h e L M C , in short, can deal with the employer on
matters affecting the employees' rights, benefits and welfare. "Dealing with the
employer," we have seen, is broader, freer, and (from the employer's viewpoint)
less threatening m e t h o d than collective bargaining.
Is an L M C merely a disguised employer-dominated group? It might be,
but it does not have to be so. An L M C is a challenge at maturity, conviction, and
vigilance - maturity in understanding and respecting the rights not only of the
workers but also of the employer; conviction in pursuing or safeguarding the
employees' rights and welfare; and vigilance against allowing itself to b e c o m e
a cold and unthinking management rubber stamp or a lifeless and voiceless
management mannequin.

2.1 Department's Promotion of L M C and Other Councils

T h e D e p a r t m e n t shall p r o m o t e the f o r m a t i o n o f labor-management
councils in organized and unorganized establishments to enable the workers to
participate in policy and decision-making processes in the establishment, insofar
as said processes will directly affect their rights, benefits and welfare, except those
which are covered by collective bargaining agreements or are traditional areas
1
of bargaining.
T h e Rules also require the department to promote other labor-management
cooperation schemes and, upon its own initiative or upon the request of both
parties, may assist in the formulation and d e v e l o p m e n t of programs and projects
on productivity, occupational safety and health, i m p r o v e m e n t of quality of work
life, product quality improvement, and other similar scheme.
In organized establishments, the worker's representatives to the council
shall be nominated by the exclusive bargaining representative. In establishments
where no legitimate labor organization exists, the workers representative shall
be elected directly by the employees at large.

'Section 1, Rule X X I , D.O. N o . 40-03.

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 COLLECTIVE BARGAINING A N D ART 255
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]
3. INDIVIDUAL GRIEVANCE
As briefly indicated above, the presence of an employees' organization, —
a union, an L M C or other forum — does not replace the individual employee's
right to pursue grievances. Each employee retains the right to deal with his or
her employer, and vice-versa. T h e labor organization is a representative of the
collective employees, but this fact does not mean that an employee can act only
through the representative. For these reasons, the law (Article 255) explicitly
preserves and respects the right of an individual employee or any group of
employees to directly present grievances to their employers at any time. Even
when under investigation, an e m p l o y e e can choose to handle personally his
1
defense, unassisted by any representative. T h e second sentence of Article 255
is meant to be an exception to the exclusiveness of the representative role of
the labor organization. Such individual right cannot be taken away even by a
union's constitution and by-laws.
A m e r i c a n jurisprudence holds that notwithstanding a union's obligation
as exclusive bargaining representative to process the grievances of all bargaining
unit employees, individual employees may at any time present grievances directly
to the e m p l o y e r for adjustment without the intervention of the bargaining
representative, and without subjecting the employer to liability for refusing
to bargain with the union. However, the adjustment of the grievances must
be consistent with the terms of the current collective bargaining contract
or a g r e e m e n t . M o r e o v e r , the bargaining representative must be given the
opportunity to be present at the meeting between the employer and employee.-

4. COLLECTIVE B A R G A I N I N G U N I T ( C B U ) DEFINED
At the enterprise level there are three democratic devices, statutorily
e m b e d d e d , to advance the cause of industrial peace, namely: airing of grievance
even by an individual e m p l o y e e directly to the employer anytime; participation
in policy and decision-making by employees, whether unionized or not; and
collective b a r g a i n i n g with the e m p l o y e r by u n i o n i z e d e m p l o y e e s . H a v i n g
examined the first two, we now consider the third.
T h e collective bargaining that the law envisions occurs between the
employer and the employees comprised in an "appropriate" collective bargaining
unit ( C B U ) represented by a union. As initially explained in Article 234, the
" C B U " is that group of j o b s and j o b h o l d e r s represented by the recognized or
certified union when it bargains with the employer. T h e "group" may comprise all
the supervisors or, separately, all the rank-and-file population in the company. Or
it may be less than all of these two categories, although the law prefers to have only
o n e grouping per category in o n e enterprise because the more solid the unit, the
stronger its bargaining capacity. But if a single unit (only one for all supervisors

1
Article 277 [ b ] .
2
48 Am. Jur. 2d 660.

419
 LABOR RELATIONS
ART. 255

or only o n e for all rank-and-file) is not feasible, the law allows subgroups as
bargaining units, p r o v i d e d only that each sub-group is "appropriate." It is
appropriate if its members share substantially c o m m o n concerns and interests.
For instance, in a school all the teachers may constitute o n e collective bargaining
unit, and the nonteaching staff another. In a manufacturing firm, the production
group may comprise a bargaining unit apart from the sales force.
As defined in Department O r d e r N o . 40-03 which is now the revised B o o k
V of the Rules Implementing the Labor C o d e , "bargaining unit" refers to a group
of employees sharing mutual interests within a given employer unit, comprised
of all or less than all of the entire body of employees in the employer unit or any
specific occupational or geographical grouping within such e m p l o y e r unit.
Within o n e unit there may be o n e or m o r e unions. T h e bargaining unit
therefore is not the same as, and usually is a bigger g r o u p than, a union. But only
one union should represent the whole C B U in bargaining with the employer.
T h e chosen union is called the bargaining agent, its principal being the C B U
members themselves.
T h e bargaining union has to be the majority union, the o n e where majority
of the C B U members belong. T h e majority status is d e t e r m i n e d through a union
selection process that will be explained later.
"Representative union," "bargaining union," "majority union," "bargaining
agent," and "bargaining representative" are o n e and the same. It refers to the
union that represents the C B U in bargaining or dealing with the employer.

5. APPROPRIATENESS OF B A R G A I N I N G U N I T ; FACTORS CONSIDERED

T h e law in Article 255 in relation to Article 234 requires that the C B U be
"appropriate" but does not explain what it means. T h e explanation is found only
in court rulings.
T h e determination of what constitutes a p r o p e r bargaining unit lies
primarily in the discretion of the Bureau, since no individual factor is given by
law decisive weight. But while the determination of the appropriate collective
bargaining unit ( C B U ) is a primary function of the Bureau, it is subject to the
legal requirement that proper consideration should be given to all legally relevant
1
factors. For instance, that each hacienda has its separate administrator strongly
supports the recognition of separate units, as labor conflicts due to management
2
practices in o n e plantation will not necessarily involve the others.
T h e basic test of a bargaining unit's acceptability ( o r appropriateness)
is whether it will best assure to all employees the exercise of their collective
bargaining rights. Industrial e x p e r i e n c e indicates that the most efficacious
bargaining unit is o n e which is comprised of constituents enjoying a community

'NLRB vs. Albuquerque Express, 54 LC 17, 766.

2
Elizalde Co. vs. CAR, L-24200, December 26, 1967.

420
 COLLECTIVE BARGAINING A N D ART 9 «
< W
ADMINISTRATION O F AGREEMENT
[Part 2. Employee Participation and Representation]

of interest. This community of interest is reflected in groups having substantial

similarity of work and duties or similarity of c o m p e n s a t i o n and working
1
conditions.
In o n e case, the Industrial Court found that the workers in the Caloocan
shops p e r f o r m major repairs of railway rolling stock, using heavy equipment
and machineries, while the others only perform minor repairs. Therefore, the
workers in the Caloocan shops require special skills sufficient to set them apart
2
from the rest of the workers.
In still another case, the stevedores and piece-rate workers were employed
on a casual or day-to-day basis and have no reasonable basis for continued or
renewed e m p l o y m e n t for any appreciable substantial time, not to mention the
nature of work they p e r f o r m . It was held that they cannot be considered to
have such mutuality of interest as to justify their inclusion in a bargaining unit
3
c o m p o s e d of permanent or regular employees.
In making judgments about "community of interest" in these different
settings, the Board will look to such factors as: ( 1 ) similarity in the scale and
manner of determining earnings; ( 2 ) similarity in employment benefits, hours of
work and other terms and conditions of employment; ( 3 ) similarity in the kinds
of work p e r f o r m e d ; ( 4 ) similarity in the qualifications, skills and training of the
employees; ( 5 ) frequency of contact or interchange a m o n g the employees; ( 6 )
geographic proximity; ( 7 ) continuity or integration of production processes; ( 8 )
c o m m o n supervision and determination of labor-relations policy; ( 9 ) history of
collective bargaining; ( 1 0 ) desires of the affected employees; or (11) extent of
4
union organization.
In another illustrative case, the fact that the three plants are located in
three different places, namely, in Cabuyao, Laguna, in Otis, Pandacan, Metro
Manila, and in San Fernandao, Pampanga is immaterial. Geographical location
can be completely disregarded if the communal or mutual interests of the
employees are not sacrificed as demonstrated in UP vs. Calleja-Ferrer where all
non-academic rank-and-file employees of the University of the Philippines in
Diliman, Q u e z o n City, Padre Faura, Manila, Los Barios, Laguna and the Visayas
were allowed to participate in a certification election. T h e Court ruled that the
distance a m o n g the three plants is not productive of insurmountable difficulties

•Democratic Labor Union vs. Cebu Stevedoring Co., et al, G.R. N o . L-10321,
February 28, 1958; Alhambra Cigar & Cigarette Manufacturing Co. vs. Alhambra
Employees' Association, G.R. N o . L-13573, February 20, 1960.
2
Mechanical Dept. Labor Union sa Phil. National Railways vs. CIR, et al, L-28223,
August 30, 1968.
Philippine Land-Air-Sea Labor Union vs. Court of Industrial Relations, et al,
G.R. N o . L-14656, November 29, 1960.
4
Cox, Bok, & Gorman, Labor Law (1977), p. 300.

421
 LABOR RELATIONS
ART. 255

in the administration of union affairs. Neither are there regional differences that
1
are likely to impede the operations of a single bargaining representative.

In still another case, petitioner Laguna C o l l e g e , proposed two separate

units, namely, college unit composed of the professors and instructors in the
college, and high school units comprising the high school teachers. On the
other hand, L A C T A (the union) proposed only one unit — the employer unit
composed of all the teachers in the entire Laguna C o l l e g e .
From the evidence adduced, the Court concluded that the factors in favor
of a single employer unit far outweigh the reasons for the establishment of two
separate bargaining units. T h e Court justified its conclusion by noting that ...
there are some teachers involved in this case w h o are teaching both in the college
and high school departments which is a decisive p r o o f of the community of
interest of these teachers and which negates the establishment of two bargaining
units. Besides, in the proposed two separate bargaining units, the elementary
2
teachers of the petitioner will be left out without a bargaining representative.

5.1 Bargaining History N o t Decisive Factor

National Association of Free Trade Unions (NAFLU) vs. Mainit Lumber Development
Company Workers Union-United Lumber and General Workers of The Philippines
(MALDECOWU-ULGWP), G.R. N o . 79526, December 21, 1990 —
Petitioner alleges that the employer M A L D E C O was composed of two
bargaining units, the Sawmill Division in Butuan City and the Logging Division,
in Zapanta Valley, Kitcharao, Agusan Norte, about 80 kilometers distant from each
other. They had two separate CBAs. From 1979 to 1985, the Ministry of Labor
and Employment recognized the existence of two (2) separate bargaining units at
M A L D E C O , one for its Logging Division and another for its Sawmill Division.
But, significantly, out of two hundred and one (201) employees of M A L D E C O ,
one hundred seventy-five (175) consented and supported the petition for certification
election, thereby confirming their desire for just one bargaining representative.
Moreover, while the existence of a bargaining history is a factor that may be
reckoned with in determining the appropriate bargaining unit, the same is not decisive
or conclusive. Other factors must be considered. T h e test of grouping is community
or mutuality of interests. This is so because "the basic test of an asserted bargaining
unit's acceptability is whether or not it is fundamentally the combination which will
3
best assure to all employees the exercise of their collective bargaining rights."
Certainly, there is a mutuality of interest among the employees of the Sawmill
Division and the Logging Division. Their functions mesh with one another. One group

!
San Miguel Corporation Supervisors vs. Honorable Bienvenido E. Laguesma,
G.R. N o . 110399, August 15, 1997.
2
Laguna College vs. Court of Industrial Relations, 25 SCRA 167 (1968).
'Democratic Labor Association vs. Cebu Stevedoring Company, Inc., et al, 103
Phil. 1103 [1985].

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A
ADMINISTRATION OF AGREEMENT *
[Part 2. Employee Participation and Representation]

needs the other in the same way that the company needs them both. There may be
difference as to the nature of their individual assignments but the distinctions are
not enough to warrant the formation of a separate bargaining unit.

5.2 Exclusion of Confidential Employees

Philips Industrial Development Inc. vs. NLRC and Philips Employees Organization
(FFW), G.R. N o . 88957, June 25, 1992 —
It is quite obvious that respondent N L R C 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.

T h e preceding ruling in Philips Industrial — which disallows confidential

employees from unionizing — has been reiterated in such subsequent cases as
Republic Planters Bank, Metrolab and San Miguel which have been discussed in the
chapter on the coverage of the right to organize under Article 243.

5.3 Temporary or Part-Time Employees

T h e N L R B has been upheld in excluding temporary employees from
bargaining units of workers in certain jobs. In determining whether temporary
or part-time employees are sufficiently identified with the regular employees in
the bargaining unit to have a community of interest with the regular employees,
so as to be properly included in the bargaining unit, one of the important factors
considered by the N L R B is the reasonable likelihood that the temporary or part-
time employees will eventually b e c o m e adequately identified in employment
1
with the other members of the bargaining unit.
Regular part-time employees are included in the bargaining unit even if
they are students or work less than 20 hours a week, or are regularly employed
elsewhere unless their work schedules are so arranged as not to conflict with
2
full-time employment elsewhere.

•48 Am. Jur. 2d 674, p. 539.

Ibid.

423
 LABOR RELATIONS
ART. 255

5.4 Seasonal Employees

T h e full-time seasonal employees w h o have a reasonable expectation of
substantial seasonal employment from year to year have been held properly
includible in the unit, but part-time seasonal employees who receive n o n e of the
fringe benefits enjoyed by full-time employees have insufficient c o m m o n interest
1
with the full-time employees to be included in the same bargaining unit.
In retail stores, part-time employees w h o regularly average 4 hours or m o r e
per week for the last quarter before the eligibility date have been held includible
in the unit. Casual employees are excluded. However, casual laborers working
for an employer who operates a referral system for unskilled labor have been
2
held an appropriate unit.

5.5 Probationary Employees

T h e fact that an employee is given a classification such as beginner, trainee,
or probationary employee, and the fact that contemplation of permanent tenure
is subject to satisfactory completion of an initial trial period, are insufficient
to warrant such employee's exclusion from a bargaining unit. Moreover, the
eligibility of probationary employees does not turn on the proportion of such
employees w h o , willingly or not, fail to continue to work for the e m p l o y e r
3
throughout the trial p e r i o d .

NOTE: See also the ruling in Airtime Specialist under the topic " W h o Can
Vote in the C.E."

6. REFERENDUM WHERE INTERESTS ARE DISSIMILAR

In the cited case of Philips Industrial, the C o u r t further h e l d that as
regards the sales representatives and service engineers [ n o t holding supervisory
positions], there is no doubt that they are entitled to j o i n or form a union,
as they are not disqualified by law from d o i n g so. Considering that they have
interests dissimilar to those of the rank-and-file employees comprising the existing
bargaining unit, and following the G l o b e Doctrine, they should be allowed to
determine for themselves what union to j o i n or form. T h e best way to determine
their preference is through a referendum.
T h e decision then of the Executive L a b o r Arbiter in merely directing the
holding of a referendum "to determine the will of the service engineers, sales
representatives as to their inclusion or exclusion in (sic) the bargaining unit" is
the most appropriate procedure that conforms with their right to form, assist
or j o i n a labor union or organization.

'48 Am. Jur. 2d 674, pp. 540.

Ibid.
3
48 Am. Jur. 2d 676, p. 541.

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ADMINISTRATION OF AGREEMENT *
[Part 2. Employee Participation and Representation]

6.1 Desire of the Employees; The Globe Doctrine

T h e desires of the employees are relevant to the determination of the
appropriate bargaining unit. T h e relevancy of the wishes of the employees
concerning their inclusion or exclusion from a proposed bargaining unit is
inherent in the basic right to self-organization. W h i l e the desires of employees
with respect to their inclusion in bargaining unit is not controlling, it is a factor
1
which would be taken into consideration in reaching a decision. This is known
as the "Globe Doctrine" which was first enunciated in the Globe Machine case that
follows.

Globe Machine & Stamping Co., 3 N L R B 294 (1937)

Three A F L unions — the Metal Polishers Union (claiming to represent the
polishers and buffers); the Machinists Union (claiming to represent the punch press
operators); and Federal Labor Union N o . 18788 (claiming to represent the rest of the
production and maintenance workers in the plant) — filed representation petitions
with the N L R B . T h e UAW-CIO intervened, claiming to represent all the production
and maintenance workers.
T h e Board found that the polishing and the punch press work at the plant was
done in separate, clearly defined areas, and was differentiated as to skill from other
classifications, but that the actual production at the plant was highly integrated. It
further found that the history of bargaining in the plant was inconclusive to show any
clear pattern of preference or clear appropriateness of either plant-wide or separate
units. T h e Board concluded as follows with respect to the problem of defining the
appropriate unit or units (3 N L R B at 299-300):
In view of the facts described above, it appears that the Company's production
workers can be considered either as a single unit appropriate for the purposes of
collective bargaining, as claimed by the UAWA, or as three such units, as claimed
by the petitioning unions. T h e history of successful separate negotiations at the
Company's plant, and the existence of a requirement of a certain amount of skill
for that work, are proof of the feasibility of the latter approach. The successful
negotiation of a plant-wide agreement on May 20, 1937, as well as the interrelation
and interdependence of the various departments at the Company's plant, are proof
of the feasibility of the former.
In such a case where the considerations are so evenly balanced, the determining
factor is the desire of the men themselves. On this point, the record affords no
help. There has been a swing toward the U A W and then away from it. The only
documentary proof is completely contradictory. We will therefore order elections
to be held separately for the men engaged in polishing and those engaged in punch
press work. We will also order an election for the employees of the Company engaged
in production and maintenance, exclusive of the polishers and punch press workers
and of clerical and supervisory employees.

' N L R B vs. Ideal and Dry Cleaning Co., 54 LC 18, 260.

425
 LABOR RELATIONS
ART. 255

"On the results of these elections will depend the determination of the
appropriate unit for the purposes of collective bargaining. Such of the groups as do
not choose the UAWA will constitute separate and distinct appropriate units, and
such as do choose the UAWA will, together, constitute a single appropriate unit."

7. SINGLE OR "EMPLOYER U N I T " IS PREFERRED

It has been the policy of the Bureau of Labor Relations to encourage the
formation of an employer unit unless circumstances otherwise require. In other
words, one employer enterprise constitutes only o n e bargaining unit. T h e m o r e
solid the employees are, the stronger is their bargaining capacity.
T h e proliferation of unions in an employer unit is discouraged as a matter
of policy unless there are compelling reasons which would deny a certain class of
1
employees the right to self-organization for purposes of collective bargaining.
Single plant units are presumed to be appropriate for purposes of collective
2
bargaining.

Pagkakaisa ng mga Manggagawa sa Triumph International Lumber, et al. vs. Pura

Ferrer-Calleja, et al., G.R. N o . 85915,January 17, 1990 —
In the case at bar, there is no dispute that the petitioner union is the exclusive
bargaining representative of the rank-and-file employees of Triumph International. A
careful examination of the records of this case reveals no evidence that rules out the
commonality of interests among the rank-and-file members of the petitioner and the
herein declared rank-and-file employees who are members of the respondent union.
Instead of forming another bargaining unit, the law requires them to be members
of the existing one. T h e ends of unionism are better served if all the rank-and-file
employees with substantially the same interests and who invoke their right to self-
organization are part of a single unit so that they can deal with their employer with
just one and yet potent voice. T h e employees' bargaining power with management is
strengthened thereby. Hence, the circumstances of this case impel us to disallow the
holding of a certificate election among the workers sought to be represented by the
respondent union for want of proof that the right of said workers to self-organization
is being suppressed.

7.1 Exceptions to One-unit Policy

T h e "one unit - o n e company" rule is not without exception. T h e exclusion
of the subject employees from the rank-and-file bargaining unit and the C B A is
definitely a "compelling reason," for it completely deprived them of the chance
to bargain collectively with petitioner and are thus left with no recourse but to

'Philtranco Service Enterprises vs. Bureau of Labor Relations, G.R. N o . 85343,

June 28, 1989.
2
Stalfort and Sons, 156 N L R B N o . 7; Parsons Investment Co., 152 N L R B N o .
14; Purity Foods, 150 N L R B N o . 148.

426
 COLLECTIVE BARGAINING AND ART. 255
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

group themselves into a separate and distinct bargaining unit and form their
own organization. T h e rationale behind the exception to the aforementioned
policy is further elucidated in Knitjoy Manufacturing, Inc. vs. Ferrer-Calleja (214
SCRA 174 [ 1 9 9 2 ] ) :
T h e usual exception, of course, is where the employer unit has to
give way to the other units like the craft unit, plant unit, or a subdivision
thereof; the recognition of these exceptions takes into account the policy
to assure e m p l o y e e s of the fullest f r e e d o m in exercising their rights.
Otherwise stated, the o n e company-one union policy must yield to the
right of the employees to f o r m unions or associations for purposes not
contrary to law, to self-organization and to enter into collective bargaining
negotiations, a m o n g others, which the Commission guarantees. (Barbizon
Phil. vs. Nagkakaisang Supervisor ng Barbizon, etc., G.R. Nos. 113204-05,
September 16, 1996.)
T h e monthly-paid rank-and-file employees may constitute a C B U apart from
that of the daily-paid. In Golden Farms, the evidence established that the monthly
paid rank-and-file employees of petitioner primarily p e r f o r m administrative
or clerical work. In contradistinction, the petitioner's daily paid rank-and-file
employees mainly work in the cultivation of bananas in the fields. It is crystal
clear that the monthly paid rank-and-file employees of petitioner have very
little in c o m m o n with its daily paid rank-and-file employees in terms of duties
and obligations, working conditions, salary rates, and skills. To be sure, the said
monthly paid rank-and-file employees have even been excluded from the bargaining unit
of the daily paid rank-and-file employees. This dissimilarity of interests warrants the
formation of a separate and distinct bargaining unit for the monthly paid rank-
and-file employees of the petitioner. To rule otherwise would deny this distinct class
of employees the right to self-organization for purposes of collective bargaining. Without
the shield of an organization, it will also expose them to the exploitations of management.
1
x x x (Italics ours.)

8. T W O C O M P A N I E S W I T H RELATED BUSINESSES
T w o corporations cannot be treated as a single bargaining unit even if
2
their businesses are related.
Indophil Textile Mill Workers Union-PTGWO vs. Voluntary Arbitrator Teodorico
P. Calico and Indophil Textile Mills, Inc., G.R N o . 96490, February 3, 1992. —
T h e central issue is whether or not Indophil Acrylic Corporation is an
extension of Indophil Textile Mills, and, if so, whether the rank-and-file employees
of Indophil Acrylic should be recognized as part of the bargaining unit of Indophil

'Golden Farms, Inc. vs. Secretary of Labor, 234 SCRA 517 [1994].
2
Diatagon Labor Federation Local 110 of the U L G W P vs. Ople, 101 SCRA 534
[1980].

427
 LABOR RELATIONS
ART. 255

Textile. T h e union in Indophil Textile wants to represent as well the employees of

Indophil Acrylic.
The union maintains that the creation of the Indophil Acrylic is but a device
of respondent Indophil Textile to evade the application of the CBA between the
Union and the Company to the Acrylic people. T h e Union points out that the two
corporations have practically the same incorporators, directors and officers. In fact, of
the total stock subscription of Indophil Acrylic, seventy percent (70%) was subscribed
to by respondent Indophil Textile.
The union also stresses that the two entities are engaged in the same kind of
business, which is the manufacture and sale of yarns and other materials of kindred
character.
But on this point, Indophil Textile [the employer] cited the case of Diatagon
Labor Federation vs. Ople, (G.R. Nos. L44493-94, December 3, 1980, 101 SCRA 534),
which ruled that two corporations cannot be treated as a single bargaining unit even
if their businesses are related.
Petitioner union counters that the evidence shows that Acrylic is but an
extension of Indophil Textile, to wit:
(a) the two corporations have their physical plants, offices and facilities
situated in the same compound, at Barrio Lambakin, Marilao, Bulacan;
(b) many of private respondent's own machineries, such as dyeing machines,
reeling, boiler, Kamitsus among others, were transferred to and are now installed
and being used in the Acrylic plant;
( c ) the services of a number of units, departments or sections of private
respondent are provided to Acrylic; and
( d ) the employees of private respondent are the same persons manning and
servicing the units of Acrylic.
In sum, petitioner union insists that the voluntary arbitrator committed grave
abuse of discretion amounting to lack or in excess of jurisdiction in erroneously
interpreting the CBA provision and in failing to disregard the corporate entity of
Indophil Acrylic.
Ruling: We find the petition devoid of merit.
The fact that the business of Indophil Textile and Indophil Acrylic are related,
that some of the employees of the Indophil Textile are the same persons manning
and providing for auxiliary services to the units of Acrylic, and that the physical
plants, offices and facilities are situated in the same compound — these facts are not
sufficient to justify piercing the corporate veil of Acrylic.
In the case of Umali, et al. vs. Court of Appeals, we already emphasized that
"the legal corporate entity is disregarded only if it is sought to hold the offices and
stockholders directly liable for a corporate debtor obligation." In the instant case,
petitioner does not seek to impose a claim against the members of the Acrylic.
Furthermore, we already ruled in the case of Diatagon Labor Federation Local
110 of the ULGWP vs. Ople that it is grave abuse of discretion to treat two companies

428
 COLLECTIVE BARGAINING A N D A R T 9KK
A 3 D
ADMINISTRATION O F AGREEMENT '
[Part 2. Employee Participation and Representation]

as a single bargaining unit when these companies are indubitably distinct endues
with separate juridical personalities.
Hence, the Acrylic not being an extension or expansion of Indophil Textile,
the rank-and-file employees working at Acrylic should not be recognized as part of,
and/or within the scope of, the petitioner union as the bargaining representative of
private respondent.
It should be emphasized that in rendering the subject arbitral award, the
voluntary arbitrator Teodorico Calica, a professor of the U.P. Asian Labor Education
Center, now the Institute for Industrial Relations, found that the existing law and
jurisprudence on the matter supported the private respondent's contentions.
Contrary to petitioner's assertion, public respondent cited facts and the law upon
which he based the award. Hence, public respondent Calica did not abuse his
discretion.

In another case involving two schools, the Court said: the Court also affirms
the findings of the voluntary arbitrator that the employees of the College of
St. Benilde should be excluded from the bargaining unit of the rank-and-file
employees of De la Salle University, because the two educational institutions have
their own separate juridical personality and no sufficient evidence was shown to
1
justify the piercing of the veil of corporate fiction.

8.1 Subsidiaries and Spun-off Corporations

Subsidiaries or corporations f o r m e d out of f o r m e r divisions of a mother
company following a bona ^ ^ r e o r g a n i z a t i o n may constitute separate bargaining
units. This is the i m p o r t of the ruling in the San Miguel case whose facts are
narrated in the previous chapter regarding the two- or three-year term of a CBA.
We tackle here the issue about bargaining unit.

San Miguel Corp. Employees Union-PTGWO, etc. vs. Confesor, San Miguel Corp.,
Magnolia Corp., and San Miguel Foods, Inc., G.R. N o . 111262, September 19,
1996 —
Magnolia and SMFI were spun-off to operate as distinct companies on October
1,1991. Management saw the need for these transformations in keeping with its vision
and long term strategy as it explained in its letter addressed to the employees dated
August 13, 1991. x x x
Undeniably, the transformation of the companies was a management
prerogative and business judgment which the courts cannot look into unless it is
contrary to law, public policy, or morals. Neither can we impute any bad faith on the
part of SMC so as to justify the application of the doctrine of piercing the corporate
veil. Ever mindful of the employees' interests, management has assured the concerned
employees that they will be absorbed by the new corporations without loss of tenure

•De La Salle University vs. DLSUEA, G.R. N o . 109002, April 12, 2000.

429
 LABOR RELATIONS
ART. 255

and retaining their present pay and benefits according to the existing CBAs. They
were advised that upon the expiration of the CBAs, new agreements will be negotiated
between the management of the new corporations and the bargaining representatives
of the employees concerned. As a result of the spin-offs:
1. Each of the companies are run by, supervised and controlled by different
management teams including separate human resource/personnel managers.
2. Each Company enforces its own administrative and operational rules
and policies and are not dependent on each other in their operations.
3. Each entity maintains separate financial statements and are audited
separately from each other.
Indubitably, therefore, Magnolia and SMFI became distinct entities with
separate juridical personalities. Thus, they cannot belong to a single bargaining unit
as held in the case of Diatagon Labor Federation Local 110 of the ULGWP vs. Ople.
Petitioner-union's attempt to include the employees of Magnolia and SMFI in
the SMC bargaining unit so as to have a bigger mass base of employees has, therefore,
no more valid ground.
Moreover, in determining an appropriate bargaining unit, the test of grouping
is mutuality or commonality of interests. T h e employees sought to be represented
by the collective bargaining agent must have substantial mutual interests in terms of
employment and working conditions as evidenced by the type of work they performed.
Considering the spin-offs, the companies would consequently have their respective
and distinctive concerns in terms of the nature of work, wages, hours of work and
other conditions of employment. Interests of employees in the different companies
perforce differ. SMC is engaged in the business of beer manufacturing. Magnolia
is involved in the manufacturing and processing of dairy products while SMFI is
involved in the production of feeds and the processing of chicken. T h e nature of
their products and scales of business may require different compensation packages.
The different companies may have different volumes of work and different working
conditions. For such reason, the employees of the different companies see the need
to group themselves together and organize themselves into distinctive and different
groups. It would then be best to have separate bargaining units for the different
companies where the employees can bargain separately according to their needs
and according to their own working conditions.

9. S U M M A T I O N OF SIGNIFICANCE
It is helpful to reiterate that the bargaining unit is not the same as the union;
in fact, there may be several unions (majority and minority) in o n e bargaining
unit. Determining the scope or "membership'' of the bargaining unit is significant
and far-reaching because it leads to the determination also of: ( 1 ) the employees
who can vote in the certification election; ( 2 ) the employees to be represented
in bargaining with the employer, and (3) the employees w h o will be covered by
the resulting C B A .

430
 COLLECTIVE BARGAINING AND ARTS 9*G_9K'7
ADMINISTRATION OF AGREEMENT 450-^57
[Part 2. Employee Participation and Representation]

Distinguishing the C B U from the union is important because

1. in a C.E. the voters are the C B U , whether union or nonunion
1
members;
2. in C B A ratification the voters are the unit, not just the union
2
members;
3. in strike voting, the voters are the members of the union, not all of
3
the unit.

ART. 256. REPRESENTATION ISSUE IN ORGANIZED ESTABLISH-

MENTS
In organized establishments, when a verified petition questioning
the majority status of the incumbent bargaining agent is filed before the
Department of Labor and Employment within the sixty-day period before
the expiration of the collective bargaining agreement, the Med-Arbiter shall
automatically order an election by secret ballot when the verified petition is
supported by the written consent of at least twenty-five percent (25%) of all
the employees in the bargaining unit to ascertain the will of the employees in
the appropriate bargaining unit. To have a valid election, at least a majority
of all eligible voters in the unit must have cast their votes. The labor union
receiving the majority of the valid votes cast shall be certified as the exclusive
bargaining agent of all the workers in the unit. When an election which
provides for three or more choices results in no choice receiving a majority
of the valid votes cast, a run-off election shall be conducted between the labor
unions receiving the two highest number of votes: Provided, That the total
number of votes for all contending unions is at least fifty percent (50%) of
the number of votes cast. In cases where the petition was filed by a national
union or federation, it shall not be required to disclose the names of the
local chapter's officers and members.
At the expiration of the freedom period, the employer shall continue
to recognize the majority status of the incumbent bargaining agent where
no petition for certification election is filed.

ART. 257. PETITIONS IN UNORGANIZED ESTABLISHMENTS

In any establishment where there is no certified bargaining agent, a
certification election shall automatically be conducted by the Med-Arbiter
upon the filing of a petition by any legitimate labor organization, including a
national union or federation which has already issued a charter certificate to
its local/chapter participating in the certification election or a local/chapter

'Articles 255 and 256.

2
Article 231.
s
Article 263(f).

431
ARTS. 258-259 LABOR RELATIONS

which has been issued a charter certificate by the national union or federation.
In cases where the petition was filed by a national union or federation, it
shall not be required to disclose the names of the local chapter's officers
and members.
ART. 258. WHEN AN EMPLOYER MAY FILE PETITION
When requested to bargain collectively, an employer may petition the
Bureau for an election. If there is no existing certified collective bargaining
agreement in the unit, the Bureau shall, after hearing, order a certification
election.
All certification cases shall be decided within twenty (20) working days.
The Bureau shall conduct a certification election within twenty (20) days
in accordance with the rules and regulations prescribed by the Secretary of
Labor.
ART. 258-A. EMPLOYER AS BYSTANDER
In all cases, whether the petition for certification election is filed by
an employer or a legitimate labor organization, the employer shall not be
considered a party thereto with a concomitant right to oppose a petition for
certification election. The employer's participation in such proceedings shall
be limited to: (1) being notified or informed of petitions of such nature;
and (2) submitting the list of employees during the pre-election conference
should the Med-Arbiter act favorably on the petition.

ART. 259. APPEAL FROM CERTIFICATION ELECTION ORDERS

Any party to an election may appeal the order or results of the election
as determined by the Med-Arbiter directly to the Secretary of Labor and
Employment on the ground that the rules and regulations or parts thereof
established by the Secretary of Labor and Employment for the conduct of
the election have been violated. Such appeal shall be decided within fifteen
(15) calendar days.
C O M M E N T S A N D CASES
1. DETERMINING THE BARGAINING U N I O N : OVERVIEW OF THE
METHODS
To bargain with the employer, the employees in the collective bargaining
unit ( C B U ) can be represented by one and only o n e union which has to be a
legitimate labor organization duly designated or selected by the employees in
the CBU.
Under the C o d e a "bargaining representative" is defined as a "legitimate
labor organization or any officer or agent of such organization whether or not
1
employed by the employer." T h e Implementing Rules, however, as amended
'Article 212 [ j ] .
432
 COLLECTIVE BARGAINING A N D ARTS. 256-259
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

by D . O . N o . 40-03 drops the "officer or agent" as it states: "Exclusive bargaining

representative means any legitimate labor union duly recognized or certified as
the sole and exclusive bargaining representative or agent of all the employees
in a bargaining unit."
T h e selection of such bargaining agent may take place in an organized or
an unorganized establishment. "Organized establishment" refers to an enterprise
1
where there exists a recognized or certified sole and exclusive bargaining agent.
T h e employer company is "unorganized" where no union has yet been duly
recognized or certified as bargaining representative. Article 256 speaks of an
organized firm; Article 257, of the unorganized.
W h e t h e r the proceedings take place in an organized or an unorganized
bargaining unit, and whether the proceedings are called consent election or
certification election ( C E ) , the objective is the same, namely, to identify the
union that will represent the employees in bargaining with the employer. Until
this representation dispute is resolved, no C B A can be entered into.
In an unorganized establishment, the employer may voluntarily recognize
the bargaining agent. If there are obstacles to this, the petition to hold an election
may be filed anytime by any legitimate labor organization ( L L O ) , except within
12 months from a previous CE, run-off, or consent election.
In an o r g a n i z e d establishment, on the other hand, voluntary recognition
is not possible. A petition to h o l d a C.E. has to be filed within the "freedom
p e r i o d " which means the last sixty ( 6 0 ) days of the fifth year of the expiring
C B A ; in other words, the contest between unions comes at intervals of roughly
four years and ten months. T h e petition may be filed by any L L O , but the
petition must have the written support of at least twenty-five percent ( 2 5 % ) of
the e m p l o y e e s in the bargaining unit. T h e 25% initial support indicates that
the petitioner has a fair chance of winning and that the petition is not just a
nuisance.
Conceivably but rarely an employer may also file a petition for a C.E.
T h e election is conducted under the supervision and control of D O L E
officials. It ends up with a formal and official statement of results, certifying
which union won, if any. H e n c e , the election is appropriately called "certification
election."
W h e r e o n e casting of votes is not decisive enough to elect a union, the
election officials may require a run-off election if certain other conditions exist,
as explained below.
But a certification election, a run-off election, or a consent election is
needed only when two or m o r e unions are vying for the "office" of exclusive
b a r g a i n i n g representative ( E B R ) . W h e r e there is but o n e union in the

'Book V, Rule 1, Section 1 of the Implementing Rules.

433
 LABOR RELATIONS
ARTS. 256-259

bargaining unit and there is ample p r o o f that that union carries the majority
of the employees, the law (i.e., the Implementing Rules) allows the employer
to voluntarily recognize such union. Voluntary recognition does away with the
more tedious electoral contest between unions.
T h e r e are, therefore, three methods to determine the bargaining union:
( 1 ) voluntary recognition; ( 2 ) certification election with or without run-off; and
( 3 ) consent election. Each is explained sequentially below.

2. FIRST M E T H O D : V O L U N T A R Y R E C O G N I T I O N ( V . R . )
T h e employer's voluntary r e c o g n i t i o n ( V R ) o f the e m p l o y e e s ' union
significantly facilitates the bargaining process. T h e employees, especially the
union leaders and organizers, rejoice when they are able to convince the employer
to voluntarily recognize and subsequently bargain with their union. But VR
requires three concurrent conditions.
First, voluntary recognition is possible only in an unorganized establishment.
In an organized setting the employer cannot voluntarily recognize any new union
because the law (Article 256) requires him to continue recognizing and dealing
with the incumbent union as long as it has not been properly replaced by another
union.
Second, only one union is asking for recognition; if there are two or m o r e
unions asking to be recognized the employer cannot recognize any of them; the
rivalry must be resolved through an election;
Third, the union voluntarily r e c o g n i z e d should be the majority union as
indicated by the fact that members of the bargaining unit did not object to the
projected recognition. If no objection is raised, the recognition will proceed,
the D O L E will be informed and C B A negotiation will c o m m e n c e . If objection is
raised, the recognition is barred, and a certification election or consent election
will have to take place.

2.1 V . R . under D . O . N o . 40-03

T h e Implementing Rules, as revised by D . O . N o . 40-03 (dated February
17, 2003), prescribes the procedure and requirements of voluntary recognition:
Section 1. When and where to file. — In unorganized establishments
with only one legitimate labor organization, the employer may voluntarily
recognize the representation status of such a union. Within thirty (30) days
from such recognition, the employer and union shall submit a notice of
voluntary recognition with the Regional Office which issued the recognized
labor union's certificate of registration or certificate of creation of a
chartered local.
Section 2. Requirements for voluntary recognition. — T h e notice of
voluntary recognition shall be accompanied by the original copy and two
( 2 ) duplicate copies of the following documents:

434
 COLLECTIVE BARGAINING A N D A R T S . 256-259
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

(a) a j o i n t statement under oath of voluntary recognition attesting

to the fact of voluntary recognition;
(b) certificate of posting of the j o i n t statement of voluntary
recognition for fifteen (15) consecutive days in at least two
( 2 ) conspicuous places in the establishment or bargaining
unit where the union seeks to operate;
(c) the approximate number of employees in the bargaining
unit, accompanied by the names of those w h o support the
voluntary recognition comprising at least a majority of the
members of the bargaining unit; and
(d) a statement that the labor union is the only legitimate labor
organization operating within the bargaining unit.
A l l accompanying documents of the notice for voluntary recognition
shall be certified under oath by the employer representative and president
of the recognized labor union.
Section 3. Action on the Notice. — W h e r e the notice of voluntary
recognition is sufficient in form, number and substance and where there
is no other registered labor union operating within the bargaining unit
c o n c e r n e d , the Regional Office, through the Labor Relations Division
shall, within ten ( 1 0 ) days from receipt of the notice, record the fact of
voluntary recognition in its roster of legitimate labor unions and notify
the labor union c o n c e r n e d .
W h e r e the notice of voluntary recognition is insufficient in form,
number and substance, the Regional Office shall, within the same period,
notify the labor union of its findings and advise it to comply with the
necessary requirements. W h e r e neither the employer nor the labor union
failed to c o m p l e t e the requirements for voluntary recognition under
Section 2 of this Rule within thirty (30) days from receipt of the advisory,
the R e g i o n a l Office shall return the notice for voluntary recognition
together with all its accompanying documents without prejudice to its re-
submission.
Section 4. Effect of recording of fact of voluntary recognition. — From the
time of recording of voluntary recognition, the recognized labor union
shall enjoy the rights, privileges and obligations of an existing bargaining
agent of all the employees in the bargaining unit.
Entry of voluntary recognition shall bar the filing of a petition for
certification election by any labor organization for a period of one (1)
year from the date of entry of voluntary recognition. U p o n expiration of
this one-year period, any legitimate labor organization may file a petition
for certification election in the same bargaining unit represented by the
voluntarily recognized union, unless a collective bargaining agreement

435
ARTS. 256-259 LABOR RELATIONS

between the employer and voluntarily recognized labor union was executed
and registered with the Regional Office in accordance with Rule X V I I of
these Rules.
Simply said, the last paragraph means that the employer and the union
should conclude and register a C B A within o n e year f r o m the voluntary
recognition, otherwise, the recognition will lapse and a rival union may petition
for a certification election.

3. SECOND M E T H O D : CERTIFICATION E L E C T I O N (C.E.)

Whenever there is doubt as to whether a particular union represents the
majority of the rank-and-file employees, in the absence of a legal impediment, the
holding of a certification election is the most democratic m e t h o d of determining
the employees' choice of their bargaining representative. It is the appropriate
means whereby controversies and disputes on representation may be laid to rest,
1
by the unequivocal vote of the employees themselves.
Exercising their suffrage through the m e d i u m of the secret ballot, they
can select the exclusive bargaining representative that, e m b o l d e n e d by their
confidence and strengthened by their support, shall fight for their rights at the
conference table. That is how union solidarity is achieved and union power is
increased in a free society. H e n c e , rather than being inhibited and delayed, the
certification election should be given every encouragement under the law so
that the will of the workers may be discovered and, through their freely chosen
2
representatives, pursued and realized.
T h e process is properly called certification election because it serves as
the official, reliable and democratic basis for the Bureau to d e t e r m i n e and
certify the union that shall be the exclusive representative of the employees
(in the bargaining unit) for the purpose of bargaining with the employer. As
defined in the Implementing Rules, "Certification Election" means the process
of determining through secret ballot the sole and exclusive representative of
the employees in an appropriate bargaining unit, for purposes of collective
3
bargaining or negotiation." T h e f o r m and content of a petition for a C.E., the
procedure in hearing and deciding the petition and other details of election are
contained in the Implementing Rules and mostly explained below.

3.1 Fact-Finding
In labor legislation, certification p r o c e e d i n g s is not a litigation in the
sense in which the term is ordinarily understood, but an investigation of non-

Philippine Airlines Employees' Association vs. Calleja, G.R. N o . 76673, Tune

22, 1988.
Associated Trade Unions [ A T U ] vs. Trajano, G.R. N o . 75321, Tune 20,
1988.
3
Book V, Rule I, Sec. 1.

436
 COLLECTIVE BARGAINING A N D ART. 256-259
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

adversary and fact-finding character. As such, it is not bound by technical rules

1
o f evidence.
T h e law does not contemplate the h o l d i n g of a certification election
unless the preliminary inquiry shows a reasonable doubt as to which of the
contending unions represents a majority. But these grounds necessarily depend
on the weight of the evidence adduced by the rival unions, and this weight,
in turn, cannot be d e t e r m i n e d properly if the right of cross examination is
2
denied.
Certification p r o c e e d i n g s directly involve only two issues: ( a ) proper
composition and constituency of the bargaining unit; and ( b ) veracity of majority
membership claims of the c o m p e t i n g unions so as to identify the o n e union that
will serve as the bargaining representative of the entire bargaining unit.
But some of the employees may not want to have a union; hence, " N o
U n i o n " is o n e of the choices ("candidates") n a m e d in the ballot. If " N o Union"
wins, the company or the bargaining unit remains ununionized for at least 12
months, the p e r i o d known as the 12-month bar. After that period, a petition for
a CE may be filed again.

3.1a Certification Election Differentiated from Union Election

A union election is held pursuant to the union's constitution and bylaws,
and the right to vote in it is enjoyed only by union members. T h e object is to elect
officers of the union. A certification election, on the other hand, is the process,
ordered and supervised by D O L E , of determining, through secret ballot, whether
or not a majority of the employees wish to be represented by a labor organization
3
and, in the affirmative case, by which particular labor organization.
In a certification election, all employees whether union m e m b e r or not,
w h o b e l o n g to the appropriate bargaining unit can vote. However, the reverse is
not always true; an e m p l o y e e w h o belongs to the bargaining unit but who is not
a union m e m b e r cannot vote in the union election, unless otherwise authorized
4
by the union constitution and bylaws.
Both in C.E. and u n i o n elections, prescribed procedures should be
followed. Thus, for instance, the alleged O c t o b e r 4, 1996 election in the U S T
union [which elected a new set of union officers to replace the incumbents]
cannot properly be called a union election, because the procedure laid down in
the U S T F U ' s C B L for the election of officers was not followed. It could not have
been a certification election either, because representation was not the issue,

'Associated Labor Unions vs. Calleja, G.R. N o . 82260, July 19, 1989.
2
FEWA vs. CIR, L-20862,July 30, 1965.
3
UST Faculty Union ( U S T F U ) , et al. vs. Director Bitonio, et al., G.R. N o . 131235,
November 16, 1999.
Ibid.

437
 LABOR RELATIONS
ARTS. 256-259

and the proper procedure for such election was not followed. T h e participation
1
of non-union members in the election aggravated its irregularity.
T h e winners in a union election b e c o m e officers and representatives of
the union only. T h e winner in a certification election is an entity, a union, which
becomes the representative of the whole bargaining unit that includes even the
members of the defeated unions.

3.2 Direct Certification No Longer Allowed

Even in a case where a union has filed a petition for certification election,
the mere fact that there was no opposition does not warrant a direct certification.
M o r e so in a case when the required p r o o f is not presented in an appropriate
proceeding and the basis of the direct certification is the union's self-serving
assertion that it enjoys the support of the majority of the employees, without
subjecting such assertion to the test of competing claims.
T h e holding of a certification election at the p r o p e r time is not necessarily
a mere formality where there is a compelling legal reason not to directly and
unilaterally certify a union whose legitimacy is precisely the object of litigation
in a pending cancellation case filed by a g r o u p of employees w h o also claim
2
majority status.
We [the Supreme C o u r t ] rule that the direct certification o r d e r e d by
respondent Secretary i s not proper. B y virtue o f Executive O r d e r N o . I l l ,
which became effective on March 4, 1987, the direct certification originally
allowed under Article 257 of the L a b o r C o d e has apparently been discontinued
as a method of selecting the exclusive bargaining agent of the workers. This
amendment affirms the superiority of the certification election over the direct
3
certification which is no longer available now under the change in said provision.

3.3 W h o Files Petition for Certification Election ( P C E )

A request or petition to h o l d certification election ( C . E . ) in an enterprise
may be filed by a registered union or by an employer.
Any legitimate labor organization, including a national union or federation
that has issued a charter certificate to its local/chapter or the local/chapter itself,
may file a petition for certification election.
A national union or federation filing a petition in behalf of its local/chapter
shall not be required to disclose the names of the local/chapter's officers and

'UST Faculty Union ( U S T F U ) , et al. vs. Director Bitonio, et al, G.R. N o . 131235,
November 16, 1999.
2
Colgate Palmolive Philippines, Inc. vs. Bias Ople, G.R. N o . 73681, Tune 30,
1988.
'Central Negros Electric Cooperative, Inc. vs. Secretary of Labor, G.R. N o .
94045, September 13, 1991; National Organization of Workingmen vs. Drilon, G.R.
N o . 91288, January 28, 1991, First Division, Minute Resolution.

438
 COLLECTIVE BARGAINING A N D ARTS. 256-259
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

members, but shall attach to the petition the charter certificate it issued to its
local/chapter.
W h e n requested to bargain collectively in a bargaining unit where no
registered collective bargaining agreement exists, an employer may file a petition
for certification election with the Regional Office.
In all cases, whether the petition for certification election is filed by an
employer or a legitimate labor organization, the employer shall not be considered
a party thereto with a concomitant right to oppose a petition for certification
election. T h e employer's participation in such proceedings shall be limited to:
( 1 ) being notified or i n f o r m e d of petitions of such nature; and ( 2 ) submitting
the list of employees during the pre-election conference should the Med-Arbiter
act favorably on the petition.
A n y employee has the right to intervene for the protection of his individual
1
right.
In an unorganized establishment o n c e a petition is filed by a legitimate
labor organization, the Med-Arbiter shall automatically order the conduct of
a certification election. T h e tenor of Article 257 is o n e of command, thus, the
order is not appealable because making it appealable will contradict the objective,
2
stated in Article 211, to p r o m o t e free trade unionism. But the application of
Article 257 has to be initiated by a genuine petition from a legitimate labor
organization. T h e law does not reduce the Med-Arbiter to an automaton which
can instantly be set to impulse by the m e r e filing of a petition for certification
election. He is still tasked to satisfy himself that all the conditions of the law are
met, and a m o n g the legal requirements is that the petitioning union must be a
3
legitimate labor organization in g o o d standing.
T h e employer, says Article 258, may file a PCE when it has been asked to
bargain. If this happens, the h o l d i n g of the CE becomes mandatory if there is
no existing registered collective bargaining agreement. However, instead of itself
filing a petition, the employer usually lets the unions interplead to determine
w h o a m o n g them will bargain with the employer.

3.3a Intervention
O t h e r unions which are interested in j o i n i n g a certification election may
file a motion for intervention. Such motion is g o v e r n e d by the same rules that
apply to a PCE.

'IRR, Book V, Rule V I I I , as amended by D.O. N o . 40-F-03.

2
Rule V I I I , Sec. 17, D.O. N o . 40-03.
'Lopez Sugar Corp. vs. Secretary of Labor, National Congress' of Unions I
the Sugar Industry of the Philippines [ N A C U S I P ] , et al, G.R. N o . 93117, August ]
1995.

439
 LABOR RELATIONS
ARTS. 256-259

In an organized establishment the incumbent bargaining agent, of course,

will not file a PCE because it will not contest its own incumbency. T h e filer will
most likely be a union that was defeated in the CE held some five years before. In
any such petition the incumbent union is a necessary party, a forced intervenor.
But even so, it does not thereby lose its representative status; it remains the sole
bargaining representative until it is replaced by another. A n d until so replaced
it has the right to retain the recognition by the employer.
Whether petitioner or intervenor, the union has to be an L L O .
If the petition for certification election was filed by the federation which is
merely an agent, the petition is d e e m e d to be filed by the chapter, the principal,
which must be a legitimate labor organization. T h e chapter cannot merely rely on
1
the legitimate status of the mother union. W h e r e the constitution, by-laws and
the list of members w h o supposedly ratified the same were not attested to by the
union president, and the constitution and by-laws were not verified under oath,
the local union has no personality to file a petition for certification election, it
2
not being a legitimate labor organization. T h e petition should be dismissed.
A union that has no legal personality to file a petition for C.E. has no
3
personality either to file a petition-in-intervention.

Note: See related discussion under Articles. 234-240.

3.4 Where to File the P C E

A petition for certification election ( P C E ) shall be filed with the Regional
Office which issued the petitioning union's certificate of registration or certificate
of creation of chartered local. T h e petition shall be heard and resolved by the
Med-Arbiter.
W h e r e two or m o r e petitions involving the same bargaining unit are filed
in o n e Regional Office, the same shall be automatically consolidated with the
Med-Arbiter w h o first acquired jurisdiction. W h e r e the petitions are filed in
different Regional Offices, the Regional Office in which the petition was first
filed shall exclude all others; in which case, the latter shall indorse the petition
to the former for consolidation.

3.5 When to File the P C E

T h e proper time to file a petition for C.E. depends on whether the C B U
has a C B A or not. If it has no C B A , the petition may be filed anytime outside

•Progressive Development Corp. vs. Secretary of Labor, et al, G.R. N o . 96425,

February 4, 1992.
2
Phoenix Iron and Steel Corp. vs. Secretary of Labor and DISCOR Workers
Union-ANGLO, G.R. N o . 112141, May 16, 1995.
'Toyota Motors Phil. Corp. Labor Union vs. Toyota Motor Phil. Corp. Employees
and Workers Union, et al, G.R. N o . 135806, August 8, 2002.

440
 COLLECTIVE BARGAINING A N D ARTS 25fi-25Q
W
ADMINISTRATION O F AGREEMENT * ^
[Part 2. Employee Participation and Representation]

the 12-month bar. If it has a C B A , it can be filed only within the last 60 days of
the fifth year of the C B A . These bare statements will be examined later in detail
because there are "election bars" that can cause the dismissal of the petition.
T h e I R R states: A petition for certification election may be filed anytime, except:
(a) when a fact of voluntary recognition has been entered or a valid
certification, c o n s e n t or run-off e l e c t i o n has b e e n c o n d u c t e d
within the bargaining unit within o n e ( 1 ) year prior to the filing of
the petition for certification election. W h e r e an appeal has been
filed from the order of the Med-Arbiter certifying the results of the
election, the running of the o n e year period shall be suspended until
the decision on the appeal has b e c o m e final and executory;
(b) w h e n the duly c e r t i f i e d u n i o n has c o m m e n c e d and sustained
negotiations in g o o d faith with the employer in accordance with
Article 250 of the L a b o r C o d e within the o n e year period referred
to in the immediately preceding paragraph;
(c) when a bargaining deadlock to which an incumbent or certified bar-
gaining agent is a party had been submitted to conciliation or arbitra-
tion or had b e c o m e the subject of a valid notice of strike or lockout;
(d) when a collective bargaining agreement between the employer and a
duly r e c o g n i z e d or certified bargaining agent has been registered in
accordance with Article 231 of the Labor C o d e . W h e r e such collective
bargaining agreement is registered, the petition may be filed only
within sixty ( 6 0 ) days prior to its expiry.

3.6 Form and Contents of Petition

T h e petition shall be in writing, verified under oath by the president of
petitioning labor organization. W h e r e a federation or national union files a
petition in behalf of its local or affiliate, the petition shall be verified under oath
by the president or duly authorized representative of the federation or national
union with a certification under oath as to the existence of its local/chapter in
the establishment and attaching thereto the charter certificate or a certified
true copy. If the petition is filed by a local/chapter it shall attach its charter
certificate or a certified true copy. In case the employer filed the petition, the
owner, president or any corporate officer, w h o is authorized by the board of
directors, shall verify the petition.
T h e petition should also state any of the following circumstances:
1) that the bargaining unit is unorganized or that there is no registered
collective bargaining agreement covering the employees in the
bargaining unit; or
2) if there exists a duly registered collective bargaining agreement,
that the petition is filed within the sixty-day freedom period of such
agreement; or

441
 LABOR RELATIONS
ARTS. 256-259

3) if another union had been previously recognized voluntarily or

certified in a valid certification, consent or run-off election, that the
petition is filed outside the one-year period from date of recording
of such voluntary recognition or conduct of certification or run-off
election and no appeal is pending thereon.
In an organized establishment, the signature of at least twenty-five percent
( 2 5 % ) of all employees in the appropriate bargaining unit shall be attached to
the petition at the time of its filing.

3.7 Action on the Petition: Preliminary Conference

H a v i n g b e e n assigned by raffle, the p e t i t i o n shall i m m e d i a t e l y be
transmitted to the assigned Mediator-Arbiter w h o shall immediately prepare
and serve a notice of preliminary conference to be held within ten (10) working
days from the Mediator-Arbiter's receipt of the petition.
T h e service of the petition to the employer and of the notice of preliminary
conference to the petitioner and the incumbent bargaining agent (if any) shall
be made within three ( 3 ) working days from the Mediator-Arbiter's receipt of
the petition. T h e service may be made by personal service, by registered mail
or by courier service.
A copy of the petition and of the notice of preliminary conference shall be
posted within the same three ( 3 ) day p e r i o d in at least two conspicuous places
in the establishment. In multiple-location workplaces, the posting shall be made
in at least two conspicuous places in every location.
T h e preliminary conference is principally meant to determine whether
the PCE should be processed further or be dismissed. It is the means also to
determine the bargaining unit that will participate in the election, the identity
of the contending unions, and the possibility of h o l d i n g a "consent election"
instead of a certification election.
If at the preliminary conference the unions agree to hold a consent election,
then the PCE will no longer be heard and the unions will instead prepare for
the consent election (discussed b e l o w ) .
If the unions fail to agree to h o l d a consent election, the Med-arbiter
proceeds to consider the petition. He may deny and dismiss, or he may grant,
the petition. Denial or grant of the petition is always appealable to the Secretary.
N e v e r appealable, however, is the approval of a P C E in an u n o r g a n i z e d
(ununionized) bargaining unit, the reason being that the law wants to unionize
the ununionized.

3.8 Action on the Petition; Hearings and Pleadings

If the contending unions fail to agree to a consent election during the
preliminary conference, the Med-Arbiter may conduct as many hearings as he
may deem necessary. But the conduct of the hearings cannot e x c e e d fifteen (15)

442
 COLLECTIVE BARGAINING A N D ARTS 95fL9rtQ
ADMINISTRATION OF AGREEMENT 400-^»
[Part 2. Employee Participation and Representation]

days from the date of the scheduled preliminary conference/hearing. After that
time the petition shall be considered submitted for decision. T h e Med-Arbiter
shall have control of the proceedings. Postponements or continuances are
discouraged.
Within the same 15-day p e r i o d within which the petition is heard, the
contending labor unions may file such pleadings as they may d e e m necessary
for the immediate resolution of the petition. Extensions of time shall not be
entertained. A l l motions shall be resolved by the Med-Arbiter in the same order
or decision granting or denying the petition.
T h e failure of any party to appear in the hearing (s) when notified or to file
its pleadings shall be d e e m e d a waiver of its right to be heard. T h e Med-Arbiter,
however, upon a g r e e m e n t of the parties for meritorious reasons, may allow
the cancellation of scheduled hearing ( s ) . T h e cancellation of any scheduled
hearing(s) shall not be used as a basis for extending the 15-day period within
which to terminate the same.
Within ten (10) days from the date of the last hearing, the Med-Arbiter
shall issue a f o r m a l o r d e r d e n y i n g or granting the petition. In o r g a n i z e d
establishments, however, the o r d e r or decision granting the petition can only
be issued after the lapse of the f r e e d o m period.
T h e reason for the last-mentioned rule is that during the entire 60-day
freedom p e r i o d , up to its last day, the d o o r should remain o p e n for any union
to file a P C E or a motion for intervention.

3.9 Action on the Petition: Denial; Eight Grounds

T h e Med-Arbiter may either approve or disapprove the petition to hold
a CE. T h e disapproval or denial of the petition has to be based on a ground
specified by law of which there are eight, increased from five by R.A. N o . 9481
o f 2007. Just to follow logical connections, we slightly rearranged the listing of
the eight grounds, as follows:
First Ground: Non-appearance
- non appearance of the petitioner for two consecutive scheduled
conferences before the Mediator-Arbiter despite notice;
Second Ground: Illegitimacy - Unregistered U n i o n
- the petitioning union or national union/federation is not listed in
the Department's registry of legitimate labor unions or that its registration
certificate has been cancelled with finality in accordance with Rule X I V of
D . O . N o . 40-03 as amended.
Third Ground: Illegitimacy - No Charter
- failure of a local/chapter or national union/federation to submit
a duly issued charter certificate upon filing of the petition for certification
election.

443
 LABOR RELATIONS
ARTS. 256-259

Fourth Ground: Absence of Employment Relationship

- absence of e m p l o y e r - e m p l o y e e relationship b e t w e e n all the
members of the petitioning union and the establishment w h e r e the
proposed bargaining unit is sought to be represented.
Fifth Ground: Election Bar - T h e 12-month Bar
- filing of a petition within o n e ( 1 ) year from the date of recording
of the voluntary recognition, or within the same p e r i o d from a valid
certification, consent or run-off election where no appeal on the results
of the certification, consent or run-off election is pending.
Sixth Ground: Election Bar - Negotiation or Deadlock
- w h e r e a duly certified union has c o m m e n c e d and sustained
negotiations with the e m p l o y e r in accordance with A r t i c l e 250 of the
Labor C o d e within the one-year p e r i o d referred to in Section 14.d of the
Implementing Rules or where there exists a bargaining deadlock which has
been submitted to conciliation or arbitration or has b e c o m e the subject
of a valid notice of strike or lockout where an incumbent or certified
bargaining agent is a party.
Seventh Ground: Election Bar - Existing C B A
- filing the petition before or after the f r e e d o m p e r i o d of a duly
registered collective bargaining agreement; provided that the sixty-day
period based on the original collective bargaining agreement shall not
be affected by any amendment, extension or renewal of the collective
bargaining agreement.
Eighth Ground: Election Bar - Lack of Support
- in an organized establishment, the failure to submit the twenty-five
percent ( 2 5 % ) signature requirement to support the filing of the petition
for certification election.
T h e eight grounds are explained below in the given sequence.

3.9a First Ground: Non-appearance — If the petitioner (usually a u n i o n )

does not appear in two successive conferences called by the Med-Arbiter, the
petition may be dismissed, after it is shown that the petitioner was duly notified.
This ground was added by D . O . N o . 40-F-03 (dated 30 O c t o b e r 2008) after R . A .
N o . 9481 took effect on June 14, 2007, although the law itself does not state this
ground.
( A t this point we must make an acerbic comment. This first ground is
controversial because it legalizes a racket. T r u e , there are unions, either local
or national, that are legitimately registered and do honestly pursue legitimate
objectives. But there are fly-by-night "union organizers" w h o file petitions for
CE, then approach the target enterprise with a proposition that, in exchange
for "something," they will not pursue the petition for CE so that the company

444
 COLLECTIVE BARGAINING A N D ARTS 9Kfi-9Ka
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

may remain ununionized. T h e i r proposition easily gets d o n e because by simply

absenting themselves from two conferences, their petition, according to the
D O L E rules, will be dismissed by the Med-Arbiter. Twelve months later they will
replay the dirty charade.
This scheme is o n e reason the D O L E relentlessly pursues a "cleansing
program" by delisting delinquent unions under Rule X V of the same Department
O r d e r N o . 40-03 as a m e n d e d by D . O . N o . 40-F-03.)

3.9b Second Ground: Illegitimacy: Unregistered Union

T h e second g r o u n d for denying a PCE pertains to the legitimacy of the
petitioner union. Excepting Article 258, only a legitimate labor organization
( L L O ) can file a petition for certification election. Thus, if the petitioning union
is not listed in the D O L E ' s list of L L O s or if its registration has been cancelled
with finality, these facts will authorize the med-arbiter to dismiss the PCE.
But even if the union is listed as L L O , its legitimacy may still be questioned
in a separate and independent petition for cancellation to be heard and decided
by the B L R Director or the Regional Director himself.
Does the filing of a petition to cancel the petitioner's registration cause
the suspension or dismissal of the PCE? N o , the m e r e filing does not. To serve
as a g r o u n d for dismissal of a P C E , the legal personality of the petitioner should
have been revoked or cancelled with finality. Section 2, Rule XI of D . O . N o . 40-
03 as renumbered by D . O . N o . 40-F-03 says:
T h e f i l i n g o r pendency o f any inter/intra-union dispute and other
related labor relations dispute is not a prejudicial question to any petition
for certification election and shall not be a g r o u n d for the dismissal of
a petition for certification election or suspension of proceedings for
certification election."
T h e justification for this rule is that the employees' opportunity to choose
a bargaining agent can easily be blocked or forestalled by an employer through
the simple e x p e d i e n c e of questioning the legitimacy of the petitioner union.
As already c o m m e n t e d , the law disfavors roadblocks along the entry route of
unions.
But because of this rule, a problematic situation can easily arise: what
happens if the petition for cancellation succeeds against the union that won in
the CE? Can the victory in the CE prevail over the cancellation order? Or does
the cancellation order nullify the victory in the C.E.?
Before D . O . N o . 40 was issued in 2003 court rulings held that the petition
for cancellation would suspend hearings on the PCE. In Progressive Development
case (1997), the Court explained:
T h e grounds ventilated in cancellation proceedings, in accordance
with Article 239 of the Labor C o d e , constitute a grave challenge to the
right of respondent Union to ask for certification election. T h e Med-Arbiter

445
 LABOR RELATIONS
ARTS. 256-259

should have looked into the merits of the petition for cancellation before
issuing an order calling for certification election. Registration based on
false and fraudulent statements and documents confer no legitimacy upon
a labor organization irregularly recognized, which, at best, holds on to a
mere scrap of paper. U n d e r such circumstances, the labor organization,
not being a legitimate labor organization, acquires no rights, particularly
the right to ask for certification election in a bargaining unit. (Progressive
Development Corp. vs. Laguesma, G.R No. 115077, April 18, 1997.)
Inasmuch as the legal personality of respondent U n i o n had been
seriously challenged, it would have been m o r e prudent for the M e d -
Arbiter and public respondent to have granted petitioner's request for the
suspension of proceedings in the certification election case, until the issue
of the legality of the Union's registration shall have been resolved. Failure
of the Med-Arbiter and public respondent to heed the request constituted
a grave abuse of discretion. (Ibid.)
This ruling, apparently, no longer finds support in Section 2, Rule XI
of D . O . N o . 40-03, quoted earlier, which refuses to hinder a PCE unless the
petitioner's legal personality has been revoked or cancelled with finality.

Suspension of Proceedings: "Company Union" Charge

Similar to a petition for cancellation of registration is a formal charge of
company domination or company unionism. Prior to D . O . N o . 40-03 such charge
is a prejudicial question that, until decided, bars proceedings for a certification
election, the reason being that the votes of the members of the dominated union
would not be free.
A complaint for unfair labor practice may be considered a prejudicial
question in a p r o c e e d i n g for certification election w h e n it is charged
therein that o n e or m o r e labor unions participating in the election are
being aided, or are controlled, by the company or employer. T h e reason
is that the certification election may lead to the selection of an employer-
dominated or company union as employees' bargaining representative,
and when the court finds that said union is employer-dominated in the
unfair practice case, the union selected would be decertified and the whole
election proceedings would be rendered useless and nugatory. (United CMC
Textile Workers Union vs. Bureau of Labor Relations, G.R No. L-51337, March
22, 1984.)
T h e sustainability of the above ruling is placed under serious doubt by the
words and intention of D . O . N o . 40-03, Rule X I , Section 2, quoted above, which
does not favor "prejudicial questions" that block certification proceedings.
Neither may a certification election be stayed during pendency of unfair
1
labor practice charge against a union filed by the employer.

'Barrera vs. Court of Industrial Relations, 107 SCRA 596 [1981].

446
 COLLECTIVE BARGAINING A N D ARTS 95fi_9KQ
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]
Similarly, certification election may be ordered despite pendency of a
petition to cancel the union's registration certificate founded on alleged illegal
1
strike by the union.
Even appeal to the Supreme Court from the order denying the motion for
reconsideration does not suspend the effect of a certification election; otherwise
a party could arrest, without the necessary adequate court action, the movement
2
of the bargaining processes by the inter-position of frivolous and useless appeals.'

3.9c Third Ground: Illegitimacy: No Charter

This g r o u n d for dismissing a P C E obliges the petitioner union, either
local or national, to submit a duly issued charter certificate of the chapter at
the time the union files its P C E ; failure to do so will cause the dismissal of the
PCE.

3.9d Fourth Ground: Absence of Employment Relationship

T h e e m p l o y e e s ' right to u n i o n i z e and the union's right to file a petition
for C E are f o u n d e d o n the existence o f e m p l o y e r - e m p l o y e e relationship.
W h e r e this is absent the petition has no legal basis and therefore should be
dismissed.
T h e employer, notified about the petition, may invoke and prove the
absence of employer-employee relationship. T h e arbiter has to verify the facts and
based on the facts, applying the tests such as the four-fold test, decide whether
or not the workers w h o m the union intends to represent are indeed employees
of the enterprise where an election is being sought. If the Med-Arbiter rules
positively that e m p l o y m e n t relationship exists, the petition hurdles this ground
and the petition advances to the next stage. But the contention of existence or
absence of employer-employee relationship is not finally closed because it may
again be raised on appeal. T h e order granting or denying a PCE is appealable,
except the order granting a PCE in an ununionized enterprise.

3.9e Fifth Ground: T h e 12-month Bar

T h e fifth reason for dismissing a PCE is known as the twelve-month bar
or the certification year bar. No petition for a C.E. may be filed within one year
from the date of a valid certification, consent, or run-off election or from the
date of entry of a voluntary recognition of the union by the employer. Thus, if an
election had been held but not o n e of the unions won, a PCE may be filed again
but only after twelve months. T h e law does not want m o r e than o n e election in
a twelve-month period. T h e same ban applies if " N o U n i o n " won in the previous
election.

'National Union of Bank Employees vs. Minister of Labor, 110 SCRA 274 [1981].
2
Philex Miners Union vs. National Mines 8c Allied Workers Union, et al. No.
L-18019, December 29, 1962.

447
 LABOR RELATIONS
ARTS. 256-259

On the other hand, if a union has won, such union and the employer must
within twelve months start negotiating a collective agreement. If they fail to do
so, they are defeating the employees' wish to have a C B A ; hence, the union or
unions that lost can petition again for a certification election after twelve months
from the last election so as to replace the unproductive bargaining agent which,
perhaps, is cavorting with the employer.
But in o n e case the winning union failed to conclude a C B A not because
it was cavorting with the e m p l o y e r but because of the e m p l o y e r ' s evasive
maneuver. Because m o r e than a year had passed and there was still no C B A ,
a rival union filed a P C E . A l t h o u g h filed outside the twelve-month bar, the
petition was nonetheless dismissed, and the court u p h e l d the dismissal. T h e
court explained that, ordinarily, a bargaining agent w h o failed to secure a C B A
within twelve months could be suspected as a tool of m a n a g e m e n t and should
deserve to be replaced. But if circumstances show that the cause of not having
concluded a C B A was not the union's fault, such union should not be blamed,
and a CE should not be authorized even though no C B A has b e e n c o n c l u d e d
despite passage of twelve months. T h e situation takes the nature of a "deadlock
1
bar."
T h e twelve-month prohibition presupposes that there was an actual conduct
of election, i.e., ballots were cast and there was a counting of votes. In a case
where there was no certification election precisely because the first petition was
dismissed on the ground that it did not include all the employees w h o should
be properly included in the collective bargaining unit, the certification year bar
2
does not apply.
Neither does this bar apply if in fact there was a failure of election because
less than majority of the C B U members voted. In that case, another P C E may
3
be held within six ( 6 ) months.
An election may be held less than a year after an invalid election. A l s o not
barred would be a second election held a m o n g a g r o u p of employees w h o had
not participated in the first election and had not been given the opportunity to
be represented as part of the unit in the first election. Furthermore, an election
involving a unit of e m p l o y e e s newly created by c o m b i n i n g e m p l o y e e s not
previously considered as o n e unit will not be barred by prior elections involving
these employees. H e n c e , employees w h o have voted as part of o n e bargaining
unit may find themselves involved in an election encompassing a larger g r o u p
4
of employees established as a different bargaining unit.

'See Capitol Medical Center Alliance etc. vs. Laguesma, G.R. N o . 118915,
February 4, 1997.
2
R.Transport Corp. vs. Laguesma, G.R. N o . 106830, November 16, 1993.
3
Sec. 18, D.O. N o . 40-03.
4
48 Am. Jur. 2d 688.

448
 COLLECTIVE BARGAINING A N D ARTS
ADMINISTRATION OF AGREEMENT *30-45»
[Part 2. Employee Participation and Representation]

A radical change in the size of a bargaining unit within a short period of

time, raising a question as to the majority status of the certified representative
may also prompt the N L R B to entertain a petition for an election during the
1
certification year.
T h e one-year rule does not apply to a unit clarification petition filed during
2
the certification year.
In the Permex case, below, the " N o U n i o n " choice won in the C.E. Within 12
months from that election the employer voluntarily recognized a new union and
then concluded with it a CBA. Is the 12-month bar violated? A r e the recognition
and the C B A valid?

Samahang Manggagawa sa Permex vs. Secretary of Labor, G.R. N o . 107792, March

2, 1998 —
As pointed out by respondent Secretary of Labor in his decision, there can be
no determination of a bargaining representative within a year of the proclamation
of the results of the certification election. Here the results, which showed that 61%
of the employees voted for "no union," were certified only on February 25,1991 but
on December 1,1991 Permex Producers already recognized the union and entered
into a CBA with it
There is something dubious about the fact that just ten (10) months after the
employees had voted that they did not want any union to represent them, they would
be expressing support for petitioner.
Excepted from the contract-bar rule are certain types of contracts which do not
foster industrial stability, such as contracts where the identity of the representative
is in d o u b t Any stability derived from such contracts must be subordinated to the
employees' freedom of choice because it does not establish the kind of industrial
peace contemplated by the law.

In other words, the court strongly doubted that the union voluntarily
recognized by the employer was really the employees' choice. Most probably, it
was a company union.

3.9f Sixth Ground: Negotiation or Deadlock Bar

T h e sixth reason for denying a PCE is the fact that the duly recognized or
certified union has c o m m e n c e d negotiation with the employer within the one-
year period mentioned above, and the negotiation is on-going. This is known
as the "negotiation bar."
Neither will a PCE prosper if the negotiation is caught in a deadlock. T h e
deadlock does not erase the fact that there is negotiation which is a barrier to
holding a certification election. T h e parties should be allowed to try to resolve
their deadlock; replacing the negotiating union will not help.

•48 A m . Jur. 2d 688.

Ibid.
449
 LABOR RELATIONS
ARTS. 256-259

T h e "Deadlock Bar" rule simply provides that a petition for certification

election can only be entertained if there is no pending bargaining deadlock
submitted to conciliation or arbitration or had b e c o m e the subject of a valid
notice of strike or lockout. T h e principal purpose is to ensure stability in the
1
relationship of the workers and the management.

Capitol Medical Center Alliance of Concerned Employees Unified Filipino Service

Workers vs. Laguesma, G.R. N o . 118915, February 4, 1997 —
There is a deadlock when there is a complete blocking or stoppage resulting
from the action of equal and opposed forces x x x. T h e word is synonymous with the
word impasse, which x x x 'presupposes reasonable effort at good faith bargaining
which, despite noble intentions, does not conclude in agreement between the
parties.'"
If the law proscribes the conduct of a certification election when there is a
bargaining deadlock submitted to conciliation or arbitration, with more reason should
it not be conducted if, despite attempts to bring an employer to the negotiation table
by the certified bargaining agent, there was "no reasonable effort in g o o d faith" on
the part of the employer to bargain collectively. It is only just and equitable that the
circumstances in this case should be considered as similar in nature to "bargaining
deadlock" when no certification election could be held.

"Deadlock Bar" Rule, When Not Applicable; Artificial Deadlock

T h e deadlock that bars a C.E. must be genuine and not a drama. O n e
indicator that it is genuine is the submission of the deadlock to a third-party
conciliator or arbitrator. A n o t h e r is that the deadlock is the subject of a valid
notice of strike or lockout. An artificial deadlock — a deadlock prearranged or
preserved by collusion of the employer and the majority union — is deception
of the workers, hence, not a barrier to a petition for a C.E.

Kaisahan ng Manggagawang Filipino (KAMPIL-KATIPUNAN) vs. Trajano, G.R.

N o . 75810, September 9, 1991 —
Facts: On February 27, 1981, N A F L U was declared by the Bureau of Labor
Relations the exclusive bargaining agent of all rank-and-file employees of Viron
Garments Mfg. Co., Inc. ( V I R O N ) .
More than four years thereafter, on April 11,1985, KAMPIL-Katipunan, another
union, filed with the BLR a petition for certification election with the support of
more than 30% of the workers of V I R O N . Despite NAFLU's opposition, the Med-
Arbiter ordered the holding of a certification election, citing the fact that since
the certification of N A F L U in 1981 as the sole bargaining agent, no CBA has been
concluded.

'National Congress of Unions in the Sugar Industry of the Philippines

(NACUSIP) - T U C P vs. Dir. Cresenciano B. Trajano, et al, G.R. N o . 67485, April 10,
1992.

450
 COLLECTIVE BARGAINING A N D ARTS 9*fi-9KQ
ADMINISTRATION OF AGREEMENT 400-^D»
[Part 2. Employee Participation and Representation]

N A F L U appealed, contending that at the time the petition for certification

election was filed, it was in the process of collective bargaining with VIRON; that
in fact a deadlock in negotiations prompted it to file a notice of strike; that these
circumstances barred a petition for certification election, pursuant to the Rules
Implementing the Labor Code.
T h e Director of the B L R upheld N A F L U ' s contentions and dismissed the
petition for certification election. Upon denial of its motion for reconsideration,
K A M P I L filed a certiorari in the Supreme Court.
Issue: Whether or not KAMPIL's petition for certification election is barred
by the alleged bargaining deadlock between N A F L U and V I R O N .
Ruling: T h e records do not show that there was a bargaining deadlock prior to
the filing of the petition for certification election. N A F L U cites VIRON's recalcitrance
in negotiation, but it did not take any action to legally coerce V I R O N to comply with
its duty to bargain collectively. N A F L U could have charged V I R O N with unfair labor
practice, but it did not. N A F L U could have gone on a legitimate strike, but it did
not. T h e fact is that for more than four years since N A F L U ' s certification as the sole
bargaining agent, no CBA was ever executed.
T h e stark, incontrovertible fact is that from February 27,1981 — when NAFLU
was proclaimed the exclusive bargaining representative of all V I R O N employees —
to April 11, 1985 — when K A M P I L filed its petition for certification election — or
a period of more than four (4) years, no collective bargaining agreement was ever
executed, and no deadlock ever arose from negotiations between N A F L U and V I R O N
resulting in conciliation proceedings or the filing of a valid strike notice.
N A F L U cites a strike declared by it on October 26, 1986, which was amicably
settled by the parties' agreement, and another strike as a result of V I R O N ' s violation of
said agreement, a dispute which had since been certified for compulsory arbitration.
These strikes and submission to compulsory arbitration, however, took place after
the filing of the petition for certification election. For a bargaining deadlock to bar
a petition for certification election, such deadlock must have been submitted to
conciliation or arbitration, or must have been the subject of a valid strike or lockout
notice before — not after — the filing of the petition for certification election.

T h e alleged deadlock in the preceding case is artificial, an afterthought to

create a semblance of a deadlock. T h e "deadlock bar" rule does not apply here.
A certification election is, therefore, o r d e r e d to be conducted.

3.9g Seventh Ground: Election Bar: Existing C B A

T h e seventh ground to dismiss a PCE is the "contract bar."
Article 232 does not allow the filing of a PCE during the life of a duly
registered C B A , except, says Article 256, within the last sixty days of the fifth year
of the C B A . This 60-day stretch is known as the "freedom period." T h e PCE may
be filed within this 60-day period - not before, not after — otherwise the PCE
may be dismissed.

451
 LABOR RELATIONS
ARTS. 256-259

T h e contract bar rule is intended to ensure stability in the relationships of

the workers and the management by preventing frequent modifications of any
collective bargaining agreement earlier entered into by them in g o o d faith and for
1
the stipulated original period. But the field is o p e n e d for union contest during
the "freedom period." T h e "freedom p e r i o d " therefore refers to that time when
unions are legally allowed to challenge openly and formally the status of a union
as the exclusive bargaining representative of the bargaining unit. Also during
that time switching of allegiance a m o n g union members or a m o n g affiliates or
chapters may be d o n e without risking a charge for disloyalty under the union
by-laws or the CBA's union security clause.
Incidentally, the term "freedom p e r i o d " is so c o m m o n in Philippine labor
relations that it has b e c o m e part of the vocabulary of its practitioners. But,
interestingly, it is not mentioned at all in any of the better known references on
the subject — not in the dictionary of industrial relations by Roberts or Duherty,
nor in the books of Watkins ( 1 9 4 6 ) , Taft ( 1 9 4 8 ) , or R o t h e n b e r g (1949) or the
newer books of H e r m a n ( 1 9 8 1 ) , D u n l o p ( 1 9 9 3 ) , Mills ( 1 9 9 4 ) , or L e a p ( 1 9 9 5 ) ,
and more than a dozen other authorities. In the 3,418 pages of The Developing
Labor Law (2001 edition) the term "freedom p e r i o d " does not appear.
T h e "freedom p e r i o d " under Articles 253-A and 256 is different from and
ought not to be mistaken for the other sixty-day p e r i o d m e n t i o n e d in Article
253. T h e latter speaks of the right of the parties to propose modifications to
the existing C B A , as an exception to the rule that the C B A cannot be modified
during its lifetime. This 60-day p e r i o d under Article 253 does not and cannot
refer to the representative status of the incumbent union since the acquisition
2
or loss of representative status is to be resolved through a certification election,
and not through negotiation with the employer. T h e r e f o r e , the 60-day p e r i o d
under Article 253 refers to modifying or renegotiating the C B A provisions other
than representational. T h o s e stipulations, in practice, are called "economic"
or "non-political." To clarify terms, the sixty days in Article 253 may be called
"renegotiation notice p e r i o d " or simply "notice/proposal period," in contrast
to the "freedom period" under Articles 253-A and 256.
T h e notice period is the last 60 days of the second or third year of the
nonrepresentational provisions; the freedom p e r i o d , in contrast, is the last 60
days of the CBA's fifth year of the representational aspect. T h e notice period
pertains to an e c o n o m i c event involving the e m p l o y e r and the bargaining
union; the freedom period is a political event involving only the unions and the
employees. T h e two periods, of course, may coincide on the fifth year of the
CBA. San Miguel Corp. Employees Union-PTGWO vs. Confesor, et al., G.R. N o . 111262,
September 19, 1996 illustrates the occurrence of these two 60-day periods; see
under Article 253-A.

'Associated Trade Unions [ A T U ] vs. Trajano, G.R. N o . 75321, June 20, 1988.
2
Articles 253-A and 256.

452
 COLLECTIVE BARGAINING A N D ARTS 256-2M
ADMINISTRATION OF AGREEMENT *
[Part 2. Employee Participation and Representation]
Registered CBA
To bar a certification election it is no longer necessary that the C B A be
"certified"; it is enough that it is registered in accordance with Article 231.

Pagkakaisa ng mga Manggagawa sa Triumph International Lumber and General

Workers of the Philippines (PMTI-ULGWP) vs. Pura Ferrer Calleja, and the
Confederation of Filipino Workers (CFW), Progressive Workers Union (PEU-TIPI),
G.R. N o . 85915, January 17, 1990 —
Respondent unions filed their petitions for certification election on November
25, 1987. At that time, a CBA was validly existing between petitioner union and
Triumph International. In fact, the CBA was effective up to September 24, 1989.
There is no doubt that the CBA constituted a bar to the holding of the certification
1
election as petitioned by the respondent unions. T h e members of the respondent
unions should wait for the proper time to file their petition.

Contract-Bar Rule Applied: Extended CBA Under Deadlock

No petition for certification election may be filed before the onset of the
freedom period nor after such period. T h e old C B A is extended until a new one
is signed.

National Congress of Unions in the Sugar Industry of the Philippines vs. Ferrer-Calleja,
et al., G.R. N o . 89609, January 27, 1992 —
Facts: Dacongcogon Company on November 14,1984 entered into a collective
bargaining agreement with National Federation of Sugar Workers (NFSW-FGT-KMU).
T h e CBA expired on November 14,1987, and the Company and union negotiated for
its renewal. T h e CBA was extended for another 3 years with reservation to negotiate
for its amendment, particularly on wage increases, hours of work and other terms
and conditions of employment.
Deadlock in negotiation ensued on the matter of wage increases and optional
retirement. To obviate friction and tension, the parties agreed on a suspension to
provide a cooling-off period. A Labor-Management Council was set up and convened,
with a representative of the D O L E , acting as chairman to resolve the issues.
On December 5,1988 another union, the NACUSIP-TUCP, filed a petition for
certification election. NFSW moved to dismiss the petition, invoking the contract-bar
rule or that the petition was filed out of time and that there was a CBA deadlock.
The petitioner N A C U S I P asserted that the Bureau of Labor Relations in denying the
petition failed to appreciate the fact that for more than 4 years there had been no
CE involving the rank-and-file workers of the Company.
On the other hand, public respondent Director of the BLR through the Solicitor
General opined:

•See Associated Trade Unions [ A T U ] vs. Trajano, 162 SCRA 318 [1988];
Federation of Democratic Trade Union vs. Pambansang Kilusan ng Paggawa, 156
SCRA 482 [1987]; Tanduay Distilling Labor Union vs. National Labor Relations
Commission, 149 SCRA 470 [1987].
453
 LABOR RELATIONS
ARTS. 256-259

(1) that the petition for CE was filed out of time because it was filed
after the lapse of more than one year after the CBA expired or outside the
60-day freedom period;
(2) that Section 3, Rule V of the Implementing Rules [Rule XI as
renumbered by D.O. N o . 9] enjoins the filing of a representation question, if
a bargaining deadlock to which the bargaining agent is a party is submitted
for conciliation or arbitration.
Issue: Whether or not the petition for certification election should have been
granted.
Ruling: N o . T h e petition is filed out of time. Also, the contract-bar rule is
applicable.
Section 6, Rule V [now Sec. 3, Rule X I ] , Book V of the Implementing Rules
provides that a petition for CE can only be entertained within 60 days prior to the
expiry date of an existing CBA. Otherwise put, the rule prohibits the filing of a
petition for CE during the existence of a CBA except within the freedom period,
when the said agreement is about to expire.
T h e petitioner's contention that since the expiration of the CBA in 1987
private respondent NFSW-FGT-KMU and the company had not concluded a new
CBA, does not render the contract-bar rule inapplicable. This is so because Article
253 of the Labor Code provides that: "it shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and conditions of
the existing agreement during the 60-day period a n d / o r until a new agreement is
reached by the parties." Despite the lapse of the formal effectivity of the CBA, the
law still considers the same as continuing in full force and effect until a new one is
executed. Thus, the contract-bar rule still applies.
It is worthy to note that the Company in its answer stated that the CBA was
extended for another 3 years and that the deadlock was submitted to the Labor-
Management Council.

Contract Bar Ride Applied: Unproved Surreptitious Registration of CBA

Even if the existing C B A is registered surreptitiously, as alleged by the
petitioner union, but no evidence is presented proving the alleged surreptitious
registration, the petition for C.E. cannot be granted. T h e contract-bar rule
applies. Whether or not the C B A was i n d e e d surreptitiously registered is a factual
matter whose determination is outside the ambit of a petition for certiorari}

Contract-Bar Rule Not Applied: (a) Defective CBA

Associated Labor Union (ALU) vs. Ferrer-CaUeja, G.R. N o . 77282, May 5,1989 —
Facts: In the present case, the standing of petitioner union as an exclusive
bargaining representative is dubious, to say the least. T h e company, in a letter dated

'Pambansang Kapatiran ng mga Anak Pawis sa Formey vs. Sec. of Labor, et al,
G.R. N o . 11836, February 1, 1996.

454
 COLLECTIVE BARGAINING A N D ARTS 9^9*0.
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

May 12, 1986 addressed to petitioner, merely indicated that it was "not against the
desire of (its) workers" and required petitioner to present proof that it was supported
by the majority of the bargaining unit in a meeting to be held on the same date. The
only express recognition of petitioner as the employees' bargaining representative
was in the CBA entered into two days thereafter.
Evidently, there was precipitate haste on the part of the company in recognizing
petitioner union, which recognition appears to have been based on the self-serving
claim of the latter that it had the support of the majority of the employees in the
bargaining unit. Furthermore, at the time of the supposed recognition, the employer
was obviously aware that there were other unions existing in the unit. Respondent
company's letter was dated May 12,1986 while the two other unions, SPFL and PSSLU,
went on strike earlier on May 9,1986. T h e unusual promptitude in the recognition of
petitioner union by respondent company as the exclusive bargaining representative
of the workers under the fluid and amorphous circumstances then obtaining, was
decidedly unwarranted and improvident.
T h e B L R director ordered the holding of a certification election, ruling
that the "contract-bar rule" does not apply in the present controversy because the
CBA involved was defective as it "was not duly submitted in accordance with the
Implementing Rules." " ( T ) h e r e is no proof tending to show that the CBA has been
posted in at least two conspicuous places in the establishment at least five days before
its ratification and that it has been ratified by the majority of the employees in the
bargaining unit."
Ruling: We find no reversible error in the challenged decision of the BLR
director. A careful consideration of the facts culled from the records of this case,
especially the allegations of petitioner itself yields the conclusion that the collective
bargaining agreement in question is indeed defective, hence unproductive of the
legal effects attributed to it...
To be a bar to a certification election, the CBA must be adequate in that it
1
comprises substantial terms and conditions of employment.

Contract-Bar Rule Not Applied: (b) Referendum to Register on Independent Union

In o n e case the union, claiming to be a local union of the rank-and-file
e m p l o y e e s of the China City Restaurant, filed with the D O L E a petition to
"Conduct a R e f e r e n d u m to D e t e r m i n e the W i l l of the China City Employees
to have their U n i o n R e g i s t e r e d I n d e p e n d e n t l y . " T h e A r b i t e r granted the
petition, but p r o h i b i t e d the union or its m e m b e r s from disaffiliating from
the m o t h e r union p r i o r to the sixty (60)-day f r e e d o m p e r i o d of the existing
CBA.
H e r e , what is involved is a referendum to be conducted among the rank-
and-file employees to determine whether or not they are in favor of having an
independently registered union in the establishment. This referendum is neither

•Buklod ng Saulog Transit vs. Casalla, 99 Phil. 16.

455
 LABOR RELATIONS
ARTS. 256-259

union disaffiliation nor severance; it is not disallowed by law even while a C B A

1
exists. H o l d i n g the referendum is not banned by the contract bar rule.

Contract-Bar Rule Not Applied: (c) CBA Signed Before or Within Freedom Period
Despite Injunctive Order
Petitioner contends that since the new C B A has already been ratified
overwhelmingly by the members of the bargaining unit and that said C B A had
already been consummated and the members of the bargaining unit have been
continuously enjoying the benefits under the said C B A , no certification election
may be conducted. But as pointed out by the Bureau of L a b o r Relations, the
parties were in bad faith when they concluded the C B A . T h e i r act was intended
to bar the N A F L U .
A collective bargaining agreement which was prematurely renewed is not
a bar to the holding of a certification election. Such indecent haste in renewing
the C B A despite an order enjoining them from d o i n g so is designed to frustrate
the constitutional right of the employees to self-organization. T h e actuation of
A L U and the management cannot be countenanced as it is not conducive to
2
industrial peace.

Validity of C.B.A. Signed During Representation Dispute

It is true that the contract-bar rule does not apply during the "freedom
period"; i.e., within that p e r i o d a petition for C.E. may be entertained. But it
is equally true that the petition for C.E. does not bar the employer and the
incumbent union from renegotiating and renewing the expiring C B A . In other
words, a C B A may be renegotiated before, during, or after the 60-day freedom
period. But if during such p e r i o d a PCE is filed, the Med-Arbiter can order the
3
suspension of the renegotiation until the representation proceedings finally e n d .
T h e authorization to renegotiate the C B A before or during the freedom
period is gleaned from express provisions of D . O . N o . 40-03. Its Section 14, Rule
V I I I states that the Med-Arbiter may dismiss the petition for a CE on any o f the
following grounds x x x " ( b ) the petition was filed before or after the freedom
period of a duly registered collective bargaining agreement; provided that the
sixty-day period based on the original collective bargaining agreement shall
not be affected by any amendment, extension, or renewal of the collective bargaining
agreement." Even clearer and m o r e categorical is Section 24 ( r e n u m b e r e d as 25)
o f the same Rule V I I I , which says: "Effect o f Early Agreement: T h e representation
case shall not be adversely affected by a collective bargaining agreement registered before
or during the last sixty (60) days of a subsisting agreement or during the pendency
of the representation case."

•Federation of Unions of Rizal vs. Calleja, G.R. N o . 85794, May 24, 1989.
^Associated Labor Unions [ A L U ] vs. Calleja, G.R. N o . 85085, November 6,1989.
3
See Associated Labor Union vs. Calleja, G.R. N o . 85085, November 6, 1989.

456
 COLLECTIVE BARGAINING A N D ARTS 2ttfi-9Ka
ADMINISTRATION OF AGREEMENT «0-43»
[Part 2. Employee Participation and Representation]

T h e law is attempting a balancing feat. By allowing a PCE during the

freedom p e r i o d the law preserves democratic contest between unions, and
in the same breath, by allowing C B A renegotiation during the same freedom
period, the law safeguards the opportunity to possibly upgrade the employees'
employment conditions. Thus, in a 1963 case the court said:
We agree with the respondent company that the pendency of the
petitions for certification election did not bar or preclude the renewal of
the collective bargaining agreement with the U n i t e d Seamen's U n i o n of
the Philippines. Otherwise, there would be a gap or interregnum during
which no agreement would govern, that is, from the time the old collective
bargaining contract e x p i r e d to the time the petition for certification
election is d e c i d e d and a new agreement entered into with the U n i o n that
may be duly certified as the proper bargaining unit. Without any agreement
to govern the relations between labor and management in the interim, the
situation would well be productive of confusion and result in breaches of
the law by either party. (Victorias Milling Co. vs. Victorias-Manapla Workers
Organizations vs. Court of Industrial Relations and Free Visayan Workers, G.R
Nos. 18467 and 18470, September 30, 1963. See also Warren Manufacturing
Workers Union vs. Bureau of Labor Relations, 159 SCRA 387, and Oriental Tin
Can Labor Union vs. Secretary of Labor, G.R No. 116751, August 28, 1998.)
T h e question may be asked: W h a t would be the effect on the renegotiated
C B A if a union other than the o n e that executed it should win the C.E.? In a
pertinent case, it was held that the union thus certified would have to respect
the contract, but that it may bargain with the management to shorten the life
1
of the contract if it is t o o long.
W h e n a collective bargaining agreement is entered into at the time when
the petition for certification election had already been filed by a union and was
then pending resolution, the said collective bargaining agreement cannot be
d e e m e d permanent, precluding the c o m m e n c e m e n t of negotiations by another
union with the management. In the meantime, however, so as not to deprive the
workers of the benefits of the said agreement, it shall be recognized and given effect
on a temporary basis, subject to the results of the certification election. T h e agreement
may be continued in force if the union that negotiated it is certified again as
the exclusive bargaining representative or may be rejected and replaced in the
2
event the rival union emerges as the winner.
But in a 2005 decision the Court took o n e step further. It invalidated the
hasty recognition of a union and the signing of a C B A with that union where

•General Maritime Stevedores Union of the Philippines, et al. vs. South Sea
Shipping Lines, et al, L-l4689, July 26, 1960; Seno vs. Mendoza, L-20565, November
29, 1967; See Implementing Rules, Book V, Rule V, Sec. 6.
2
Associated Trade Unions [ A T U ] vs. Trajano, G.R. N o . 75321, June 20, 1988.

457
 LABOR RELATIONS
ARTS. 256-259

such acts were done while there was a pending petition for certification election
1
by another union.
This 2005 decision appears to conform with a 1989 ruling that a C B A
signed while there was a pending representation case was invalid. In 1989 the
Court said:
Basic to the contract-bar rule is the proposition that the delay of
the right to select representatives can be justified only where stability is
d e e m e d paramount. Excepted from the contract-bar rule are certain types
of contracts which do not foster industrial stability, such as contracts where
the identity of the representatives is in doubt. A n y stability derived from
such contracts must be subordinated to the employees' freedom of choice
because it does not establish the type of industrial peace contemplated by
the law. (Philippine Association of Free Labor Unions vs. Estrella, G.R No. 45323,
February 20, 1989.)
T h e 1989 ruling, in turn, strengthened the conclusion in a 1955 decision
where the Court said:
A C B A automatically r e n e w e d usually o p e r a t e s as a bar to a
certification election. But it is not a bar if the e m p l o y e r has served notice
that it will terminate the contract if and w h e n the union no l o n g e r
represents the majority of the employees. (See PLDT Employees' Union vs.
Philippine Long Distance Telephone Company and Free Telephone Workers' Union
[PAFLU], G.R No. L-8138, August 20, 1955.)

3.9h Eight Ground: Election Bar: Lack of Support

T h e eighth reason for possible dismissal of a P C E is the lack of support
to the petition. Article 256 requires that the petition for a C.E. in an organized
establishment which may be filed within the " f r e e d o m p e r i o d " should be
supported by at least twenty-five percent ( 2 5 % ) of the bargaining unit.
T h e support requirement is e x p l a i n e d by g o v e r n m e n t policy to favor
the self-organization of workers. In a company still unorganized the workers
should find it easy to organize, but o n c e a union has established itself as the
employees' representative, it should not be so easy for another union to replace
the incumbent. Trying to do so will disturb the peace in the enterprise. To justify
the disturbance, it must appear that a sizeable portion of the employees — at
least 25% — desires to have a new union. Without this m i n i m u m support the
challenge to the incumbent looks like a nuisance.
T h e twenty-five percent support is an a m e n d m e n t introduced by R . A .
6715. W h e n the amendment was still being debated at the bicameral conference
committee, the author (Senator Ernesto F. H e r r e r a ) explained: "I don't think

•Me-Shurn Corp. vs. Me-Shurn Workers Union-FSM, G.R. N o . 156292, January

11,2005.

458
 COLLECTIVE BARGAINING A N D ARTS 9*fi_9KQ
ADMINISTRATION OF AGREEMENT *00-ZJ>»
[Part 2. Employee Participation and Representation]

it's a g o o d policy of the State to encourage union quarrel. That's why we have
to make it difficult for an outsider to c o m e in. He has to get really a substantial
1
membership in order to disturb the union. Ganoon ang policy."

The CBU, Not the Enterprise

If a company's rank-and-file employees are unionized but the supervisors
are not, does the supervisors' petition n e e d the 25% minimum support?
N o , because the company is considered unorganized. T h e petition for C.E.
involves only the supervisors, not the rank-and-file. Insofar as the supervisors
are c o n c e r n e d , the "establishment" is considered ununionized. H e n c e the
2
requirement for 25% support to the petition does not apply.
In other words, in deciding whether the 25% requirement is applicable or
not, the law considers the C B U involved, not the whole enterprise. This, again,
makes it easy for workers to unionize, a basic objective of labor relations law.

Election Despite Lack of 25 Percent Support

Even in the situation w h e r e the 25% is n e e d e d , this requirement may be
relaxed. T h e C o u r t reiterated this ruling in the California case just cited, thus:
Compliance with the said requirement n e e d not even be established
with absolute certainty. T h e C o u r t has consistently ruled that "even
c o n c e d i n g that the statutory r e q u i r e m e n t of 30% ( n o w 2 5 % ) of the
labor f o r c e asking for a certification e l e c t i o n had not b e e n strictly
c o m p l i e d with, the Director ( n o w the M e d - A r b i t e r ) is still e m p o w e r e d
to o r d e r that it be h e l d precisely for the purpose of ascertaining which
of the c o n t e n d i n g labor organizations shall be the exclusive collective
bargaining agent. (Atlas Free Workers Union [AFWU-PSSLU] Local vs. Noriel,
G.R. No. L-51905, May 26, 1981.) T h e requirement then is relevant only
when it b e c o m e s mandatory to conduct a certification election. In all
other instances, the discretion, according to the rulings of this Tribunal,
o u g h t to be ordinarily exercised in favor of a petition for certification."
(National Mines and Allied Workers Union [NAMAWU-UIF] vs. Luna, et al,
G.R No. L-46722,June 15, 1978.)

Effect of Withdrawal of Signatories

If a petition for a certification election lacks the 25% support because a
sizeable number of union members has withdrawn their membership, may the
petition still be granted? Or must it be dismissed? A critical fact to consider is
whether the withdrawal happened before or after the filing of the petition. If it

'December 15, 1988 conference, p. 73.

2
California Manufacturing Corp. vs. Honorable Undersecretary Laguesma and
A B D Federation of Free Workers (FFW), California Mfg. Corp. Supervisors Union
Chapter ( C A L M A S U C O ) , G.R. N o . 97020, June 8, 1992.

459
 LABOR RELATIONS
ARTS. 256-259

happened before the filing, the withdrawal is presumed voluntary and it does
affect the propriety of the petition; if after, the withdrawal is d e e m e d involuntary
(perhaps pressured by the e m p l o y e r ) and it does not necessarily cause the
dismissal of the petition.
La Suerte Cigar and Cigarette Factory vs. Director, 123 SCRA 679 (1983) —
Facts: On April 7, 1979, the La Suerte Cigar and Cigarette Factory Provincial
(Luzon) and Metro Manila Sales Force Association (herein referred to as the local
union) applied for and was granted chapter status by the National Association of
Trade Unions ( N A T U ) .
On April 16, 1979, some thirty-one (31) local union members signed a joint
letter withdrawing their membership from N A T U .
Nonetheless, on April 18, 1979, the local union and N A T U filed a petition for
direct certification or certification election. T h e company opposed the petition on
the ground that it was not supported by at least 30% [now 25%] of the members of
the proposed bargaining unit because (a) of the alleged 48 members of the local
union, 31 had withdrawn prior to the filing of the petition, and ( b ) 14 of the alleged
members of the union were not employees of the company but were independent
contractors. The BLR director thumbed down the company's objection.
Ruling: On the issue—whether or not the withdrawal of 31 union members from
N A T U affected the petition for certification election insofar as the 30% requirement
is concerned — We reverse the Order of the respondent B L R Director, it appearing
undisputably that the 31 union members had withdrawn their support to the petition
before the filing of said petition. It would be otherwise if the withdrawal was made
after the filing of the petition for it would then be presumed that the withdrawal
was not free and voluntary. T h e presumption would arise that the withdrawal was
procured through duress, coercion or for valuable consideration. In other words,
the distinction must be that withdrawals made before the filing of the petition
are presumed voluntary unless there is convincing proof to the contrary, whereas
withdrawals made after the filing of the petition are deemed involuntary.
The reason for such distinction is that if the withdrawal or retraction is made
before the filing of the petition, the names of employees supporting the petition
are supposed to be held secret to the opposite party. Logically, any such withdrawal
or retraction shows voluntariness in the absence of proof to the contrary. Moreover,
it becomes apparent that such employees had not given consent to the filing of the
petition, hence the subscription requirement has not been met.
When the withdrawal or retraction is made after the petition is filed, the
employees who are supporting the petition become known to the opposite party since
their names are attached to the petition at the time of filing. Therefore, it would not
be unexpected that the opposite party would use foul means for the subject employees
to withdraw their support.
In recapitulation, We hold and rule that the 14 members of respondent local
union are dealers or independent contractors. They are not employees of petitioner
company. With the withdrawal by 31 members of their support to the petition prior

460
 COLLECTIVE BARGAINING A N D ARTS. 256-259
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

to or before the filing thereof, making a total of 45, the remainder of 3 out of the
48 alleged to have supported the petition can hardly be said to represent the union
Hence, the dismissal of the petition by the Med-Arbiter was correct and justified
Respondent Director committed grave abuse of discretion in reversing the order of
the Med-Arbiter.

3.10 Prohibited Ground for the Denial/Suspension of the Petition

We now turn to unacceptable reasons to deny or suspend a petition for a
C.E.
3.10a Commingling

T h e inclusion as union members of employees outside the bargaining unit

shall not be a g r o u n d for the cancellation of the registration of the union. Said
employees are automatically d e e m e d r e m o v e d from the list of membership of
said unions. N e i t h e r is such c o m m i n g l i n g e n o u g h reason to dismiss a PCE.

3.10b Validity of Registration

A l l issues pertaining to the validity of the petitioning union's certificate of
registration or its legal personality as a labor organization, validity of registration
and execution of collective bargaining agreements shall be heard and resolved
by the R e g i o n a l Director in an i n d e p e n d e n t petition for cancellation of its
registration and not by the Mediator-Arbiter in the petition for certification
election, unless the petitioning union is not listed in the Department's roster of
legitimate labor organizations, or an existing collective bargaining agreement
1
is not registered with Department.

3.10c Authority to Decide Existence of Employer-Employee Relationship;

Med-Arbiter's O r d e r Appealable to Secretary
Does the Med-Arbiter or the Secretary of L a b o r and Employment have
the authority to determine the existence of an employer-employee relationship
between the parties in a petition for certification election?
A l l issues pertaining to the existence of employer-employee relationship
or to eligibility to union membership shall be resolved in the order or decision
granting or denying the petition for certification election. In other words, those
issues do not stall the PCE and they are not grounds for dismissing a PCE.
It is absurd to suggest that the Med-Arbiter and the Secretary of Labor
c a n n o t make their own i n d e p e n d e n t f i n d i n g as to the existence of such
relationship and must have to rely and wait for such a determination by the Labor
Arbiter or the National L a b o r Relations Commission in a separate proceeding.
For then, given a situation where there is no separate complaint filed with the
L a b o r Arbiter, the Med-Arbiter a n d / o r the Secretary of Labor can never decide

•As amended D.O. N o . 40-F-03, 30 October 2008.

461
 LABOR RELATIONS
ARTS. 256-259

a certification election case or a labor-management dispute properly brought

before them as they have no authority to determine the existence of an employer-
1
employee relationship. Such a proposition is, to say the least, anomalous.
O n c e there is a determination as to the existence of such relationship,
the Med-Arbiter can decide the certification election case. As the authority to
determine the employer-employee relationship is necessary and indispensable
in the exercise of jurisdiction by the Med-Arbiter, his finding thereon may only
be reviewed and reversed by the Secretary of L a b o r w h o exercises appellate
2
jurisdiction under Article 259 of the Labor C o d e as a m e n d e d .
Similarly, incidental to the power of the Med-Arbiter to hear and decide
cases is the power to determine eligibility of voters. For instance, it is necessary
to consider the legality of the members' withdrawal from the cooperative in
3
order to determine the legality of their j o i n i n g a union.

3.11 Employer a Bystander; Cannot Oppose P C E

In petitions for certification election has the e m p l o y e r b e e n transformed
from being an "intruder" to being a party? L e t us contrast the I m p l e m e n t i n g
Rules. In the Rules prior to 1997 the employer was not even to be notified about
the filing of the petition, but in the Rules of 1997 the employer was not only to be
notified but required to file a position paper. Similarly, the Rules of2003 require
the Med-Arbiter to call the employer together with the unions to a preliminary
conference before hearing the petition. Finally, the issue is put to rest by R . A .
N o . 9481 of 2007 by stating that in a P C E the e m p l o y e r is not a party.
T h e Supreme Court maintains in recent decisions that employers are "mere
bystanders" in the CE proceedings.
In Toyota Motor Phil. Corp. Workers' Association (TMPCWA) vs. CA, etc., G.R.
N o . 148924, promulgated on September 24, 2003, the Supreme Court set aside
and nullified the Writ of Preliminary Injunction issued by the Court of Appeals
upon petition of the employer.
Referring to the preceding Toyota ruling, the Court said in 2004:
We have held that "in certification elections, the e m p l o y e r is a bystander;
it has no right or material interest to assail the certification election." Steadfast,
in 2005, the Supreme Court recalled a 1996 case by saying:
Our ruling in San Miguel Foods, Inc.- Cebu B-Meg Feed Plant v. Laguesma,
(G.R. N o . 116172, 10 O c t o b e r 1996) is still sound, thus:

•M.Y. San Biscuits, Inc. vs. Acting Secretary Laguesma, G.R. N o . 95011, April
22, 1991.
Ibid.
3
Central Negros Electric Cooperative, Inc. vs. Secretary of Labor, et al, G.R.
N o . 94045, September 13, 1991.
 COLLECTIVE BARGAINING A N D ARTS 9KQ
ADMINISTRATION OF AGREEMENT *3V-4D\t
[Part 2. Employee Participation and Representation]

In any case, this Court notes that it is petitioner, the employer, which
has offered the most tenacious resistance to the holding of a certification
election among its monthly-paid rank-and-file employees. This must not be
so, for the choice of a collective bargaining agent is the sole concern of the
employees. T h e only exception to this rule is where the employer has to file
the petition for certification election pursuant to Article 258 of the Labor
C o d e because it was requested to bargain collectively, which exception
finds no application in the case before us. Its role in a certification election
has aptly been described in Trade Unions of the Philippines and Allied Services
(TUFAS) v. Trajano, as that of a m e r e bystander. It has no legal standing
in a certification election as it cannot oppose the petition or appeal the
Med-Arbiter's orders related thereto. (Laguna Autoparts Mfg. Corp. vs. Office
of the Secretary, G.R No. 157146, April 29, 2005.)
Still on this issue, we will see later that the Supreme Court, nevertheless, has
allowed an e m p l o y e r to protest against irregularities committed in the conduct
1
of a certification election.
T h e employer's standing in representation disputes, such as a petition for
a CE, has been definitely defined by law. Republic A c t N o . 9481 of 2007 inserts
an amendatory article that states:
Article 258-A. Employer as Bystander. - In all cases, whether the petition
for certification election is filed by an e m p l o y e r or a legitimate labor
organization, the e m p l o y e r shall not be considered a party thereto with
a concomitant right to oppose a petition for certification election. T h e
employer's participation in such proceedings shall be limited to: (1) being
notified or i n f o r m e d of petitions of such nature; and (2) submitting the list
of employees during the pre-election conference should the Med-Arbiter
act favorably on the petition.

3.12 Action on the Petition; Approval

If there exists no g r o u n d to dismiss or otherwise deny the petition for C.E.,
the Med-Arbiter has to grant it.
T h e ruling for the conduct of a certification election shall state the
following:
(a) the name of the employer or establishment;
(b) a description of the bargaining unit;
(c) a statement that n o n e of the grounds for dismissal (enumerated in
the preceding discussion) exists;
(d) the names of the contending labor unions which shall appear in the
following order: the petitioner unions in the order of the date of

'National Federation of Labor vs. Secretary of Labor, et al, G.R. N o . 104556,

March 19, 1998.

463
 LABOR RELATIONS
ARTS. 256-259

filing of their respective petitions; the forced intervenor; and "no

union";
(e) to afford an individual employee-voter an informed choice where
a l o c a l / c h a p t e r is o n e of the c o n t e n d i n g unions, a directive to
an unregistered l o c a l / c h a p t e r or a f e d e r a t i o n / n a t i o n a l union
representing an unregistered local/chapter to personally submit
to the election officer its certificate of creation at least five working
days before the actual conduct of the certification election. N o n -
submission of this requirement as certified by the election officer shall
disqualify the local/chapter from participating in the certification
election; and
(f) a directive upon the employer and the contending union(s) to submit
within ten (10) days from receipt of the order, the certified list of
employees in the bargaining unit, or where necessary, the payrolls
covering the members of the bargaining unit for the last three ( 3 )
1
months prior to the issuance of the order.

3.13 Appeal of Order Granting or Denying Petition

T h e Philippines has a tedious process of identifying the o n e union that
will represent the employees in bargaining with the employer. This identifying
process is often p r o l o n g e d by two occasions of appeal to the office of the D O L E
secretary: First, after the Med-Arbiter decides the petition for CE, and second,
after the CE, when the Med-Arbiter certifies the election results.
T h e only order that cannot be appealed is an o r d e r granting the conduct
of a certification election in an unorganized establishment. A n y issue arising
therefrom may be raised by means of protest on the conduct and results of the
2
certification election.
T h e order granting the conduct of a certification election in an organized
establishment and the decision dismissing or denying the petition, whether in
an organized or unorganized establishment, may be appealed to the Office of
the Secretary within ten (10) days from receipt thereof. In short, denial of any
petition for C.E. is always appealable, but never appealable is the approval of
any PCE in an enterprise still ununionized. T h e reason is sound and simple: the
law wants to unionize the ununionized.
T h e appeal shall be verified under oath and shall consist of a memorandum
of appeal specifically stating the grounds relied upon by the appellant with the
supporting arguments and evidence. T h e m e m o r a n d u m of appeal shall be
filed in the Regional Office where the petition originated, copy furnished the
contending unions and the employer, as the case may be. Within twenty-four

'As amended by D.O. N o . 40-F-03, 30 October 2008.

2
Sec. 17, D.O. N o . 40-03.

464
 COLLECTIVE BARGAINING A N D A R T S 256-2259
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

(24) hours from receipt of the appeal, the Regional Director shall cause the
transmittal thereof together with the entire records of the case to the Office of
1
the Secretary.
W h e r e no appeal is filed within the ten-day period, the Med-Arbiter shall
enter the finality of the o r d e r / d e c i s i o n in the records of the case and cause the
2
transmittal of the records of the petition to the Regional Director.
A reply to the appeal may be filed by any party to the petition within ten
( 1 0 ) days from receipt of the m e m o r a n d u m of appeal. T h e reply shall be filed
3
directly with the Office of the Secretary.
T h e Secretary shall have fifteen (15) days from receipt of the entire records
of the petition within which to decide the appeal. T h e filing of the memorandum
of appeal from the order or decision of the Med-Arbiter stays the holding of any
4
certification election.
T h e decision of the Secretary shall b e c o m e final and executory after ten
(10) days from receipt thereof by the parties. No motion for reconsideration of
the decision shall be entertained. Within forty-eight ( 4 8 ) hours from notice of
receipt of decision by the parties and finality of the decision, the entire records of
the case shall be r e m a n d e d to the Regional Office of origin for implementation.
Implementation of the decision shall not be stayed unless restrained by the
5
appropriate court.
May a certification election be held legally upon petition of U n i o n B while
a petition for C.E. earlier filed by U n i o n A is p e n d i n g on appeal at the Office of
6
the Secretary? N o , the appeal should first be resolved.

3.14 Conducting the C.E.

3.14a Pre-election Conference
Raffle of the case. — W i t h i n twenty-four ( 2 4 ) hours from receipt of the
notice o f entry o f f i n a l j u d g m e n t g r a n t i n g the c o n d u c t o f a certification
election, the R e g i o n a l Director shall cause the raffle of the case to an Election
O f f i c e w h o shall have control of the pre-election c o n f e r e n c e and election
7
proceedings.
Pre-election conference. — W i t h i n twenty-four (24) hours from receipt of the
assignment for the conduct of a certification election, the Election Officer shall

'Sec. 19, D.O. N o . 40-03, as renumbered.

2
Sec. 20, D.O. N o . 40-03, as renumbered.
3
Sec. 21, D.O. N o . 40-03, as renumbered.
4
Sec. 22, D.O. N o . 40-03, as renumbered.
Ibid.
6
Samahan ng mga Manggagawa sa Filsystems vs. Sec. of Labor, G.R. N o . 128067,
June 5, 1998.
7
Sec. 1, Rule I X , D.O. N o . 40-03.

465
 LABOR RELATIONS
ARTS. 256-259

cause the issuance of notice of pre-election conference upon the contending

unions, which shall be scheduled within ten ( 1 0 ) days from receipt of the
assignment.'
T h e pre-election conference shall set the mechanics for the election and
shall determine, among others, the following:
(a) date, time and place of the election, which shall not be later than
forty-five (45) days from the date of the first pre-election conference,
and shall be on a regular working day and within the employer's
premises, unless circumstances require otherwise;
(b) list of eligible and challenged voters;
(c) number and location of polling places or booths and the number of
ballots to be prepared with appropriate translations, if necessary;
(d) name of watchers or representatives and their alternates for each of
the parties during election;
(e) mechanics and guidelines of the election.
Waiver of right to be heard. — Failure of any party to appear during the pre-
election conference despite notice shall be considered as a waiver to be present
and to question or object to any of the agreements reached in said pre-election
conference. N o t h i n g herein, however, shall deprive the non-appearing party
or the employer of its right to be furnished notice of subsequent pre-election
2
conferences and to attend the same.
Minutes of pre-election conference. — T h e election Officer shall keep the
minutes of matters raised and agreed upon during the pre-election conference.
T h e parties shall acknowledge the completeness and correctness of the entries in
the minutes by affixing their signatures thereon. W h e r e any of the parties refuse
to sign the minutes, the Election Officer shall note such fact in the minutes,
including the reason for refusal to sign the same. In all cases, the parties shall
be furnished a copy of the minutes.
T h e pre-election conference shall be c o m p l e t e d within thirty ( 3 0 ) days
3
from the date of the first hearing.
Posting of Notice. — T h e Election Officer shall cause the posting of notice
of election at least ten ( 1 0 ) days b e f o r e the actual date of the e l e c t i o n in
two ( 2 ) most conspicuous places in the c o m p a n y premises. T h e notice shall
contain:
(a) the date and time of the election;
(b) names of all contending unions;

'Sec. 2, Rule I X , D.O. N o . 40-03 as amended by D.O. N o . 40-F-03.

Ibid.
3
Sec. 4, Ibid.

466
 COLLECTIVE BARGAINING A N D ARTS 256-25Q
4
ADMINISTRATION OF AGREEMENT *
[Part 2. Employee Participation and Representation]
(c) the description of the bargaining unit and the list of eligible and
challenged voters.
T h e posting of the notice of election, the information required to be
included therein and the duration of posting cannot be waived by the contending
1
unions or the employer.

3.14b Conducting the C.E.; the Voters

O n e of the matters the pre-election conference threshes out is the list of
voters.
Qualification of voters; inclusion-exclusion. — A l l employees who are members
of the appropriate bargaining unit sought to be represented by the petitioner
at the time of the issuance of the order granting the conduct of a certification
election shall be eligible to vote.
T h e list of voters should be based on the employer-certified list of employees
in the C B U or payrolls. If the employer does not submit the list or payrolls, the
union may submit its own list.
Even the list of employees submitted to the SSS may be used as basis to
comprise the list of voters for the C.E. "It should ideally be the payroll which
should have been used for the purpose of the election. However, the unjustified
refusal of a company to submit the payroll in its custody, despite efforts to make it
produce it, c o m p e l l e d resort to the SSS list as the next best source of information.
2
After all, the SSS list is a public record whose regularity is presumed."
Only the employees who are directly employed by the employer and working
along the activities to which the employer is e n g a g e d and linked by employer-
e m p l o y e e relationship are qualified to participate in the certification election,
3
"irrespective of the p e r i o d of their employment."
Employees of an independent contractor w h o undertakes to do a piece
of work for his account and responsibility, with minimum interference on the
part of the other contracting party (indirect e m p l o y e r ) , not being laborers or
4
employees of the latter, are not qualified to participate therein.
In case of disagreement over the voters' list or over the eligibility of voters,
all contested voters shall be allowed to vote. But their votes shall be segregated
and sealed in individual envelopes in accordance with Sections 10 and 11 of Rule
5
I X , D . O . N o . 40-03.

'Sec. 6, Rule I X , D.O. N o . 40-03 as amended by D.O. N o . 40-F-03.

2
Samahan ng Manggagawa sa Pacific Plastic vs. Hon. Bienvenido Laguesma,
G.R. N o . 111245, January 31, 1997.
3
Eastland Mfg. Corporation vs. Noriel, 111 SCRA 674.
4
Maligaya Ship Watchmen Agency, et al. vs. Associate Watchmen and Security
Union, L-12214-14, May 28, 1958.
Section 5, Rule I X , D.O. N o . 40-03.

467
 LABOR RELATIONS
ARTS. 256-259

Dismissed Employee
An employee who has been dismissed from work but has contested the
legality of the dismissal in a forum of appropriate jurisdiction at the time of the
issuance of the order for the conduct of a certification election shall be considered
a qualified voter, unless his/her dismissal was declared valid in a final j u d g m e n t
at the time of the conduct of the certification election.
In Philippine jurisprudence it is now settled that employees w h o have been
improperly laid off but w h o have a present, unabandoned right to an expectation
of reemployment, are eligible to vote in certification elections. Thus, and to
repeat, if the dismissal is under question, as in the case now at bar, whereby a
case of illegal dismissal a n d / o r unfair labor practice was filed, the employees
1
concerned could still qualify to vote in the elections.

Probationary Employees
In a certification election all rank-and-file employees in the appropriate
bargaining unit are entitled to vote. This principle is stated in Article 255 of the
Labor C o d e , which states that "the labor organization designated or selected
by the majority of the employees in an appropriate bargaining unit shall be
the exclusive representative of the employees in such unit for the purpose of
2
collective bargaining."
Collective bargaining covers all aspects of the e m p l o y m e n t relation and
the resultant C B A negotiated by the certified union binds all employees in the
bargaining unit. H e n c e , all rank-and-file employees, probationary or permanent,
have a substantial interest in the selection of the bargaining representative. T h e
C o d e makes no distinction as to their e m p l o y m e n t status as basis for eligibility
in supporting the petition for certification election. T h e law refers to "all" the
employees in the bargaining unit. A l l they n e e d to be eligible to support the
3
petition is to belong to the "bargaining unit."

INK Believers May Vote

In the CE all members of the unit, whether union members or not, have
the right to vote. U n i o n membership is not a prerequisite. If majority of the unit
members do not want a union, as expressed in the CE, such majority decision
must be respected.

Reyes, et al. vs. Cresenciano B. Trajano, et al. and Tri-union Employees Union, et al.,
G.R. N o . 84433, June 2, 1992 —
Facts: The BLR authorized the conduct of a certification election among the
employees of Tri-Union Industries Corporation. T h e competing unions were the

'Phil. Fruits and Vegetables Industries, Inc. vs. Torres, et al, G.R. N o . 92391,
July 3, 1992.
2
Airtime Specialists, Inc. vs. Director of Labor Relations, G.R. Nos. 80612-16,
December 29, 1989.
Ibid.
468
 COLLECTIVE BARGAINING A N D ARTS 2^fi-9*Q
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

T U E U - O L A L I A , and TUPAS. Of the 348 workers initially deemed to be qualified

voters, only 240 actually took part in the election. A m o n g the 240 who cast their
votes 141 were members o f the Iglesia ni Kristo ( I N K ) .
T h e ballots provided for three (3) choices: (a) TUPAS; ( b ) TUEU-OLALIA-
and (c) " N O U N I O N . "
T h e final tally of the votes showed the following results:
TUPAS 1
TUEU-OLALIA 95
NO U N I O N 1
SPOILED 1
CHALLENGED 141
T h e challenged votes were those cast by the 141 I N K members. They were
segregated and excluded from the final count because the competing unions agreed
earlier that the I N K members should not be allowed to vote "because they are not
members of any union and refused to participate in the previous certification
election."
T h e I N K employees promptly protested the exclusion of their votes. They
filed a petition to cancel the election alleging that it "was not fair" and the result
thereof did "not reflect the true sentiments of the majority of the employees." T U E U -
O L A L I A opposed the petition. It contended that the petitioners "do not have legal
personality to protest the results of the election," because "they are not members of
either contending unions, but*** of the I N K which prohibits its followers, on religious
grounds, from joining or forming any labor organization.**"
T h e Med-Arbiter, seeing no merit in the I N K employees' petition, certified
the T U E U - O L A L I A as the sole and exclusive bargaining agent of the rank-and-file
employees.
T h e petitioner employees brought the matter up on appeal to the Bureau of
Labor Relations which denied the appeal.
Ruling: Logically, the right N O T to j o i n , affiliate with, or assist any union,
and to disaffiliate or resign from a labor organization, is subsumed in the right to
j o i n , affiliate with, or assist any union, and to maintain membership therein. T h e
right to form or j o i n a labor organization necessarily includes the right to refuse
or refrain from exercising said right. It is self-evident that just as no one should be
denied the exercise of a right granted by law, so also, no one should be compelled
to exercise such a conferred right. T h e fact that a person has opted to acquire
membership in a labor union does not preclude his subsequently opting to renounce
such membership.
As early as 1974 this Court had occasion to expatiate on these self-evident
propositions in Victoriano vs. Elizalde Rope Workers' Union, et al, (59 SCRA 54, 66-
67).
T h e purpose of a certification election is precisely the ascertainment of the
wishes of the majority of the employees in the appropriate bargaining unit: to be or
not to be represented by a labor organization, and in the affirmative case, by which

469
 LABOR RELATIONS
ARTS. 256-259

particular labor organization. If the results of the election should disclose that the
majority of the workers do not wish to be represented by any union, then their
wishes must be respected, and no union may properly be certified as the exclusive
representative of the workers in the bargaining unit in dealing with the employer
regarding wages, hours and other terms and conditions of employment. T h e minority
employees — who wish to have a union represent them in collective bargaining —
can do nothing but wait for another suitable occasion to petition for a certification
election and hope that the results will be different. They may not and should not
be permitted, however, to impose their will on the majority — who do not desire
to have a union certified as the exclusive workers' benefit [sic] in the bargaining
unit — upon the plea that they, the minority workers, are being denied the right to
self-organization and collective bargaining.
The respondents' argument that the petitioners are disqualified to vote because
they "are not constituted into a duly organized labor union" — "but members of the
I N K which prohibits its followers, on religious grounds, from joining or forming
any labor organization" — and "hence, not one of the unions which vied for
certification as sole and exclusive bargaining representative," is specious. Neither law,
administrative rule nor jurisprudence requires that only employees affiliated with
any labor organization may take part in a certification election. On the contrary, the
plainly discernible intendment of the law is to grant the right to vote to all bona fide
employees in the bargaining unit, whether they are members of a labor organization
or not, as held in Airtime Specialists, Inc. vs. Ferrer-Calleja (180 SCRA 749).

3.14c Conducting the CE: T h e Voting

T h e voting shall open on the date and time agreed upon in the pre-election
conference.
Secrecy and sanctity of the ballot. — To ensure secrecy of the ballot, the Election
Officer, together with the authorized representatives of the contending unions
and the employer, shall, before the start of the actual voting, inspect the polling
1
place, the ballot boxes and the polling booths.
Preparation of ballots. — T h e Election Officer shall prepare the ballots in
English and Filipino or the local dialect, corresponding to the number of voters
and a reasonable number of extra ballots. A l l ballots shall be signed at the back
by the Election Officer and authorized representative of each of the contending
unions. A party who refuses or fails to sign the ballots waives its right to do so
and the Election Officer shall enter the fact of refusal and the reason therefor
in the records of the case.
Marking of votes. — T h e voter must put a cross (X) or check ( • ) mark in
the square opposite the name of the union of his choice or " N o U n i o n " if h e /
she does not want to be represented by any union.

'Section 7, Rule I X , D.O. N o . 40-03.

470
 COLLECTIVE BARGAINING A N D A R T S . 256-259
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

If a ballot is torn, defaced or left unfilled in such a manner as to create

doubt or confusion or to identify the voter, it shall be considered spoiled. If the
voter inadvertently spoils a ballot, h e / s h e shall return it to the Election Officer
1
who shall destroy it and give h i m / h e r another ballot.
Procedure in the challenge of votes. — T h e ballot of the voter who has been
properly challenged during the pre-election conferences, shall be placed in an
envelope which shall be sealed by the Election Officer in the presence of the
voter and the representatives of the contending unions. T h e Election Officer shall
indicate on the envelope the voter's name, the union challenging the voter, and
the ground for the challenge. T h e sealed envelope shall then be signed by the
Election Officer and the representatives of the contending unions. T h e Election
Officer shall note all challenges in the minutes of the election proceedings
and shall have custody of all envelopes containing the challenged votes. T h e
envelopes shall be o p e n e d and the question of eligibility shall be passed upon
by the Mediator-Arbiter only if the number of segregated votes will materially
2
alter the results of the election.
On-the-spot questions. — T h e Election Officer shall rule on any question
relating to and raised during the conduct of the election. In no case, however,
shall the election officer rule on any of the grounds for challenge specified in
3
the immediately preceding section.
Protest; when perfected. — A n y party-in-interest may file a protest based on
the conduct or mechanics of the election. Such protest shall be recorded in the
minutes of the election proceedings. Protests not so raised are d e e m e d waived.
T h e protesting party must formalize its protest with the Med-Arbiter, with
specific grounds, arguments and evidence, within five ( 5 ) days after the close of
the election proceedings. If not recorded in the minutes and formalized within
4
the prescribed period, the protest shall be d e e m e d d r o p p e d .

ULP in Relation to Election

T h e employer deserves condemnation for ignoring the employees' request
for permission for some time out to attend to the hearing of their petition before
the Med-Arbiter. It is not only an act of arrogance, but a brazen interference as
well, with the employees' right to self-organization, contrary to the prohibition
5
against unfair labor practice.
It is unfair labor practice for the company to suspend the workers on
the ground of "abandonment of work" on the day on which the pre-election

•Section 9.
2
Sec. 10, D.O. N o . 40-03 as amended by D.O. N o . 40-F-03.
3
Sec. 11, Ibid.
4
Sec. 12.
5
C L L C E. G. Gochongco Workers Union, et al. vs. National Labor Relations
Commission, G.R. N o . 67158, May 30, 1988.
471
 LABOR RELATIONS
ARTS. 256-259

conference had been scheduled. It is the employee's right to hold a certification

1
election, the exercise of which is their sole prerogative.
A company commits unfair labor practice where it issued suspension
and termination orders while the employees are in the midst of a certification
election preliminary to a labor-management conference "to normalize employer-
2
employee relations."

3.14d Conducting the CE: Canvassing of Votes

T h e voting shall close on the date and time agreed upon in the pre-election
conference. Canvassing shall immediately follow.
Canvassing of votes. — T h e votes shall be counted and tabulated by the
Election Officer in the presence of the representatives of the c o n t e n d i n g
unions. U p o n completion of the canvass, the Election Officer shall give each
representative a copy of the minutes of the election proceedings and results of
the election. T h e ballots and the tally sheets shall be sealed in an envelope and
signed by the Election Officer and the representatives of the contending unions
and transmitted to the Med-Arbiter, together with the minutes and results of the
3
election, within twenty-four (24) hours from the completion of the canvass.
W h e r e the election is conducted in m o r e than o n e region, consolidation
of results shall be made within fifteen (15) days from the conduct thereof.
Failure of the representative/s of the contending unions to appear during
the election proceedings and canvass of votes shall be considered a waiver of the
right to be present and to question the conduct thereof.

3.14e W h o Wins in the C.E.; Proclamation and Certification

In order to have a valid election, at least a majority of all eligible voters in
the unit must have cast their votes.
Within twenty-four (24) hours from final canvass of votes, there being a
valid election, the Election Officer shall transmit the records of the case to the
Med-Arbiter who shall, within the same p e r i o d from receipt of the minutes and
results of election, issue an order proclaiming the results of the election and
certifying the union which obtained a majority of the valid votes cast as the sole
and exclusive bargaining agent in the subject bargaining unit, under any of the
following conditions:
(a) no protest was filed or, even if o n e was filed, the same was not
perfected within the five-day period for perfection of the protest;
(b) no challenge or eligibility issue was raised or, even if o n e was raised,
the resolution of the same will not materially change the results of
the elections.
1
C L L C E. G. Gochongco Workers Union, et al. vs. National Labor Relations
Commission, G.R. N o . 67158, May 30, 1988
Ibid.
3
Sec. 13, Rule I X , D.O. N o . 40-03 as amended by D.O. N o . 40-F-03.
472
 COLLECTIVE BARGAINING A N D A R T S 2Hfi-2KQ
ADMINISTRATION OF AGREEMENT
[Part 2. Employee Participation and Representation]

T h e winning union shall have the rights, privileges and obligations of

a duly certified collective bargaining agent from the time the certification is
issued.
W h e r e majority of the valid votes cast results in " N o U n i o n " obtaining the
1
majority, the Med-Arbiter shall declare such fact in the order.
Certification of Collective Bargaining Agent. — T h e union which obtained a
majority of the valid voles cast shall be certified as the sole and exclusive bargaining
agent of all the employees in the appropriate bargaining unit within five ( 5 ) days
from the day of the election, provided no protest is recorded in the minutes of
2
the election.

3.14f Failure of Election; Motion for a Remedial Election

Failure of election. — W h e r e the number of votes cast in a certification or
consent election is less than the majority of the number of eligible voters and
there are no material challenged votes, the Election Officer shall declare a failure
3
of election in the minutes of the election proceedings.
Effect of failure of election. — A failure of election shall not bar the filing of a
m o t i o n for the immediate holding of another certification or consent election
4
within six ( 6 ) months from date of declaration of failure of election.
Action on the motion. — Within twenty-four (24) hours from receipt of the
motion, the Election officer shall immediately schedule the conduct of another
certification or consent election within fifteen (15) days from receipt of the
motion and cause the posting of the notice of certification election at least ten
(10) days prior to the scheduled date of election in two ( 2 ) most conspicuous
places in the establishment. T h e same guidelines and list of voters shall be used
5
in the election.

3.14g Run-off Election

W h e n an election which provides for three ( 3 ) or m o r e choices results in
n o n e of the contending unions receiving a majority of the valid votes cast, and
there are no objections or challenges which if sustained can materially alter the
results, the Election Officer shall motu proprio conduct a run-off election within
ten (10) days from the close of the election proceedings between the labor unions
receiving the two highest number of votes; provided, that the total number of
votes for all contending unions is at least fifty ( 5 0 % ) percent of the number of
votes cast.
" N o U n i o n " shall not be a choice in the run-off election.

•Sec. 19, D . O . N o . 40-03 as amended by D.O. N o . 40-F-03.

2
Sec. 15, Ibid.
3
Sec. 16, Ibid.
4
Sec. 17, Ibid.
5
Sec. 18, Ibid.

473
 LABOR RELATIONS
ARTS. 256-259

Notice of run-off elections shall be posted by the Election Officer at least

1
five ( 5 ) days before the actual date of run-off election.
Qualification of voters in the run-off election. — T h e same voters' list used in
the certification election shall be used in the run-off election. T h e ballots in the
run-off election shall provide as choices the unions receiving the highest and
second highest number of the votes cast. T h e labor union receiving the greater
number of valid votes cast shall be certified as the winner, subject to Section 20,
Rule IX of D . O . N o . 40-03 (quoted in the topic 3.13e).
To summarize, a run-off election is proper if five concurrent conditions
exist, namely:
1. a valid election took place because majority of the C B U members
voted.
2. the election presented at least three choices, e.g., U n i o n O n e ,
U n i o n T w o , and No U n i o n , meaning there are at least two union
"candidates."
3. not one of the unions obtained the majority of the valid votes.
4. the total number of votes for all the unions is at least 50% of the
votes cast.
5. there is no unresolved challenge of voter or election protest.
Examples:
1. T h e C B U has 100 members, fifty voted: "Union O n e " received
30 votes; "Union T w o , " 15 and " N o U n i o n , 5." Is a run-off election proper?
N o , because in the first place there is no valid election since the votes cast
are less than 51 (majority of the C B U voters). T h e r e is failure of election.
T h e status q u o is maintained, that is, the company is ununionized. But
another C.E. may be called within six ( 6 ) months.
2. T h e C B U has 100 members and everyone voted: 25 for "Union
O n e , " 20 for "Union T w o , " and 55 for " N o U n i o n . " No invalid votes. Is
run-off election proper? N o , because although there is valid election the
45 votes for the unions are less than 50% of the votes cast. Status q u o is
maintained.
3. T h e C B U has 100 members. Eighty voted: 30 for "Union O n e , "
15 for "Union T w o , " 15 for "Union T h r e e , " and 20 for " N o U n i o n . " No
invalid votes. Which union won? N o n e , because not o n e g o t the majority of
the 80 valid votes. Is run-off election proper? Yes, because the contending
unions obtained 60 votes which even exceeds one-half of the votes cast.
T h e run-off will be between the labor unions receiving "the two highest
number of votes." In this example, "Union O n e " will face both "Union T w o "
and "Union T h r e e " because these two tied for the second highest number

'Sec. 1, Rule 10, D.O. N o . 40-03.

474
 COLLECTIVE BARGAINING A N D ARTS 2^fi-9*;Q
ADMINISTRATION OF AGREEMENT *
[Part 2. Employee Participation and Representation]

of union votes. T h e rematch is not between two "unions" but between

"two highest votes." If they did not de, only the union that received the
higher vote will have a rematch with "Union O n e . " T h e N o - U n i o n choice
is eliminated from the run-off.

3.15 Appeal to Secretary as to Election Result

W h e n it was issued in 2003 as the Rules Implementing Book V of the C o d e ,
D . O . N o . 40 did not carry provisions on appeal as to the result of the C.E. But
the silence cannot mean nonavailability of the appeal. This recourse is provided
for in Article 259 and it cannot be abolished by a department order.
N o t i c i n g the gap, the D O L E issued D . O . N o . 40-E-03 (dated 30 N o v e m b e r
2005) to clarify the appeal procedure in certification election protests. It adds
to D . O . N o . 40-03, Rule I X , the following sections —
"Section 21. Appeal; finality of decision. — T h e decisions of the
Med-Arbiter may be appealed to the Secretary within ten (10) days from
receipt by the parties of a copy thereof.
T h e appeal shall be under oath and shall consist of a memorandum
of appeal, specifically stating the grounds relied upon by the appellant
with the supporting arguments and evidence.
W h e r e no appeal is filed within the ten-day period, the order/decision
shall b e c o m e final and executory and the Med-Arbiter shall enter this fact
into the records of the case.
"Section 22. W h e r e to file appeal. — T h e m e m o r a n d u m of appeal
shall be filed in the Regional Office where the petition originated, copy
furnished the contending unions and the employer, as the case may be.
Within twenty-four ( 2 4 ) hours from receipt of the appeal, the Regional
Director shall cause the transmittal thereof together with the entire records
of the case to the Office of the Secretary.
"Section 23. Period to Reply. — A reply to the appeal may be filed
by any party to the petition within ten ( 1 0 ) days from receipt of the
m e m o r a n d u m of appeal. T h e reply shall be filed directly with the Office
of the Secretary.
"Section 24. Decision of the Secretary. — T h e Secretary shall have
fifteen (15) days from receipt of the entire records of the petition within
which to decide the appeal.
T h e decision of the Secretary shall b e c o m e final and executory
after ten (10) days from receipt thereof by the parties. No motion for
reconsideration of the decision shall be entertained.
"Section 25. Transmittal of records to the Regional Office. — Within
forty-eight (48) hours from notice of receipt of decision by the parties and
finality of the decision, the entire records of the case shall be remanded

475
ARTS. 256-259 LABOR RELATIONS

to the Regional Office of origin for implementation. Implementation

of the decision shall not be stayed unless restrained by the appropriate
court."

( N o t e : D . O . N o . 40-F-03 has renumbered these Sections as 20 to 24.)

3.16 Election Irregularities, Protest by Employer

National Federation of Labor vs. Sec. of Labor, et al., G.R. N o . 104556, March
19, 1998 —
Nor is it improper for private respondent [Hijo Plantation, Inc.] to show interest
in the conduct of the election. Private respondent is the employer. T h e manner in
which the election was held could make the difference between industrial strife and
industrial harmony in the company. What an employer is prohibited from doing is to
interfere with the conduct of the certification election for the purpose of influencing
its outcome. But certainly an employer has an abiding interest in seeing to it that the
election is clean, peaceful, orderly, and credible.
In this case, petitioner [union] maintains that private respondent [employer]
did not make any protest regarding the alleged irregularities (e.g., massive
disfranchisement of employees) during the election. Hence, the appeal and motions
for reconsideration of private respondent H P I should have been dismissed summarily.
The complaint in this case was that a number of employees were not able to
cast their votes because they were not properly notified of the date. They could not
therefore have filed their protests within five (5) days. At all events, the Solicitor
General states, that the protests were not filed within five ( 5 ) days, is a mere techni-
cality which should not be allowed to prevail over the workers' welfare [sic]. As this
Court stressed in LVN Pictures, Inc. vs. Phil. Musicians Guild, 1 SCRA 132 (1961), it
is essential that the employees must be accorded an opportunity to freely and intel-
ligendy determine which labor organization shall act in their behalf. T h e workers in
this case were denied this opportunity. N o t only were a substantial number of them
disfranchised, there were, in addition, allegations of fraud and other irregularities
which put in question the integrity of the election. Workers wrote letters and made
complaints protesting the conduct of the election. T h e Report of Med-Arbiter Pura
who investigated these allegations found the allegations of fraud and irregularities
to be true.
In one case this Court invalidated a certification election upon a showing of
1
disfranchisement, lack of secrecy in the voting and bribery. We hold the same in
this case.

4. THIRD METHOD: CONSENT ELECTION

Already discussed are voluntary recognition and certification election, two
of the methods to determine which union will bargain with the employer. T h e
third and last method is called "consent election."

•Confederation of Citizens Labor Unions vs. Noriel, 116 SCRA 699 [1982].

476
 f
COLLECTIVE BARGAINING A N D ARTS 25fi-25Q
ADMINISTRATION OF AGREEMENT *
[Part 2. Employee Participation and Representation]
A l t h o u g h not specifically m e n t i o n e d in the C o d e , consent election is
authorized and detailed in the Implementing Rules. Like a C.E., its purpose is
the same, namely, to find out which union should serve as the bargaining agent.
T h e difference is that a certification election is ordered by the Department while
a consent election is voluntarily agreed upon by the parties, with or without the
intervention of the Department.
T w o o r m o r e unions are i n v o l v e d i n a c o n s e n t e l e c t i o n . A n d like
certification election, consent election may take place in an unorganized or
organized establishment.
In hearing a petition for a certification election, the Med-Arbiter may
persuade the contending unions to agree to a consent election. If the unions
do agree, the Med-Arbiter shall not issue an order calling for the conduct of an
election. Instead, he shall enter in the minutes of the hearing or preliminary
conference the fact of the agreement and then cause the immediate scheduling
of the pre-election conference. T h e minutes should be signed by the parties and
attested to by the Med-Arbiter. T h e Mediator-Arbiter shall immediately forward
the records of the petition to the Regional Director or his/her authorized
representative for the determination of the Election Officer w h o shall be chosen
by raffle in the presence of representatives of the contending unions if they so
desire.
T h e first pre-election conference shall be scheduled within ten (10) days
from the date of the consent election agreement. Subsequent conferences may
be called to expedite and facilitate the holding of the consent election.
To afford an individual employee-voter an informed choice where a local/
chapter is the petitioning union, the local/chapter shall secure its certificate of
creation at least five working days before the date of the consent election.

4.1 Effect of Consent Election

W h e r e a petition for certification election had been filed, and upon the
intercession of the Med-Arbiter, the parties agreed to hold a consent election,
the results shall constitute a bar to the holding of a certification election for
o n e ( 1 ) year from the holding of such consent election. W h e r e an appeal has
been filed from the results of the consent election, the running of the one-year
period shall be suspended until the decision on appeal has become final and
1
executory.
W h e r e no petition for certification election was filed but the parties
themselves a g r e e d to h o l d a consent election with the intercession of the
Regional Office, the results thereof shall constitute a bar to another petition for
2
certification election.

'Sec. 24, Rule V I I I , D.O. N o . 40-03.

Ibid.
477
 LABOR RELATIONS
ARTS. 256-259

5. THE W I N N E R AS SOLE A N D EXCLUSIVE REPRESENTATIVE

Collective bargaining contemplates the representation of the collective
interests of all of the employees in the particular bargaining unit by a properly
selected bargaining agent. T h e selection of a bargaining agent by a majority of
such employees, under express provisions of the Act, constitutes the agent as the
representative of all the employees within the particular bargaining unit. T h e
Act provides that such bargaining agent shall be the "exclusive" representative
of the employees. T h e term "exclusive" was interpreted under the original A c t
to mean that the employer must treat with the representative to the exclusion
1
of all other claiming bargaining agents.

5.1 Exclusive Bargaining Agent Represents Even the Minority Union

On the part of the union that won in the certification election, it becomes,
and is certified as, the exclusive bargaining agent of all the workers in the
2
bargaining unit. It represents even the members of the minority union. Thus,
when the certified union files a claim against the employer and the case is decided
in due course, the decision binds even the minority union which, therefore, is
barred from filing another case for the same cause of action against the same
3
employer. T h e action is barred by the principle of res judicata.
However, although the union has every right to represent its m e m b e r s
in the negotiation regarding the terms and conditions of their e m p l o y m e n t , it
cannot negate their wishes on matters which are purely personal and individual
to them. In o n e case, for instance, the forty e m p l o y e e s freely o p t e d to be
covered by the O l d Plan. W h e n the c o m p a n y gave them the opportunity to
choose, and they voluntarily exercised their c h o i c e , their decision should be
respected. T h e union cannot p r e t e n d to know better; it cannot impose its will
4
on them.

5.2 Protection and Capacity of the Loser; the Duty of Fair Representation
W h a t if the majority u n i o n neglects the interest of the e m p l o y e e s in
the minority union? T h e majority u n i o n in such case will be violating its duty
of fair representation. T h i s duty, e n j o i n e d explicitly in A m e r i c a n jurispru-
dence and implicitly in P h i l i p p i n e law, obligates the majority u n i o n to serve
the interest of all m e m b e r s of the w h o l e bargaining unit without hostility or
6
discrimination.

'Rothenberg on Labor Relations, p. 476.

2
Article 265.
3
Danilo Militante, et al. vs. N L R C , Golden Taxi Cab Co., et al, G.R. N o . 113448,
July 14, 1995.
4
Caltex Refinery Employees Association ( C R E A ) vs. H o n . Jose S. Brillantes,
G.R. N o . 123782, September 16, 1997.
5
See: The Developing Labor Law, 2001 ed., p. 1861.

478
 COLLECTIVE BARGAINING A N D ARTS 25fi-9KQ
4 4 3 9
ADMINISTRATION O F AGREEMENT
[Part 2. Employee Participation and Representation]

If the majority union neglects the interest of employees in the minority

union, that is, if the duty of fair representation is violated, what can the minority
do?
T h e minority union, although a loser in the election, does not lose its
character as a lawful labor organization entitled to protection under Article 246
which makes it unlawful for any person to abridge the right to self-organization.
To this may be added the reservation in Article 255 that, despite presence
of a bargaining agent, "an individual e m p l o y e e or group of employees shall have
the right at any time to present grievances to their employer." N o t e , furthermore,
that under the same Article 255 the bargaining agent's capacity as "exclusive
representative" is only for "the purpose of collective bargaining." For negotiating
and administering a C B A , the majority union is therefore the sole and exclusive
representative, but for n o n - C B A issues the minority union may act as a group of
employees to present grievances to the employer.
May a minority union charge the employer with U L P ? T h e protection
provided by Article 246 and the U L P acts proscribed in Articles 247-248 do
not distinguish between bargaining agent or non-bargaining agent. What is
being shielded from U L P is the right to self-organize and not only the right to
collectively bargain. This implies that a legitimate labor organization, although
not a bargaining agent, is protected by the law against U L P by the employer.
H e n c e , if the minority union or its members are targets of U L P acts by the
employer, with or without collusion with a majority union, the minority union
or its members, faced with the majority union's disregard of its duty of fair
representation, can file an individual or g r o u p complaint for U L P . It can even
engage in peaceful concerted activity. But it cannot resort to work stoppage or
strike because strike is reserved, under Article 263, to an exclusive bargaining
representative (i.e., the majority u n i o n ) , if there is o n e . A group action without
work stoppage is not necessarily a strike and such act, as an exercise of the
freedom of expression, may be done, peacefully, by employees, whether unionized
o r not.

5.3 Is the Bargaining Union a Majority Union?

T h e minority union's entitlement to protection gains greater force and
respect if it is r e m e m b e r e d that the bargaining union does not always comprise
the numerical majority in the bargaining unit.
Article 256 requires, for a union to win in a C.E., only a majority of the
valid votes cast. T h e majority of the valid votes may be lesser than the majority of
the employees in the bargaining unit.
To illustrate: T h e C B U has 100 members. Applying Article 255, the union
to represent them should have been selected by at least 51 of the 100. But under
Article 256, a union can be declared the winner even if it received only a majority
of the valid votes cast which, as already said, can be lesser than majority of the

479
 LABOR RELATIONS
ARTS. 256-259

members. If 51 voted and 30 of the valid votes went to U n i o n O n e , this union

becomes the bargaining union although, in fact, less than one-third of the C B U
voted for it.
Article 256 therefore does n o t support A r t i c l e 255; in fact, they are
incongruent. Whereas Article 255 requires selection by majority of the unit
members, Article 256 requires only majority of the valid votes cast. T h e result
may be a bargaining agent that does not carry the mandate of the majority of
the employees.

5.4 May the Bargaining Agent Represent Retired Employees?

In pursuing their claim for retirement benefits under the C B A , the claimant
retirees are represented by the union of which they were f o r m e r members. T h e
employer asserts that employer-employee relationship no l o n g e r exists because
the claimants have retired, and that the union has no personality to file the
complaint in their behalf.
Rejecting such assertion, the Supreme Court explains:
W h e n the retired employees were requesting that their retirement
benefits be granted, they were not pleading for generosity but were merely
demanding that their rights, as e m b o d i e d in the C B A , be recognized. Thus,
when an employee has retired but his benefits under the law or the C B A
have not yet been given, he still retains, for the purpose of prosecuting his
claims, the status of an e m p l o y e e entitled to the protection of the L a b o r
C o d e , o n e of which is the protection of the labor union. In Esso Philippines,
Inc. vs. Malayang Manggagawa sa Esso (75 SCRA 77 [1977]), we recognized
that while the individual complainants are the real party in interest in issues
involving monetary claims and benefits, the union, however, is not d e n i e d
its right to sue on behalf of its members. (Producers Bank of the Phil, [now
First Philippine International Bank] vs. NLRC and Producers Bank Employees
Association, G.R No. 118069, November 16, 1998.)

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GRIEVANCE MACHINERY AND VOLUNTARY
1
ARBITRATION

O v e r v i e w / K e y Questions Box 17
1. A C B A is said to be the law between the parties. What
are the consequences of its violation?
2. A C B A is in personam. W h a t are the implications? the
exceptions?
3. W h a t is "grievance machinery" and why is it a required
provision in a CBA?
4. In what cases is resort to the grievance machinery a
prerequisite o r jurisdictional, and when is it optional?
5. W h o are voluntary arbitrators? In what sense are they
"voluntary"? A r e their decisions appealable?
6. W h a t rules govern voluntary arbitration?

ART. 260. GRIEVANCE MACHINERY AND VOLUNTARY ARBITRATION

T h e parties to a Collective Bargaining Agreement shall include therein
provisions that will ensure the mutual observance of its terms and conditions.
T h e y shall establish a machinery f o r the adjustment and resolution of
grievances arising f r o m the interpretation or implementation of their
Collective Bargaining Agreement and those arising from the interpretation
or enforcement of company personnel policies.
All grievances submitted to the grievance machinery which are not
settled within seven ( 7 ) calendar days f r o m the date of its submission shall
automatically be referred to voluntary arbitration prescribed in the Collective
Bargaining Agreement.
For this purpose, parties to a Collective Bargaining Agreement shall
name and designate in advance a Voluntary Arbitrator or panel of Voluntary
Arbitrators, or include in the agreement a procedure for the selection of such
Voluntary Arbitrator or panel of Voluntary Arbitrators, preferably from the
listing of qualified Voluntary Arbitrators duly accredited by the B o a r d . In
case the parties fail to select a Voluntary Arbitrator or panel of Voluntary

'Added by Sec. 21, R . A 6715.

481
 LABOR RELATIONS
ART. 260

Arbitrators, the B o a r d shall designate the Voluntary Arbitrator or panel

of Voluntary Arbitrators, as may be necessary, pursuant to the selection
procedure agreed upon in the Collective Bargaining Agreement, which shall
act with the same force and effect as if the Arbitrator or panel of Arbitrators
has been selected by the parties as described above.
C O M M E N T S A N D CASES
1. C O N T R A C T ADMINISTRATION AS PART OF T H E D U T Y TO BARGAIN
Collective bargaining is not an end in itself. It is a means to an end, which
is the making of collective agreements stabilizing employment relations for a
1
period of time with results advantageous both to the worker and the employer.
However narrowly it may canalize its course, the execution of a contract does
not complete collective bargaining. Piece rates and work assignments frequently
require day-to-day adjustments; periodic decisions must be made concerning such
matters as shop rules, j o b content, and the letting of subcontracts. T h e r e will
2
be ambiguities in the agreement to be clarified and gaps to be filled. In other
3
words, the duty to bargain continues into the contract administration stage.
In effect, therefore, "contract negotiations are the legislative process
of collective bargaining; the day-to-day working out of plant problems is its
4
administrative or judicial aspects."
T h e trade agreement thus becomes, as it were, the industrial constitution
of the enterprise, setting forth the broad general principle upon which the
relationship of employer and e m p l o y e e is to be conducted.... T h e m e r e fact that
it provides a framework within which the process of collective bargaining may
5
be carried on is of incalculable value in removing the costs of industrial strife.
Strengthening the binding force of the C B A , Article 248 considers as unfair
labor practice any act that violates an existing collective bargaining agreement.
But this law must be related to Article 261 which limits that kind of U L P to "gross
violations" only.

2. C B A . , LAW BETWEEN T H E PARTIES

T h e provisions of the collective bargaining agreement must be respected
since its terms and conditions "constitute the law between the parties." T h o s e
who are entitled to its benefits can invoke its provisions. In the event that an
obligation therein imposed is not fulfilled, the aggrieved party has the right

•Archibald Cox and John T. Dunlop, The Duty to Bargain Collectively During the
Terms of an Existing Agreement, 63 Harvard Law Review, pp. 1097, 1099-1100.
Ibid.
Ibid.
Ibid.
5
N L R B vs. Highland Park Mfg. Co., 11 F. 2d 632, 638 [4th Cir. 1940].

482
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

1
to go to court for redress. Thus, it has been ruled that an employer violates
his duty to bargain collectively where he unilaterally alters or changes a term
or condition of e m p l o y m e n t maintained pursuant to an existing collective
2
bargaining agreement.
In another case, the employer is found to have failed to live up in g o o d
faith to the terms of its collective bargaining agreement by denying the privileges
and benefits thereof to fifteen drivers and helpers through its device of trying
to pass them o f f as 'employees' of its salesmen and propagandists. Such posture
was a serious violation of the duty to bargain collectively and constituted unfair
3
labor practice in any language.
T h e C B A during its lifetime constitutes the law between the parties. Thus,
its provisions that monthly-paid employees shall be entitled to the additional
holiday pay authorized by law cannot be impaired by a subsequent rule of the
Minister of L a b o r that the salaries of monthly-paid employees whose salaries are
above the statutory minimum shall be d e e m e d to include already said holiday
4
pay.
Unilaterally f o r m u l a t e d rules and policy can neither contradict nor
undermine the C B A provisions.

Holy Cross of Davao College vs. Holy Cross of Davao Faculty Union-KAMAPI, G.R.
N o . 156098, June 27, 2005 —
Facts: J. Legaspi, a teacher in the petitioner school, requested the school for a
study leave of 18 months with salary and allowance. Such benefit was provided for in
the 1997 CBA between the school and the union of which Ms. Legaspi was a member.
T h e school, however, denied her request and instead approved only a study leave
of 12 months without pay. T h e school reasoned out that she was not entitled to the
18-month grant-in-aid under the school's "Policy Statement and Guidelines for Trips
for Professional Growth." T h e school policy, issued in 1998 would grant financial
assistance only if the faculty member would pursue a "higher degree" unlike in Ms.
Legaspi's scholarship that would confer only a "certificate."
Ruling: Since the collective bargaining agreement is considered the law between
the parties, containing as it does the agreed terms of employment of the employee
with his employer, unilaterally imposed orders or rules qualifying the terms contained

•Roche [Philippines], et al. vs. National Labor Relations Commission, G.R. N o .

83335, October 5, 1989.
2
Century Papers, Inc., 155 N L R B N o . 40; C 8c C Plywood Corp., 138 NLRB 414;
Adams Dairy Co., 147 N L R B 1410.
3
See Security Bank Employees Union vs. Security Bank Trust Co., L-28536,
April 30,1968; Alhambra Industries, Inc. vs. Court of Industrial Relations, G.R. N o .
L-25984, October 30, 1970.
4
Citibank Phils. Employees Union-NATU vs. Minister of Labor, 97 SCRA 52
[1980].
483
 LABOR RELATIONS
ART. 260

in the agreement are subordinate to the CBA. At most, such rules, such as the rules
on trips abroad formulated by petitioner [school] a few months before Legaspi's
application, are merely suppletory and can neither contradict nor undermine the
terms found in the CBA.
Further, while no degree but only a certificate will be conferred on Legaspi,
she should not be barred from availing of the benefits under the CBA. Indeed, the
CBA merely states 'higher studies' and did not specify to which trainings the benefit
will apply. If the CBA intended that such trainings be confined to those which will
formally grant degrees as petitioner contends, the agreement should have so stated.
Contrary thereto, however, the CBA provides the award of grant-in-aid benefits to
faculty members who will pursue 'higher studies.' T h e term is so broad as to include
programs that would grant certificates and not degrees. In any case, the unassailable
truth is that the certificate which is granted by a premier foreign institute, is an added
higher qualification in favor of Legaspi in recognition of her increased competence
in handling her classes under petitioner's auspices.
In any event, the construction of any ambiguity in the CBA, such as which
course would be relevant to Legaspi's j o b , and whether such course comprises 'higher
studies' should be made in favor of the employee, Legaspi, in consonance with the
rule that labor laws and agreements should be construed in favor of the working
man.

A recent interesting case of C B A interpretation centers on the meaning

of a "dependent." Does the term "dependent" include a fetus? T h e C B A states
that the company agrees to grant bereavement leave with pay to any e m p l o y e e
in case of death of a "dependent" namely: parents, spouse, children, brothers
and sisters. In addition if a legitimate parent, spouse or child dies, the e m p l o y e e
will receive death and accident insurance benefit from the employer.
T h e legal wife of e m p l o y e e " H " had a premature delivery in her 38th week
of pregnancy.
T h e female fetus died during labor of the mother. Is the death of the fetus
death of a dependent that entities Mr. H to the leave-with-pay and the death
insurance under the CBA? T h e voluntary arbitrator chosen by the parties (Atty.
Allan M o n t a ñ o ) ruled that the fetus had the right to be supported by the parents
from the m o m e n t h e / s h e was conceived; therefore, the fetus was a "dependent"
covered by the C B A provision m e n t i o n e d above. T h e e m p l o y e r disputes this
interpretation, insisting that only o n e with civil personally could die; the fetus
did not "die" because it had not acquired legal personality. T h e fetus that was
dead from the m o m e n t of delivery did not b e c o m e a person, therefore it was
not a "dependent."
T h e Supreme Court sustained the ruling of the V A . W h i l e the Civil C o d e
states that civil personality may be extinguished by death, it does not say that
only those who have acquired juridical personality can die. A child inside the

484
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

w o m b already has life. It can die in the w o m b . If the unborn already has life,
then the cessation of life before the child was delivered qualifies as "death."
A n d the unborn child is a dependent because a "dependent" is "one w h o relies
on another for support." T h e fetus could not have reached 38 or 39 weeks of
gestational life without d e p e n d i n g upon its mother. H e n c e , the employee is
entitled to the leave-with-pay and the insurance benefit under the C B A because
1
of death of a "legitimate d e p e n d e n t child."
In another recent case involving C B A interpretation and implementation,
the court upheld the legality of management-formulated guidelines upgrading
the academic qualifications of applicants r e c o m m e n d e d by its ex-employees,
although the C B A does not specify such qualifications.

United Kimberly-Clark Employees Union-PTGWO vs. Kimberly-Clark Philippines,

Inc., G.R. N o . 162957, March 6, 2006 —
Facts: T h e CBA of the parties provides:
Section 1. T h e Company agrees to employ, regardless of sex, the
immediate member of the family of an employee provided qualified, upon
the employee's resignation, retirement, disability or death. In case of resignation,
however, employment of an immediate member of the family of an employee
may be allowed provided the employee has rendered a service of ten (10) years
and above and the resignation is not a forced resignation. For the purpose
of this section the phrase "immediate member of the family of an employee"
shall refer to the employee's legitimate children and in default thereof to the
employee's collateral relative within the third civil degree. T h e recommendee
of the retired/resigned employee shall, if qualified, be hired on probationary
status. (Emphasis added)
Under this provision some ex-employees recommended applicants who were
only high school graduates and the company hired some of them. In 1993 the
provision was the subject of a Supreme Court interpretation in the case Kimberly
Clark vs. Laredo that a retired employee could recommend a nephew instead of a son
or a daughter who was still a minor. T h e Supreme Court decision also stated that
the company "was not obliged to unconditionally accept the recommendee since
the latter must still meet the required employment standard theretofore set by it."
Because of this decision, the company formulated in 1995 the Guidelines on hiring
qualifications or standards. A m o n g them is the requirement that the recommendee
should have completed a two year technical/vocational course or a third year college
education.
Objecting to the educational requirement in the Guidelines, the union
requested that its implementation be deferred, to which request the employer agreed.
The union attempted to write into the CBA that high school education should be
enough. But two renegotiated CBAs were concluded and the questioned provision

'Continental Steel Manufacturing Corp. vs. Hon. Accredited VA Allan S.

Montaño, etc., G.R. N o . 182836, October 13, 2009.

485
 LABOR RELATIONS
ART. 260

remained intact. When the company started to implement the Guidelines, the union
filed its complaint.
Rulings: By agreement to the parties, the implementation of the Guidelines
was deferred until January 1, 1997, unless revoked or amended by the 1997 CBA.
The union proposed that the practice of hiring ex-employee-recommendees who
were only high school graduate be included in their CBA. T h e employer did not
agree, hence, Article X X , Section 1 of the 1997 CBA of the parties remained intact.
There was thus no more legal bar for the company to implement the 1995 Guidelines
requiring higher educational qualifications. By executing the 1997 CBA, in its present
form, petitioner union is bound by the terms and conditions therein set forth.

In other words, the Court finds that respondent employer acted in accord
with the C B A and the 1995 Guidelines. These, by agreement of the parties, may
be implemented by respondent after January 1, 1997.

2.1 Construing the Contract

T h e C B A being a contract, the rules e m b o d i e d in the Civil C o d e on
interpretation of contracts should g o v e r n . T h e intent of the parties should be
1
ascertained by considering relevant provisions of said C B A . T h e intention of
the parties is primordial; if the terms of the contract are clear, the literal meaning
of the stipulations shall control, but if the words appear to be contrary to the
evident intention of the parties, the latter shall prevail over the f o r m e r [Article
1970, Civil C o d e , Sy vs. Court of Appeals, 131 S C R A 116; Philippine Apparel Workers
Union vs. NLRC, 106 S C R A 444 (1981); Kimberly Clark Philippines vs. Lorredo, G.R.
N o . 103090, September 21, 1993.]
Any doubts or ambiguity in the contract between management and the
union members should be resolved in the light of Article 1702 of the Civil
C o d e that: In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living for the laborer. This is in
consonance with the principle enunciated in the L a b o r C o d e that all doubts
2
should be resolved in favor of the worker.
But contracts which are not ambiguous are to be interpreted according
to their literal meaning and should not be interpreted b e y o n d their obvious
3
i n t e n d m e n t . It has b e e n ruled, for instance, that bonus p r o v i d e d in the
Collective Bargaining A g r e e m e n t was meant to be in addition to the legal
4
requirement.

•Marcopper Mining Corporation vs. N L R C , et al., G.R. N o . 83207, August 5,

1991.
2
Plastic Town Center Corporation vs. National Labor Relations Commission,
G.R. N o . 81176, April 19, 1989.
Ibid.
Universal Corn Products vs. N L R C , 153 SCRA 191 [1987].

486
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

Compliance with a C B A is mandated by the explicit policy to give protection

to labor. In the same vein, C B A provisions should be "construed liberally rather
than narrowly and technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve." This is founded on the
dictum that a C B A is not an ordinary contract but o n e impressed with public
interest. It goes without saying, however, that only provisions e m b o d i e d in the
1
C B A should be so interpreted and c o m p l i e d with.

2.2 Proposal Contained in Minutes but N o t in the C B A Itself

A proposal m e n t i o n e d in the negotiation minutes but not e m b o d i e d in
the collective bargaining contract itself is not part of the C B A . It cannot serve
as basis of a charge of violating the C B A or of bargaining in bad faith.

Samahang Manggagawa sa Top Form Manufacturing-United Workers of the

Philippines (SMTFM-UWP) vs. NLRC, et al, G.R. N o . 113856, September 7,
1998 —
Facts: T h e union charged the employer with U L P through bargaining in bad
faith when the employer refused to implement across-the-board the wage increases
mandated by Wage Orders Nos. 01 and 02. T h e union alleged that during the
CBA negotiation the management panel committed itself to an across-the-board
implementation of government-mandated wage increase. But nowhere does the CBA
mention such alleged promise or commitment.
Ruling: T h e Court affirmed the dismissal of the union's complaint. Through
Justice Romero, the Supreme Court explains its ruling:
To start with, if there was indeed a promise or undertaking on the part
of private respondent to obligate itself to grant an automatic across-the-board
wage increase, petitioner union should have requested or demanded that such
"promise or undertaking" be incorporated in the CBA. After all, petitioner
union has the means under the law to compel private respondent to incorporate
this specific economic proposal in the CBA. It could have invoked Article
252 of the Labor Code defining "duty to bargain"; thus, the duty includes
"executing a contract incorporating such agreement if requested by either
party." Petitioner union's assertion that it had insisted on the incorporation of
the same proposal may have a factual basis considering the allegations in the
aforementioned joint affidavit of its members. However, Article 252 also states
that the duty to bargain "does not compel any party to agree to a proposal or
make any concession." Thus, petitioner union may not validly claim that the proposal
embodied in the Minutes of the negotiation forms part of the CBA that it finally entered
into with private respondent.

'Samahang Manggagawa sa T o p Form Manufacturing-United Workers of the

Philippines (SMTFM-UWP) vs. N L R C , et al, G.R. N o . 113856, September 7, 1998.

487
 LABOR RELATIONS
ART. 260

Where a proposal raised by a contracting party does not find print in the
CBA, it is not a part thereof and the proponent has no claim whatsoever to its
implementation.
Hence, petitioner union's contention that the Minutes of the collective
bargaining negotiation meeting forms part of the entire agreement is pointless.
The Minutes reflects the proceedings and discussions undertaken in the process
of bargaining for worker benefits in the same way that the minutes of court
proceedings show what transpired therein. At the negotiations, it is but natural for
both management and labor to adopt positions or make demands and offer proposals
and counter-proposals. However, nothing is considered final until the parties have
reached an agreement. In fact, one of management's usual negotiation strategies
is to "x x x agree tentatively as you go along with the understanding that nothing is
binding until the entire agreement is reached." If indeed private respondent promised
to continue with the practice of granting across-the-board salary increases ordered
by the government, such promise could only be demandable in law if incorporated
in the CBA.
Moreover, by making such promise, private respondent may not be considered
in bad faith or at the very least, resorting to the scheme of feigning to undertake the
negotiation proceedings through empty promises. As earlier stated, petitioner union
had, under the law, the right and the opportunity to insist on the foreseeable fulfillment
of the private respondent's promise by demanding its incorporation in the CBA.
Because the proposal was never embodied in the CBA, the promise has remained
just that, a promise, the implementation of which cannot be validly demanded under
the law.

2.3 "Zipper Clause"

A device to forestall negotiation proposals after the C B A has been signed
is the "zipper clause." It is a stipulation in a C B A indicating that issues that could
have been negotiated upon but not contained in the C B A cannot be raised for
negotiation when the C B A is already in effect. In short, the C B A is a complete
agreement; negotiation is closed, as a zipper does. T h e veteran negotiator Charles
S. Loughran gives an example of such clause:
"It is a g r e e d that this l a b o r a g r e e m e n t contains the full and
complete agreement on all subjects upon which the parties did bargain
or could have bargained. N e i t h e r party shall be required, during the
term of this A g r e e m e n t , to negotiate or bargain upon any other issue.
All matters not included in this agreement shall be d e e m e d to have been
raised and disposed of as if covered herein. A l l subjects referred to in the
management's rights clause shall likewise be d e e m e d to have been raised
and bargained to a conclusion." (Charles S. Loughran, Negotiating a Labor
Contract [BNA, 1992], p. 465.)

488
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

3. LAW DEEMED W R I T T E N IN C O N T R A C T
T h e principle is well-settled that an existing law enters into and forms part
of a valid contract without the n e e d for the parties expressly making reference
to it. Only thus could its validity insofar as some of its provisions are concerned
1
be assured.
Thus, the fact that the officers and unlicensed members of the crew of
the vessels had a collective bargaining that did not contain any provision on
the payment of accumulated leaves does not bar by itself the employees' resort
to the leave law. T h e rule is that the law forms part of, and is read into, every
contract, unless clearly excluded therefrom in those cases where such exclusion
2
is allowed.

4. B I N D I N G EFFECT OF A G R E E M E N T
A collective bargaining agreement entered into by officers of a union, as
agent of the members, and an employer, gives rise to valid enforceable contractual
relations, against the individual union members in matters that affect them
peculiarly, and against the union in matters that affect the entire membership
3
or large classes of its m e m b e r s . A union m e m b e r w h o is employed under an
agreement between the union and his employer is bound by the provisions
thereof, since it is a j o i n t and several contract of the members of the union
4
entered into by the union as their agent.

4.1 Persons entitled to Benefits

W h e n a collective b a r g a i n i n g contract is e n t e r e d into by the union
representing the employees and the employer, even the non-member employees
are entitled to the benefits of the contract. To accord its benefits only to members
of the union without any valid reason would constitute undue discrimination
5
against non-members.

•Lakas ng Manggagawang Makabayan [ L M M ] vs. Carlos Abiera, G.R. N o .

L-29474, December 19, 1970.
2
Manresa, Comm. Vol. 8, part 2 [5th Ed]., p. 535; Liberation Steamship Co.,
Inc. vs. CIR, et al, G.R. N o . L-25389, June 27, 1968.
3
Dangel & Shriber, The Law of Labor Union, 1941 ed., p. 340.
4
Capra vs. Local Lodge, 102 Colo. 63, cited in Dangel & Shirber, The Law of
Labor Unions, 1941 ed., p. 342; Manalang, et al. vs. Artex Development Co., Inc., et
al, G.R. N o . L-20432, October 30, 1967.
5
National Brewery & Allied Industries Labor Unions vs. San Miguel Brewery, et
al, L-18170, August 31,1963; International Oil Factory Workers' Union vs. Martinez,
L-15560, December 31,1960; Prisco vs. Prisco Workers' Union, L-9288, December 29,
1958; Lasedeco vs. Caledonia Pile Workers' Union, L-4877, February 26,1952; Leyte
Land Trans, vs. Leyte Farmers' Laborers' Union, 80 Phil. 842, May 12, 1948; Rivera
vs. San Miguel Brewery Corporation, Inc., L-26197, July 20, 1968, 24 SCRA 1986.

489
 LABOR RELATIONS
ART. 260

It is even conceded that a laborer can claim benefits from a collective

bargaining agreement entered into between the company and the union of
which he is a member at the time of the conclusion of the agreement, even after
1
he has resigned from said union.

4.2 Managers Not entitled to CBA Benefits; Exception

Managers, who are not allowed to unionize to bargain collectively with the
employer, cannot claim the benefits contained in the C B A negotiated by the
workers under them. T h e y cannot obtain indirectly what they cannot do directly.
Accordingly, managerial employees cannot, in the absence of an agreement
to the contrary, be allowed to share in the concessions obtained by the labor
union through collective negotiation. Otherwise, they would be exposed to the
temptation of colluding with the union during the negotiations to the detriment
2
of the manager.
However, there is nothing to prevent the employer from granting benefits to
managerial employees equal to or higher than those afforded to union members.
T h e r e can be no conflict of interest where the employer himself voluntarily
agrees to grant such benefits to managerial employees. In the case at bar, at the
beginning of petitioner's employment, he was told that those w h o are not covered
by the C B A would nevertheless be entitled to benefits which would be, if higher,
at least equivalent to those provided in the C B A . T h a t private respondents made
3
such a promise to petitioner is not d e n i e d by them.

4.3 Effect of Collective Agreement on the Individual Contracts of

Employment
W h e n a collective agreement is concluded between a labor union and an
employer, the members of the labor union are precluded from entering into
individual contracts of employment. But if the agreement merely fixes wages
and working conditions, the employer may enter into particular contracts of
employment with his employees even though both are b o u n d by the general
4
contract as to wages and working conditions.

5. ENFORCEABILITY AGAINST TRANSFEREE OF ENTERPRISE

5.1 Purchase of Assets
T h e rule is that unless expressly assumed, labor contracts, such as
employment contracts and collective bargaining agreements are not enforceable
against a transferee of an enterprise, labor contracts being in personam, thus

'Kapisanan Ng Mga Manggagawang Pinagyakap vs. Franklin Baker Co. of the

Phil., CIR, June 3, 1949.
2
Martinez vs. N L R C , GMCR, Inc., et al, G.R. N o . 118743, October 12, 1998.
Ibid.
4
Dangel & Shriber, Labor Unions, p. 341.

490
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION ART. 260

binding only between the parties. A labor contract merely creates an action in
personam and does not create any real right which should be respected by third
parties. This conclusion draws its force from the right of an employer to select
his employees and to decide when to engage them as protected under our
Constitution, and the same can only be restricted by law through the exercise
1
of the police power.
As a general rule, there is no law requiring a bona fide purchaser of assets
2
of an on-going concern to absorb in its employ the employees of the latter.

Sundowner Development Corp., petitioner vs. Hon. F. Drilon, National Union of

Workers in Hotel Restaurant and Allied Industries (NUWHRAIN), et al, Respondent,
G.R. N o . 82341, December 6, 1989 —
Facts: Hotel Mabuhay Inc., lessee of premises belonging to Syjuco Inc., was to
be ejected for non-payment of rentals. To raise the needed money to pay Syjuco and
Mabuhay employees, Mabuhay asked Syjuco to find a buyer of its assets. Syjuco found
Sundowner Development Corporation, a legally existing entity, bought Mabuhay's
assets and properties. N U W H R A I N , the union of Mabuhay employees, demanded
that the employees be retained by Sundowner.
Ruling: In the case at bar, contrary to the claim of the public respondent that
the transaction between petitioner [Sundowner] and Mabuhay was attended with
bad faith, the court finds no cogent basis for such contention. Thus, the absorption
of the employees of Mabuhay may not be imposed on petitioner.
It is undisputed that when Mabuhay surrendered the leased premises to Syjuco
and asked Syjuco to offer same to other lesses, it was Syjuco who found petitioner
and persuaded petitioner to lease said premises. Mabuhay has nothing to do with
the negotiation and consummation of the lease contract between petitioner and
Syjuco.
It was only when Mabuhay offered to sell its assets and personal properties in
the premises to petitioner that they came to deal with each other. It appears that
petitioner agreed to purchase said assets of respondent Mabuhay to enable Mabuhay
to pay its obligations to its striking employees and to Syjuco. Indeed, in the deed of
assignment that was executed by Mabuhay in favor of petitioner on April 14, 1987
for and in consideration of P2,500,000.00, it is specifically provided therein that the
same is "purely for and in consideration of the sale/transfer and assignment of the
personal properties and assets of Hotel Mabuhay, Inc. listed x x x" and "in no way
involves any assumption or undertaking on the part of Second Party (Petitioner) of
any debts or liabilities whatsoever of Hotel Mabuhay, Inc." The liabilities alluded to
in this agreement should be interpreted to mean not only any monetary liability of
Mabuhay but any other liability or obligation arising from the operation of its business
including its liability to its employees.

'Sundowner Development Corporation vs. Drilon, G.R. N o . 82341, December

6, 1989.
Ibid.

491
 LABOR RELATIONS
ART. 260

Moreover, in the tri-partite agreement that was entered into by petitioner with
respondents N U W H R A I N and Mabuhay, it is clearly stipulated as follows:
"8. That, immediately after the execution of this Agreement, the
FIRST PARTY shall give a list of its members to the T H I R D P A R T Y that it
desires to recommend for employment so that the latter can consider them
for employment, with no commitment whatsoever on the part of the T H I R D
PARTY to hire them in the business that it will operate in the premises
formerly occupied by the Hotel Mabuhay."
From the foregoing, it is clear that petitioner has no liability whatsoever to the
employees of Mabuhay and its responsibility, if at all, is only to consider them for
re-employment in the operation of the business in the same premises. There can be
no implied acceptance of the employees of Mabuhay by petitioner and acceptance
of statutory wrong as it is expressly provided in the agreement that petitioner has no
commitment or duty to absorb them.
Moreover, the court does not subscribe to the theory of public respondent
that petitioner should have informed N U W H R A I N of its lease of the premises and
its purchase of the assets and personal properties of Mabuhay therein so that said
employees could have taken steps to protect their interest. T h e court finds no such
duty on the part of petitioner and its failure to notify said employees cannot be an
indicium of bad faith.
Much less is there any evidence that petitioner and respondent Mabuhay are
joint tortfeasors as found by public respondent. While it is true that petitioner is using
the leased property for the same type of business as that of respondent Mabuhay, there
can be no continuity of the business operations of the predecessor employer by the
successor employer as respondent Mabuhay had not retained control of the business.
Petitioner is a corporation entirely different from Mabuhay. It has no controlling
interest whatever in respondent Mabuhay. Petitioner and Mabuhay have no privity
and are strangers to each other.
What is obvious is that the petitioner, by purchasing the assets of respondent
Mabuhay in the hotel premises, enabled Mabuhay to pay its obligations to its
employees. There being no employer-employee relationship between the petitioner
and the Mabuhay employees, the petition must fail. Petitioner can not be compelled
to absorb the employees of Mabuhay and to pay them backwages.

5.2 Exceptions
Although the purchaser of the assets or enterprise is not legally bound
to absorb in its employ the employees of the seller of such assets or enterprise,
the parties are liable to the employees if the transaction between the parties is
1
colored or clothed with bad faith.

'Sundowner Development Corporation vs. Drilon, G.R. N o . 82341, December 6,

1989, citing Majestic and Republic Theaters Employees' Association vs. CIR, 4 SCRA
457 [1962]; Cruz vs. PAFLU, 42 SCRA 68 [1971).

492
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION ART. 260

See the topic Sale in Bad Faith in comments under Article 248.

Note: This matter is also discussed in the subject of Unfair Labor Practice
and violation of the duty to bargain.

5.3 Merger and Consolidation

M e r g e r takes place when two or m o r e corporations j o i n into a single
corporation which is o n e of the m e r g i n g corporations; the separate existence
of the other constituent corporations ceases. Consolidation occurs when two or
m o r e corporations j o i n into a new single corporation; the separate existence of all
the constituent corporations ceases, except that of the consolidated corporation.
U n d e r the Corporation C o d e , the surviving or consolidated corporation
shall be responsible and liable for all the liabilities and obligations of each of the
constituent corporations in the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obligations. Any pending claim,
action or p r o c e e d i n g brought by or against any of such constituent corporations
may be prosecuted by or against the surviving or consolidated corporation, as
the case may be. T h e rights of creditors or liens upon the property of any of such
1
constituent corporations shall not be impaired by such merger or consolidation.
Section 76 of the Corporation C o d e (Batas Pambansa Big. 68) is the present
law governing mergers. Prior to the enactment of BP 68, merger was undertaken
via the transfer of all assets and the assumption of debts and liabilities of the
absorbed corporation by the acquiring corporation and then a separate action
would be undertaken to dissolve the o l d absorbed corporation. T h e enactment
of Section 76 of BP 68, however, merely facilitated the process of merger, because
the law still requires that the surviving corporation be responsible and liable for
all the liabilities and obligations of each of the constituent corporations in the
same manner as if such surviving corporation had itself incurred such liabilities or
obligations; and any claim may be prosecuted against the surviving corporation.
N e i t h e r the rights of creditors nor any lien upon the property of any of each
2
constituent corporation shall be impaired by such merger.

5.4 Wiley Doctrine

T h e disappearance by m e r g e r of a corporate employer which has entered
into a collective bargaining agreement with a union does not automatically
terminate all rights of the employees covered by the agreement, even though the
merger is for genuine business reasons. U n d e r the Wiley doctrine, announced by
the [ U . S . ] Supreme Court, a duty to arbitrate arising from a collective bargaining
agreement survives the employer's ceasing to do business as a separate entity

^ e c . 80, B.P. Big. 68.

2
See "The Wiley Doctrine, "an unpublished study by Dominique P. Gallego
Elizabeth L. Medina, Ateneo de Manila University, College of Law, 1997.

493
 LABOR RELATIONS
ART. 260

after its merger with a substantially large corporation, so as to be binding on the

larger corporation, where relevant similarity and continuity of operations across
the change in ownership is evidenced by the wholesale transfer of the smaller
corporation's employees to the larger corporation's plant. If a contractual duty
to arbitrate survives the employer's merger into another corporate employer,
question as to the effect of the merger on the rights of the employees covered by
the agreement - the former employees of the m e r g e d employer - are arbitrable
1
if questions as to those rights would have been arbitrable before the merger.
But a duty to arbitrate arising from collective bargaining agreement does
not survive in every case in which the ownership or corporate structure of an
enterprise is changed. It does not survive where there is lack of any substantial
continuity of identity in the business enterprise before and after a change, or
where the union abandons its right to arbitration by failing to make its claims
2
known.
T h e effects of merger on employees' rights in a non-unionized company
are discussed in the case of Filipinos Port in B o o k V I .

6. C H A N G E OF B A R G A I N I N G A G E N T ; S U B S T I T U T I O N A R Y D O C T R I N E
In commentaries to A r t i c l e 237, we i n t r o d u c e d the matter of u n i o n
disaffiliation. H o w does disaffiliation affect the CBA?
T h e agreement is binding on the parties for the p e r i o d therein specified.
T h e employees cannot revoke the validly executed collective bargaining contract
with their e m p l o y e r by the simple e x p e d i e n t of c h a n g i n g their bargaining
representative. Thus, when there occurs a shift in employees' union allegiance
after the execution of such contract with their employer, and the employees
change their bargaining representative, the contract continues to bind them up
to its expiration date. T h e new agent, however, may bargain for the shortening
3
of the contract p e r i o d .

Benguet Consolidated, Inc. vs. BCI Employees & Workers Union-PAFLU, G.R. N o .
L-24711, April 30, 1968 —
In formulating the "substitutionary" doctrine, the only consideration involved
was the employees' interest in the existing bargaining agreement. T h e agent's interest
never entered the picture. In fact, the justification for said doctrine was:
"x x x that the majority of the employees, as an entity under the statute, is the
true party in interest to the contract, holding rights through the agency of
the union representative. Thus, any exclusive interest claimed by the agents is
defeasible at the will of the principal, x x x" (Italics for emphasis).

'48 A m . Jur. 2d 1845, pp. 282-283.

2
Ibid.
3
Benguet Consolidated vs. BCI Employees and Workers Union, 23 SCRA 465,
7
471.

494
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

Stated otherwise, the "substitutionary" doctrine only provides that the

employees cannot revoke the validly executed collective bargaining contract with
their employer by the simple expedient of changing their bargaining agent. And
it is in the light of this that the phrase "said new agent would have to respect said
contract" must be understood. It only means that the employees, thru their new
bargaining agent, cannot renege on their collective bargaining contract, except of
course to negotiate with management for the shortening thereof.
T h e "substitutionary" doctrine, therefore, cannot be invoked to support
the contention that a newly certified collective bargaining agent automatically
assumes all the personal undertakings — like the no-strike stipulation here — in
the collective bargaining agreement made by the deposed union. When BBWU
bound itself and its officers not to strike, it could not have validly bound also
all the other rival unions existing in the bargaining units in question. BBWU
was the agent of the employees, not of the other unions which possess distinct
personalities. To consider U N I O N contractually bound to the no-strike stipulation
would therefore violate the legal maxim that res inter alios acta alios nec prodest nec
nocet.
Of course, U N I O N , as the newly certified bargaining agent, could always
voluntarily assume all the personal undertakings made by the displaced agent. But
as the lower court found, there was no showing at all that, prior to the strike, U N I O N
formally adopted the existing C O N T R A C T as its own and assumed all the liabilities
imposed by the same upon BBWU.
There is nothing then, in law as well as in fact, to support plaintiff BENGUET's
contention that defendants are contractually bound by the CONTRACT. And the
stand taken by the trial court all the more becomes unassailable in the light of Article
1704 of the Civil Code providing that:
"In the collective bargaining, the labor union or members of the board
or committee signing the contract shall be liable for nonfulfillment thereof."
(Stressed for emphasis)
There is no question, defendants were not signatories nor participants in the
CONTRACT.
Lastly, BENGUET contends, citing Clause II in connection with Clause XVIII of
the C O N T R A C T , that since all the employees, as principals, continue being bound by
the no-strike stipulation until the C O N T R A C T ' S expiration, U N I O N , as their agent,
must necessarily be bound also pursuant to the Law on Agency. This is untenable.
T h e way we understand it, everything binding on a duly authorized agent, acting as
such, is binding on the principal; not vice-versa, unless there is a mutual agency, or
unless the agent expressly binds himself to the party with whom he contracts. As the
Civil Code decrees it:
"The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers." (Stressed for
emphasis)

495
 LABOR RELATIONS
ART. 260

Here, it was the previous agent who expressly bound itself to the other party,
BENGUET U N I O N , the new agent, did not assume this undertaking of BBWU.

7. GRIEVANCES
A grievance is defined as "any question by either the e m p l o y e r or the
union regarding the interpretation or application of the collective bargaining
agreement or company personnel policies or any claim by either party that
the other party is violating any provision of the C B A or company personnel
1
policies."
If the term grievance is to be applied in the loose or generic sense, any
dispute or controversy respecting terms and conditions of employment which an
employee or group of employees may present to the employer can be a grievance,
even without a union or C B A . U n d e r this interpretation, any complaint, question
or problem that an employee or g r o u p of employees may wish to take up or
discuss with the employer respecting terms and conditions of e m p l o y m e n t for
the purpose of resolving or satisfying the same, constitutes a grievance. T h e
expansion of the original and exclusive jurisdiction of voluntary arbitrators to
include questions arising from the interpretation and enforcement of company personnel
policies has the effect of widening the meaning and interpretation of a grievance
2
to include a situation where there is no collective bargaining agent and no C B A .
Personnel policies are guiding principles stated in broad, long-range terms
that express the philosophy or beliefs of an organization's top authority regarding
personnel matters.
They deal with matters affecting efficiency and well-being of employees and
include, among others, the procedures in the administration of wages, benefits,
promotions, transfer and other personnel movements which are usually not
spelled out in the collective agreement. T h e usual source of grievances, however,
is the rules and regulations g o v e r n i n g disciplinary actions.

7.1 By-passing the Grievance Machinery: U L P

A l l grievances arising from the implementation or interpretation of the
collective bargaining agreement a n d / o r interpretation and e n f o r c e m e n t of
company personnel policies are compulsorily subject to the grievance machinery.
Establishing and utilizing this m o d e are emphatically required by Article 260. T h e
requirement is an extension of the parties' duty to bargain as defined in Articles
252 and 253, violation of which amounts to U L P under Article 2 4 8 ( g ) and ( i ) .
Upholding the requirement, the Court has ruled that the grievance procedure
provided in the C B A should be adhered to by the parties. Refusal or failure to
do so is an unfair labor practice, because the grievance procedure is part of the

•NCMB, Primer on Grievance Settlement and Voluntary Arbitration, 1990, p. 3.

2
Ibid., p. 4.

496
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

continuous process of collective bargaining. It is intended to promote friendly

dialogue between labor and management as a means of maintaining industrial
1
peace.
Before an aggrieved e m p l o y e e may resort to the courts to enforce his
individual rights under a bargaining contract, the employee must exhaust all the
remedies available to him under such contract. A n d a court should not entertain
any complaint by an aggrieved e m p l o y e e until proper use has been made of the
contract grievance procedure agreed upon by employer and the bargaining
2
representative.
T h e g r i e v a n c e m a c h i n e r y u n d e r the a g r e e m e n t is the very heart of
3
industrial self-government.
A strike was carried out notwithstanding the provisions of the existing
collective bargaining a g r e e m e n t p r o v i d i n g for a specific procedure for dealing
with grievances of union members. Such procedure was not availed of before the
4
strike was declared. A c c o r d i n g to the Supreme Court, such strike was illegal.
W h e r e the collective bargaining agreement describes the procedure for
the dismissal of employees, such procedure must be observed, even in the case
of dismissals for cause, as where the e m p l o y e e was allegedly absent without leave
or permission of the company. W h e r e the procedural requirements of such
collective bargaining agreement were disregarded, the purported dismissal for
just cause of an e m p l o y e e was invalid, particularly where the company acted post
haste and without affording the e m p l o y e e the time and opportunity to present
5
his side.
W h e r e under an existing contract it is the employee or his steward who may
initiate grievances under the grievance procedure provided in the contract, it
is not an unfair labor practice for the employer to refuse to process a grievance
6
which the union had attempted to file and initiate under the contract.
May a grievance be b r o u g h t to voluntary arbitration without passing
through the grievance procedure under the CBA?
This appears to be proscribed by the L a b o r C o d e which directs the parties
to a C B A to establish a grievance machinery for the adjustment and resolution of
grievances arising from the interpretation or enforcement of company personnel
policies.

'Republic Savings Bank vs. CIR, 21 SCRA 226, 235.

t a l k e r vs. Southern Railway, 52 LC 24, 071.
3
United Steel Workers vs. Warrior Gulf Navigation Co., 4 L ed 2d 1409.
4
United Seamen's Union of the Philippines vs. Davao Shipowners Association,
G.R. N o . L-18778, August 31, 1967; Baer, pp. 92-93.
5
Norton Harrison Co. and Jackbilt Concrete Blocks Co. Labor Union vs. Norton
Harrison Co. and Jackbilt Concrete Blocks Co., L-18461, February 10, 1967.
6
Sohio Chemical Co., 141 N L R B 810.

497
 LABOR RELATIONS
ART. 260

In view, however, of the State policy to encourage voluntary arbitration

of all other labor-management disputes, it is submitted that a grievance may be
brought directly to voluntary arbitration without passing through the grievance
machinery, especially when the latter has been proven to be ineffective in the
past, or when the parties inadvertently failed to include a grievance machinery
1
provision in their CBA.

7.2 Waiver of Grievance Machinery Procedure and Submission to VA

Apalisok vs. Radio Philippines Network, et al, G . R . N o . 138094, May 29,
2003 —
Facts: Apalisok, production chief for Radio Philippines Network ( R P N ) Station
was asked to explain her allegedly hostile, arrogant, disrespectful, and defiant behavior
towards her superior, the Station Manager. She gave her explanation the next day.
After 15 days, she was dismissed. She informed R P N that she waived her right to
resolve her case through the grievance machinery as provided in the CBA; instead
she filed an illegal dismissal complaint with the N L R C which referred the case to the
NCMB.
By a Submission Agreement, the employee and the employer agreed to submit
the case to a Voluntary Arbitrator. T h e VA resolved the case in the employee's favor.
On appeal, the CA ruled in favor of R P N because it considered the waiver of
petitioner to file her complaint before the grievance machinery as a relinquishment of
her right to avail herself of the aid of the Voluntary Arbitrator. T h e CA said the waiver
had the effect of resolving an otherwise unresolved grievance; thus the decision of
the Voluntary Arbitrator should be set aside for lack of jurisdiction.
Issue: Is the CA ruling correct?
Ruling: Article 262 of the Labor Code provides that upon agreement of the
parties, the voluntary arbitrator can hear and decide all other labor disputes.
Contrary to the finding of the Court of Appeals, voluntary arbitration as a mode
of settling the dispute was not forced upon respondents. Both parties indeed agreed
to submit the issue of validity of the dismissal of petitioner to the jurisdiction of the
voluntary arbitrator by the Submission Agreement duly signed by their respective
counsels. T h e voluntary arbitrator had jurisdiction over the parties' controversy.
The employee's waiver of her option to submit her case to grievance machinery
did not amount to relinquishing her right to avail herself of voluntary arbitration.

7.3 Structure and Procedure

T h e structure for and the mechanics of grievance handling are suggested
in the Implementing Rules.
In the absence of applicable provision in the collective bargaining
agreement, a grievance committee shall be created within ten (10) days

'NCMB Primer on Voluntary Arbitration, p. 14.

498
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

from signing o f the collective bargaining agreement. T h e committee shall

be composed of at least two ( 2 ) representatives each from the members of
the bargaining unit and the employer, unless otherwise agreed upon by the
parties. T h e representatives from among the members of the bargaining
unit shall be designated by the union.
Section 2. Procedure in handling grievances. — In the absence of a
specific provision in the collective bargaining a g r e e m e n t or existing
company practice prescribing for the procedures in handling grievance,
the following shall apply:
(a) An e m p l o y e e shall present his grievance or complaint orally
or in writing to the shop steward. U p o n receipt thereof, the
shop steward shall verify the facts and determine whether or
not the grievance is valid.
(b) If the grievance is valid, the shop steward shall immediately
bring the complaint to the employee's immediate supervisor.
T h e shop steward, the e m p l o y e e and his immediate supervisor
shall exert efforts to settle the grievance at their level.
(c) If no settlement is reached, the grievance shall be referred
to the grievance committee which shall have ten (10) days to
decide the case.
W h e r e the issue involves or arises from the interpretation or imple-
mentation of a provision in the collective bargaining agreement, or from
any order, m e m o r a n d u m , circular or assignment issued by the appropri-
ate authority in the establishment, and such issue cannot be resolved at
the level of the shop steward or the supervisor, the same may be referred
immediately to the grievance committee. (Sec. 2, D.O. No. 40-03.)

8. VOLUNTARY ARBITRATION
W h e r e the grievance remains unresolved, either party may serve notice
upon the other of its decision to submit the issue to voluntary arbitration. T h e
notice shall state the issue or issues to be arbitrated, copy thereof furnished
the board or the voluntary arbitrator or panel of voluntary arbitrators named
or designated in the collective bargaining agreement. If the party upon whom
the notice is served fails or refuses to respond favorably within seven ( 7 ) days
from receipt thereof, the voluntary arbitrator or panel of voluntary arbitrators
designated in the collective bargaining agreement shall c o m m e n c e voluntary
arbitration proceedings. W h e r e the collective bargaining agreement does not
so designate, the board shall call the parties and appoint a voluntary arbitrator
or panel of voluntary arbitrators, w h o shall thereafter c o m m e n c e arbitration
proceedings in accordance with the preceeding paragraph.
In instances where parties fail to select a voluntary arbitrator or panel
of voluntary arbitrators, the regional branch of the Board shall designate the

499
 LABOR RELATIONS
ART. 260

SETTLING GRIEVANCES

The following rules were issued by the Steel Workers Organizing Committee
but fairly represent standards of procedure by many unions, both A.F. of L., C.I.O.,
and Railway Brotherhoods.

"DO'S A N D D O N T ' S "

POINTERS FOR COMMITTEE MEN

DO get both sides to every grievance. D O N ' T make a final decision or public
declaration on a grievance until you know both sides of the grievance.
DO refuse to handle unjustified grievances. There are two kinds of unjustified
grievances. First, the grievance that is not covered by the contract. Usually
grievances not covered by the contract should be corrected, but you cannot do
anything about it unless your contract covers it. Secondly, there is the grievance
that is not supported by facts. Ascertain all the facts concerning every grievance
submitted to you by your fellow employees. If the grievance is not supported by
fact, be BIG ENOUGH to say so frankly. If a member of the Union is not satisfied
with your decision, he can always take it up at the Union meeting.
DO give everybody a civil and courteous answer. Every fellow employee,
union member or not, deserves a decent reply. If he is treated as a friend and
fellow worker and sympathetically listened to, he will feel a lot more friendly
toward the Union, than he will if given a short unkind answer.
D O N ' T coerce or intimidate anybody into joining the Union. He may join
if threatened, but he will never be a good Union man.
D O N ' T be kicked into a wildcat or illegal strike. A good many management
supervisory and minor officials have deep-seated prejudices against Unions. They
feel the Union threatens their power. Some such officials endeavor to destroy
the Union by subtle threats, rumors, petty discriminations, etc. Our experience
has generally been that the chief executive officials of the companies who have
signed Union contracts have done so in good faith and intend that the contracts
be observed by their associate management officials in every respect. Where
foremen or other minor company officials are obviously unfair and hostile toward
Union members, DON'T strike. Instead, such acts on their part should be brought
to the attention of Union committeemen and S.W.O.C. staff members who, if
necessary, will report such acts to proper company officials as being such as to
prevent proper co-operative relationships.
DON'T laugh if your boss has to go to school. Just as new Union members
and officials require education, so do many company officials. Some companies
are now holding meetings of foremen and other supervisory officials for the
purpose of acquainting them with the Union contract and company policy
regarding observance of its provisions.

JAMES MYERS
Do You Know Labor!
(John Day Co., New York, 1943), p. 42

500
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

GRIEVANCE HANDLING TIPS FOR T.U.C.P. SHOP STEWARDS

T h e r e are a number of things the Steward and the other Union

representatives involved in grievance-handling can do to make the grievance
procedure work smoothly and effectively:
Settle grievances on the basis of merit
In general only genuine grievance, or issues on which the contract is clear,
should be taken up. To build respect for the grievance procedure, the Steward
and other Union representatives must be concerned with getting a fair and just
settlement under the terms of the contract, not just with winning the grievance
for the sake of winning.
Settle grievance at the first step when possible
The Steward and the foreman know the situation first hand. If they can settle
grievances fairly, it saves time, reduces irritation, builds worker's confidence in
the Union.
Avoid delays
Delay in settling a grievance worries the worker and results in loss of
confidence in the Union.
Define authority and responsibility clearly
The Steward and the foreman must have the authority to settle grievances
at the first step. Union and management have the responsibility of seeing that
their representatives are given the authority — in fact— that the contract calls
for.
Avoid favoritism
The contract must be enforced and grievances settled fairly for the good
of all. One worker's grievance today may be another's grievance next month.
Whether the Steward likes the worker or not, regardless of that worker's race,
creed, color, or nationality, his grievance should be taken up on its merits under
the contract.
Follow all steps in the grievance procedure
Grievance representatives should follow the procedure outlined in the
contract. It is not wise to skip steps — if the procedure works badly, perhaps the
contract should be changed at the next negotiation.
Keep the worker informed about action at higher steps
If a grievance goes to higher steps in the grievance procedure, the worker
should be kept informed about its progress, and given the exact terms of the
final settlement as soon as it is reached.
Build an attitude of mutual respect and confidence
Successful operation of the grievance procedure depends on development
of union-management relations to the point where there is mutual respect and
cooperative attitude toward solving whatever problems arise.
TUCP's Manual for Shop Stewards, pp. 22-23.

501
 LABOR RELATIONS
ART. 260

voluntary arbitrator or panel of voluntary arbitrators, as may be necessary, which

1
shall have the same force and effect as if the parties have selected the arbitrator.
T h e parties to a C B A will decide on the number of arbitrators w h o may
hear a dispute only when the need for it arises. Even the law itself does not specify
die number of arbitrators. T h e i r alternatives — whether to have o n e or three
arbitrators have their respective advantages and disadvantages. In this matter,
cost is not the only consideration; full deliberation on the issues is another, and
it is best accomplished in a hearing conducted by three arbitrators. In effect,
the parties are afforded the latitude to decide for themselves the composition
2
of the grievance machinery as they find appropriate to a particular situation.
Labor arbitration is the reference of a labor dispute to a third party for
determination on the basis of evidence and arguments presented by such parties,
who are bound to accept the decision.
Voluntary arbitration has b e e n d e f i n e d as a contractual p r o c e e d i n g
whereby the parties to any dispute or controversy, in o r d e r to obtain a speedy
and inexpensive final disposition of the matter involved, select a j u d g e of their
3
own choice and by consent submit their controversy to him for determination.
Under voluntary arbitration, referral of a dispute by the parties is made, pursuant
to a voluntary arbitration clause in their collective agreement, to an impartial
4
third person for a final and binding resolution.
Ideally, arbitration awards are supposed to be c o m p l i e d with by both parties
without delay, such that once an award has been r e n d e r e d by an arbitrator,
nothing is left to be d o n e by both parties but to comply with the same. After all,
they are presumed to have freely chosen arbitration as the m o d e of settlement for
that particular dispute. Pursuant thereto, they have chosen a mutually acceptable
arbitrator who shall hear and decide their case. A b o v e all, they have mutually
5
agreed to be bound by said arbitrator's decision.
Compulsory arbitration is the process of settlement of labor disputes by a
government agency ( o r other means provided by the g o v e r n m e n t ) which has the
power to investigate and make an award binding upon the parties. It is a system
whereby the parties to a dispute are c o m p e l l e d by the g o v e r n m e n t to f o r e g o
their right to strike and are c o m p e l l e d to accept the resolution of their dispute
through arbitration by a third party. T h e essence of arbitration remains since a
resolution of a dispute is arrived at by resort to a disinterested third party whose

'Sec. 3.
2
Caltex Refinery Employees Association ( C R E A ) vs. Hon. lose S. Brillantes,
G.R. N o . 123782, September 16, 1997.
3
Gates vs. Arizona Brewing Co., 95 P 2d 49.
4
Luzon Development Bank vs. Association of Luzon Development Bank
Employees, et al, G.R. N o . 120319, October 6 1995
5
Ibid.

502
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

decision is final and binding on the parties, but in compulsory arbitration, such
a third party is normally appointed by the government."
In P h i l i p p i n e context, the "judge" in voluntary arbitration is called
arbitrator, while that in compulsory is labor arbiter. T h e jurisdiction of a VA is
stated in Articles 261 and 262 while that of an LA is in Article 217.

8.1 Voluntary Arbitration: A Private Judicial System

A voluntary arbitrator "is not a public tribunal imposed upon the parties by
a superior authority which the parties are o b l i g e d to accept. He has no general
character to administer justice for a community which transcends the parties.
He is rather part of a system of self-government created by and confined to the
2
parties."
T h e arbitration system has other unique characteristics. Unlike judges
in our courts of law, arbitrators have no tenure of office and are not politically
appointed or elected. An arbitrator's continued selection depends upon how
satisfactorily and effectively he serves the needs of the parties in settling industrial
disputes. In effect, management and labor have established a private judicial
system whereby they select their own judges and fix their own rules of procedure.
T h e system is r e c o g n i z e d by law. W h e n the parties have agreed to final and
binding arbitration, the courts will enforce the agreement and the arbitrator's
3
award.
T h e primary function of voluntary labor arbitration is to provide (1) a
process for the orderly disposition of disputes and ( 2 ) a foundation for stable
4
labor-management relations.
C o m m e r c i a l arbitration grew up as an alternative to court action, while
5
labor-management arbitration has evolved primarily as a substitute for strikes.

8.2 Voluntary Arbitration, a Master Procedure

In labor-management relations voluntary arbitration is a master procedure.
A n y and all kinds of labor disputes may be submitted to, settled, or resolved
through voluntary arbitration, if the parties so desire. M o n e y claims, bargaining
deadlocks, strike or lockout, employment termination, and even questions about
existence or absence of employer-employee relationship, may be resolved by the
parties — with finality — by availing themselves of voluntary arbitration.

'Luzon Development Bank vs. Association of Luzon Development Bank

Employees, et al, G.R. N o . 120319, October 6, 1995.
Maurice S. Trotta, Arbitration of Labor Management Disputes, American Management
Association, New York, 1974, p. 73.
Ibid.
Ibid.
5 u
Franklin Elkouri and Edna Asper Elkouri, How Arbitration Works," Bureau of
National Affairs, Inc. [Washington DC, 1979] pp. 3-7.
503
 LABOR RELATIONS
ART. 260

As a master procedure, voluntary arbitration takes precedence over other

dispute settlement devices. W h e n a labor arbiter, for instance, is presented with
a case falling under his "original and exclusive" jurisdiction, the parties may
withdraw it from him, no matter at what stage it may be, if the parties mutually
decide to bring the dispute instead to voluntary arbitration. A n d even when a
1
strike or lockout in a "national interest" case is placed under the jurisdiction
of the Secretary of Labor or the N L R C , the parties can withdraw the case from
either office anytime to l o d g e it instead to a voluntary arbitrator ( o r panel of
arbitrators).
T h e primacy of voluntary arbitration is mandated by the P h i l i p p i n e
Constitution itself and e n t r e n c h e d in the L a b o r C o d e as a matter of basic
2
industrial relations policy. T h e s e legal mandates, in turn, are f o r m a l i z e d
recognition of the fundamental tenet that the best persons to resolve a labor
dispute are the party disputants themselves.
Is voluntary arbitration really voluntary? Yes, because the parties themselves
choose the arbitrator and define the issues submitted to him. But submission
to him of the issues named in Article 261 is required by law. Because of this
requirement, the D O L E committee that drafted the L a b o r C o d e (half-jokingly)
3
called it "mandatory voluntary arbitration."
A dispute pending in voluntary arbitration ( o r compulsory arbitration, for
that matter) cannot be the subject of a strike or lockout notice.

9. W H O MAY BE A C C R E D I T E D AS V O L U N T A R Y A R B I T R A T O R
T h e list of accredited voluntary arbitrators of the National Conciliation
and Mediation Board consists of persons mostly involved as employees or officials
in Government or in education, civic and religious institutions, trade union
organizations and private enterprises. Many are m e m b e r s of the Philippine
Association on Voluntary Arbitration ( P A V A ) which has regional chapters.
T h e following are the m i n i m u m criteria for accreditation as voluntary
arbitrator:
1. A Filipino citizen residing in the Philippines;
2. A holder of a Bachelor's D e g r e e in any field of behavioral or applied
sciences or equivalent educational trainings short of a Bachelor's D e g r e e ;
3. At least five ( 5 ) years experience in labor-management relations;
4. Completion of a training course on voluntary arbitration conducted
by the Board; and

•Article 263 [ g ] .
2
Article 211.
3
"Summary of Changes, Innovations and Reforms Introduced by the Proposed Labor
Code of the Philippines" prepared by the Department of Labor Staff Committee on
Labor Code, undated, appended to the unamended Labor Code ( P D N o . 442).

504
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 260

5. A person of g o o d moral character, noted for impartiality, probity,

and has not been civilly, criminally and administratively adjudged guilty of any
offense involving moral turpitude as evidenced by a duly sworn affidavit.

10. H O W V O L U N T A R Y ARBITRATOR IS C H O S E N
A voluntary arbitrator is chosen by the parties themselves. T h e i r choice is
not limited to the arbitrators accredited by the N C M B , although Article 260 says
they should preferably choose the accredited ones. T h e choice is usually influenced
by the trust in the person's fairness and knowledge of the dynamics, including
law, of labor-management relations.
T h e preferred m e t h o d of selection is by mutual agreement of the parties.
Alternative methods include the selection or appointment by an administrative
agency like the N C M B .
Parties in general may choose between the use of a temporary or permanent
arbitrator. T h e y have also a choice as to the number of arbitrators, either a sole
arbitrator or a panel of arbitrators or Arbitration Board.
T e m p o r a r y or ad hoc arbitrator is selected w h e n a dispute is already
at h a n d . He is n a m e d to arbitrate a specific dispute or a specific g r o u p
of disputes, and there is no c o m m i t m e n t to select him again. P e r m a n e n t
arbitrator, on the o t h e r hand, is o n e w h o is selected b e f o r e a dispute arises,
usually d u r i n g the n e g o t i a t i o n of the C B A . He is to serve for a p e r i o d of time,
usually d u r i n g the life of the C B A , rather than f o r just o n e case or specific
g r o u p o f cases.

11. DISTINGUISHED F R O M A C O U R T OF LAW

T h e procedures f o l l o w e d in an arbitration case are quite different from
those in a court of law. T h e latter are formal, whereas arbitration proceedings
are informal. A j u d g e under the doctrine of stare decisis is obliged to follow
precedents set by other judges. Arbitrators are not obliged to follow precedents
set by other arbitrations in similar cases.
T h e rules of evidence established in courts of law are not followed in
arbitration proceedings. W h a t might be admissible in an arbitration case would
not necessarily be admissible in a court of law. T h e arbitrator determines what
is admissible evidence.
In courts of law, decisions may be appealed to a higher court, but in
arbitration there is no comparable appeal recourse.
With the exception of certain specialized courts, judges hear a great variety
of cases and are not usually experts in the particular subject matter brought before
them. Most labor arbitrators, on the other hand, have extensive background
and knowledge of the manifold problem in industrial relations, and they hear
only industrial disputes. This specialized experience enable them to become
eminently qualified as experts in this field.

505
 LABOR RELATIONS
ARTS. 261-262

T h e complexity of public court procedures (except in small claims court)

makes it almost impossible for a person to pursue a claim without the aid of an
attorney. In arbitration hearings the procedures are simple and, where the issues
are not complicated and technical, the services of an attorney are not essential.
Fees paid to an arbitrator are shared equally by the parties. T h e total cost
of an arbitration proceedings is far less than costs of a lawsuit.
Arbitration, in sum, is a non-technical and relatively inexpensive procedure
for obtaining a quick solution to industrial disputes by persons w h o have
1
specialized knowledge of labor management relations.

ART. 261. JURISDICTION OF VOLUNTARY ARBITRATORS OR PANEL

OF VOLUNTARY ARBITRATORS
T h e Voluntary Arbitrator o r p a n e l o f Voluntary Arbitrators shall
have original and exclusive jurisdiction to hear and decide all unresolved
grievances arising f r o m the interpretation or i m p l e m e n t a t i o n of the
Collective Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies referred to in the immediately
p r e c e d i n g article. A c c o r d i n g l y , violations of a Collective B a r g a i n i n g
Agreement, except those which are gross in character, shall no longer be
treated as unfair labor practice and shall be resolved as grievances u n d e r the
Collective Bargaining Agreement. For purposes of this article, gross violations
of Collective Bargaining Agreement shall mean flagrant a n d / o r malicious
refusal to comply with the economic provisions of such agreement.
T h e Commission, its Regional Offices and the Regional Directors of
the Department of L a b o r and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and r e f e r the same to the G r i e v a n c e M a c h i n e r y or Voluntary
Arbitration provided in the Collective Bargaining Agreement.

A R T . 262. JURISDICTION OVER OTHER LABOR DISPUTES

T h e Voluntary Arbitrator or panel of Voluntary Arbitrators, u p o n
agreement of the parties, shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks.

C O M M E N T S A N D CASES
1. A R B I T R A B L E DISPUTES
In the field of labor relations, arbitration applies to two kinds of disputes:
( 1 ) contract-negotiation disputes; and ( 2 ) contract interpretation disputes.
Contract negotiation disputes are disputes as to the terms of a collective bargaining

'Trotta, Arbitration of Labor-Management Disputes, pp. 66-67.

506
 GRIEVANCE MACHINERY A N D VOLUNTARY A R T S 261 2fi9
4 4
ARBITRATION *

agreement. W h e r e there is an existing agreement to arbitrate such disputes,

and a bargaining deadlock or impasse has arisen, the disputants submit to an
impartial outsider for settlement the collective bargaining issue which they had
been unable to settle by themselves, whether or not aided by conciliators. Contract
interpretation disputes are disputes arising under an existing collective bargaining
agreement, involving such matters as the interpretation and application of the
1
contract, or alleged violation of its provisions.
Arbitration of contract negotiation disputes is often known as arbitration
of "interest," while arbitration of contract interpretation disputes is known as
2
arbitration of "grievance" or "rights."
T h e usual arbitration clauses in collective bargaining agreements empower
the arbitrator to only interpret the contract. Few contracts provide for the
arbitration of "interest" disputes. W h e n the terms and conditions of an agreement
are in dispute, they are usually submitted to arbitration by means of a special
contract, called a submission agreement, which is signed by the disputants.

2. JURISDICTION OF L A . A N D V A .
A "contextual and wholistic analysis" of the jurisdiction of a labor arbiter
and a voluntary arbitration is d o n e by Mr. Justice Purisima for the Supreme Court
in San Jose vs. NLRC, extensively q u o t e d below.
T h e jurisdiction o f L a b o r Arbiters ( L . A . ) and Voluntary Arbitrator ( V . A . )
or Panel of Voluntary Arbitrators is clearly defined and specifically delineated
in the L a b o r C o d e . T h e pertinent provisions of the Labor C o d e are in Articles
217, 261 and 262.
T h e aforecited provisions of law cannot be read in isolation or separately.
T h e y must be read as a w h o l e and each Article of the C o d e reconciled o n e with
the other. An analysis of the provisions of Articles 217, 261, and 262 indicates
that:
1. T h e jurisdiction of the L a b o r Arbiter and Voluntary Arbitrator or
Panel of Voluntary Arbitrators over the cases enumerated in Articles 217, 261,
and 262, can possibly include money claims in o n e f o r m or another.
2. T h e cases w h e r e the L a b o r Arbiters have original and exclusive
jurisdiction are enumerated in Article 217, and that of the Voluntary Arbitrator
or Panel of Voluntary Arbitrators in Article 261.
3. T h e original and exclusive jurisdiction of Labor Arbiters is qualified
by an exception as indicated in the introductory sentence of Article 2 1 7 ( a ) , to
wit:
Article 217'. Jurisdiction of Labor Arbiters ... ( a ) "Except as otherwise
p r o v i d e d under this C o d e the L a b o r Arbiter shall have original and

Gregory, Labor and the Law, pp. 477-479.

2
Smith Merrifield, Labor Relations Law, pp. 828-829.

507
 LABOR RELATIONS
ARTS. 261-262

exclusive jurisdiction to hear and decide ... the following cases involving
all workers..."
T h e phrase "Except as otherwise provided under this C o d e " refers to the
following exceptions:
A. Article 217. Jurisdiction of Labor Arbiters ...
XXX

(c) Cases arising from the interpretation or implementation of collective

bargaining a g r e e m e n t and those arising from the interpretation or
enforcement of company p r o c e d u r e / p o l i c i e s shall be disposed of by
the Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitrator as may be provided in said agreement.
B. Article 262. Jurisdiction over other labor disputes. — T h e Voluntary
Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties,
shall also hear and decide all other labor disputes including unfair labor
practices and bargaining deadlocks.
4. T h e jurisdiction o f Voluntary A r b i t r a t o r o r Panel o f Voluntary
Arbitrators is provided for in Arts. 261 and 262 of the L a b o r C o d e as indicated
above.
A. A close reading of Article 261 indicates that the original and exclusive
jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators is limited
only to:
" . . . unresolved grievances arising from the interpretation or implementation
of the Collective Bargaining A g r e e m e n t and those arising f r o m the
interpretation or enforcement of company personnel policies...
Accordingly, violations of a collective bargaining agreement, except those
which are gross in character, shall no longer be treated as unfair labor
practice and shall be resolved as grievances under the Collective Bargaining
Agreement, x x x . "
B. Voluntary Arbitrators or Panel of Voluntary Arbitrators, however,
can exercise jurisdiction over any and all disputes between an employer and a
union a n d / o r individual worker as provided for in Article 262.
It must be emphasized that the jurisdiction of the Voluntary Arbitrator or
Panel of Voluntary Arbitrators under Article 262 must be voluntarily conferred
by both labor and management. T h e labor disputes referred to in the same
Article 262 can include any or all of those disputes mentioned in Article 217
which ordinarily are under Labor Arbiter's original and exclusive jurisdiction.
As shown in the above contextual and wholistic analysis of Articles 217,
261, and 262 of the L a b o r C o d e , the National L a b o r Relations Commission
correctly ruled that the L a b o r A r b i t e r had no j u r i s d i c t i o n to hear and
d e c i d e petitioner's money-claim-underpayment of retirement benefits, as
the controversy b e t w e e n the parties i n v o l v e d an issue "arising f r o m the

508
 GRIEVANCE MACHINERY A N D VOLUNTARY 9fi1 9ftO
ARBITRATION 4b«62

interpretation or implementation" of a provision of the collective bargaining

agreement. T h e Voluntary Arbitrator or Panel of Voluntary Arbitrators has
original and exclusive jurisdiction over the controversy under Article 261 of
1
the L a b o r C o d e , and not the L a b o r Arbiter.

2.1 Jurisdiction Over Termination Disputes

T h e preference or bias of the law in favor of voluntary arbitration justifies
the view that e m p l o y m e n t termination disputes, arising from C B A or personnel
policy implementation, are cognizable by a voluntary arbitrator and not a labor
arbiter. Such termination cases, if filed with a labor arbiter, is to be dismissed for
lack of jurisdiction and referred to the c o n c e r n e d N C M B Regional Branch for
appropriate action. T h e parties will p r o c e e d to select a voluntary arbitrator (or
panel of voluntary arbitrators) based on the procedure outlined in their CBA.
But this referral by the labor arbiter presupposes that the parties had agreed
"in unequivocal language" that the termination dispute should be submitted to
grievance machinery and voluntary arbitration. Without such explicit agreement,
2
the labor arbiter may hear and decide the case.
Article 260 of the L a b o r C o d e on grievance machinery and voluntary
arbitrator states that " ( t ) h e parties to a Collective Bargaining A g r e e m e n t shall
include therein provisions that will ensure the mutual observance of its terms and
conditions. T h e y shall establish a machinery for the adjustment and resolution of
grievances arising from the interpretation or implementation of their Collective
Bargaining A g r e e m e n t and those arising from the interpretation or enforcement
of company personnel policies." It n e e d not be m e n t i o n e d that the parties to a
C B A are the union and the company. H e n c e , only disputes involving the union
and the company shall be referred to the grievance machinery or voluntary
3
arbitrators.
In this Sanyo case, both the union and the company are united or have come
to an agreement regarding the dismissal of private respondents [complainant
e m p l o y e e s ] . No grievance between the company and the union exists which
could be brought to a grievance machinery. T h e problem or dispute in the
present case is between die union and the company, on the o n e hand, and some
union and non-union members w h o were dismissed, on the other hand. T h e
dispute has to be settled before an impartial body. T h e grievance machinery
with members designated by the union and the company cannot be expected
to be impartial against the dismissed employees. Due process demands that the
dismissed workers' grievances be ventilated before an impartial body. Since there

L
San Jose vs. N L R C and Ocean Terminal Services, Inc., G.R. N o . 121227, August
17, 1998.
2
See San Miguel Corp. vs. N L R C in the discussion under Article 217(2).
3
Sanyo Philippines Workers Union-PSSLU vs. Canizares, G.R. N o . 101619, July
8, 1992.

509
 LABOR RELATIONS
ARTS. 261-262

has already been an actual termination, the matter falls within the jurisdiction
1
of the Labor Arbiter.
Article 261 grants to voluntary arbitrators original and exclusive jurisdiction
to hear and decide all unresolved grievances arising from the interpretation or
implementation of the collective bargaining agreement and those arising from
the interpretation or enforcement of company personnel policies. N o t e the
phrase "unresolved grievances." In the case at bar, the termination of petitioner
is not an unresolved grievance. H e n c e , it was proper to have filed the illegal
2
dismissal complaint with the labor arbiter's office.
Further, Article 260 provides that the parties to a C B A shall name or
designate their respective representative to the grievance machinery and if
the grievance is unsettled in that level, it shall automatically be referred to the
voluntary arbitrators designated in advance by the parties to a C B A of the union
and the company. It can thus be deduced that only disputes involving the union
and the company shall be referred to the grievance machinery or voluntary
3
arbitrators.
In the case at bar, the union does not c o m e into the picture, not having
objected or voiced any dissent to the dismissal of the herein petitioner. T h e
reason for this, according to petitioner, is that "the practice in said H o t e l in cases
of termination is that the latter cases are not referred anymore to the grievance
committee"; and that "the terminated e m p l o y e e w h o wishes to question the
legality of his termination usually goes to the L a b o r Arbiter for arbitration,
whether the termination arose from the interpretation or enforcement of the
4
company personnel policies or otherwise."
As ruled in Sanyo, "Since there has b e e n an actual termination, the matter
falls within the jurisdiction of the L a b o r Arbiter." T h e aforequoted doctrine is
applicable foursquare in petitioner's case. T h e dismissal of the e m p l o y e e does
not call for the interpretation or enforcement of company personnel policies
but is a termination dispute which comes under the jurisdiction of the L a b o r
5
Arbiter.

2.1a "Policies," "Rules," "Procedures"

As earlier stated, "company personnel policies" are guiding principles
stated in broad, long-range terms that express the philosophy or beliefs of an
organization's top authority regarding personnel matters. T h e y deal with matters

•Sanyo Philippines Workers Union-PSSLU vs. Canizares, G.R. N o . 101619, July

8, 1992.
2
Maneja vs. N L R C and Manila Midtown Hotel, G.R. N o . 124013, June 5, 1998.
Ibid.
Ibid.
Ibid. See also Adas Inc. vs. N L R C , et al., G.R. N o . 142244, November 18, 2002.

510
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ARTS. 261-262

affecting efficiency and well-being of employees and include, among others, the
procedure in the administration of wages, benefits, promotions, transfer and
other personnel movements which are usually not spelled out in the collective
agreement. T h e usual source of grievances, however, are the rules and regulations
governing disciplinary actions.
Sison, a pioneering personnel management practitioner and writer, offers
a similar definition: "Policy is a general plan of action that serves as a guide in
the operation of a company. A l l the policies of a company make up the basic
framework of management decisions which set the course the company is to
1
follow." He writes further: "Policies are formulated by management even before
a company opens for business in order to guide the men in the operational
level, the line manager or supervisor as to the scope of their activities, authority
and responsibility, and to enable them to arrive at sound decisions... Policies
are valuable in fixing definite objectives for the organization. Policy statements
are also n e e d e d to allow subordinate executives to make fair and consistent
decisions on recurrent problems. T h e y p r o m o t e uniformity of action and prevent
conflicting decisions especially as regards labor matter."
Company policies must be issued by top management which is responsible
for making major policies that are by their nature company-wide in application.
M i n o r policies, better known as rules and procedures, are the extension
of major policies and are usually formulated by minor executives or department
managers. Rules are specific guides intended to govern conduct and action of
operating supervisors and employees in the performance of their designated
activities. Procedure are made to specify ways or methods of carrying out policies
and rules. A procedure tells what work or task to d o , how to do it, and when to
2
d o it.

2.2 Jurisdiction Over C B A Violations

C B A violations not constituting U L P are likewise cognizable by a voluntary
arbitrator if not resolved through the grievance machinery. If the violations,
however, are "gross" in character, these are to be treated as unfair labor practice
which, following Article 217 (a-1), are to be heard and decided by a labor arbiter.
"Gross violations" refer to flagrant a n d / o r malicious refusal to comply with the
e c o n o m i c provisions of the C B A . Yet, even in gross violation cases, the parties
are allowed by Article 262 to submit the U L P case to a voluntary arbitrator. In
fact, even bargaining deadlocks and "all other disputes" may, by agreement of
the parties, be submitted to a voluntary arbitrator.
T h e law wants the industrial players to resolve their differences by and
among themselves as much as possible. A n d if they need help, they are likewise

•Perfect© S. Sison, Personnel Management: Principles and Practices (1973), p. 103.

Ibid., p. 114-115.

511
 LABOR RELATIONS
ARTS. 261-262

free to agree where that help may c o m e from. Accordingly, it is the policy of
the state "to promote and emphasize the primacy of free collective bargaining
and negotiations, including voluntary arbitration, mediation and conciliation,
1
as modes of settling labor or industrial disputes x x x"
For a U L P case to be c o g n i z a b l e by the L a b o r Arbiter, and the N L R C
to exercise its appellate jurisdiction, the allegations in the c o m p l a i n t should
show prima facie the c o n c u r r e n c e of two things, namely: ( 1 ) gross violation
of the C B A ; and ( 2 ) the violation pertains to the e c o n o m i c provisions of the
2
CBA.
Unsubstantiated conclusions of bad faith and unjustified refusal to re-
employ petitioners [complainant employees] do not constitute gross violation
of the C B A for purposes of l o d g i n g jurisdiction with the L a b o r Arbiter and the
N L R C . Although evidentiary matters are not required (and even discouraged) to
be alleged in a complaint, still sufficient details supporting the conclusion of bad
faith and unjust refusal to re-employ petitioners must be indicated. Furthermore,
it is even doubtful if the C B A provision on re-employment fits into the accepted
3
notion of an economic provision of the C B A .

2.3 Other Cases

Voluntary arbitrators also have exclusive and original jurisdiction to hear
and decide wage distortion issues arising from the application of any wage orders
in organized establishments, as well as unresolved grievances arising from the
interpretation and implementation of the productivity incentive programs under
4
R.A. 6971.
U p o n agreement of the parties, any other labor dispute may be submitted
to a voluntary arbitrator or panel of voluntary arbitrators. Before or at any stage
of the compulsory arbitration process, the parties many o p t to submit their
5
dispute to voluntary arbitrations.
T h e National L a b o r Relations Commission, its regional branches and
the Regional Directors of the Department of L a b o r and E m p l o y m e n t shall
not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the voluntary arbitrator or panel of voluntary arbitration provided
6
in the collective bargaining agreement.

'Article 211.
2
Silva, et al. vs. N L R C and Philtread, G.R. N o . 110226, June 19, 1997.
Ibid.
4
Sec. 4, Rule X I X , D.O. N o . 40-03.
Ibid. See also Apalisok vs. Radio Philippines Network, etc., G.R. N o . 138094,
May 29, 2003.
Ibid.

512
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ARTS. 261-262

2.4 Dispute over Company's Drug Abuse Policy

A union's petition to enjoin implementation of the company's drug policy
is a labor dispute beyond R T C ' s jurisdiction. It is a personnel policy dispute
1
within the jurisdiction of a V A .

3. H O W V O L U N T A R Y A R B I T R A T I O N IS INITIATED
Voluntary arbitration may be initiated either by 1) a Submission or 2) by a
Demand or N o t i c e invoking a collective agreement arbitration clause. Sometimes
both instruments are used in a case.
Submission is sometimes called a "Stipulation" or an " A g r e e m e n t to
Arbitrate." It is used where there is no previous agreement to arbitrate. T h e
Submission, which must be signed by both parties, describes an existing dispute; it
often names the arbitrator, procedures in the hearing and it sometimes contains
considerable details of the arbitrator's authority and other matters which the
parties wish to control. Submission is m o r e appropriate in interest disputes since
collective agreement generally do not provide for the arbitration of such disputes
that may arise in the future. Submission is often entered into after the dispute
has materialized and the issues can already be defined.
H o w e v e r , D e m a n d o r N o t i c e o f I n t e n t t o Arbitrate i s m o r e applicable
to rights dispute because c o l l e c t i v e a g r e e m e n t s are r e q u i r e d under Republic
A c t 6715 to p r o v i d e f o r a g r i e v a n c e p r o c e d u r e and a voluntary arbitration
clause with respect to disputes arising f r o m the application or interpretation
of the a g r e e m e n t . T h u s , there is an " a g r e e m e n t to arbitrate" future dispute
that may arise u n d e r and d u r i n g the term of the C B A . If a dispute is c o v e r e d
by such an arbitration clause, arbitration may be initiated unilaterally by
o n e party by serving u p o n the o t h e r a written d e m a n d or n o t i c e of intent to
2
arbitrate.

3.1 The Submission Agreement; Extent of Arbitrator's Authority

A l t h o u g h the contract may establish the breadth of the arbitrator's power
and the limits of his authority, his power may be m o r e sharply defined in the
submission agreement. frequently, the parties jointly formulate in writing the
specific issues to be d e c i d e d by the arbitrator. Sometimes the arbitrator is asked
by the parties to help them frame the issue on the basis of the written grievance
or the case as presented.
T h e parties sometimes find framing the issues a difficult task. Each side
may feel it can gain an advantage by narrowing or broadening the disputed issue.
T h e issue argued in the grievance procedure may be quite different from what
finally emerges in the submission agreement. Arbitrators and courts scrutinize

'Union of Nestle Workers vs. Nestle Philippines, Inc., G.R. N o . 148303, October
17, 2002.
2
N C M B Primer on Voluntary Arbitration, p. 16.

513
 LABOR RELATIONS
ARTS. 261-262

these submissions with great care and endeavor to avoid too liberal a construction
of their content.
In general, the arbitrator is expected to decide those questions expressly
stated and limited in the submission agreement. However, since arbitration is
the final resort for the adjudication of disputes, the arbitrator will assume that
he has the power to make a final settlement. To illustrate: Assume that the
submission empowers the arbitrator to decide whether Mr. X was discharged
for "just cause." T h e arbitrator in this instance would assume that his powers
extended beyond giving a yes-or-no answer and included the power to reinstate
Mr. X with or without back pay.
W h i l e some leeway is i m p l i e d from the circumstances and the contract,
the arbitrator will normally not prescribe p r o p e r p r o c e d u r e s for the future
relations of the parties unless expressly authorized to do so. N o r may he
resolve other grievances that are n o t precipitated by the same facts. It is
important to note that even if the particular issue is non-contractual or is
not arbitrable under the contract, the parties may stipulate to arbitrate such
issue in the submission a g r e e m e n t . T h e arbitrator then has full authority to
1
handle the matter.
In one case, for instance, petitioner Sime Darby contends that the Arbitrator
gravely abused his discretion in passing upon not only the question of whether
or not a performance bonus is to be granted but also, in the affirmative case,
the amount thereof. T h e position of petitioner [ e m p l o y e r ] , to the extent we
can understand it, is that the Arbitrator was authorized to d e t e r m i n e only the
question of whether or not a performance bonus was to be granted, the second
question being reserved for determination by the e m p l o y e r Sime Darby. T h e
Court ruled: We noted earlier that in their agreement to arbitrate, the parties
submitted to the Voluntary Arbitrator "the issue of p e r f o r m a n c e bonus." T h e
language of the agreement to arbitrate may be seen to be quite cryptic. T h e r e
is no indication at all that the parties to the arbitration agreement regarded
"the issue of performance bonus" as a two-tiered issue, only o n e tier of which
was being submitted to arbitration. Possibly, Sime Darby's counsel considered
that issue as having dual aspects and intended in his own m i n d to submit only
one of those aspects to the Arbitrator; if he did, however, he failed to reflect his
2
thinking and intent in the arbitration agreement.
It is thus essential to stress that the Voluntary Arbitrator had plenary
jurisdiction and authority to interpret the a g r e e m e n t to arbitrate and to
determine the scope of his own authority subject only, in a p r o p e r case, to
the certiorari jurisdiction of this Court. T h e Arbitrator, as already indicated,
viewed his authority as embracing not merely the determination of the abstract

•Trotta, Arbitration of Labor-Management Disputes, p. 83.

2
Sime Darby Philippines vs. Magsalin, G.R. N o . 90426, December 15, 1989.

514
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ARTS. 261-262

question of whether or not a performance bonus was to be granted but also, in

1
the affirmative case, the amount thereof.
In another case raising again the issue of extent of authority, the employees
presented claims for monetary benefits to the employer but the latter did not
act on the claim because it questioned the starting date of the employees'
regular status. T h e employer and the employees through their union executed
a submission agreement raising the sole issue of the date of regularization of the
workers. T h e voluntary arbitrator ruled that the regular status started "six ( 6 )
months from the first day of service." He ruled further that "the complainants,
being entitled to the C B A benefits during the regular status, are awarded sick
leave, vacation leave, and annual wage and salary increases during such period
in the amount of... P5,707,261.61. T h e employer complained that the arbitrator
stepped b e y o n d his authority.
T h e Supreme Court ruled that the arbitrator did not exceed his authority.
"Generally, the arbitrator is e x p e c t e d to decide only those questions expressly
delineated by the submission agreement. Nevertheless, the arbitrator can assume
that he has the necessary p o w e r to make a final settlement since arbitration
2
is the final resort for adjudication of disputes." T h e Supreme Court further
said: "The issue of regularization should be viewed as two-tiered issue. W h i l e
the submission agreement m e n t i o n e d only the determination of the date of
regularization, law and jurisprudence give the voluntary arbitrator enough
leeway of authority as well as adequate prerogative to accomplish the reason for
which the law on voluntary arbitration was created — speedy labor justice. It
bears stressing that the underlying reason why this case arose is to settle, once
and for all, the ultimate question of whether respondent employees are entitled
to higher benefits. To require them to file another action for payment of such
benefits w o u l d certainly u n d e r m i n e labor p r o c e e d i n g s and contravene the
3
constitutional mandate providing full protection to labor."

4. POWERS O F T H E ARBITRATOR
A study of collective bargaining agreements discloses different types of
arbitration clauses with varying degrees of power granted to the arbitration. This
4
power may be very limited or unusually broad in scope.

4.1 Power to Arbitrate Any Dispute

T h e contract clause that gives the arbitrator the broadest scope of power is
commonly known as the "disputes" clause. T h e following excerpt from a contract

'Sime Darby Philippines vs. Magsalin, G.R. N o . 90426, December 15, 1989.
2
C.A. Azucena, The Labor Code with Comments and Cases, 1993 ed., p. 283 and
Sime Darby Phil., Inc. vs. Magsalin, G.R. N o . 90426, 180 SCRA 177, 183 (1989).
3
Ludo and Luym Corp. vs. Saornido, et al, G.R. N o . 140960, January 20, 2003.
4
Trotta, Arbitration of Labor-Management Disputes, p. 78.
 LABOR RELATIONS
ARTS. 261-262

is illustrative: "Any difference or dispute arising between the company and the
1
union or its members shall be settled in the following manner..."
This type of clause grants the arbitrator jurisdiction to hear and determine
practically any matter in dispute between the parties. M o r e o v e r , he is n o t
necessarily limited to matters specifically stated in the contract. It is c o m m o n ,
however, for some relationship to be shown between the matter in dispute and
2
the provisions of the contract.

4.2 No Power to A d d to or Subtract from the Contract

Some arbitration clauses limit the arbitrator's power to an interpretation
and application of the contract and further specifically provide that he "shall
have no power to add to or subtract from the contract." Such a clause might
read: "The arbitrator shall have no power to add to or subtract from or modify
any of the terms of the agreement...."
Such clauses clearly state the parties' intention that the arbitrator will
be e m p o w e r e d only to interpret the contract but not add to or modify it. T h e
distinction between an award that merely interprets and o n e that adds to or
modifies the contract is not always easy to make. What an arbitrator may consider
as merely an interpretation of a contractual provision may be viewed by o n e of
the parties as an addition to or a modification of the contract.
On the other hand, a refusal by an arbitrator to rule because in his opinion
he would be adding to or modifying the contract may be interpreted by o n e of the
parties as a rationalization for refusing to make a decision. A far m o r e effective
way to narrow the range of arbitral power is to state exactly what matter he is
3
not to handle.
As a general rule, the authority of an arbitrator embraces or covers the
following:
1. General authority to investigate and hear the case upon notice
to the parties and to render an award based on the contract and
record of the case;
2. Incidental authority to p e r f o r m all acts, necessary to an adequate
discharge of his duties and responsibilities like setting and conduct
of hearing, attendance of witnesses and production of documents
and other evidences, fact-finding and other modes of discovery,
reopening of hearing, etc;
3. Special powers in aid of his general contractual authority like the
authority to determine arbitrability of any particular dispute and to

'Trotta, Arbitration of Labor-Management Disputes, p. 78.

Ibid.
Ibid., p. 80.

516
 GRIEVANCE MACHINERY A N D VOLUNTARY A B T 5 9fi1 9fiO
1
ARBITRATION

modify any provision of existing agreement upon which a proposed

change is submitted for arbitration;
1
4. Authority to issue writ of execution.

5. F U N C T I O N S OF A R B I T R A T O R
T h e labor arbitrator u n d e r a collective bargaining a g r e e m e n t is an
indispensable agency in the continuous collective bargaining process. He sits
to settle disputes at the plant level - disputes which require for their solution
knowledge of the custom and practices of a particular factory or of a particular
industry as reflected in particular agreements. T h e labor arbitrator is usually
chosen because of the parties' confidence in his knowledge of the c o m m o n law of
the shop and their trust in his personal j u d g m e n t to bring to bear considerations
not expressed in the contract as criteria for j u d g m e n t . H e n c e , he performs
functions which are not normal to the courts, and the considerations which help
2
him to fashion his j u d g m e n t may be foreign to the competence of courts.
On the o t h e r hand, the p o w e r and authority of arbitrators in labor
dispute cases is derived from and limited by the terms of the parties' agreement.
T h e arbitrator is confined to interpretation and application of the collective
bargaining agreement; he does not sit to dispense his own brand of industrial
justice. T h e arbitrator's authority is contractual rather than judicial in nature;
his power is conferred by the collective bargaining agreement; and his duty with
respect to that agreement is to settle disputes arising thereunder by applying
3
and interpreting that agreement.
But so long as an arbitrator is not arbitrary, he has wide latitude in exercising
his authority, especially in fashioning an appropriate remedy. A clause limiting
the arbitrator's p o w e r to add to, subtract from, or alter the provisions of the
agreement does not affect the arbitrator's jurisdiction but merely limits his power
4
to fashion an award.

5.1 Arbitrator's Interpretation of C B A

It is said that an arbitral award does not draw its essence from the CBA,
hence, there is an unauthorized a m e n d m e n t or alteration thereof, if:
1. It is so unfounded in reason and fact;
2. It is so unconnected with the wording and purpose of the agreement;
3. It is without factual support in view of its language, its context, and
any other indicia of the parties' intention;
4. It ignores or abandons the plain language of the contract;

•NCMB Primer on Voluntary Arbitration, p. 15.

2
48 Am. Jur. 2d 1895, p. 318.
Ibid.
Ibid.

517
 LABOR RELATIONS
ART. 262-A

5. It is mistakenly based on a crucial assumption which concededly is

a nonfact;
6. It is unlawful, arbitrary or capricious; and
7. It is contrary to public policy.
If the terms of a C B A are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of its stipulation shall prevail.
However, if, in a C B A , the parties stipulate that the hirees must be presumed of
employment qualification standards but fail to state such qualification standards
in said CBA, the VA may resort to evidence extrinsic of the C B A to determine
the full agreement intended by the parties. W h e n a C B A may be expected to
speak on a matter, but does not, its sentence imports ambiguity on that subject.
T h e VA is not merely to rely on the cold and cryptic words on the face of the
C B A but is mandated to discover the intention of the parties. R e c o g n i z i n g the
inability of the parties to anticipate or address all future problems, gaps may be
left to be filled in by reference to the practices of the industry, and the step which
is equally a part of the C B A although not expressed in it. In order to ascertain
the intention of the contracting parties, their contemporaneous and subsequent
acts shall be principally considered. T h e VA may also consider and rely upon
negotiating and contractual history of the parties, evidence of past practices
interpreting ambiguous provisions. T h e VA has to examine such practices to
determine the scope of their agreement, as where the provision of the C B A has
been loosely formulated. Moreover, the C B A must be construed liberally rather
than narrowly and technically and the Court must place a practical and realistic
1
construction upon it.

ART. 262-A. PROCEDURES

The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have
the power to hold hearings, receive evidences and take whatever action is
necessary to resolve the issue or issues subject to the dispute, including
efforts to effect a voluntary settlement between the parties.
All parties to the dispute shall be entitled to attend the arbitration
proceedings. The attendance of any third party or the exclusion of any witness
from the proceedings shall be determined by the Voluntary Arbitrator or
panel of Voluntary Arbitrators. Hearing may be adjourned for cause or upon
agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for the
Voluntary Arbitrator or panel of Voluntary Arbitrators to render an award
or decision within twenty (20) calendar days from the date of submission of
the dispute to voluntary arbitration.

'United Kimberly-Clark Employees Union-PTGWO vs. Kimberly-Clark Phil.,

Inc., G.R. N o . 162957, March 6, 2006.

518
 GRIEVANCE MACHINERY A N D VOLUNTARY A P T 9fi9 A
A
ARBITRATION '

T h e award or decision of the Voluntary Arbitrator or panel of Voluntary

Arbitrators shall contain the facts a n d the law on which it is based. It shall
be final and executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties.
U p o n motion of any interested party, the Voluntary Arbitrator or panel
of Voluntary Arbitrators or the L a b o r Arbiter in the region where the movant
resides, in case of the absence or incapacity of the Voluntary Arbitrator or
panel or Voluntary Arbitrators f o r any reason, may issue a writ of execution
requiring either the sheriff of the Commission or regular courts or any
public official w h o m the parties may designate in the submission agreement
to execute the final decision, o r d e r or award.

C O M M E N T S A N D CASES
1. C O M P L I A N C E W I T H D U T Y TO ARBITRATE
If a C B A requires settlement of disputes "exclusively" by the arbitration,
then arbitration is n e e d e d before court suits for breach of the contract may be
filed. Thus, it has b e e n held that an employer cannot maintain a suit against a
union for breach of the no-strike clause of their agreement where the agreement
requires arbitration of such disputes. Likewise, a suit by a union, alleging contract
infractions by an employer, cannot be maintained where the contract requires
arbitration of the dispute. T h e rule also applies to suits filed by employees. An
e m p l o y e e is precluded from bringing a court suit against his employer unless the
parties to the collective bargaining agreement expressly agreed that arbitration
1
was not to be exclusive remedy under the contract.
Nonetheless, the parties to a collective bargaining agreement may waive
the arbitration covenants of the agreement, but their conduct must clearly show
2
that intention.

2. W H O DETERMINES T H E A R B I T R A T I O N PROCEDURES
In practice, voluntarily arbitration of labor cases use procedures based on
the L a b o r C o d e as a m e n d e d by Republic A c t 6715 and its Implementing Rules,
the C B A , and other agreement of the parties, the directives of the arbitrator,
and the procedural rules of appropriate agencies like the N C M B Procedural
3
Guidelines in Conduct of Voluntary Arbitration Proceedings. In the appreciation
4
of evidence, the arbitrator is not b o u n d by the Rules of Court.

3. ETHICAL STANDARDS OF ARBITRATORS

An arbitrator is o b l i g e d to maintain a high level of professional ethics in
his relationships with the parties and the appointing agencies. He also has a

•48 Am. Jur. 2d 1937, p. 347.

Ibid.
s
See the Primer on Voluntary Arbitration, p. 26.
Ibid., p. 33.
519
 LABOR RELATIONS
ART. 262-A

responsibility to society. His conduct should be above reproach. Since in effect,

he is a j u d g e , and his ethics must be on the same high level as the code that
governs the conduct of judicial tribunals.
T h e absence of judicial rituals does not minimize the judicial functions
of the arbitrator. Decisions made by the arbitrator vitally affect the rights and
responsibilities of the parties. W h e n a j u d g e makes a decision, it can be appealed
to a higher tribunal. T h e absence of a similar appeal procedure in arbitration
places a much heavier responsibility upon the arbitrator. But the parties also have
ethical responsibilities. T h e i r words and actions should not place the arbitrator
in a position where a question of ethics can be raised.
Failure on the part of the voluntary arbitrator to r e n d e r a decision,
resolution, order or award within the prescribed p e r i o d shall, upon complaint
of a party, be sufficient g r o u n d for the B o a r d to discipline said voluntary
arbitrator, pursuant to the guidelines issued by the Secretary. In cases where
the r e c o m m e n d e d sanction is de-listing, it shall be unlawful for the voluntary
arbitrator to refuse or fail to turn over to the Board, for its further disposition,
1
the records of the case within ten calendar days from d e m a n d thereof.

4. V O L U N T A R Y ARBITRATION AWARD, GENERALLY FINAL; EXCEPTIONS

Continental Marble Corp., et al. vs. National Labor Relations Commission, G.R. N o .
L-43825, May 9, 1988; Oceanic Bic Division vs. Romero, 130 SCRA 392 (1984);
Mantrade/FMMC Division Employees and Workers Union vs. Bacungan, 144 SCRA
510 (1986) —
The decisions of voluntary arbitrators must be given the highest respect and,
as a general rule, must be accorded a certain measure of finality. This is especially
true where the arbitrator chosen by the parties enjoys first-rate credentials. It is not
correct, however, that this respect precludes the exercise of judicial review over their
decisions.
In spite of statutory provisions making "final" the decisions of certain
administrative agencies, the Supreme Court may take cognizance of petitions
questioning these decisions where want of jurisdiction, grave abuse of discretion,
violation of due process, denial of substantial justice, or erroneous interpretation of
the law are brought to its attention.
A voluntary arbitrator by the nature of his functions acts in a quasi-judicial
capacity. There is no reason why his decisions involving interpretation of law should
be beyond the Supreme Court's review. Administrative officials are presumed to act in
accordance with law and yet the Supreme Court does not hesitate to pass upon their
work where a question of law is involved or where a showing of abuse of authority or
discretion in his official acts is properly raised in petitions for certiorari.
The Labor Code and its Implementing Rules reflect the important public
policy of encouraging recourse to voluntary arbitration and of shortening the

'Sec. 6, Rule X I X , D.O. N o . 40-03.

520
 GRIEVANCE MACHINERY A N D VOLUNTARY A W T 9fi9 A
4 A
ARBITRATION * ° '

arbitration process by rendering the arbitral award nonappealable to the National

Labor Relations Commission. T h e result is that a voluntary arbitral award may be
modified and set aside only upon the grounds on which a decision of the National
Labor Relations Commission itself may be modified or set aside by the Supreme
1
Court [Court of Appeals, per Luzon Development, below].

4.1 Motion for Reconsideration

T h e rule used to be that a voluntary arbitrator's decision or award could
be the subject of a m o t i o n for reconsideration. This rule has been changed.
B e f o r e its a m e n d m e n t by R . A . N o . 6715, A r t i c l e 263 p r o v i d e d that a
voluntary arbitrator's award or decision is "final, unappealable and executory"
2
upon its issuance, subject only to judicial review in appropriate cases.
In 1989, however, R . A . N o . 6715, a m e n d e d the C o d e by inserting Article
262-A providing for a p e r i o d of ten calendar days before the VA decision or
award becomes final and executory. I m p l e m e n t i n g the amendment, the N C M B
Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings,
dated July 28, 1989, categorically states:
"Section 6. Finality of Award or Decisions. - Awards or decisions of
voluntary arbitrator becomes final and executory after ten (10) calendar
days from receipt of copies of the award or decision by the parties."
In 1993, the Court interpreted the amendment by saying "Presumably,
the decision may still be reconsidered by the VA on the basis of a motion for
3
reconsideration duly filed during that period."
T h e propriety of filing a m o t i o n for reconsideration was confirmed in
Coca-Cola Bottlers Phil, etc. vs. Coca-Cola, G.R No. 155651. Although decided on
July 28, 2005, the decision, applying Article 262 and the N C M B Rules of 1989,
recognized the permissibility of filing a m o t i o n for reconsideration (although
the Court sustained the denial of the m o t i o n for having been filed 20 days late).
Clearly, under the 1989 N C M B guidelines, a motion for reconsideration of a VA
decision was allowable.
But Section 7, Rule X I X of D . O . N o . 40, series of 2003, appears to depart
from previous rules and rulings. It reads: ' T h e decision, order, resolution or
award of the voluntary arbitrator or panel of voluntary arbitrators shall be
final and executory after ten (10) calendar days from receipt of the copy of
the award or decision by the parties and it shall not be subject of a motion for
reconsideration." [Emphasis mine - C A A ]

'Sime Darby Pilipinas, Inc. vs. Magsalin, G.R. N o . 90426, December 15, 1989.
Consolidated Bank and Trust Corp. vs. BLR, G.R. N o . 64926, October 15,
1984.
imperial Textile Mills, Inc. vs. Sampang, G.R. N o . 94960, March 8, 1993.

521
 LABOR RELATIONS
ART. 262-A

4.2 Review of Award by Certiorari

Luzon Development Bank vs. Association of Luzon Development Bank Employees, et
al., G.R. N o . 120319, October 6, 1995 —
In Volkschel Labor Union, et al. vs. NLRC, et al. (98 SCRA 314 [1980]), on the
settled premise that the judgment of courts and awards of quasi-judicial agencies
must become final at some definite time, this court ruled that the awards of voluntary
arbitrators determine the rights of parties; hence, their decisions have the same legal
effect as judgments of a court. In Oceanic Bic Division (FFW), et al. vs. Romero, et al.
(130 SCRA 392 [1984]), this Court ruled that "a voluntary arbitrator by the nature
of her functions acts in a quasi-judicial capacity." Under these rulings, it follows that
the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status
of a quasi-judicial agency but independent of, and apart from, the N L R C since his
decisions are not appealable to the latter.
Section 9 of BP Big. 129, as amended by Republic Act N o . 7902, provides that
the Court of Appeals shall exercise:
(3) Exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of Regional Trial Courts and quasi-judicial
agencies, instrumentalities, boards or commissions, including the Securities
and Exchange Commission, the Employees Compensation Commission and the
Civil Service Commission, except those falling within the appellate jurisdiction
of the Supreme Court in accordance with the Constitution, the Labor Code of
the Philippines under Presidential Decree N o . 442, as amended, the provisions
of this Act, and of subparagraph (1) of the third paragraph and subparagraph
(4) or the fourth paragraph of Section 17 of the Judiciary Act of 1948.
Assuming arguendo that the voluntary arbitrator or the panel of voluntary
arbitrators may not strictly be considered as a quasi-judicial agency, board or
commission, still both he and the panel are comprehended within the concept of a
"quasi-judicial instrumentality."
The voluntary arbitrator no less performs a state function pursuant
to a governmental power delegated to him under the provisions therefor
in the Labor Code and he falls, therefore, within the contemplation of the
term "instrumentality" in the aforequoted Sec. 9 of BP 129. T h e fact that his
functions and powers are provided for in the Labor Code does not place him
within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality
as contemplated therein, x x x.
A fortiori, the decision or award of the voluntary arbitrator or panel of
arbitrators should likewise be appealable to the Court of Appeals, in line with
the procedure outlined in Revised Administrative Circular N o . 1-95, just like
those of the quasi-judicial agencies, boards and commissions enumerated
therein, x x x
In effect, this equates the award or decision of the voluntary arbitrator with that
of the regional trial court. consequently, in a petition for certiorari from that award
or decision, the Court of Appeals must be deemed to have concurrent jurisdiction

522
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 262-A

with the Supreme Court. As a matter of policy, this Court shall henceforth remand
to the Court of Appeals petitions of this nature for proper disposition.

4.2a F r o m VA to C A : M o d e of A p p e a l is Rule 43, not 65

By the 1995 ruling in Luzon Development Bank, it is now settled that an
appeal from the decision of a voluntary arbitrator falls within the exclusive
appellate jurisdiction of the Court of Appeals. I n d e e d , the Supreme Court took
this decision into consideration in approving the 1997 Rules of Civil Procedure,
the pertinent provision of which [Rule 43] states as follows:
S E C T I O N 1. Scope. - This Rule shall apply to appeals from judgments
or final orders of the Court of Tax Appeals and from awards, judgments,
final orders or resolutions of or authorized by any quasi-judicial agency in
the exercise of its quasi-judicial functions. A m o n g these agencies are the
Civil Service Commission, Central Board of Assessment Appeals, Securities
and Exchange Commission, Office of the President, L a n d Registration
Authority, Social Security Commission, Civil Aeronautics Board, Bureau
of Patents, Trademarks and T e c h n o l o g y Transfer, National Electrification
Administration, Energy Regulatory Board, National Telecommunications
Commission, Department o f Agrarian R e f o r m under Republic A c t N o .
6657, G o v e r n m e n t Service Insurance System, Employees Compensation
C o m m i s s i o n , Agricultural Inventions B o a r d , Insurance Commission,
Philippine A t o m i c Energy Commission, Board of Investments, Construction
Industry Arbitration Commission, and voluntary arbitrators authorized by
law. (1997 Rules of Civil Procedure, Rule 43, Section 1 [1997].)
T h e m o d e of appeal from VA to the CA is therefore Rule 43 of the 1997
Rules of Procedure. It is not Rule 65 because a petition for certiorari under that
Rule lies only where there is "no appeal" and "no plain, speedy and adequate
remedy in the ordinary course of law." Certiorari under Rule 65 cannot be
allowed when a party fails to appeal a j u d g m e n t despite availability of that remedy.
Certiorari is not a substitute for a lost appeal. A p p e a l and certiorari are mutually
1
exclusive and not alternative or successive.
T h e preceding Nippon Paint ruling is reiterated in Samahan ng Manggagawa
sa Hyatt-NUWHRAIN-APL vs. VA Froilan Bacungan, et al., G.R. N o . 149050, March
25,2009. In that case the Court of Appeals noted that contrary to Sees. 1, 4, and 6
in relation to Sec. 7, Rule 43 of the 1997 Rules of Civil Procedure, the petitioner
union had resorted to a special civil action for certiorari under Rule 65 instead
of a petition for review under Rule 43. For that reason the CA dismissed the
petition. T h e Supreme Court sustained the dismissal.

'Nippon Paint Employees Union-OLALIA vs. CA, G.R. N o . 159010, November

19, 2004.

523
 LABOR RELATIONS
ART. 262-B

4.3 Findings of Facts of a Voluntary Arbitrator

T h e r e is no merit in the contention that only questions of law, and not
findings of fact, of a voluntary arbitrator may be reviewed by the Court. W h i l e the
Court has accorded great respect for, and finality to, findings of fact of voluntary
arbitrator and administrative agencies which have acquired expertise in their
respective fields, like the Labor Department and the National Labor Relations
Commission, their findings of fact and the conclusions drawn therefrom have
to be supported by substantial evidence. In the instant case, the finding of the
voluntary arbitrator that [ R N ] was an e m p l o y e e of the petitioner corporation is
1
not supported by the evidence or by the law.

ART. 262-B. COST OF VOLUNTARY ARBITRATION AND VOLUNTARY

ARBITRATOR'S FEE
T h e parties to a Collective Bargaining Agreement shall provide therein
a proportionate sharing scheme on the cost of voluntary arbitration including
the Voluntary Arbitrators fee. T h e fixing of fee of Voluntary Arbitrators,
whether shouldered wholly by the parties or subsidized by the Special
Voluntary Arbitration Fund, shall take into account the following factors:
(a) Nature of the case;
(b) T i m e consumed in hearing the case;
(c) Professional standing of the Voluntary Arbitrator;
(d) Capacity to pay of the parties; and
(e) Fees provided for in the Revised Rules of Court.

Principles of Union-Management Relations

A. Rationale of Relations
1. Workers organize into labor unions not alone for e c o n o m i c
motives but also for equally compelling psychological and social
ones, so that they can participate in making the decisions that
vitally affect them in their work and community life.
2. Union-management cooperation tends to make management
m o r e efficient and unions m o r e cost-conscious, thereby improv-
ing the competitive position of a business enterprise and increas-
ing the earnings of both workers and owners.
3. T h e nature of union-management relations and the administra-
tion of a contract are influenced greatly by the pattern of social
relationship in any given community.
4. T h e future of industrial democracy depends upon the attainment
of full production and employment on a sustained basis during
and after the war.

'Continental Marble Corp. vs. N L R C , G.R. N o . L-43825, May 9, 1988.

524
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 262-B

B. Attitude and Leadership

5. T h e leadership requirements and responsibilities of management
increase under union-management relations.
6. M a n a g e m e n t should frankly acknowledge the role of the union
in bringing about improvements in working conditions.
7. T h e policies and actions of unions are likely to reflect the policies
and actions of management.
8. T h e attitudes and actions of management largely determine the
d e g r e e of co-operativeness of union leadership.
9. T h e time lag in the growth of constructive union leadership,
after management ceases its opposition, varies with the extent
to which labor assumes responsibility for the development of its
leaders.
C. Collective Bargaining and Contract Administration
10. Collective bargaining marks the e n d of individual and the
beginning of g r o u p relations between workers and management.
11. T h e initial collective-bargaining practices are influenced in
varying degrees by the preunion history of the particular
industrial concern and by the fact that genuine union-
m a n a g e m e n t relations are initiated by the union.
12. Collective bargaining is an instrument for workers and owners,
through unions and management, to solve their problems
directly without recourse to the government.
13. Collective bargaining is the extension of the basic principles and
practices of democracy into industry.
14. A p r i m e objective of collective bargaining is the redistribution of
the proceeds of production.
15. Workers acquire a qualified property interest in their j o b s under
a collective-bargaining contract.
16. T h e successful administration of a contract requires the mainte-
nance of an effective system of communications for both man-
agement and the union, in bringing complaints from the bottom
up and relaying decisions and policies from the top down.
17. Participation of workers, union representatives, and management
at all levels is a prerequisite to the successful administration of a
collective-bargaining contract.
18. T h e peaceful administration of a contract requires the confidence
of workers that they will get justice through the collective-
bargaining machinery in the settlement of their grievance.

525
 LABOR RELATIONS
ART. 262-B

19. T h e natural outgrowth of local-plant and individual company

collective bargaining is bargaining between district or industry-
wide organizations of management and union.
D. Grievance Handling
20. Grievances should be settled speedily and as near their point of
origin as possible.
21. Grievances should be settled on their merits with no logrolling
permitted.
22. Salesmen and purchasing agents usually possess a m o r e natural
ability for handling management's relations with unions than do
operating officials.
E. Participation
23. Management's assumption of sole responsibility for productive
efficiency actually prevents the attainment of maximum output.
24. T h e participation of organized workers in m a n a g e m e n t provides
an outlet for their creative desires, as it is essentially a creative
and co-operative undertaking.
25. Union-management co-operation to reduce costs, eliminate
wastes, increase productive efficiency, and i m p r o v e quality
represents a practical program that provides workers with effective
direct participation in the creative phases of management.
26. Unions should participate with m a n a g e m e n t in distributing
the proceeds of each firm's production between its owners and
workers.
27. T h e greater the participation of workers through their unions in
setting piecework and tonnage rates, in making time and motion
studies, in determining work standards and j o b evaluations, the
greater are the earnings and output.
E Employee Security and Sharing
28. Each group of workers strives for the kind of seniority rules which
it thinks will provide the greatest amount of j o b protection.
29. Seniority is an instrument designed to eliminate favoritism and
discrimination.
30. T h e power to discharge should not be l o d g e d in a single indi-
vidual.
31. Workers should enjoy full freedom of opportunity for advance-
ment and promotion.
32. T h e r e is no basic conflict between seniority and productive
efficiency.

526
 GRIEVANCE MACHINERY A N D VOLUNTARY
ARBITRATION
ART. 262-B

33. T h e proceeds of technological changes, labor saving machinery,

and other factors contributing to lower unit costs of production
should be shared equitably between owners and workers.
34. T h e adjustment of wage-rate inequalities should be exclusively
on the basis of the merits of each case.
G. Union Security
35. Membership in the union should be a condition of employment.
36. T h e union shop is a necessary prerequisite for constructive
union-management relations.
37. T h e union shop may be an instrument for either constructive or
negative union-management relations, depending chiefly upon
management's outlook and the caliber of union leadership.
T h e s e principles are not immutable rules of union-management
relations, because they are the outgrowth of changing conditions and, as
a consequence, are themselves constantly subject to change. Any enduring
validity that they may prove to have will d e p e n d largely on the continued
growth of industrial democracy.
We make no claim that they apply to all types of union-management
relations, only to those prevailing in the basic and mass-producing industries
— although in varying degrees they may well have validity in all fields of
collective bargaining. N o r do we claim that they are necessarily original
with us, only that our experiences have demonstrated these principles to
be conducive to the establishment and maintenance of industrial peace
and fruitful union-management relations. It is in this spirit that they are
presented.
Clinton S. G o l d e n (Director, Northeastern R e g i o n , Steel Workers
Organizing C o m m i t t e e ) and H a r o l d J. Ruttenberg (Research Director,
Steel Workers Organizing C o m m i t t e e ) , The Dynamics of Industrial Democracy
(Harpers & Brothers Publishers: N e w York, 1942, pp. xxiii-xxvi.)
[ T h e principles are lifted verbatim but rearranged to suit the topic
groupings that I introduced. — C . A . A . ]

527
 Title VIII
STRIKES AND LOCKOUTS AND FOREIGN
INVOLVEMENT IN TRADE UNION ACTIVITIES
1
Chapter I
STRIKES A N D L O C K O U T S

[Part 1. REGULATIONS AND LIMITS OF STRIKE

AND LOCKOUT]
O v e r v i e w / K e y Questions B o x 18
1. In general, what is meant by "concerted activity"?
2. W h e n a strike/lockout happens, the key issue, most
often, is w h e t h e r or n o t it is legal. To d e c i d e this
question what factors n e e d to be examined?
3. Government employees may unionize and negotiate a
collective contract. May they also strike?
4. What is the good-faith strike doctrine?
5. What are the acts the strikers and the employer may not
do on the occasion of a strike? May an employer hire
workers in place of the strikers?
6. What is a "national interest" dispute? In what ways is it
subjected to the police power?
7. A "no strike - no lockout" clause in a C B A is valid and
binding. What are the exceptions?

2
A R T . 263. STRIKES, PICKETING, AND LOCKOUTS
( a ) It is the policy of the State to encourage free trade unionism and
free collective bargaining.

'To facilitate study and discussion, this rather long Chapter is divided into three
parts:
Part 1. Regulations and Limits of Strike and Lockout.
Part 2. Picketing and Other Concerted Actions.
Part 3. Consequences of Concerted Actions.
Paragraphs ( g ) and ( i ) are as amended by Sec. 27, R.A. 6715.

528
 STRIKES A N D LOCKOUTS
ART. 263
[Part 1. Regulations and Limits of Strike
and Lockout]

(b) Workers shall have the right to engage in concerted activities for
purposes of collective bargaining or for their mutual benefit and protection.
The right of legitimate labor organizations to strike and picket and of
employers to lockout, consistent with the national interest, shall continue
to be recognized and respected. However, no labor union may strike and
no employer may declare a lockout on grounds involving inter-union and
intra-union disputes.
(c) In cases of bargaining deadlocks, the duly certified or recognized
bargaining agent may file a notice of strike or the employer may file a notice
of lockout with the Ministry at least 30 days before the intended date thereof.
In cases of unfair labor practice, the period of notice shall be 15 days and
in the absence of a duly certified or recognized bargaining agent, the notice
of strike may be filed by any legitimate labor organization in behalf of its
members. However, in case of dismissal from employment of union officers
duly elected in accordance with the union constitution and by-laws, which
may constitute union busting where the existence of the union is threatened,
the 15-day cooling-off period shall not apply and the union may take action
immediately.
(d) The notice must be in accordance with such implementing rules
and regulations as the Minister of Labor and Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the Ministry to
exert all efforts at mediation and conciliation to effect a voluntary settlement.
Should the dispute remain unsettled until the lapse of the requisite number
of days from the mandatory filing of the notice, the labor union may strike
or the employer may declare a lockout.
(f) A decision to declare a strike must be approved by a majority of
the total union membership in the bargaining unit concerned, obtained by
secret ballot in meetings or referenda called for that purpose. A decision to
declare a lockout must be approved by a majority of the board of directors of
the corporation or association or of the partners in a partnership, obtained
by secret ballot in a meeting called for that purpose. The decision shall be
valid for the duration of the dispute based on substantially the same grounds
considered when the strike or lockout vote was taken. The Ministry may at
its own initiative or upon the request of any affected party, supervise the
conduct of the secret balloting. In every case, the union or the employer shall
furnish the Ministry the results of the voting at least seven days before the
intended strike or lockout, subject to the cooling-off period herein provided.
(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
529
 LABOR RELATIONS
ART. 263

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 b e f o r e the strike or lockout. T h e Secretary
of L a b o r 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.
In line with the national concern f o r and the highest respect accorded
to the right of patients to life and health, strikes and lockouts in hospitals,
clinics and similar medical institutions shall, to every extent possible, be
avoided, and all serious efforts, not only by l a b o r a n d management but
government as well be exhausted to substantially minimize, if not prevent,
their adverse effects on such life a n d health, through the exercise, however
legitimate, by labor of its right to strike and by management to lock out.
In l a b o r disputes adversely affecting the continued o p e r a t i o n of such
hospitals, clinics or medical institutions, it shall be the duty of the striking
union or locking-out employer to provide a n d maintain an effective skeletal
workforce of medical and other health personnel whose movement a n d
services shall be unhampered and unrestricted, as are necessary to insure
the p r o p e r and adequate protection of the life a n d health of its patients,
most especially emergency cases, f o r the duration of the strike or lockout. In
such cases, therefore, the Secretary of L a b o r and Employment is mandated
to immediately assume, within twenty-four (24) hours f r o m knowledge of
the occurrence of such a strike or lockout, jurisdiction over the same or
certify it to the Commission f o r compulsory arbitration. F o r this p u r p o s e ,
the contending parties are strictly enjoined to comply with such orders,
prohibitions a n d / o r injunctions as are issued by the Secretary of L a b o r
and Employment or the Commission, under pain of immediate disciplinary
action, including dismissal or loss of employment status or payment by the
locking-out employer of backwages, damages and other affirmative relief,
even criminal prosecution against either or both of them.

T h e foregoing notwithstanding, the President of the Philippines shall

not be precluded f r o m determining the industries that, in his opinion, are
indispensable to the national interest, and f r o m intervening at any time
and assuming jurisdiction over any such labor dispute in o r d e r to settle or
terminate the same.
(h) Before or at any stage of the compulsory arbitration process, the
parties may opt to submit their dispute to voluntary arbitration.

530
 STRIKES A N D LOCKOUTS
[Part 1. Regulations and Limits of Strike
ART. 264
and Lockout]

(i) T h e Secretary of L a b o r and Employment, the Commission or

the voluntary arbitrator shall decide or resolve the dispute within thirty
(30) calendar days from the date of the assumption of jurisdiction or the
certification or submission of the dispute, as the case may b e . T h e decision
of the President, the Secretary of L a b o r and Employment, the Commission
or the voluntary arbitrator shall be final and executory ten (10) calendar
days after receipt thereof by the parties.

ART. 264. PROHIBITED ACTIVITIES

(a) No labor organization or employer shall declare a strike or lockout
without first having bargained collectively in accordance with Title V I I of this
B o o k or without first having filed the notice required in the preceding article
or without the necessary strike or lockout vote first having been obtained
and reported to the Ministry.
No strike or lockout shall be declared after assumption of jurisdiction
by the President or the Minister or after certification or submission of the
dispute to compulsory or voluntary arbitration or during the pendency of
cases involving the same grounds f o r the strike or lockout.
A n y worker whose employment has been terminated as a consequence
of an unlawful lockout shall be entitled to reinstatement with full backwages.
Any union officer w h o knowingly participates in an illegal strike and any
worker or union officer w h o knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall
not constitute sufficient g r o u n d for termination of his employment, even if
a replacement h a d b e e n hired by the employer during such lawful strike.
( b ) No person shall obstruct, impede, or interfere with by force,
violence, coercion, threats or intimidation any p e a c e f u l picketing by
employees during any labor controversy or in the exercise of the right of
self-organization or collective bargaining, or shall aid or abet such obstruction
or interference.
(c) No employer shall use or employ any strike-breaker, nor shall any
person be employed as a strike-breaker.
( d ) No public official or employee, including officers and personnel
of the N e w A r m e d Forces of the Philippines or the Integrated National
Police, or a r m e d person, shall bring in, introduce or escort in any manner
any individual w h o seeks to replace strikers in entering or leaving the
premises of a strike area, or work in place of the strikers. T h e police force
shall k e e p out of the picket lines unless actual violence or other criminal
acts occur therein: Provided, T h a t nothing herein shall be interpreted to
prevent any public officer f r o m taking any measure necessary to maintain

531
 LABOR RELATIONS
ART. 265
ingress = entrance
egress = exit
peace and order, protect life and property, a n d / o r enforce the law and
legal order.
(e) No person engaged in picketing shall commit any act of violence,
coercion or intimidation or obstruct the free ingress to or egress f r o m the
employer's premises for lawful purposes, or obstruct public thoroughfares.
A R T . 265. IMPROVED OFFER BALLOTING*
In an effort to settle a strike, the Department of L a b o r and Employment
shall conduct a referendum by secret balloting on the improved offer of the
employer on or before the 30th day of the strike. W h e n at least a majority of
the union members vote to accept the improved offer, the striking workers
shall immediately return to work and the employer shall thereupon readmit
them upon the signing of the agreement.
In case of a lockout, the Department of L a b o r and Employment shall
also conduct a referendum by secret balloting on the reduced offer of the
union on or before the 30th day of the lockout. W h e n at least a majority of
the b o a r d of directors or trustees or the partners holding the controlling
interest in the case of a partnership vote to accept the reduced offer, the
workers shall immediately return to work and the employer shall thereupon
readmit them u p o n the signing of the agreement.

C O M M E N T S A N D CASES
1. THE R I G H T TO E N G A G E IN C O N C E R T E D ACTIVITIES
A m o n g the rights guaranteed to employees by the Constitution and the
Labor C o d e is that of engaging in concerted activities in o r d e r to attain their
legitimate objectives.
A r t i c l e X I I I S e c t i o n 3 o f the C o n s t i t u t i o n c o m m a n d s the state to
guarantee the rights of all workers to self-organization, collective bargaining
and negotiations and peaceful converted activities, including the right to strike
in accordance with law.
T h e constitutionalist Joaquin G. Bernas, SJ. explains that "peaceful
c o n c e r t e d activities includes e v e r y t h i n g short of strike." T h e phrase "in
accordance with law," furthermore, applies not only to the right to strike but
also to the other rights mentioned in that provision. By virtue of such phrase the
state can enact reasonable laws which can expand or even diminish the coverage
of the right to strike. But, injunction must be reduced to the barest minimum
because the right to strike is of constitutional stature.
Bernas also retells from constitutional deliberations that there is no
intention to increase the valid grounds for strike beyond the traditional ones

' A new provision added by Sec. 28, R.A. 6715 in lieu of the old provision
defining "strike" and "lockout" which was repealed by BP 130. T h e definitions are
now in Article 212.
532
 STRIKES AND LOCKOUTS ARTS 263-26 f%
4
[Part 1. Regulations and Limits of Strike *
and Lockout]
of unfair labor practice and bargaining deadlocks. N e i t h e r is there intention
to ban lockouts although this term is not m e n t i o n e d in the constitutional
1
provision.
Article 263 of the L a b o r C o d e , as amended, declares that in line with "the
policy of the State to encourage free trade unionism and free collective bargaining
x x x (w)orkers shall have the right to engage in concerted activities for purposes
of collective bargaining or for their mutual benefit and protection." A similar
right to engage in concerted activities for mutual benefit and protection is tacitly
2
and traditionally recognized in respect of employers.

1.1 Concerted Activity by O n e

W h e n an activity is planned and accomplished by p e o p l e acting together,
the activity is said to be "concerted." But o p i n i o n has been advanced that
instances may arise when an individual, acting alone, may be d e e m e d engaged
in "concerted activity." For instance, if the e m p l o y e e is seeking to induce group
activity or is acting as representative of at least o n e other employee, such act may
be considered "concerted." An e m p l o y e e , w h o is preparing a leaflet to distribute
to other employees about n e e d e d improvements in their working condition and
suggesting the n e e d for a union, is e n g a g e d in concerted activity even if he is
3
working alone on the project.
Jurisprudentially defined, "concerted" activity is o n e undertaken by two or
m o r e employees, or by o n e on behalf of others. Even a conversation, "although
it involves only a speaker and a listener," may constitute concerted activity if it
4
has some relation to g r o u p action in the interest of employees. For instance,
US decisions have held, in interpretating a Taft-Hardey A c t provision similar to
Article 248, that an e m p l o y e e was d o i n g a "concerted activity" when she called up
the L a b o r Department to question her employer's holiday pay practices, which
call was related to the act of her co-employees w h o had previously raised the
question to their employer. T h e employee's call to the Labor Department was a
"concerted activity" as it was a "logical outgrowth" of the original protest of the
affected employees. By discharging the e m p l o y e e w h o made the telephone call
5
the employer violated the employee's right to concerted activity."

'Joaquin G. Bernas, S. J., The 1987 Constitution of the Republic of the Philippines:
A Commentary (2003 e d . ) , p. 1195-1196.
2
Ilaw at Buklod ng Manggagawa ( I B M ) vs. National Labor Relations Commission
[First Division], Hon. Carmen Talusan and San Miguel Corporation, G.R. N o . 91980,
June 27, 1991.
'Bruce L. Feldacker, Labor Guide to Labor Law (Prentice Hall, 2000), p. 153.
4
Patrick Hardin and John E. Higgins,Jr. [Editors-in-chief] the Developing Labor
Law [ B N A ] , 2001, p. 79, citing cases.
b
Ibid. p. 80.

533
 LABOR RELATIONS
ARTS. 263-265

2. N A T U R E OF STRIKE
2.1 Definition
A strike has been defined as a cessation of work by e m p l o y e e s in an
effort to get more favorable terms for themselves, or as a concerted refusal by
employees to do any work for their employer, or to work at their customary rate
of speed, until the object of the strike is attained by the employer's granting the
demanded concession. T h e term has also been defined as meaning in its ordinary
connotation a combined effort on the part of a body of w o r k m e n e m p l o y e d by
the same employer to enforce a d e m a n d for higher wages, shorter hours, or any
other concession, by stopping work in a body at a prearranged time, and refusing
1
to resume work until the d e m a n d e d concession shall have been granted.
T h e word "strike" in its broad significance has reference to a dispute
between an employer and his workers, in the course of which there is a concerted
suspension of employment. As a f o r m of labor activity, it is rarely carried on
2
without the concomitants of picketing or boycotting.
As defined in Article 212 ( o ) , strike means any temporary stoppage of work
by the concerted action of employees as a result of an industrial or labor dispute.
A strike may legally be held because of either or both ( 1 ) a collective
bargaining deadlock or ( 2 ) an unfair labor practice act of the employer.
Strike has been considered the most effective weapon of labor in protecting
the rights of employees to improve the terms and conditions of their employment.
It may be that in highly d e v e l o p e d countries, the significance of strike as a
coercive weapon has shrunk in view of the preference for m o r e peaceful modes
of settling labor disputes. In u n d e r d e v e l o p e d countries, however, where the
economic crunch continues to enfeeble the already marginalized working class,
the importance of the right to strike remains undiminished as i n d e e d it has
proved many a time as the only coercive w e a p o n that can correct abuses against
3
labor. It remains as the great equalizer.

2.2 Characteristics
A strike has the following characteristics:
(1) there must be an established relationship between the strikers and
the person or persons against w h o m the strike is called;
(2) the relationship must be o n e of employer and e m p l o y e e ;
( 3 ) the existence of a dispute between the parties and the utilization by
labor of the weapon of concerted refusal to work as a means of persuading, or
coercing compliance with the working men's demands;

*48 A m . Jur. 2d 2024, p. 405.

2
Teller, p. 236.
3
Bisig ng Manggagawa sa Concrete Aggregates, Inc. vs. N L R C , et al, G.R. N o .
105090, September 16, 1993.

534
 STRIKES AND LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
( 4 ) the contention advanced by the workers that although work ceases,
the employment relation is d e e m e d to continue albeit in a state of belligerent
1
suspension;
(5) there is work stoppage, which stoppage is temporary;
(6) the work stoppage is d o n e through concerted action of the employees;
( 7 ) the striking g r o u p is a legitimate labor organization and, in case of
bargaining deadlock, is the employees' sole bargaining representative.

2.3 Basic Objective

Ordinarily, a strike is a coercive activity resorted to by laborers to enforce
their demands. T h e idea behind a strike is that a company engaged in a profitable
business cannot afford to have its production or activities interrupted, much less
paralyzed. A n y interruption or stoppage of production spells loss, even disaster.
T h e capital invested in machinery, factory and other properties connected
with the business w o u l d be unproductive during a strike or the stoppage of
the business. On the other hand, the overhead expenses consisting of salaries
of its officials, including real estate taxes and license fees continue. Knowing
this, the strikers by g o i n g on strike seek to interrupt and paralyze the business
and production of the company. T h e employer company is on the defensive. It
almost invariably wants the strike stopped and the strikers back to work so as to
resume and continue production. Because of this threat or danger of loss to the
company, it does not infrequently give in to the demands of the strikers, just so
2
it can maintain the continuity of its production.

2.4 Constitutional Status

In the Philippine milieu where social justice remains m o r e as a rhetoric
than a reality, labor has vigilantly fought to safeguard the sanctity of the right
to strike. Its struggle to gain the right to strike has not been easy and effortless.
Labor's early exercise of the right to strike collided with the laws on rebellion and
sedition and sent its leaders languishing in prisons. T h e spectre of incarceration
did not spur its leaders to sloth; on the contrary, it spiked labor to work for its
legitimization. This effort was enhanced by the flowering of liberal ideas in the
U n i t e d States which inevitably crossed our shores. It was enormously boosted
by the American occupation of our country. H e n c e , on July 17, 1953, Congress
gave statutory r e c o g n i t i o n to the right to strike when it enacted R . A . 875,
s
otherwise known as the Industrial Peace A c t . For nearly two ( 2 ) decades, labor
enjoyed the right to strike until it was prohibited on September 21, 1972 upon

•See Teller, pp. 236-237.

Philippine Can Company vs. Court of Industrial Relations and Liberal Labor
Union, respondents, G.R. N o . L-3021, July 13, 1950.
'Bisig ng Manggagawa sa Concrete Aggregates, Inc. vs. NLRC, G.R. N o . 105090,
September16, 1993.
535
 LABOR RELATIONS
ARTS. 263-265

the declaration of martial law in the country. T h e 14-year battle to end martial
rule produced many martyrs and foremost among them were the radicals of the
labor movement. It was not a mere happenstance, therefore, that after the final
battle against martial rule was fought on EDSA in 1986, the new g o v e r n m e n t
treated labor with a favored eye.
A m o n g those chosen by then President Corazon C. A q u i n o to draft the
1987 Constitution were recognized labor leaders like Eulogio L e r u m , Jose D.
Calderon, Bias D. O p l e and Jaime S.L. T a d e o . These delegates h e l p e d craft
into the 1987 Constitution its Article X I I I entitled Social Justice and H u m a n
Rights. For the first time in our constitutional history, the fundamental law of
our land mandated the State to "... guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law." This constitutional
imprimatur given to the right to strike constitutes signal victory for labor. O u r
Constitutions of 1935 and 1973 did not accord constitutional status to the right
to strike. Even the liberal US Federal Constitution did not elevate the right to
1
strike to a constitutional level.
With a constitutional matrix, enactment of a law i m p l e m e n t i n g the right
to strike was an inevitability. R . A . 6715 came into being on March 21, 1989, an
intentional replication of R . A . 875. In light of the genesis of the right to strike,
it ought to be obvious that the right should be read with a libertarian latitude in
favor of labor. In the wise words of Father Joaquin G. Bernas, 5./., a distinguished
commissioner of the 1987 Constitutional Commission, "x x x the constitutional
recognition of the right to strike does serve as reminder that injunctions should
2
be reduced to the barest minimum."

2.5 Nature and Definition of Lockout

If employees can strike, the e m p l o y e r can lockout.
Lockout means the temporary refusal of any e m p l o y e r to furnish work
3
as a result of an industrial or labor dispute; it is an employer's act excluding
4
employees w h o are union members from the plant.
Strike and lockout are similar because they both c o n n o t e temporary
stoppage of work. T h e difference is in the identity of the doer. Strike is d o n e by
employees or labor union while lockout is resorted to by an employer.
T h e two are similar also in the sense that they occur because of and in
relation to a labor or industrial dispute involving the parties.

'Bisig ng Manggagawa sa Concrete Aggregates, Inc. vs. N L R C , G.R. N o . 105090,

September 16, 1993.
Ibid.
3
Article212[p].
4
Sta. Mesa Slipways Engineering Co. vs. CIR, 48 O.G. 3353.

536
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]

Thus, the law treats strike and lockout similarly. Except for certain obviously
inapplicable particulars, like the identity of voters, the number of votes required
and nonobservance of cooling-off period in case of union busting, the regulations
and limits applicable to a strike are applicable likewise to a lockout.
Lockout may affect all or less than all of the employee-union members.
Lockout, in the sense in which it is universally used, is an act directed at the union
itself rather than at the individual employee-members of the union. T h e dismissal
of individual employee-union members to discipline the acts of these individuals
differs from a lockout. Whereas in the former action, the discharge is in discipline
1
of individuals, in a lockout the dismissal is in discipline of the union itself.

3. GROUNDS FOR STRIKE/LOCKOUT

S t r i k e / L o c k o u t may be caused either by a collective bargaining deadlock
or an unfair labor practice act. D . O . N o . 40-03 as amended by D . O . N o . 40A-
03 (dated 12 March 2003) reads: A strike or lockout may be declared in cases
of bargaining deadlocks and unfair labor practices. Violations of collective
bargaining agreements, except flagrant a n d / o r malicious refusal to comply with
its e c o n o m i c provisions, shall not be considered unfair labor practice and shall
not be strikeable. No strike or lockout may be declared on grounds involving
inter-union and intra-union disputes or without first having filed a notice of strike
or lockout or without the necessary strike or lockout vote having been obtained
and reported to the Board. N e i t h e r will a strike be declared after assumption of
jurisdiction by the Secretary or after certification or submission of the dispute to
compulsory or voluntary arbitration or during the pendency of cases involving
2
the same grounds for the strike or lockout.
Strike or L o c k o u t is recognized as a valid weapon in collective bargaining.
Either of them may be declared to bring pressure upon the other party, where an
impasse has arisen during bargaining negotiations or where o n e party commits
unfair labor practice, subject to statutory requirements. Like the strike, lockout,
as a rule, is not subject to labor injunction or restraining orders, except in those
cases or for reasons specified, such as in national interest cases or if prohibited
acts under Article 264 are being committed.
In the course of collective bargaining, a lockout is proper only when the
following requisites are met: ( a ) notice of intention to declare a strike/lockout
has been filed with the Department of Labor; ( b ) at least thirty days has elapsed
since the filing of the notice before lockout is declared; ( c ) an impasse has
3
resulted in the negotiations; and ( d ) the strike/lockout is not discriminatory.
U n d e r Article 263, the notice or cooling-off period is 15 days for U L P strike/
lockout and 30 days for bargaining strike/lockout.

1
Rothenberg, p. 58.
2
Rule X X I I , Sec. 5.
*San Pablo Oil Factory vs. CIR, 6 SCRA 628.
537
ARTS. 263-265 LABOR RELATIONS

An employer may lockout his employees to protect his bargaining position

after an impasse occurs in negotiations, and possibly also before such an impasse
is reached. In defending against an unfair labor practice charge arising out of
such a use of a lockout, an employer should show that he was merely protecting
his bargaining position and not acting out of hostility to the process of collective
bargaining or by way of discriminating against union members. In an unfair labor
practice proceeding which arises out of a lockout used as a weapon during a
labor-management dispute, an employer's legal position is improved if it appears
that he did not lock out his employees during the early stages of negotiations,
1
and did not employ the lockout to force acceptance of his terms.
An employer may in various circumstances use a lockout as a legitimate
economic weapon. W h i l e the right of an employer to lock out is conditional, his
justification for resorting to a lockout is not limited to those factors which might
be described as economic hardships. T h e question whether a lockout constitutes
an unfair labor practice under the National Labor Relations A c t must be decided
on the facts of each case, and each case must be carefully measured by its own
2
setting.
A lockout is valid where, in the course of a labor dispute, it is undertaken
as a defensive weapon, or in pursuance of the employer's interest. In o n e case,
the employer was a manufacturer of cement, with a plant in the province and
a bodega in the city. T h e union presented a set of demands covering all the
workers of the company, and following failure of negotiations, declared a strike
at the plant. Because of acts of sabotage at the plant, the e m p l o y e r locked out
its employees in the bodega, in order to forestall threatened acts of sabotage. In
upholding the validity of the lockout, the Supreme Court observed that it was
due to "the Company's justified apprehension and fear that sabotage might be
3
committed in the warehouse."
Lockout has been held valid in the following situations:
(1) In anticipation of a threatened strike, where motivated by e c o n o m i c
4
considerations;
5
(2) In response to unprotected strike or walkout;
6
(3) In response to a whipsaw strike.

'NLRB vs. Brown, 13 L ed 839.

2
N L R B vs. Brown, 13 L e d 2d 839; See also American Ship Bldg., Co. vs. N L R B ,
13 L ed 2d 855; 20 A L R 2d 403.
3
Rizal Cement Workers Union vs. Madrigal Co., 10 SCRA 831, 836.
4
Re Tidewater Express Lines, 142 N L R B 1111.
5
News Union of Baltimore vs. N L R B , 393 F2d 673.
6
N L R B vs. Brown, 13 L ed 2d 839; N L R B vs. Truck Drivers Local Union, 1 L
ed 2d 676.

538
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
Lockouts have been held unlawful where undertaken for the following
purposes:
1
( 1 ) To discourage and dissipate membership in a labor organization,
2
or otherwise kill the union;
( 2 ) To aid a particular union by preventing further organizational work
3
of its rival, or to coerce the employees to j o i n the favored union;
4
(3) T o avoid bargaining.
Lockout must be for a lawful purpose and carried out through lawful means.
A lockout is unlawful where it is declared in order to defeat organizational and
5
bargaining r i g h t s o f employees.
T h e limitations of purpose and means of lockout are equally applicable to
a strike on which the following pages now concentrate.

4. KINDS OF STRIKE
Strikes may be classified on the following bases:
4.1 Extent
(a) General
(b) L o c a l or particular
4.2 Nature of the Act
(a) Strike p r o p e r
(b) Sit-down strike
(c) Partial or quickie strike
4.3 Degree of Employee Interest
(a) Primary strike
(b) Secondary strike
(c) Sympathetic strike
4.4 Purpose or Nature of Employee Interest
(a) Economic strike
(b) Unfair labor practice strike
General strike extends over a whole community, province, state or country.
It is an extended f o r m of sympathetic strike, involving many workers who cease
to work in sympathy with the workers of another employer, or in order to put
pressure upon the g o v e r n m e n t or in order to paralyze the present economic
and social systems.

'Re Standard Industries, 133 N L R B 320.

2
20 A L R 2d 403.
3
2 0 A L R 2 d 417.
4
Re American Stores Packing Co., 158 NLRB 620.
5
Dinglasan vs. N L U , 98 Phil. 649.

539
ARTS. 263-265 LABOR RELATIONS

Local strike is one undertaken by workers in a particular enterprise/locality,

or occupation; it usually involves only o n e union or only o n e industry.
Sit-down strike occurs "when a group of employees or others interested in
obtaining a certain objective in a particular business forcibly take over possession
of the property of such business, establish themselves within the plant, stop its
production and refuse access to the owners or to the others desiring to work."
Issue is taken with the above definition, however, insofar as it explains the sit-
down strike in terms of taking over of possession on the part of the employees. T h e
genuine sit-down strike involves rather the remaining in possession by employees.
T h e sit-down strike should more accurately be defined as a strike in the traditional
sense, to which is added the element of trespass by the strikers upon the property
1
of the employer. Sit-down strikes are a combination of the strike plus a refusal
of the strikers to leave the plant and machines, and a refusal to permit the
latter to be operated. "Sit-down" is a m e t h o d of prosecuting a strike in which
the striking employees of the offending employer remain on the employer's
business premises, and, without working themselves, retain such d o m i n i o n over
the plant's facilities so as to prevent access to and the continued operation of
2
these facilities.
Slowdown is a willful reduction in the rate of work by a g r o u p of employees
for the purpose of restricting the output of the employer. T h e "slowdown" is
a method by which one's employees, without seeking a complete stoppage of
work, retard production and distribution in an effort to c o m p e l compliance by
3
the employer with the labor demands made upon h i m .
Partial strike, also known as "quickie" strike, takes the f o r m of intermittent,
unannounced work stoppage, including slowdowns, unauthorized extension of
4
rest periods, and walkouts for portions of a shift or for entire shifts. "Quickie
strike" is sometimes used interchangeably with "wildcat strike" which is a work
5
stoppage that violates the labor contract and is not authorized by the union.
Primary strike is o n e declared by the employees w h o have a direct and
immediate interest, whether economic or otherwise, in the subject of the dispute,
which exists between them and their employer. Typical examples are employees
who strike for a raise in their wages or in protest of employer's refusal to bargain
with their duly certified representative. It also refers to an original or initial strike,
6
that is, a strike which is waged by the union primarily aggrieved.

'Teller, 311.
2
Rothenberg, p. 99.
3
Rothenberg, p. 101. See further discussion of slowdown under "Picketing and
other Concerted Actions"in Part 2 of this Chapter.
4
Int'l. Union UAWAAFL vs. WERBA, 336 US 245.
& T e r r L
^^ y - Leap, Collective Bargaining and Labor Relations [Prentice Hall, 1995],
6
Rothenberg, p. 73.

540
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
Secondary strike refers to a coercive measure adopted by workers against
an employer connected by product or employment with alleged unfair labor
1
conditions or practices. A secondary strike exists where employees in concert
refuse to assist or cooperate with the allegedly unfair employers or their p r o d u c t
It is the absence of this connection between employment and product which
characterizes the sympathetic as distinguished from the secondary strike. A
secondary strike occurs when a g r o u p of employees refuse in concert to remain
at work for an employer, not because of any complaint over their labor standards
under him, but because he persists in dealing with a third person against w h o m
they have a grievance. It is an attempt to secure the e c o n o m i c assistance of their
e m p l o y e r to c o m p e l this third person to capitulate to the union over some issue
between them, at the risk of losing the unionized employer's business if he does
2
not capitulate.
Economic strike is intended to force wage and other concessions from the
3
employer, which he is not required by law to grant. It is declared for the purpose
of securing higher wages and for other immediate conditions of labor as a shorter
work day, higher rate of overtime compensation, and such other e c o n o m i c
benefits as are usually included in a collective bargaining contract. Also known
as bargaining strike, it is designed to enforce the union position on bargainable
issues, i.e., the terms and conditions of e m p l o y m e n t being demanded of the
employer at the bargaining table, when an impasse is reached or the negotiations
fail to produce any agreement. T h e striking employees have no intention of
severing e m p l o y m e n t relations with their employer, except temporarily for the
duration of the strike, although the employer is free to replace them, if he can.
I n d e e d , this recourse of the e m p l o y e r to the available p o o l of unorganized
labor is theoretically o n e of the strongest e c o n o m i c assets he has in combatting
a strike. A n d o n e of the strikers' chief concerns is to see that he does not gain
4
free access to this supply of labor. Strikes are presumed to be "economic" rather
5
than "unfair labor practice."
Unfair labor practice strike is called against the unfair labor practices of the
employer, usually for the purpose of making him desist from further committing
such practices. This type of strike is perhaps the best known of strikes for mutual
protection, which are declared in protest, and for the discontinuance, of employer
6
abuses.

'Teller, p. 298.
t e l l e r , p. 373.
Consolidated Labor Association of the Philippines vs. Marsman Co., Inc., 11
SCRA 589.
4
Charles O. Gregory and Harold Katz, Labor and Law [New York: Norton Co.,
1979], p. 106.
5
Rothenberg, p. 417.
6
Mastro Plastics Corp. vs. N L R B , 350 US 270.

541
 LABOR RELATIONS
ARTS. 263-265

5. A VALID STRIKE NEEDS A L A B O R DISPUTE

As will be seen shortly, there are legal and contractual restrictions to a strike.
But, more fundamentally, a strike can validly take place only in the presence of
and in relation to a labor dispute between the employer and employees involved.
A "strike," says Article 2 1 2 ( o ) , "means any temporary stoppage of work by the
concerted action of employees as a result of an industrial or labor dispute."
A n d a "labor dispute," according to the same article, "includes any controversy
or matter concerning terms and conditions of employment or the association
or representation of persons in negotiating, fixing, maintaining, changing or
arranging the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of employer and e m p l o y e e . "
Read together, these provisions lead to the conclusion that a strike,
in contemplation of labor law, is recognized and protected only if the work
stoppage is brought about by disagreements regarding terms and conditions of
employment or regarding ways to arrange or adjust, inter alia, those terms and
conditions. W h e r e there is no dispute or the dispute has nothing to do with
the terms and conditions of e m p l o y m e n t in the establishment, the stoppage of
work by its employees has no basis in labor law and the employees w h o engage
in the work stoppage actually c o m m i t an illegal strike and take the risks and
consequences of such an illegal act.
In o n e case, minority g r o u p in the bargaining union elected its own set of
officers ("junta") then filed a notice of strike. T h e N C M B dismissed the notice
of strike because the alleged g r o u n d was non-strikeable, it b e i n g merely an intra-
union dispute. T h e splinter group nonetheless went on strike. Is the strike valid?
Is the dismissal of the alleged officers valid?

National Union of Workers in Hotels, etc. vs. NLRC and Peninsula Hotel, G.R. N o .
125561, March 6, 1998 —
Petitioners should have complied with the prohibition to strike ordered by the
NCMB when the latter dismissed the notices of strike after finding that the alleged
acts of discrimination of the hotel were not ULP, hence not "strikeable." T h e refusal
of petitioners to heed said proscription of the N C M B is reflective of bad faith. In
light of the foregoing circumstances, their claim of g o o d faith must fall and we agree
with the NLRC that there was no justification for the illegal strike.
We accordingly uphold the dismissal from employment of the 15 officers of the
Junta who knowingly participated in the strike. An employer may lawfully discharge
employees for participating in an unjustifiable wildcat strike and especially so in this
case, because said wildcat strike was an attempt to undermine the Union's position
as the exclusive bargaining representative and was, therefore, an unprotected
activity. The cessation from employment of the 15 Junta officers as a result of their
participation in the illegal strike is a consequence of their defiant and capricious
decision to participate therein.

542
 STRIKES AND LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
5.1 Sympathetic Strike
Because a valid strike presupposes a labor dispute, it follows that a
sympathetic or sympathy strike is illegal. Sympathetic striking is one in which
the striking employees have no demands or grievances of their own, but strike
for the purpose of directly or indirectly aiding others, without direct relation to
1
the advancement of the interest of the strikers.
A sympathetic strike is stoppage of work to make c o m m o n cause with other
strikers in other establishments or companies, without the existence of any labor
2
dispute between the striking employees and their own employer.
This type of strike is unwarranted and unjustified. It is inimical not only
to the interests of the e m p l o y e r but also the welfare of the laborers and to the
3
peace and order of the community.
A sympathetic strike is d e e m e d to be an unlawful infliction of damage,
aimless and unjustifiable because of the absence of any direct e c o n o m i c
4
advantages to the g r o u p of workers participating in it.
US decisions likewise h o l d that a strike is illegal unless there exists a labor
dispute between the e m p l o y e r and the striking employees. T h e rule has been
applied to render illegal a strike against a subcontractor for the purpose of
coercing him to coerce the main contractor, the owner, to break an existing
contract and give the strikers the work they demand. A sympathetic strike is
likewise illegal which is held for the purpose of coercing o n e employer to coerce
5
another to settle a trade dispute between him and his employees.

5.2 Welga ng Bayan (People's Strike)

Also following the ruling that a labor dispute is n e e d e d for a valid strike,
a work stoppage in a particular enterprise due to a welga ng bayan is likewise
illegal. A "welga ng bayan" is in the nature of a general strike which is but an
e x t e n d e d sympathetic strike; it is work stoppage affecting numerous (if not all)
employers including a particular employer w h o has no dispute with his employees
regarding their terms and conditions of employment. Employees who have no
labor dispute with their employer but w h o , on a day they are supposed to work,
refuse to work so as to j o i n instead a "welga ng bayan," are committing an illegal
work stoppage. Notwithstanding their laudable purpose — perhaps to protest
an increase in electric power rate, or to denounce a plan to give honors to a
dead dictator, or to lament the incompetence of a g o v e r n m e n t agency — their

'Teller, p. 306.
Pascual, p. 354.
s
Pascual, p. 354, citing Dee C. Chuan Sons, Inc. vs. Kaisahan ng mga
Manggagawa sa Kahoy sa Filipinas, G.R. N o . L-8149, 99 Phil. 1050 [1956].
4
Gregory and Katz, Labor and Law, 1979 ed., p. 109.
5
31 Am. Jur., Sec. 387, p. 716.

543
 LABOR RELATIONS
ARTS. 263-265

righteous indignation does not legalize an illegal work stoppage. T h e stoppage

violates employment obligations, sacrifices productivity, and victimizes even law-
abiding employers.
But in the realm of political freedom, a general strike may be defensible.
For instance, it is the stand of the W o r l d Confederation of Labor that "it is the
vocation of the trade union movement to contribute at all levels — political,
economic, social, and cultural — with a view to participating in the control of
the institutions which organize the life of the community in each of the fields
1
concerned." This W C L stand is hardly debatable. As a legitimate organization
a union can seek reformation of political, economic, social, and even cultural
institutions. But the point of this c o m m e n t is simply that, at the enterprise level,
the employees' absence from work to j o i n a general strike is in itself an unexcused
absence. In relation to the employer, the employees' absence is an illegal and
actionable work stoppage, because the stoppage is not due to an existing labor
or industrial dispute between said employees and the employer.
Participation in political protests or welga ng bayan should be balanced with
the obligations at the work place.

N o t e : T h e preceding comments are echoed by the Supreme Court (through

Justice Carpio Morales) in Biflex Phil., Inc. Labor Union, etc. vs. Filflex Industrial
Mfg. Corp., etc., G.R. N o . 155679, D e c e m b e r 19, 2006.

6. A V O I D A N C E OF STRIKE
Pacific measures or remedies must first be exhausted before employees may
stage a strike. Our courts have insisted on something analogous to the doctrine of
exhausting administrative remedies, by requiring employees to exhaust available
means of settling the dispute without resort to strike. Strikes and other coercive
acts are d e e m e d justified only when peaceful alternatives have proved unfruitful
2
in settling the dispute.
Thus, disregarding the grievance p r o c e d u r e or refusal to submit the
arbitrable issue to voluntary arbitration may justify a conclusion that the strike
3
was held prematurely, hence, illegally.

•BATU Monitor, October 1992, p. 1.

2
P H I L M A R O A vs. CIR, and Cia. Maritima vs. P H I L M A R O A , 103 Phil. 373;
Interwood Employees Assn. vs. Int'l. Hardwood Veneer Co. of the Phil., 99 Phil 82;
Union of PECO Employees vs. PECO, 91 Phil. 93; INSUREFCO Employees Union
vs. CIR, 95 Phil. 161; Citizens Labor Union vs. Standard Vacuum Oil Co., 97 Phil.
949; Almeda vs. CIR, 97 Phil. 306; N L U vs. Phil. Match Factory, 70 Phil. 300; Luzon
Marine Department Union vs. Roldan, N o . L-2660, May 30, 1950.
3
Liberal Labor Union vs. Phil. Can Co., G.R. N o . L-4834, March 28, 1952;
San Miguel Corp. vs. N L R C , G.R. N o . 99266, March 2, 1999; San Miguel Corp. vs.
NLRC, G.R. N o . 119293, June 10, 2003; Philcom Employees Union vs. Phil. Global
Communication, G.R. N o . 144315, July 17, 2006.

544
 STRIKES A N D LOCKOUTS ARTS 2fi<L9fit;
[Part 1. Regulations and Limits of Strike
and Lockout]

6.1 Conciliation, Mediation, Compromise to Avoid Strike

An issue awaiting resolution in arbitration proceedings, whether compulsory
or voluntary, cannot serve as basis of a strike. Arbitration, by its nature, is a legal
device to forestall compulsive action over a dispute. To resort to a strike despite
o n g o i n g arbitration is an act amounting to sabotage of a peaceful conciliatory
1
process. T h e law disdains it.
T h e b o a r d [ N C M B ] may, u p o n request o f either o f both parties o r
u p o n its o w n initiative, p r o v i d e c o n c i l i a t i o n - m e d i a t i o n services to labor
disputes o t h e r than notices of strikes or lockouts. Conciliation cases which
are not subjects of notices of strike or lockout shall be d o c k e t e d as preventive
2
m e d i a t i o n cases.
Information and statements given in confidence at conciliation proceedings
shall be treated as privileged communications. Conciliators and similar officials
shall not testify in any court or body regarding any matter taken up at conciliation
3
proceedings conducted by t h e m .
T h e Board shall have the p o w e r to require the appearance of any parties
4
at conciliation meetings.
A n y c o m p r o m i s e settlement, including those involving labor standard
laws, voluntarily a g r e e d u p o n by the parties with the assistance of the Board
and its regional branches shall be final and binding upon the parties. T h e
National L a b o r Relations Commission or any court shall not assume jurisdiction
over issues involved therein e x c e p t in case of non-compliance thereof or if
there is prima facie e v i d e n c e that the settlement was obtained through fraud,
misrepresentation, or coercion. U p o n motion of any interested party, the Labor
A r b i t e r in the r e g i o n w h e r e the a g r e e m e n t was reached may issue a writ of
execution requiring a sheriff of the Commission or the courts to enforce the
5
terms of the a g r e e m e n t .

6.2 Premature Strike

T h e Court found the strike unjustified or unreasonable and hence illegal
where:
(1) it was declared without giving the manager or Board of Directors,
w h o were in another place, reasonable time within which to consider and act

'Article 264, second paragraph. Bulletin Publishing Corp. vs. Sanchez, G.R.
N o . 74425, October 7, 1986; Zamboanga Wood Products vs. N L R C , G.R. N o . 82088,
October 13, 1989; Telefunken Semiconductors Employees Union-FFW vs. CA, G.R.
N o . 143013-14, December 18, 2000.
2
Sec. 1, Rule X X I I , D.O. 40-03.
3
Sec. 2.
4
Sec. 3.
5
Sec. 4.

545
 LABOR RELATIONS
ARTS. 263-265

on the demands of the union, the nature of which were such that no possible
1
action could be taken by the officials to w h o m they were submitted.
( 2 ) the petitioners went on strike, knowing their demands could not be
acted upon by the Treasurer of the company in the absence of its President w h o
was then in the United States and they did not wait until their demands could
2
be transmitted to said president and acted upon by him.
( 3 ) despite the attention given by the company to the union's demand
for the dismissal of its foreman for an alleged assault, the company even asking
the Fiscal to reopen the case after he had d r o p p e d it, the laborers went on strike
3
without awaiting the result of the Fiscal's investigation of the case.
A strike was also held illegal for being premature where it was called before
the expiration of the six-day period granted by the Conciliation Service to the
4
employer within which to answer the union's demands.
However, failure to wait for the expiration of such p e r i o d was excused
where the strikers had presented their demands for a p e r i o d of four months
5
before the strike and no answer thereto had been obtained.
Neither is the strike illegal where, after the union submitted its demands,
the company i g n o r e d them and sent out notice to the e m p l o y e e s that, unless
they j o i n e d a different labor union, they w o u l d be d i s c h a r g e d at the e n d of
6
the m o n t h ; or w h e r e the c o m p a n y f o r e m a n was pressuring the strikers to
j o i n his (the f o r e m a n ' s ) u n i o n w h e n they already had a u n i o n of their own
7
choice.
In Union of the Philippine Education Employees (NLU) vs. PECO (L-4423, March
31, 1952), the Supreme Court laid down the rule:
Until all the remedies and negotiations looking toward the adjustment
or settlement of labor disputes have been exhausted, the law does not look
with favor upon resort to radical measures, the pernicious consequences
of which transcend the rights of the immediate parties.

7. P R O T E C T I O N OF STRIKE
T h e right to strike is given the following protection:

'Insurefco Paper Pulp Project Workers Union vs. Insular Sugar Refinery
Corporation, 95 Phil. 161.
2
Almeda vs. Court of Industrial Relations, 97 Phil. 306.
3
National Labor Union vs. Philippine Match Factory Co., 70 Phil. 300.
Philippine Marine Radio Officers' Association vs. Court of Industrial Relations,
102 Phil. 438.
5
Radio Operators Association of the Philippines vs. Philippine Marine Radio
Officers Association, 102 Phil. 526.
6
Macleod Company vs. Progressive Federation of Labor, 97 Phil. 205.
'Standard Coconut Corporation vs. Court of Industrial Relations, 89 Phil. 562.

546
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
1
(1) it is generally not subject to labor injunction or restraining order;
( 2 ) employees may not be discriminated against merely because they
2
have exercised the right to strike;
3
(3) the use of strike-breakers is prohibited;
( 4 ) m e r e participation in a strike d o e s n o t sever the e m p l o y m e n t
4
relationship.
Article 264(c) provides that no employer shall employ any strike-breakers,
nor shall any person be e m p l o y e d as a strike-breaker. A strike-breaker is a person
w h o obstructs, impedes, or interferes with by force, violence, coercion, threats or
intimidation any peaceful picketing by employees during any labor controversy
affecting wages, hours or conditions of work or in the exercise of the right of
5
self-organization or collective bargaining.
Employees w h o peacefully struck for a lawful object were not liable to their
employer even though the strikes shut him down, bankrupted him, or put him out
of business, and even though it also caused e n o r m o u s and irreparable damage
to hundreds of thousands of innocent persons not involved in the strike. Strikers
could not use unlawful means — such as physical force, threats, or intimidation
— to u p h o l d or maintain the strike, but unless the strikers' methods or objects
were illegal, the e m p l o y e r had no cause of action for damage to his business
6
from the strike.
T h e clear weight of authority is to the effect that striking employees may
advise or persuade others to quit work and j o i n in a strike, so long as contractual
rights are not invaded, and that they may advise and persuade others not to
engage their services to the employer against w h o m the strike is directed. In other
words, the right to strike includes the right to use peaceable and lawful means
7
to induce present and expectant employees to j o i n the ranks of the strikers.

7.1 Role of the Police

T h e Department of L a b o r and Employment has issued Guidelines for the
conduct of I N P / A F P personnel during strikes, lockouts, and labor disputes in
general. It provides that the involvement of the A F P / I N P ( n o w P N P ) in those
situations shall be limited to the maintenance of peace and order, enforcement
of laws and legal orders of duly constituted authorities and the performance of
specific functions as may be provided by law. A n o t h e r provision requires that

•Article 254.
2
Article 248.
3
Article 264[c].
4
Article 264[a], third paragraph.
5
Article 212[r].
6
48-A Am. Jur. 2d 2025, pp. 405-406.
7
31 Am. Jur., Sec. 267, p. 965.

547
 LABOR RELATIONS
ARTS. 263-265

the personnel detailed as peace-keeping force in strike or lockout should be in

uniform, with proper namecloth at all times. T h e y shall observe strict neutrality
in dealings with both parties to the controversy, bearing in mind that the parties
to the labor dispute are not their adversaries but their partners in the quest for
industrial peace and human dignity.
T h e Guidelines also states that the peace-keeping details shall not be
stationed in the picket ( o r confrontation l i n e ) but should be stationed such
that their presence may deter the commission of criminal acts from either side.
T h e members of the peace-keeping detail shall maintain themselves outside a
50-meter radius from the picket line, except, if 50-meter radius includes a public
thoroughfare, they may station themselves in such public thoroughfare for the
purpose of insuring the free flow of traffic.
Another significant provision of the Guidelines states: "Any person w h o
obstructs the free and lawful ingress to and egress from the employer's premises
or w h o obstructs public thoroughfares may be arrested and accordingly charged
in court." ( T h e Guidelines is reproduced in the L a b o r Laws Source B o o k . )
Under Article 264 it is unlawful for any public official or employee, including
officers and personnel of the N e w A r m e d Forces of the Philippines or the
Integrated National Police ( n o w Philippine National P o l i c e ) , or armed person,
to bring in, introduce or escort any individual w h o seeks to replace strikers in
entering or leaving the premises of a strike area, or work in place of the strikers.
T h e Article does not prohibit a worker from working in place of the strikers.
What it prohibits is being escorted by p o l i c e / m i l i t a r y m e n or an a r m e d person.

8. STATUS OF STRIKERS
It has long been r e c o g n i z e d by law that the relationship existing between
employer and employee is not necessarily terminated by a strike. By withdrawing
temporarily from the service, the employees seek to induce the employer to
acquiesce in their demands and to reinstate them in the service under the
conditions that they seek to impose. A l t h o u g h they cease to work, the employees
1
intend to retain their position.
Our Supreme Court holds that "the declaration of a strike does not amount
2
to a renunciation of the e m p l o y m e n t relation."
T h e United States Supreme Court explains: "In the case of controversy
over wages and conditions of work in a private and local industry, we agree with
counsel for plaintiffs in error that a 'strike' does not itself terminate the relation
of employer and employee. A controversy arises, and the employees, then at
work, say to their employer: We shall stop work until you are in what we may

'31 Am. Jur., Sec. 191, p. 928.

2
Rex Taxicab Co. vs. Court of Industrial Relations and the Philippine Taxi
Drivers' Union, 40 Off. Gaz., N o . 13, p. 138.

548
 STRIKES A N D LOCKOUTS ARTS 2fi* 915 K
[Part 1. Regulations and Limits of Strike *o
and Lockout]
consider a m o r e reasonable state of mind. We shall deprive you of our labor as
a legitimate means of exerting e c o n o m i c pressure to induce you to yield. If we
do go out, we shall remain at hand, ready to negotiate with you concerning fair
wages and working rules, and ready to return to work the m o m e n t we can agree.
If, by reason of a failure to agree, the employees stop their work, a 'strike' is
on. T h e y are no l o n g e r working and receiving wages; but, in the absence of any
action other than above indicated looking to a termination of the relationship,
they are entitled to rank as 'employees,' with the adjective 'striking' defining
1
their immediate status."

8.1 Notion of "Striking Employee"

During a strike the employer-employee relationship is not terminated but
merely suspended as the w o r k stoppage is not p e r m a n e n t but only temporary.
Thus, a striking e m p l o y e e is still an e m p l o y e e . T h i s notion is found in the
definition of "employee" in Article 212(f) which states that, "employee" includes
"any individual whose w o r k has ceased as a result of or in connection with any
current labor dispute or because of any unfair labor practice if he has not
obtained any other substantially equivalent and regular employment." T h e
e m p l o y e e ' s status during a strike remains, but the effects of e m p l o y m e n t are
suspended, h e n c e a striking e m p l o y e e , as a rule, is not entitled to his wage
during the strike.
T h e above-quoted provision is taken from the W a g n e r Act. T h e comments
of T e l l e r on the status of striking employees under the W a g n e r A c t may be
enlightening. T e l l e r says:
Retention by striking employees of their e m p l o y e e status under the
act has two main consequences: first, the employer's obligation to bargain
collectively in g o o d faith with his employees continues notwithstanding
the fact that the employees are on strike. Second, the employer is under
an obligation to reinstate striking employees upon termination of the
strike, without discriminating against those m o r e actively engaged in union
activity.
T h e question of reinstatement of striking employees is taken up further
under "Consequences of C o n c e r t e d Actions" in Part 3 of this chapter.

9. L E G A L I T Y OF STRIKE: T H E SIX F A C T O R S A F F E C T I N G L E G A L I T Y
T h e right to strike is o n e of the rights recognized and guaranteed by the
Constitution as an instrument of labor for its protection against exploitation by
management. By virtue of this right, the workers are able to press their demands
for better terms of e m p l o y m e n t with m o r e energy and persuasiveness, poising

•Jeffrey-De Will Insulator Co. vs. National Labor Relations Board [ C C A . 4th],
91 F. [2d] 134, 112 A . L . R . 948, writ of certiorari denied in 302 U.S. 731, 82 L. ed.
565, 58 S. Ct. 55.

549
 LABOR RELATIONS
ARTS. 263-265

the threat to strike as their reaction to the employer's intransigence. T h e strike

is indeed a powerful weapon of the working class. But precisely because of this,
it must be handled carefully, like a sensitive explosive, lest it blow up in the
workers' own hands. Thus, it must be declared only after the most thoughtful
consultation among them, conducted in the only way allowed, that is, peacefully,
and in every case conformably to reasonable regulation. Any violation of the
legal requirements and strictures, such as a defiance of a return-to-work order
in industries affected with public interest, will render the strike illegal, to the
1
detriment of the very workers it is supposed to protect.
T h e authoritative Ludwig Teller says that an illegal strike is o n e which:
(1) is contrary to a specific prohibition of law, such as strike by employees
performing governmental functions; or
(2) violates a specific requirement of law; or
( 3 ) is declared for an unlawful purpose, such as inducing the employer
to commit an unfair labor practice against nonunion employees; or
( 4 ) employs unlawful means in the pursuit of its objective, such as a
widespread terrorism of nonstrikers; or
(5) is declared in violation of an existing injunction; or
( 6 ) is contrary to an existing agreement, such as a no-strike clause or
2
conclusive arbitration clause.
T h e Supreme Court approvingly cited, explained and applied the six factors
in deciding the case Toyota Motor Phil. Corp. Workers Association vs. Toyota Motor
Philippines Corp., G . R . N o . 158798-99, O c t o b e r 19, 2007. T h e Court upheld the
dismissal of the union officers and 227 union members whose "mass action" and
"walk-outs" were, in fact, illegal work stoppages.
T h e following pages discuss, in the sequence enumerated by Teller, the
six factors affecting the legality of a strike or lockout in Philippine context.

10. FIRST F A C T O R I N L E G A L I T Y O F STRIKE: S T A T U T O R Y P R O H I B I T I O N

Government employees have the right to organize and this has been
discussed in the comments to Articles 243-246. But they do not have the right
to strike. A strike held by them would be an example of an illegal strike that
violates a legal prohibition.

Social Security System Employees Association (SSEA) vs. Court of Appeals, 175 SCRA
686 (1989) —
Government employees may, through their unions or associations, either
petition the Congress for the betterment of the terms and conditions of employment

'Batangas Laguna Tayabas Bus Company vs. N L R C , et al., G.R. N o . 101858,

August 21, 1992.
t e l l e r , pp. 314-317.

550
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
which are within the ambit of legislation or negotiate with the appropriate government
agencies for the improvement of those which are not fixed by law. If there be any
unresolved grievances, the dispute may be referred to the Public Sector Labor-
Management Council for appropriate action.
But employees in the civil service may not resort to strikes, walkouts and
other temporary work stoppages, like workers in the private sector, to pressure the
Government to accede to their demands. As now provided under Sec. 4, Rule III
of the Rules and Regulations to Govern the Exercise of the Right of Government
Employees to Self-Organization, "the terms and conditions of employment in the
government, including any political subdivision or instrumentality thereof and
government-owned and -controlled corporations with original charters, are governed
by law and employees therein shall not strike for the purpose of securing changes
thereof."
While there is no question that the Constitution recognizes the right of
government employees to organize, it is silent as to whether such recognition also
includes the right to strike.
Resort to the intent of the framers of the organic law becomes helpful in
understanding the meaning of these provisions. A reading of the proceedings of
the Constitutional Commission that drafted the 1987 Constitution would show that
in recognizing the right of government employees to organize, the commissioners
intended to limit the right to the formation of unions or associations only, without
including the right to strike.
Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision
that "[t]he right to self-organization shall not be denied to government employees'
[Article I X ( B ) , Sec. 2(5) ] , in answer to the apprehensions expressed by Commissioner
Ambrosio B. Padilla, vice president of the Commission, explained:
MR. L E R U M . I think what I will try to say will not take that long. When
we proposed this amendment providing for self-organization of government
employees, it does not mean that because they have the right to organize, they
also have the right to strike. That is a different matter. We are only talking about
organizing, uniting as a union. With regard to the right to strike, everyone
will remember that in the Bill of Rights, there is a provision that the right to
form associations or societies whose purpose is not contrary to law shall not be
abridged. Now then, if the purpose of the state is to prohibit the strikes coming
from employees exercising government functions, that could be done because
the moment that it is prohibited, then the union which will go on strike will
be an illegal union.
T h e statement of the Court in Alliance of Government Workers vs. Minister of Labor
and Employment [G.R. N o . 60403, August 3,1983,124 SCRA 1] furnishes the rationale
for distinguishing between workers in the private sector and government employees
with regard to the right to strike:
T h e general rule in the past and up to the present is that "the terms and
conditions of employment in the Government, including any political subdivision
or instrumentality thereof are governed by law" (Section 11, the Industrial Peace

551
 LABOR RELATIONS
ARTS. 263-265

Act, R.A. N o . 875, as amended and Article 277, the Labor Code, PD N o . 442, as
amended). Since the terms and conditions of government employment are fixed
by law, government workers cannot use the same weapons employed by workers
in the private sector to secure concessions from their employers. T h e principle
behind labor unionism in private industry is that industrial peace cannot be
secured through compulsion by law. Relations between private employers and
their employees rest on an essentially voluntary basis. Subject to the minimum
requirements of wage laws and other labor and welfare legislation, the terms and
conditions of employment in the unionized private sector are settled through the
process of collective bargaining.
In government employment, however, it is the legislature and, where properly
given delegated power, the administrative heads of government which fix the
terms and conditions of employment. A n d this is effected through statutes or
administrative circulars, rules, and regulations, not through collective bargaining
agreements.

Bangalisan, et al. vs. Court of Appeals, The Civil Service Commission and The
Secretary of the Department of Education, Culture and Sports, G . R . N o . 124678,
July 31, 1997 —
Facts: In the instant case, herein petitioners were charged by the Secretary of
the DECS with gave misconduct, gross neglect of duty, gross violation of Civil Service
law, rules and regulations, and reasonable office regulations, refusal to perform
official duty, gross insubordination, conduct prejudicial to the best interest of the
service and absence without official leave ( A W O L ) , for joining the teachers' mass
actions held at Liwasang Bonifacio on September 17 to 21, 1990.
Ruling: T h e issue of whether or not the mass action launched by the public
school teachers during the period from September up to the first half of October,
1990 was a strike has been decided by this Court in a resolution, dated December
18, 1990, in the herein cited case of Manila Public School Teachers Association, et al. vs.
Laguio,Jr., supra. It was there held "that from the pleaded and admitted facts, those
'mass actions' were to all intents and purposes a strike; they constituted a concerted
and unauthorized stoppage of, or absence from, work which it was the teachers' duty
to perform, undertaken for essentially economic reasons."
T h e fact that the conventional term "strike" was not used by the striking
employees to describe their common course of action is inconsequential, since the
substance of the situation, and not its appearance, will be deemed to be controlling.
The ability to strike is not essential to the right of association. In the absence of statute,
public employees do not have the right to engage in concerted work stoppages for
any purpose.
It is the settled rule in this jurisdiction that employees in the public service
may not engage in strikes. While the Constitution recognizes the right of government
employees to organize, they are prohibited from staging strikes, demonstrations,
mass leaves, walk-outs and other forms of mass action which will result in temporary

552
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
stoppage or disruption of public services. T h e right of government employees to
organize is limited only to the formation of unions or associations, without including
the right to strike.
Herein petitioners, except Mariano, are being penalized not because they
exercised their right of peaceable assembly and petition for redress of grievances but
because of their successive unauthorized and unilateral absences which produced
adverse effects upon their students for whose education they are responsible. The
actuations of petitioners definitely constituted conduct prejudicial to the best interest
of the service, punishable under the Civil Service law, rules and regulations.
It may be conceded that the petitioners had valid grievances and noble
intentions in staging the "mass actions," but that will not justify their absences to the
prejudice of innocent school children. Their righteous indignation does not legalize
an illegal work stoppage.
As a general rule, even in the absence of express statutory prohibition like
Memorandum Circular N o . 6, public employees are denied the right to strike or
engage in a work stoppage against a public employer. T h e right of the sovereign
to prohibit strikes or work stoppages by public employees was clearly recognized
at common law. Indeed, it is frequently declared that modern rules which prohibit
such strikes, either by statute or by judicial decision, simply incorporate or reassert
the common law rule.

11. S E C O N D FACTOR IN LEGALITY OF STRIKE: P R O C E D U R A L

REQUIREMENTS
A strike ( o r l o c k o u t ) , to enjoy the protection of law, must observe certain
procedural requisites. These are mentioned in Article 263 and the Implementing
Rules, namely: filing of notice of strike, observance of cooling-off period, taking
of strike vote, and observance of the seven-day strike-vote-report period.
It bears stressing that these requirements are mandatory, meaning, non-
compliance therewith makes the strike illegal. T h e evident intention of the law
in requiring the strike notice and strike-vote report is to reasonably regulate the
right to strike, which is essential to the attainment of legitimate policy objectives
e m b o d i e d in the law.
Failure to comply with the aforesaid requirements makes the strike illegal.
Consequently, the officers of the union w h o participated therein are d e e m e d to
1
have lost their e m p l o y m e n t status.
A. Notice of Strike (NS)
A notice of strike (or lockout), in the prescribed form and with the required
contents, should be filed with the Department of L a b o r and Employment,
specifically the regional branch of the National Conciliation and Mediation
Board, copy furnished the employer or the union, as the case may be.

•Bukluran ng Manggagawa sa Clothman Knitting, etc. vs. Court of Appeals, et

al, G.R. N o . 158158, January 17, 2005.
553
 LABOR RELATIONS
ARTS. 263-265

W h o files a notice of strike? That is, w h o can strike? Only a legitimate

1
(registered) labor organization can legally hold a strike. If the reason for the
intended strike is U L P by the employer, the notice should be filed by the duly
recognized or certified bargaining agent. If the bargaining unit involved has
yet no bargaining agent, then the notice may be filed by even an unrecognized
labor union, provided the union is duly registered.
If the reason for the intended strike is bargaining deadlock, only the
bargaining union has the legal right to file a notice of strike. A bargaining
deadlock presupposes that a union has been selected as the bargaining agent
and such union has been certified by D O L E or recognized by the employer as the
employees' exclusive bargaining representative. N o w that a bargaining deadlock
exists, only the bargaining union — and no other union — has the duty and
authority to take appropriate action, including the filing of a strike notice.
Contents of notice. — T h e notice shall state, a m o n g others, the names and
addresses of the employer and the union involved, the nature of the industry to
which the employer belongs, the number of union members and of the workers in
the bargaining unit, and such other relevant data as may facilitate the settlement
of the dispute, such as a brief statement or enumeration of all p e n d i n g labor
2
disputes involving the same parties.
In cases of bargaining deadlocks, the notice shall, as far as practicable,
further state the unresolved issues in the bargaining negotiations and be
accompanied by the written proposals of the union, the counter-proposals of
the employer and the p r o o f of a request for conference to settle the differences.
In cases of unfair labor practices, the notice shall, as far as practicable, state the
acts complained of and the efforts taken to resolve the dispute amicably.
In case a notice does not c o n f o r m with the requirements of this and the
foregoing section/s, the regional branch of the Board shall inform the concerned
party of such fact.

B. Cooling-off Period
A cooling-off period must be observed, i.e., a time gap is required to cool
off tempers between the filing of notice and the actual execution of strike ( o r
lockout). T h e cooling-off period is thirty days in case of bargaining deadlock
and fifteen days in case of unfair labor practice. However, in the face of union
busting as defined in Article 2 6 3 ( c ) , the cooling-off period n e e d not be observed
and the union may take action immediately after the strike vote is conducted and
the results thereof submitted to the appropriate regional branch of the Board.
As mentioned under the topic avoidance of strike, the N C M B , upon receipt
of the notice of strike and during the cooling-off period, mediates and conciliates

'Stanford Marketing Corp. vs. Julian, G.R. N o . 145496, February 24, 2004.
2
Sec. 8, Rule X X I I , D.O. N o . 40-03.

554
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
the parties. T h e regional branch of the Board may, upon agreement of the parties,
treat a notice as a preventive mediation case. It shall also encourage the parties
to submit the dispute to voluntary arbitration.
During the proceedings, the parties shall not do any act which may disrupt
or i m p e d e the early settlement of the dispute. T h e y are obliged, as part of their
duty to bargain collectively in g o o d faith; to participate fully and promptly in
the conciliation meetings called by the regional branch of the Board.
A strike/lockout notice, upon agreement of the parties, may be referred
to alternative modes of dispute resolution, including voluntary arbitration.
I n f o r m a t i o n and statements g i v e n at c o n c i l i a t i o n p r o c e e d i n g s are
treated as p r i v i l e g e d c o m m u n i c a t i o n . Conciliators and similar officials shall
n o t testify in any court or b o d y r e g a r d i n g any matter taken up at conciliation
p r o c e e d i n g s c o n d u c t e d by them. T h e reason for these rules is to e n c o u r a g e
free and frank e x c h a n g e of proposals and counter-proposals between the
parties, thus assisting the conciliator in searching for the "formula" most
acceptable to both sides.

C. Strike Vote (SV)

Before a strike ( o r lockout) may actually be started, a strike/lockout vote
should be taken by secret balloting, in meetings or referenda specially called for
the purpose. T h e regional branch of the Board may, at its own initiative or upon
request of any affected party, supervise the conduct of the secret balloting. In
every case, the union or the employer shall furnish the regional branch of the
Board the notice of meetings referred to at least twenty-four (24) hours before
such meetings as well as the results of the voting at least seven (7) days before
the intended strike or lockout, subject to the cooling-off period. T h e decision to
declare a strike requires the secret-ballot approval of majority of the total union
membership in the bargaining unit concerned. T h e n e e d e d vote is majority of
the total union membership, not just majority of the members present in the
meeting or referenda. A n d it is majority of the union membership, not of the
bargaining unit. T h e members of the minority union may or may not be called
to the strike vote meeting.
T h e purpose of the strike vote is to ensure that the decision to strike broadly
rests with the majority of the union members in general and not with a mere
minority, and at the same time, discourage wildcat strikes, union bossism and
even corruption. A strike vote report submitted to the N C M B at least seven days
prior to the intended date of strike ensures that a strike vote was, indeed, taken.
In the event that the report is false, the seven-day period affords the members an
opportunity to take the appropriate remedy before it is too late. T h e 15 to 30 day
cooling-off period is designed to afford the parties the opportunity to amicably
resolve the dispute with the assistance of the N C M B conciliator/mediator, while
the seven-day strike ban is intended to give the D O L E an opportunity to verify

555
 LABOR RELATIONS
ARTS. 263-265

whether the projected strike really carries the imprimatur of the majority of the
1
union members.
T h e needed vote is 50 percent plus o n e of the total union membership.
W h e r e the total union membership was 178, about 60 of w h o m had been
dismissed and had received separation benefits, but their dismissal was being
contested by the union, the vote n e e d e d to pass a strike vote should be majority
of the 178, which includes the 60. So, the n e e d e d vote is at least 90. T h e union
cannot claim that the dismissal of the 60 is illegal and yet exclude them in trying
to get majority vote to hold a strike. This is the court's ruling in Industrial Timber
Corp. vs. NLRC, etc., G.R. N o . 107302, June 10, 1997.
Similarly, a lockout needs the secret-ballot concurrence of majority of the
directors or partners.
D. Strike Vote Report (SVR)
T h e result of the strike ( o r lockout v o t i n g ) should be reported to the
N C M B at least seven (7) days before the intended strike or lockout, subject to the
cooling-off period. This means that after the strike vote is taken and the result
reported to N C M B , seven days must pass before the union can actually c o m m e n c e
the strike. This seven-day reporting p e r i o d is intended to give the Department
of Labor and Employment an opportunity to verify whether the projected strike
really carries the imprimatur of the majority of the union members. A strike
2
held within the seven-day waiting p e r i o d is plainly illegal. T h e submission of the
report gives assurance that a strike vote has been taken and that, if the report
concerning it is false, the majority of the members can take appropriate remedy
3
before it is too late.
A strike staged without the submission of the result of the strike-vote is
4
illegal.
T h e requirement of giving notice of the conduct of a strike vote to the
N C M B at least 24 hours before the meeting for the said purpose is designed
to ( a ) inform the N C M B of the intent of the union to conduct a strike vote;
( b ) give the N C M B ample time to decide on whether or not there is a n e e d to
supervise the conduct of the strike vote to prevent any acts of violence a n d / o r
irregularities attendant thereto; and ( c ) should the N C M B decide on its own
initiative or upon the request of an interested party including the employer, to
supervise the strike vote, to give it ample time to prepare for the deployment of
the requisite personnel, including peace officers if n e e d be. Unless and until the

'Capitol Medical Center vs. N L R C , et al., G.R. N o . 147080, April 26, 2005.
2
Lapanday Workers' Union, et al. vs. N L R C and Lapanday Agricultural and
Development Corp., G.R. Nos. 95494-97, September 7, 1995.
3
National Federation of Sugar Workers vs. Ovejera: see case below.
4
Samahan ng Manggagawa in Moldex Products, et al. vs. N L R C , et al., G.R. N o .
119467, February 1, 2000.

556
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
N C M B is notified at least 24 hours of the union's decision to conduct a strike
vote, and the date, place, and time thereof, the N C M B cannot determine for
itself whether to supervise a strike vote meeting or not and insure its peaceful
and regular conduct. T h e failure of a union to comply with the requirement of
the giving of notice to the N C M B at least 24 hours prior to the holding of a strike
1
vote meeting will render the subsequent strike staged by the union illegal.
Should the strike vote be taken within or outside the cooling-off period?
T h e law does not specify, but N C M B ' s Primer on Strike, Picketing and Lockout
states (in Question N o . 06) that if the strike vote is filed within the cooling-off
period, the 7-day requirement "shall be counted from the day following the
2
expiration of the cooling-off period."
In effect, the seven days are added to the 15-day or 30-day cooling-off
period.

11.1 Declaration of Strike or Lockout

If the dispute remains unsettled after the lapse of the cooling off period and
the seven-day reporting p e r i o d , the labor union may strike or the employer may
lock out its workers. T h e regional branch of the N C M B shall continue mediating
and conciliating. T h e conciliator-mediator, however, can only suggest solutions.
He is not an arbitrator or an adjudicator w h o may impose his decisions upon
the parties.

11.2 Procedural Requirements, Mandatory; Non-observance Makes Strike

Illegal
National Federation of Sugar Workers (NFSW) vs. Ovejera, G.R. N o . 59743, May
31,1982 —
( a ) Mandatory periods; Language of the law. — T h e provisions hardly leave any
room for doubt that the cooling-off period in Article 264(c) and the 7-day strike ban
after the strike-vote report prescribed in Article 264(f) were meant to be, and should
3
be deemed, mandatory.
When the law says "the labor union may strike" should the dispute "remain
unsettled until the lapse of the requisite number of days (cooling-off period) from
the mandatory filing of the notice," the unmistakable implication is that the union
may not strike before the lapse of the cooling-off period. Similarly, the mandatory
character of the 7-day strike ban after the report on the strike-vote is manifest in the
provision that "in every case," the union shall furnish the M O L E with results of the
voting "at least seven ( 7 ) days before the intended strike, subject to the (prescribed)
cooling-off period." It must be stressed that the requirements of cooling-off period
and 7-day strike ban must both be complied with, although the labor union may take
a strike vote and report the same within the statutory cooling-off period.

'Capitol Medical Center vs. N L R C , et al, G.R. N o . 147080, April 26, 2005.
2
See Sukhotai Cuisine vs. CA, et al, G.R. N o . 150437, July 17, 2006.
'Article 264 should now read Article 263.

557
 LABOR RELATIONS
ARTS. 263-265

If only the filing of the strike notice and the strike-vote report would be deemed
mandatory, but not the waiting periods as specifically and emphatically prescribed by
law, the purposes (hereafter discussed) for which the filing of the strike notice and strike-
vote report is required would not be achieved — as when a strike is declared immediately
after a strike notice is served, or when — as in the instant case — the strike-vote report
is filed with MOLE after the strike had actually commenced. Such interpretation of the
law ought not and cannot be countenanced. It would indeed be self-defeating for the
law to imperatively require the filing of a strike notice and strike-vote report without
at the same time making the prescribed waiting periods mandatory.
(b) Purposes of strike notice and strike-vote report. — In requiring a strike notice
and a cooling-off period, the avowed intent of the law is to provide an opportunity
for mediation and conciliation. It thus directs the M O L E "to exert all efforts at
mediation and conciliation to effect a voluntary settlement" during the cooling-off
period. As applied to the CAC-NFWS dispute regarding the 13th-month pay, M O L E
intervention could have possibly induced C A C [Central Azucarera de la Carlota] to
provisionally give the 13th-month pay in order to avert great business loss arising
from the projected strike, without prejudice to the subsequent resolution of the legal
dispute by competent authorities; or mediation/conciliation could have convinced
NFWS to at least postpone the intended strike so as to avoid great waste and loss to
the sugar central, the sugar planters and the sugar workers themselves, if the strike
would coincide with the milling season.
So, too, the 7-day strike-vote report is not without a purpose. As pointed out
by the Solicitor General —
Many disastrous strikes have been staged in the past based merely on the
insistence of minority groups within the union. T h e submission of the report gives
assurance that a strike vote has been taken and that, if the report concerning it is
false, the majority of the members can take appropriate remedy before it is too late.
If the purpose of the required strike notice and strike-vote report are to be
achieved, the periods prescribed for their attainment must, as aforesaid, be deemed
mandatory.
. . . [W]hen a fair interpretation of the statute, which directs acts or proceedings
to be done in a certain way, shows the legislature intended a compliance with such
provision to be essential to the validity of the act or proceeding, or when some
antecedent and prerequisite conditions must exist prior to the exercise of power
or must be performed before certain other powers can be exercised, the statute
must be regarded as mandatory. So it has been held that, when a statute is founded
on public policy [such as the policy to encourage voluntary settlement of disputes
without resorting to strikes], those to whom it applies should not be permitted to
1
waive its provisions.
(c) Waiting period after strike notice and strike-vote report, valid regulation of right
to strike. — To quote Justice Jackson in International Union vs. Wisconsin Employment
Relations Board, 336 U.S. 245, and 259 —

'82 C.J.S. 873-874. Bracketed words supplied.

558
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
The right to strike, because of its more serious impact upon the public interest,
is more vulnerable to regulation than the right to organize and select representatives
for lawful purposes of collective bargaining...
The cooling-off period and the 7-day strike ban after the filing of a strike-vote
report, as prescribed in Article 264 [now 263] of the Labor Code, are reasonable
restrictions and their imposition is essential to attain the legitimate policy objectives
embodied in the law. We hold that they constitute a valid exercise of the police power
of the state.

Gold City Integrated Port Service, Inc. (INPORT) vs. NLRC, Adelo Ebuna, et al.,
G.R. N o . 103560, July 6, 1995 —
Facts: Early in the morning of April 30, 1985, petitioner's employees stopped
working and gathered in a mass action to express their grievances regarding wages,
thirteenth-month pay and hazard pay. Said employees were all members of the
Macajalar Labor Union — Federation of Free Workers ( M L U - F F W ) with whom
petitioner had an existing collective bargaining agreement. On the same morning,
the strikers filed individual notices of strike ("Kaugalingon nga Declarasyon sa Pag-
Welga'') with the then Ministry of Labor and Employment.
Petitioner was engaged in stevedoring and arrastre services at the port of
Cagayan de O r o . T h e strike paralyzed operations at said port.
With the failure of conciliation conferences between petitioner and the strikers,
I N P O R T filed a complaint before the Labor Arbiter for Illegal Strike with prayer for
a restraining order/preliminary injunction. On May 7, 1985, the National Labor
Relations Commission issued a temporary restraining order. Thereafter, majority
of the strikers returned to work, leaving herein private respondents who continued
their protest.
For not having complied with the formal requirements in Article 264 of the
Labor Code, the strike staged by petitioner's workers on April 30, 1985 was found
by the Labor Arbiter to be illegal. T h e workers who participated in the illegal strike
did not, however, lose their employment, since there was no evidence that they
participated in illegal acts.
Both petitioner and private respondents filed motions for reconsideration,
which public respondent N L R C treated as appeals.
In its resolution dated January 14,1991, the N L R C held that the facts prevailing
in the case at bench require a relaxation of the rule that the formal requisites for a
declaration of a strike are mandatory. Furthermore, what the employees engaged in
was more of a spontaneous protest action than a strike.
Nevertheless, the Commission affirmed the Labor Arbiter's decision which
declared the strike illegal.
Ruling: Private respondents and their co-workers stopped working and held
the mass action on April 30, 1985 to press for their wages and other benefits. What
transpired then was clearly a strike, for the cessation of work by concerted action
resulted from a labor dispute.

559
 LABOR RELATIONS
ARTS. 263-265

The complaint before the Labor Arbiter involved the legality of said strike.
The Arbiter correctly ruled that the strike was illegal for failure to comply with the
requirements of Article 264 (now Article 263), paragraphs ( c ) and ( f ) of the Labor
Code.
The individual notices of strike filed by the workers did not conform to the
notice required by the law to be filed since they were represented by a union ( M L U -
FFW) which even had an existing collective bargaining agreement with I N P O R T .
Neither did the striking workers observe the strike vote by secret ballot, cooling-
off period and reporting requirements.
As we stated in the case of National Federation of Sugar Workers vs. Ovejera, (G.R.
N o . L-59743, May 31, 1982) the language of the law leaves no room for doubt that
the cooling-off period and the seven-day strike ban after the strike-vote report were
intended to be mandatory.

Union of Filipro Employees, et al. vs. Nestle Philippines, Inc., et al., G.R. N o s .
88710-13, December 19, 1990 —
T h e N L R C correctly upheld the illegality of the strikes and the corresponding
dismissal of the individual complainants because of their "brazen disregard of
successive lawful orders of then Labor Ministers Bias F. O p l e , Augusto Sanchez
and Labor Secretary Franklin Drilon dated December 11, 1985, January 30, 1986
and February 4, 1986, respectively, and the cavalier treatment of the provisions of
the Labor Code and the return-to-work orders of the Minister (now Secretary) of
Labor and Employment, or Articles 264 and 265 (now renumbered Articles 263
and 264).
The N L R C also gave the following reasons:
1. T h e strike was staged in violation of the existing CBA provisions on "No
Strike/No Lockout Clause" stating that a strike, which is in violation of the terms of
the collective bargaining agreement, is illegal, especially when such terms provide for
1
conclusive arbitration clause. T h e main purpose of such an agreement is to prevent
a strike and it must, therefore, be adhered to strictly and respected if their ends are
to be achieved;
2. Instead of exhausting all the steps provided for in the grievance
machinery provided for in the collective bargaining agreement to resolve the dispute
amicably and harmoniously within the plant level, UFE went on strike;
3. T h e prescribed mandatory cooling-off period and the 7-day strike ban
after submission of the report of strike vote at Nestle's Makati Offices and Muntinlupa
and Cabuyao Plants were not complied with (NLRC-NCR-12-4007-85 8c NCR-1-295-
86), while no notice of strike was filed by respondents when they staged the strike at
Nestle's Cagayan de Oro Plant (RABX-2 0047-86), contrary to the pertinent provision
of Articles 263 and 264 of the Labor Code, emphasizing that "the mandatory character

•Liberal Labor Union vs. Phil. Can Co., 91 Phil. 72; Phil. Airlines vs. PAL
Employees Association, L-8197, October 31, 1958.

560
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
of these cooling-off periods has already been categorically ruled upon by the Supreme
Court";'
4. In carrying out the strike, coercion, force, intimidation, violence with
physical injuries, sabotage, and the use of unnecessary and obscene language or
epithets were committed by die respondent officials and members of either UFE
2
or W A T U . It is well-settled that a strike conducted in this manner is illegal. In fact,
criminal cases were filed with the Makati Fiscal's Office.
T h e employees' going on strike the very day they filed their notice of strike
violates Article 263(c) and ( f ) of the Labor Code, which provides for a cooling-off
3
period and a 7-day strike ban before a strike may be commenced.

11.2a Strike on Installment: Work Slowdown and Overtime Boycott

T h e "overtime boycott" and "work slowdown" amounted to illegal strike.
T h e employees refused to adhere to their normal work schedules unless the
company gives in to the d e m a n d of the union regarding the effectivity of the
C B A . T h e overtime boycott and work slowdown had resulted not only in financial
4
losses to the company but also damaged its business reputation.
Respondents' unjustified unilateral alteration of the 24-hour work schedule
thru their concerted activities of "overtime boycott" and "work slowdown" can
be classified as a strike on an installment basis. It constituted a violation of their
C B A , which prohibits the union or e m p l o y e e , during the existence of the CBA,
5
to stage or e n g a g e in slowdown or interruption of work.
In Raw at Buklod ng Manggagawa vs. NLRC, this Court ruled: T h e concerted
activity in question would still be illicit because [it is] contrary to the worker's
explicit contractual c o m m i t m e n t "that there shall be no strikes, walkouts,
stoppage or slowdown of work, boycotts, secondary boycotts, refusal to handle
any merchandise, picketing, sit-down strikes of any kind, sympathetic or general
strikes, or any other interference with any of the operations of the C O M P A N Y
during the term of their collective bargaining agreement." T h e Court is in
substantial agreement with the petitioner's concept of a slowdown as a "strike
on the installment plant," as a willful reduction in the rate of work by concerted
action of workers for the purpose of restricting the output of the employer, in
relation to a labor dispute; as an activity by which workers, without a complete
stoppage of work, retard production or their performance of duties and functions

'National Federation of Sugar Workers [NFSW] vs. Ovejera, 114 SCRA 354.
2
United Seamen's Union vs. Davao Shipowners Association, 20 SCRA 122.
'Trade Unions of the Philippines and Allied Services Local Chapter N o . 1335
vs. National Labor Relations Commission, G.R. N o . 88083, May 31, 1989.
4
Interphil Laboratories Employees Union-FFW, et al. vs. Interphil Laboratories,
Inc., et al., G.R. N o . 142824, December 19, 2001.
Ibid.

561
 LABOR RELATIONS
ARTS. 263-265

to compel management to grant their demands. Such a slowdown is generally

condemned as inherently illicit and unjustifiable, because while the employees
"continue to work and remain at their positions and accept the wages paid to
them," they at the same time "select what part of their allotted tasks they are
to perform of their own volition or refuse openly or secretly, to the employer's
1
damage, to do their work;" in other words, they "work on their own terms."
See "Slowdown" in Part 2 of this chapter.

11.3 In Case of Union Busting

W h e r e the employer is trying to bust the union, the union is a victim. It
needs assistance, not hindrance. A n d it will be adding insult to injury to ask the
unionists to cool o f f while their union is being busted. H e n c e , Article 2 6 3 ( c )
does away with the cooling o f f period requirement in case of union busting.
But union busting has to be defined because the union officers may perceive
the situation as union busting, while the employer and other employees may view
it otherwise. T h e codal definition has specific elements: U n i o n busting exists
when (1) the union officers are being dismissed; ( 2 ) those officers are the ones
duly elected in accordance with the union constitution and by-laws; and ( 3 ) the
existence of the union is threatened.
If the union is being busted, there is no n e e d to observe the cooling o f f
period. But must the union still file a notice of strike, and take a strike vote, and
submit the strike vote report? It is submitted that those requirements are still
mandatory even in the face of union busting. F r o m Article 263 itself it is clear
that what is being excused in case of union busting is only the observance of the
15-day cooling o f f period. A n d Article 264 is emphatic in its list of prohibited
activities, that "no labor organization ... shall declare a strike ... without first
having filed the notice ... or without the necessary strike ... vote first having been
obtained and reported to the Ministry." Equally uncompromising is the N C M B
Primer on Strike, Picketing, and L o c k o u t (January 31,1992) which partly states:
"In case of U L P due to U n i o n Busting, the time requirement for the filing of the
Notice of Strike shall be dispensed with but the strike vote requirement being
mandatory in character, shall 'in every case' be c o m p l i e d with."
Indeed, in case of alleged union busting, the three remaining requirements
— notice, strike vote, and 7-day report p e r i o d — cannot be dispensed with; in
fact, there is greater n e e d for their observance. Unlike in bargaining deadlock
where the parties' positions are usually expressed in "yes" or " n o " or are
verifiable from objective facts and figures, the assertions in a U L P charge can
be highly subjective, even distorted by emotions. Perceptions are relative and
emotions can deceive. Even judicial statements acknowledge that testing a U L P

'Interphil Laboratories Employees Union-FFW, et al. vs. Interphil Laboratories,

Inc., et al, G.R. N o . 142824, December 19, 2001.

562
 STRIKES AND LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
act involves an appraisal of the perpetrator's motives ( see discussion under
Article 248). Moreover, according to the totality of conduct doctrine, an act, to
be characterized as U L P , should be viewed not in isolation but in connection
with collateral circumstances,. An allegation of union busting should therefore
be subjected to an intelligent and unbiased review and verification. It calls for
a delicate balancing of the respective rights of the employer and the workers.
A n d it is a balancing task that is better d o n e by sober, impartial persons.
T h o s e persons are the N C M B and the union members themselves. T h e y
are brakes or moderating device against precipitate, impulsive reactions of union
officers. Before plunging the organization into a strike because of alleged union
busting by the employer, the union officers should notify the N C M B and consult
the general membership. These persons must be given the opportunity to assess,
coolly and carefully, whether or not union busting is indeed occurring.
T h e codal avenue to this pre-strike assessment is the notice of strike, the
strike vote meeting, and the strike vote report. These requisites are most needed
and therefore should not be dispensed with when the union officers are incensed
by alleged union busting acts of the employer.

11.4 Strike During Arbitration, Illegal

Filsyn Employees Chapter vs. Drilon, et al, G.R. N o . 82225, April 5, 1989 —
Facts: Filsyn, which produced polyester raw materials for textiles, required
24-hour operations. Pursuant to the employment contracts of the employees, they
were to report for work on Sundays and holidays if their work schedules so required,
subject, of course, to additional compensation required by law.
In February 1985, the union officers filed notices of strike. Upon Filsyn's
petition, the Minister of Labor certified the labor dispute to the N L R C for compulsory
arbitration.
T h e N L R C held conciliation meetings upon the union's request. However, on
April 4,1985 (Maundy Thursday), while the conciliation meetings were still pending,
the union officers and members did not report for work. The shuttle buses that were
regularly sent to fetch employees from designated pick-up points returned with only
probationary employees on board, as the regular employees refused to board the
buses. Neither did they report for work on the next two days (Good Friday and Black
Saturday). Thus, the factory's operations stopped and the company suffered losses.
The union contended that there was no strike, the failure to work of the officers
and members on Maundy Thursday, Good Friday, and Black Saturday, being justified
because these days were legal holidays.
Ruling: T h e certification of the dispute to the N L R C for compulsory arbitration
had the effect of enjoining the intended strike subject of the notices.
T h e concerted action of the union members and officers in not reporting
for work on April 4-6, 1985, when they were supposed to render work on those days
according to their work schedules and during the pendency of the compulsory
arbitration proceedings on the certified labor dispute, constituted an illegal strike.

563
 LABOR RELATIONS
ARTS. 263-265

The strike being illegal, the officers of the striking union who knowingly took part
in the strike are deemed to have lost their employment status.

In another case the Court held, in line with Article 264, second paragraph,
that no strike or lockout can be declared while a case is pending involving the
1
same grounds for strike or lockout. In Sukhotai Cuisine and Restaurant vs. CA,
G.R. N o . 150437, July 17, 2006, the strike was declared illegal because of the
union's failure to exhaust all in the steps in the arbitration proceedings. Fully
aware of such proceedings, it cannot claim g o o d faith as a defense. However, if
after the decision of the Court of Industrial Relations declaring a strike illegal,
new demands or matters arise not in connection with, or similar to, the demands
in the former case subject of the decision, and the laborers strike anew, the new
2
strike cannot be held as a violation of the decision. But, again, the procedural
requirements must be c o m p l i e d with.

11.5 Strike Despite Preventive Mediation

Mediation (in general) — is a process of resolving disputes with the aid
of a neutral person — the mediator — w h o helps the parties identify issues
and develop proposals to resolve their disputes. Unlike an arbitrator, but like a
conciliator, the mediator is not e m p o w e r e d to decide disputes. He proposes but
does not dispose.
A l t h o u g h the L a b o r C o d e does not n a m e preventive mediation as a
settlement m o d e , the N C M B Manual enunciates it as a remedy to prevent or
resolve disputes whether strikeable or not. Preventive mediation ( " P M " ) can be
initiated simply by a letter-request.
Even in the judiciary, mediation is a r e c o g n i z e d alternative m o d e of
dispute resolution. [Section 2 ( a ) , Rule 18 of the 1987 Rules of Civil P r o c e d u r e ]
M e d i a t i o n / conciliation is o n e of such alternative modes that is not only speedy
3
but inexpensive as well.
Mediation protects confidentiality. Information discovered in mediation
is inadmissible in court. A party cannot use information gathered in mediation
against the other party and the Mediator cannot be subpoenaed to reveal what
4
transpired in mediation.

Philippine Airlines, Inc. vs. Secretary of Labor and Employment, G.R. N o . 88210,
January 23, 1991 —
Facts: The Collective Bargaining Agreement between the Philippine Airlines
and the PAL Employees Association provided for pay increases for various categories

•Bulletin Publishing Corporation vs. Sanchez, 144 SCRA 428.

2
Caltex [Phil.], Inc. vs. Philippine Labor Organization, 93 Phil. 295.
'The PHILJA Judicial Journal, Vol. 4; Issue N o . 11, January-March 2002, p. 8.
4
Ibid., pp. 3-4.

564
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
of employees. T h e CBA also provided for the formation of a P A L / P A L E A Payscale
Panel.
The PALEA panel members proposed P H P 3,349. as minimum salary entry
level for the lowest j o b grade, while the PAL panel members proposed PHP 2,310.
and P200 across the board increase for employees who could not avail of the payscale
adjustments. PALEA would not accept less than what it proposed, while PAL panel
members said they had no authority to offer more.
PALEA accused P A L of bargaining in bad faith, then filed with the N C M B a
notice of strike on account of: (a) bargaining deadlock; and ( 2 ) unfair labor practice
by bargaining in bad faith.
PAL moved to dismiss the notice of strike for being premature.
T h e Mediator advised PALEA that the issues raised in the notice of strike were
appropriate only for preventive mediation, hence, not valid grounds for a lawful
strike.
Nevertheless, PALEA submitted the strike vote to N C M B . PAL petitioned the
Labor Secretary to assume jurisdiction to avert the strike, but the Secretary failed to
act promptly on PAL's petition, hence, PALEA declared a strike. On the same day, the
Secretary assumed jurisdiction over the labor dispute which had already exploded
into a full-blown strike. He ordered the strikers to lift the pickets and return to work
and directed PAL to accept the returning strikers. He also awarded monetary benefits
to the strikers, while prohibiting the company from taking retaliatory action against
them. He declared the strike valid.
PAL avers that the Labor Secretary gravely abused his discretion when he (1)
ruled on the legality of the strike; ( 2 ) directed PAL to desist from retaliating against
the officers and members of the union responsible for the illegal strike; and (3) failed
to protect the interests of PAL whose business is affected with public interest.
Ruling: T h e Supreme Court nullified the Labor Secretary's order insofar as it
declared valid the P A L E A strike and restrained PAL from taking appropriate legal
action against PALEA's officers and members who led the illegal strike. T h e Court,
however, affirmed the monetary award.
T h e P A L strike was illegal for three reasons: (a) It was premature for there was
an existing CBA which still had nine (9) months to run. T h e law provides that neither
party to a collective bargaining agreement shall terminate nor modify such agreement
during its lifetime. While either party can serve a written notice to terminate or
modify the agreement at least 60 days prior to the expiration date (known as the
freedom period), it shall nevertheless be the duty of both parties to keep the status
quo and to continue in full force and effect the terms and conditions of the existing
agreement during the freedom period or until a new agreement is reached by them
(Article 253, Labor C o d e ) ; ( b ) It violated the no-strike provision of the CBA; ( c ) The
N C M B had declared the notice of strike as "appropriate for preventive mediation."
T h e effect of that declaration (which PALEA did not ask to be reconsidered or
set aside) was to drop the case from the docket of notice of strikes as provided in Rule
41 of the N C M B Rules, as if there was no notice of strike. During the pendency of

565
 LABOR RELATIONS
ARTS. 263-265

preventive mediation proceedings no strike could be legally declared. T h e Secretary

must have thought so too, that is why he failed to act, for 7 days, on PAL's petition
for him to assume jurisdiction over the labor dispute. T h e strike which the union
mounted, while preventive mediation proceedings were ongoing, was an "ambush."
Since the strike was illegal, the company has a right to take disciplinary action
against the union officers who took part in it, and against any union members who
committed illegal acts during the strike, pursuant to Article 264 of the Labor Code.
The Labor Secretary exceeded his jurisdiction when he restrained the employer
( P A L ) from taking disciplinary action against its guilty employees. Under Article 263
of the Labor Code, all that the Secretary may enjoin is the holding of the strike, but
not the company's right to take action against union officers who participated in the
illegal strike and committed illegal act. T h e prohibition which the Secretary issued
to PAL constitutes an unlawful deprivation of property and denial of due process for
it prevents PAL from seeking redress for the huge property losses that it suffered as
a result of the union's illegal mass action.
The Secretary's delay does not excuse the irresponsible action of the union in
declaring an illegal strike. T h e liability of the union for that is primary and exclusive.

11.6 Violation of a Valid Order

T h e strikers, through their representatives, had misled, not to say deceived,
the Industrial Court because despite their assurances that they would not go on
strike and did not even have the intention of striking, they went on strike just
the same. It was held that the strike was equivalent to a violation or disobedience
1
of an order of the court, hence, illegal.

11.7 Grievance Procedure Bypassed

T h e union brands as illegal the stipulation in the collective bargaining
agreements that "in case of any a l l e g e d unfair labor practice on the part of
either party, there will be no strikes, lockouts, or any prejudicial action x x x
until the question or grievance is resolved by the p r o p e r court if not settled
through a grievance procedure herein outlined." Ruling: T h e union's argument
in support of that contention is vague and unconvincing. No specific statutory
enactment was cited to show the illegality of that stipulation. T h e union merely
avers that that stipulation contravenes A r t i c l e 1701 of the Civil C o d e because it
would permit capital to act oppressively against labor. T h e legality of that kind
of stipulation was inferentially upheld in Liberal Labor Union vs. Philippine Can
Company (91 Phil. 7 2 ) . In that case, it appears that on February 26, 1949 the
union and the company entered into a collective bargaining agreement. It was
stipulated therein that if a laborer had a complaint, the same w o u l d first be
resolved by a grievance committee. T h e n , if the decision was not satisfactory,
the same would be referred to the top officials of the union and the company.

'Almeda vs. CIR, 97 Phil. 306.

566
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
A n d if still no settlement was reached, the matter would be submitted to the
C I R . Such stipulation was upheld.
In another case, the union declared a strike as a protest against the
reduction of the wages of seven laborers. It was held that the strike was illegal
because the union d i d n o t a d h e r e to the p r o c e d u r e a g r e e d upon for the
settlement of disputes. Said the court:
T h e main purpose of the parties in entering into a collective bargaining
agreement is to adopt a procedure in the settlement of their disputes so that
strikes may be prevented. This procedure must be followed in its entirety if it is
to achieve its objective.
Even if the management has failed to do its duty in connection with the
formation of the grievance committee stipulated in the agreement, such failure
does not give to labor the right to declare a strike outright, for its duty under
the agreement is to exhaust all available means within its reach before resorting
to force. If labor chooses not to deal with the management either because of
distrust or prejudice, the other way left to achieve a peaceful settlement on its
grievance is to resort to the Court of Industrial Relations. Strikes held in violation
of the terms contained in a collective bargaining agreement are illegal, specially
when they provide for conclusive arbitration clauses. These agreements must be
strictly adhered to and respected if their e n d is to be achieved.
A strike or walkout on the basis of grievances which have not b e e n
submitted to the grievance committee, as stipulated in the agreement of the
1
parties sanctioned by the C I R , is premature and illegal.

San Miguel Corporation vs. NLRC and IBM, G.R. N o . 119293, June 10, 2003 —
Facts: Petitioner San Miguel Corporation (SMC) and respondent Haw at Buklod
ng Manggagawa ( I B M ) , exclusive bargaining agent of petitioner's daily rank and
file employees, executed a CBA under which they agreed to submit all disputes to
grievance and arbitration proceedings. T h e CBA also included a mutually enforceable
no-strike no-lockout agreement.
Subsequently, two groups from the Haw at Buklod ng Manggagawa ( I B M ) filed
notices of strike with the N C M B against SMC for allegedly committing unfair labor
practices. T h e N C M B director held that the issues were non-strikeable, and issued
letter-orders to both union groups converting their notices of strike into preventive
mediation.
While preventive mediation proceedings were ongoing, the Colomeda group
filed with the N C M B a notice of holding a strike vote. T h e N C M B director issued
another letter reiterating the conversion of the notice of strike into a case of preventive
mediation. He emphasized that the grounds raised were centered on an intra-union

'Insurefco Paper Pulp & Project Workers' Union vs. Insular Sugar Refining
Corporation, 95 Phil.761. See 51 C.J.S. 1088 and 48 A m . Jur. 2nd 795; GOP-CCP
Workers Union vs. CIR, 93 SCRA 116 [1979].

567
 LABOR RELATIONS
ARTS. 263-265

conflict, which is non-strikeable, since the case simply calls for the resolution of the
question as to who between the two groups shall represent the workers for collective
bargaining purposes. Still, the Colomeda group later notified the N C M B of the results
of their strike vote, which favored the holding of a strike. T h e N C M B issued another
letter, informing the Colomeda group that their notice of strike is deemed to have
not been filed due to their conversion into a case of preventive mediation. Despite
this and the pendency of the preventive mediation proceedings, I B M went on strike.
Upon action by petitioner, the N L R C issued a T R O directing free ingress to
and egress from petitioner's plants, without prejudice to the union's right to peaceful
picketing and continuous hearings on the injunction case.
SMC and IBM then entered into a Memorandum of Agreement calling for the
lifting of the picket lines and resumption of work in exchange for "good faith talks"
between the management and labor management committees. Thus, the picket lines
ended and work was resumed.
Later, IBM moved to reconsider the issuance of the T R O and sought to dismiss
the injunction case in view of the cessation of the picketing activities as a result of the
M O A . The N L R C denied the petition for injunction for lack of factual basis, finding
that there were no actual or threatened commission of unlawful acts at that time.
Issue: Whether the N L R C should have granted the petition for injunction.
Ruling: Article 254 of the Labor Code provides that no injunction or restraining
order shall be issued by any court except as otherwise provided in Articles 218 and
264. Under Article 218(e), injunction maybe used to restrain an actual or threatened
unlawful strike.
SMC is correct in claiming that the union failed to comply with the procedural
requirements of a valid strike, because it failed to file a valid notice of strike with the
NCMB as prescribed by Article 263 of the Labor Code. When the N C M B converted
IBM's notices into preventive mediation, this had the effect of dismissing the notices
of strike filed by IBM. In the case of PAL vs. Drilon, the Court ruled that after such a
conversion, it is "as if there was no notice of strike." A n d that "during the pendency
of the preventive mediation proceedings, no strike could be legally declared."
IBM went on strike despite the lack of a valid notice of strike, and despite the
pendency of the mediation proceedings. A n d even after the execution of the M O A
by the parties, IBM circulated fliers declaring: "Ipaalala nyo sa management na hindi
iniaatras ang ating Notice of Strike (NOS) at anumang oras ay pwede nating muling itirik
ang picket line." This shows that at that time, there were threats of commission of
prohibited activities. Clearly, it was grave abuse of discretion on the part of the N L R C
when it failed to grant the petition for injunction filed by SMC.
And since the CBA contained provisions on grievance and arbitration, obviously
the union violated such provisions when it filed a notice of strike without availing of
the remedies therein. Such infringement of the grievance and arbitration provisions
constitutes further justification for the issuance of an injunction against the strike.
As held by the court in the case of IPP & PWU vs. ISRC: "Strikes held in violation of
the terms contained in collective bargaining agreement are illegal when they provide

568
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
for conclusive arbitration clauses. These agreements must be strictly adhered to and
respected if their ends have to be achieved."

11.8 Dismissal of Employees During Conciliation, W h e n Legal and

Enforceable
GTE Directories Corp. vs. Sanchez, et al, G.R. N o . 76219, May 27, 1991 —
Facts: G T E Directories Corporation issued a new "Sales Evaluation and
Production Policy." T h e new policy, however, did not sit well with the union. It
demanded that it be given 15 days within which to raise questions or objections. The
request was granted.
GTE next formulated a new set of "Sales Administrative Practices" requiring
all sales representatives to submit individual reports reflecting target revenues as of
deadlines. Nobody complied. T h e company suspended them. Revisions were made
in the policy. Still no compliance. So, all the sales representatives concerned were
suspended anew.
Finally, GTE gave its sales representatives an ultimatum. By a memorandum
individually addressed to its sales representatives, GTE required them, for the last time,
to submit the required reports ("list of accounts to be cancelled") within twenty-four
(24) hours from receipt of the memorandum; otherwise, they would be terminated
"for cause." Again not one sales representative submitted a report.
Subsequently, by separate letters dated August 29, 1985 individually received,
GTE terminated the employment of the sales representatives, numbering fourteen,
with the undertaking to give them "separation pay, upon proper clearance and
submission of company documents, material etc., in x x x (their) possession." Among
those dismissed were the union's president and third vice president, and several
members of its board of directors. On September 2,1985, the union declared a strike
in which about 60 employees participated.
During all this time, conciliation efforts were being exerted by the Bureau
of Labor Relations, including attempts to prevent the imposition of sanctions by
GTE on its employees, and the strike itself. When these proved futile, Acting Labor
Minister Vicente Leogardo, Jr. issued an Order dated December 6, 1985 assuming
jurisdiction over the dispute pursuant to Article 264(g) [now 263(g)] of the Labor
Code. Still, the company proceeded to dismiss the employees.
T h e Minister, among other things, invoked Section 6, Rule X I I I of the Rules
and Regulations Implementing the Labor Code, pertinently reading as follows:
During the proceedings, the parties shall not do any act which may
disrupt or impede the early settlement of the dispute. They are obliged, as
part of their duty to bargain collectively in g o o d faith, to participate fully
and promptly in the conciliation proceedings called by the Bureau or the
Regional Office.
and pointed out that "in dismissing 14 salesmen for alleged violations of the reportorial
requirements of its sales policies which was then the subject of conciliation
proceedings between them, ( G T E ) acted evidently in bad faith; hence, the status quo

569
 LABOR RELATIONS
ARTS. 263-265

prior to their dismissal must be restored (and) their reinstatement with backwages
is in order up to the time they were on forced leave."
Ruling: The dismissal is valid; the conciliation proceedings are not violated.
No other facts appear on record relevant to the issue of GTE's dismissal of the
14 sales representatives. There is no proof on record to demonstrate any underhanded
motive on the part of GTE in formulating and imposing the sales policies in question,
or requiring the submission of reports in line therewith. What, in fine, appears to be
the Minister's thesis is that an employer has the prerogative to lay down basic policies
and rules applicable to its employees, but may not exact compliance therewith, much
less impose sanctions on employees shown to have violated them, the moment the
propriety or feasibility of those policies and rules, or their motivation, is challenged
by the employees and the latter files a strike notice with the Labor Department —
which is the situation in the case at bar.
When the strike notice was filed by the union, the chain of events which
culminated in the termination of the 14 salespersons' employment was already
taking place; the series of defiant refusals by said sales representatives to comply
with GTE's requirement to submit individual reports was already in progress. At that
time, no less than three ( 3 ) of the ultimate six (6) direct orders of the employer for
the submission of the reports had already been disobeyed. T h e filing of the strike
notice, and the commencement of conciliation activities by the Bureau of Labor
Relations did not operate to make GTE's orders illegal and unenforceable so as to
excuse continued noncompliance therewith. It does not follow that just because
the employees or their union are unable to realize or appreciate the desirability
of their employer's policies or rules, the latter were laid down to oppress the
former and subvert legitimate union activities. Indeed, the overt, direct, deliberate
and continued defiance and disregard by the employees of the authority of their
employer left the latter with no alternative except to impose sanctions. T h e sanction
of suspension having proved futile, termination of employment was the only option
left to the employer.

12. THIRD FACTOR IN LEGALITY OF STRIKE: PURPOSE; E C O N O M I C A N D

U.L.P. STRIKE
T h e Labor C o d e recognizes only two strikeable grounds or causes that may
validly support a strike: ( 1 ) collective bargaining deadlock and ( 2 ) employer's
unfair labor practice. A strike not based on any of these two causes is necessarily
tainted with illegality.
Accordingly, the following are non-strikeable issues:
(1) inter-union or intra-union disputes
( 2 ) violation of labor standards law, unless Article 248, particularly clauses
( c ) , ( f ) , o r ( i ) , i s also violated
1
(3) any issue involving wage distortion

'Section 16, R.A. N o . 6727.

570
 STRIKES A N D LOCKOUTS A R T S 263-265
[Part 1. Regulations and Limits of Strike *
and Lockout]

( 4 ) cases pending at the D O L E regional offices, BLR, N L R C or its regional

branches, N W P C and its regional wage boards, office of the Secretary, Voluntarily
Arbitrator, Court of Appeals, or the Supreme Court
( 5 ) execution and enforcement of final orders, decisions, resolution or
awards in no. 4 above.
( 6 ) any issue covered by a n o . strike c o m m i t m e n t in a duly executed
C B A , (cf: N C M B , Manual of Procedures in the settlement and Disposition of
Conciliation and Preventive Mediation Cases)
Inter-union and intra-union disputes and violation of labor standards laws
are not valid grounds for strike or lockout. T h e law provides for med-arbitration
procedures in the disposition of inter- and intra-union disputes, and labor
1
enforcement in the case of labor standards violations.
A strike which is p r o v o k e d or p r o l o n g e d by a refusal to bargain or a
discriminatory discharge or any o t h e r sort of unfair labor practice by the
2
e m p l o y e r is called "unfair labor practice strike."
A strike held to force wage or other concessions from the employer which
3
he is not required by law to grant is called "economic strike."
To distinguish e c o n o m i c strike from unfair labor practice strike is not
pointless because upon it depends the applicability of certain requirements
or strikers' rights. For instance, the cooling-off p e r i o d required for bargaining
deadlock strike (which usually involves e c o n o m i c demands) is thirty (30) days;
a U L P strike, on the other hand, requires only fifteen (15) days.

12.1 The Conversion Doctrine

Problems arise because it is not always clear whether the strike is "economic"
o r "ULP." A strike may start as e c o n o m i c and, as it progresses, b e c o m e ULP, or
vice-versa.
In o n e case, for instance, the strike staged by the union was initially meant
to c o m p e l the company to grant it certain e c o n o m i c benefits set forth in its
proposal for collective bargaining. But the strike changed its character from the
time the company refused to reinstate the complainants because of their union
4
activities although it agreed to readmit the others.
T h e Harvardian labor law authorities explain further the conversion
doctrine:

' D O L E Guidelines Governing Labor Relations, October 19, 1987.

2
See T h e La Mallorca Local 101 vs. T h e La Mallorca Taxi, CIR, Case N o . MC-4,
September 11, 1953.
'Consolidated Labor Association of the Philippines vs. Marsman Co., et al, G.R.
Nos. L-17038 and L-17057, July 31, 1964.
Ibid.
571
 LABOR RELATIONS
ARTS. 263-265

T h e issue of determining the cause of the strike becomes complicated

when a strike is initiated over bargaining demands but during the course
of the strike, the employer commits unfair labor practices, e.g., refusing
to bargain with a certified union or discriminatorily discharging a union
supporter. Such an employer unfair labor practice will be held to "convert"
the strike if it can be determined that the employer's action p r o l o n g e d
the strike beyond the date it would have terminated in due course as an
economic strike. In Laid Law Corp. case (171 NLRB 11366), the N L R B
applied the "conversion doctrine" when it ruled that what had begun as
a strike over bargaining demands became an unfair labor practice when
it was p r o l o n g e d by the union's vote to protest the employer's outright
termination of strikers seeking reinstatement. T h e Board applied the usual
rule that strikers who are permanently replaced during the economic phase
of the strike are not entitled to immediate reinstatement, while strikers
replaced after the date of conversion are. (Archibald C o x , Derek Curtis
Bok, and Robert A. German, Cases and Materials on Labor Law, Foundation
Press, N e w York, 1977, p. 981.)

12.2 Lawful Purpose: Strike Incident to Collective Bargaining

T h e Industrial Peace A c t [and now the L a b o r C o d e ] recognizes the right
of the employees to strike for the purpose of collective bargaining and other
mutual aid or protection. T h e p r o m o t i o n of the welfare of the strikers should
1
therefore be the aim of a valid strike.
It is unquestioned that laborers have the right, through concerted action
by means of strike, to attempt to secure the attainment of any of the lawful
objects for which they may combine. It is settled that w o r k m e n have the right to
organize for the purpose of securing improvement in the terms and conditions
of labor, and to quit work or to threaten to quit work as a means of compelling
or attempting to compel employers to accede to their demands for better terms
and conditions. Indeed, the reason for a strike may be based upon any o n e or
more of the multifarious considerations which in g o o d faith may be believed to
2
tend toward the advancement of the employees.
Without attempting an enumeration of all the grounds which will lawfully
justify members of an organization in refusing, as a body and by prearrangement,
to work, it may be stated that laborers may strike to better their w o r k i n g
conditions, to secure an advance in wages or shorter periods of labor, to secure
reemployment of a m e m b e r of a union d e e m e d to have b e e n i m p r o p e r l y
discharged, to secure the discharge of a fellow e m p l o y e e d e e m e d obnoxious,
3
or to obtain improved relations with their employers.

Caltex Philippines, Inc. vs. Philippine Labor Organization-Caltex Chapter,

G.R. N o . 1^4758, May 31, 1953.
2
31 Am. Jur., Sec. 204, pp. 934-935
Ibid.

572
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
On the other hand, strikes for the following purposes are illegal: to procure
the commission of an unlawful or criminal act, to compel an employer to j o i n a
1
boycott, or to overthrow the government.

Bargaining Deadlock
San Miguel Corporation, petitioner vs. National Labor Relations Commission,
Second Division, and San Miguel Corporation Employees Union (SMCEU) PTGWO,
respondents, G.R. N o . 99266, March 2, 1999 —
Collective Bargaining Deadlock is defined as "the situation between the labor
and the management of the company where there is failure in the collective bargaining
negotiations resulting in a stalemate." T h e situation is non-existent in the present case
since there is a Board assigned on the third level (Step 3) of the grievance machinery
to resolve the conflicting views of the parties. Instead of asking the Conciliation
Board composed of five representatives each from the company and the union, to
decide the conflict, petitioner declared a deadlock, and thereafter, filed a notice of
strike. For failing to exhaust all the steps in the grievance machinery and arbitration
proceedings provided in the Collective Bargaining Agreement, the notice of strike
should have been dismissed by the N L R C and private respondent union ordered to
proceed with the grievance and arbitration proceedings.
In abandoning the grievance proceedings and stubbornly refusing to avail of
the remedies under the CBA, private respondent [union] violated the mandatory
provisions of the collective bargaining agreement.
Petitioner [employer] having evinced its willingness to negotiate the fate of
the remaining employees affected, there is no ground to sustain the notice of strike
of the union.

12.2a Legality of Strike N o t Dependent U p o n Ability of Management to

Grant Demands
T h e demands that gave rise to the strike may not properly be granted under
the circumstances of this case, but that fact should not make said demands and
the consequent strike illegal. T h e ability of the Company to grant said demands
is o n e thing, and the right of the laborers to make said demands is another thing.
T h e latter should be kept inviolate. T h e r e are adequate instrumentalities which
2
may be resorted to in case of excesses.
In a similar case, the union presented certain demands to the company
referring to wage differentials, retirement and insurance benefits, free medical
treatment and hospitalization with pay, Christmas bonus, bonus to drivers,
vacation and sick leave, overtime pay, reinstatement of certain employees, gratuity

x
31 A m . Jur., Sec. 204, pp. 934-935.
Central Vegetable Oil Manufacturing vs. Philippine Oil Industry Workers
Union, G.R. N o . L-4061, May 28, 1952.

573
 LABOR RELATIONS
ARTS. 263-265

to pre-war employees and back pay during the Japanese occupation. In a second
letter, the union gave the manager of the company forty-eight hours to decide
on the demands, with the admonition that the union would declare a strike. T h e
company failed to meet the union's demands; consequently, the union struck.
In holding that the strike was legal, the Supreme Court said:
These demands, if granted, would certainly tend to improve the
conditions of the laborers and employees affected, and cannot be said
to be trivial, much less illegal. But whether the same are unreasonable
or unjust is a matter to be decided after p r o p e r consideration. If said
demands cannot be granted for being unjust or unreasonable, the only
consequence, in the appropriate words of the Court of Industrial Relations
en banc, should 'be their rejection and not the punishment of the workers
who presented them.' To make the legality or illegality of strikes dependent
solely on whether the demands of laborers may or may not be granted, is in
effect to outlaw altogether an effective means for securing better working
conditions. (Caltex Philippines, Inc. vs. Philippine Labor Organization-Caltex
Chapter, 93 Phil. 295.)

12.3 Lawful Purpose: Strike Against Employer's Unfair Labor Practice

U n i o n busting, or interference with the formation of a union, constitutes
an unfair labor practice act (Article 248, L a b o r C o d e ) , hence a valid g r o u n d for
1
the declaration of strike. A n y U L P act under Article 248 is strikeable.

Davao Free Workers Front vs. CIR, et al., 60 SCRA 408 —

Facts: Following the expiration of the CBA, the petitioner union submitted
bargaining proposals for renewal of the CBA to the Davao branch of respondent
company. Instead of responding to such demands, the management sponsored the
organization of a new labor union, required the members of petitioner union to j o i n
the new union, negotiated and bargained with the new union, and executed with
the latter a new CBA. When the members of petitioner union refused to accept the
new CBA, management locked out its members. Provoked by such acts, petitioner
union called for a strike. Is such strike valid?
Ruling: Such strike is valid, for clearly it was declared by the union as a measure
of self-defense and protection against the employer's unfair labor practices.

Phil. Steam Navigational Co. vs. Phil. Marine Officers Guild [PMOG], G.R. Nos.
L-20667 and L-20669, October 29, 1965 —
T h e respondent court has found that P H I L S T E A M ' s interrogation of its
employees had in fact interfered with, restrained and coerced the employees in the
exercise of their rights to self-organization.

'Zamboanga Wood Products, Inc. vs. National Labor Relations Commission,

G.R. N o . 82088, October 13, 1989.

574
 STRIKES A N D LOCKOUTS
[Part 1. Regulations and Limits of Strike ARTS. 263-265
and Lockout]

The rule in this jurisdiction is that subjection by the company of its employees
to a series of questionings regarding their membership in the union or their union
activities in such a way as to hamper the exercise of free choice on their part
1
constitutes unfair labor practice. P H I L S T E A M ' s aforestated interrogation squarely
falls under this rule.
[ T h e Union's] subjection to vilification is likewise borne out by substantial
evidence. P H I L S T E A M ' s purchasing agent told Feliciano on August 6, 1954 that
P M O G was a "money-asking union," that "all the members of the FFW are low people"
and that CSA "is a g o o d union."
Nonetheless, P H I L S T E A M would contend that PMOG's strike was illegal, for
the reason that the purpose of the strike was illegal. It is argued that P M O G staged
a strike so as to compel P H I L S T E A M to bargain collectively with it notwithstanding
that it was as minority union. First of all, the statement that P M O G is a minority union
is not accurate. Respondent court precisely found that there has been no proof as
to which union, P M O G , CSA or any other, represented the majority of PHILSTEAM
employees. For lack of showing that CSA represented the majority it declared the
PHILSTEAM-CSA's collective bargaining agreement null and void. It stated that the
parties to the dispute were welcomed to file a petition for certification election to
decide this point.
Secondly, P M O G ' s strike was in retaliation to P H I L S T E A M ' s unfair labor
practice rather than, as P H I L S T E A M would picture it, an attempt to undermine
the PHILSTEAM-CSA agreement. For said agreement was signed only on August
24, 1954 but P M O G filed its notice of strike as early as July 17, 1954. PHILSTEAM's
unfair labor practice, consisting in its interference with the employees' rights to
self-organization started on June 29, 1954. It was because of said unlawful act of the
employer that the union struck. T h e notice of strike, in fact, mentioned company
unfair labor practice as reason for the intended strike.
From the foregoing it follows that P M O G ' s strike was for a lawful purpose and,
therefore, justified.

12.4 Lawful Purpose: U . L . P . Strike in G o o d Faith

T h e r e are two tests in determining the existence of an unfair labor practice
strike:
(1) Objectively, when the strike is declared in protest of unfair labor
practice which is found to have been actually committed; and
( 2 ) Subjectively, when a strike is declared in protest of what the union
b e l i e v e d to be unfair labor practices c o m m i t t e d by management, and the
circumstances warranted such belief in g o o d faith, although found subsequently
2
as not committed.

'Scoty's Department Store vs. Micaller, 52 O.G. 5119.

'^Norton and Harrison Co. Labor Union vs. Norton and Harrison Co., 29 SCRA
310,315.
575
 LABOR RELATIONS
ARTS. 263-265

It is not even required that there be in fact an unfair practice committed

by the employer. It suffices if such a belief in g o o d faith is entertained by labor
1
as the inducing factor for staging a strike.
If the management p e r f o r m e d acts (like taking disciplinary measures
against certain union members) which, under the circumstances, the strikers
believed were unfair labor practices on the part of the management, although
they were not, the court ruled that the strike cannot be held illegal. However,
the union's belief needs some rational basis.

Ferrer vs. Court of Industrial Relations, N o . L-24267, May 31, 1966 —

Facts: In its negotiations with employer, the union had pressed for a union
security clause. When the draft of the proposed contract did not include a stipulation
for a closed shop, the union disauthorized its representatives from signing the
same. Thereupon, management circularized the employees informing them of the
union's refusal to sign the contract. This circular apparently provoked a number of
resignations from the union. Believing that management had been undermining the
union, the latter filed a notice of strike and then declared a strike.
Ruling: T h e surrounding circumstances were such that petitioners were
reasonably justified in believing that the respondent's act constituted unfair labor
practices and that petitioner had to strike forthwith in order to arrest the evil effects
of said practices upon the union and its members. We hold that the strike in question
had been called to offset what petitioners were warranted in believing in g o o d faith
to be unfair labor practices on the part of the management, that petitioners were
not bound to wait for the expiration of thirty (30) days [now 15 days under the
Labor Code] from notice of strike before staging the same, that said strike was not,
accordingly, illegal and that the strikers had not thereby lost their status as employees
of respondents herein. Upon the other hand, considering that the latter have been
absolved from the charge of unfair labor practice, the reinstatement of the strikers
must be without back pay.

T h e above Ferrer ruling was reiterated in Norton and Harrison where the
Court said:
Since Arcaina was the former president of the union and his activities
for and in the union — which were well-known — had continued even
after his presidency, as a m e m b e r of said union, his swift dismissal without
benefit of the required procedure, for an infraction of the rule of the
company that resulted in no appreciable damage to the latter, could not
but reasonably lead the union and its members into believing that said dismissal
was in reality predicated upon his union activities.

l
Shel\ Oil Workers' Union vs. Shell Company of the Philippines, Ltd., 39 SCRA
289.

576
 STRIKES A N D LOCKOUTS ARTS 9fi*L9fiK
4 4 0 3
[Part 1. Regulations and Limits of Strike
and Lockout]

x x x the act of the company in dismissing Arcaina, done without the

required fair hearing and, therefore, not tenable even under strict legal
ground, induced the union and its members to believe that said company
was guilty of unfair labor practice, although viewed now in retrospect said
act would fall short of unfair labor practice. Since the strike of the union
was in response to what it was warranted in believing in g o o d faith to be
unfair labor practice on the part of management, said strike, following the
Ferrer ruling, did not result in the termination of the striking members'
status as employees, and, therefore, they are still entitled to reinstatement
but without backwages. (Orton & Harrison Co. and Jackbilt Concrete Blocks
Co. Labor Union vs. Norton & Harrison Co. and Jackbilt Concrete Blocks Co.,
L-18461, February 1, 1967.)

12.4a The "Good-Faith Strike" Doctrine Retraced and Reiterated

People's Industrial and Commercial Employees and Workers Org. (FFW) vs. Peoples
Industrial and Commercial Corp., G.R. N o . 37687, March 15, 1982 —
Facts: On April 5,1965, the president of P I C E W O , sent to the management a
set of proposals for a collective bargaining agreement. T h e management on April
13, 1965 replied that the formal reply to the proposals could not be made within
the reglementary period because they would submit the said proposals to their legal
counsel for further study and instead their reply would be made on April 19, 1965.
No reply was made on that date. On April 29, 1965, individual petitioners were
dismissed. A strike was staged the next day. O n e day after the petitioners struck, a
new collective bargaining agreement was signed by the respondent company and
the F T L O .
T h e respondent company knew that a new union was formed, composed
of about 85% of the total number of its employees. It was furnished a copy of the
certification that the majority of the F T L O members are forming a new union called
P I C E W O . T h e set of bargaining proposals was in the name of the new union. While
a company cannot be forced to sit down and bargain collectively with the new union
since it had no notice of the union's official capacity to act as the bargaining agent,
the respondent company cannot deny that it had factual knowledge of the existence
of a majority union. It could have asked for further proof that the new union was
indeed the certified bargaining agent. It did not. Instead, it dismissed individual
petitioners and signed a new CBA the day after the expiration of the old CBA, on the
pretext that F T L O was presumed to be the certified bargaining agent. Such pretext
does not seem justified nor reasonable in the face of the established fact that a new
union enjoyed a majority status within the company.
On the belief that the respondent company refused to bargain collectively with
PICEWO, individual petitioners together with the other members staged a strike.
Ruling: We have in several cases ruled that a strike may be considered legal
when the union believed that the respondent company committed unfair labor acts
and the circumstances warranted such belief in good faith although subsequently
such allegation of unfair labor practices are found out as not true.

577
 LABOR RELATIONS
ARTS. 263-265

The Ferrer ruling was also upheld in Shell Oil Workers Union vs. Shell Company of
the Phil, Ltd. (L-28607, May 31,1971), where We stated that " ( i ) t is not even required
that there be in fact an unfair labor practice committed by the employer. It suffices,
if such a belief in good faith is entertained by labor as the inducing factor for staging
a strike. So it was clearly stated by the present Chief Justice while still an Associate
Justice of this Court: 'As a consequence, we hold that the strike in question had
been called to offset what petitioners were warranted in believing in g o o d faith to be
unfair labor practices on the part of Management, that petitioners were not bound,
therefore, to wait for the expiration of thirty (30) days from notice of strike before
staging the same, that said strike was not, accordingly, illegal and that the strikers
had not thereby lost their status as employees of respondents herein.'"
The Ferrer ruling was promulgated in 1966, that in the Shell Oil case in 1971.
In 1980, there was the case of Pepito vs. Secretary of Labor, L-49418, February 29,1980,
where the petitioner [employee] was separated for having been implicated in a
pilferage case by a co-employee but was later absolved from the charge. T h e Supreme
Court thru Chief Justice Fernando ruled that the cause for his dismissal was proved
nonexistent or false and thus ordered his reinstatement with three years backwages,
without deduction and qualification.
We adopt the Pepito ruling and we hold that the petitioners in the case at bar
are entitled not only to reinstatement but also to three years backwages without
deduction and qualification. This is justified and proper since the strike was proved
and We held the same to be not illegal but was induced in the honest belief that
management had committed unfair labor practices and, therefore, the cause of their
dismissal from employment was nonexistent. It is clear that management gave cause
or reason to induce the staging of the strike by improperly refusing to recognize the
new union formed by petitioners. It has been twelve (12) years since petitioners were
dismissed from their employment and in their destitute and deplorable condition,
to them the benign provisions of the New Constitution for the protection of labor,
assuring the rights of workers to self-organization, collective bargaining and security
of tenure would be useless and meaningless. Labor, being the weaker in economic
power and resources than capital, deserves protection that is actually substantial and
material.

Pepsi-Cola Labor Union vs. NLRC and Pepsi-Cola Bottling Co., G.R. N o . L-58341,
June 29, 1982 —
Facts: A certification election was held at the Pepsi plant in Naga City. T h e
Union got 128 out of 130 votes cast by employees within the bargaining unit. T h e
losing group contested the election at various levels. During the pendency of the
election contest, the "winning" Union filed a notice of strike with the MOLE's Regional
Office on the ground that Pepsi refused to bargain with it. Pepsi countered that it
was willing to bargain but there was yet no final decision on the appeal of the losing
union. The Med-Arbiter issued a resolution dismissing the notice of strike for being
premature with a warning that any strike staged under the notice of strike shall be
deemed illegal.

578
 STRIKES A N D LOCKOUTS ARTS 9fi3 9RZ
[Part 1. Regulations and Limits of Strike
and Lockout]

Disregarding the resolution, the Union mounted a strike. Pepsi filed a complaint
for unfair labor practice and illegal strike. The Labor Arbiter declared the strike illegal
with consequent forfeiture of employment of the Union officers and members.
Ruling: T h e Supreme Court reversed the finding of strike illegality and said:
"It is now settled 'that a strike does not automatically carry the stigma
of illegality even if no unfair labor practices were committed by the employer.
It suffices if such a belief in g o o d faith is entertained by labor as the inducing
factor for staging a strike.'... A n d it has also been held that the members of a
union cannot be held responsible for an illegal strike on the sole basis of such
membership or even on account of their affirmative vote authorizing the same.
They become liable only if they actually participated therein. (Esso Philippines,
Inc. vs. Malayang Manggagawa sa ESSO [MME], G.R No. L-36545, January 26,
1988, 75 SCRA 73.)
"In the case at bar, although the strike was indeed illegal, we cannot
discount the presence of g o o d faith on the part of the rank-and-file members
of the union considering that in the certification election the union obtained
128 out of the 130 votes cast so that they could justifiably consider it as their
sole bargaining representative. Moreover, there is no proof that the members
of the union all participated in the illegal strike. T h e ones who deserve what
Justice Barredo calls 'capital punishment' in the Esso Philippines case, supra,
are the officers of the union who staged the strike in defiance of the ruling of
Med-Arbiter Caayao."

12.4b "Good-Faith Strike" Doctrine Applied Even to a Strike without Prior

Notice and Despite a No-Strike Clause
Philippine Metal Foundries, Inc. vs. Court of Industrial Relations, 90 SCRA 135
(May 15, 1979) —
Facts: T h e Union and the Company had an existing collective bargaining
agreement containing a no-strike no-lockout clause and providing for a grievance
procedure for the resolution of grievances.
During the effectivity of the agreement, the union president invited the
management representatives to a conference to thresh out certain employee
grievances, such as the hiring of casual workers without giving preference to previously
laid-off workers, poor toilet facilities, and the prolonged lay-off of workers who
should have been recalled after two months. Hours after the submission of the union
invitation, the union president received a letter from the management advising him
of his dismissal on account of chronic absenteeism.
Without any prior notice, the union declared a strike in protest against the
dismissal of the union president. T h e Company assailed the legality of the strike
before the CIR on the ground that it was declared without prior notice and was m
violation of the no-strike clause of the collective bargaining agreement. The union
contended that the strike was in protest against the dismissal of its president for his
union activities and need not have been preceded by any notice.

579
 LABOR RELATIONS
ARTS. 263-265

The industrial court found that while the union president had in fact incurred
several absences, these infractions were apparently disregarded by management and
that the real cause for the dismissal was his union activities.
Ruling: Relying on these findings of fact, the Supreme Court declared that the
strike was legal by saying:
"In determining whether a discharge is discriminatory, the true reason
for the discharge must be established. It has been said that while union activity
is no bar to a discharge, the existence of a lawful cause for discharge is no
defense if the employee was actually discharged for union activity... There is
no question that Celestino Baylon incurred numerous absences from January
to September 1963. Had the Company wanted to terminate his services on
the ground of absences, it could have done so, pursuant to Article V of the
Collective Bargaining Agreement as early as March 1963 when he incurred
twelve consecutive absences without permission. Its failure to do so shows that
the infractions committed by Baylon were disregarded...
"It is admitted by petitioner that it accepted the invitation of Baylon for
a grievance conference on October 5, 1963. Yet, two hours after it accepted
the letter of invitation, it dismissed Baylon without prior notice a n d / o r
investigation. Such dismissal is undoubtedly an unfair labor practice committed
by the Company. Under these facts and circumstances, Baylon and the members
of the union had valid reasons to ignore the scheduled grievance conference
and declare a strike. When the union declared a strike in the belief that the
dismissal of Baylon was due to his union activities, said strike was not illegal. It
is not even required that there be in fact an unfair labor practice committed by
the employer. It suffices, if such belief in g o o d faith is entertained by labor as
the inducing factor for staging a strike. T h e strike staged by the union in this
case cannot be considered a violation of the 'no-strike' clause of the collective
bargaining agreement because it was due to the unfair labor practice of the
employer. Moreover, a no-strike clause prohibition in a collective bargaining
agreement is applicable only to economic strikes.

12.4c Even "Good-Faith Strike" Requires Rational Basis

T h e "good-faith strike" doctrine does not tolerate groundless strike. It does
not excuse the union's non-presentation of substantial evidence to support its
allegation of U L P by the employer.

Tiu and Hayuhay vs. NLRC and Republic Broadcasting System, G.R. N o . 123276,
August 18, 1997 —
Facts: T h e RBS management issued guidelines intended to minimize overtime
expenses. Management had invited comments from the union regarding the
draft guidelines, but the union did not submit any. Later on, when the guidelines
were put into effect, the union filed a notice of strike, alleging that the guidelines
violated CBA provisions. In the notice of strike it also charged the management with
interference, coercion, and discrimination against the union. Management requested

580
 STRIKES A N D LOCKOUTS ARTS.
[Part 1. Regulations and Limits of Strike
and Lockout]

for particulars of the alleged ULP. T h e union gave no particulars, and then went on
strike. When charged with holding an illegal strike, the union offered as defense its
belief in good faith that U L P acts were being committed by management. T h e same
argument was raised up to the Supreme Court.
T h e Court rejected the argument.
Ruling: We find no merit in the petition at bar.
T h e notice of strike filed by the union before the N C M B on July 12, 1991
contained general allegations that RBS management committed unfair labor practices
by its gross violation of the economic provisions in their collective bargaining
agreement and by alleged acts of coercion, union interference and discrimination
which amounted to union busting. It is the union, therefore, who had the burden
of proof to present substantial evidence to support these allegations.
Significantly, the union had two (2) conciliatory meetings arranged by the
N C M B at which it could have substantiated these additional allegations. However, the
fact that it had submitted the results of the strike vote even ahead of the conciliatory
meetings, and continuously refused to substantiate its allegations in its notice of
strike thereafter, lends credence to the N L R C ' s observation that these charges were
indiscriminately hurled against RBS to give a semblance of validity to its notice of
strike.
Petitioners (union officers) plead that their contemporaneous acts, reckoned
from their June 26,1991 letter to RBS up to the actual strike held on August 2,1991,
were justified based on its honest belief that RBS was committing unfair labor practices.
Stated otherwise, "the presumption of legality ( o f the strike) prevails even if the
1
allegations of unfair labor practices are subsequently found out to be untrue."
T h e Court is not unmindful of this rule, but in the case at bar the facts and the
evidence did not establish even at least a rational basis why the union would wield a
strike based on alleged unfair labor practices it did not even bother to substantiate
during the conciliation proceedings. It is not enough that the union believed that
the employer committed acts of unfair labor practice when the circumstances clearly
negate even a prima facie showing to warrant such a belief.
T h e Court affirms the factual finding of the labor arbiter and the N L R C that
"there was no strikeable issue to support respondent's subject strike."
Even assuming arguendo that in the issuance of said guidelines RBS may have
violated some provisions in the collective bargaining agreement, there was no palpable
showing that the same was a flagrant and/or malicious refusal to comply with its economic
2
provisions. Hence, the law mandates that said violation "shall not be considered unfair
labor practice and shall not be strikeable."
T h e bottom line is that the union should have immediately resorted to the
grievance machinery established in their agreement with RBS. In disregarding said
procedure, the union leaders who knowingly participated in the illegal strike "have

'Citing Master Iron Labor Union vs. N L R C , 219 SCRA 47.

2
Book V, Implementing Rules of die Labor Code, Rule X I I I , Section 1.

581
 LABOR RELATIONS
ARTS. 263-265

acted unreasonably, and, as such, the law cannot interpose its hand to protect them
1
from the consequences of their behavior."

12.4d Do the Procedural Requirements Apply even to a U L P Strike in

Good Faith?
National Federation of Labor, et al. vs. NLRC and Permex Producer and Exporter
Corp., et al, G.R. N o . 113466, December 15, 1997 —
In the case at bar, no notice of strike, as required by Article 263 ( c ) was filed
by NFL prior to the strike on January 25 and 26. No prior notice of the taking of a
strike vote was furnished the N C M B , nor was the seven-day strike ban after the strike
vote observed. Instead, the workers immediately barricaded company premises in
the afternoon of January 25, 1996, completely disregarding the procedural steps
prescribed by Article 263(c) and ( f ) .
As for the strike commenced on February 11, only six days had elapsed from
the filing of the Notice to Strike on February 5, 1993. In addition, various illegal
acts were committed by the strikers during said strike. It can be gleaned from the
record that the strikers destroyed company property and intimidated and harassed
non-striking workers in violation of Article 264(c) of the Labor Code. Likewise,
barricading, chaining and padlocking of gates to prevent free ingress and egress into
company premises are also violations of the self-same article.
Arguing that despite its failure to comply with the statutory requirements
necessary for a valid strike, N F L asserts that the same can be declared legal for it was
done in good faith, citing the cases of People s Industrial and Commercial Employees and
Workers Organization (FEW) vs. Peoples Industrial and Commercial Corp., 112 SCRA 440
(1982) and Philippine Metal Foundries, Inc. vs. Court of Industrial Relations, 90 SCRA 135
(1979). The reliance is misplaced. People's Industrial did not rule that the procedural
steps can be dispensed with even if the union believed in g o o d faith that the company
was committing an unfair labor practice. While it is true that Philippine Metal held
that a strike cannot be declared as illegal for lack of notice, however, it is important
to note that said case was decided in 1979. At this juncture, it must be stressed that
with the enactment of Republic Act N o . 6715 which took effect on March 21, 1989,
the rule now is that such requirements as the filing of a notice of strike, strike vote,
2
and notice given to the Department of Labor are mandatory in nature.
Thus, even if the union acted in g o o d faith in the belief that the company
was committing an unfair labor practice, if no notice of strike and a strike vote were
3
conducted, the said strike is illegal.

'National Labor Union vs. Philippine Match Factory, 70 Phil. 300; United
Seamen's Union vs. Davao Shipowner's Association, 20 SCRA 1226.
2
Lapanday Workers Union vs. N L R C , 248 SCRA 95 [1995].
3
First City Interlink Transportation Co. vs. The Honorable Secretary Ma. Nieves
Roldan-Confesor, G.R. N o . 106316, May 5, 1997.

582
 STRIKES AND LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
12.5 Lawful Purpose: Strike to Compel Recognition of and Bargaining
with the Majority Union
Caltex Filipino Managers and Supervisors Association vs. CIR, G.R. Nos. L-30632-
33, April 11, 1972 —
Facts: The Association sent a letter to the Company asking for recognition as the
exclusive bargaining representative of managers and supervisors in the Company. The
Company asked the Association for position listings to be included in the bargaining
unit. When the Association did not submit the list, the Company initiated certification
proceeding in the industrial court.
subsequently, the Association filed a notice of strike based, among other
grounds, on the Company's refusal to bargain in g o o d faith and act on the
Association's demands. T h e Association eventually declared a strike, the legality of
which the Company questioned before the industrial court. The Association also
filed an unfair labor practice complaint against the Company.
T h e industrial court declared the strike illegal on the ground that it was done
to compel the Association's recognition.
Ruling: On the issue of strike illegality, the Supreme Court, reversing the
decision, said: "In addition, from the voluminous evidence presented by the
Association, it is clear that the strike of the Association was declared not just for
the purpose of gaining recognition as concluded by respondent court but also for
bargaining in bad faith on the part of the Company and by reason of unfair labor
practices committed by its officials. But even if the strike was really declared for the
purpose of recognition, the concerted activities of the officers and members of the
Association in this regard may not be said to be unlawful nor the purpose thereof as
trivial. Significantly, in the voluntary return-to-work agreement entered into between
the Company and the Association, thereby ending the strike, the Company agreed to
recognize for membership in the Association the position titles mentioned in Annex
B of said agreement. This goes to show that striking for recognition is productive of
g o o d result insofar as a union is concerned."
We are convinced from the records that on the whole the means employed by
the strikers during the strike, taking into account the activities of the Company and
the nonstriking employees on the same occasion, cannot be labelled as unlawful;
in other words, the Company itself, through the provocative if not unlawful acts of
the nonstriking employees, is not entirely blameless for the isolated incidents relied
upon by the respondent court as tainting the picketing of the strikers with illegality.
Nowhere is there serious claim on the part of the Company that it entertains
real doubt as to the majority representation of the Association. Consider further that,
admittedly, the certification election proceeding for the Cebu supervisors union in
the Company had been pending for six years already. From all appearances, therefore,
and bearing in mind the deliberate failure of the Company to attend the conciliation
meetings ... it is clear that the Company employed dilatory tactics doubtless to
discredit CAFIMSA before the eyes of its own members and prospective members
as an effective bargaining agent, postpone eventual recognition of the Association,
and frustrate its efforts towards securing favorable action on its economic demands.

583
 LABOR RELATIONS
ARTS. 263-265

12.6 Unlawful Purpose: Strike for Union Recognition Without Having

Proven Majority Status
Lest confusion arise, it should be emphasized that the legal way to secure
union recognition is not through a strike. It is through a certification election,
or voluntary recognition by the employer if there is no doubt as to the union's
majority status, as we have seen in the chapter on Collective Bargaining. This
is why Article 263(b) prohibits a strike due to an inter-union or intra-union
dispute. If two or m o r e unions are contending for majority status and eventually
for the right to be recognized as the exclusive bargaining representative, such
contest should be resolved through election and not through a work stoppage.
This means, in other words, that recognitional strike has no place in our labor
relations law.
But where the majority status of a union is not in doubt (as in the above
Caltex case), not in dispute, or is certainly established and, despite this, the
employer still refuses to bargain, then the situation is o n e of refusal to bargain
which is unfair labor practice act by the employer; in this situation the union, if
it strikes, will be staging a valid U L P strike, assuming that the other requirements
are complied with.
No confusion n e e d arise in distinguishing recognition strike from U L P
strike if o n e remembers the three jurisdictional preconditions to collective
bargaining. To recall, these are: 1) possession of majority status; 2) p r o o f of
1
majority representation; and 3) a d e m a n d to bargain. If these or any o n e of
these conditions is not present, it will be premature for a union to h o l d a strike
to compel bargaining; in fact, such a strike is not to c o m p e l bargaining but to
compel recognition. Such strike finds no support in present law. This is illustrated
in the case of Lakas ng Manggagawang Makabayan vs. Marcelo Enterprises already
discussed in the chapter on "Collective Bargaining C o n c e p t and Procedure."

Association of Independent Unions in the Philippines (AIUP),Joel Densing, et al. vs.

NLRC, Cenapro Chemical Corporation, et al, G.R. N o . 120505, March 25,1999 —
Facts: Densing et al were casual employees of C E N A P R O which had a collective
bargaining agreement with C E N A P R O Employees Association ( C C E A ) . Their CBA
excluded casual employees from membership in the incumbent union.
The casual employees who have rendered at least one to six years of service
sought regularization of their employment. When their demand was denied, they
formed themselves into an organization and affiliated with the Association of
Independent unions in the Philippines ( A I U P ) . Thereafter, A I U P filed a petition
for certification election, which petition was opposed by the company. T h e CCEA
anchored its opposition on the contract bar rule.
On May 4 and July 3,1990, the union filed a notice of strike, citing unfair labor
practice, more specifically coercion of employees and systematic union busting.

•See Loy vs. N L R C , supra, in the chapter on "Collective Bargaining Concept

and Procedure."

584
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
On July 23, 1990, the union staged a strike, in the course of which the union
perpetrated illegal acts. T h e strikers padlocked the gate of the company, barricaded
the areas fronting the gate and prevented non-striking employees from reporting to
work. Because of such illegal activities, the company filed a petition for injunction
with the N L R C , which granted a Temporary Restraining Order ( T R O ) , enjoining
the strikers from doing further acts of violence, coercion, or intimidation and from
blocking free ingress and egress to the company premises.
T h e company filed a complaint for illegal strike while the union complained
of unfair labor practice and illegal lockout.
Ruling: T h e N L R C correctly ruled that the strike staged by petitioners was
in the nature of a union-recognition-strike. A union-recognition-strike, as its legal
designation implies, is calculated to compel the employer to recognize one's union,
and not the other contending group, as the employees' bargaining representative
to work out a collective bargaining agreement despite the striking union's doubtful
majority status to merit voluntary recognition and lack of formal certification as
the exclusive representative in the bargaining unit. It is undisputed that at the time
the petition for certification election was filed by AIUP, the petitioner union, there
was an existing CBA between the respondent company and CCEA, the incumbent
bargaining representative of all rank and file employees. T h e petition should have
not been entertained because of the contract bar rule. When a collective bargaining
agreement has been duly registered in accordance with Article 231 of the Labor Code,
a petition for certification election or motion for intervention may be entertained
only within sixty (60) days prior to the expiry date of the said agreement.

12.6a May a Minority Union Strike?

By law the right to be the exclusive representative of all the employees in an
appropriate collective bargaining unit is vested in the labor union "designated or
selected" for such purpose "by the majority of employees" in the unit concerned.
W h e n a union, after winning in an election, is certified as the exclusive bargaining
representative, any other union who participated in the election thereby becomes
a minority union. A minority union cannot demand collective bargaining with
the employer because such right properly belongs to the union that commands
the majority. Moreover, the defeated union cannot lawfully undertake a strike
against the employer; if o n e is being d o n e , it must c o m e to a halt. Neither can
it picket to c o m p e l bargaining. ' T o allow said union to continue picketing for
the purpose of drawing the employer to the collective bargaining table would
obviously be to disregard the results of the consent election. To further permit
the union's picketing activities would be to flaunt at the will of the majority."
After a union has been certified as the bargaining representative, a strike by a
minority union to c o m p e l an employer to bargain with it is unlawful. No labor
dispute can exist between a minority union and an employer in such a case.

•United Restauror's Employees and Labor Union-PAFLU vs. Hon. Torres and
Delta Development Corp., N o . L-24993, December 18, 1968.

585
 LABOR RELATIONS
ARTS. 263-265

If a union, after defeat in a certification election, stages a strike to c o m p e l

recognition as the bargaining agent, such strike is clearly unlawful.
But this is not to say that the minority union is helpless or an easy prey.
Although it cannot strike it can engage in peaceful concerted activity short of
strike and it can file a U L P complaint. This has been explained in the topic Duty
of Fair Representation in the comments to Articles 256 to 259.

12.6b Strike held to Compel Recognition while Case is Unresolved,

Illegal
Luzon Marine Department Union vs. Arsenio Roldan, et al., 86 Phil. 507 (1950) —
Facts: The Luzon Marine Department Union presented to Luzon Stevedoring
Company, Inc. a petition containing twelve demands, including recognition with right
to collective bargaining. The Union also filed with the CIR a petition asking that the
Company be directed to comply immediately with all these demands. Another union,
the UOEF, intervened in the proceedings, claiming that the demand for recognition
and collective bargaining would violate its agreement with the Company under which
the UOEF was recognized as the employees' collective bargaining representative.
While the proceeding before the CIR was still unresolved, the members of the Luzon
Marine Department Union declared a strike, the legality of which was assailed by the
Company.
Ruling: Counsel for the petitioner insists before this Court that the strike in
question was called for a lawful purpose. They contend that the evidence clearly
shows that the members of the petitioning Union struck 'in order to show the
Company and the UOEF that they had more than thirty members, and due to
the threats of Alejo Villanueva, who threatened to dismiss the laborers from the
Company.'
"In our opinion, neither of these motives or both of them justified such a
drastic measure as a strike, which necessarily entails pernicious consequences
not only to the Company but also to the laborers themselves and the public.
It was of no avail to the petitioner to strike to show to the company and the
intervenor UOEF that the petitioner had more than thirty members, because
the question of whether or not the petitioner had more than thirty members
employed in the service of the Company was at that time sub judice, both
parties having submitted evidence before the court to prove their respective
contentions and the Company had the right to wait for the decision of the
court upon the evidence adduced before it. As the lower court correctly
observed, 'the only permissible way to prove an allegation and to influence
the decision of the court is to adduce evidence in the regular course of the
proceedings.'"

In a similar case, the ruling of the C I R that a strike staged by a labor

organization was illegal, was upheld by the Supreme Court when the following
circumstances were shown by evidence: T h e labor union staged the strike,

586
 STRIKES A N D LOCKOUTS
[Part 1. Regulations and Limits of Strike
ARTS. 263-265
and Lockout]

notwithstanding the existence of a collective bargaining agreement as well as a

majority representative and during the pendency of a petition for certification
election filed by the striking union. T h e labor organization filed its notice
of strike even before it received the answer of the employer to its demands,
clearly indicating that the union was predisposed to go on strike, regardless of
the willingness of the members to negotiate. Moreover, the grievances of the
individual members of the striking union, which partly provoked the strike, have
not been processed in accordance with the grievance procedure agreed upon
1
in the collective bargaining contract.

12.7 Unlawful Purpose: Trivial, Unjust, or Unreasonable

In holding that the strike was illegal in the above cited Luzon Marine case,
the Supreme Court further declared:
T h e second motive, referring to the alleged threat of dismissal by
Alejo Villanueva, is likewise trivial and puerile. Villanueva was not an officer
or e m p l o y e e of the respondent company, and the petitioner knew that he
had no power or authority to dismiss any of the company's employees.
He was merely an officer of the intervenor U O E F . Indeed, we venture to
say, that even if the threat had been made by an officer of the respondent
company, the petitioner would not have been justified thereby to declare a
strike because the petitioner knew that under the law, during the pendency
of an industrial dispute b e f o r e the C o u r t of Industrial Relations, the
e m p l o y e r cannot lay off, and much less dismiss, the petitioning employee
without the permission of the Court....
T h e law does not expressly ban strikes except when enjoined against by the
court; but if a strike is declared for a trivial, unjust or unreasonable purpose, or
if it is carried out through unlawful means, the law will not sanction it and the
2
court will declare it illegal, with the adverse consequences to the strikers.
It can be readily seen," said the Supreme Court in the case of Insurefco
Paper Pulp & Project Workers' Union vs. Insular Sugar Refining Corp. ( G . R . N o .
L-7394, September 8, 1954) "that the walkout was premature as it was declared
without giving to the General Manager, or the Board of Directors of the Company,
reasonable time within which to consider and act on the demands submitted by
the U n i o n . T h e nature of the demands was such that no possible action could
be taken thereon by the officials to w h o m they were submitted. T h e y could have
only been acted upon by the General Manager, or by the Board of Directors.
T h e former was then in Bacolod, and the latter could not be convened because
the chairman and two of its members were also absent. A n d this fact was well

'United Seamen's Union of the Phils, vs. Davao Shipowners Ass'n., L-18778,
August 31, 1967.
2
Luzon Marine Department Union vs. Roldan, et al., G.R. N o . L-2660, May 30,
1950.
587
 LABOR RELATIONS
A R T S . 263-265

known to the leaders of the U n i o n . In the circumstances, the only conclusion

that can be drawn is that, as found by the lower court, the strike staged by the
Union was unfortunate, as it is ill-considered, considering the great damage
caused to the business of the refinery resulting from the complete paralyzation
of its operations. T h e Court of Industrial Relations, therefore, acted rightly in
declaring said strike unjustified and illegal."
In another case, the Court declared: T h e law's protection will be withheld
if the motive that impels, prompts, moves or leads members of a labor union
or organization to stage a strike be unlawful, illegitimate, unjust, unreasonable,
or trivial. Such is the case where the strike was declared, at the instance of the
union president, as a protest against his supposed dismissal by the management
on account of his union activities, when the truth was that he was separated
from the service of the company because of his voluntary resignation, which
was duly accepted, and afterwards the company refused to r e e m p l o y him upon
1
his application.

12.8 Strike to Compel Removal of an Employee; Implied Assertion of

Union Infallibility
T h e weight of authority [in U S jurisdiction] appears to u p h o l d the right of
employees, either individually or in combination, to quit working because some
fellow employee is obnoxious to them, when they are not g o v e r n e d by a contract
of service of definite duration, the principle being that employees may choose
not only their employer, but also their working associates. However, the right to
strike for this purpose seems to be subject to the qualification that employees
may not lawfully give the employer the option of dispensing with their services
or with the services of another e m p l o y e e w h o m the e m p l o y e r is b o u n d to retain
for a definite period. Moreover, the right is subject to the further restrictions
that the primary purpose must not be to injure an obnoxious e m p l o y e e , and,
according to some decisions, that the refusal to work with another workman may
not be for an arbitrary cause. T h e r e can be no doubt that the habits, conduct,
or character of an employee, rendering him an objectionable associate, may be
a justification for procuring his discharge by means of a strike. But under the
view entertained by some courts, a strike to get rid of a foreman because some
2
of the employees have a dislike for him is not for a legal purpose.
In P h i l i p p i n e jurisdiction, it was h e l d that a strike m o t i v a t e d by an
unreasonable demand of the labor union for the dismissal of a factory foreman
3
is illegal and unjustified.

'Interwood Employees Association vs. International Hardwood and Veneer

Company of the Philippines, 99 Phil. 82.
2
31 Am. Jur., Sec. 221, pp. 937-938.
3
Luzon Marine Department Union vs. Roldan, et al, G.R. N o . L-2660, May 30,
1950.

588
 STRIKES A N D LOCKOUTS ARTS 263-265
[Part 1. Regulations and Limits of Strike *
and Lockout]
In another case, the Supreme Court said: Considering that the weight of
authority is that employees have a right, either individually or in combination,
to quit working because a fellow e m p l o y e e is obnoxious to them (unless an
employment contract for a definite p e r i o d intervenes, or the move is actuated
by malice) since employees may choose not only their employer but also their
1
associates, the only objectionable feature of the strike now under consideration
appears to be the union's p e r e m p t o r y d e m a n d on the management to transfer
V. Mauricio Jr. within 48 hours, and its subsequent refusal to extend that period.
Such d e m a n d implied an unacceptable assertion of infallibility of the union's
2
findings in matters affecting the character and innocence of a fellow man.

12.9 Unlawful Purpose: Strike on Nonstrikeable Issue

12.9a Nonstrikeable: Physical Rearrangement of Office
Reliance Surety and Insurance Co., Inc. vs. National Labor Relations Commission,
G.R. Nos. 86917-18, January 25, 1991 —
Facts: To avoid unnecessary loss of productive working time due to personal
and nonwork-related conversations, personal telephone calls and nonwork connected
visits by personnel to other departments, Reliance Surety Insurance, through its
underwriting Department Manager, effected a change in the seating arrangement
of its personnel in said department.
Four of those affected protested the transfer of their tables and seats, claiming
that the change was without prior notice and was done merely to harass them as union
members. When the manager insisted, a heated discussion ensued, during which the
employees hurled unprintable insults to the manager and supervisors.
They were asked to explain why no disciplinary action should be taken against
them for misconduct and gross disrespect. T h e work atmosphere in the department
became charged as the employees refused to stay at their designated places. Hence,
the four were placed under preventive suspension and ultimately dismissed after
investigation.
T h e union claimed that the company was guilty of unfair labor practice
because it, among others, effected transfer and changes in the seating arrangement
to intimidate union members. While the complaint for illegal dismissal and unfair
labor practice was hibernating in the Arbitration Branch, the union filed a notice of
strike. T h e following day, the company received a copy of the notice of strike and a
telegram from D O L E setting the notice of strike for initial conciliation conference
on March 17. But even before the initial conference could take place, the union in
the morning of March 17 struck and picketed the company premises by forming
human barricades.
Ruling: There is no question that the strike itself was prompted by no actual,
existing unfair labor practice committed by the petitioner. In effecting a change in

'31 A m . Jur. Sec. 211, pp. 937-938; 63 C.J. 658; 56 C.J. 154.
Citizens Labor Union vs. Standard Vacuum Oil Co., G.R. N o . L-7478, May 6,
1955.
589
 LABOR RELATIONS
ARTS. 263-265

the seating arrangement in the offices of the underwriting department, the employer
merely exercised a reasonable prerogative employees could not validly question, much
less assail as an act of unfair labor practice. T h e Court is at a loss how rearranging
furniture can justify a four-month-long strike. As to the respondent's charges of
harassment, the Commission found none, and as a general rule, the Supreme Court
is bound by its findings.
In staging the strike in question, a strike that was illegal in more ways than one,
the reinstated union officers were clearly in bad faith, and to reinstate them without
loss of seniority rights is to reward them for an act public policy does not sanction.
The sympathy of the Court, as a rule, is on the side of the laboring classes,
not only because the Constitution imposes sympathy but because of the one-sided
relation between labor and capital. T h e Court must take care, however, that in the
contest between labor and capital, the results achieved are fair and in conformity
with the rules.

Note: N o t only the officers but even the union members were o r d e r e d
dismissed. See discussion in the chapter on "Consequences of C o n c e r t e d
Actions."

12.9b Nonstrikeable: Company's Sales Evaluation Policy

GTE Directories Corporation vs. Hon. Augusto S. Sanchez, et al., G.R. N o . 76219,
May 27, 1991 —
The facts of this case, which have been narrated under the topic "Dismissal of
Employees During Conciliation," raise another issue:
Does the union's objection to the new company regulation automatically
suspend its enforcement? Does the union objection justify the e m p l o y e e s '
disobedience and their strike?
Ruling: This Court has already had occasion to rule upon a similar issue. T h e
issue was raised in a 1989 case, San Miguel Brewery Sales Force Union (PTGWO) vs. Ople,
G.R. N o . 53515,170 SCRA 25-28.
In the case at bar, it must thus be conceded that the company's adoption of a
new "Sales Evaluation and Production Policy" was within its management prerogative
to regulate, according to its own discretion and judgment, all aspects of employment,
including the manner, procedure and processes by which particular work activities
should be done. There were, to be sure, objections presented by the union, i.e., that
the schedule had not been "drawn (up) as a result of an agreement of all concerned,"
that the new policy was incomprehensible, discriminatory and whimsical, and "would
result to further reduction" of the sales representatives' compensation. There was,
too, the union's accusation that GTE had committed unfair labor practices, such
as —
"1. Refusal to bargain or unjust sales policies particularly on the failure to
meet the 75% of the average sales production for two consecutive years;
2. Open territory of accounts;

590
 STRIKES A N D LOCKOUTS ARTS
[Part 1. Regulations and Limits of Strike
and Lockout]

3. Illegal suspension of Brian Pineda, a union officer; and

4. Nonpayment of eight days' suspension pay increase."
This Court fails to see, however, how these objections and accusations justify the
deliberate and obdurate refusal of the sales representatives to obey the management's
simple requirement for submission by all Premise Sales Representatives (PSRs) of
individual reports or memoranda requiring reflecting target revenues - which is all
that GTE basically required - and which it addressed to the employees concerned no
less than six (6) times. T h e Court fails to see how the existence of objections made
by the union justify the studied disregard of, or willful disobedience by, the sales
representatives of direct orders of their superior officers to submit reports. Surely,
compliance with their superiors' directives could not have foreclosed their demands
for the revocation or revision of the new sales policies or rules; there was nothing
to prevent them from submitting the requisite reports with the reservation to seek
such revocation or revision.
To sanction disregard or disobedience by employees of a rule or order laid
down by management, on the pleaded theory that the rule or order is unreasonable,
illegal, or otherwise irregular for one reason or another, would be disastrous to the
discipline and order that it is in the interest of both the employer and his employees
to preserve and maintain in the working establishment and without which no
meaningful operation and progress is possible. Deliberate disregard or disobedience
of rules, defiance of management authority cannot be countenanced. This is not to
say that the employees have no remedy against rules or orders they regard as unjust
or illegal. They may object thereto, ask to negotiate thereon, bring proceedings for
redress against the employer before the Ministry of Labor. But until and unless the
rules or orders are declared to be illegal or improper by competent authority, the
employees ignore or disobey them at their peril. It is impermissible to reverse the
process: suspend enforcement of the orders or rules until their legality or propriety
shall have been subject of negotiation, conciliation, or arbitration.
These propositions were in fact adverted to in relation to the dispute in
question by then Minister Bias Ople in his Order dated January 21,1986, to the effect
among others, that "promulgations of company policies and regulations are basic
management prerogatives" and that it is a recognized principle of law that company
policies and regulations are, unless shown to be grossly oppressive or contrary to law,
generally binding (and) valid on the parties and must be complied with until finally
revised or amended unilaterally or preferably through negotiations or by competent
authorities.

12.9c Nonstrikeable: Salary Distortion Under the Wage Rationalization Act

Raw at Buklod ng Manggagawa (IBM) vs. National Labor Relations Commission,
G.R. N o . 91980, June 27, 1991 —
Facts: Upon the effectivity of RA N o . 6727 (Wage Rationalization Act) on
June 5, 1989, the union, known as Haw at Buklod ng Manggagawa ( I B M ) — said to
represent 4,000 employees of San Miguel, working at the various plants, offices, and

591
 LABOR RELATIONS
ARTS. 263-265

warehouses — presented to the company a "demand" for correction of the "significant

distortion in the workers' wage." In that demand the Union explicitly invoked Section
4 ( d ) of Republic Act 6727.
After the SMC rejected the Union's proposal of P15.00 per day increase, the
workers issued a joint notice. T h e Union's position was that the workers' refusal to
work beyond eight hours every day starting October 16,1989 was a legitimate means
of compelling SMC to correct the distortion in their wages brought about by the
implementation of the laws ( R A 6640 and RA 6717) to newly hired employees.
The abandonment of the long-standing schedule of work and the reversion to
the eight-hour shift caused substantial losses to SMC. These losses occurred despite
such measures taken by SMC as organizing a "third shift composed of regular
employees and some contractuals" and appeals to Union members, through letters
and dialogue with the plant delegates and shop stewards, to adhere to the existing
work schedule.
SMC filed a complaint against the Union and members thereof with the
National Labor Relations Commission to enjoin and restrain illegal slowdown and
for damages.
The National Labor Relations Commission issued a restraining order, directing
the employees to cease and desist from further committing the acts complained about
particularly their not complying with the work schedule established and implemented
by the company through the years or since 1984, which schedule was adhered to by
the employees until October 16, 1989.
Ruling: T h e legislative intent that solution of the problem of wage distortions
shall be sought by voluntary negotiation or arbitration, and not by strikes, lockouts or
other concerted activities of the employees or management, is made clear in the rules
implementing Republic Act 6727 issued by the Secretary of Labor and Employment
pursuant to the authority granted by Section 13 of the Act. Section 16, Chapter I of
these implementing rules, after reiterating the policy that wage distortions be first
settled voluntarily by the parties and eventually by compulsory arbitration, declares
that, "any issue involving wage distortion shall not be a ground for a strike/ lockout."
T h e collective bargaining agreement between the SMC and the Union also
prescribes a similar eschewal of strikes or other similar or related activities as a mode
of resolving disputes or controversies, generally, said agreement clearly stating that
settlement of "all disputes, disagreements or controversies of any kind" should be
achieved by the stipulated grievance procedure and ultimately by arbitration. T h e
Union was thus prohibited to declare and hold a strike or otherwise engage in
nonpeaceful concerted activities for the settlement of its controversy with SMC in
respect of wage distortions, or for that matter, any other issue involving or relating
to wages, hours of work, conditions of employment or employer-employee relations.
The partial strike or concerted refusal by the Union members to follow the five-
year-old work schedule which they had theretofore been observing, resorted to as a
means of coercing correction of "wage distortions," was therefore forbidden by law
and contract and, on this account, illegal.

592
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
12.9d Nonstrikeable: Inter-union or Intra-union Dispute
It may be recalled that the Bureau of Labor Relations, under Article 226,
exercises original and exclusive authority to act on all inter-union and intra-union
disputes. "Internal union dispute" is defined in Article 2 1 2 ( q ) . Whether the
dispute is between or a m o n g unions (inter-union) or internal to o n e union, the
dispute does not involve the employer. Since the dispute is not with the employer,
the dispute cannot justify a work stoppage. Thus, the Rules Implementing the
L a b o r C o d e provides in Rule X I I I that "no strike or lockout may be declared on
grounds involving inter-union or internal union disputes or on issues brought
to voluntary or compulsory arbitration."

13. F O U R T H FACTOR IN LEGALITY OF STRIKE: MEANS A N D METHODS

A strike has to be pursued within the bounds of law. A strike does not
suspend the binding force of law; it does not put the strikers above the law or
above their fellowmen. T h e right to self-organization and the right to strike, as
offsprings of the industrial civilization, are not envisioned to create an uncivilized
situation. Thus, the law puts limits to their exercise. These limits are among the
prohibited activities that Article 264 speaks of, particularly paragraph ( e ) . It
states that "no person e n g a g e d in picketing shall —
(a) c o m m i t any act of violence, coercion or intimidation, or
( b ) obstruct the free ingress to or egress from the employer's premises
for lawful purposes, or
(c) obstruct public thoroughfares."
W h o e v e r commits these acts — union officers or members, employees or
non-employees — is answerable for the acts.
T h e use of violence or threat in pursuing labor rights is punishable under
the Revised Penal C o d e . Its Article 289 provides that "The penalty of arresto mayor
and a fine not exceeding 300 pesos shall be imposed upon any person who, for
the purpose of organizing, maintaining or preventing coalitions of capital or
labor, strike of laborers or lockout of employers, shall employ violence or threats
in such a d e g r e e as to c o m p e l or force the laborers or employers in the free and
legal exercise of their industry or work, if the act shall not constitute a more
serious offense in accordance with the provisions of this C o d e . "

13.1 Threats, Coercion or Violence

Even if the purpose of a strike is valid, the strike may still be held invalid
where the means e m p l o y e d are illegal. Thus, a strike was considered invalid in
the light of the following circumstances: T h e strikers formed a human cordon
alongside the wharf used by the shipping company and blocked all approaches
to the vessels of the shipping companies. In trying to prevent work from being
p e r f o r m e d , the strikers e m p l o y e d not only a human fence but also acts of
violence and coercion. In the course of the strike, the strikers obtained through

593
 LABOR RELATIONS
ARTS. 263-265

coercion possession of the vessels of the shipowners on several occasions and

refused to leave in spite of appeals made by the owners and officers of said vessels.
Non-striking employees were threatened with bodily harm if they persisted in
proceeding to the vessels of the ship companies. Threats were directed against
the mates, marine engineers, and crew members in the employer of the shipping
companies by the strikers, some of w h o m shook their fists at the employees with
the warning that something will surely happen to them if they boarded the vessel.
Some nonstrikers were also mauled by the strikers and suffered physical injuries.
Finally, the strikers shouted slanderous and scurrilous words against the owners
1
of the vessels.
T h e use of violence, intimidation, restraint or coercion in carrying out
concerted activities, which are injurious to the rights of property, or to particular
2
individuals, makes a strike illegal. Unlawful acts include resort to terrorism
attended with physical violence for the purpose of preventing nonstrikers from
3
working and the commission of acts of sabotage against the property of the
4
employee as well as the e m p l o y m e n t of violence on nonstrikers; infliction of
physical injuries, assault, breaking of truck side and windows, throwing of empty
5
bottles at nonstrikers.
In this jurisdiction, acts of violence in carrying on a strike are not so easily
overlooked in the determination of its legality or illegality. To overlook them
'would encourage abuses and terrorism and would subvert the very purpose of
6
the law which provides for arbitration and peaceful settlement of disputes.' T h i s
Court has repeatedly frowned upon the use of unlawful means in carrying out
7
a strike."
Way back in 1952, the Court already laid down the rule against coercion of
nonstrikers: If in carrying out the strike, coercion, force, intimidation, violence
with physical injuries, sabotage, and the use of unnecessary and obscene language
or epithets are committed by members of the labor union in an attempt to
prevent the other willing laborers to go to work, such strike cannot be justified
in a regime of law, for that would encourage abuses and terrorism and would

•United Seamen's Union of the Phil. vs. Davao Shipowners Association, G.R.
N o . L-18778, August 31, 1967.
2
Cf. Liberal Labor Union vs. Phil. Can Co., 91 Phil. 72.
Ibid.
4
N L U vs. CIR, 70 Phil. 300.
5
Phil. Marine Officers Guild vs. Cia. Maritima, 22 SCRA 113,1126; also United
Seamen's Union vs. Davao Shipowners Ass'n., 20 SCRA 1226. See Sukhothai Cuisine
vs. CA, et al, G.R. N o . 150437, July 17, 2006.
6
Liberal Labor Union vs. Phil. Can Co., 91 Phil. 78.
7
Phil. Marine Officers' Guild vs. Compania Maritima, et al, L-20662 and L-20663,
March 9, 1968.

594
 STRIKES AND LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]

subvert the very purpose of the law which provides for arbitration and peaceful
1
settlement of labor dispute."
2
Acts of v i o l e n c e justify the dismissal of the guilty strikers. Likewise,
employees may be discharged for illegal acts or misconduct during a strike,
such as circulating libelous statements against the employer which show actual
3
malice.
But it must be noted that the m e r e filing of charges against an employee
for alleged illegal acts during a strike does not by itself justify his dismissal. T h e
charges must be proved at an investigation duly called where the employee shall
be given an opportunity to defend himself. This is true even if the alleged ground
4
constitutes a criminal offense, as we held in Almira vs. B.F. Goodrich Phil, Inc.
In that case, we o r d e r e d the reinstatement of employees against w h o m criminal
5
complaints had been filed but not yet proved.

13.1a Violence on Both Sides

On the allegation of violence committed in the course of the strike, the
L a b o r Arbiter and the Commission found that "the parties are agreed that
there were violent incidents x x x resulting to injuries to both sides, the union
and management." T h e evidence on record show that the violence cannot be
attributed to the striking employees alone, for the company itself employed hired
m e n to pacify the strikers.
W h e r e violence was committed on both sides during a strike, such violence
6
cannot be a g r o u n d for declaring the strike as illegal.

13.2 Responsibility for U s e of Force: Individual or Collective?

W h a t is clearly within the law is the concerted activity of cessation of work
in order that a union's e c o n o m i c demands may be granted or that an employer
cease and desist from an unfair labor practice. T h a t the law recognizes as a right.
T h e r e is, though, disapproval of the utilization of force to attain such an objective.
For implicit in the very concept of a legal order is the maintenance of peaceful
ways. A strike otherwise valid, if violent in character, may be placed beyond the
pale. Care is to be taken, however, especially where an unfair labor practice is
involved, to avoid stamping it with illegality just because it is tainted by such acts.
To avoid rendering illusory the recognition of the right to strike, responsibilities

'Liberal Labor Union vs. Phil. Can Co., L-4834, March 28, 1952.
2
Shell Oil Workers Union vs. Shell Company of the Philippines, 43 SCRA 224.
3
Linn vs. United Plant Guard Workers, 15 L ed. 2d. 582.
4
58 SCRA 120.
5
Batangas Laguna Tayabas Bus Company vs. N L R C , G.R. N o . 101858, August
21, 1995.
6
Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos, G.R.
N o . 113907, February 28, 2000.
595
 LABOR RELATIONS
ARTS. 263-265

in such a case should be individual and not collective. A different conclusion

would be called for, of course, if the existence of force while the strike lasts was
pervasive and widespread consistently and deliberately resorted to as a matter of policy. It
could be reasonably concluded then that even if justified as to ends, it becomes
1
illegal because of the means employed.

Causes of Violence

When the civil liberies of free speech and peaceful assemblage of strikers
are denied by local authorities, as frequently occurs;
When local police or company guards are provocative or undisciplined;
When strikers resort to personal violence against nonstriking employees
or to the type of mass picketing which makes it physically impossible for
anyone desiring to do so to enter the plant;
When the strike is a prolonged one so that workers' wives and children
suffer from hunger and the men become desperate;
When union leaders are unjustifiably arrested and thrown into jail;
When tear gas or firearms are used against the strikers;
When spies in the employ of the company insinuate themselves
into the union, often becoming union officials, and circulate among the
strikers, purposely urging them on to violence in order to throw public
opinion against the union — a state of great bitterness, hatred, and public
disorder follows. During such industrial disturbances, when mysterious
explosions occur or stink bombs or bricks are thrown in a strike city, unless
the perpetrators are caught red-handed, it is never possible to tell whether
these acts are the work of spies hired by the company, or done by the strikers
themselves.
T h e situation may end in complete defeat of the strikers followed by
years of bitterness, sullenness and relatively inefficient labor in the plant.
It may terminate in complete victory for the union, producing a 'Victory
complex" in union members which makes it hard to live with them for some
time. Or the strike may be finally settled around the conference table where
it could have been settled in the first place — without the hardships and
losses which a strike imposes on all parties concerned.

JAMES MYERS
Do You Know Labor?
(John Day Co., New York, 1943), p. 67

'Shell Oil Workers vs. Shell Oil. Co., 39 SCRA 292.

596
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
Contrary to respondent Secretary's finding, the strike declared by the Union
was attended by pervasive and widespread violence. T h e acts of violence committed
were not mere isolated incidents which could normally occur during any strike.
T h e hijacking of Fil-Transit Bus N o . 148 at the intersection of EDSA and Quezon
Avenue on Sunday, July 27, 1986, three days before the scheduled conciliation
conference, reveals that it was staged in pursuance of a preconceived plan. This
was followed by the barricading of the terminal in Alabang by means of five buses
which had also been hijacked. In the days that followed, the strikers persisted
in their violent acts, ( 1 ) the hijacking of 26 more buses which resulted in injuries
to some employees and panic to the commuters; ( 2 ) the puncturing of tires; ( 3 )
the cutting of electric wirings, water hoses and fan belts; and ( 4 ) the alleged theft of
expensive equipment such as fuel injections worth P30,000 each. T h e commission
of these illegal acts was neither isolated nor accidental but deliberately employed
to intimidate and harass the employer and the public. T h e strikers even resorted
1
to the use of molotov bombs which were thrown into the petitioner's compound.
Nevertheless, we are constrained to uphold the respondent Secretary's
ruling that responsibility for these illegal acts must be on an individual and
not collective basis. T h e r e f o r e , although the strike was illegal because of the
commission of illegal acts, only the union officers and strikers w h o engaged
in violent, illegal and criminal acts against the employer are d e e m e d to have
lost their e m p l o y m e n t status. U n i o n members w h o were merely instigated to
2
participate in the illegal strike should be treated differently.
In o r d e r to h o l d a labor organization liable for the unlawful acts of
individual officers, agents or members, there must be p r o o f of actual authorization
or ratification of such acts after actual knowledge thereof. Thus, where a union,
through its leaders, not only had knowledge of the acts of violence committed
by some of the strikers but either participated or ratified the same, the strike
3
was illegal, and the dismissal of all active participants therein was justified.

13.3 Minor Disorders

We think it must be c o n c e d e d that some disorder is unfortunately quite
usual in any extensive or l o n g drawn out strike. A strike is essentially a battle
waged with e c o n o m i c weapons. Engaged in it are human beings whose feelings
are stirred to the depths. Rising passions call forth hot words. H o t words lead to
blows on the picket line. T h e transformation from economic to physical combat
by those engaged in the contest is difficult to prevent even when cool heads direct
the fight. V i o l e n c e of this nature, however much it is to be regretted, must have
been in the contemplation of the Congress when it provided in Sec. 13 of Act

•First City Interlink Transportation Co., etc. vs. Confesor and Nagkakaisang
Manggagawa ng Fil-Transit-NFL, G.R. N o . 106316, May 5, 1997.
Ibid.
3
Phil. Marine Officers' Guild vs. Cia. Maritima, 22 SCRA 1113, [1968].

597
 LABOR RELATIONS
ARTS. 263-265

29 U S C A Sec. 163, that nothing therein should be construed so as to interfere

with or impede or diminish in any way the right to strike. If this were not so, the
rights afforded to employees by the A c t would indeed be illusory. We accordingly
recently held that it was not intended by the A c t that minor disorders of this
1
nature would deprive a striker of the possibility of reinstatement.

13.4 Officials' Inability to Leave Premises, N o t Illegal Detention

People vs. Barba, 29 SCRA 663, September 30, 1969 —
Issue: Some management officials were unable to leave the premises of the
company during a strike. May the strikers be held guilty of illegal detention?
Ruling: Clearly, there was no kidnapping; the detention or deprivation of
liberty under the circumstance while certainly not to be justified, was not done with
criminal intent. It was the outcome of picketing carried to excess, one might say, by
people who, perhaps in a less tense atmosphere and in the absence of the bitterness
that did characterize this particular labor dispute, should have known better but
apparently did not. Their objective, as clearly observed by the lower court, was not to
inflict loss of freedom to the complainants but to weaken management resistance so
that it would give in to their demands. While no doubt to be deplored, such conduct
cannot be made a basis for a finding of probable cause that the crime penalized by
the codal provision in question was committed.
Instances may occur where a criminal action may lie. We do not intimate any
opinion as to what offense may be then committed or under what circumstances
a finding of probable cause is justified. We do not have to do so as that is not the
question before us. What we do affirm is that the judiciary should be on the alert
lest in scrutinizing conduct that may be outside the traditional concept of peaceful
picketing, those so engaged may subject themselves to a serious criminal liability.
More precisely, while the acts here complained of are immoderate, they certainly
do not add up to the commission of the offense of slight illegal detention. To such
a judicial approach, the lower court manifested fidelity. We cannot reverse it then.
It is not to be forgotten either that the offense of slight illegal detention is
penalized by reclusion temporal. To say that the accused, numbering more than one
hundred who took part in such picketing, laid themselves open to such a serious
charge, there being a probable cause, and thus, if convicted, be made to suffer a
severe penalty would be to pose an ever present threat to labor. Obviously, the result
is far from desirable. The Revised Penal Code in effect becomes a veritable sword of
Damocles. Militancy and zeal in the defense of labor's rights could be stigmatized as
the perpetration of a criminal act. As a result, the probability that punishment, not
excluding the afflictive kind, may be incurred is no longer remote. To that extent, the
constitutional policy of social justice and protection to labor would be nullified and
set at naught.

'Republic Steel Corp. vs. N L R B , 107 F 2d 472, cited in Mathews, Labor Relations
and the Law, p. 378. The Insular Life Assurance Co., Ltd. Employees Association-
N A T U vs. The Insular Life Assurance Co., Ltd., 37 SCRA 244 [1971].
598
 STRIKES A N D LOCKOUTS ARTS 263-265
A l i a
[Part 1. Regulations and Limits of Strike " °~
and Lockout]
13.5 Blockade or Obstruction
Article 2 6 4 ( e ) further forbids obstruction of points of ingress or egress
as well as public thoroughfares. Such obstructions are beyond valid exercise
of the right to strike because they deprive the o w n e r of the company premises
of its right to use them for lawful purposes and the passers-by the use of public
passage. T h e illegal obstructions on public thoroughfares, such as streets or
sidewalks, are nuisances which local g o v e r n m e n t authorities can summarily
remove.
Obstructions or blockades to entrance or exit of a private company during
a labor dispute may also be r e m o v e d upon orders of the office of the Secretary,
the N L R C , or its branches. T h e removal is to be d o n e by police authorities,
1
coordinating with labor officials c o n c e r n e d .
Obstruction by picketing is further discussed in the next part of this chapter.

14. FIFTH FACTOR IN L E G A L I T Y OF STRIKE: I N J U N C T I O N

14.1 "National Interest" Cases; Automatic Injunction and Return-to-Work
Order
W h e n there is a labor dispute causing or likely to cause a strike affecting
national interest, the Secretary of L a b o r and Employment may either assume
jurisdiction or certify the dispute to the National L a b o r Relations Commission
for compulsory arbitration. T h e secretary may so act at his own initiative or upon
petition by any of the parties.

Don't Pull Down the House

T h e strongest b o n d outside of the family relations should be

o n e uniting all working p e o p l e of all nations, tongues, and kindreds,
nor should this lead to a war on property or owners of property.
Property is the fruit of labor. Property is desirable - is a positive
g o o d in the world. T h a t some should be rich shows that others may
b e c o m e rich, and hence is just e n c o u r a g e m e n t to industry and
enterprise. L e t not him w h o is houseless pull down the house of
another, but let him labor diligently and build o n e for himself, thus
by example assuring himself that his own shall be safe from violence
when built.

Abraham Lincoln
April 1864

^ O L E Memorandum dated October 22, 1987; see in the Labor Laws Source
Book.

599
 LABOR RELATIONS
ARTS. 263-265

Such assumption or certification has the effect of automatically enjoining

the intended or impending strike or lockout as specified in the assumption or
certification order. If o n e 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
1
lockout. This is an example of automatic injunction. But this is strictly limited
to "national interest" cases, and even in these cases the parties retain the option
to submit the dispute to voluntary arbitration.
A prohibited activity under Article 264 is the holding of a strike or lockout
after assumption of jurisdiction by the President or the Secretary of Labor or after
certification or submission of the dispute to compulsory or voluntary arbitration.
This prohibition flows from the power granted in Article 2 6 3 ( g ) of the C o d e .
Use of the power automatically stops a strike or prevents an i m p e n d i n g strike.
T h e issuance of injunction in "national interest" cases is an exception to
Article 254 which, in general, forbids labor injunctions.
T h e assumption or certification o r d e r under Article 263 ( g ) has the effect
of regulating the m a n a g e m e n t prerogative of d e t e r m i n i n g the assignment
or movement of employees. Thus, p e n d i n g the resolution of the dispute the
layoff of 94 rank-and-file employees was declared illegal as it was violative of the
2
assumption order.

14.2 What are Considered "National Interest" Cases

T h e C o d e vests the President of the Philippines and the Secretary of L a b o r
and Employment almost unlimited discretion to d e t e r m i n e what industries may
be considered as indispensable to the national interest.
T h e assumption of jurisdiction by the Secretary of Labor over labor disputes
causing or likely to cause a strike or lockout in an industry indispensable to
the national interest is in the nature of a police power measure. It cannot be
denied that the private respondent [Nestle Philippines, I n c . ] is e n g a g e d in an
undertaking affected with public interest being o n e of the largest manufacturers
of food products. T h e compelling consideration is the fact that a p r o l o n g e d strike
or lockout is inimical to the national e c o n o m y and thus, the n e e d to i m p l e m e n t
some measures to suppress any act which will hinder the company's essential
productions is indispensable for the p r o m o t i o n of the c o m m o n g o o d . U n d e r
this situation, the Secretary's certification o r d e r for compulsory arbitration
which was intended for the immediate formulation of an already delayed C B A ,
3
was proper.

•See Article 263 [ g ] , Labor Code, as amended by Batas Pambansa Big. 227.
2
Metrolab Industries, Inc. vs. Roldan-Confesor, 254 SCRA 182 (1996).
3
Union of Filipro Employees vs. N L R C , et al, G.R. N o . 91025, December 19,
1990.

600
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[Part 1. Regulations and Limits of Strike
ARTS. 263-265
and Lockout]

T h e secretary of l a b o r acts to maintain industrial peace. Thus, his

certification for compulsory Arbitration is not intended to impede the workers'
1
right to strike but to obtain a speedy settlement of the dispute.
T h e assumption of jurisdiction by the Secretary of Labor and Employment
over labor disputes involving academic institutions was upheld in Philippine School
of Business Administration vs. Noriel ( G . R . N o . 80648, August 15, 1988), thus:
T h e r e is no doubt that the o n g o i n g labor dispute at the school
adversely affects the national interest. T h e school is a duly registered
educational institution of higher learning with m o r e or less 9,000 students.
T h e ongoing work stoppage at the school unduly prejudices the student and
will entail great loss in terms of time, effort and money to all concerned.
M o r e important, it is not amiss to mention that the school is engaged in
the p r o m o t i o n of the physical, intellectual and emotional well-being of
the country's youth.
On the other hand, in another case, the Court ruled that the production
and publication of telephone directories, which is the principal activity of G T E ,
can scarcely be described as an industry affecting the national interest. G T E is
a publishing firm chiefly d e p e n d e n t on the marketing and sale of advertising
space for its not inconsiderable revenues. Its services, while of value, cannot
be d e e m e d to be in the same category of such essential activities as "the
generation or distribution of energy" or those undertaken by "banks, hospitals,
and export-oriented industries." It cannot be regarded as playing as vital a
role in communication as other mass media. T h e small number of employees
involved in the dispute, the employer's payment of "P10 million in income tax
alone to the Philippine government," and the fact that the "top officers of the
union were dismissed during the conciliation process," obviously do not suffice
to make the dispute in the case at bar o n e "adversely affecting the national
2
interest."

14.2a "National Interest" by Statutory Declaration

T h e General Banking Law, revised in 2000, explicitly classifies banking as
an industry indispensable to the national interest. T h e provision states:
"Sec. 22. Strikes and Lockout. - T h e banking industry is hereby
declared as indispensable to the national interest and, notwithstanding
the provisions of any law to the contrary, any strike or lockout involving
banks, if unsettled after seven ( 7 ) calendar days, shall be reported by the
Bangko Sentral to the Secretary of Labor who may assume jurisdiction over

'Philtread Workers Union [ P T W U ] vs. Confessor, G.R. N o . 117169, March 12,

1997.) See also Telephone Semiconductors Employees Union-FFW, et al. vs. CA, et
al, G.R. N o . 143013-14, December 18, 2000.
2
G T E Directories Corp. vs. Sanchez, et al, G.R. N o . 76219, May 27, 1991. Add:
Phimco, March 17/99.

601
 LABOR RELATIONS
ARTS. 263-265

the dispute or decide it or certify the same to the National Labor Relations
Commission for compulsory arbitration. However, the President of the
Philippines may at any time intervene and assume jurisdiction over such
labor dispute in order to settle or terminate the same. (RA. No. 8791, or
"The General Banking Law of2000, " approved on April 12, 2000.)

14.3 Assumption of Jurisdiction: Prior Notice Not Required

T h e discretion to assume jurisdiction may be exercised by the Secretary
of Labor and Employment without the necessity of prior notice or hearing
given to any of the parties disputants. T h e rationale for his primary assumption
of jurisdiction can justifiably rest on his own consideration of the exigency of
1
the situation in relation to the national interests.
T h e Labor Minister may immediately take action where a strike has
effectively paralyzed a vital industry, e.g., a bus company drivers' strike, without
2
waiting the filing of notice of strike.

14.4 Power to Assume Jurisdiction, Constitutional

Union of Filipro Employees, et al. vs. Nestle Phil, Inc., et al., G.R. Nos. 88710-13,
December 19, 1990 —
The petitioner union (UFE) questions the power of the Secretary of Labor
under Article 263(g) of the Labor Code to assume jurisdiction over a labor dispute
tainted with national interests, or to certify the same for compulsory arbitration. UFE
contends that Articles 263 and 264 are based on the 1973 Constitution, specifically
Sec. 9 of Article II thereof, the pertinent portion of which reads:
"Sec. 9. x x x. T h e State may provide for compulsory arbitration.''
UFE argues that since the aforecited provision of Sec. 9 is no longer found
in the 1987 Constitution, Articles 263(g) and 264 of the Labor C o d e are now
"unconstitutional and must be ignored."
Ruling: On the contrary, the continued validity and operation of Articles 263
and 264 of the Labor Code has been recognized by no less than the Congress of the
Philippines when the latter enacted into law RA 6715, otherwise known as Herrera
Law, Section 27 of which amended paragraphs ( g ) and ( i ) of Article 263 of the Labor
Code.
At any rate, it must be noted that Articles 263(g) and 264 of the Labor Code
have been enacted pursuant to the police power of the State, which has been defined
as the power inherent in a Government to enact laws, within constitutional limits, to
3
promote the order, safety, health, morals and general welfare of society. The police
power, together with the power of eminent domain and the power of taxation, is an

'Magnolia Poultry Employees Union, et al. vs. Sanchez, et al, G.R. Nos. 76227-
28, November 5, 1986, Minute Resolution; also: Capitol Medical Center vs. Trajano,
G.R. N o . 155690, June 30, 2005.
2
Saulog Transit, Inc. vs. Lazaro, 128 SCRA 591 [1984].
3
People vs. Vera Reyes, 67 Phil. 190.

602
 STRIKES A N D LOCKOUTS
[Part 1. Regulations and Limits of Strike
ARTS. 263-265
and Lockout]

inherent power of government and does not need to be expressly conferred by the
Constitution.

14.5 Certification to N L R C
" C e r t i f i e d l a b o r disputes" are cases c e r t i f i e d [ o r r e f e r r e d ] to the
Commission for compulsory arbitration under Article 263 ( g ) of the Labor Code
dealing about "national interest" cases.
A "national interest" dispute may be certified to the N L R C [i.e., submitted
to the proper division] even before a strike is declared since Section 10 of the
A c t [ n o w Article 263 of the C o d e ] does not require the existence of a strike,
but only of an industrial dispute; and it is not denied that the employer and
the Unions had such a dispute, and that officials of the Department of Labor
1
previously tried to conciliate the disputants but without success.
W h e n sitting in a compulsory arbitration certified to by the Secretary
of Labor, the N L R C is not sitting as a judicial court but as an administrative
body charged with the duty to i m p l e m e n t the order of the Secretary. As the
i m p l e m e n t i n g body, its authority d i d n o t include the p o w e r to amend the
2
Secretary's order.
Moreover, the Commission is further tasked to act within the earliest time
possible and with the e n d in view that its action would not only serve the interests
of the parties alone, but would also have favorable implications to the community
and to the e c o n o m y as a w h o l e . This is the clear intention of the legislative body
in enacting Article 263 paragraph ( g ) of the L a b o r C o d e , as amended by Section
3
27 of R . A . 6715.

14.6 Effects of Defiance

Non-compliance with the certification o r d e r of the Secretary of Labor and
Employment shall be considered as an illegal act committed in the course of the
strike or lockout, and shall authorize the Commission to enforce the same under
pain of immediate disciplinary action, including dismissal or loss of employment
status or payment by the locking-out employer of backwages, damages a n d / o r
4
other affirmative relief, even criminal prosecution against the liable parties.
T h e Commission may also seek the assistance of law enforcement agencies
to ensure compliance and enforcement of its orders and resolutions.

'Government Service Insurance System Employees Association [GSISEA], et

al. vs. Court of Industrial Relations, G.R. N o . L-18734, December 30, 1961.
2
University of Santo Tomas vs. National Labor Relations Commission, UST
Faculty Union, G.R. N o . 89920, October 18, 1990.
3
Union of Filipro Employees vs. T h e Honorable National Labor Relations
Commission, et al., G.R. N o . 91025, December 19, 1990.
4
Sec. 4, Rule V I I I , N L R C Revised Rules of Procedure, 2005.
603
 LABOR RELATIONS
ARTS. 263-265

Grand Boulevard Hotel vs. Genuine Labor Organization of Workers in Hotel,

Restaurant and Allied Industries (GLOWHRAIN), G.R. N o . 153664, Jury 18,2003;
Grand Boulevard Hotel vs. Dacanay, G.R. N o . 153665, Jury 18, 2003 —
Facts: G L O W H R A I N and the petitioner G B H (then Silahis International
Hotel, Inc.) executed a CBA. Later, petitioner dismissed some of its employees and
suspended others who were members of the respondent union. T h e union filed a
notice of strike with the N L R C alleging illegal dismissal, illegal suspension, CBA
violations, and harassment.
The acting Secretary of Labor and Employment issued a status quo ante bellum
order certifying the labor dispute to the N L R C for compulsory arbitration pursuant
to Article 263(g) of the Labor Code. Subsequently, the union filed another notice
of strike due to its belief that GBH was committing ULP T h e SOLE responded by
issuing another status quo ante bellum order. Further, it directed the employees to
return to work, enjoined the parties from engaging in strike or lockouts, and ordered
the parties to sign a new CBA.
GBH, through its general manager, then wrote SOLE to inform him of the
company's decision to retrench around 200 employees due to financial difficulties.
Meanwhile, the union wrote the SOLE that the union will conduct a strike vote
referendum. This led to the issuance by the SOLE of another status quo ante bellum
order certifying the case to the N L R C for compulsory arbitration and enjoining the
parties from engaging in any strike or lockout. But another notice of strike was filed
by the union on Sept. 27, 1990. T h e SOLE issued another certification order.
When G B H implemented its retrenchment program, the union filed a notice
of strike on Nov. 16,1990 and staged a picket on the same day. T h e SOLE thus issued
a Cease and Desist order and ordered the reinstatement of some of the employees.
GBH subsequently filed a complaint for illegal strike against the union with the
NLRC. T h e labor arbiter found in favor of G B H , finding that the union was guilty
of illegal strike and declaring the union officers to have forfeited their employment.
The union appealed to the N L R C , which Later affirmed the Labor Arbiter's decision.
However, on certiorari, the CA reversed. Hence, this petition.
Issue: Whether the strike staged by the union is legal.
Ruling: N o .
The requisites of a valid strike are: 1.) a notice of strike must be filed with the
D O L E thirty days before the intended date thereof or fifteen days in case of U L P ;
2.) a strike vote must be approved by a majority of the total union membership in
the bargaining unit concerned by secret ballot in a meeting called for that purpose;
and 3.) notice must be given to the D O L E of the results of the voting at least seven
1
days before the intended strike.
In this case, the union went on strike simultaneously with the filing of the
notice of strike. This rendered the strike illegal for failure to comply with the requisite
periods as stated above. Moreover, a strike undertaken despite the issuance by the

'Article 263, Labor Code.

604
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
SOLE of a certification order becomes a prohibited activity and thus, illegal pursuant
to Article 264(a) of the Labor Code.
The union claimed that its Nov. 16 notice merely reiterated its Sept. 27 notice
of strike, thus it claims it complied with the statutory procedural requirements for
a lawful strike. T h e court held that the matters contained in the notice of strike of
September 27 had already been taken cognizance of by the SOLE when he issued a
status quo ante bellum order enjoining the union from staging a strike. Thus, when the
union went on strike despite the SOLE order, it violated said Article 264 of the labor
code.
T h e union further claims that it went on strike because of its belief in g o o d
faith that the company was committing ULP. Still, the court held that a claim of
g o o d faith is not a valid excuse to dispense with the procedural steps for a lawful
strike.

14.7 Assumption or Certification O r d e r Immediately Effective Even

without Return-to-Work Order; Strike Becomes an Illegal Activity
Union of Filipro Employees, et al vs. Nestle Phil, Inc., et al., G.R. Nos. 88710-13,
December 19, 1990 —
On the issue of the legality of the strike committed [despite a return-to-work
order], the petitioner Union ( U F E ) seeks to absolve itself by pointing out qualifying
factors such as motives, g o o d faith, absence of findings on specific participation and/
or liability, and limiting the no-strike provision to economic strikes.
Ruling: UFE completely misses the underlying principle embodied in Article
264(g) [now 263(g) ] on the settlement of labor disputes and this is, that assumption
and certification orders are executory in character and are to be strictly complied with
by the parties even during the pendency of any petition questioning their validity.
This extraordinary authority given to the Secretary of Labor is aimed at arriving
at a peaceful and speedy solution to labor disputes, without jeopardizing national
interests.
Regardless therefore of their motives, or the validity of their claims, the striking
workers must cease and/or desist from any and all acts that tend to, or undermine
this authority of the Secretary of Labor, once an assumption and/or certification
order is issued. They cannot, for instance, ignore return-to-work orders, citing unfair
labor practices on the part of the company, to justify their actions.
We also wish to point out that an assumption and/or certification order of the
Secretary of Labor automatically results in a return-to-work of all striking workers,
whether or not a corresponding order has been issued by the Secretary of Labor. Thus,
the striking workers erred when they continued with their strike alleging absence
of a return-to-work order. Article 263(g) is clear. Once an assumption/certification
order is issued, strikes are enjoined, or if one has already taken place, all strikers
shall immediately return to work.
A strike that is undertaken despite the issuance by the Secretary of Labor
of an assumption or certification order becomes a prohibited activity and thus

605
 LABOR RELATIONS
ARTS. 263-265

illegal, pursuant to the second paragraph of Article 264 of the Labor C o d e , as

1
amended.

Certification of the dispute to the N L R C makes the continuation of the

strike illegal, provided that the parties are duly notified of the certification order.
Notice to the parties is a prerequisite even if the order states that it is "immediately
executory."
PNOC Dockyard and Engineering Corp. vs. NLRC, et al., G.R. N o . 118223, June
26, 1998 —
In addition, we disagree with petitioner's contention that the strike became
automatically illegal upon the labor secretary's certification of the dispute to the N L R C
for compulsory arbitration. Basic is the rule that no order, decision or resolution
— not even one that is "immediately executory" — is binding and automatically
executory unless and until the proper parties are duly notified thereof. T h e Labor
Code specifically enjoins that decisions, orders or awards of the labor secretary, the
regional director, the N L R C or the labor arbiter are "to [ b e ] separately furnish [ e d ]
immediately [to] the counsels of record and the parties x x x." This means that in
labor cases, both the party and its counsel must be duly served their separate copies
of the order, decision or resolution, unlike in ordinary judicial proceedings where
notice to counsel is deemed notice to the party.
Private respondents precisely impugn the validity of the service of the D O L E
certification order dated December 13, 1991. They maintain that said order was not
validly served on them, since their supposed copy was left only with a security guard
at the gate of the office premises of the union. Allegedly, no effort was made to serve
the same to an authorized person inside their office.

14.8 Refusal to Receive the R T W O

Refusal to receive the AJO (Assumption of jurisdiction O r d e r ) amounts to
defiance of the Order, which defiance makes the continuation of the strike an
illegal act, thus subjecting the strikers to loss of e m p l o y m e n t status. T h e strikers
should resume work immediately upon receipt or constructive receipt of the
Order. A grace period may be given but that is not required by law.

University of San Agustin vs. CA, et al, G.R. N o . 169632, March 28, 2006 —
The sheriffs report unequivocally stated the union officers' refusal to receive
the AJO when served on them in the morning of September 19,2003. T h e September
16, 2003 Union's Board Resolution N o . 3 which gave sole authority to its president to
receive the AJO must not be allowed to circumvent the standard operating procedure
of the Office of the Undersecretary for Labor Relations which considers AJOs as
duly served upon posting of copies thereof on designated places. T h e procedure

'Zamboanga Wood Products, Inc. vs. N L R C , G.R. N o . 82088, October 13,1989.

606
 STRIKES A N D LOCKOUTS ARTS 263 265
[Part 1. Regulations and Limits of Strike *
and Lockout]

was adopted in order to prevent the thwarting of AJOs by the simple expedient of
refusal of the parties to receive the same, as in this case.
In this case, the AJO was served at 8:45 a.m. of September 19, 2003. T h e
strikers then should have returned to work immediately. However, they persisted
with their refusal to receive the AJO and waited for their union president to receive
the same at 5:25 p.m. T h e Union's defiance of the AJO was evident in the sheriffs
report.
We went back to the main gate of the University and there NCMB Director
Dadivas introduced us to the Union lawyer, Atty. Mae Lacerna a former D O L E
Regional Director. Atty. Lacerna however refused to be officially served the
Order again pointing to Board Resolution N o . 3 passed by the Union officers.
Atty. Lacerna then informed the undersigned Sheriffs that the Union president
will accept the Order at around 5:00 o'clock in the afternoon. Atty. Lacerna
told the undersigned Sheriff that only when the Union president receives the
Order at 5:00 p.m. shall the Union recognize the Secretary of Labor as having
assumed jurisdiction over the labor dispute.
Thus, we see no reversible error in the CA's finding that the strike of September
19, 2003 was illegal. consequently, the Union officers were deemed to have lost their
employment status for having knowingly participated in said illegal act.
T h e Union's assertion of a well settled practice that the SOLE [Secretary of Labor
and Employment] always gives twenty-four hours (24) to the striking workers within
which to return to work, offers no refuge. Aside from the fact that this alleged well
settled practice has no basis in law and jurisprudence. Article 263(g) of the Labor Code,
supra, is explicit that if a strike has already taken place at the time of assumption of
jurisdiction 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 lock-
out. This is compounded further by this Court's rulings which have never interpreted
the phrase "immediately return to work" found in Article 263(g) to mean "within
twenty-four (24) hours." On the other hand, the tenor of these ponencias indicates an
almost instantaneous of automatic compliance for a striker to return to work once
an AJO has been duly served.

W h e n the L a b o r Secretary assumes jurisdiction over a labor dispute in

an industry indispensable to national interest, such assumption shall have the
effect of automatically enjoining the intended or i m p e n d i n g strike. T h e mere
issuance of an assumption o r d e r by the Secretary automatically carries with
it a return-to-work order. T h e petitioners in this case refused to acknowledge
this directive of the Secretary thereby necessitating the issuance of another
o r d e r expressly directing the striking workers to cease and desist from their
actual strike, and to immediately return to work but which directive was also
i g n o r e d . In this connection, Article 264(a) of the L a b o r C o d e clearly provides
that:

607
 LABOR RELATIONS
ARTS. 263-265

Article 264. Prohibited Activities —

(a) x x x No strike or lockout shall be declared after the assumption
of jurisdiction by the President or Secretary or after the certification or
submission of the dispute to compulsory or voluntary arbitration or during
the pendency of cases involving the same grounds for strike or lockout.
xxx. Any union officer who knowingly participates in illegal strike and any worker
or union officer who knowingly participates in the commission of illegal acts during
the strike may be declared to have lost his employment status: Provided that mere
participation of a worker in lawful strike shall not constitute sufficient ground for
termination of his employment even if a replacement had been hired by the employer
during such lawful strike.
T h e rationale for this prohibition is that once jurisdiction over the labor
dispute has been properly acquired by the competent authority, such jurisdiction
should not be interfered with by the application of coercive processes of a strike.
T h e Supreme Court has held in a number of cases that defiance to the assumption
and return-to-work orders of the Secretary after he has assumed jurisdiction is
a valid ground for loss of the e m p l o y m e n t status of any striking union officer
or member. T h e refusal to receive such orders and other processes is described
by the Supreme Court in Navale, et al, vs. CA (253 S C R A 705), as "an apparent
attempt to frustrate the ends of justice."
Thus, the strike of the U n i o n is illegal for having been staged in o p e n and
knowing defiance of the assumption and return-to-work orders. T h e necessary
consequence thereof is detailed by the Supreme Court in Marcopper Mining Corp.
vs. Brilliantes, wherein the Court stated that:
"by staging a strike after the assumption of jurisdiction or certification for arbitration,
workers forfeited their right to be admitted to work, having abandoned their
employment, and could be validly replaced. "
(Telefunken Semiconductors Employees Union-FFW, et al. vs. CA, G.R. Nos. 143013-
14, December 18, 2000.)

14.9 Defying the R T W O

Sarmiento vs. Tuico, G.R. N o s . 75271-73; Asian Transmission Corp. vs. NLRC, G.R.
N o . 77567, June 27, 1988 —
The return-to-work order not so much confers a right as it imposes a duty. While
as a right it may be waived, it must be discharged as a duty even against the worker's
will. Returning to work in this situation is not a matter of option or voluntariness
but of obligation. The worker must return to his j o b together with his co-workers
so the operations of the company can be resumed and it can continue serving the
public and promoting its interest. That is the reason such return can be compelled.
So imperative is the order in fact that it is not even considered violative of the right
against involuntary servitude. The worker can of course give up his work, thus severing
his ties with the company, if he does not want to obey the order, but the order must
be obeyed if he wants to retain his work even if his inclination is to strike.
608
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
The return-to-work order should benefit only those workers who comply with it
and, regardless of the outcome of the compulsory arbitration proceedings, are entitled
to be paid for the work they have actually performed. Conversely, those workers who
refuse to obey the said order and instead wage a strike are not entitled to be paid for
work not done or to reinstatement to the positions they have abandoned by their
refusal to return thereto as ordered.
One purpose of the return-to-work order is to protect the workers who might
otherwise be locked out by the employer for threatening or waging the strike. But
the more important reason is to prevent impairment of the national interest in case
the operations of the company are disrupted by a refusal of the strikers to return to
work as directed.
If the stoppage of work will be unfruitful not only to both the employer and
the employees, more particularly if the national economy will suffer because of the
resultant reduction in our export earnings and our dollar reserves, not to mention
possible cancellation of the contracts of the company with foreign exporters, the
labor dispute may properly be certified to the National Labor Relations Commission,
to avoid such a development, with the return-to-work order following as a matter of
course under the law.
W h e r e the return to work order is issued pending the determination of
the legality of the strike, it is not correct to say that it may be enforced only if the
strike is legal and may be disregarded if the strike is illegal. Precisely, the purpose
of the return-to-work order is to maintain the status quo while the determination
is being made. Otherwise, the workers who contend that their strike is legal can
refuse to return to their work and use a standstill in the company operations while
retaining the positions they refuse to discharge or allow the management to fill.
Worse, they will also claim payment for work not done, on the ground that they
are still legally employed although actually engaged in activities inimical to their
employer's interest.

14.10 Defiance of R T W O , an Illegal Act

N o t only union officers but also union members w h o defy a return-to-work
order are subject to dismissal. T h e y are d e e m e d to have participated in an illegal
act.

St. Scholastica's College vs. Hon. Ruben Torres and Samahan ng Manggagawang
Pang-edukasyon sa Sta. Escolastika-NAFTEU, G.R. N o . 100158, June 29, 1992 —
Article 263(g) of the Labor Code provides that if a strike has already taken place
at the time of assumption, "all striking x x x employees shall immediately return to
work." This means that by its very terms, a return-to-work order is immediately effective
1
and executory notwithstanding the filing of a motion for reconsideration. It must
be strictly complied with even during the pendency of any petition questioning its

'University of Sto. Tomas vs. N L R C , G.R. N o . 89920, October 18, 1990, 190
SCRA 759.
609
 LABOR RELATIONS
ARTS. 263-265

1
validity. After all, the assumption and/or certification order is issued in the exercise
of respondent Secretary's compulsive power of arbitration and, until set aside, must
therefore be immediately complied with.
The rationale for this rule is explained in University of Sto. Tomas vs. NLRC,
citing Philippine Air Lines Employees Association vs. Philippine Air Lines, Inc. (38 SCRA
372 [1971]):
To say that its (return-to-work order) effectivity must wait affirmance in
a motion for reconsideration is not only to emasculate it but indeed to defeat
its import, for by then the deadline fixed for the return-to-work would, in the
ordinary course, have already passed and hence can no longer be affirmed
insofar as the time element is concerned.
The respective liabilities of striking union officers and members who failed to
immediately comply with the return-to-work order [are] outlined in Article 264 of
the Labor Code which provides that any declaration of a strike or lockout after the
Secretary of Labor and Employment has assumed jurisdiction over the labor dispute
is considered an illegal act. Any worker or union officer who knowingly participates
in a strike defying a return-to-work order may, consequently, "be declared to have
lost his employment status."
T h e sympathy of the Court which, as a rule, is on the side of the laboring
2
classes cannot be extended to the striking union officers and members in the instant
petition. There was willful disobedience not only to one but two return-to-work orders.
Considering that the U N I O N consisted mainly of teachers, who are supposed to be
well-lettered and well-informed, the Court can not overlook the plain arrogance and
pride displayed by the U N I O N in the labor dispute.
Lastly, the union officers and members also argue that the doctrine laid down
in Sarmiento vs. Tuico, supra, and Union of Filipro Employees vs. Nestle Philippines, Inc.,
supra, cannot be made applicable to them because in the latter two cases, workers
defied the return-to-work orders for more than five (5) months. Their defiance of
the return-to-work order, it is said, did not last more than a month.
Again, this line of argument must be rejected. It is clear from the provisions
above quoted that from the moment a worker defies a return-to-work order, he is
deemed to have abandoned his j o b . It is already in itself knowingly participating
in an illegal act. Otherwise, the worker will just simply refuse to return to his work
and cause a standstill in the company operations while retaining the positions they
3
refuse to discharge or allow the management to fill. Suffice it to say, in Federation of
Free Workers vs. Inciong, supra, the workers were terminated from work after defying
the return-to-work order for only nine ( 9 ) days. It is indeed inconceivable that an
employee, despite a return-to-work order, will be allowed in the interim to stand
akimbo and wait until five (5) orders shall have been issued for their return before
they report back to work. This is absurd.

'Union of Filipro Employees vs. Nestle Philippines, Inc., 192 SCRA 396.
"Reliance Surety Insurance Co., Inc. vs. N L R C , G.R. Nos. 86917-18, January
25, 1991; 193 SCRA 365.
3
Sarmiento vs. Tuico, supra.

610
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
In fine, respondent secretary gravely abused his discretion when he ordered the
reinstatement of striking union members who refused to report back to work after he
issued two (2) return-to-work orders, which in itself is knowingly participating in an
illegal act. T h e [reinstatement] Order in question is, certainly, contrary to existing
law and jurisprudence.

A strike undertaken despite the issuance by the Secretary of Labor of an

assumption or certification order becomes a prohibited activity and, thus, illegal,
pursuant to Article 264(a) of the L a b o r C o d e . Moreover, the union officers and
members w h o have participated in the said illegal activity are, as a result, d e e m e d
1
to have lost their e m p l o y m e n t status.
But to justify dismissal, the defiance of the return-to-work order must be
proved. In o n e case the Court said that the m e r e fact that the majority of the
strikers were able to return to work does not necessarily mean that the rest
deliberately defied the return to work order or that they had been sufficiently
notified thereof. As the Solicitor General correctly adds, some of them may have
left M e t r o Manila and did not have e n o u g h time to return during the period
2
given by the petitioner, which was only five days.
T h e contention of the petitioner [ e m p l o y e r ] that the private respondents
[employees] abandoned their position is also not acceptable. An employee who
forthwith takes steps to protest his lay-off cannot by any logic be said to have
3
abandoned his work.
F o r a b a n d o n m e n t t o c o n s t i t u t e a v a l i d cause f o r t e r m i n a t i o n o f
employment, there must be a deliberate, unjustified refusal of the employee to
resume his employment. This refusal must be clearly established. As we stressed
4
in a recent case, m e r e absence is not sufficient; it must be accompanied by overt
acts unerringly pointing to the fact that the e m p l o y e e simply does not want to
5
work anymore.
Thus, the alleged or perceived defiance of the R T W O does not mean
automatic dismissal of the defying employees. Due process must be observed.
Given the chance to explain, the employees may prove that there was no defiance
at all.

•Allied Banking Corp. vs. N L R C , et al, G.R. N o . 116128, July 12, 1996. See
Philcom Employees Union vs. Phil. Global Communications and Philcom Corp.,
G.R. N o . 144315, July 17, 2006.
2
Batangas Laguna Tayabas Bus Company vs. N L R C , G.R. N o . 101858, August
21, 1992.
Ibid.
4
Nueva Ecija I Electric Cooperative, Inc. [NEECO-I] vs. Minister of Labor, 184
SCRA 25.
Ibid.

611
 LABOR RELATIONS
ARTS. 263-265

14.10a "Abandonment" has Varying Elements

However, this rigorous meaning of abandonment as a reason to terminate
an e m p l o y e e has been clarified by the Court. It agrees with the N L R C in
explaining that abandonment of work as a ground to dismiss under Article
282(b) of the C o d e should not be confused with abandonment of work under
the law on strike, particularly under Article 263(g) and 2 6 4 ( a ) . T h e rule that to
constitute abandonment of position there must be concurrence of the intention
to abandon and some overt act from which it may be inferred that the employee
has no more interest in working is available as a defense against dismissals under
Article 282. But it cannot be invoked in dismissals resulting from a striker's
1
defiance of return to work order under Article 2 6 3 ( g ) or 2 6 4 ( a ) .
But the Secretary of Labor may temper the consequence of the defiance to
2
the R T W O . H e may merely suspend rather than dismiss the employees involved.

14.11 Restoration of Condition U p o n Issuance of Return-to-Work O r d e r

An order to return to work, which the L a b o r Court may properly issue in
3
the exercise of its power of arbitration and conciliation, is intended to restore
the strikers to their positions in the company under the last terms and conditions
4
existing before the dispute arose.
T h e enforcement of a new c o m p a n y policy, requiring the e m p l o y e e s
to use up their earned leaves instead of accumulating them, without judicial
authorization, w o u l d i n d e e d constitute a v i o l a t i o n of such o r d e r f o r the
5
maintenance of status quo in the relations between the workers and the company.
W h e r e a return-to-work order is issued, may the employer be c o m p e l l e d
to accept back to work the strikers with pending criminal charges?

Telefunken Semiconductors Employees Union-FFW vs. Secretary of Labor, et al., G.R.

Nos. 122743 and 127215, December 12, 1997 —
It may be true that the workers struck after the Secretary of Labor and
Employment had assumed jurisdiction over the case and that they may have failed to
immediately return to work even after the issuance of a return-to-work order, making
their continued strike illegal. For, a return-to-work order is immediately effective

'See Allied Banking Corp. vs. N L R C , G.R. N o . 116128, July 12, 1996.
2
Cebu Portland Cement Co. vs. Cement Workers' Union, et al, L-25032 and
L-25037-38, October 14, 1968.
Philippine Marine Radio Officers' Association vs. CIR, L-10115, October 31,
1957; Feati University vs. Bautista, L-21278, L-21462 & L-21500, December 27, 1966;
Bachrach Trans. Co. vs. Rural Transit Shop Employees Association, L-26764, July 25,
1967.
"Section 19, Commonwealth Act 103.
5
Cebu Portland Cement Co. vs. Cement Workers' Union, et al, L-25032 and
L-25037-38, October 14, 1968.

612
 STRIKES AND LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike *
and Lockout]
and executory notwithstanding the filing of a motion for reconsideration. But, the
liability of each of the union officers and the workers, if any, has yet to be determined.
More so in the instant case where the U N I O N alleges inadequate service upon the
U N I O N leadership of the Assumption Order of September 8, 1995 and the return-
to-work Order of September 16, 1995.' Thus, did all or some of the union leaders
knowingly participate in the illegal strike? Did any or all of the members of the U N I O N
who then had pending criminal charges knowingly participate in the commission, if
any, of illegal acts during the strike? T h e records do not bear the answers to these
questions, but only expectedly so, for Atty. [Tito R ] Genilo of the D O L E [now of the
N L R C ] has yet to hear and receive evidence on the matter, and to submit a report
and recommendation thereon.
Thus to exclude union officers, shop stewards and those with pending criminal
charges in the directive to the C O M P A N Y to accept back the striking workers without
first determining whether they knowingly committed illegal acts would be tantamount
to dismissal without due process of law. We therefore hold that the Honorable
Secretary of Labor gravely abused his discretion in excluding union officers, shop
stewards and those with pending criminal charges in the order to the C O M P A N Y to
accept back the striking workers pending resolution of the issue involving the legality
of the strike.

14.12 Actual, N o t Payroll, Readmission

T h e third sentence of Article 2 6 3 ( g ) states that the striking or locked out
employees shall return to work and the employer shall readmit them, "under
the same terms and conditions prevailing before the strike or lockout." T h e
Court interprets this to mean actual, not payroll, readmission to the employees'
positions.
Thus, the placement of the striking teachers to "substantially equivalent
academic assignments" could not be considered reinstatement under the "same
2
terms and conditions prevailing before the strike."
Similarly, in case of striking ship personnel the order of readmission simply
means that they should be returned to their [same] ship assignment as before
they staged their strike. T h e employer was mandated to issue embarkation order
to the employees. But the employer tried to argue that non-reinstatement of the
strikers was a legitimate precautionary measure because the strikers, if actually
reinstated, might sabotage the operations in the ship, thereby endangering the
passengers. T h e argument failed to convince the Supreme Court which even
reiterated that Article 2 6 3 ( g ) constitutes an exception to the management
3
prerogative of hiring, firing, transfer, d e m o t i o n and promotion of employees.

•St. Scholastica's College vs. Torres, G.R. N o . 100158, June 29, 1992.
University of Sto. Tomas vs. N L R C , 190 SCRA 758 [1990].
'Trans-Asia Shipping Lines, Inc.-Unlicensed Crew Employees Union, etc. vs.
Court of Appeals and Trans-Asia Shipping Lines, Inc., G.R. N o . 145428, July 7, 2004.

613
 LABOR RELATIONS
ARTS. 263-265

T h e phrase "under the same terms and conditions" contemplates actual,

not payroll reinstatement of the workers. This is in keeping with the rationale
that any work stoppage or slowdown in that particular industry can be inimical
to the national economy. It is clear that Article 2 6 3 ( g ) was not written to protect
labor from the excesses of management nor was it written to ease management
from expenses, which it normally incurs during a work stoppage or slowdown.
It was an error on the part of the Court of Appeals to view the assumption order
of the Secretary as a measure to protect the striking workers from any retaliatory
action of the [ e m p l o y e r ] . [ T h e S u p r e m e ] Court, through Justice Azcuna,
reiterates that this law was written as a means to be used by the State to protect
itself from an emergency or crises. It is not for labor, nor is it for management...
[P]ayroll reinstatement [under Article 2 6 3 ( g ) ] in lieu of actual reinstatement is
a departure from the rule in these cases and there must be a showing of special
circumstances rendering actual reinstatement impracticable ... or otherwise not
conducive to attaining the purpose of the law
In another case the C o u r t r e c o g n i z e s that o n e of the "superseding
circumstances" that justifies payroll reinstatement [instead of actual reinstatement
which is the norm in readmission of workers under Article 263 ( g ) ] is the fact that
the subject employees' positions were declared confidential in nature by a panel
of voluntary arbitrators. To insist on their actual reinstatement is impracticable
and more likely to exacerbate the situation. In ordering payroll rather than actual
2
reinstatement the Secretary of L a b o r did not abuse his discretion.
Neither did the Secretary of L a b o r abuse her discretion when she allowed
payroll reinstatement of the strikers in a large hotel. She d i d not insist that
the management physically and immediately reinstate them because as the
management pointed out, it would not look nice to have bald staff attending to
the hotel's guests. Protesting against C B A negotiation deadlock, those employees
had shaved their heads then went on strike. W h e n the Secretary of L a b o r issued
the return to work order they still had shiny, hairless heads! T h e Court ruled
3
that it had "great confidence" in the secretary's discretion.

14.13 Voluntary Return to Work Is N o t Waiver of Original Demands

On October 24, 1953, the Philippine Marine Radio Officers Association
(Philmaroa) filed a notice of intention to strike with the Conciliation Service
Division of the D e p a r t m e n t of L a b o r against the petitioner. P e n d i n g the
resolution of the dispute by the Court of Industrial Relations, by reason of the

'Manila Diamond Hotel Employees' Union vs. T h e H o n . Court of Appeals, et

al, G.R. N o . 140518, December 16, 2004.
2
University of Immaculate Conception, Inc. vs. T h e Honorable Secretary of
Labor, et al, G.R. N o . 151379, January 14, 2005.
National Union of Workers, etc. vs. T h e Honorable CA, G.R. Nos. 163942 and
166295, November 11, 2008.

614
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]

presidential certification to it of the said dispute, Benjamin Nadanza and Arcadio

Guano abandoned their ships, which belong to petitioner. Some weeks thereafter
said radio operators came back and, upon their request, were readmitted by the
company. subsequently, the company claimed that when the radio operators went
back to work and the company reinstated them, the parties thereby waived the
grounds that they may have had for striking. Said the Supreme Court:
T h e r e is absolutely no merit in this contention. T h e strike in this case
was adopted by the union to c o m p e l the respondent shipping company to
accede to its demand. T h e strike was but o n e of the means employed to
achieve its ends. W h e n the radio officers returned back to work after the
strike, such return d i d not imply the waiver of the original demands. T h e
fact that the radio operators returned back to work and e n d e d their strike
only meant that they desisted from the strike; such desistance is a personal
act of the strikers, and cannot be used against the union and interpreted
as a waiver by it of its original demands for which the strike was adopted
as a weapon. Bisaya Land Transportation Company, Inc. vs. Court of Industrial
Relations and Philippine Marine Radio Officers Association, 102 Phil. 438.

14.14 All Issues to be Determined in the Certified Industrial Dispute

W h e r e the industrial dispute has b e e n certified by the President [ o r the
Secretary] to the industrial court, all issues involved in the industrial dispute
should be aired and d e t e r m i n e d in the case w h e r e the dispute as certified by
the President is d o c k e t e d . T h e parties should n o t be permitted to isolate other
g e r m a n e issues or demands and reserve them for determination in the other
cases p e n d i n g b e f o r e o t h e r branches of the industrial court. A l l such other
p e n d i n g cases should be consolidated in, or at least jointly tried by, the branch
which has taken c o g n i z a n c e of the case over the certified industrial dispute
towards the e n d that all the issues and demands may be finally d e t e r m i n e d
and the dispute definitely settled, rather than merely arrive at a piece-meal
settlement, with the a d d e d disadvantage that in passing upon certain issues
b e f o r e it, it w o u l d have to rule upon certain aspects likewise involved in the
other cases and on which the other branches might reach a contrary evaluation
1
and conclusion.
A l l cases between the same parties, except where the certification order
specifies otherwise the issues submitted for arbitration, which are already filed
or may be filed, and are relevant to or are proper incidents of the certified case,
shall be considered subsumed or absorbed by the certified case, and shall be
2
decided by the appropriate Division of the Commission.

'Philippine Federation of Petroleum Workers [PFPW] vs. Court of Industrial

Relations, 37 SCRA 711 [1971].
2
Sec. 3, Rule V I I I , N L R C Revised Rules of Procedure, 2005.

615
 LABOR RELATIONS
ARTS. 263-265

Subject to the second paragraph of Section 4 of Rule IV, the parties to

a certified case, under pain of contempt, shall inform their counsels and the
Division concerned of all cases pending with the Regional Arbitration Branches
1
and the Voluntary Arbitrators relative or accident to the certified case before it.
Whenever a certified labor dispute involves a business entity with several
workplaces located in different regions, the Division having territorial jurisdiction
over the principal office of the company shall acquire jurisdiction to decide such
2
labor dispute; unless the certification order provides otherwise.
T h e certification for compulsory arbitration, as directed by the Minister
of Labor, overrides the other unresolved proceedings before the National L a b o r
Relations Commission. Proceedings in the injunction and unfair labor practice
cases filed by the employer necessarily have to be suspended to await the outcome
of the compulsory arbitration proceedings directed by the Minister of L a b o r to
3
be conducted by the National Labor Relations Commission.

International Pharmaceuticals, Inc. vs. Secretary of Labor and Associated Labor Union
(ALU), G.R. Nos. 92981-83, January 9, 1992 —
Facts: Before the CBA expired, the Union submitted to the Company its
economic and political demands. A deadlock ensued, triggering a strike.
Three labor cases involving the same parties were filed with the N L R C , namely:
(a) a petition for injunction and damages filed by the Company against the
Union for picketing the Company's establishment, allegedly without the required
majority vote of the employees;
( b ) a complaint for U L P with damages filed by the Union against the
Company and the Workers Alliance of Trade Unions ( W A T U ) as a result o f the
Company's coddling of W A T U as a separate bargaining agent of the sales workers;
(c) a petition to declare the strike illegal filed by the Company.
Meanwhile, considering that the Company was engaged in the manufacture
of drugs and pharmaceuticals, employing 600 workers, the Acting Secretary issued
an order assuming jurisdiction over the case.
The union filed a motion to consolidate the three N L R C cases. Despite the
company's objection the secretary ordered the consolidation of the three cases. T h e
company assails the order on three grounds:
(a) that the exclusive jurisdiction to hear and decide the three N L R C cases
is vested in the Labor Arbiter;
( b ) that there is nothing in Article 263(g) of the Labor Code which directs
the Labor Arbiter to hold in abeyance all proceedings in the N L R C cases and await
instruction from the Secretary. Section 6, Rule V of the Revised Rules of the N L R C

^ e c . 3, Rule V I I I , N L R C Revised Rules of Procedure, 2005.

Ibid.
3
Bagong Bayan Corporation Realty Investors and Developers vs. Bias F. Ople,
et al, G.R. N o . 73334, December 8, 1986.

616
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
which is invoked by the Secretary is null and void for mandating the cessation of all
proceedings before the Labor Arbiter where the Secretary has assumed jurisdiction,
thereby amending Article 263(g) by enlarging the jurisdiction of the Secretary;
(c) that assuming that Sec. 6, Rule V is in accordance with Article 263(g),
still the Secretary should not have ordered the consolidation of the three cases, since
the Secretary assumed jurisdiction only over the deadlock in the CBA negotiations.
Issue: Whether or not the secretary has the power to assume jurisdiction over
a labor dispute and its incidental controversies.
Ruling: Yes.
(1) In fine, the issuance of the assailed orders is within the province of
the Secretary as authorized by Article 263(g) and Article 217(a) (1) and ( 5 ) , taken
jointly and rationally construed to subserve the objective of the jurisdiction vested in
the Secretary. "It is fundamental that a statute is to be read in a manner that would
breathe life into it, rather than defeat it."
In the present case, the Secretary was conferred with jurisdiction over cases
which would otherwise be under the original and exclusive jurisdiction of labor
arbiters. There was an existing labor dispute as a result of a deadlock in the negotiation
for a CBA and the consequent strike over which the Secretary assumed jurisdiction
pursuant to Article 263(g). "Necessarily, this authority to assume jurisdiction over the
said labor dispute must include and extend to all questions and controversies arising
therefrom, including cases over which the labor arbiter has exclusive jurisdiction."
T h e three N L R C cases were just offshoots of the stalemate in the negotiations and
the strike. T h e consolidation of the three N L R C cases was necessary to enable the
Secretary to competently and efficiently dispose of the dispute in its entirety.
(2) T o uphold petitioner Company's arguments that the N L R C cases are
alien and totally separate and distinct from the deadlock in the negotiation of the
CBA is to sanction split jurisdiction which is obnoxious to the orderly administration
of justice.
(3) T h e court should help provide workers immediate access to their rights
and benefits without being hampered by financially burdensome litigation processes.
(4) T h e pronouncement of the court on this point should be distinguished
from the situation which obtained and was consequently ruled upon in the case of
Servando's, Inc. vs. the Secretary of Labor and Employment, et al. (G.R. N o . 85840, June 5,
1991).
T h e petition is dismissed.

14.15 Submission of Incidental Issues; Rulings Reconciled

St. Scholastica's College vs. Hon. Ruben Torres, et al., G.R. N o . 100158, June 29,
1992 —
Facts: In July 1990, petitioner St. Scholastica's College and private respondent
union initiated negotiations for a first-ever collective bargaining agreement. A
deadlock in the negotiations led to a strike starting November 5,1990. The Secretary

617
 LABOR RELATIONS
ARTS. 263-265

of Labor immediately assumed jurisdiction over the labor dispute and issued on the
same day a return-to-work order. Instead of returning to work, the Union filed a
motion for reconsideration of the re turn-to-work order, questioning the assumption
of jurisdiction.
The College enjoined the striking employees to return to work not later than
8 o'clock A . M . of November 12, 1990. In response, the Union presented a list of
demands to the College, the most important being the unconditional acceptance
back to work of the striking employees. These were flatly rejected.
Respondent Secretary denied reconsideration of his return-to-work order and
sternly warned the striking employees to comply with its terms.
The College manifested to respondent Secretary that the Union continued to
defy his return-to-work order so that "appropriate steps under the said circumstances"
may be undertaken by him.
On November 23, the College terminated the employment of all the striking
employees and, on December 5, filed a Complaint for Illegal Strike against the union
officers and several of its members.
After submission of position papers respondent Secretary issued an Order
which, inter alia, directed the reinstatement of striking Union members, but sustained
the termination of the union officers.
Petitioner College questions the assumption by the respondent Secretary of
jurisdiction to decide on termination disputes, maintaining that such jurisdiction is
vested instead on the Labor Arbiter pursuant to Article 217 of the Labor Code.
In support of its position, petitioner College invokes the ruling in PAL vs.
Secretary of Labor and Employment (G.R. N o . 88210, January 23, 1991, 19 SCRA 223)
where We held:
T h e Labor Secretary exceeded his jurisdiction when he restrained PAL
from taking disciplinary measures against its guilty employees, for, under Article
263 of the Labor Code, all that the Secretary may enjoin is the holding of the
strike but not the company's right to take action against union officers who
participated in the illegal strike and committed illegal acts.
Petitioner further contends that following the doctrine laid down in Sarmiento
vs. Tuico (G.R. Nos. L-75271-73, June 27, 1988; 162 SCRA 676) and Union of Filipro
Employees vs. Nestle Philippines, Inc. (G.R. Nos. 88710-12, December 19,1990; 192 SCRA
396), workers who refuse to obey a return-to-work order are not entitled to be paid
for work not done, or to reinstatement to the positions they have abandoned by
reason of their refusal to return thereto as ordered.
Taking a contrary stand, private respondent Union pleads for reinstatement
of its dismissed officers.
Ruling: T h e issue on whether respondent Secretary has the power to assume
jurisdiction over a labor dispute and its incidental controversies, causing or likely to
cause a strike or lockout in an industry indispensable to the national interest, was
already settled in International Pharmaceuticals, Inc. vs. Secretary of Labor and Employment
(G.R. Nos. 92981-83, January 9, 1992). Therein, We ruled that:

618
 STRIKES AND LOCKOUTS ARTS 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]

Necessarily, this authority to assume jurisdiction over the said labor

dispute must include and extend to all questions and controversies arising
therefrom, including cases over which the Labor Arbiter has exclusive
jurisdiction.
Previously, We held that Article 263(g) of the Labor Code was broad enough
to give the Secretary of Labor and Employment the power to take jurisdiction over
1
an issue involving unfair labor practice.
At first glance, the rulings above stated seem to run counter to that of PAL vs.
Secretary of Labor and Employment, supra, which was cited by petitioner. But the conflict
is only apparent, not real.
To recall, We ruled in the latter case that the jurisdiction of the Secretary of
Labor and Employment in assumption a n d / o r certification cases is limited to the
issues that are involved in the disputes or to those that are submitted to him for
resolution. T h e seeming difference is, however, reconcilable. Since the matter on
the legality or illegality of the strike was never submitted to him for resolution, he
was thus found to have exceeded his jurisdiction when he restrained the employer
from taking disciplinary action against employees who staged an illegal strike.
Before the Secretary of Labor and Employment may take cognizance of an
issue which is merely incidental to the labor dispute, therefore, the same must be
involved in the labor dispute itself, or otherwise submitted to him for resolution.
If it was not, as was the case in PAL vs. Secretary Labor and Employment, supra, and he
nevertheless acted on it, that assumption of jurisdiction is tantamount to a grave abuse
of discretion. Otherwise, the ruling in International Pharmaceuticals, Inc. vs. Secretary
of Labor and Employment, supra, will apply.
T h e submission of an incidental issue of a labor dispute, in assumption and/
or certification cases, to the Secretary of Labor and Employment for his resolution
is thus one of the instances referred to whereby the latter may exercise concurrent
jurisdiction together with the Labor Arbiters.
In the instant petition, the College in its Manifestation, dated November 16,
1990, asked the "Secretary of Labor to take the appropriate steps under the said
circumstances." It likewise prayed in its position paper that respondent Secretary
uphold its termination of the striking employees. Upon the other hand, the Union
questioned the termination of its officers and members before respondent Secretary
by moving for the enforcement of the return-to-work orders. There is no dispute then
that the issue on the legality of the termination of striking employees was properly
submitted to respondent Secretary for resolution.

In assumption of jurisdiction, the power of the Secretary of Labor extends

to all questions and controversies arising therefrom. A dispute in a company
supplying the sulfate requirements of MWSS is a "national interest" dispute.

'Meycauayan College vs. Drilon, G.R. N o . 81144, May 7, 1991.

619
 LABOR RELATIONS
ARTS. 263-265

T h e petitioner corporation was then supplying the sulfate requirements

of MWSS as well as the sulfuric acid of N A P O C O R , and consequently, the
continuation of the strike would seriously affect the water supply of M e t r o
Manila and the power supply of the Luzon Grid. Such authority of the Secretary
to assume jurisdiction carries with it the power to determine the retroactivity of
the parties' C B A . T h e authority of the Secretary of Labor to assume jurisdiction
over a labor dispute causing or likely to cause a strike or lockout in an industry
indispensable to national interest extends to all questions and controversies
arising therefrom. T h e power is plenary and discretionary in nature to enable
1
him to effectively and efficiendy dispose of the primary dispute.
Necessarily, this authority to assume jurisdiction over the said labor dispute
must include and extend to all questions and controversies arising therefrom,
2
including cases over which the labor arbiter has exclusive jurisdiction.
Exception
But the University of San Augustin case notes an exception: where the parties
have an existing no strike-no lockout agreement requiring that their disputes be
brought to voluntary arbitration. This exception is explained under the c o m i n g
topic "Sixth Factor in the Legality of Strike; A g r e e m e n t of the Parties."

14.16 Procedure in Certified Cases

a) Unless there is a necessity to conduct a clarificatory hearing, the
Commission shall resolve all certified cases within thirty ( 3 0 ) calendar days
from receipt by the assigned Commissioner of the c o m p l e t e records, which shall
include the position papers of the parties and the order of the Secretary of Labor
and Employment denying the m o t i o n for reconsideration of the certification
3
order, if such motion has been filed.
b) W h e r e a clarificatory hearing is needed, the Commission shall, within
five ( 5 ) calendar days from receipt of the records, issue a notice to be served on
the parties through the fastest means available, requiring them to appear and
4
submit additional evidence, if any.
c) Notwithstanding the necessity for a clarificatory hearing, all certified
cases shall be resolved by the Commission within sixty ( 6 0 ) calendar days from
5
receipt of the complete records.

' L M G Chemicals Corporation vs. T h e Secretary of the Department of Labor

and Employment, Hon. Leornardo A. Quisumbing, and Chemical Worker's Union,
G.R. N o . 127422, April 17, 2001.
2
Interphil Laboratories Employees Union-FFW, et al. vs. Interphil Laboratories,
Inc., et al., G.R. N o . 142824, December 19, 2001.
3
Sec. 5, Rule V I I I , N L R C Revised Rules of Procedure, 2005.
Ibid.
Ibid.

620
 STRIKES A N D LOCKOUTS ARTS 263-265
[Part 1. Regulations and Limits of Strike "
and Lockout]
1
d) No motion for postponement or extension shall be entertained.
Execution of Judgment in Certified Case. — U p o n issuance of the entry
of judgment, the Commission, motu proprio or upon motion by the proper party,
2
may cause the execution of the j u d g m e n t in the certified case.

14.17 Assumption O r d e r Regulates Management Prerogatives

O n e of the aims of Article 263(g) is to control a labor dispute detrimental
to national interest. W h e n such a labor dispute has in fact occurred and a
general injunction has been issued restraining the commission of disruptive
acts, management prerogatives must be exercised consistently with the statutory
objective.

Metrolab Industries, Inc. vs. Roldan-Confesor, G.R. N o . 108855, February 28,

1996 —
In this Metrolab case (discussed also under Article 245 regarding confidential
employees) the secretary of Labor assumed jurisdiction over the dispute. T h e
assumption order stated in part:
"Accordingly, any strike or lockout is hereby strictly enjoined. T h e
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."
W h i l e the dispute was still unresolved, the company laid off 94 and 73
employees, one batch after the other, on ground of redundancy due to lack of
work. T h e secretary of labor nullified the dismissals. Metrolab argues that the labor
secretary's order enjoining the parties from committing an 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.
Turning down Metrolab's contention, the Supreme Court quoted with approval
the secretary's explanation:
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,
xxx xxx xxx

•Sec. 5, Rule V I I I , N L R C Revised Rules of Procedure, 2005.

2
Sec: 6, Rule V I I I .

621
 LABOR RELATIONS
ARTS. 263-265

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.

14.18 "Legal Discretion''; Judicial Review of Secretary's Award or O r d e r

T h e Supreme Court has taken a position of respect and understanding
1
towards the secretary's resolution of "national interest" cases.
But respect towards the exercise of the Secretary's assumption power does
not mean exemption from judicial review. T h e Court may inquire not just into
the validity of the act of assuming jurisdiction over the dispute but even into the
correctness or reasonableness of the contents of the secretary's order, award, or
resolution.
W h e n the Secretary exercises the powers granted by Article 2 6 3 ( g ) of the
Labor C o d e , he is, indeed, granted great breadth of discretion. However, the
application of this power is not without limitation, lest the Secretary would be
above the law. Discretion is defined as the act or the liberty to decide, according
to the principles of justice and one's ideas of what is right and p r o p e r under the
circumstances, without wilfulness or favor. W h e r e anything is left to any person
to be done according to his discretion, the law intends it must be d o n e with a
sound discretion, and according to law. T h e discretion conferred upon officers
by law is not a capricious or arbitrary discretion, but an impartial discretion
guided and controlled in its exercise by fixed legal principles. It is not a mental
discretion to be exercised ex gratia, but a legal discretion to be exercised in
conformity with the spirit of the law, and in a manner to subserve and not to
impede or defeat the ends of substantial justice. F r o m the f o r e g o i n g , it is quite
apparent that no matter how broad the exercise of discretion is, the same must
be within the confines of law. Thus, the wide latitude of discretion given the
2
Secretary under Article 2 6 3 ( g ) shall and must be within the sphere of law.

Manila Electric Co. vs. Hon. Sec. Quisumbing and Meralco Employees and Workers
Association (MEWA), G.R. N o . 127598, January 27, 1999 —
Facts: Meralco and MEWA, renegotiating their CBA for the remaining two of
its five-year term, deadlocked on such issues as wage increase, coverage of bargaining
unit, Christmas bonus, and so forth. Meralco management petitioned the D O L E
secretary to assume jurisdiction over the deadlock dispute. In due time, the Secretary

•Caltex Refinery Employees Association vs. Brillantes and Caltex (Phil.), Inc.,
G.R. N o . 123782, September 16, 1997.
Philippine Long Distance Telephone Co. vs. Manggagawa ng Komunikasyon
sa Pilipinas and the Court of Appeals, G.R. N o . 162783, July 14, 2005.

622
 STRIKES A N D LOCKOUTS
[Part 1. Regulations and Limits of Strike
ARTS. 263-265
and Lockout]

rendered an award and directed the parties to incorporate it in their renegotiated

CBA. Objecting to particular items in the award as excessive or arbitrary, Meralco
moved for reconsideration, and the Secretary did reconsider some of the items. Still
dissatisfied, Meralco charged the Secretary with grave abuse of discretion before the
Supreme Court. T h e union opposed the petition.
Ruling: Speaking through Mr. Justice Martinez, the court rejected the union's
opposition.
T h e Secretary of Labor's statutory power under Article 263(g) of the Labor
Code to assume jurisdiction over a labor dispute in an industry indispensable to
the national interest, and, to render an award on compulsory arbitration, does not
exempt the exercise of this power from the judicial review that Sec. 1, Article 8 of
the Constitution mandates. This constitutional provision states:
"Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the government. "
Under this constitutional mandate, every legal power of the Secretary of Labor
under the Labor Code, or, for that matter, any act of the Executive, that is attended
by grave abuse of discretion is subject to review by this Court in an appropriate
proceeding.
T h e extent of judicial review over the Secretary of Labor's arbitral award is not
limited to a determination of grave abuse in the manner of the secretary's exercise
of his statutory powers. This Court is entitled to, and must — in the exercise of its
judicial power — review the substance of the Secretary's award when grave abuse
of discretion is alleged to exist in the award, i.e., in the appreciation of and the
conclusions the Secretary drew from the evidence presented.
T h e natural and ever present limitation on the Secretary's acts is, of course,
the Constitution. A n d we recognize that indeed the constitutional provisions the
union cited are State policies on labor and social justice that can serve as standards in
assessing the validity of a Secretary of Labor's actions. [The union cited the provisions
on promotion of workers' welfare, "distributive justice," "humane conditions of work,"
"living wage," etc.] However, we note that these provisions do not provide clear,
precise and objective standards of conduct that lend themselves to easy application.
We likewise recognize that the Constitution is not a lopsided document that only
recognizes the interests of the working man; it too protects the interests of the property
owner and employer as well.

14.19 Secretary's Abuse of Discretion, Examples

In a bargaining deadlock over which the Secretary of Labor assumed
jurisdiction, it is abuse of discretion for the Secretary to impose a stipulation
which even the union did not ask for. In a Manila Electric case, above, neither the
management nor the union raised the issue of union security in their motions
for reconsideration. But the Secretary motu proprio changed the maintenance-

623
 LABOR RELATIONS
ARTS. 263-265

of-membership clause contained in his earlier O r d e r to a m o r e stringent union

1
shop clause. This, the Court said, is an instance of grave abuse of discretion.
Similarly, the Secretary abused her discretion when she excluded from
readmission the employees-strikers w h o m the employer separated on ground
of redundancy. T h e alleged redundancy was precisely the cause of the strike. By
excluding them, the Secretary in effect prejudged the case.

Philippine Long Distance Telephone Co. vs. Manggagawa ng Komunikasyon sa

Pilipinas, G.R. N o . 162783, July 14, 2005 —
Our ruling in the case of Phimco Industries, Inc. v. Brillantes was most appropriately
and auspiciously alluded to by the [union]. In this case, we held:
... This is precisely why the law sets and defines the standard: even in
the exercise of his power of compulsory arbitration under Article 263(g) of
the Labor Code, the Secretary must follow the law. For "when an overzealous
official by-passes the law on the pretext of retaining a laudable objective,
the intendment or purpose of the law will lose its meaning as the law itself is
disregarded."
As Article 263(g) is clear and unequivocal in stating that A L L striking or locked
out employees shall immediately return to work and the employer shall immediately
resume operations and readmit A L L workers under the same terms and conditions
prevailing before the strike or lockout, then the unmistakable mandate must be
followed by the Secretary. (Capitalization in original)
In the case of Trans-Asia Shipping Lines, Inc.-Unlicensed Crews Employees Union-
Associated Labor Unions (Tasli-Alu) v. Court of Appeals, we held:
. . . Assumption of jurisdiction over a labor dispute, or as in this case the
certification of the same to the N L R C for compulsory arbitration, always co-
exists with an order for workers to return to work immediately and for employers
to readmit all workers under the same terms and conditions prevailing before the strike
or lockout.

14.20 Withdrawal of Case to Submit to VA

Consistent with Article 211 ( a ) , the present Article 2 6 3 ( h ) allows the parties,
at any stage, to withdraw the case from compulsory arbitration to bring it instead
to a voluntary arbitrator.

15. SIXTH FACTOR IN L E G A L I T Y OF STRIKE: AGREEMENT O F T H E PARTIES

A C B A contains a nostrike/no lockout clause. It provides that disputes
between the parties, including alleged U L P act by the e m p l o y e r should be
resolved through voluntary arbitration instead of through a strike. Is this
stipulation valid? May the union disregard it and stage a strike?

•Manila Electric Co. vs. Quisumbing and MEWA, G.R. N o . 127598, January 27,

624
 STRIKES AND LOCKOUTS ARTS
[Part 1. Regulations and Limits of Strike
and Lockout]

T w o decisions of the Supreme Court on this matter conflict with each

other.
O n e , promulgated on May 15,1979, in the case of Philippine Metal Foundries,
Inc. vs. CIR, declared that a no-strike prohibition in a Collective Bargaining
A g r e e m e n t is applicable only to e c o n o m i c strikes. In other words, U L P strike is
not covered and workers may go on strike based on U L P despite the no-strike
provision. In this Metal Foundries case, it is admitted by the employer company that
it accepted the invitation of Baylon [union president] for a grievance conference
on O c t o b e r 5, 1963. Yet, two hours after it accepted the letter of invitation, it
dismissed Baylon without prior notice a n d / o r investigation. Such dismissal was
undoubtedly an unfair labor practice committed by the company. U n d e r these
facts and circumstances, Baylon and the members of the U n i o n had valid reasons
to ignore the scheduled grievance conference and declared a strike. W h e n the
U n i o n declared a strike in the belief that the dismissal of Baylon was due to union
activities, said strike was not illegal. It is not even required that there be in fact
an unfair labor practice committed by the employer. It suffices if such a belief
in g o o d faith is entertained by labor as the inducing factor for staging a strike.
T h e strike declared by the U n i o n in this case cannot be considered a violation
of the "no strike" clause of the Collective Bargaining A g r e e m e n t because it was
due to the unfair labor practice of the employer. Moreover, a no strike clause
prohibition in a Collective Bargaining A g r e e m e n t is applicable only to economic
1
strikes.
T h e other decision, issued on September 10,1979, in the case of GOP-CCP
Workers Union vs. CIR, enforced the binding effect of the "no-strike" stipulation
in the C B A . T h e Court said:
T h e U n i o n brands as illegal the stipulation in the collective bargain-
ing agreements that 'in case of any alleged unfair labor practice on the part
of either party, there will be no strikes, lockouts, or any prejudicial action
x x x until the question or grievance is resolved by the proper court if not
settled through a grievance procedure therein outlined.' T h e union's argu-
ment in support of that contention is vague and unconvincing. No specific
statutory enactment was cited to show the illegality of that stipulation. T h e
union merely avers that that stipulation contravenes Article 1701 of the
Civil C o d e because it would permit capital to act oppressively against labor.
T h e legality of that kind of stipulation was inferentially upheld in Liberal
Labor Union vs. Philippine Can Company, 91 Phil. 72, 78, where it was ruled:
' T h e authorities are numerous which hold that strikes held in
violation of the terms contained in a collective bargaining agreement
are illegal, especially when they provide for conclusive arbitration
clauses. These agreements must be strictly adhered to and respected

Philippine Metal Foundries, Inc. vs. CIR, G.R. Nos. L-34948-49, May 25,1979.

625
 LABOR RELATIONS
ARTS. 263-265

if their ends have to be achieved." (GOP-CCP Workers Union vs. CIR,

G.R No. L-33015, September 10, 1979.)
In the light of the fact that the latter case [ G O P - C C P ] is m o r e recent and
in view of the present state policy of preference for voluntary modes of dispute
settlement, it is submitted that the latter decision is m o r e conducive to industrial
stability, unless the Unfair Labor Practice act of the company is so gross and so
patent as to threaten the existence of the union.'
In June 1991, the Supreme Court again upheld a no-strike contractual
commitment. It said that even if there was no legal prohibition against strike
because of alleged wage distortions, and even assuming the controversy really did
not involve wage distortions caused by R.A. 6727, the concerted activity would still
be illicit because it was contrary to the workers' explicit contractual c o m m i t m e n t
"that there shall be no strikes, walkouts, stoppage or slowdown of work, boycotts,
secondary boycotts, refusal to handle any merchandise, picketing, sit down strikes
of any kind, sympathetic or general strikes, or any other interference with any
of the operations of the company during the term of their collective bargaining
2
agreement."

15.1 Ruling in Master Iron Case

T h e question of whether a no-strike clause in the C B A bars even a U L P
strike appears to have been categorically answered in the negative in Master Iron
Labor Union, et al. vs. NLRC and Master Iron Works and Construction Corp., G.R. N o .
92009, February 17, 1993. In this case, the Court declared:
As this Court has held in Philippine Metal Foundries, Inc. vs. CIR (90 S C R A
135 [ 1 9 7 9 ] ) , a no-strike clause in a C B A is applicable only to e c o n o m i c strikes.
Corollarily, if the strike is founded on an unfair labor practice of the employer,
a strike declared by the union cannot be considered a violation of the no-strike
clause.
An e c o n o m i c strike is defined as o n e which is to force wage or other
3
concessions from the employer which he is not required by law to grant. In
this case, petitioners enumerated in their notice of strike the following grounds:
violation of C B A or the C o r p o r a t i o n ' s practice of subcontracting workers;
discrimination; coercion of employees; unreasonable suspension of union
officials, and unreasonable refusal to entertain grievance.
Private respondent contends that petitioner's clamor for the implementation
of Section 2, Article V I I I of the C B A on service allowances granted to workers who

'NCMB, Primer on Voluntary Arbitration, p. 11.

2
Ilaw at Buklod ng Manggagawa [IBM] vs. National Labor Relations Commission,
G.R. N o . 91980,June 27, 1991.
Consolidated Labor Association of the Philippines vs. Marsman & Co., Inc.,
11 SCRA 589 [1964].

626
 STRIKES A N D LOCKOUTS ARTS
[Part 1. Regulations and Limits of Strike ^ . ^uo-<oo
and Lockout]

are assigned outside the company premises is an economic issue. On the contrary,
petitioners decry the violation of the C B A , specifically the provision granting
them service allowances. Petitioners are not, therefore, asking for an economic
benefit not already agreed upon, but are merely asking for the implementation
of the same. T h e y aver that the Corporation's practice of hiring subcontractors
to do j o b s outside of the company premises was a way "to d o d g e paying service
allowance to the workers."
In fine, if the employer commits an unfair labor practice, as in the above
case, the right to strike becomes available despite a no-strike provision in the
C B A of the parties.

15.2 N o - S t r i k e Clause B i n d i n g ; P r i m a c y o f V o l u n t a r y A r b i t r a t i o n
Agreement
A no-strike-no l o c k o u t stipulation generally deserves respect by the
parties to the C B A and by the labor authorities. Such stipulation applies even
to a deadlock in renegotiating the e c o n o m i c provisions of the C B A . W h e r e the
C B A stipulates that disputes between the parties should be resolved through a
grievance machinery, including voluntary arbitration, a notice of strike filed by
the union violates that agreement. T h e N C M B should consider such notice as
not duly filed and then direct the union to avail itself of the grievance machinery
and voluntary arbitration. A similar posture should be taken by the Secretary of
L a b o r instead of assuming jurisdiction over the dispute.

University of San Agustin Employees Union-FFW, et al. vs. CA and University of San
Agustin, G.R. N o . 169632, March 28, 2006 —
T h e grievance machinery and the no strike, no lockout provisions of the CBA
forged by the University and the Union are founded on Articles 261 and 262 [of the
Labor C o d e ] . T h e parties agreed that practically all disputes — including bargaining
deadlocks — shall be referred to the grievance machinery which ends in voluntary
arbitration. Moreover, no strike or no lockout shall ensue while the matter is being
resolved.
T h e University filed a Motion to Strike Out Notice of Strike and Refer the Dispute to
Voluntary Arbitration precisely to call the attention of the N C M B and the Union to the
fact that the CBA provides for a grievance machinery and die parties' obligation to
exhaust and honor said mechanism. Accordingly, the N C M B should have directed the
Union to honor its agreement with the University to exhaust administrative grievance
measures and bring the alleged deadlock to voluntary arbitration. Unfortunately,
the N C M B did not resolve the University's motion thus paving the way for the strike
on September 19, 2003 and the deliberate circumvention of the CBA's grievance
machinery and voluntary arbitration provisions.
As we see it, the failure or refusal of the N C M B and thereafter the SOLE
[Secretary of Labor and Employment] to recognize, honor and enforce the grievance
machinery and voluntary arbitration provisions of the parties' CBA unwittingly
rendered said provisions, as well as, Articles 261 and 262 of the Labor Code, useless

627
 LABOR RELATIONS
ARTS. 263-265

and inoperative. As here, a union can easily circumvent the grievance machinery
and a previous agreement to resolve differences or conflicts through voluntary
arbitration through the simple expedient of filing a notice of strike. On the other
hand, management can avoid the grievance machinery and voluntary arbitration
provisions of its CBA by simply filing a notice of lockout.
In Liberal Labor Union vs. Philippine Can Company, the Court viewed that the main
purpose of management and labor in adopting a procedure in the settlement of their
disputes is to prevent a strike or lockout. Thus, this procedure must be followed in
its entirety if it is to achieve its objective. Accordingly, the Court in said case held:
The authorities are numerous which hold that strikes held in violation of
the terms contained in a collective bargaining agreement are illegal, specially
when they provide for conclusive arbitration clauses. These agreement must
be achieved.

[Primacy of Voluntary Arbitration over Assumption of Jurisdiction]

We are not unmindful of the Court's ruling in International Pharmaceuticals,
Inc. vs. Secretary of Labor, et al., that the S O L E ' s jurisdiction over labor disputes
must include and extend to all questions and controversies arising therefrom,
including cases over which the Labor Arbiter has exclusive jurisdiction. However,
we are inclined to treat the present case as an exception to that holding. For, the
N C M B ' s inaction on the University's m o t i o n to refer the dispute to voluntary
arbitration veritably forced the hand of the University to seek and accordingly
submit to the jurisdiction of the S O L E . Considering that the C B A contained
a no strike, no lockout and grievance machinery and voluntary arbitration
clauses, the N C M B , under its very own Manual of Procedures in the Settlement
and Disposition of Conciliation and Preventive Mediation Cases, should have
declared as not duly filed the Union's N o t i c e of Strike and thereafter, should have
referred the labor dispute to voluntary arbitration pursuant to Article 261, ...
o f the Labor C o d e . For sure, Section 6 ( c ) ( i ) , Rule V I , o f the N C M B ' s Manual
specifically provides:

Section 6. Action on non-strikeable issues. — A strike or lockout notice

anchored on grounds involving (1) inter-union or intra-union disputes (2)
violation of labor standard laws (3) pending cases at the D O L E Regional Offices,
BLR, N L R C and its appropriate Regional Branches, N W P C and its Regional
Wage Boards, Office of the Secretary, Voluntary Arbitrator, Court of Appeals and
the Supreme Court (4) execution and enforcement of final orders, decisions,
resolutions or awards of no. (3) above shall be considered not duly filed and
the party so filing shall be notified of such finding in writing by the Regional
Branch Director. On his part, the Conciliator-Mediator shall convince the party
concerned to voluntarily withdraw the notice without prejudice to further
conciliation proceedings. Otherwise, he shall recommend to the Regional Branch
Director that the notice be treated as a preventive mediation case.
xxx xxx xxx

628
 STRIKES A N D LOCKOUTS ARTS 2fi^-9fi5
4 J 4 D O
[Part 1. Regulations and Limits of Strike "
and Lockout]

c. Action on Notices Involving Issues Cognizable by the Grievance

Machinery, Voluntary Arbitration or the National Labor Relations
Commission.
i) Disputes arising from the interpretation or implementation of
a collective bargaining agreement or from the interpretation or
enforcement of company personnel policies shall be referred to
the grievance machinery as provided for under Article 261 of the
Labor Code xxx (Emphasis supplied)

15.3 No-Strike Clause N o t Binding U p o n Newly Certified Bargaining

Agent
Benguet Consolidated, Inc. vs. BCI Employees and Workers Union-PAFLU, N o .
L-24711, April 30, 1968 —
Facts: T h e Company concluded a CBA with the BBWU effective for a period
of 4-1/2 years. It contained a no-strike clause. While the CBA was subsisting, a
certification election was held among the employees, which resulted in the selection
of another bargaining representative. T h e certified Union thereafter declared a
strike for the enforcement of certain demands. T h e Company filed an action for the
recovery of damages against the certified Union on the ground that it violated the
no-strike clause of the CBA. Is the new bargaining agent bound by the strike clause,
thus making the strike illegal?
Ruling: Stated otherwise, the 'substitutionary doctrine' only provides that the
employees cannot revoke the validly-executed collective bargaining contract with their
employer by the simple expedient of changing their bargaining agent. And it is in the
light of this that the phrase 'said new agent would have to respect said contract' must
be understood. It only means that the employees, through their bargaining agent,
cannot renege on their collective bargaining contract except of course to negotiate
with management for the shortening thereof.
T h e 'substitutionary doctrine,' therefore, cannot be invoked to support the
contention that a newly certified collective bargaining agent automatically assumes
all the personal undertakings — like the no-strike stipulation here — in the collective
bargaining agreement made by the deposed Union. When BBWU bound itself and
its officers not to strike, it could not have validly bound also all the other rival unions
existing in the bargaining units in question. BBWU was the agent of the employees,
not of the other unions which possessed distinct personalities. To consider U N I O N
contractually bound to the no-strike stipulation would therefore violate the legal
maxim that res inter alios acta alios nec prodest nec nocest.
Of course, Union, as the newly certified bargaining agent, could always
voluntarily assume all the personal undertakings made by the displaced agent. But
as the lower court found, there was no showing at all that, prior to the strike, Union
formally adopted the existing contract as its own and assumed all the liabilities
imposed by the same upon BBWU.

629
 LABOR RELATIONS
ARTS. 263-265

15.4 If Members Disregard a No-Strike Clause, Union May Become Liable

It has been held that a no-strike clause in a collective bargaining agreement,
at the very least, establishes a rule of conduct or condition of employment, the
violation of which by an employee justifies discipline or discharge. A no-strike
clause is binding not only upon the union, but also upon its individual members.
An employer may maintain an action against a union for damages resulting from
a violation of a no-strike clause, even though the employer grievances relating
1
to the same work stoppage are arbitrable.
Moreover, a union which agrees to an express no-strike clause impliedly
agrees to undertake every reasonable means to induce members participating in
an unauthorized strike to return to work. T h e union is entitled to a reasonable
period of time after inception of the strike in which to take required action, after
which the union's damage liability commences; where the union knows of the
strike at about the time it commences, the union is properly allowed about 48
hours in which to take action to e n d the strike, after which the union's p e r i o d
2
of liability runs.

15.5 No Violation If Work Stoppage N o t Initiated or Supported by the

Union
In a P h i l i p p i n e case a t e m p o r a r y w o r k s t o p p a g e resulted f r o m the
recalcitrance of two dismissed employees w h o picketed the gate of the employer's
premises and prevented the entry of other employees w h o were willing to report
for work. But the U n i o n , through its officers, lost no time in putting an e n d to
the incident and prevailed upon the employees to resume their work. It was
held that there was no strike that violated the no-strike clause of the subsisting
collective bargaining agreement. Said the Supreme Court:
We find no reason to consider the stoppage of work in the night
of February 19, 1961 as the strike declared in violation of the no-strike
clause of the collective bargaining agreement or which should have been
preceded by a recourse to the grievance procedure established, let alone a
strike for which the officers of the U n i o n should be held responsible. T h e y
took steps to get the situation back to normal as soon as they were notified
about it; and g o o d labor-management relations as well as the broader
imperatives of industrial peace dictated that the spontaneous recalcitrance
of some employees which after all had been settled without unnecessary
delay, should not be made an excuse to punish the U n i o n officers. If said
employees were readily admitted back to work, there is no reason why the
officers, through whose efforts the incident was settled, should deserve
a different treatment. (Diwa ng Pagkakaisa vs. Fillex International Corp., 43
SCRA 217.)

'48-A Am. Jur. 2d 1898, p. 319.

2
48-AAm.Jur. 2d 1899, p. 320.

630
 STRIKES A N D LOCKOUTS ARTS. 263-265
[Part 1. Regulations and Limits of Strike
and Lockout]
15.6 No-Strike P l e d g e I n f e r r e d from Other Provisions
A strike during the term of a collective bargaining agreement is not ipso
facto a violation of the agreement. Generally speaking, a court will not imply
a no-strike clause in the contract which does not provide for arbitration of
disputes. A n d language in a collective bargaining agreement's preamble, stating a
contractual purpose to prevent lockouts, boycotts, and strikes, does not constitute
a waiver of the right to strike. However, a no-strike pledge is inferable from a
collective bargaining agreement establishing arbitration as a means of settling
disputes, such as from an agreement that disputes shall be settled exclusively and
finally by compulsory arbitration or an agreement that the arbitration procedure
1
"shall be the exclusive means of adjudicating all matters."

16. IMPROVED-OFFER B A L L O T I N G
Article 265 about "improved other balloting" is a fitting ending to this
series of articles about work stoppage. "Improved offer balloting" is a device to
stop the work stoppage. Basically, work stoppage is counter-productive. This is
why the law itself disfavors it, and if it has begun the law wants to e n d it as soon
as possible. By the improved-offer balloting device, the strike or lockout may
e n d peaceably, silently, without anyone losing face because no o n e will appear
defeated.
Sometimes a strike ( o r a lockout) is p r o l o n g e d by amor propio. T h e o n e
that started it is t o o proud to admit that he "backs out" from a fight despite the
contrary sentiment of the g r o u p . Improved-offer balloting opens a graceful exit.
An i m p r o v e d offer by the employer, or a reduced demand by the union, will
serve as basis for a secret balloting that will not reveal w h o "retreated" from the
fight."

•48.A A m . Jur. 2d, 1903, pp. 322-323.

631
 Chapter I
STRIKES A N D L O C K O U T S (Cont'd)
[Part 2. PICKETING A N D OTHER CONCERTED
ACTIONS]

O v e r v i e w / K e y Questions B o x 19
1. What are the legal limits to a picket? May picketing be
conducted without a strike?
2. What is the recourse of a neutral party being affected
by a picket?
3. What is the recourse of an employer when employees
conduct a g r o u p action without work stoppage?
4. W h e n is a g r o u p action a strike even if there is no work
stoppage? Is boycott a strike?

1. PICKETING
Picketing involves the presence of striking workers or their union brothers
who pace back and forth before the place of business of an e m p l o y e r considered
"unfair to organized labor," in the h o p e of being able to persuade peacefully
other workers not to work in the establishment, and customers not to do business
1
there.
Picketing almost always accompanies a strike. But there may be picketing
without a strike because e m p l o y e e s may picket without e n g a g i n g in w o r k
stoppage. Although picketing is a f o r m of concerted action, not every concerted
action is a strike.

Picketing, like strike, should be d o n e within the bounds of law.

1.1 As Phase of F r e e d o m of Speech

T h e right to picket as a means of communicating the facts of a labor dispute
2
is a phase of the freedom of speech guaranteed by the Constitution. If peacefully

•Watkins and Dodd, Labor Problems [1946], p. 605.

2
De Leon, et al. vs. National Labor Union [ N L U ] , et al, 100 Phil. 789; Philippine
Association of Free Labor Unions [ P A F L U ] et al. vs. Barot, et al, supra; Cruz vs.
Cinema, Stage and Radio Entertainment Free Workers [FFW], 101 Phil. 1259. See
also Thornbill vs. Alabama, 310 U.S. 88, 60 S.C. 736, 84 L. Ed. 1093.

632
 STRIKES A N D LOCKOUTS
[Part 2. Picketing and Other Concerted Actions]

carried out, it cannot be curtailed even in the absence of employer-employee

1
relationship.
In o n e case, the Court ruled that under the circumstances, the picketers
were not legally bound to yield their grounds and withdraw from the picket lines.
Being where the law expects them to be in the legitimate exercise of their rights,
they had every reason to defend themselves and their rights from any assault or
unlawful transgression. Yet the police blotter adverted to attests that they did
2
not resort to violence.

1.2 Picketing without Striking

T h e common-law rule in some jurisdictions was that picketing without
a strike was no m o r e unlawful than a strike without picketing. U n d e r this
rule, consumer picketing and recognitional or organizational picketing were
lawful. O t h e r jurisdictions forbade picketing in the absence of a labor dispute
between the employer and his employees, as where a strike had ended. Today
it is established that the constitutional right of free speech is infringed by a
state's judicial policy forbidding resort to peaceful picketing where there is
no immediate employer-employee dispute, as in the case of organizational or
recognitional picketing. H e n c e , a state cannot outlaw picketing merely because
3
there is no strike in progress.

1.3 Moving Picket

It will be n o t i c e d that a picket line, whether large or small, keeps in
constant motion. T h e underlying reason is o n e of law. T h e public easement of
way and passage permits the pickets to parade in front of or near the picketed
establishment. As members of the general public, they have the right of passage
over so much of the employer's land as is used as a highway. This right, however,
is o n e of passage — a pedestrian right. It does not create the additional rights of
squatting or assembly on this portion of the employer's land. Any such squatting
or assembly would exceed the scope of the public's easement and would constitute
4
an enjoinable trespass.
T h e pickets ( o r picketer) used by the union in picket lines may or may
not be employees of the offending employer. Although the task of picketing in
a strike in which less than all of the union's members are involved is generally
first assigned to such of the union's members w h o are directly affected by the
strike, where this number is either inadequate or unavailable for that purpose,
other members of the striking union are assigned to that task. These disinterested

'PAFLU vs. Cloribel, 27 SCRA 472.

' T h e Insular Life Assurance Co., Ltd. Employees Association-NATU vs. The
Insular Life Assurance Co., Ltd., N o . L-25291, January 30, 1971.
3
48 A m . Jur. 2d, 2054, p. 425.
*Rothenberg, pp. 93-94.

633
 LABOR RELATIONS

pickets are customarily drawn from the union's unemployed or partially employed
members. Where all of the members of the union are affected, all are assigned
to picket duty. In the instances where necessity requires it, even fully employed
and disinterested members are assigned to such picket duty as is compatible with
1
the requirements of their employment.

1.4 Picketing of Neutral Parties or "Innocent Bystanders"

Philippine Association of Free Labor Unions vs. Cloribel, N o . L-25878, March 28,
1969 —
Facts: The union had a labor dispute with a banking firm holding offices in
a six-storey building, and in furtherance of such dispute, its members picketed or
demonstrated in front of the building and along the common passageway. T w o of
the other tenants filed a petition for damages with injunction, claiming that said
activities of the union had adversely affected their enjoyment of the premises leased
by them as well as their respective businesses, and that they were neutral parties
insofar as the dispute of the union with the banks was concerned. A writ was issued
prohibiting picketing in front and along the passageway, resort to disorderly conduct
on the premises of plaintiff, and leaving signs and placards unattended along the
side of said premises. The Union objected to the issuance of the writ.
Ruling: T h e r e is no labor dispute between petitioner union and the
complainants, who are innocent bystanders. After modifying its operation so as to
allow picketing in front of the passageway, the Supreme Court sustained the right of
the plaintiffs to a writ under the Rules of Court, and quoted a US precedent —
While peaceful picketing is entitled to protection as an exercise of free
speech, we believe that courts are not without power to confine or localize
the sphere of communication or the demonstration to the parties to the labor
dispute, including those with related interest, and to insulate establishments
or persons with no industrial connection or having interest totally foreign to
the context of the dispute. (Carpenters and Joiners Union of America, Local No.
213 vs. Bitters Cafe, 315 U.S. 722, 62 S. Ct. 807, 86 L ed 1143.) Thus, the right
may be regulated at the instance of third parties or "innocent by-standers" if it
appears that the inevitable result of its exercise is to create an impression that
a labor dispute with which they have no connection or interest exists between
them and the picketing union (15 A.L.R. 2d. 1396.) or constitute an invasion
of their rights. (Jensen vs. Cooks and Waiters Union, 39 Wash. 51, 81 P. 1069, 4
L.R.A., N.S. 302. Ibid.)
It is true that by peaceful picketing workingmen communicate their grievances.
As a means of communicating, the facts of a labor dispute may be a phase of the
constitutional right of free utterance. But recognition of peaceful picketing as an
exercise of free speech does not imply that the states must be without power to confine
2
the sphere of communication to that directly related to the dispute.

]
Rothenberg, p. 95.
2
Citing Thornhill vs. Albama, 86 L ed 1143, Ibid.

634
 STRIKES A N D LOCKOUTS
[Part 2. Picketing and Other Concerted Actions]

A picketing labor union has no right to prevent employees of another Company

from getting in and out of its rented premises, otherwise it will be held liable for
1
damages for its act against innocent bystanders.

Liwayway Publications, Inc. vs. Permanent Concrete Workers Union, et al., G.R. N o .
L-25003, October 23, 1981 —
Facts: Liwayway Publications, Inc. was the second sublessee of a part of the
premises of the Permanent Concrete Products, Inc. at Cordeleria Street, Sta. Mesa,
Manila. T h e employees of the latter declared a strike against their company. But
they also picketed, stopped and prohibited Liwayway's truck from entering the
compound to load newsprint from its bodega. T h e union members also intimidated
and threatened with bodily harm the Liwayway's employees who were in the truck.
Liwayway Publications, Inc. filed an action for damages and injunction against
the union in the Court of First Instance of Manila. T h e said court issued a preliminary
injunction and awarded damages to plaintiff.
T h e union contends that the Court of First Instance of Manila had no
jurisdiction over the case.
Ruling: T h e first question that strikes us to be of determinative significance is
whether or not this case involves or has arisen out of a labor dispute. If it does, then
with certainty, Section 9 of Republic Act 875, the "Industrial Peace Act" [now Article
218, Labor C o d e ] , would apply. If it does not, then the Rules of Court will govern
the issuance of the writ of preliminary injunction because it will not partake of the
nature of a labor injunction which the lower court has no jurisdiction to issue.
T h e record before us reveals that appellant union and its members picketed
the gate leading to appellee's bodega. This gate is about 200 meters from the gate
leading to the premises of the employer of the appellants. Appellee is not in any way
related to the striking union except for the fact that it is the sublessee of a bodega
in the company's compound. T h e picketers belonging to the appellant union had
stopped and prohibited the truck of the appellee from entering the compound to
load newsprint from its bodega, the union members intimidating and threatening with
bodily harm the employees who were in the truck. T h e union members also stopped
and prohibited the general manager, including the man in-charge of the bodega and
other employees of the Liwayway Publication, Inc., from getting newsprint in said
bodega. T h e business of the appellee is exclusively the publication of the magazines
Bannawag, Bisaya, Hiligaynon and Liwayway weekly magazine which has absolutely
no relation or connection whatsoever with the cause of the strike of the union against
their company, much less with the terms, conditions or demands of the strikers. In
such a factual situation, the query to be resolved is whether the appellee is a third
party or an "innocent by-stander" whose right has been invaded and, therefore entitled
to protection by the regular courts.

'Liwayway Publications, Inc. vs. Permanent Concrete Workers Union, 108 SCRA
161.

635
 LABOR RELATIONS

As we said in Phil. Association of Free Labor Unions (PAFLU), et al. vs. Tan, 99 Phil.
854, that "with regard to activities that may be enjoined, in order to ascertain what
court has jurisdiction to issue the injunction, it is necessary to determine the nature of
the controversy." We find and hold that there is no connection between the appellee
Liwayway Publications, Inc. and the striking Union, nor with the company against
whom the strikers staged the strike, and neither are the acts of the driver of the
appellee, its general manager, personnel manager, the man in-charge of the bodega
and other employees of the appellee in reaching the bodega to obtain newsprint
therefrom to feed and supply its publishing business interwoven with the labor dispute
between the striking Union and the Permanent Concrete Products Company. If there
is connection between appellee publishing company and the Permanent Concrete
Products Company, it is that both are situated in the same premises, which can hardly
be considered as interwoven with the labor dispute pending in the Court of Industrial
Relations between the strikers and their employer.

1.5 Picketing of H o m e
T h e picketing of a private h o m e in a residential district is generally held
improper, even when the pickets are domestic servants. This is on the grounds
that "a h o m e is not an industrial or a business enterprise, that it is not acquired
or maintained for pecuniary gain or profit, but rather, that it is an institution used
and maintained as a place of abode, and that an enterprise not conducted as a
means of livelihood, or for profit, does not c o m e within the ordinary meaning
1
of such terms as 'business,' 'trade, 'or 'industry.'"

1.6 Limitations
Picketing as a concerted activity is subject to the same limitations as
strike, particularly as to lawful purpose and lawful means. L i k e the f r e e d o m of
expression in general, it has its limits. Thus, to the extent that it is an instrument
of coercion rather than of persuasion, it cannot rightfully be entitled to the
2
protection associated with free speech.

1.7 Obstruction
A l l courts agree that picketing so conducted as to amount to a nuisance
is unlawful. Picketing may constitute a nuisance if it is so conducted as to fall
within the definition of the term. It would seem that picketing may be nuisance
if it constitutes an obstruction to the free use of property, so as substantially to
interfere with the comfortable enjoyment of life or property, or if it constitutes
an unlawful obstruction to the free passage or use, in the customary manner, of
a street. Picketing accompanied by intimidation, threats, violence, and coercion
3
may properly be held to constitute a nuisance.

^tate vs. Cooper, 205 Minn. 333, 285, N.W. 903, 122 A.L.R. 727.
2
Security Bank Employees Union vs. Security Bank and Trust, 23 SCRA 503,516.
3
31 Am. Jur., Sec. 248, p. 955.

636
 STRIKES A N D LOCKOUTS
[Part 2. Picketing and Other Concerted Actions]

Permissible activities on the part of picketers do not include obstruction

of access of customers. Pickets may not aggressively interfere with the right of
peaceful ingress and egress to and from the employers' shop, or obstruct the
public thoroughfares. Picketing is not peaceful where the sidewalk or entrance
to a place of business is obstructed by pickets parading around in a circle or
1
lying on the sidewalk.

1.8 Violence and intimidation

Picketing carried on with intimidation, threats, c o e r c i o n , or force is
unlawful, however laudable the strikers' motive or purpose, and regardless of
whether the intimidated persons are the employer's employees or potential
employees or customers. T h e law does not countenance any display that is the
equivalent of force and intimidation, or of a disturbance of the peace, and even
those e n g a g e d in a bona fide labor dispute are not justified in assaulting a police
officer, obstructing an officer in attempting to make an arrest, and engaging in
an affray. Vandalism and acts of a less terroristic nature which are designed to
2
cause physical discomfort to the employer's customers are also unlawful.
W h a t constitutes unlawful intimidation depends on all the circumstances.
Force threatened is the equivalent of force exercised. T h e r e may be unlawful
intimidation without many direct threats or overt acts of violence. Words or acts
which are calculated and intended to cause an ordinary person to fear an injury to
his person, business, or property are equivalent to threats. T h e number of pickets,
their methods, their placards, and their circulars may constitute intimidation.
A display of force without actual use thereof may be intimidation. On the other
hand, since it is not unlawful to threaten to do what o n e may legally do, a strike
3
threat or threat to drive an e m p l o y e r out of business is not an unlawful threat.

1.9 Untruthful Picketing

Picketing may carry placards and banners truthfully advising the public
c o n c e r n i n g the dispute, but untruthful p i c k e t i n g is unlawful picketing
and is enjoinable even though its purpose is valid. False statements are not
constitutionally protected free speech; however, the Constitution does not permit
an injunction against all picketing merely because the pickets have carried signs
4
with false statements.
Picketing is not peaceful where there is shouting or the use of loudspeakers
in front of a picketed place of business. Pickets may not properly use abusive and
threatening language toward patrons of a place or business or against employees.
Employees cannot be said to have kept within the bounds of peaceful picketing

•31 Am. Jur., Sec. 249, p. 955.

2
48-A A m . Jur. 2d 2059, pp. 427-428.
Ibid.
4
48-A Am. Jur. 2d 2062, p. 431.

637
 LABOR RELATIONS

when they have g o n e beyond mere attempt to persuade customers to withdraw

their patronage and resort to abusive and threatening language toward the
1
patrons themselves.
Permissible activities on the part of picketers do not include misrepresenta-
tion. This is in accord with the general rule that the means e m p l o y e d in aid of
2
a strike must be free from falsehood or defamation.
Nonetheless, the use of discourteous and impolite language by the picketers
3
does not give rise to a cause of action for libel and damages.
T h e US Supreme Court declared that the following means used to carry
on a picketing were illegal:
T h e defendants conspired to injure and destroy plaintiffs' business by
inducing their theretofore willing patrons and would-be patrons not to patronize
them, and they influenced them to withdraw or withhold their patronage —
(1) By having the agents of the union walk forward and back constantly
during all the business hours in front of plaintiff s restaurant, and within five
feet thereof, displaying a banner announcing in large letters that the restaurant
was unfair to cooks and waiters and their union.
( 2 ) By having agents attend at or near the entrance of the restaurant
during all business hours and continuously announce in a loud voice, audible
for a great distance, that the restaurant was unfair to the labor union.
( 3 ) By characterizing the employees of the plaintiffs as cab Mexican
labor, using opprobrious epithets concerning them in handbills continuously
4
distributed in front of the restaurant to would-be customers.

2. OTHER CONCERTED ACTIVITIES

2.1 Collective Letter
Concerted activities include not only strikes and picketing, but also informal
action participated in by at least two employees for "mutual aid or protection"
in regard to their interests, such as acting in concert with other employees to
voice their grievances against the bank president through a letter signed and
5
published by them.

2.2 Publicity
Members of a labor union may, without authorization by statute, make
known the facts of a labor dispute, for freedom of speech is guaranteed by the

'31 Am. Jur, Sec. 245, p. 954. See also 116 A.L.R477; 116 A . L . R . 505,32 A . L . R .
756 & 27 A.L.R. 375.
2
31 Am. Jur., Sec. 246. See also 106 A . L . R . 335.
P h i l i p p i n e Commercial and Industrial Bank vs. Philnabank Employees
Association, 105 SCRA 315.
^aft, C.J. in Truax vs. Corrigan [1921], 257 U.S. 312; 27 A . L . R . 375.
5
Republic Savings Bank vs. CIR, 31 SCRA 225, 232-234.

638
 STRIKES A N D LOCKOUTS
[Part 2. Picketing and Other Concerted Actions]

Constitution. Striking employees, too, have a right to acquaint the public with
the fact of the existence of a strike setting forth their claims in a controversy
over terms and conditions of employment, by sign, handbill, or newspaper
1
advertisement as a legitimate means of e c o n o m i c coercion.

2.3 Placards and Banners

It is generally c o n c e d e d that a striker having the right to apprise the public
of the fact of the strike and solicit its support may inscribe his grievances upon
placards and banners to be seen at a distance and to be read by many at the
same time, and that he may carry such placards or banners upon a public street,
2
provided the inscription is not libelous or otherwise unlawful.
T h e r e are limitations upon the right to banner, for the right to publish does
not mean that o n e may always publish when and where he pleases. T h e legality
of bannering may d e p e n d upon the locality in which it takes place, and the right
to speak or publish may not be so used as to constitute a nuisance. T h e display
3
of signs misstating the facts in respect of the labor dispute is not permitted.
T h e display in the street of banners and placards advising the public of the
existence of an industrial dispute, or that the employer is "unfair" is not unlawful
if the statements m a d e are true in fact, and if there is no obstruction to traffic or
of access to the plaintiff s place of business, and no threat, intimidation, or other
unlawful interference, and if the object sought to be attained by the boycott is
4
not an unlawful o n e .

2.4 Wearing of Armbands

Bascon et al. vs. CA, et al., G.R. N o . 144899, February 5, 2004 —
In this case, the Court of Appeals found that petitioners' [employees'] actual
participation in the illegal strike was limited to wearing armbands and putting up
placards. There was no finding that the armbands or the placards contained offensive
words or symbols. Thus, neither such wearing of armbands nor said putting up of
placards can be construed as an illegal act. In fact, per se, they are within the mantle
of constitutional protection under freedom of speech....
Wearing armbands and putting up placards to express one's views without
violating the rights of third parties, are legal per se and even constitutionally
protected. Thus, M C C H could have done well to respect petitioners' right to
freedom of speech instead of threatening them with disciplinary action and
eventually terminating them.
Wearing armbands to signify union membership and putting up placards to
express their views cannot be of such great dimension as to warrant the extreme

'31 Am. Jur., Sec. 274, p. 968.

2
31 Am. Jur., Sec. 278, p. 971.
3
31 Am. Jur., Sec. 279, p. 972.
Ibid.

639
 LABOR RELATIONS

penalty of dismissal, especially considering the long years of service rendered by

petitioners and the fact that they have not heretofore been subject of any disciplinary
action in the course of their employment with M C C H .
The termination of petitioners' employment not being for any of the just or
authorized causes, it constitutes illegal dismissal.

2.5 Speeches, Music, and Broadcasts

It is not unlawful for a labor organization in a radio broadcast, without
employing threat or intimidation, to express its honest opinion as to the fairness
of an employer toward organized labor and to advise the public and friends of
labor not to patronize him. N o r is it unlawful to cause to be driven through
streets a vehicle which bears signs that are not unlawful and is equipped with
apparatus for broadcasting music. However, the use of loudspeaker in front of a
picketed place of business has been c o n d e m n e d as a f o r m of intimidation. T h e
same is true of the holding of street meetings near the place of business of the
1
employer with w h o m a union has a dispute.

2.6 Employees' Demonstration to Protest Police Abuses

Philippine Blooming Mills Employees Organization vs. Philippine Blooming Mills,
51 SCRA 189 (1973) —
Facts: The workers of the Company working in the first, second and third
shifts planned a demonstration in Malacañang to protest alleged abuses of the Pasig
police. Upon learning of this plan, the Company management called a meeting with
the Union officers.
T h e Company officers warned the Union officers that a mass action of all the
workers would be in violation of the no-strike clause of the CBA. T h e Union officers
asserted that the demonstration had nothing to do with the Company with which
the Union had no dispute.
When the workers proceeded with the demonstration despite the pleas of the
Company, it filed an unfair labor practice case against the Union and its officers for
their violation of the no-strike clause of the CBA. T h e CIR declared the Union and
its officers guilty of bargaining in bad faith and violating the CBA and ordered the
dismissal of the Union officers.
Ruling: T h e Supreme Court reversed this decision and held:
T h e respondent Court of Industrial Relations, after finding that the mass
demonstration was not a declaration of a strike, concluded that by "concerted act
and the occurrence of a temporary stoppage of work," herein petitioners are guilty
of bargaining in bad faith and hence violated the collective bargaining agreement
with respondent Philippine Blooming Mills Company, Inc. Set against and tested by
the foregoing principles governing a democratic society, such a conclusion cannot
be sustained.

]
31 Am. Jur., Sec. 285, p. 975.

640
 STRIKES A N D LOCKOUTS
[Part 2. Picketing and Other Concerted Actions]

T h e demonstration held by petitioners on March 4, 1969 before Malacañang

was against alleged abuses of some Pasig policemen, not against employer, herein
private respondent firm. Said demonstration was purely and completely an exercise
of their freedom of expression, in general, and of their right of assembly and of
petition for redress of grievances, in particular, before the appropriate agency, the
Chief Executive, against the police officers of the municipality of Pasig. They exercised
their civil and political rights for their mutual aid and protection from what they
believed were police excesses.
As a matter of fact, it was the duty of herein private respondent firm to protect
herein petitioner Union and its members from the harassment of local police officers.
It was to the interest of herein private respondent firm to rally to the defense of and
to take up the cudgels for its employees so that they can report for work free from
harassment, vexation or peril and as a consequence perform more efficiendy their
respective task to enhance its productivity as well as profits.
T h e collective bargaining agreement which fixes the working shifts of the
employees, according to the respondent Court of Industrial Relations, in effect
imposes on the workers the "duty... to observe regular working hours." T h e strained
construction of the Court of Industrial Relations that such stipulated working shifts
denied the workers the right to stage a mass demonstration against police abuses
during working hours, constitutes a virtual tyranny over the mind and life of the
workers and deserves serious condemnation. Renunciation of the freedom should
not be predicated on such a slender ground.

2.6a Rallies as Illegal Strike

Toyota Motor Phils. Corp. Workers Association, et al. vs. NLRC, et al., G.R. Nos.
158786 and 158789, October 19, 2007 —
Relying on the above Philippine Blooming Mills ruling, workers and union officers
of Toyota Motors tried to justify the work stoppages they committed on February 22
and 23, 2001 as they held rallies in front of D O L E offices.
T h e Court rejected the argument with this explanation: "... the Unions fail
to realize one major difference: there was no labor dispute in Philippine Blooming
Mills Employees Organization. In the present case, there was an on-going labor dispute
arising from Toyota's refusal to recognize and negotiate with the Union, which was
the subject of the notice of strike filed by the Union on January 16, 2001. Thus, the
Union's reliance on Philippine Blooming Mills Employees Organization is misplaced, as
it cannot be considered a precedent to the case at bar."
T h e Court thus affirmed the dismissal of more than 200 union officers and
members.

3. BOYCOTT
T h e term "boycott," as applied to labor unions, is generally understood to
be a combination to harm o n e person by coercing others to harm him — that is,
a combination of many to cause a loss to o n e person by causing others, against

641
 LABOR RELATIONS

their will, to withdraw from him their beneficial business intercourse through
1
threats that unless others do so, the many will cause similar loss to him or them.
As applied to labor unions, a "boycott" has been defined as an attempt, by
arousing a fear of loss, to coerce others, against their will to withhold from o n e
2
denominated "unfriendly to labor" their beneficial business intercourse.
T h e essential idea of boycotting is a confederation, generally secret, of many
persons whose intent is to injure another by preventing any and all persons from
doing business with him, through fear of incurring the displeasure, persecution,
3
and vengeance of the conspirators.

3.1 Kinds of Boycott

In general, a primary boycott is applied directly and alone to the offending
person by withdrawing from him all business relations on the part of the
4
organization that initiated the boycott.
T h e right of an individual to refuse to deal with another is not o p e n
to doubt. According to the weight of authority, the fact that a m e m b e r of a
labor organization exercises this right in concert with his co-members does
not render his otherwise lawful act unlawful, or make concerted action in this
regard a wrongful conspiracy, at least if such members are interested in bringing
to a successful issue an industrial controversy between m e m b e r s of a labor
organization and the person or manufacturer whose product, by a concerted
action, such members have ceased to use. T h e damage to the business of the
persons subjected to such a primary boycott, lawfully conducted, is o n e of the
5
inconveniences for which the law does not afford a remedy.
W h e n a union which had contracts with virtually all the funeral directors
in the area picketed a funeral h o m e whose owners refused to pay dues to the
union and requested suppliers in accordance with the contract to refuse to deal
6
with the owners, the union was said to e n g a g e in a primary boycott.
A secondary boycott is a combination n o t merely to refrain from dealing
with a person, or to advise or by peaceable means persuade his customers
to refrain, but to exercise coercive pressure upon such customers, actual or
prospective, in order to cause them to withhold or withdraw patronage from
7
him through fear of loss or damage to themselves should they deal with h i m .

'31 Am. Jur., Sec. 250, p. 956.

2
31 Am. Jur., Sec. 250, p. 956.
3
Crump vs. Commonwealth, 84 Va. 927, 6 S.E. 620, 10 A m . St. Rep. 895, cited
in 31 Am. Jur., p. 768.
4
31 Am. Jur., Sec. 252, p. 957.
5
31 Am. Jur., Sec. 256, p. 958.
6
Harper vs. Brennan, 311 Mich. 489,18 N.W. 2d 905, cited in 31 A m . Jur., p. 768.
'Duplex Printing Press Co. vs. Deering, 254 US. 443,65 L ed 349,41 S. Ct. 172,
15A.L.R196.

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 STRIKES A N D LOCKOUTS
[Part 2. Picketing and Other Concerted Actions]

A secondary boycott exists "where many combine to injure one in his

business by coercing third persons, against their will, to cease patronizing him
1
by threats of similar injury.
T h e picketing of a construction set by a union for the purpose of inducing
union employees of the general contractor to cease work in order to cause the
general contractor to discharge a subcontractor with w h o m the union has a
2
labor dispute, is a secondary boycott.

3.2 Lawfulness of the Boycott

Boycott may be lawful or unlawful d e p e n d i n g on the means and methods
employed, and the ends intended to be accomplished. Its lawfulness may also depend
upon whether it is used against the industrial antagonist directly or against an
3
outsider because of his influence on or connection with the industrial antagonist.
Boycott by labor for the purpose of the maintenance or advancement of wages,
improvement of conditions of labor, shortening of periods of labor, engagements
of union employees, and reinstatement under contract of union men dismissed
because of union affiliation are considered legitimate. But boycott is illegal where
its purpose is to require an e m p l o y e r to coerce his employees to pay their back
dues to the union or discharge them, or to c o m p e l the payment by an employee
of a fine or other penalties, or to c o m p e l an e m p l o y e e to refrain from working,
or to c o m p e l e m p l o y m e n t of m o r e help than is necessary, or to compel one to
sign a contract, or to c o m p e l an employer to refrain from issuing new process
4
or machinery.
As to the means or methods employed, only a boycott that is free of violence or
malevolence is held anywhere to be lawful. Interference with one's patronage
by persuading his patrons against their will, or preventing them by means of
5
violence or threats, from having beneficial intercourse with him is unlawful.

3.3 Means or M e t h o d s to Carry O u t the Boycott

T h e striking employees not only have a right to acquaint the public with
the fact of the existence of a strike and the cause thereof, but may appeal for
sympathetic aid by a request to withhold patronage or make like proper measures
to induce third persons to withhold their patronage from the employer in order
to compel him to recognize the demands of the employees.
T h e means or methods of carrying out the boycott may be in form of a
refusal of a labor union to allow its members to handle products of the employer

•Truax vs. Corrigan, 257 U.S. 31 2, 66 L ed. 254, 42 S. Ct. 124, 27 A.L.R. 375.
^ . E . Anderson Sons Co. vs. Local Union, 311,156 Ohio St. 541,46 Ohio, Ops.
460, 104 N.E. 2d. 22, cited in 31 A m . Jur., p. 769.
3
31 Am. Jur., Sec. 465, p. 770.
4
31 Am. Jur., Sec. 471, p. 775.
5
31 Am. Jur., Sec. 472, p. 775.

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 LABOR RELATIONS

or to work on materials from nonunion shops, or to work on a j o b upon which

a contract or with w h o m they are at variance in an existing labor dispute. It may
consist in instructing or ordering their members not to accept employment with
an individual or to continue in his employment where the action of the union
is to promote its members or it may be thru the distribution of circulars or the
publication of newspaper articles put forth in pursuance of a legitimate object
1
and form no part of a scheme of intimidation.

3.4 Overtime Boycott

O v e r t i m e boycott and w o r k slowdown may a m o u n t to illegal strike,
according to the Court in Interphil, see discussion of "Strike on Installment" in
Part I of this Chapter.

4. SLOWDOWN
T h e "slowdown" is a m e t h o d by which one's employees, without seeking a
complete stoppage of work, retard production and distribution in an effort to
2
compel compliance by the employer with the labor demands made upon h i m .
T h e "slowdown" does not, like other enforcement methods, have as its
object the complete curtailment of operations. It suffers the plant to continue
to function, but merely reduces the pace of production and distribution. T h e
extent of the reduction depends entirely on the circumstances and disposition
of the labor element involved, although it sometimes happens that operations
are reduced to so diminished a point that the condition differs only nominally
3
from complete stoppage of work.
T h e slowdown may or may not be accompanied by strike. It may be a
gesture, preliminary to strike, which is calculated to serve as an admonition or
warning to the offending employer; or, alternatively, it may be a m o v e m e n t in
prosecution of a strike which has been declared without a walk-out. In either
event, the movement can be executed only by the employees themselves. In this
respect does the slowdown differ from picketing, secondary boycott, etc. In the
latter cases, the project may be executed by employees and nonemployees alike; in
the slowdown, however, although there may be picketing or a secondary boycott
in aid of the slowdown, it is obvious that the slowdown itself can be executed
only by such of the offending employer's personnel as operate the facilities of
4
production and distribution.

In one case, our Supreme Court sustained the concept that a slowdown
is "strike on the installment plan," a willful reduction of the rate of work by
concerted action of workers to restrict the output of employer, in relation to a

'31 Am. Jur., Sec. 482, p. 781.

2
Rothenberg, p. 101.
Ibid.
Ibid.

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 STRIKES A N D LOCKOUTS
[Part 2. Pickering and Other Concerted Actions]

labor dispute; as an activity by which workers, without a complete stoppage of

work, retard production or their performance of duties and functions to compel
management to grant their demands.
Such s l o w d o w n is g e n e r a l l y c o n d e m n e d as i n h e r e n t l y illicit a n d
unjustifiable, because while the employees continue to work and remain at their
positions and accept the wages due them, they at the same time select what part
of their allocated task they care to p e r f o r m of their own volition or refuse openly
or secretly to the employer's damage, to do other work. T h e y work on their own
terms. But whether or not the workers' activity in question — their concerted
adoption of a different work schedule than that prescribed by management and
adhered to for several years — constitutes a slowdown need not be g o n e into. T h e
activity is contrary to Republic A c t 6727 and the parties' collective bargaining
1
agreement.
See "Strike on Installment" in Part 1 of this chapter.

ART. 266. REQUIREMENT FOR ARREST AND DETENTION

Except on grounds of national security and public peace, or in case
of commission of a crime, no union m e m b e r s or union organizers may be
arrested or detained f o r union activities without previous consultation with
the Secretary of L a b o r .
COMMENTS
DIRECTIVE T O P R O S E C U T O R S
Circular N o . 15, Series of 1982 and Circular N o . 9, Series of 1986, issued by
the Ministry of Justice in connection with the implementation o f Batas Pambansa
Big. 227, require fiscals and other g o v e r n m e n t prosecutors to first secure the
clearance of the Ministry of L a b o r a n d / o r the Office of the President "before
taking cognizance of complaints for preliminary investigation and the filing in
court of the corresponding informations of cases arising out of or related to a
labor dispute," including "allegations of violence, coercion, physical injuries,
assault u p o n a person in authority and o t h e r similar acts of intimidation
obstructing the free ingress to and egress from a factory or place of operation
2
of the machines of such factory, or the employer's premises."
T h e criminal cases should be suspended until the completion of the
3
compulsory arbitration proceedings in the N L R C .

•Haw at Buklod ng Manggagawa [IBM] vs. NLRC, G.R. N o . 91980, June 27,
1991.
2
Sarmiento vs. Judge Tuico, G . R Nos. 75271-73; Asian Transmission Corporation
vs. National Labor Relations Commission, G.R. Nos. 75271-73, June 27, 1988.
Ibid.

645
 Chapter I
S T R I K E S A N D L O C K O U T S (Cont'd)
[Part 3 . C O N S E Q U E N C E S O F C O N C E R T E D A C T I O N S ]

O v e r v i e w / K e y Questions B o x 20
1. W h o are the strikers that may return to their j o b s when
the strike is over?
2. Either in e c o n o m i c or in U L P strike, the strikers are
not to be paid for the p e r i o d they were on strike. W h a t
are the exceptions?
3. On what grounds may the e m p l o y m e n t of strikers the
terminated? by whom? when? through what process?
4. What liabilities may employees incur by holding a strike?

1. STRIKERS' R E T E N T I O N OF E M P L O Y M E N T
We have explained in the early part of this chapter that strikers remain as
employees while they are on strike. T h e effects of employment, generally, are
merely suspended during that time — the workers do n o t work and do not g e t
paid. W h e n the strike is over, the employees go back to work and the effects of
employer-employee relationship are resumed. Generally therefore the strikers
retain their jobs. Thus, the C o d e says in Article 264:
... M e r e participation of a worker in a lawful strike shall not constitute
sufficient ground for termination of his employment, even if a replacement
had been hired by the employer during such lawful strike.
But what if the strike is illegal — do the strikers still retain their jobs?
Generally, yes. In Bacus vs. Ople (L-56856, October 23,1984), the Court said: "Even
if declared illegal, the strike n e e d not have been attended with such a drastic
consequence as termination of e m p l o y m e n t relationship." This is so, according
to the court, because of the security of tenure provision of the Constitution.
Reiterating this posture in 1987, this time using compassion and g o o d
faith as reasons, the Court ruled that a finding of illegality of a strike should not
be automatically followed by wholesale dismissal of striking workers from their
employment. On equitable considerations, the Court o r d e r e d the reinstatement
of the striking workers to their f o r m e r positions without backwages, or if
reinstatement is not possible, to pay them separation pay under the Labor C o d e
or under the collective bargaining agreement, whichever is higher, except those
who have accepted their termination and financial assistance from the company.

646
 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

Insofar as the strikers w h o are ordinarily unschooled laborers and who do

not fully understand the impact of what constitutes a strikeable or nonstrikeable
issue are concerned, compassion plays a role. In o n e case, the strikers are low-
i n c o m e earners to w h o m a seemingly meager increase of P I . 5 0 in daily wage is
worth fighting for. T h e i r reading and interpretation of the collective bargaining
agreement provision, albeit erroneous, led them to believe in g o o d faith that
they are entitled to such increase and that the failure of respondent company
to comply with the collective bargaining agreement provision provided a valid
g r o u n d for a strike. T h e y had previously met with representatives of respondent
company over this matter, but to no avail. U n d e r the circumstances, they cannot
entirely be blamed for thinking that only through the potent weapon of strike
1
could they attain their objective.
Even earlier than the Bacus and Progressive Workers cases the Court had
already said that a union m e m b e r may not be held responsible for the union's
illegal strike on the sole basis of such membership or on account of his having
2
voted affirmatively for the holding of the strike later declared illegal.
T h e above rulings indicate rejection of the rule of "vicarious liability."
U n d e r this rule, m e r e membership in a labor union could serve as basis of
liability for acts of individuals, or for a labor activity, d o n e on behalf of the union.
T h e union m e m b e r could be made liable on the theory that all the members
were e n g a g e d in a general conspiracy, and the unlawful acts of the particular
members were viewed as necessary incidents of the conspiracy. It has been said
that in the absence of statute providing otherwise, the rule of vicarious liability
would apply.
Even the Industrial Peace Act, however, which was in effect from 1953 to
1974, did not adopt the vicarious liability concept. It expressly provided that:
No officer or m e m b e r of any association or organization, and no
association or organization participating or interested in a labor dispute
shall be h e l d responsible or liable for the unlawful acts of individual
officers, members, or agents, except upon p r o o f of actual participation in,
or actual authorization of, such acts or of ratifying of such acts after actual
knowledge thereof.
Replacing the Industrial Peace Act, the Labor C o d e has not adopted the
vicarious liability rule. T h e nonrevival is shown by the decisions in Bacus and
Progressive Workers, as already explained.
Thus, quoting a textbook, the Court declared in Toyota Motor Phil. Corp
Workers Association, et al. vs. NLRC, et al, G.R. N o . 158786 and 158789, October
19, 2007 that the rule on vicarious liability of a union member is inapplicable

'Progressive Workers Union vs. Aguas, 150 SCRA 429 [1987].

2
Esso Philippines, Inc. vs. Malayang Manggagawa sa Esso, 75 SCRA 73 [1977].

647
 LABOR RELATIONS

and it is only when a striking worker "knowingly participates in the commission

of illegal act during a strike" that he will be penalized with dismissal.

2. STRIKERS' LOSS OF EMPLOYMENT

T h e law, as it now stands, protects the union members. T h e i r participation
in a strike that turned out to be illegal does not result in their loss of j o b . As to
the union officers, however, the law is different. T h e C o d e says in Article 264,
third paragraph:
... A n y union officer w h o knowingly participates in an illegal strike
and any worker or union officer w h o k n o w i n g l y participates in the
commission of illegal acts during a strike may be declared to have lost
his employment status: Provided, T h a t m e r e participation of a worker in
a lawful strike shall not constitute sufficient g r o u n d for termination of
his employment, even if a replacement had been hired by the e m p l o y e r
during such lawful strike.
Article 264 makes a distinction between workers and union officers w h o
participate in a strike. An ordinary striking worker cannot be terminated for mere
participation in an illegal strike. T h e r e must be p r o o f that he committed illegal
1
acts during a strike. A union officer, on the other hand, may be terminated from
work when he knowingly participates in an illegal strike, or when he commits an
2
illegal act during a strike.

2.1 What "Illegal Acts"?

What are considered "illegal acts" under Article 2 6 4 ( a ) , third paragraph?
No precise meaning was given to the phrase "illegal acts." It may encompass
a number of acts that violate existing labor or criminal laws, such as the following:
(1) Violation of Article 2 6 4 ( e ) of the L a b o r C o d e x xx
( 2 ) Commission of crimes and other unlawful acts in carrying out the
strike; and
( 3 ) Violation of any order, prohibition, or injunction issued by the
D O L E Secretary or N L R C in connection with the assumption of jurisdiction/
certification O r d e r under Article 2 6 3 ( g ) of the L a b o r C o d e .
This enumeration is not exclusive and it may cover other breaches of
3
existing laws. ( A n y o n e , in fact, w h o knowingly commits illegal acts with or
without a strike can be held liable.)
We may now summarize. A n y o n e — whether union officer or m e m b e r —
who commits illegal acts in the course of a strike, whether the strike itself is legal

•Cold City Integrated Port Service, Inc. [ I N P O R T ] vs. N L R C , Adelo Ebuna, et

al., G.R. N o . 103560, July 6, 1995.
2
Toyota Motor Phil. Corp., Workers Association, et al. vs. N L R C , et al, G.R. N o .
158786 and 158789, October 19, 2007.
Ibid.

648
 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

or illegal, is liable for his illegal acts and may lose his j o b . During a work stoppage,
even if it is based on a defensible reason, the laws of the land continue with full
force and effect. T h e criminal laws, for instance, are not suspended even if the
workers have valid reason to complain and to strike. T h e i r grievances, no matter
how valid, do not e x e m p t the strikers from observance of the laws, particularly
labor and penal laws.
T h e individual strikers committing the illegal acts must be identified.
Simply referring to "strikers," " A I U strikers," or "complainants in this case" is
1
not enough to justify their dismissal.
Dismissal of a union officer w h o committed illegal acts during a strike is not
discrimination constituting U L P . A union officer carries heavier responsibilities
2
than a union m e m b e r does.

2.2 Suspension Instead of Dismissal

T h e penalty imposable on the erring strikers does not always have to
be dismissal; it may be scaled down to suspension. Suspension was upheld by
the Court in PAL vs. Brillantes and PALEA, G.R. N o . 119360, October 10, 1997
based on the finding that both parties ( e m p l o y e r and u n i o n ) contributed to
the volatile atmosphere e m e r g i n g despite the Secretary of Labor's status quo
order, disrupting thereby the orderly continuance of negotiations. T h e P A L
management, observed the Court, did not c o m e with "clean hands" in seeking
the termination of P A L E A officers and members w h o participated in the illegal
strike. P A L had terminated en masse 183 strikers in violation of the Secretary's
earlier O r d e r enjoining the parties to cease and desist from committing any act
that might exacerbate the situation. In short, both sides were at fault or in pari
delicto.
Moreover, in justifying suspension instead of dismissal, the Court cited
"judicial prerogative." It said: ' T h e Court invokes its judicial prerogative to resolve
disputes in a way to render to each interested party the most judicious solution,
and in the ultimate scheme a resolution of a dispute tending to preserve the
greater order of society."

2.3 Union Officers or Leaders?

Should all the union officers a n d / o r leaders be dismissed for staging an
illegal strike?
In a 1990 case of a cement factory, the union staged a strike to compel
the employer to comply with an arbitration award for payment of vacation and

'Association of Independent Unions in the Phil. vs. Cenapro Chemical Corp.,

et al., G.R. N o . 120505, March 25, 1999. See Sukhotai Cuisine vs. CA, et al., G.R. N o .
150437, July 17, 2006.
2
Great Pacific Life Employees Union and R.P. De La Rosa vs. Great Pacific Life
Insurance Corp., et al., G.R. N o . 126717, February 11, 1999.

649
 LABOR RELATIONS

sick leave of employees. T h e Court held that the strike was unnecessary and
had no lawful basis. What the union should have d o n e was to apply for a writ
of execution of the award instead of g o i n g on strike. T h e union did not only
violate the no-strike provision of the C B A but also repeatedly defied the return-
to-work orders. T h e Court said that "the union officers had the duty to guide their
members to respect the law. Instead, they urged them to violate the law and defy
the duly constituted authorities. T h e i r responsibility is greater than that of the
members. T h e i r dismissal from the service is a just penalty for their unlawful
acts." Concluding, the Court observed:
T h e officers of petitioner [ u n i o n ] misinformed the members and led
them into staging an illegal strike. If the N L R C is to attain the objective of
the Labor C o d e to ensure a stable but dynamic and just industrial peace,
the removal of undesirable labor leaders must be effected. (Continental
Cement Corporation Labor Union [NLU] vs. Continental Cement Corporation and
the Deputy Minister of Labor, G.R No. 51544, August 30, 1990.)
On the same day (August 30) that the ruling in Continental Cement was
handed down, another ruling of the same tenor, affecting leaders of the union,
came out in a textile company case. In that case the Secretary of L a b o r issued
a return-to-work o r d e r in January 1990, in which he considered not only the
first work stoppage staged by the union in S e p t e m b e r 1989 but also the mass
protest and strike in O c t o b e r 1989. "For these acts of the petitioners," said the
Court, "who are leaders of petitioner union obviously inimical to the national
interest, the Secretary of L a b o r properly and lawfully sustained and u p h e l d
their separation from the service and their exclusion from the return-to-work
1
order."
T h e codal provision mentions "officers," not "leaders." T h e r e can be leaders
who are not officers.

2.4 Shop Stewards are Union Officers

T h e union's shop stewards are not m e r e members; they are officers.
Thus, shop steward ( w h o ) is appointed by the U n i o n in a shop, department,
or plant serves as representative of the U n i o n , charged with negotiating and
adjustment of grievances of employees with the supervisor of the employer. He
is the representative of the U n i o n members in a building or other workplace.
Black's Law Dictionary defines a shop steward as a union official w h o represents
members in a particular department. His duties include the conduct of initial
negotiations for settlement of grievances. He is to help other members when
they have concerns with the employer or other work-related issues. He is the
first person that workers turn to for assistance or information.

•Progresibong Samahan ng Manggagawa sa I T M vs. Secretary of Labor and

Imperial Textile Mills, G.R. N o . 92397, August 30, 1990.

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 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

In this case, instead of playing the role of "peacemakers" and grievance

solvers, the petitioners-shop stewards participated in the (illegal) strike. Thus, like
the officers and directors of petitioner U n i o n w h o j o i n e d the strike, petitioners-
12
shop stewards also deserve the penalty of dismissal from their employment.

2.5 Union Members

A union m e m b e r w h o participated in committing illegal acts during a strike
(whether legal or illegal) may also lose his employment status.
In a case the Court ruled:
Petitioner's participation in the illegal strike and his commission
of illegal acts while the strike was in progress, i.e., he participated in
the barricade which barred p e o p l e from entering a n d / o r leaving the
e m p l o y e r ' s premises, had b e e n sufficiently established by substantial
evidence, including the testimony of Mr. M a n i e g o , Personnel Supervisor
at the Cabuyao Plant. Mr. M a n i e g o testified, a m o n g other things, that he
was not able to report to work because of the presence of the barricade.
T h e law prohibits any person e n g a g e d in picketing from obstructing free
ingress to or egress from the employer's premises for lawful purposes.
Since petitioners' participation in the unlawful and violent strike was amply
shown by substantial evidence, the N L R C was correct in holding that the
dismissal of petitioner was valid being based on lawful or authorized cause.
(Chua vs. NLRC, G.R No. 105775, February 8, 1993.)
In a similar case, two strikers w e r e f o u n d guilty of acts of v i o l e n c e
consisting of hurling stones which smashed glass windows of the building of
the company and the headlights of a car and the utterance of obscenities such
2
as "P.. i...."

3. W H O DECLARES "LOSS O F E M P L O Y M E N T STATUS"?

Article 264, third paragraph, quoted above, states that the union officer or
worker x x x "may be declared to have lost his employment status." W h o makes
the declaration? T h e answer is found in the Gold City case of 1995.
Gold City Integrated Port Service, Inc. [INPORT] vs. NLRC, Adelo Ebuna, et al.,
G.R. N o . 103560, Jury 6, 1995 —
Under Article 264 of the Labor Code, a worker merely participating in an illegal
strike may not be terminated from his employment. It is only when he commits illegal
acts during a strike that he may be declared to have lost his employment status. Since
there appears no proof that these union members committed illegal acts during

'Santa Rosa Coca-Cola Plant Employees Union, et al. vs. Coca-Cola bottlers
Phil., Inc., G.R. N o . 164302-03, January 24, 2007.
2
Cromwell Commercial Employees and Laborers Union [ P T U C ] vs. Court
of Industrial Relations, L-19778, September 30, 1964. The two were held validly
dismissed.
651
 LABOR RELATIONS

the strike, they cannot be dismissed. T h e striking union members among private
respondents are thus entitled to reinstatement, there being no just cause for their
dismissal.
However, considering that a decade has already lapsed from the time the
disputed strike occurred, we find that to award separation pay in lieu of reinstatement
would be more practical and appropriate.
No backwages will be awarded to private respondent-union members as a
penalty for their participation in the illegal strike. Their continued participation in
said strike, even after most of their co-workers had returned to work, can hardly be
rewarded by such an award.
The fate of private respondent — union officers—is different. Their insistence
on unconditional reinstatement or separation pay and backwages is unwarranted and
unjustified. For knowingly participating in an illegal strike, the law mandates that a
union officer may be terminated from employment.
Notwithstanding the fact that I N P O R T previously accepted other union officers
and that the screening required by it was uncalled for, still it cannot be gainsaid that
it possessed the right and prerogative to terminate the union officers from service.
The law, in using the word "may," grants the employer the option of declaring a union
officer who participated in an illegal strike as having lost his employment. (Italics
supplied)
Moreover, an illegal strike which, more often than not, brings about unnecessary
economic disruption and chaos in the workplace should not be countenanced by a
relaxation of the sanctions prescribed by law.
The union officers are, therefore, not entitled to any relief.

3.1 Declaration of Illegality of Strike N o t a Prerequisite to Dismissal of

Illegal Strikers
Jackbilt Industries, Inc. vs. Jackbilt Employees' Workers Union-NAFLU-KMU, G.R.
N o . 171618-19, March 13, 2009 —
Filing a petition to declare a strike illegal is not a prerequisite for the employer
to terminate the employment of employees, whether union officers or members,
who commit illegal acts in the course of the strike. Article 264(e) prohibits any
person engaged in picketing from obstructing the free ingress to and egress from
the employer's premises. Where the strikers were found to have prevented the free
entry into and exit of vehicles from the employer's compound, their dismissal from
employment was declared legal. A prior petition to declare the strike illegal is not
necessary. Article 264 allows an employer to terminate employees that committed
illegal acts in the course of a strike.

3.1a Exception: Pending Case at the N L R C

May the employer dismiss the strikers while its complaint for illegal strike
is pending at the N L R C ?

652
 STRIKES A N D LOCKOUTS
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PNOC Dockyard and Engineering Corp. vs. NLRC, et al, G.R. N o . 118223, June
26, 1998 —
T h e N L R C correctly observed that, although petitioner averred that the
dismissals of individual respondents were due to infractions of company rules and
regulations, the alleged infractions actually arose from their participation in the
strike. This is crystal clear from the charges leveled against the union officers, such as
"active participation in the illegal work stoppage," "disruption of company operations
resulting [in] losses," "violation of the ' N O STRIKE' clause of the existing CBA,"
among others, cited in their similarly worded notices of investigation that eventually
led to their dismissals.
Furthermore, such investigations conducted by petitioner were in flagrant
disregard of the authority and jurisdiction of Respondent Commission and in defiance
of the Memorandum of Agreement with the striking unions, executed upon the
order of then acting Labor Secretary Nieves R. Confesor. T h e issues relating to the
strike and lockout were already submitted before the N L R C through the corresponding
complaints filed by petitioner itself and private respondents. By filing a formal
complaint for illegal strike, it behooved petitioner to desist from undertaking its own
investigation on the same matter, concluding upon the illegality of the union activity
and dismissing outright the union officers involved. T h e latter objected, in fact, to
the conduct of such investigations precisely due to the pendency before the N L R C
of an action based on the same grounds. Instead, petitioner preempted the N L R C
from ascertaining the merits of the complaints.

4. "GOOD-FAITH STRIKE"
A strike may be justified by belief in g o o d faith that the employer was
committing unfair labor practice at the time the strikers went on strike. G o o d
faith saves the strike from being declared illegal and the strikers from being
declared to have lost their e m p l o y m e n t status. This doctrine has been explained
in Part I of this Chapter. H e r e , we concentrate on its consequences.

Ferrer vs. Court of Industrial Relations, 17 SCRA 353 (1966) —

Although management may have had the strict legal right to take against
Union members disciplinary and other administrative measures above referred to,
there is no denying the fact that the time chosen by the management therefor, when
considered in relation with the attending circumstances, reasonably justify the belief
of the Union that the real or main purposes of the management was to discourage
membership in the Union, to discredit the officers thereof, to weaken the Union and
to induce or compel the same to sign the draft of a collective bargaining agreement.
. . As stated in the decision of his Honor, the trial judge, said belief was confirmed by
the fact that prosecutors of the Court of Industrial Relations found sufficient grounds
to file, and did file against the management, a complaint for unfair labor practices.
In other words, both parties had performed acts which understandably induced
each other to believe that the other was guilty of such practices — although, as we
now analyze the whole situation, without the excitement, the heat and the passion

653
 LABOR RELATIONS

of the direct participants in the labor dispute, at the peak thereof, such belief may
not turn out to be borne out by the objective realities — and both were reasonably
justified in taking the counter-measures adopted by them. As a consequence, we hold
that the strike in question had been called to offset what petitioners were warranted
in believing in good faith to be unfair labor practices on the part of management,
that petitioners were not bound, therefore, to wait for the expiration of thirty
(30) days from notice of strike before staging the same, and that the strikers had
not thereby lost their status as employees of respondents herein. Upon the other
hand, considering that the latter had been absolved from the charge of unfair labor
practices, the reinstatement of the strikers must be without backpay.

Cebu Portland Cement Company vs. Cement Workers Union, 25 SCRA 504 —
The Union declared a strike against the Company for its refusal to concede to
its demand for the collection of agency fee of PI.00 from each nonunion member.
The strike was certified to the CIR which declared it illegal but nonetheless ordered
the return to work of the strikers. The company contended before the Supreme Court
that the CIR should have authorized the dismissal of the strikers, relying upon certain
decisions of the Court. T h e Supreme Court conceded that under earlier decisions,
the participants in an illegal strike forfeited their employment but declared that
these cases had already been abandoned, x x x
In the case of Ferrer vs. CIR, et al, the belief of the strikers that the management
was committing unfair labor practice was properly considered in declaring an
otherwise premature strike not unlawful, and in affirming the order of the labor
court for the reinstatement without backwages of said employees.

5. STRIKE W H I C H IS ILLEGAL A N D N O T MARKED W I T H G O O D FAITH —

STRIKERS FORFEIT THEIR E M P L O Y M E N T
Reliance Surety and Insurance Co., Inc. vs. NLRC and Reliance Surety and Insurance
Employees Union, G.R. Nos. 86917-18, January 25, 1991 —
There is no dispute that the strike in question was illegal for failure of the
striking personnel to observe legal strike requirements, to wit: (1) as to the fifteen-day
notice; (2) as to the two-thirds required vote to strike done by secret ballot; ( 3 ) as to
submission of the strike vote to the Department of Labor at least seven days prior to
the strike. [Note: T h e strike vote required is now majority of the union membership
instead of two-thirds; see Article 263(f), as amended.]
As found likewise by the Commission, in the course of the strike held on April
1, 1987, certain strikers harassed nonstriking employees, called company officers
names, and committed acts of violence (as a result of which, criminal charges were
brought with the fiscal's office).
There is no question, finally, that the strike itself was prompted by no actual,
existing unfair labor practice committed by the petitioner. In effecting a change in
the seating arrangement in the office of the underwriting department, the petitioner
merely exercised a reasonable prerogative employees could not validly question,
much less assail as an act of unfair labor practice. T h e Court is indeed at a loss how

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[Fart 3. Consequences of Concerted Actions]

rearranging furniture, as it were, can justify a four-month-long strike. As to the private

respondent's charges of harassment, the Commission found none, and as a general
rule, we are bound by its findings of fact.
Amid this background, the Court must grant the petition. In staging the strike in
question, a strike that was illegal in more ways than one, the reinstated union officers
were clearly in bad faith, and to reinstate them without, indeed, loss of seniority rights,
is to reward them for an act public policy does not sanction.
T h e private respondents cannot find sanctuary in the cases of Ferrer vs. Court of
Industrial Relations and Almira vs. BF Goodrich Philippines, Inc., in which We affirmed
reinstatement in spite of an "illegal" strike. In the first place, neither Ferrer nor Almira
involved an illegal strike. What was involved in Ferrer was a defective strike, that is, one
conducted in violation of the thirty-day "cooling-off" period, but one carried out in
g o o d faith "to offset what petitioners were warranted in believing in good faith to be
unfair labor practices [committed by] Management." What Almira, on the other hand,
declared was that a violent strike alone does not make the action illegal, which would
justify the dismissal of strikers. It is therefore clear that we ordered reinstatement in
both cases not in spite of the illegality of the strike but on the contrary, because the
same was "legal," that is to say, carried out in g o o d faith.
We can not apply, either, the ruling in Bacus vs. Ople, where we held that the
mere finding of illegality attending a strike does not justify the "wholesale" dismissal
of strikers who were otherwise impressed with g o o d faith.
T h e Court must not be understood to be abandoning the teachings of either
Ferrer, Almira, or Bacus. T h e Court reiterates that g o o d faith is still a valid defense
against claims of illegality of a strike. We do find, however, not a semblance of good
faith here, but rather plain arrogance, pride, and cynicism of certain workers.
As a general rule, the sympathy of the Court is on the side of the laboring classes,
not only because the Constitution imposes sympathy but because of the one-sided
relation between labor and capital. T h e Court must take care, however, that in the
contest between labor and capital, the results achieved are fair and in conformity
with the rules. We will not accomplish that objective here by approving the act of
the National Labor Relations Commission which we hold to constitute grave abuse
of discretion.

6. FORFEITURE OF REINSTATEMENT
In East Asiatic Co., Ltd., et al vs. CIR, et al, G.R N o . L-29068, August 31,
1971, the Court had occasion to rule that a striker w h o failed to report for work
when o n e had the opportunity to do so waived thereby his right to reinstatement.
"Because of the apparent lack of interest of the strikers concerned as shown by
their failure to report for work without justifiable reason with the petitioners
therein, we are constrained to declare them to have forfeited their right to
reinstatement." This rule is reiterated in Jackbilt Concrete Block Co., et al. vs. Norton
and Harrison Co. and Jackbilt Concrete Block Co. Labor Union-NLU and the CIR (L-
39174 and L-39186, May 7, 1976).

655
 LABOR RELATIONS

If, during the strike, a striking employee has found another j o b , is he

still entitled to reinstatement? T h e answer is yes and no. In the leading case of
Cromwell Commercial, the Supreme Court answered in this wise:
We agree with the union that under the ruling of Phelps Dodge Corp.
vs. NLRB, 313 U.S. 177, 85 L. ed. 1271 (See also C o x and Bok, Cases on
Labor Law, 259,5th e d . ) , the mere fact that strikers or dismissed employees
have found such e m p l o y m e n t elsewhere is not necessarily a bar to their
reinstatement. But it is just as true to say that the Phelps Dodge case d i d
not rule that in any event discriminatorily dismissed e m p l o y e e s must
be o r d e r e d reinstated even though they have in the meanwhile found
substantially equivalent e m p l o y m e n t somewhere else. W h i l e denying that
employees w h o have obtained equivalent e m p l o y m e n t are ineligible as a
matter of law to reinstatement, the Supreme Court of the U n i t e d States
at the same time d e n i e d also that the definition of the term " e m p l o y e e "
can be disregarded by the National L a b o r Relations Board in exercising
its power under Section 1 0 ( c ) of the W a g n e r A c t , which corresponds to
Section 5 ( c ) of our Industrial Peace Act, to direct the taking of affirmative
action by an e m p l o y e r to r e m e d y unfair labor practice. A c c o r d i n g to the
Court, it is for the Board in each case to w e i g h the particular facts and to
determine, in the exercise of wise administrative discretion, whether the
A c t would best be effectuated by directing reinstatement despite the fact
that the given employees had f o u n d equivalent e m p l o y m e n t . (Cromwell
Commercial Employees and Laborers Union [PTUC] vs. Court of Industrial
Relations and Cromwell Commercial Co., Inc., No. L-19778, September30, 1964.)

7. DISCRIMINATION IN READMISSION OF STRIKERS

T h e r e s p o n d e n t e m p l o y e r d i d n o t m e r e l y discriminate against all the
strikers in general. T h e y separated the active f r o m the less active unionists
on the basis of their militancy, or lack of it, on the picket lines. Unionists
b e l o n g i n g to the first c a t e g o r y w e r e refused readmission even after they w e r e
able to secure clearances from the c o m p e t e n t authorities with respect to the
criminal charges filed against them. It is significant to n o t e in this c o n n e c t i o n
that e x c e p t for o n e union official w h o deserted his u n i o n on the second day
of the strike and w h o later participated in the crashing through the picket
lines, not a single u n i o n officer was taken back to w o r k . D i s c r i m i n a t i o n
undoubtedly exists w h e r e the r e c o r d shows that the union activity of the
rehired strikers has b e e n less p r o m i n e n t than that of the strikers w h o w e r e
1
d e n i e d reinstatement.

•The Insular Life Assurance Co., Ltd. Employees Association-NATU vs. T h e

Insular Life Assurance Co. Ltd., 37 SCRA 244.

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 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

8. EXACTION OF PROMISE OR CLEARANCES FROM R E T U R N I N G

STRIKERS
As to the charge of discrimination in the readmission of the strikers, it may
be pointed out that under the Industrial Peace Act, to constitute an unfair labor
practice, the discrimination committed by the employer must be in regard to
the 'hire or tenure of e m p l o y m e n t or any term or condition of employment to
encourage or discourage membership in any labor organization.' T h e exaction
by the C o m p a n y from the strikers returning to work, of a promise not to
destroy company property and not to c o m m i t acts of reprisal against the U n i o n
members w h o did not participate in the strike, cannot be considered as intended
to encourage or discourage U n i o n membership. Taking the circumstances
surrounding the prescribing of that condition, the requirement by the Company
is actually an act of self-preservation and designed to insure the maintenance of
1
peace and o r d e r in the C o m p a n y premises.
Wrongfully dismissed employees and strikers w h o are o r d e r e d reinstated
may be subjected to periodic physical examination as o l d reinstated workers but
2
not as a precondition to reinstatement.

9. REINSTATEMENT MAY RENDER M O O T THE Q U E S T I O N OF ILLEGALITY

OF STRIKE
As pointed out by the dissenting judges in the Court of Industrial Relations,
the letter (Exh. 4) invited the workers to return to their posts, without making
reference to the pending case, or imposing any condition or alteration of the
terms of the employment, and was thus a waiver of any right to consider the
strikers as wrongdoers; and as previously observed, such invitation was accepted
by strikers. T h e r e f o r e , the Court of Industrial Relations should have granted the
U n i o n ' s m o t i o n to dismiss the proceedings filed on Feb. 7,1953, for the matter
had b e c o m e m o o t . T h e parties had both abandoned their original positions
and c o m e to a virtual compromise and agreed to resume unconditionally their
former relations. To p r o c e e d with the declaration of illegality would not only
breach this understanding, freely arrived at, but unnecessarily revive animosities
3
to the prejudice of industrial peace.
W h e r e the e m p l o y e r voluntarily a g r e e d to reinstate the strikers, such
agreement on the part of the employer constitutes a waiver of the defense that
4
the strike was illegal.

'PIMA vs. Ang Tibay, L-22273, May 16, 1967.

2
Davao Free Workers Front vs. CIR, 60 SCRA 408.
3
Citizens Labor Union vs. Standard Vacuum Oil Co., G.R. N o . L-7478, May 6,
1955.
4
Bisaya Land Trans. Co. vs. Court of Industrial Relations, et al., G . R N o . L-10114,
November 26, 1957.

657
 LABOR RELATIONS

10. GENERALLY, NO BACKWAGES IN STRIKE

10.1 Economic Strike
In an economic strike, the strikers are not entitled to backwages on the
principle that "a fair day's wage" accrues only for a "fair day's labor." This has
been established even in pre-Industrial Peace A c t era. Thus, in the January 1953
decision in Heilbronn vs. NLU, the Supreme Court quoted with approval:
In the case of San Miguel Brewery, Inc. vs. National Labor Union, et al.
(case N o . 271-V), in passing upon a demand of laborers for their wages
corresponding to the days that they were on strike, the C I R held:
As to the demand for the payment of the wages that the strikers
lost on the occasion of their strike on N o v e m b e r 22,1948, the Court
understands that a strike is a voluntary and deliberate cessation of
work on the part of the workers. U p o n this consideration and based
on the equitable tenet of a fair day's wage for a fair day's labor, this
demand falls of its own weight and must be, as it is hereby, denied.
Again, in the case of Federacion Obrera de Filipinos (FOF) vs. Philippine Rubber
Projects Co., Inc. (case N o . 346-V), ruling upon a similar demand, the C I R said:
T h e strike was, therefore, justified under the circumstances, but for
reasons that wages and salaries represent the compensation of the labor
p e r f o r m e d by the laborers or employees and, not having p e r f o r m e d any
work during the strike, they should not be paid any wage or salary therefor.
For this reason this demand is hereby denied.
In a case where a laborer absents himself from work because of a strike
or to attend a conference or hearing in a case or incident between him and his
employer, he might seek reimbursement of his wages from his union which had
declared the strike or filed the case in the industrial court. Or he might have
1
his absence from his work charged against his vacation leave.

The Philippine Marine Radio Officers Association vs. Court of Industrial Relations,
102 Phil. 373 (1957) —
Facts: T h e P H I L M A R O A presented a list of demands to the companies, the
most important of which were the standardization and increase of salaries; vacation
and sick leaves; hospitalization and sick leave; and a closed-shop agreement. As none
of the companies was willing to consider its demands, the P H I L M A R O A gave notice
of its intention to strike to the different shipping companies and to the Conciliation
Service Division of the Department of Labor. T h e P H I L M A R O A eventually declared
a strike against the companies when conciliation efforts failed to effect a settlement.
The strike was certified by the President to the CIR for compulsory arbitration. O n e
of the issues raised was the claim of the P H I L M A R O A that the strikers should be
entitled to reinstatement with backwages.

'J.P. Heilbronn Co. vs. National Labor Union, L-5121, January 20, 1953.

658
 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

Ruling: T h e Supreme Court upheld the strikers' reinstatement but rejected

the claim for backwages.
It must be taken into account that neither the pleadings nor the evidence,
nor the judgment disclosed the existence of any act amounting to discrimination or
unfair labor practice. T h e strike was resorted to by members of petitioner Union as
an economic weapon to compel the respondent Companies to grant improvement
in the pay of the members of the Unions and in the conditions of their employment.
As a matter of fact, they expressly wanted closed shop, standardization and increase
of salaries, as well as vacation leave with pay. At the hearing of the case before the
court a quo, counsel for the petitioner Union, when asked if the strikers wanted to
return back to work, did not say no but instead expressly declared that the strike
was adopted as a weapon to enforce their demands. T h e strike was by all means,
therefore, a voluntary act on the part of the strikers, not one to which they are
compelled by reason of any act of discrimination, or unfair labor practice, or refusal
of the respondent Companies to admit them back to work. T h e strike may have
been legal because it was used as a weapon in the interest of labor; but it was not
caused by any illegal or unfair act on the part of the employers, and the strikers
should not be entitled to pay during the period they voluntarily absented themselves
from work.
What we stated in the case of J.P. Heilbronn Company vs. National Union... are
exactly applicable:
T h e age old rule governing the relations between labor and capital or
management and employee is that of a "fair day's wage for a fair day's labor."
If there is no work performed by an employee there can be no wage or pay,
unless, of course, the laborer was able, willing and ready to work but was illegally
locked out, dismissed or suspended. It is hardly fair or just for an employee or
laborer to fight or litigate his employer on the employer's time.
No commission of any unfair labor practice is involved in this case. The grant
of backpay is, therefore, to be governed by the general principle of 'fair day's wage for
a fair day's labor.' If even in cases of unfair labor practices, the Court may be justified
in denying backpay... there is absolutely no reasons for granting backpay if there has
not been any unfair labor practice on the part of the respondent companies at all.

10.1a Unfair L a b o r Practice Strike

Cromwell Commercial Employees and Laborers Union (PTUC) vs. Court of Industrial
Relations, G.R. N o . L-19778, September 30, 1964 —
T w o types of employees involved in unfair labor practice cases should be
distinguished, namely, those who were discriminatorily dismissed for union activities
and those who voluntarily went on strike even if it is in protest of an unfair labor
practice. Both types of employees are entitled to reinstatement. From the rule that
employees who strike because of unfair labor practice are entitled to reinstatement,
however, must be excepted those who, although discriminatorily discharged, must
nevertheless be denied reinstatement because of (1) unlawful conduct or (2) because
of violence.
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 LABOR RELATIONS

Coming now to the question of backpay, the decision under review directs the
company "to reinstate all the strikers listed in Annex 'A' of the complaint, without
backwages, in view of the circumstances, as explained on the subject of the strike, unless they
have found substantial employment elsewhere during the pendency of this case."
The union assails this order as erroneous. According to the union, it is unfair to
deny backwages to the strikers after finding that the strike declared by them was legal
because it was provoked by unfair labor practices of the company.
For this purpose, We shall advert again to the distinction earlier made between
discriminatorily dismissed employees and those who struck, albeit in protest against
the companies' unfair labor practice. Discriminatorily dismissed employees received
backpay from the date of the act of discrimination, that is, from the day of their
discharge.
In contrast, the rest of the employees struck as a voluntary act of protest against
what they considered unfair labor practices of the company. T h e stoppage of their
work was not the direct consequence of the companies' unfair labor practice. Hence
1
their economic loss should not be shifted to the employer.

10.2 Exception: "Involuntary" Strikers Illegally L o c k e d O u t

Macleod & Co. of P.I. vs. Progressive Federation of Labor, G.R. N o . L-7887, May
31, 1955 —
While there is a rule that "strikers may not collect their wages during the
days they did not go to work" because of the age-old rule governing the relation of
2
labor and capital epitomized in a "fair day's wage for a fair day's labor," this rule
does not apply in this case for the simple reason that the thirty-eight laborers herein
concerned did not voluntarily strike but were practically locked out. They were
notified that on a certain date they would cease to work, and notwithstanding their
efforts to reach a compromise, the company adopted a stern attitude which left no
other alternative to them than to walk out. Moreover, the company not only limited
itself to dispensing with their services, but indirectly forced them to join another
labor union as a condition whereby they could be readmitted. We refer to the clause
inserted in the contract of service entered into by the company with the Davao
Stevedoring Terminal Co., which provides that the employment of the members of
the outside gang would be subject to the condition that they shall affiliate themselves
with the Davao Stevedoring Mutual Benefit Ass'n. This clause smacks of an unfair
labor practice the purpose of which is to bust a well-organized labor union.
Since it appears that the walkout of said employees is not of their own volition but
in spite of it, it is only fair that they be reinstated with the payment of their backwages.
However, as it appears that the thirty-eight laborers had been out of the service of

•See Dinglasan vs. National Labor Union, G.R. N o . L-14183, November 28,
1959.
Manila Trading &: Supply Co. vs. Manila Trading Labor Assn., G.R. N o . L-5062,
April 27, 1953 and J. P. Heilbronn Co. vs. National Labor Union, G.R. N o . L-5121,
January 20, 1953.

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 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

the company for more than two years during which they may have found another
employment or means of livelihood, it is the sense of the Court that whatever they may
have earned during that period may be deducted from their backwages to mitigate
somewhat the liability of the company. This is under the principle that no one should
be allowed to enrich himself at the expense of another.

In Davao Free Workers Front vs. CIR, et al. (60 S C R A 408), strike duration pay
was awarded to the strikers. This was questioned by the employer, since generally,
strikers are not entitled to pay for the strike period. Is the award valid? T h e Court
ruled that, under the circumstances, the strike duration pay must be awarded to
the strikers.
T h e self-same considerations of the company's unfair labor practices
and discriminatory acts and anti-union activities that fully justify the award of
backwages to the unlawfully dismissed employees equally justify the granting
of strike duration pay to petitioner union's members w h o were left no other
alternative by their employer's i m p r o p e r and oppressive conduct but to declare a
strike to render aid and protection to themselves and their unlawfully dismissed
companions.
In case of discriminatory dismissal, therefore, the law on illegal dismissal
under B o o k V I o f the C o d e applies.

10.2a "Voluntary" Strikers in U L P Strike who Offered to Return to Work

Unconditionally
T h e Cromwell decision cited above gives an exception to the rule that
"voluntary" strikers, even in a U L P strike, are not entitled to backpay. T h e
exception is explained in this portion of the decision:
As explained by the National L a b o r Relations Board in the case of
American Manufacturing Co., NLRB 443, "When employees voluntarily go on
strike, even if in protest against unfair labor practices, it has been our policy
not to award them backpay during the strike. However, when the strikers
abandon the strike and apply for reinstatement despite the unfair labor
practices and the employer either refuses to reinstate them or imposes upon
their reinstatement new conditions that constitute unfair labor practices,
We are of the opinion that the considerations impelling our refusal to
award backpay are no longer controlling. Accordingly, We hold that where,
as in this case, an employer refuses to reinstate strikers except upon their
acceptance of the new conditions that discriminate against them because
of their union membership or activities, the strikers who refuse to accept
the conditions and are consequently refused reinstatement are entitled to
be made whole for any losses of pay they may have suffered by reason of
the respondent's discriminatory acts." (Quoted in Teller, 2 Labor Disputes and
Collective Bargaining, Sec. 371, pp. 997-998). (Cromwell Commercial Employees

661
 LABOR RELATIONS

and Laborers Union [PTUC] vs. Court of Industrial Relations, L-19778, September
30, 1964, p. 134)
T h e strikers' offer to return to work should be unconditional so that they
will be entitled to backpay.
While it is true that the strikers in this case offered to return to work
on March 14,1957, we find that their offer was conditional. T h e i r offer was
predicated on the company's observance of the provisions of the collective
bargaining agreement — the very b o n e of contention between the parties
by reason of which the union walked out. To be effective so as to entitle the
strikers to backpay, the offer must have been unconditional. The strikers must have
offered to return to work under the same conditions under which they worked just
before their strike so that the company's refusal would have placed on the latter the
blame for their economic loss. But that is not the case here. I n d e e d , the offer of
the company to accept the strikers under the conditions obtaining before
the strike (without prejudice, of course, to taking up the grievances of the
strikers) can be considered in its favor in denying backwages to the strikers.
(Dinglasan vs. National Labor Union, G.R No. L-14183, November 28, 1959.
Cromwell Employees and Laborers Association vs. CIR, L-19778, September 30,
1964, 12 SCRA 124.) (Italics supplied.)
T h e petitioner union contends that it was an abuse of discretion to
disallow backwages to strikers w h o abandoned their legal strike but were refused
reinstatement in spite of their unconditional offer to return to work. This has
for its premises: 1) that the strike was legal; 2) that there was an unconditional
offer to return to work; and 3) that the strikers were refused reinstatement.
Indeed, if all these circumstances concurred, the strikers would be entitled to
backwages. But where the strikers' unconditional offer to return to work was
not implemented because of an injunction issued by the Supreme Court, the
1
employer is not obliged to pay backwages.
It must be stressed that for the exception in Philippine Marine Officers case to
apply, it is required that the strike must be legal. If it is illegal, the U n i o n officers
2
will lose their wages and their j o b s .

11. C O U R T ' S D I S C R E T I O N O N BACKWAGES

Even after a finding of U L P by the employer, award of backwages rests on
the Court's discretion.

Consolidated Labor Association of the Philippines vs. Marsman and Company, Inc.,
11 SCRA 589 (1964) —
Facts: T h e Union was certified as the bargaining representative of the
Company's employees and commenced negotiations with it for a CBA. Despite several

'Philippine Marine Officers' Guild vs. Compania Maritima, 22 SCRA 1113.

Philippine Diamond Hotel, etc. vs. Manila Diamond Hotel Employees Union,
G.R. N o . 158075, June 30, 2006.
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 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

meetings, the parties failed to reach an agreement, eventually leading to the filing of
a notice of strike by the Union. A strike was eventually declared by the Union when
conciliation meetings at the Department of Labor failed to produce a settlement.
T h e strike was attended by acts of violence on the part of certain strikers. Thereafter
upon the intercession of the Secretary of Labor, the strikers agreed to return to work
on the promise that the Company would discuss their demands with them. While
the Company admitted some of the strikers, it refused readmission to others unless
they ceased to be active union members. As a result, the strike and picketing were
resumed.
One of the issues raised was the liability of the Company for backwages. The
Union contends that the initial economic strike had been transformed into a U L P
strike when the Company discriminated against certain strikers. Hence, the Union
claimed that the strikers are entitled to backwages.
Ruling: T h e Supreme Court held that the CIR had the discretion whether or
not to award backwages in an unfair labor practice strike.
We now come to the question of backpay. In an economic strike, the strikers
are not entitled to backpay, since the employer should get the equivalent day's work
for what he pays his employees. During the time that the strike was an economic one,
complainant had no right to backpay. T h e industrial court could not have made a
finding of unfair labor practice with respect to such time, as none had so far been
committed. This being an unfair labor practice case, it cannot, therefore, order
reinstatement much less backpay for that period.
On the other hand, even after the court has made a finding of unfair labor
practice, it has the discretion to determine whether or not to grant backpay. Such
discretion was not abused when it denied backwages to complainants, considering
the climate of violence which attended the strike and picket that the complainants
conducted. While the complainants ordered reinstated did not actively take part in
the acts of violence, their minatory attitude towards the Company may be gathered
from the fact that from the very first day of the strike, policemen had to patrol the
strike zone in order to preserve peace.

Brugada, et al. vs. The Secretary of Education, G.R. N o . 142332-43, January 31,
2005 —
Petitioners [public school teachers] have no right to backwages because they were
neither exonerated nor unjustifiably suspended. Petitioners admitted participating in
the teachers' strike which disrupted the education of public school students. For this
offense, the CSC reduced Secretary Carino's dismissal orders to six months suspension
without pay. T h e Court has already put to rest the issue of the award of back wages
to public school teachers whom the CSC reinstated in the service after commuting
Secretary Carino's dismissal orders to six months suspension without pay. In Alipat v.
Court of Appeals, the Court denied the teachers' claim for back wages stating thus:
This Court has also resolved the issue of whether back wages may be
awarded to the teachers who were ordered reinstated to the service after
the dismissal orders of Secretary Carino were commuted by the Civil Service
Commission to six (6) months' suspension. T h e issue was resolved in the

663
 LABOR RELATIONS

negative in Bangalisan vs. Court of Appeals on the ground that the teachers
were neither exonerated nor unjustifiably suspended. T h e Bangalisan case
also ruled that the immediate implementation of the dismissal orders, being
clearly sanctioned by law, was not unjustified. T h e Court held that as regards
the payment of back salaries during the period of suspension of a member of
the civil service who is subsequently ordered reinstated, the payment of back
wages may be decreed if "he is found innocent of the charges which caused
the suspension and when the suspension is unjustified."
Citing the Bangalisan ruling, this Court in Jacinto vs. Court of Appeals held
that when the teachers have given cause for their suspension - i.e., the unjustified
abandonment of classes to the prejudice of their students - they were not fully
innocent of the charges against them although they were eventually found guilty only
of conduct prejudicial to the best interest of the service and not grave misconduct
or other offense warranting their dismissal from the service; "being found liable for
a lesser offense is not equivalent to exoneration."

12. EMPLOYER'S R I G H T T O HIRE R E P L A C E M E N T S D U R I N G STRIKE;

DISCHARGE OF REPLACEMENTS
W h e r e a strike is declared in protest of employer's conduct which the
strikers could reasonably and in g o o d faith believe to constitute unfair labor
practice, such strike is d e e m e d to have some legal basis, even if subsequent judicial
investigation shows that no unfair labor practice on the part of the employer
had been committed. Consequently, the strikers have a right to reinstatement,
notwithstanding that the management may have hired other workers to replace
them. A c c o r d i n g to the Supreme Court:
A n e n t the company's argument that reinstatement of said strikers
would be unfair to those w h o had been taken in to replace them during the
strike, when the company direly n e e d e d their services, suffice it to consider
two other points. T h e first is that said other workers must be d e e m e d to
have accepted their employment as replacements with the knowledge that
the same is subject to the consequences of the labor dispute between the
strikers and the company on the resolution of which d e p e n d e d the effects
of the strike as to the right to reinstatement of the strikers. T h e second point
is that said workers had by now been engaged for almost nine years, so that
it is not inequitable for them to be made to yield their positions to those
finally ruled to be with right to occupy the same. (Norton Harrison Company
&Jackbilt Concrete Blocks Co. Labor Union vs. Norton & Harrison Co. &Jackbilt
Concrete Blocks Co., L-18461, February 10, 1967.)
T h e replacements did not gain permanent right to the positions they held.
Neither could such temporary employment bind the University ( e m p l o y e r ) to
1
retain permanently the strikers.

'Feati University vs. Bautista, et al., L-21278, December 27, 1966.

664
 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

T h e failure or refusal of the employer to obey the court order reinstating

1
the strikers constitutes contempt of court.
Reinstatement of the strikers, w h o have not found substantially equivalent
employment elsewhere, therefore follows as a matter of right, notwithstanding
that the employer has hired others to take the place of the strikers for the purpose
2
of continuing the operation of the plant or the business of the industry.
W h e r e the employer's unfair labor practice caused or contributed to the
strike or where the 'lockout' by the employer constitutes an 'unfair labor practice,'
the employer cannot successfully urge as a defense that the striking or locked-out
employee's position has been filled by replacements. U n d e r such circumstances,
if no j o b sufficiently and satisfactorily comparable to that previously held by the
aggrieved employee can be found, the employer must discharge the replacement
employee, if necessary, to restore the striking or locked-out worker to his own or
comparable position.... If the employer's improper conduct was an initial cause
of the strike, all the strikers are entitled to reinstatement and to the dismissal of
3
the replacement employees wherever necessary.

12.1 Where Reinstatement of Illegally Dismissed Strikers Has Become

Impossible, Backwages Should be Paid
Coronet, et al. vs. CIR, 23 SCRA 990 (1968) —
T h e Union declared a strike against the Columbian Rope Company which was
utilizing the services of union members through independent contractors Coronel,
Salvador, and Bertulano. T h e strike was conciliated and an agreement was reached for
the reinstatement of the strikers. subsequently, some of the reinstated workers were
laid off, which triggered a U L P charge against the Company and the contractors. The
Supreme Court found that the contractors indeed were guilty of discrimination in
laying off the reinstated strikers, but found reinstatement impossible to accomplish.
Under the circumstances, the Supreme Court only declared the employees entitled
to backwages from the day of the lay-off to the date of its decision.
Said the Court:
To be recalled is that said judgment requires petitioners herein 'to
reinstate' and 'pay backwages.' We are primarily concerned with that portion
relative to reinstatement. Reinstatement refers to a restoration to a state from
which one has been removed or separated; it is the return to the position from
which he was removed.
"We take stock of the facts of the case and pronouncements of the court
below and we find that reinstatement has become impossible to accomplish.

'Diwa ng Pagkakaisa - PAFLU vs. Filtex, et al, N o . L-23960, February 6, 1968.

2
2 Teller, op. cit., Sec. 277, p. 754.
T h e Insular Assurance Company, Ltd. Employees Association-NATU vs. The
Insular Life Assurance Company, Ltd., 37 SCRA 244 [1971]. See Article 264, third
paragraph.
665
 LABOR RELATIONS

"It should be remembered that the employees involved here worked on

jobs given and made available to them by Columbian. To require Coronel,
Salvador and Bertulano [the independent contractors] to reinstate them
will entail a further order to require Columbian to make their former jobs
available to, and to accept, these workers. This cannot be done inasmuch
as the CIR in its en banc resolution of February 2, 1961 — now final — has
already released Columbian from such obligation. That resolution ipso
facto ruled out reinstatement. T h e law does not exact compliance with the
impossible.
"How about the backwages? Our considered view is that petitoners
[Coronel, Salvador, and Bertulano], the employers, must pay them. T h e said
petitioners are guilty of unfair labor practice; they were responsible for their
laborers' being thrown out of their jobs. If we are to enhance the vitality of
and give meaning to the constitutional precept that "(t)he promotion of social
justice to ensure well-being and economic security of all the people should be
the concern of the State," then duty exacts that we give the nod to the grant
of relief to these laborers for the wrong done to them. They are entitled to
backpay to commence from the time spelled out in the trial judge's decision
of September 2, 1960 up to the date this judgment becomes final. Justice and
equity demand that this last date be fixed as the terminus — in lieu of the date
of reinstatement."

13. RESIGNATION OF STRIKERS DOES N O T PREVENT S I G N I N G O F CBA

Commodity Transport Corporation vs. National Labor Relations Commission,
G . R . N o . 84926, May 8, 1989 —
Facts: P A F L U , the certified collective bargaining agent of the workers of
Commodity Transport, submitted to the latter a set of proposals for collecting
bargaining. Commodity Transport responded with a counter-proposal which the
workers rejected. They subsequently staged a strike. By agreement of the parties,
the dispute was submitted to the labor arbiter for adjudication. After the hearings,
the labor arbiter ordered the parties to execute and sign a CBA containing certain
benefits contained in the decision.
Commodity Transport (1) impugns the jurisdiction of the labor arbiter on the
ground that when the workers voluntarily returned to work, the case had become
moot and academic, thus divesting the labor arbiter of jurisdiction; (2) insists that
the case is moot because the workers who took part in the strike had resigned, and
the union ceased to be certified collective bargaining agent since it could no longer
meet the 20% requirement.
Ruling: Notwithstanding the termination of the strike, the collective bargaining
deadlock had not yet been resolved.
The 20% requirement stated in Article 234 of the Labor Code pertains to
registration of a labor organization and not to its election as a collective bargaining
agent. Even when a legitimate labor organization could no longer meet the 20%

666
 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

requirement after its registration, it does not, ipso facto, lose its status as such until
1
after due hearing by the Bureau of Labor Relations.
Since PAFLU was the certified collective bargaining agent at the time of the
negotiation of the collective bargaining agreement, it continues to be so until a new
one shall have been chosen in a certification election.

14. CIVIL LIABILITY OF L A B O R O R G A N I Z A T I O N S

T h e efforts of labor organizations by any lawful means to attain their
legitimate objects will not make them or their members liable in damages to those
w h o may be directly or indirectly injured by such efforts. If any injury results to
anyone, it will be considered merely incidental and damnum absque injuria. Thus,
where a combination of laborers is recognized as legal and a strike is lawful, no
liability arises because of injuries incidental thereto. However, labor unions may
be held liable for resulting damages where they attempt to attain their legitimate
2
objectives by unlawful means or where they attempt to attain unlawful objectives.
In order to hold a labor organization liable for the unlawful acts of individual
officers, agents or members, there must be p r o o f of actual authorization or
3
ratification of such acts after actual knowledge thereof.

14.1 Labor Organizations N o t Liable for Unauthorized Acts of Officers

L a b o r unions are liable for the unlawful acts of their officers or members
which they have authorized or adopted and labor unions which form a conspiracy
are liable for the acts of n o n m e m b e r s w h o voluntarily j o i n in the doing of
unlawful acts in aid of the scheme. However, labor unions are not liable in
damages for the unauthorized or unratified unlawful acts of their officials nor
are they responsible for the unlawful acts of individual members which neither
4
their officers nor committees have directed, aided, or approved.

14.2 Liability of Officers of Labor Organizations

W h e r e the acts of labor unions and their members are unlawful and
tortious, the officers participating in such unlawful actions are liable for the
resulting damages irrespective of the fact that they were acting in behalf of the
union. Officers of labor unions are also liable for unlawful and tortious acts done
5
pursuant to a conspiracy to which unions are a party.

14.3 Liability of Members of Labor Organizations

Members of labor unions are not subject to civil liability for the acts of the
unions or its officers as such, unless it is shown that they personally authorized or

'Article 238, Labor Code, as amended.

2
32 Am. Jur., Sec. 135, p. 492.
3
See Phil. Marine Officers Guild vs. Cia. Maritima, 22 SCRA 113.
4
31 Am. Jur., Sec. 13, p. 492.
r>
31 Am. Jur., Sec. 135, p. 498.
667
 LABOR RELATIONS

participated in the particular acts, and the liability of a member of a labor union
for the wrongful acts of his associates done without his knowledge or approval
is not to be inferred from mere membership in the union. However, members
of a labor union are liable for damages resulting from particular unlawful acts
which they participated in or which are p e r f o r m e d at their direction or pursuant
to a delegation of authority by them.'
Many unionists were charged with and convicted of various crimes like
coercion, malicious mischief, physical injuries, breach of the peace, light threats,
and damage to property, all committed during the period from September 4,
1954 to October 12, 1954. Admittedly, the Company could not have c o n d o n e d
these acts which were committed after it had offered to reinstate the strikers.
Nevertheless, as the lower court reasoned out, it does not appear that the
aforementioned individual acts were authorized or even impliedly sanctioned
by the Union. H e n c e , the other strikers w h o were innocent of and did not
participate in the illegal acts should not be punished by being deprived of their
right to reinstatement. It is only those w h o had been found guilty w h o should
2
be penalized by the loss of the right.

14.4 Liability of L a b o r Unions f o r Damages Arising f r o m Boycott

A person against w h o m an unlawful boycott has been instituted may have
an action for damages thereby occasioned against any and all of the persons
who have combined against him, provided there is a causal connection between
the acts complained of and the damage suffered. This is true irrespective of
the impossibility of determining the total amount of the loss or the difficulty of
3
ascertaining with certainty the money value of the damages which can be proved.

14.5 Liability of L a b o r Unions f o r Damages f o r Interfering with Right of

Laborers to Work
A labor organization which interferes with the right of a worker to dispose
of his services in a free market must justify such interference or respond in
damages. A n action for damages will lie against anyone, including a labor union,
its officers or members, or a former employer, w h o unlawfully prevents o n e from
procuring employment, or who intentionally and without legal justification or
excuse procures an employer to discharge his e m p l o y e e , to the damage of the
latter. So, if officers of a labor union wrongfully prevent o n e from obtaining
employment, an action will be against them, and against the union as well, if
their acts were done in the course of their service and for the benefit of that
4
body.

'31 Am. Jur., Sec. 137, p. 494.

Consolidated Labor Association of the Philippines vs. Marsman Co., Inc., 11
SCRA 596-597.
3
31 Am. Jur., p. 499.
4
31 Am. Jur., p. 500.

668
 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

14.6 Liability for Extorting Money from Employers

A labor union has no right to extort money from employers as the price
of forbearance from threatened labor difficulties. W h e r e an employer pays a
sum of money to a labor union upon a threat of refusal to handle his products
because of a sale to employers of nonlabor union, he may recover such sum
of money. Similarly, a conspiracy by the members of a labor union to obtain
from an e m p l o y e r m o n e y which he is under no legal obligation to pay, by
inducing his workmen to leave him and by deterring others from entering into
his employment, or by threatening to do this, so that he is induced to pay the
m o n e y demanded, under a reasonable apprehension that he cannot carry on
his business without yielding to the demand, is an illegal conspiracy; and the
money thus obtained may be recovered back from the conspiring parties, who
are also liable for all damages to the business of such employer occasioned by
1
such illegal acts.

14.7 Liability for Damages Arising Out of Publications and Circulation

of False Statements
L a b o r unions have b e e n h e l d liable for damages arising out of the
publication and circulation of false statements relating to industrial controversies.
For example, the circulation of a false statement by members of a labor union
a m o n g members of a craft for the purpose of preventing a contract or from
securing employees, which results in damage to the contractor, gives him a right
of action for damages although the purpose of the union was a lawful one, that
2
of furthering the interests of its members.

15. DAMAGES
U n i o n officers may n o t be vicariously h e l d liable for illegal acts of
strikers. T h e rule of vicarious liability has, since the passage of Republic Act
875, b e e n expressly legislated out. U n d e r the said rule, m e r e membership in
a labor union is sufficient to predicate liability for acts of individuals d o n e in
behalf of the union, or a labor activity undertaken in behalf of the union. T h e
standing rule n o w is that for a labor union a n d / o r its officials and members
to be liable, there must be p r o o f of actual participation in, or authorization or
ratification of, the illegal acts. W h i l e the lower court found that some strikers
and picketers resorted to intimidation and actual violence, it also found that
defendants presented uncontradicted evidence that before and during the
strike, the strike leaders had time and again warned the strikers not to resort
to violence but to conduct peaceful picketing only. Assuming that the strikers
d i d not h e e d these admonitions c o m i n g from their leaders, the failure of
the union officials to go against the erring union members pursuant to the

'31 Am. Jur., 504.

2
31.Am.Jur., p. 503.

669
 LABOR RELATIONS

union and P A F L U constitution and by-laws exposes, at the most, only a flaw or
weakness in the defense which, however, cannot be a basis for plaintiff Benguet
1
to recover.
A Court of First Instance (now Regional Trial Court) has no jurisdiction
over a complaint for damages filed by an employer against a labor union for
2
declaring an allegedly illegal strike.
As to the use of violence which outlaws a strike otherwise valid in purpose,
the Court has made it clear that absent a pervasive and widespread use of force
and violence deliberately p r o m o t e d and countenanced by the union, where
responsibility for injury to persons and destruction of property may be collectively
attributed to the entire union leadership and membership, responsibility for
3
such sporadic and isolated acts must be individual in nature.
W h e r e the strike is illegal, the employer is entitled to an award for damages
adequately proved.

National Federation of Labor, et al. vs. NLRC and Permex Producer and Exporter
Corp., et al, G.R. N o . 113466, December 15, 1997 —
This Court has ruled that "in order that damages may be recovered, the best
evidence obtainable by the injured party must be presented. Actual or compensatory
damages cannot be presumed, but must be duly proved, and so proved with a
reasonable degree of certainty. A court cannot rely on speculation, conjecture or
guesswork as to the fact and amount of damages, but must depend upon competent
proof that they have been suffered and on evidence of the actual amount thereof. If
4
the proof is flimsy and insubstantial, no damages will be awarded."
However, the strike dragged on for nearly 50 days, paralyzing respondent's
operations; thus, "there is no room for doubt that some species of injury was caused
to private respondent. In the absence of competent proof on the actual damages
suffered, private respondent is entitled to nominal damages — which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been violated or invaded
by the defendant, may be vindicated and recognized, and not for the purpose
5
of indemnifying the plaintiff for any loss suffered." We consider the amount of
P300,000.00 just and reasonable under the circumstances.

In another case the union that lost in the certification election staged a
strike. T h e Labor Arbiter declared the strike illegal and o r d e r e d the strikers to

'Benguet Consolidated, Inc. vs. BCI Employees Union-PAFLU, 23 SCRA 465.

2
P L D T Company vs. Free Telephone Workers Union, 116 SCRA 145; Goodrich
Employees Association vs. Hon. D. Flores and B.F. Goodrich Phil., N o . L-30211,
October 5, 1976.
3
Feati University Faculty Club [ P A F L U ] vs. Feati University, 58 SCRA 395.
4
DBP vs. CA, 249 SCRA 331 [1995].
'Lufthansa German Airlines vs. CA, 243 SCRA 600 [1995].

670
 STRIKES A N D LOCKOUTS
[Part 3. Consequences of Concerted Actions]

pay, jointly and severally, the sum of P820,000.00 as damages to the employer
whose business was paralyzed by the illegal strike for two months. But the award
was deleted by the N L R C "for lack of factual and legal basis." T h e Supreme Court
upheld the deletion with this observation:
"The alleged losses suffered by petitioner [ e m p l o y e r ] were never
substantially proved, as borne out by the fact that no hearing was conducted
and no real evidence was ever presented on the matter. T h e only thing
that appears on record is an unsigned summary of actual and estimated
losses, certified by a certified public accountant that he had examined and
reviewed the same. This is not enough. Considering the very large amount
of damages awarded, there is n e e d for m o r e convincing evidence to be
presented in order to justify the same. (City Fair Corporation vs. NLRC, et
al, G.R No. 95711, April 21, 1995.)
T h e lessons are clear: U n i o n officers are liable for damages caused to the
business by the illegal strike. T h e business owner may recover those damages if
he is able to prove them. In addition, the officers will lose their jobs.
 Chapter II

ASSISTANCE T O L A B O R O R G A N I Z A T I O N S

ART. 267. ASSISTANCE BY THE DEPARTMENT OF LABOR

T h e Department of L a b o r , at the initiative of the Secretary of L a b o r ,
shall extend special assistance to the organization, for purposes of collective
bargaining, of the most u n d e r p r i v i l e g e d w o r k e r s w h o , f o r reasons of
occupation, organizational structure or insufficient incomes are not normally
covered by major labor organizations or federations.

ART. 268. ASSISTANCE BY THE INSTITUTE OF LABOR AND

MANPOWER STUDIES
The Institute of L a b o r and Manpower Studies shall render technical and
other forms of assistance to labor organizations and employer organizations
in the field of labor education, especially pertaining to collective bargaining,
arbitration, labor standards and the L a b o r C o d e of the Philippines in general.
COMMENTS
LABOR EDUCATION
Labor education is an indispensable ingredient of industrial peace and
progress. Without it, employees will not know their rights and obligations as
employees and those of their employer. T h e y will not know their rights and
obligations as union members, what the union officers owe them and the limits
to the latter's powers. Advancement of industrial peace and democracy should
be matched by sustained education of workers.
To conduct labor education and research, Article 277(a) authorizes unions
to collect reasonable membership fees and other contributions. A labor union's
failure to provide labor education to members is such a great neglect it was a
ground for cancellation of union registration and expulsion of the union officers
1
at fault.
But employers also need labor education. T h e y have to know the limits to
their powers, limits that are written as rights of the workers. T h e y have to shift
from autocratic to participatory management of p e o p l e .
Labor education, in short, is a potent force for mutual respect towards
attainment of industrial peace. O n e does not respect what o n e does not know.
For this reason labor education ought to be a pillar principle and overarching
objective of the Philippine labor law system.

'Article 241 [ p ] .
672
 Chapter III
FOREIGN ACTIVITIES

A R T . 269. PROHIBITION AGAINST ALIENS; EXCEPTIONS

All aliens, natural or juridical as well as foreign organizations are strictly
prohibited from engaging directly or indirectly in all forms of trade union
activities without prejudice to normal contacts between Philippine labor
unions and recognized international labor centers: Provided, however, That
aliens working in the country with valid permits issued by the Department of
L a b o r and Employment, may exercise the right of self-organization and join
or assist labor organizations of their own choosing for purposes of collective
bargaining; Provided, further, That said aliens are nationals of a country which
grants the same or similar rights to Filipino workers.

ART. 270. REGULATION OF FOREIGN ASSISTANCE

( a ) No f o r e i g n individual, organization or entity may give any
donations, grants or other forms of assistance, in cash or in kind, directly
or indirectly, to any labor organization, g r o u p of workers or any auxiliary
thereof, such as cooperatives, credit unions and institutions engaged in
research, education or communication, in relation to trade union activities,
without prior permission by the Secretary of Labor.
"Trade union activities" shall mean:
(1) organization, formation and administration of labor organiza-
tions;
( 2 ) negotiation and administration of collective bargaining agree-
ments;
(3) all forms of concerted union action;
( 4 ) organizing, managing, or assisting union conventions, meetings,
rallies, referenda, teach-ins, seminars, conferences and institutes;
( 5 ) any f o r m of participation or involvement in representation
proceedings, representation elections, consent elections, union
elections; and
(6) other activities or actions analogous to the foregoing.
( b ) This prohibition shall equally apply to foreign donations, grants
or other forms of assistance, in cash or in kind, given directly or indirectly to
any employer or employers' organization to support any activity or activities
affecting trade unions.

673
 LABOR RELATIONS
ART. 271

(c) The Secretary of L a b o r shall promulgate rules and regulations to

regulate and control the giving and receiving of such donations, grants, or
other forms of assistance, including the mandatory reporting of the amounts
of the donations or grants, the specific recipients thereof, the projects or
activities proposed to be supported, and their duration.

A R T . 271. APPLICABILITY TO FARM TENANTS AND RURAL WORKERS

The provisions of this Title pertaining to foreign organizations and
activities shall be deemed applicable likewise to all organizations of farm
tenants, rural workers, and the like: Provided, That in appropriate cases the
Secretary of Agrarian R e f o r m shall exercise the powers and responsibilities
vested by this Title in the Secretary of L a b o r .

674
 Chapter IV
PENALTIES FOR V I O L A T I O N

1
ART. 272. PENALTIES
(a) Any person violating any of the provisions of Article 264 of
this Code shall be punished by a fine of not less than one thousand pesos
(PI,000.00) but more than ten thousand pesos (P10,000.00) and/or
imprisonment for not less than three months nor more than three (3) years, or
both such fine and imprisonment, at the discretion of the court. Prosecution
under this provision shall preclude prosecution for the same act under the
Revised Penal Code, and vice versa.
( b ) Upon the recommendation of the Minister of Labor and
Employment and the Minister of National Defense, foreigners who violate
the provisions of this Title shall be subject to immediate and summary
deportation by the Commission on Immigration and Deportation and shall
be permanently barred from reentering the country without the special
permission of the President of the Philippines.
COMMENTS
T h e regular courts shall have jurisdiction over any criminal action under
2
Article 272 of the L a b o r C o d e .
Article 2 7 2 ( b ) should be compared with Article 288, dealing also with
penalties for violation of provisions of the C o d e . Article 272(b) says that
foreigners w h o violate the provisions of Title V I I I shall be subject to immediate
and summary deportation; on the other hand, Article 288, second paragraph,
provides that "in addition to such penalty, any alien found guilty shall be
summarily d e p o r t e d upon completion of service of sentence."

'As amended by Sec. 29, R.A. 6715.

2
Sec. 15, Rule X X I I I , D.O. N o . 40-03.

675
 Title IX
SPECIAL P R O V I S I O N S

ART. 273. STUDY OF LABOR-MANAGEMENT RELATIONS

The Secretary of L a b o r shall have the p o w e r and it shall be his duty to
inquire into:
(a) T h e existing relations between employers and employees in the
Philippines;
(b) T h e growth of associations of employees and the effect of such
associations upon employer-employee relations;
(c) T h e extent and results of the methods of collective bargaining in
the determination of terms and conditions of employment;
(d) The methods which have been tried by employers and associations
of employees for maintaining mutually satisfactory relations;
(e) Desirable industrial practices which have been developed through
collective bargaining and other voluntary arrangements;
(f) T h e possible ways of increasing the usefulness and efficiency of
collective bargaining for settling differences;
(g) T h e possibilities f o r the adoption of practical and effective
methods of labor-management cooperation;
(h) Any other aspects of employer-employee relations concerning
the promotion of harmony and understanding between the parties; and
(i) T h e relevance of l a b o r laws a n d l a b o r relations to national
development.
T h e Secretary of L a b o r shall also inquire into the causes of industrial
unrest and take all the necessary steps within his p o w e r as may be prescribed
by law to alleviate the same, and shall from time to time recommend the
enactment of such remedial legislation as in his j u d g m e n t may be desirable
for the maintenance and promotion of industrial peace.
ART. 274. VISITORIAL POWER'
T h e Secretary of L a b o r and E m p l o y m e n t or his duly authorized
representative is hereby e m p o w e r e d to inquire into the financial activities
of legitimate labor organizations upon the filing of a complaint under oath
and duly supported by the written consent of at least twenty (20%) percent

'Added by Sec. 31, R.A. 6715.

676
 SPECIAL PROVISIONS
ARTS. 273-274

of the total membership of the labor organization concerned and to examine

their books of accounts and other records to determine compliance or non-
compliance with the law and to prosecute any violations of the law and the
union constitution and by-laws; Provided, That such inquiry or examination
shall not be conducted during the sixty (60)-day freedom period nor within
the thirty (30) days immediately preceding the date of election of union
officials.
COMMENTS
1. VISITORIAL-ENFORCEMENT POWER
Visitorial power of the Secretary of Labor and Employment (or his duly
authorized representative) is the subject also of Article 128. But the visitorial
power under that article covers a broader subject than that under this Article
274. Article 128 pertains to administrative enforcement of Labor Code provisions
and all labor laws and wage orders in employer establishments. This Article 274,
on the other hand, speaks of enforcement of law or regulations relating only to
financial activities and records of labor organizations.
T h e inspection under Article 128 may be d o n e at the Department's own
initiative, whereas that under Article 274 needs a sworn complaint filed and
supported by at least 20 percent of the organization's membership. In this respect
Article 274 also differs from Article 241 which requires 30 percent of the union
members to support a report of violation of members' rights.
W h y does Article 241 require 30% while Article 274 needs only 20%?
Article 241 contemplates an action seeking cancellation of union registration
or expulsion of union officers; Article 274 does not.
But may a violation of Article 274 fall also under Article 241? That is easily
possible, and in that case cancellation of registration or expulsion of officers
may be sought, provided that the required 30 percent support to the complaint
is mustered, and depending, of course, on evidence presented.
Nonetheless, the intriguing question remains: Why does the Department
have to wait for complaints before it inspects and enforces compliance with
regulations in the sensitive area of union finances? T h e all-too-common intra-
union discords over money matters can better be avoided with an active, not a
passive, use of D O L E ' s visitorial power. In fact, transparency in union's financial
activities and records will help brighten the horizon for labor unions.

2. U N D E R D . O . N O . 40-03
A request for examination of books of accounts of independent labor
unions, chartered locals and workers associations pursuant to Article 274 shall
be filed with the Regional Office that issued its certificate of registration or
certificate of creation of chartered local.
A request for examination of books of accounts of federations or national
unions and trade union centers pursuant to Article 274 shall be filed with the

677
 LABOR RELATIONS
ARTS. 273-274

Bureau. Such request or complaints, in the absence of allegations pertaining to

a violation of Article 241, shall not be treated as an intra-union dispute and the
appointment of an Audit Examiner by the Regional or Bureau Director shall
not be appealable.
T h e complaint or petition for audit or examination of funds and b o o k of
accounts shall prescribe within three ( 3 ) years from the date of submission of
the annual financial report to the Department or from the date the same should
have been submitted as required by law, whichever comes earlier.
A decision granting the conduct of audit shall include the appointment of
the Audit Examiner and a directive upon h i m / h e r to submit h i s / h e r report and
recommendations within ten (10) days from termination of audit. T h e decision
granting the conduct of audit is interlocutory and shall not be appealable.
T h e decision denying or dismissing the complaint or petition for audit may be
appealed within ten (10) days from receipt thereof pursuant to the provisions
prescribed in Rule XI of D . O . N o . 40-03.
T h e Audit Examiner shall conduct an inventory of all physical assets
acquired by the labor organization, if any, and on the basis of h i s / h e r findings
prepare his/her audited financial report or statement reflecting the true and
correct financial accounts and balances of the labor organization with relevant
annexes attached.
T h e Audit Examiner shall have sixty (60) days from the date of first pre-audit
conference within which to c o m p l e t e the conduct of audit, unless the volume
of financial records, the p e r i o d covered by the audit and other circumstances
warrant the extension thereof. In such a case, the A u d i t Examiner shall notify
the Med-Arbiter or the Bureau Director, as the case may be, of such fact at least
ten (10) days before the expiration of the sixty ( 6 0 ) day period.
T h e Audit Examiner shall make a report of h i s / h e r findings to the parties
involved and the same shall include his findings and recommendations.
A copy of the audit report shall be forwarded by the A u d i t Examiner to
the Med-Arbiter or the Bureau Director, as the case may be, within ten (10) days
from termination of the audit, together with the entire records of the case and
all documents relative to the conduct of the audit.
T h e Med-Arbiter or the Bureau Director shall render a decision within
twenty (20) days from receipt of the audit report. A l l issues raised by the parties
during the conduct of the audit shall be resolved by the Med-Arbiter. T h e decision
shall be released in the same manner prescribed in Section 15, Rule XI of D . O .
N o . 40-03.
W h e n warranted, the Med-Arbiter or Bureau Director shall o r d e r the
restitution of union funds by the responsible officer(s) in the same decision.
Appeal from the decision of the Med-Arbiter denying the conduct of audit
and from the results of the audit may be filed by any of the parties with the Bureau.

678
 SPECIAL PROVISIONS ART. 275

Decisions rendered by the Bureau after the conduct of audit in the exercise of its
original jurisdiction may be appealed to the Office of the Secretary. Both shall
1
be resolved in accordance with the provisions of Section 16, Rule X I .
No complaint for inquiry or examination of the financial and book of
accounts as well as other records of any legitimate labor organization shall be
entertained during the sixty (60) day freedom period or within thirty (30) days
immediately preceding the date of election of union officers. A n y complaint or
petition so filed shall be dismissed.
2
ART. 275. TRIPARTISM AND TRIPARTITE CONFERENCES
(a) Tripartism in l a b o r relations is hereby declared a State policy.
Towards this end, workers and employers shall as far as practicable, be
represented in decision and policy-making bodies of the government.
(b) T h e Secretary of L a b o r and Employment or his duly authorized
representatives may f r o m time to time call a national, regional, or industrial
tripartite c o n f e r e n c e o f representatives o f g o v e r n m e n t , w o r k e r s and
employers f o r the consideration a n d a d o p t i o n of voluntary codes of
principles designed to promote industrial peace based on social justice or
to align labor movement relations with established priorities in economic
and social development. In calling such conference, the Secretary of L a b o r
and Employment may consult with accredited representatives of workers
and employers.
COMMENTS
TRIPARTISM
W h e n first promulgated in 1974 as P.D. N o . 442, the Labor C o d e contained
no provision on tripartism as a national policy, although it provided for the
calling of tripartite conferences ( A r t i c l e 265) by the Secretary of Labor. In
1975, amendatory D e c r e e N o . 850 categorically adopted tripartism as a state
policy. T h e present Article 275 reflects a slight a m e n d m e n t made in 1989 by
R.A. N o . 6715.
Tripartism, as here contemplated, is representation of the three sectors
— the public or the government, the employers, and the workers — in policy-
making bodies of the government. Such kind of representation in the policy-
making bodies of private enterprises is not ordained, not even by the Philippine
Constitution. What is provided for, for the private sector, is workers' participation
in policy and decision-making processes directly affecting their rights, benefits,
3
and welfare. But such participatory right does not mean representation or

'D.O. N o . 40-03.
2
Added by Sec. 32, R.A. 6715.
s
See Articles 211 and 255, Labor Code.

679
 LABOR RELATIONS
ARTS. 276-277

membership in the corporate board. This line of interpretation is borne out by

1
deliberations in the 1986 Constitutional Commission.
Tripartism is observed in numerous g o v e r n m e n t agencies or
instrumentalities, among them the National Labor Relations Commission, the
National Wages and Productivity Commission, the Employees Compensation
Commission, the P O E A Governing Board, the Philippine Health Insurance
Corporation, the Social Security Commission, the GSIS Board of Trustees, and
so forth.
Although legislated in the Philippines only in 1975, tripartism is not
new. T h e International Labor Organization ( I L O ) , founded in 1919 to adopt
conventions and recommendations intended to improve workers' conditions
everywhere, is tripartite. Its various deliberative bodies are c o m p o s e d not only
of government representatives but also of representatives of employers' and
2
workers' organizations.'

ART. 276. GOVERNMENT EMPLOYEES* see art. 244

T h e terms and conditions of employment of all government employees,
including employees of government-owned and controlled corporations, shall
be governed by the Civil Service Law, rules and regulations. Their salaries
shall be standardized by the National Assembly as p r o v i d e d f o r in the N e w
Constitution. However, there shall be no reduction of existing wages, benefits
and other terms and conditions of employment being enjoyed by them at
the time of the adoption of this C o d e .

ART. 277. MISCELLANEOUS PROVISIONS

(a) All unions are authorized to collect reasonable m e m b e r s h i p
fees, union dues, assessments and fines and other contributions f o r labor
education and research, mutual death and hospitalization benefits, welfare
fund, strike fund and credit and cooperative undertakings.
(b) Subject to the constitutional right of w o r k e r s to security of
tenure and their right to be protected against dismissal except for a just
and authorized cause and without prejudice to the requirement of notice
under Article 283 of this C o d e , the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a statement
of the causes for termination and shall afford the latter ample opportunity
to be heard and to defend himself with the assistance of his representative if
he so desires in accordance with company rules and regulations promulgated

'See J.G. Bernas, S.J., The Intent of the 1986 Constitution Writers, [1995, p. 920];
see also annotations to Articles 211 and 255 in this volume.
^Valticos and von Potobsky, International Labour Law [Kluwer Law and Taxation
Publishers, 1995], p. 34.
'Paragraphs (a), ( b ) , ( c ) , ( f ) , (h) and ( i ) are as amended by Sec. 33, R.A. 6715.

680
 SPECIAL PROVISIONS
ART. 277

pursuant to guidelines set by the Department of L a b o r and Employment. Any

decision taken by the employer shall be without prejudice to the right of the
workers to contest the validity or legality of his dismissal by filing a complaint
with the regional branch of the National L a b o r Relations Commission. T h e
burden of proving that the termination was for a valid or authorized cause
shall rest on the employer.
T h e Secretary of the Department of L a b o r and Employment may
suspend the effects of the termination pending resolution of the dispute in
the event of a prima facie finding by the appropriate official of the Department
of L a b o r and Employment b e f o r e w h o m such dispute is pending that the
termination may cause a serious labor dispute or is in implementation of a
mass layoff.
( c ) Any employee, whether employed for a definite period or not,
shall, beginning on his first day of service, be considered an employee for
purposes of membership in any labor union.
( d ) No docket fee shall be assessed in labor standards disputes.
In all other disputes, docket fees may be assessed against the filing party,
provided that in bargaining deadlock such fees shall be shared equally by
the negotiating parties.
(e) T h e Minister of L a b o r and Employment and the Minister of the
Budget shall cause to be created or reclassified in accordance with law such
positions as may be necessary to carry out the objectives of this C o d e and
cause the upgrading of the salaries of the personnel involved in the L a b o r
Relations System of the Ministry. Funds needed for this purpose shall be
provided out of the Special Activities Fund appropriated by Batas Pambansa
Big. 80 and f r o m annual appropriations thereafter.
(f) A special Voluntary Arbitration Fund is hereby established in the
B o a r d to subsidize the cost of voluntary arbitration in cases involving the
interpretation and implementation of the Collective Bargaining Agreement,
including the Arbitrators fees, and for such other related purposes to promote
and develop voluntary arbitration. T h e B o a r d shall administer the Special
Voluntary Arbitration Fund in accordance with the guidelines it may adopt
upon the recommendation of the Council which guidelines shall be subject to
the approval of the Secretary of L a b o r and Employment. Continuing funds
needed for this purpose in the initial yearly amount of fifteen million pesos
(PI5,000,000.00) shall be provided in the 1989 annual general appropriation
acts.
T h e amount of subsidy in appropriate cases shall be determined by
the B o a r d in accordance with established guidelines issued by it upon the
recommendation of the Council.

681
 LABOR RELATIONS
ART. 277

T h e Fund shall also be utilized f o r the operation of the Council

the training and education of Voluntary Arbitrators, and the Voluntary
Arbitration Program.
(g) T h e Ministry shall help promote and gradually develop, with
the agreement of labor organizations and employers, labor-management
cooperation programs at appropriate levels of the enterprise based on
shared responsibility and mutual respect in o r d e r to ensure industrial peace
and improvement in productivity, working conditions and the quality of
working life.
(h) In establishments where no legitimate labor organization exists,
labor-management committees may be f o r m e d voluntarily by workers and
employers for the purpose of promoting industrial peace. T h e Department
of L a b o r and Employment shall endeavor to enlighten and educate the
workers and employers on their rights a n d responsibilities through labor
education with emphasis on the policy thrusts of this C o d e .
(i) To ensure speedy labor justice, the periods provided in this C o d e
within which decisions or resolutions of l a b o r relations cases or matters
should be rendered shall be mandatory. For this p u r p o s e , a case or matter
shall be d e e m e d submitted f o r decision or resolution u p o n the filing of the
last pleading or m e m o r a n d u m required by the rules of the Commission
or by the Commission itself, or the L a b o r Arbiter, or the Director of the
Bureau of L a b o r Relations or Med-Arbiter, or the Regional Director.
U p o n expiration of the corresponding p e r i o d , a certification stating
why a decision or resolution has not b e e n r e n d e r e d within the said p e r i o d
shall be issued forthwith by the Chairman of the Commission, the Executive
L a b o r Arbiter, or the Director of the B u r e a u of L a b o r Relations or M e d -
Arbiter, or the Regional Director, as the case may b e , and a copy thereof
served u p o n the parties.
Despite the expiration of the applicable mandatory p e r i o d , the
aforesaid officials shall, without prejudice to any liability which may have
been incurred as a consequence thereof, see to it that the case or matter
shall be decided or resolved without any further delay.

682
 SPECIAL PROVISIONS

LABOR-MANAGEMENT COUNCIL:
T H E N O N A D V E R S A R I A L , PARTICIPATIVE A P P R O A C H

T h e r e is hardly any question that strikes and any form of work

stoppages are counter-productive and therefore must be avoided or
controlled. Strikes are not the way to progress. This means that the
authorities should not relax the regulations on the declaration and
conduct of strikes but should facilitate the organization of workers.
T h e r e is n e e d to p r o m o t e a kind or method of organization
through which the workers' voice may be heard without triggering a
repulsive reaction from the employer. This institutional arrangement
is envisioned in the Philippine L a b o r C o d e in Article 277 which
provides: "In establishments where no organization exists, labor-
management committees may be f o r m e d voluntarily by workers and
employers for the purpose of promoting industrial peace."
No matter how called, an employee-management committee
o r council ( L M C ) should b e nonadversarial, consultative and
consensual forum where designated representatives of employees and
employer may regularly dialogue on matters affecting employment
and other matters of mutual interest. It should also be a mechanism
for developing labor-management cooperation "to ensure industrial
peace and i m p r o v e m e n t in productivity, working conditions and the
quality of working life."
In other words, the n e e d of the hour is not to clobber labor
or to ban strikes but to innovate the structures that can effectively
check the causes of strikes in keeping with Filipino culture.
Properly propagated, nurtured, and developed, L M C s might
very well be an alternative to confrontation — the nonadversarial
system appropriate to our culture and circumstances, the mechanism
through which the workers may be heard regularly, not sporadically,
as a partner, not an adversary.

C . A . A Z U C E N A , JR.
Philippine Law Gazette,
Jan.-Feb., 1986

683
 LABOR RELATIONS

PROTECTING LABOR IN THE GLOBAL ECONOMY

While international trade has resulted in great affluence for

OECD member countries, the ongoing liberalization of trade does not
go along with increases in prosperity everywhere. In many emerging
market economies, working conditions, wages, and environmental
standards have deteriorated particularly in the plants producing for
export. Every year, the International Confederation of Free Trade
Unions ( I C F T U ) documents widespread abuses of workers' rights.
While only about 10 percent of the goods traded globally are produced
in the context of such violations, according to the I C F T U the risk of
union organizers being harassed, arrested, or killed has increased in
recent years (http://www.icftu.org/english/turights/etuindex.html).
Neither the IMF-prescribed reliance on export-led growth nor
the wave of democratization after the end of the Cold War has changed
the situation in developing countries for the better. In general, the
relative power of labor and capital has shifted at the expense of
the former. Several instruments are under discussion in terms of
remedying this situation.
Recently, the International Labour Organization's reliance
on code-writing and moral suasion has attracted renewed interest.
T h e I L O ' s tripartite system has produced more than 180 conventions
on labor matters, ranging from core labor rights like freedom of
association and the right to organize, to rather technical issues. T h e
problem with the I L O ' s conventions - and very likely the reason why
many interested parties have "rediscovered" the I L O - is not only
that ratification is voluntary but that compliance is essentially also
voluntary since the I L O has no enforcement mechanism to speak of.
T h e court of public opinion is called upon through cautiously worded
I L O reports on violations of individual countries.

1
C H R I S T O P H SCHERRER
2
T H O M A S GREVEN
Global Rules for Trade,
2001 ed., p. 15

'Professor of Globalization and Politics at the University of Kassel.

2
Assistant Professor of Political Science at the John F. Kennedy Institute,
Free University Berlin.

684
 BOOK SIX
POST-EMPLOYMENT
1
Title I
TERMINATION OF EMPLOYMENT
[Part 1. INTRODUCTION: EMPLOYEE'S
SECURITY OF TENURE]
ART. 278. COVERAGE
The provisions of this Title shall apply to all establishments or
undertakings, whether for profit or not.
2
ART. 279. SECURITY OF TENURE
In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.
C O M M E N T S A N D CASES
1. C O N S T I T U T I O N A L G U A R A N T Y OF T E N U R E
T h e policy of the state is to assure the right of workers to "security of
3 4
tenure." T h e guaranty is an act of social justice.

'To facilitate discussion this Title is here divided into seven parts:
Part 1. Introduction: Employee's Security of Tenure
Part 2. Kinds of Employment
Part 3. Management Rights and the Just Causes of Termination
Part 4. Authorized Causes of Termination
Part 5. Procedure to Terminate Employment
Part 6. Consequences of Termination
Part 7. Termination by Employees and Suspension of Operation
2
As amended by Sec. 34, R.A. 6715.
3
Article XIII, Sec. 3,1987 Constitution; Section 9, Article II, 1973 Constitution.
4
Rance, et al. vs. National Labor Relations Commission, G.R. N o . 68147, June
30, 1988.
691
 POST-EMPLOYMENT
ARTS. 278-279

T h e great mass of the population is almost wholly dependent on their

employment for their livelihood. T h e alternative of returning or turning to
farming as a secondary occupation is no longer feasible. W h e n a worker losses
his j o b , his family faces deprivation, if not starvation. H e n c e , the demand for j o b
security. Responding to popular demand, the Constitutional Convention [1973]
has expressly provided for State recognition of the right of workers to security
1
of tenure.
Both the Constitution (Section 3, Article X I I I ) and the Labor Code (Article
279) enunciate this right as available to an employee. In a host of cases, the Court
has upheld the employee's right to security of tenure in the face of oppressive
management behavior and management prerogative. Security of tenure is a right
2
which may not be denied on mere speculation of any unclear and nebulous basis.
W h e n a person has no property, his j o b may possibly be his only possession
or means of livelihood. T h e r e f o r e , he should be protected against any arbitrary
deprivation of his j o b . Article 280 [ n o w 279] of the L a b o r C o d e has construed
security of tenure as meaning that "the employer shall not terminate the services
3
of an employee except for a just cause or when authorized by" the C o d e .

1.1 Non-regular Employees

Article 279 itself is defective because it recognizes security of tenure only "in
cases of regular employment." Such specification is not found in the Constitution
which entitles "all workers" to the right to security of tenure. Moreover, the C o d e
itself and the court rulings do not limit security of tenure to regular employees.
For instance, terminating a probationary e m p l o y e e needs a valid reason and
proper procedure. So also a project or seasonal employee enjoys security of tenure
even only for the duration of the limited p e r i o d of their employment. Clearly,
the Court said: "As probationary and contractual employees, private respondents
[complainant employees] enjoyed security of tenure, but only to a limited extent
— i.e., they remained secure in their e m p l o y m e n t during the p e r i o d of time
4
their respective contracts of e m p l o y m e n t remained in effect." I n d e e d , security

'Karen V. Jimeno, Labor Laws as Secundum Rationem and Secundum Caritatem:

Applying Social Justice without Causing an Injustice in Philippine Law Journal, Vol. 81,
May 2007, p. 742.
2
Escareal vs. National Labor Relations Commission, G.R. N o . 99359, September
2, 1992.
3
Rance, et al. vs. National Labor Relations Commission, G.R. N o . 68147, June
30,1988; Offshore Industries, Inc. vs. National Labor Relations Commission, G.R. N o .
83108, August 29,1989; Century Textile Mills, Inc., et al. vs. National Labor Relations
Commission, et al., G.R. N o . 77859, May 25, 1988.
4
Labajo vs. San Andres High School of Maramag, Inc. vs. Alejandro, et al.,
N o . L-80383, September 26, 1988; See also the cases of Lao Construction and Vinta
Maritime, infra.

692
 TERMINATION OF EMPLOYMENT ARTS. 278-279
[Part 1. Introduction: Employee's
Security of Tenure]
of tenure — the right not to be removed from one's j o b without valid cause and
valid procedure — is so fundamental it extends to regular (permanent) as well
1
as nonregular (temporary) employment.
In short, there is security of tenure for a limited period and security of
tenure for an unlimited period.

2. T E N U R E OF M A N A G E R I A L P E R S O N N E L
Generally, e m p l o y e r s are a l l o w e d a w i d e r latitude of discretion in
terminating the e m p l o y m e n t of managerial personnel or those who, while not
of similar rank, p e r f o r m functions which by their nature require the employer's
full trust and confidence. This should be distinguished from the case of ordinary
rank-and-file employees, whose termination on the basis of same grounds require
a higher p r o o f of involvement in the events in question. M e r e uncorroborated
2
assertions and accusations by the employer will not suffice.
But while a managerial e m p l o y e e may be dismissed merely on the ground
of loss of confidence, the matter of determining whether the cause for dismissing
an e m p l o y e e is justified on g r o u n d of loss of confidence, cannot be left entirely
3
to the employer.

2.1 Even Managerial Employees A r e entitled to Security of Tenure

W h i l e an employer has its own interests to protect, and pursuant thereto,
it may terminate a managerial e m p l o y e e for a just cause, such prerogative to
dismiss or lay o f f an e m p l o y e e must be exercised without abuse of discretion. Its
implementation should be t e m p e r e d with compassion and understanding. T h e
employer should bear in m i n d that in the execution of said prerogative, what is
at stake is not only the employee's position but his livelihood. T h e fact that one
is a managerial e m p l o y e e does not by itself exclude him from the protection of
4
the constitutional guarantee of security of tenure.
A dean of a c o l l e g e is a position at the managerial level. Managerial
personnel and other employees occupying positions of trust and confidence are
entitled to security of tenure, fair standards of employment and the protection
5
of labor laws.
An in-house legal counsel may be an e m p l o y e e — in fact, a regular
employee. He is entitled to security of tenure. T h e relationship is that of employer-

'See Kiamco vs. N L R C , G.R. N o . 129449, June 29, 1999.

2
Coca-Cola Bottlers Philippines, Incorporated vs. National Labor Relations
Commission, et al, G.R. N o . 82580; Vega vs. National Labor Relations Commission,
et al, G.R. N o . 84075, April 25, 1989.
3
De Leon vs. National Labor Relations Commission, 100 SCRA 691 [1980].
4
Maglutac vs. N L R C , Commart [Phil.] Inc., G.R. N o . 78345, September 21,
1990.
5
Cruz vs. Medina, G.R. N o . 73053, September 15, 1989.
693
 POST-EMPLOYMENT
ARTS. 278-279

employee, and not of client-lawyer. To terminate the relationship the applicable

1
law is the Labor C o d e , not the Rules of Court.
In the earlier case of Hydro Resources Contractors Corp. vs. Pagalilauan, the
Court ruled:
"A lawyer, like any other professional, may very well be an employee
of a private corporation or even of the government. It is not unusual for a
big corporation to hire a staff of lawyers as its in-house counsel, pay them
regular salaries, rank them in its table of organization, and otherwise treat
them like its other officers and employees. At the same time, it may also
contract with a law firm to act as outside counsel on a retainer basis. T h e
two classes of lawyers often work closely together but o n e group is made
up of employees while the other is not. A similar arrangement may exist
as to doctors, nurses, dentists, public relations practitioners, and other
professionals."
3. R I G H T T O S E C U R I T Y O F T E N U R E C A N N O T B E C O N T R A C T E D AWAY
T h e right to security of tenure cannot be blotted out by an employment
contract.
In trying to justify the employee's dismissal, the employer did not cite any
of the just or authorized causes. Instead, it merely insisted that the dismissal
was authorized in the e m p l o y m e n t contract that the e m p l o y e e had voluntarily
signed. T h r o u g h Justice (later C h i e f Justice) Panganiban, the Court responded:
Truly, the contracting parties may establish such stipulations, clauses,
terms and conditions as they want, and their agreement would have the
force of law between them. However, petitioner [ e m p l o y e r ] overlooks the
qualification that those terms and conditions agreed upon must not be
contrary to law, morals, customs, public policy or public order. As explained
earlier, the employment contract between [ e m p l o y e r ] and [ e m p l o y e e ] is
governed by Philippine labor laws. H e n c e , the stipulations, clauses, and
terms and conditions of the contract must not contravene our labor law
provisions. (Philippine National Bank vs. Cabansag, G.R. No. 157010, June 21,
2005.)
Moreover, a contract of e m p l o y m e n t is imbued with public interest.
T h e Court has time and time again r e m i n d e d parties that they "are not at
liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other." Also,
while a contract is the law between the parties, the provisions of positive
law that regulate such contracts are d e e m e d included and shall limit and
govern the relations between the parties. (Ibid.)

'See Equitable Banking Corp., et al. vs. N L R C And R.L. Sadac, G.R. N o . 102467,
June 13, 1997.
2
G.R. N o . L-62909, April 18, 1989.

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 Title I
TERMINATION OF EMPLOYMENT (cont'd)
[Part 2. KINDS OF EMPLOYMENT]

O v e r v i e w / K e y Questions Box 21
1. What are the kinds of e m p l o y m e n t and which ones are
entitled to the right to security of tenure?
2. W h a t is project employment? W h e n does a project
e m p l o y e e b e c o m e regular?
3. What are the kinds of fixed-period employment and
under what circumstances are they considered valid?
4. W h o is c o n s i d e r e d "regular seasonal" and "regular
casual" employee?
5. W h a t are the rights of a probationary employee?
6. May the e m p l o y e r contract out a regular job?

A R T . 280. REGULAR AND CASUAL EMPLOYMENT

T h e provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall
be d e e m e d to be regular where the employee has been engaged to p e r f o r m
activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or where the
work or services to be p e r f o r m e d is seasonal in nature and the employment
is for the duration of the season.
An employment shall be d e e m e d to be casual if it is not covered by
the preceding paragraph. Provided, That, any employee who has rendered
at least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such activity exists.
C O M M E N T S A N D CASES
1. ESSENTIALITY OF EMPLOYER-EMPLOYEE R E L A T I O N S H I P
It is pointless to discuss security of tenure if the parties involved are not
employer-employee to each other. T h e whole of Book VI of the Code assumes the

695
existence of an employment relationship. What makes a person an employer and
another an employee has been dwelt upon in Book I I I . T h e explanations there
of employment indicators, of valid and invalid contracting, and of employment
obligations are here equally pertinent.

1.1 Article 280 Presupposes Employment Relationship

This A r t i c l e 280 applies w h e r e the existence of e m p l o y e r - e m p l o y e e
relationship is not the issue in dispute. If the issue is whether or not the claimant is
an employee, the answer should be searched elsewhere but not in this Article 280.
T h e article limits itself to differentiating four kinds of employment arrangement:
regular, project, seasonal and casual. T h e article presupposes that the relationship
of being employer and employee exists between the parties.

Singer Sewing Machine Co. vs. Drilon, et al., G . R . N o . 91307, January 24,
1991 —
The nature of the relationship between a company and its collecting agents
depends on the circumstances of each particular relationship. N o t all collecting
agents are employees and neither are all collecting agents independent contractors:
The collectors could fall under either category depending on the facts of each case.
The respondents' contention that the union members are employees of the
Company is based on selected provisions of the Agreement but ignores the following
circumstances which respondents never refuted either in the trial proceedings before
the labor officials nor in its pleading filed before this Court:
1. The collection agents are not required to observe office hours or report
to Singer's office every day except, naturally and necessarily, for the purpose of
remitting their collections.
2. The collection agents do not have to devote their time exclusively for
Singer. There is no prohibition on the part of the collection agents from working
elsewhere. N o r are these agents required to account for their time and submit a
record of their activity.
3. The manner and method of effecting collections are left solely to the
discretion of the collection agents without any interference on the part of Singer.
4. The collection agents shoulder their transportation expenses incurred
in the collections of the accounts assigned to them.
5. The collection agents are paid strictly on commission basis. T h e amounts
paid to them are based solely on the amounts of collection each of them makes. They
do not receive any commission if they do not effect any collection even if they put a
lot of effort in collecting. They are paid commission on the basis of actual collections.
6. The commissions earned by the collection agents are directly deducted
by them from the amount of collections they are able to effect. T h e net amount is
what is then remitted to Singer.
The Court finds the contention of the respondents that the union members are
employees under Article 280 of the Labor Code to have no basis. T h e definition that

696
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

regular employees are those who perform activities which are desirable and necessary
for the business of the employer is not determinative in this case. Any agreement
may provide that one party shall render services for and in behalf of another for
a consideration (no matter how necessary for the latter's business) even without
being hired as an employee. This is precisely true in the case of an independent
contractorship as well as in an agency agreement.
T h e Court agrees with the petitioner's argument that Article 280 is not the
yardstick for determining the existence of an employment relationship because it
merely distinguishes between two kinds of employees, i.e., regular employees and
casual employees, for purposes of determining the right of an employee to certain
benefits, to join or form a union, or to security of tenure. Article 280 does not apply
where the existence of an employment relationship is in dispute.

T h e presence of a physician w h o will give medical attention to employees

as required by Article 157 is, of course, necessary or desirable. But that fact does
not decide whether the physician is an e m p l o y e e or not. "We [the Supreme
C o u r t ] take it that any a g r e e m e n t may provide that o n e party shall render
services for and in behalf of another, no matter how necessary for the latter's
business, even without being hired as an employee, This set-up is precisely true in
the case of an independent contractorship as well as in an agency agreement.
Indeed, Article 280... is not the yardstick for determining the existence of an
employment relationship. T h e provision merely distinguishes between two kinds
of employees, i.e., regular and casual. It does not apply where the very existence
of an employment is in dispute." Thus, a company physician "on retained" basis,
1
under Article 157, is not necessarily an employee.
To summarize, the question of existence of employer-employee relationship
is resolved principally by applying the four-fold test which Court rulings explain
(see in comments to Article 8 2 ) . It is not resolved by applying Article 106 or
Article 280. Article 106 is relevant in resolving whether the employer is solidarily
liable with the contractor for unpaid wages; Article 280 is relevant in determining
the employment status of an employee. U n d e r both articles the existence of
2
employer-employee relationship is not in question.

2. REGULAR EMPLOYMENT
T h e primary standard to determine a regular employment is the reasonable
connection between the particular activity performed by the employee in relation
to the usual business or trade of the employer. T h e test is whether the former is
3
usually necessary or desirable in the usual business or trade of the employer.

•Philippine Global Communications, Inc. vs. De Vera, G.R. N o . 157214, June

7, 2005; emphasis in the decision itself.
2
Singer Sewing Machine Co. vs. Drilon, et al., G.R. N o . 91307,January 24,1991.
3
De Leon vs. National Labor Relations Commission, G.R. N o . 70705, August
21, 1989.
697
 Policy Instructions N o . 2 of the then Minister of Labor (now Secretary of
Labor and Employment) provides that "Presidential Decree 859 has defined
the concept of regular and casual employment. What determines regularity or
casualness is not the employment contract, written or otherwise, but the nature
of the j o b . If the j o b is usually necessary or desirable to the main business of the
1
employer, then employment is regular, x x x"
T h e basis of regular status of the e m p l o y e e is entirely different from
the basis of computation of the compensation. T h e latter may be based on
time spent on the j o b , on actual output, or some other arrangement. In a
case involving employees paid on piece-rate basis as "repackers" because they
receive a certain amount for every thousand of cheese curls or other products
repacked, the Supreme Court resolved that they are regular employees; in other
words, their bring piece raters does not prevent them from gaining status as
2
employees.
Article 281 [now 280] of the Labor C o d e reinforces the [constitutional]
mandate to protect the interest of labor. Its language manifests the intent to
safeguard the tenurial interest of the worker w h o should not be denied the rights
and benefits due a regular e m p l o y e e through lopsided agreements with the
economically powerful employer. Maneuvers to keep an e m p l o y e e on a casual
3
status for as long as convenient cannot be tolerated.
A "contract of services" under Articles 1642 and 1644 of the Civil C o d e
4
does not necessarily negate the existence of e m p l o y m e n t relationship.
If the work is integral part of the business and the worker does not furnish
an independent business or professional service, the work is presumed to be a
5
regular employment. Considering the provisions of Article 280, there are two
kinds of regular employees: ( 1 ) regular employees by nature of work, and ( 2 )
regular employees by years of service.

2.1 Examples of Regular Employment by Nature of Work

De Leon vs. National Labor Relations Commission, G.R. N o . 70705, August 21,
1989 —
Facts: Moises was employed by La Tondeña (which manufactures wines and
liquors) on December 11, 1981 at the maintenance section of its Engineering

'A.M. Oreta and Co., Inc. vs. National Labor Relations Commission, et al, G.R.
N o . 74004, August 10, 1989.
2
Labor Congress of the Philippines vs. N L R C , et al, G.R. N o . 123938, May 21,
1998.
3
See: De Leon vs. National Labor Relations Commission, G.R. N o . 70705,
August 21, 1989; also; Baguio Country Club Corp. vs. N L R C , et al, G.R. N o . 71664,
February 28, 1992.
4
Paguio vs. N L R C , et al, N o . 147816, May 9, 2003.
5
ABS-CBN vs. Nazareno, G.R. N o . 164156, September 26, 2006.

698
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

Department. His work consisted mainly of painting company building and equipment
and other odd jobs relating to maintenance. He was paid on a daily basis through
petty cash vouchers. After a service of more than one year, Moises requested that
he be included in the payroll of regular workers, instead of being paid through
petty cash vouchers. La Tondeña's response to the request was to dismiss Moises. La
Tondeña claimed that Moises was contracted on a casual basis specifically to paint
a certain company building. T h e Labor Arbiter ordered La Tondeña to reinstate
Moises with backwages. But the N L R C reversed the Labor Arbiter, reasoning out
that "painting the factory building is not a part of La Tondeña's manufacturing
or distilling process of wines."
Ruling: The law demands that the nature and entirety of the activities performed
by the employee be considered. Here, the painting and maintenance work given
Moises manifests a treatment consistent with a maintenance man and not just a
painter, for if his j o b was only to paint a building there would be no basis for giving
him other work assignments in-between painting activities.
It is not tenable to argue that the painting and maintenance work of Moises are
not necessary in La Tondeña's business of manufacturing liquors; otherwise, there
would be no need for the regular maintenance section of the company's engineering
department.
It is of no moment that Moises was told when he was hired that his employment
would only be casual, that he was paid through cash vouchers, and that he did not
comply with regular employment procedure.
What determines whether a certain employment is regular or casual is not
the will and word of the employer, to which the worker often accedes, much less the
procedure of hiring the employee or the manner of paying his salary. It is the nature
of the activities performed in relation to the particular business or trade considering
all circumstances, and in some cases the length of time of its performance and its
continued existence.

2.1a Workers Supplied by Labor-only Contractor Considered Regular

Employees of Contractee
Ecal, et al. vs. National Labor Relations Commission (Third Division), J. Matchuka
and Hi-Line Timber, Inc., G.R. Nos. 92777-78, March 13, 1991 —
Facts: T h e Company (Hi-Line Timber) denies the existence of an employer-
employee relationship between the company and the petitioners [workers], claiming
that they are under the employ of an independent contractor, petitioner Mr. Ecal,
an employee of the company until his resignation on February 4, 1987.
Petitioners [workers] primarily question the finding of the [ N L R C ] that no
employer-employee relationship exists between them and the company. They contend
that Ecal is not an independent contractor but a mere employee of Hi-Line.
T h e finding of the N L R C that Mr. Ecal is no longer an employee of Hi-Line is
amply supported by the evidence on record. His resignation letter dated February
4, 1987 stating "ako po ay magreresign na sa aking trabaho bilang laborer sapagka't nakita

699
 POST-EMPLOYMENT
ART. 280

ko na mas malaki ang kikitain kung mangongontrata na lamang" speaks for itself. This
was unsuccessfully rebutted by petitioners.
Ruling: The Court finds petitioner Mr. Ecal to be a "labor-only" contractor,
a mere supplier of manpower to Hi-Line. Mr. Ecal was only a poor laborer at the
time of his resignation on February 4, 1987. He resigned and became a supplier of
laborers for Hi-Line.
A finding that Mr. Ecal is a "labor-only" contractor is equivalent to a finding that
an employer-employee relationship exists between the company and Ecal including
the latter's "contract workers," herein petitioners, the relationship being such as
provided by the law itself.
Since petitioners perform tasks which are usually necessary or desirable in the
main business of Hi-Line, they should be deemed regular employees of the latter and,
as such, are entitled to all the benefits and rights appurtenant to regular employment

2.1b "Contractual Project" Employee Becoming Regular

Magante vs. National Labor Relations Commission and Constress Philippines, Inc.,
G.R. N o . 74969, May 7, 1990 —
Facts: Petitioner Magante was employed by Constress Philippines, Inc. as a
carpenter from April 17,1980 until his dismissal on March 6,1982. His work involved
the making of molds (forma or siding of cement posts). He was never assigned to
work outside the plant of respondent Company.
Every three months, he was made to fill up and sign an employment contract
relating to a particular phase of work in a specific project. T h e last hiring agreement
was entered into on December 7, 1981.
On March 6,1982, petitioner was told that he could not work anymore because
he was already old, that his contract had already expired and was not renewed.
Petitioner filed a complaint for illegal dismissal. T h e Labor Arbiter rendered
a decision with the following pronouncement:
T h e terms of the contract that complainant is a project worker is not the
determining factor of the status of complainant or any worker but the work
performed by him and the place where he performed his assignment. T h e
contract entered into by respondent and complainant is more of a scheme to
evade its liability or obligation under the law.
On the other hand, on appeal, the N L R C dismissed the complaint, holding
that petitioner was a project employee.
Ruling: T h e decision of the N L R C is reversed and set aside, and the decision
of the Labor Arbiter is affirmed and reinstated. Petitioner has established that since
the very inception of his employment in 1980, he was never deployed from project to
project of private respondent but had been regularly assigned to perform carpentry
work. This goes to show two things: that petitioner was assigned to perform tasks
which are usually necessary or desirable in the usual business or trade of private
respondent; and that said assignments did not end on a project basis, although the

700
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

contrary was made to appear by private respondent through the signing of separate
employment contracts allegedly for different projects.
Although petitioner had only rendered almost two years of service, nevertheless
this should not detract from his status of being a regular employee because as correctly
stated by the Labor Arbiter, the determining factor of the status of complainant-
petitioner or any worker is the nature of the work performed by the latter and the
place where he performed his assignment.

2.1c "Day-to-Day Contractual" Employee Becoming Regular

Baguio County Club Corporation vs. National Labor Relations Commission, et al.,
G.R. N o . 71664, February 28, 1992 —
Facts: J. Calamba was employed on a day-to-day basis in various capacities as
laborer and dishwasher for ten (10) months from October 1, 1979 to July 24, 1980.
From September 1, 1980 to October 1, 1980, Calamba was hired as a gardener and
rehired as such from November 15, 1980 to January 4, 1981 when he was dismissed
by the corporation.
Calamba complained of illegal dismissal.
T h e employer maintained that Calamba was a contractual employee whose
employment was for a fixed and specific period as evidenced by the contracts of
employment, the pertinent portions of which are quoted as follows:
" x x x [ T ] he employment may be terminated at any time without liability
to the Baguio Country Club other than for salary actually earned up to and
including the date of last service.
"His/Her employment shall be on a day-to-day BASIS for a temporary
period x x x subject to termination at any time at the discretion of the Baguio
Country Club Corporation.
Ruling: T h e law on the matter is Article 280 of the Labor Code which defines
regular and casual employment, x x x
T h e petitioner corporation, which is certified by the Ministry of Labor and
Employment as an "entertainment service" establishment, claims that [the employee]
was contracted for a fixed and specific period. However, the records reveal that the
[employee] was repeatedly re-hired to perform tasks ranging from dishwashing and
gardening, aside from performing maintenance work.
Such repeated rehiring and the continuing need for his service are sufficient
evidence of the necessity and indispensability of his service to the petitioner's business
or trade.
Furthermore, [ h e ] performed the said tasks which lasted for more than one
year, until early January 1981 when he was terminated. Certainly, by this fact alone
he is entitled by law to be considered a regular employee.

Another example of a regular j o b is that of "sales route helpers" that [a

softdrink company} hired for five months and thereafter on day-to-day basis. They

701
 POST-EMPLOYMENT
ART. 280

would wait every morning outside the company premises, so that when regular
sales route helpers were absent or additional helpers were needed, they would
be hired and paid a daily wage. T h e y would go with route salesmen on board
delivery trucks and undertook the laborious task of loading and unloading soft
drink products to various delivery points. They, the Court ruled, were doing a
regular j o b .
T h e argument of [the company] that the j o b of the respondents is merely
"postproduction activities" and that it is not indispensable in the manufacture of
its products is not persuasive. If that is the case, then only those w h o are directly
involved in the production of the soft drinks can be considered as regular
employees and even truck sales route helpers are not necessary. T h e nature of
the work performed must be viewed from a perspective of the business or trade
1
in its entirely and not on a confined scope.

2.Id Temporary Employee Becoming Regular

Beta Electric Corporation vs. National Labor Relations Commission, et al., G.R. N o .
86408, February 15, 1990 —
Issue: Petitioner argues mainly that the private respondent's appointment was
temporary and, hence, she may be terminated at will.
Rulings: That she had been hired merely on a "temporary basis, for purposes
of meeting the seasonal or peak demands of the business," and as such, her services
may lawfully be terminated "after the accomplishment of her task" is untenable. She
was to all intents and purposes, and at the very least, a probationary employee, who
became regular upon the expiration of six months.
Under the Labor Code, "an employment may only be said to be "temporary"
where it has been fixed for a specific undertaking" the completion or termination
of which has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and the employment
is for the duration of the season. Quite the contrary, respondent's work, that of
"typist-clerk," is far from being specific or seasonal, but rather, one, according to
the Code: "Where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business." A n d under the Code where one
performs such activities, he is a regular employee, the provisions of written agreement
to the contrary notwithstanding.

2.2 Casual employee; Regular Employee by Year(s) of Service

T h e other type of regular e m p l o y e e is the casual e m p l o y e e w h o , after o n e
year of service, becomes regular. But he is "regular" only for that work activity
for which he was hired. His employment may be on-and-off, but every time the
particular work activity occurs, he is the o n e to be rehired. In this sense he is a

'Magsalin vs. N O W M , G.R. N o . 148492, May 9, 2003.

702
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

"regular casual." A casual may b e c o m e regular even if he is not issued a "regular"

appointment.

Philippine Geothermal, Inc. vs. National Labor Relations Commission, et al, G . R .

N o s . 82643-47, August 30, 1990 —
Facts: petitioner Philippine Geothermal, Inc., a US corporation engaged in
the exploration and development of geothermal energy resources, is the prime
contractor of the National Power Corporation at the latter's operation of the Tiwi,
Albay and the Makiling Banahaw Geothermal Projects.
Private respondents are employees of herein petitioner occupying various
positions ranging from carpenter to Clerk II who had worked with petitioner company
under individual contracts, categorized as contractual employment, for a period
ranging from fifteen days to three months. These contracts were regularly renewed
to the extent that the individual private respondents had rendered service from
three to five years until 1983 and 1984 when petitioner started terminating their
employment by not renewing their individual contracts. Subsequently, petitioner
entered into j o b contracting agreement with an alleged contractor who supplied it
with skilled manpower.
Sometime in July 1983, respondent employees organized a separate labor
union in view of their exclusion from the bargaining unit of the regular rank-and-
file employees. When they filed a petition for certification election the petitioner
allegedly started harassing them and replaced them with so-called contract workers.
They filed a case for illegal lockout and unfair labor practice, and/or illegal dismissal,
with money claim.
T h e main issue is whether or not private respondents may be considered regular
and permanent employees due to their length of service in the company despite the
fact that their employment is on contractual or casual basis.
Rulings: (1) Two kinds of regular employees. — In the recent case of Kimberly
Independent Labor Union vs. Drilon, the Court classified the two kinds of regular
employees as (1) those who are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, and (2) those
who have rendered at least one (1) year of service, whether continuous or broken
with respect to the activity in which they are employed.
(2) Employee's right to security of tenure; casual becoming regular employee. —
Assuming, therefore, that an employee could properly be regarded as a casual (as
distinguished from a regular employee), he becomes entitled to be regarded as a
regular employee of the employer as soon as he completes one year of service. Under
the circumstances, the employer may not terminate the service of a regular employee
except for a just cause or when authorized under the Labor Code. It is not difficult
to see that to uphold the contractual arrangement between the employer and the
employee would in effect be to permit employers to avoid the necessity of hiring
regular or permanent employees indefinitely on a temporary or casual status, thus to
deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely
designed to prevent such result.

703
 POST-EMPLOYMENT
ART. 280

2.2a Casual Employee with Less Than O n e Year of Service does not
become Regular
Capule, et al. vs. National Labor Relations Commission, et al, G.R. N o . 90653,
November 12, 1990 —
Facts: Petitioners were hired to cut cogon grass and weeds at the back of the
factory building used by respondent company. They were not required to work on
fixed schedule and they worked on any day of the week on their own discretion and
convenience. When the services of the petitioners were terminated by the company,
they filed a complaint for illegal dismissal. T h e Labor Arbiter found their dismissal
illegal and required respondent Company to reinstate them. T h e N L R C set aside
the Arbiter's decision and ordered, instead, that they be paid one month's pay each
based on humanitarian considerations.
The issue is whether or not casual or temporary employees may be dismissed
by the employer before the expiration of the one-year period of employment.
The petition is DISMISSED for lack of merit.
Ruling: The usual business or trade of private respondent is the manufacture of
cultured milk. The cutting of the cogon grasses in the premises of its factory is hardly
necessary or desirable in the usual business of the private respondents. Indeed, it is
alien thereto.
Thus, petitioners are casual employees who cannot be considered regular
employees under the aforestated provision of the Labor Code. Nevertheless, they
may be considered regular employees if they have rendered services for at least one
(1) year. When, as in this case, they were dismissed from their employment before
the expiration of the one-year period they cannot lawfully claim that their dismissal
was illegal.

2.2b Salary of Casual Employee Converted to Regular should not be

Reduced
Philippine American Management Association, et al. vs. Court of Industrial Relations,
et al, G.R. N o . 37206, April 15, 1988 —
Upon the increase of the minimum wage to P6.00 in 1965 under Republic Act
N o . 4180 and to P8.00 under Republic Act 6129 in 1970, the parties agreed that the
formula to be adopted in determining the monthly salaries of the workers was to
multiply the daily rate by 30, representing the number of paid working days, including
Sundays and holidays.
There were, however, casual employees receiving more than the statutory
minimum wage at the time who were converted to regular employees but paid monthly
salaries determined under a different formula. In their case, their actual rate was
reduced to the minimum rate and this was then also multiplied by 30 calendar days.
Ruling: These casual employees have been converted to regular and so should
be entitled to be treated as such in every respect. In addition to enjoying the fringe
benefits, they should also be allowed to retain the same rate they were enjoying at the
time of their conversion to regular employees. Otherwise, they would be effectively

704
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

demoted in rank and compensation. Thus, the casual employee formerly receiving
a daily rate of P10.00 should be entitled to have that rate multiplied by 30 calendar
days, for a monthly salary of P300.

2.3 May Regular Jobs be Contracted Out?

Is contracting out valid if it results in terminating the employment of regular
employees? Or if it reduces the work hours of the employees? Or if it reduces or
splits the bargaining unit? To all these questions, the answer is a qualified yes or
no. T h e matter is covered by D . O . N o . 18-02 (Rules Implementing Articles 106
to 109) in its Section 6 which is titled "Prohibitions." It states: "Notwithstanding
Section 5 of these Rules, the following are hereby declared prohibited for being
contrary to law or public policy: ( a ) Contracting out a j o b , work or service when
not d o n e in g o o d faith and not justified by the exigencies of the business and
the same results in the termination of regular employees and reduction of work
hours o r reduction o r splitting o f the bargaining unit, x x x "
T h i s p r o v i s i o n , styled negatively, says the same thing w h e n restated
positively: "Contracting out of a j o b , work, or service that results in termination
of regular employees and reduction of work hours or reduction or splitting of
the bargaining unit is allowed when done in good faith and justified by exigencies
of the business." This restatement is, in fact, the import of court rulings; thus,
the answer to the questions posed above depends on two conditions: g o o d faith
and exigencies of the business. If these conditions are absent, the answer is no;
if present, the answer is yes — even regular j o b s can be contracted out.
It has to be so because survival, expansion, and even dominance are
legitimate aims of business and management is allowed by law and impelled by
business economics to take lawful measures to realize these aspirations. Business
creates jobs. W h e n a business collapses, labor protection collapses with it. Thus, in
the prominent Serrano vs. Isetann case (January 27,2000), where the management
abolished some regular positions and instead hired an independent contractor,
the H i g h Court explained and ruled:
In De Ocampo vs. National Labor Relations Commission, this Court upheld
the termination of e m p l o y m e n t of three mechanics in a transportation
company and their replacement by a company rendering maintenance
and repair services. It held,
"In contracting the services of Gemac Machineries, as part
of the company's cost saving program, the services rendered by
the mechanics became redundant and superfluous, and therefore
properly terminable. T h e company merely exercised its business
j u d g m e n t or management prerogative. A n d in the absence of any
p r o o f that the m a n a g e m e n t abused its discretion or acted in a
malicious or arbitrary manner, the court will not interfere with the
exercise of such prerogative."
705
 POST-EMPLOYMENT
ART. 280

In Asian Alcohol Corporation vs. National Labor Relations Commission,

the Court likewise upheld the termination of employment of water pump
tenders and their replacement by independent contractors. It ruled that
an employer's g o o d faith in implementing a redundancy program is not
necessarily put in doubt by the availment of the services of an independent
contractor to replace the services of the terminated employees to p r o m o t e
economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a company]
cannot be denied the faculty of promoting efficiency and attaining economy by a study
of what units are essential for its operation. To it belongs the ultimate determination
of whether services should, be performed by its personnel or contracted to outside
agencies. [While there] should be mutual consultation, eventually deference is to be
paid to what management decides. " Consequently absent proof that management
acted in a malicious or arbitrary manner the Court will not interfere with the exercise
of judgment by an employer. (Italics supplied)
In the case at bar, we have only the bare assertion of petitioner that
in abolishing the security section, private respondent's real purpose was
to avoid payment of a security checkers of the wage increases provided in
the collective bargaining agreement approved in 1990. Such an assertion
is not sufficient basis for concluding that the termination of petitioner's
e m p l o y m e n t was n o t a bona fide d e c i s i o n of m a n a g e m e n t to obtain
reasonable return from its investment, which is a right guaranteed to
employers under the Constitution.
In the Serrano ruling, efficiency and e c o n o m i c a l operations are therefore
recognized as valid, lawful reasons for contracting out j o b s , even those b e i n g
d o n e by direct-hire regular employees. But, always, the legal bars must n o t be
transgressed so as to protect the workers, namely: ( 1 ) the contractor must be
a legitimate o n e and not a labor-only contractor, and ( 2 ) the contracting out
is not o n e of the arrangements p r o h i b i t e d under Section 6 of D . O . N o . 18-02
nor does it amount to U . L . P . This has b e e n taken up under Articles 106-109.

2.4 Contracting Out A l m o s t A l l Regular Jobs

Wack Wack GoJf&Country Club vs. NLRC, et al., G.R No. 149793, April 15,2005—
How many regular jobs can be contracted out?
Because a large portion of the Wack Wack Golf and Country Club was destroyed
by fire, the club has to suspend the operation of its Food and Beverage department,
about which it notified the D O L E and the affected employees. But contending that
the projected suspension of operations was discriminatory, the employees filed a
notice of strike. In the conciliation proceedings before the N C M B , the management
and the union, assisted by counsel, entered into an agreement which offered a special
separation benefit or retirement package to Wack Wack employees, including those in
the F & B department. T h e package consisted of one and one-half month's salary for

706
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[Part 2. Kinds of Employment]
ART. 280

every year of service regardless of length of service, plus other benefits, such as cash
value of unused leaves, proportionate 13th month pay and other benefits. A number
of employees availed themselves of the package, among them the complainants, one
of whom was the personnel officer. T h e employees who received the package signed
a Release and Quitclaim in favor of Wack Wack; the personnel officer signed such
document on September 30, 1997.
On October 30, 1997 Wack Wack entered into a management contract with
the Business Staffing and Management Inc. under which BSMI would provide the
following services: ( 1 ) golf operations management, ( 2 ) management and mainte-
nance of building facilities, ( 3 ) management of food and beverage operation, (4)
management of materials and procurement functions, and (5) Administrative and
support services for the said projects.
Four other contractors were hired by Wack Wack to handle various operating
functions such as those of golf director, agriculturist, gardeners, locker attendants,
secretaries, janitorial, and finance and accounting.
Sometime in October 1997 the personnel officer and a telephone operator
from Wack Wack Golf Club filed applications for employment with BSMI. They
were hired as project employees under probationary status. But soon thereafter,
BSMI notified them that BSMI had identified their positions as redundant. After
serving required the notices, their services were terminated in February 1998.
They filed complaints of illegal dismissal and damages against Wack Wack and
BSMI.
T h e pertinent questions were: Was there severance of employment relation-
ship with Wack Wack? Was it legal? Was the contracting out of the complainants'
jobs with BSMI legal and valid? T h e labor arbiter dismissed the complaint, ruling
that the employment termination was for a valid and authorized cause. On appeal,
however, the N L R C considered BSMI a labor-only contractor and ordered Wack
Wack to reinstate the complainants with full backwages.
Ruling: It must be recalled that [the employees] availed of the special separation
package offered by the petitioner [Wack Wack]. This special separation package was
thought of and agreed by the two parties (Wack Wack and the Union) after a series of
discussions and negotiations to avert any labor unrest due to the closure of Wack
Wack. T h e applications which were similarly worded read as follows:

TO: W A C K W A C K GOLF & C O U N T R Y CLUB

BOARD O F DIRECTORS A N D M A N A G E M E N T
Based on the information that the club and the employees'
Union have reached an agreement on a special separation benefit
package equivalent to one-and-one-half months salary for every year of
service, regardless of the number of years of service, for employees who
have been affected and may be affected by ongoing as well as forthcom-
ing Club renovation, construction and related activities and reportedly
even for those who may not be affected but wish to avail of an early
retirement under the above package arrangement, / hereby register my de-

707
 POST-EMPLOYMENT
ART. 280

sire to be separated from the Club and receive the benefits under the above stated
package.
Thereafter, the respondents [employees] signed their respective release and
quitclaims after receiving their money benefits.
It cannot be said that the respondents in the case at bar did not fully
comprehend and realize the consequences of their acts. Herein respondents
are not unlettered persons who need special protection. They held responsible
positions in the petitioner-employer, so they presumably understood the contents
of the documents they signed. There is no showing that the execution thereof was
tainted with deceit or coercion. Further, the respondents were paid hefty amounts of
separation pay indicating that their separation from the company was for a valuable
consideration. Where the person making the waiver has done so voluntarily, with
a full understanding thereof, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as being a valid and binding
undertaking. As in contracts, these quitclaims amount to a valid and binding
compromise agreement between the parties which deserve to be respected.
The N L R C posits that BSMI is merely a supplier o f workers or a labor-only
contractor; hence, the petitioner remains to be the principal employer of the
respondents and liable for their reinstatement and payment of backwages.
The ruling of the N L R C is wrong.
There is indubitable evidence showing that BSMI is an independent contractor,
engaged in the management of projects, business operations, functions, jobs and
other kinds of business ventures, and has sufficient capital and resources to undertake
its principal business. It had provided management service to various industrial and
commercial business establishments.
As a legitimate j o b contractor, there can be no doubt as to the existence of an
employer-employee relationship between the contractor and the workers.

2.5 Does Contracting Out Require Union's Conformity?

In o n e case the union was d e m a n d i n g that the management should first
consult the union before it may contract out j o b s that may last for six months or
more. T h e Secretary of Labor granted the demand, but the Court turned it down,
explaining that contracting out is a management right, subject to regulations
already existing.
Proceeding from our ruling in San Miguel Employees Union-PTGWO
vs. Bersamira, 186 SCRA 496 [1990], (where we recognized that contracting
out of work is a proprietary right of the e m p l o y e r in the exercise of
an inherent management prerogative) the issue we see is whether the
Secretary's consultation requirement is reasonable or unduly restrictive
of the company's management prerogative. We note that the Secretary
himself has considered that management should not be hampered in the
operations of its business when he said that:

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 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

' W e feel that the limitations imposed by the union advocates

are too specific and may not be applicable to the situations that the
company and the union may face in the future. To our mind, the
greater risk with this type of limitation is that it will tend to curtail
rather than allow the business growth that the company and the
union must aspire for. H e n c e , we are for the general limitations we
have stated above because they will allow a calibrated response to
specific future situations the company and the union may face."
Additionally, we recognize that contracting out is not unlimited;
rather, it is a prerogative that management enjoys subject to well-defined
legal limitations. (Manila Electric Co. vs. Quisumbing and MEWA, G.R No.
127598, January 27, 1999.)

3. PROJECT E M P L O Y M E N T : M E A N I N G A N D SCOPE
A project e m p l o y e e is o n e whose employment has been fixed for a specific
project or undertaking, the c o m p l e t i o n or termination of which has been
d e t e r m i n e d at the time of the e n g a g e m e n t of the employee or where the work
or service to be p e r f o r m e d is seasonal in nature and the employment is for the
1
duration of the season.
It is evidently important to b e c o m e clear about the meaning and scope of
the term "project" in the present context. T h e "project" for the carrying out of
which "project employees" are hired would ordinarily have some relationship
to the usual business of the employer. Exceptionally, the "project" undertaking
might not have an ordinary or normal relationship to the usual business of the
employer. In this latter case, the determination of the scope and parameters of the
"project" becomes fairly easy. It is unusual (but still conceivable) for a company
to undertake a project which has absolutely no relationship to the usual business
of the company; thus, for instance, it would be an unusual steel-making company
which would undertake the breeding and production of fish or the cultivation of
vegetables. From the viewpoint, however, of the legal characterization problem
here presented to the Court, there should be no difficulty in designating the
employees w h o are retained or hired for the purpose of undertaking fish culture
or the production of vegetables as "project employees," as distinguished from
ordinary or "regular employees," so l o n g as the duration and scope of the
project were determined or specified at the time of engagement of the "project
2
employees."

•Article 280, Labor Code; Sandoval Shipping, Inc. vs. N L R C , 136 SCRA
674; Philippine National Construction Corporation vs. National Labor Relations
Commission, G.R. N o . 85323, June 20, 1989.
2
ALU-TUCP, et al. vs. N L R C and National Steel Corp., G.R. N o . 109902, August
2, 1994.

709
 POST-EMPLOYMENT
ART. 280

Determining whether an employee is a project or a permanent employee

is not always easy even among judicial authorities. In the case of a worker hired
by Alcatel for jobs outsourced by P L D T spanning m o r e than seven years, the
complainant worker contended that he was a permanent, not project employee.
T h e labor arbiter agreed with him, but the N L R C did not; the Court of Appeals
in turn disagreed with the N L R C . T h e Supreme Court, at the end, reversed the
1
Court of Appeals and held that the complainant was a project employee.

3.1 Two Types of Project Activities

In the realm of business and industry, we note that "project" could refer
2
to one or the other of at least two distinguishable types of activities.
Firstly, a project could refer to a particular j o b or undertaking that is within
the regular or usual business of the employer company, but which is distinct and
separate, and identifiable as such, from the other undertakings of the company.
Such j o b or undertaking begins and ends at d e t e r m i n e d or determinable times.
T h e typical example of this first type of project is a particular construction j o b
or project of a construction company. A construction company ordinarily carries
out two or m o r e discrete identifiable construction projects: e.g., a twenty-five-
story hotel in Makati; a residential c o n d o m i n i u m building in Baguio City; and
a domestic air terminal in I l o i l o City. Employees w h o are hired for the carrying
out of one of these separate projects, the scope and duration of which has been
determined and made known to the employees at the time of employment,
are properly treated as "project employees," and their services may be lawfully
terminated at completion of the project.
Secondly, the t e r m "project" c o u l d also r e f e r to a particular j o b or
undertaking that is not within the regular business of the corporation. Such a j o b
or undertaking must also be identifiably separate and distinct from the ordinary
or regular business operations of the employer. T h e j o b or undertaking also
begins and ends at determined or determinable times. T h e case at bar presents
3
what appears to our mind as a typical example of this kind of "project."
W h i c h e v e r type of project e m p l o y m e n t is found in a particular case,
a c o m m o n basic requisite is that the designation of n a m e d e m p l o y e e s as
"project employees" and their assignment to a specific project are effected and
implemented in g o o d faith, and not merely as a means of evading otherwise
4
applicable requirements of labor laws.
T h e services of project employees are coterminous with the project and
may be terminated upon the e n d or completion of that project for which they
were hired. Regular employees, in contrast, are legally entitled to remain in the

•See Alcatel Phil., Inc., et al. vs. R.R. Relos, G.R. N o . 164315, July 3, 2009.
2
ALU-TUCP, et al. vs. N L R C , August 2, 1994.
Ibid.
Ibid.

710
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

service of their employer until their services are terminated by one or another
1
of the recognized modes of termination of service under the Labor Code.

3.2 Principal Test

As is evident from the provisions of Article 280, the principal test for
determining whether particular employees are properly characterized as "project
employees" as distinguished from "regular employees," is whether or not the
"project employees" were assigned to carry out a "specific project or undertaking,"
the duration (and scope) of which were specified at the time the employees were
2
e n g a g e d for that project.
T h e predetermination of the duration or period of a project employment
is important in resolving whether o n e is a project employee or not. On this score,
the term period has b e e n defined to be "a length of existence; duration. A point of
time marking a termination as of a cause or an activity; an end, a limit, a bound;
conclusion; termination. A series of years, months or days in which something
is c o m p l e t e d . A time of definite length or the p e r i o d from o n e fixed date to
3
another fixed date." In this Violeta case the Court (through Justice Regalado)
observes that the e m p l o y e e is clearly hired for a specific project. But the absence
of definite duration of the project led the Court to conclude that the employee
was regular. T h e Court noted that "the records are barren of any definite period
or duration for the expiration of the assigned items of work of petitioners at the
time of their engagement. An examination of said appointments reveal that the
completion or termination of the project for which petitioners were hired was
not d e t e r m i n e d at the start of their employment. T h e r e is no specific mention
of the p e r i o d or duration w h e n the project will be c o m p l e t e d or terminated. In
fact, the lines for " D A T E OF C O V E R A G E " in the appointments (referring to
the particular items of work for which petitioners are e n g a g e d ) are left blank."
M o r e o v e r , the C o u r t reiterates, security of workers in their j o b is a
fundamental objective of Philippine labor laws. This is why the law and the court
decisions incline toward regular instead of nonregular employee status. In fact,
Article 280 manifests a bias for regularity of status. A n y other arrangement is an
unpreferred deviation from that presumption.
T o b e e x e m p t e d from the presumption o f regularity o f employment,
therefore, the agreement between a project employee and his employer must
strictly c o n f o r m with the requirements and conditions provided in Article 280.
It is not enough that an e m p l o y e e is hired for a specific project or phase of work.
T h e r e must also be a determination of or a clear agreement on the completion
or termination of the project at the time the employee is engaged if the objective

•ALU-TUCP, et al. vs. N L R C , August 2, 1994.

Ibid.
*Violeta vs. National Labor Relations Commission, G.R. N o . 119523, October
10, 1997.
711
 POST-EMPLOYMENT
ART. 280

of Article 280 is to be achieved. Since this second requirement was not met
in petitioners' case, they should be considered as regular employees despite
their admissions and declarations that they are project employees made under
1
circumstances unclear to us.
It has been held that the length of service of a project e m p l o y e e is not the
controlling test of employment tenure but whether or not 'the employment has
been fixed for a specific project or undertaking the completion or termination
2
of which has been determined at the time of the engagement of the e m p l o y e e . '
T h e simple fact that the e m p l o y m e n t as project employees has g o n e
beyond one year, does not detract from, or legally dissolve, their status as project
employees. T h e second paragraph of Article 280, providing that an e m p l o y e e
who has served for at least o n e year shall be considered a regular e m p l o y e e ,
relates to casual employees, not to project employees. In the case of Mercado, Sr.
vs. National Labor Relations Commission ( G . R . N o . 9869, September 5, 1991), this
Court ruled that the proviso in the second paragraph of Article 280 relates only
to casual employees and is not applicable to those w h o fall within the definition of
said Article's first paragraph, i.e., project employees or seasonal employees.

3.3 Project Employees in the Construction Industry

Fernandez vs. NLRC and DM. Consunji, Inc., G.R. N o . 106090, February 28,
1994 —
Respondent Consunji presented material documents showing that petitioner
was hired as a project employee with the specific dates of hiring, the duration of
hiring, the dates of his lay-offs, including the lay-off reports and the termination
reports submitted to the then Ministry of Labor and Employment. Such data covered
the period from November 5, 1974 to March 23, 1986.
Inasmuch as the documentary evidence clearly showed gaps of a month or
months between the hiring of petitioner in the numerous projects wherein he was
assigned, the ineluctable conclusion is that petitioner has not continuously worked
with private respondent but only intermittently as he was hired solely for specific
projects. As such, he is governed by Policy Instruction N o . 20, the pertinent portions
of which read as follows.
"Generally, there are two types of employees in the construction industry,
namely 1) Project Employees and 2) Non-project Employees.
"Project employees are those employed in connection with a particular
construction project. Non-project employees are those employed by a construction
company without reference to a particular project.
"Project employees are not entitled to termination pay if they are terminated
as a result of the completion of the project or any phase thereof in which they are

•Violetavs. N L R C , G.R. N o . 119523, October 10, 1997.

2
See Hilario Rada vs. N L R C , G.R. N o . 96078, January 9, 1992 and Sandoval
Shipping, Inc. vs. N L R C , 136 SCRA 674 [1985]. Ibid.

712
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

employed, regardless of the number of projects in which they have been employed
by a particular construction company."

T h e Policy Instruction also requires an employer company to report to the

nearest Public Employment Office the fact of termination of a project employee
as a result of the completion of the project or any phase thereof in which he is
employed. Department O r d e r N o . 19, issued on April 1,1993, superseded D . O .
N o . 20 of 1977. It does not totally dispense with the notice requirement but,
instead, makes provisions therefor and considers it as one of the "indicators"
1
that a worker is a project e m p l o y e e .

3.4 Indicators of Project Employment

Section 2.2 of Department O r d e r N o . 19 states:
"Either o n e or m o r e of the following circumstances, among others,
may be considered as indicators that an employee is a project employee:
( a ) T h e duration of the specific/identified undertaking for which the
worker is e n g a g e d is reasonably determinable; ( b ) Such duration, as well
as the specific w o r k / s e r v i c e to be p e r f o r m e d , is defined in an employment
agreement and is made clear to the e m p l o y e e at the time of hiring; ( c )
T h e w o r k / s e r v i c e p e r f o r m e d by the employee is in connection with the
particular project/undertaking for which he is engaged; ( d ) T h e employee,
while not e m p l o y e d and awaiting engagement, is free to offer his services
to any other employer; ( e ) The termination of his employment in the particular
project/undertaking is reported to the Department of Labor and Employment (DOLE)
Regional Office having jurisdiction over the workplace within 30 days following
the date of his separation from work, using the prescribed form on employees'
terminations/dismissals/suspensions; ( f ) An undertaking in the employment
contract by the employer to pay completion bonus to the project employee
as practiced by most construction companies." (Samson vs. NLRCandAG&P
Co., G.R No. 113166, February 1, 1996.) (Italics supplied)
P e r f o r c e , we a g r e e with the labor arbiter that private respondent's
failure to report the termination of petitioner's services to the nearest Public
Employment Office, after completion of every project or a phase thereof to which
he is assigned, is a clear indication that petitioner was not and is not a project
2
employee.
Private respondent [ e m p l o y e r ] should have filed as many reports of
termination as there were construction projects actually finished if petitioners
were indeed project employees, considering that petitioners were hired and
again rehired for various projects or the phases of work therein. Its failure to

'Samson vs. N L R C and AG&P Co., G.R. N o . 113166, February 1, 1996.

Ibid. Also: Philippine National Construction Corp. vs. N L R C , G.R. N o . 85323,
June 20, 1989.
713
 POST-EMPLOYMENT
ART. 280

submit reports of termination cannot but sufficiently convince us further that

1
petitioners are truly regular employees.

3.5 Work Pool

Members of a work pool from which a construction company draws its
project employees, if considered employee of the construction company while in
the work pool, are non-project employees or employees for an indefinite period.
If they are employed in a particular project, the completion of the project or
any phase thereof will not mean severance of employer-employee relationship.
2
(Policy Instruction N o . 2 0 . )
But in another P N C C case in 1997 the Court clarifies this ruling, regarding
work pool workers. Quoting a prior ruling the Court said: In Raycor Aircontrol
Systems, Inc. vs. National Labor Relations Commission, ( G . R . N o . 114290, September
9,1996) we clarified the status of project employees in a "work p o o l " as recognized
by Policy Instruction N o . 20, thus:
" x x x project e m p l o y e e s may o r may n o t b e m e m b e r s o f a work
p o o l (that is, the e m p l o y e r may or may n o t have f o r m e d a w o r k p o o l at
a l l ) , and in turn, m e m b e r s of a w o r k p o o l c o u l d be either project em-
ployees or regular employees. In the instant case, respondent N L R C did
not indicate how private respondent c a m e to be considered m e m b e r s of
a work p o o l as distinguished f r o m ordinary (non-work p o o l ) employees.
It did not establish that a work p o o l existed in the first place. N e i t h e r
did it make any finding as to w h e t h e r the h e r e i n private respondents
were i n d e e d free to leave anytime and offer their services to other employers,
as vigorously c o n t e n d e d by petitioner, despite the fact that such a de-
termination w o u l d have b e e n critical in d e f i n i n g the precise nature of
private respondent's e m p l o y m e n t . Clearly, the N L R C ' s conclusion o f
regular e m p l o y m e n t has no factual support and is thus unacceptable."
(Italics supplied — C A A )
As clearly explained above, an e m p l o y e e in the work p o o l is not necessarily
3
a regular employee; he may also be a project e m p l o y e e .

3.5a Illustrative Case: Project Employee

Cartagenas vs. Romago Electric Company, Inc., G.R. N o . 82973, September 15,
1989 —
Fact: As an electrical contractor, Romago depends for its business on the
contracts it is able to obtain from real estate developers and builders of buildings.

'Violeta vs. N L R C , G.R. N o . 119523, October 10, 1997.

Philippine National Construction Corporation vs. National Labor Relations
Commission, G.R. N o . 85323, June 20, 1989.
3
Phil. National Construction Corp. vs. N L R C , G.R. N o . 107307, August 11,
5
1997.

714
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

Its work depends on the availability of such contracts or "projects." T h e National

Labor Relations Commission held that complainants were project employees
because their appointments were "coterminous with the phase or item of work
assigned to them in said project." It held further that the fact that the complainants
worked for R o m a g o under different project employment contracts for so many
years could not be made a basis to consider them as regular employees for they
remain project employees regardless of the number of projects in which they
have worked.
Ruling: Since its work depends on availability of such contracts or projects,
necessarily the duration of the employment of its workforce is not permanent but
coterminous with the projects to which they are assigned and from whose payrolls
they are paid. It would be extremely burdensome for their employer who, like them,
depends on the availability of projects, if it would have to carry them as permanent
employees and pay them wages even if there are no projects for them to work on.

3.5b Project Employees N o t entitled to Separation Pay; Exception

Salazar vs. National Labor Relations Commission (2nd Division) and Carlos
Construction, Co., Inc., G.R. N o . 109210, April 17, 1996 —
On the last issue, we rule that petitioner is a project employee and, therefore,
not entitled to separation pay. In the case at bench, it was duly established that private
respondent hired petitioner as project or construction engineer specifically for its
Monte de Piedad building project. Accordingly, as project employee, petitioner's
services are deemed coterminous with the project, that is, petitioner's dismissal
was due to the completion of the construction of the Monte de Piedad building.
Petitioner himself stated that it took him and his assisting laborers until May 15,1991
to complete the "finishing touches" on the said building. Petitioner, thus, has no
legal right to demand separation pay. Policy Instructions N o . 20 entitled "Stabilizing
Employer-Employee Relations in the Construction Industry," explicitly mandates that:
" x x x Project employees are not entitled to termination pay if they are terminated
as a result of the completion of the project or any phase thereof in which they are
employed, regardless of the number of projects in which they have been employed
by a particular construction company." Moreover, the company is not required to
obtain a clearance from the Secretary of Labor in connection with such termination.
What is required of the company is a report to the nearest Public Employment Office
for statistical purposes.

De Ocampo, et al. vs. NLRC, G.R. N o . 81077, June 6, 1990 —

We stress the rule in Cartagenas vs. Romago Electric Co. [see above] that contract
workers are not considered regular employees, their services being needed only when
there are projects to be undertaken. T h e rationale of this rule is that if a project has
already been completed, it would be unjust to require the employer to maintain them
in the payroll while they are doing absolutely nothing except waiting until another
project is begun, if at all. In effect, these stand-by workers would be enjoying the
status of privileged retainers, collecting payment for work not done, to be disbursed

715
 POST-EMPLOYMENT
ART. 280

by the employer from profits not earned. This is not fair by any standard and can
only lead to a coddling of labor at the expense of management.
We believe, however, that this rule is not applicable in the case at bar, and
for good reason. T h e record shows that although the contracts of the project
workers had indeed expired, the project itself was still on-going and so continued
to require the workers' services for its completion. There is no showing that such
services were unsatisfactory to justify their termination. This is not even alleged by
the private respondent [employer]. O n e can therefore only wonder why, in view of
these circumstances, the contract workers were not retained to finish the project
they had begun and were still working on. This had been done in past projects.
This arrangement had consistently been followed before, which accounts for the
long years of service many of the workers had with the Makati Development Cor-
poration.
It is obvious that the real reason for the termination of their services — which,
to repeat, were still needed — was the complaint the project workers had filed and
their participation in the strike against the private respondent. These were the acts
that rendered them persona non grata to the management. Their services were
discontinued by the MDC not because of the expiration of their contracts, which
had not prevented their retention or rehiring before as long as the project they
were working on had not yet been completed. T h e real purpose of the M D C was to
retaliate against the workers, to punish them for their defiance by replacing them
with more tractable employees.

3.6 Non-Project E m p l o y e e ; T h r e e T y p e s
De Jesus vs. Philippine National Construction Corporation, et al., G.R. N o . 89990,
March 20, 1991 —
Facts: The petitioner was a carpenter for the respondent construction company.
In September 1984, while on duty, he vomitted blood and was treated at the company
clinic. He reported back in December 1984, but was no longer accepted.
He filed a complaint for reinstatement with backwages and payment of legal
benefits.
The company, on the other hand, presented the petitioner's "201-file" which
disclosed that he had been hired as Carpenter II on March 31,1984; that among the
terms and conditions of his employment was that he was being "employed only for the
period and specific works stated" in his appointment, and that as a "project worker"
he was subject to the provisions of Policy Instructions N o . 20; that his separation was
due to the completion of the project.
In support of this petition, the petitioner attached thereto, among other things,
certain "personnel action forms" which showed that he was given appointments for
specific projects on June 16, 1974; July 2, 1975; July 1, 1976; May 1, 1977; April 5,
1978; December 1, 1979; July 30,1980; November 20, 1981; March 15, 1982; August
24, 1983; September 30, 1983; December 30, 1983; and May 1, 1984; and that since
January 15, 1978, he had been a member of the CDCP Employees Savings Loan

716
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

Association; and that, as a result, he has become a regular, not a project, employee,
who may be terminated only for a lawful cause.
Ruling: It is clear from the records that the petitioner is, contrary to the assailed
decision, a non-project employee and is, hence, entitled to regular employment
having rendered service for more than ten years. As such, he can not be terminated
unless for just cause.
Without question, the petitioner, a carpenter, performs work "necessary
or desirable" in the construction business, the respondent corporation's field of
activity. T h e fact however that he had been involved in project works will not alter
his status because the law requires a "specific project or undertaking the completion
or termination of which has been determined at the time of the engagement" in
order to make a project employee a true project employee. Based on his employment
contract:
Your herein A p p o i n t m e n t Employment will be coterminous with
the need of Structures [ o f North Luzon Expressway (Stage) I I ] as it will
necessitate personnel in such number and duration contingent upon the
progress accomplishment from time to time. T h e company shall determine
the personnel and the number as the work progresses.
We cannot say that the petitioner's engagement has been predetermined
because the duration of the work is "contingent upon the progress accomplishment"
and secondly, the company, under the contract is free to "determine the personnel
and the number as the work progresses." Clearly, the employment is subject to no
term but rather, a condition, that is, "progress accomplishment." It cannot therefore
be said to be definite that will therefore exempt the respondent company from the
effects of Article 280.
Members of a work pool from which a construction company draws its project
employees, if considered employees of the construction company while in the work
pool, are non-project employees or employees for an indefinite period. If they are
employed in a particular project, the completion or the project or of any phase
thereof will not mean severance of employer-employee relationship.
However, if the workers in the work pool are free to leave any time and offer
their services to other employers then they are project employees employed by a
construction company in a particular project or in a phase thereof.
Generally, there are three (3) types of nonproject employees: first, probationary
employees; second, regular employees; and third, casual employees.
Based therefore on the personnel action forms submitted to this Court, the
petitioner is either a member of a work pool of workers, which Policy Instructions
N o . 20 terms as "nonproject employees," or at the very least, a probationary worker
who, after the period of six months, has achieved a regular status.
As a regular employee, the petitioner could not have been validly terminated
by reason alone of the completion of the project.

717
 POST-EMPLOYMENT
ART. 280

3.7 What Makes a Project Employee Regular

Samson vs. National Labor Relations Commission and Atlantic Gulf and Pacific Co.,
Manila, Inc., G.R. N o . 113166, February 1, 1996 —
It is not disputed that petitioner had been working for private respondent
for approximately twenty-eight (28) years as of the adjudication of his plaint by
respondent NLRC, and that his "project-to-project" employment was renewed several
times. With the successive contracts of employment wherein petitioner continued
to perform virtually the same kind of work, i.e., as rigger, throughout his period of
employment, it is manifest that petitioner's assigned tasks were usually necessary or desirable
in the usual business or trade of private respondent. The repeated re-hiring and continuing
need for his services are sufficient evidence of the necessity and indispensability of such services
to private respondent's business or trade.
Where from the circumstances it is apparent that periods have been imposed to preclude
the acquisition of tenurial security by the employee, they should be struck down as contrary to
public policy, morals, good customs or public order. As observed by the Solicitor General,
the record of this case discloses, as part of petitioner's position paper, a certification
duly issued by private respondent clearly showing that the former's services were
engaged by private respondent on a continuing basis since 1965. T h e certification
indubitably indicates that after a particular project has been accomplished, petitioner
would be re-hired immediately the following day save for a gap of one (1) week from
the last project to the succeeding one. There can, therefore, be no escape from the
conclusion that petitioner is a regular employee of private respondent. (Emphasis
supplied)

Tomas Lao Construction, et al. vs. NLRC, et al., G.R. N o . 116781, September 5,
1997 —
While it may be allowed that in the instant case the workers were initially hired
for specific projects or undertakings of the company and hence can be classified as
project employees, the repeated re-hiring and the continuing need for their services
over a long span of time (the shortest, at seven [7] years) have undeniably made them
regular employees. Thus, we held that where the employment of project employees
is extended long after the supposed project has been finished, the employees are
removed from the scope of project employees and considered regular employees.
While length of time may not be a controlling test for project employment, it
can be a strong factor in determining whether the employee was hired for a specific
undertaking or in fact tasked to perform functions which are vital, necessary and
indispensable to the usual business or trade of the employer. In the case at bar, private
respondents had already gone through the status of project employees. But their
employments became non-coterminous with specific projects when they started to be continuously
re-hired due to the demands of petitioners' business and were re-engaged for many more projects
without interruption.
The denial by petitioners of the existence of a work pool in the company
because their projects were not continuous is amply belied by petitioners themselves
who admit that —

718
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

All the employees of either of the three petitioners were actually assigned to a
particular project to remain in said project until the completion or termination
of that project. However, after the completion of that particular project or
when their services are no longer needed in the project or particular phase
of the project where they were assigned, they were transferred and rehired in
another ongoing project.
A work pool may exist although the workers in the pool do not receive salaries and
are free to seek other employment during temporary breaks in the business, provided
that the worker shall be available where called to report for a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned, x x x
We apply by analogy the case of Industrial-Commercial-Agricultural Workers
Organization vs. CIR which deals with regular seasonal employees. There we held —
That during the temporary layoff the laborers are free to seek other employ-
ment is natural, since the laborers are not being paid, yet must find means
of support. A period during which the Central is forced to suspend or cease
operation for a time x x x should not mean starvation for employees and their families
(emphasis supplied).
Moreover, if private respondents were indeed employed as "project employees,"
petitioners should have submitted a report of termination to the nearest public
employment office every time their employment was terminated due to completion
of each construction project. T h e records show that they did not.
We agree with the N L R C that the execution of the project employment contracts
was "farcical." Obviously, the contracts were a scheme of petitioners to prevent
respondents from being considered as regular employees. It imposed time frames
into an otherwise flexible employment period of private respondents some of whom
were employed as far back as 1969. Clearly, here was an attempt to circumvent labor
laws on tenurial security.
Petitioners submit that since private respondents were only project employees,
they are not entitled to security of tenure. This is incorrect. In Archbuild Masters and
Construction, Inc. vs. NLRC we held —
x x x a project employee hired for a specific task also enjoys security of
tenure. A termination of his employment must be for a lawful cause and must
be done in a manner which affords him the proper notice and hearing x x x x
To allow employers to exercise their prerogative to terminate a project worker's employment
based on gratuitous assertions of project completion would destroy the constitutionally
protected right of labor to security of tenure (emphasis supplied).

3.7a Recapitulation: Circumstances that Make a Project Employee Regular

Maraguinot and Enero vs. NLRC and Viva Films, G.R. N o . 120969, January 22,
1998 —
A project employee or a member of a work pool may acquire the status of a
regular employee when the following concur:

719
 POST-EMPLOYMENT
ART. 280

1) There is a continuous rehiring of project employees even after cessation

of a project; and
2) The tasks performed by the alleged "project employee" are vital, necessary
and indispensable to the usual business or trade of the employer.
However, the length of time during which the employee was continuously re-
hired is not controlling, but merely serves as a badge of regular employment.
In the instant case, the evidence on record shows that petitioner Enero was
employed for a total of two (2) years and engaged in at least eighteen (18) projects,
while petitioner Maraguinot was employed for some three (3) years and worked on
at least twenty-three (23) projects. Moreover, as petitioners' tasks involved, among
other chores, the loading, unloading and arranging of movie equipment in the
shooting area as instructed by the cameramen, returning the equipment to the Viva
Films' warehouse, and assisting in the "fixing" of the lighting system, it may not be
gainsaid "that these tasks were vital, necessary and indispensable to the usual business
or trade of the employer. As regards the underscored phrase, it has been held that
this is ascertained by considering the nature of the work performed and its relation
1
to the scheme of the particular business or trade in its entirety.
Truly, the cessation of construction activities at the end of every project is
a foreseeable suspension of work. Of course, no compensation can be demanded
from the employer because the stoppage of operations at the end of a project and
before the start of a new one is regular and expected by both parties to the labor
relations. Similar to the case of regular seasonal employees, the employment relation
2
is not severed by merely being suspended. T h e employees are, strictly speaking, not
separated from services but merely on leave of absence without pay until they are
reemployed. Thus, we cannot affirm the argument that non-payment of salary or
non-inclusion in the payroll and the opportunity to seek other employment denote
3
project employment.
While Lao admittedly involved the construction industry, to which Policy
Instructions N o . 20/Department Order N o . 19 regarding work pools specifically
applies, there seems to be no impediment to applying the underlying principles
to industries other than the construction industry. Neither may it be argued that a
substantial distinction exists between the projects undertaken in the construction
industry and the motion picture industry. On the contrary, the raison d'etre of both
industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an
employer by imposing a duty to re-hire a project employee even after completion
of the project for which he was hired. T h e import of this decision is not to impose
a positive and sweeping obligation upon the employer to re-hire project employees.
What this decision merely accomplishes is a judicial recognition of the employment

'De Leon vs. N L R C , 176 SCRA 615, 621 [1989].

2
Citing Manila Hotel Co. vs. CIR, 9 SCRA 186 (1963).
^ o m a s Lao Construction, et al. vs. N L R C , et al, G.R. N o . 116781, September
5, 1997.

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 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

status of a project or work pool employee in accordance with what is fait accompli,
i.e., the continuous re-hiring by the employer of project or work pool employees who
perform tasks necessary or desirable to the employer's usual business or trade. Let
it not be said that this decision "coddles" labor, for as Lao has ruled, project or work
pool employees who have gained the status of regular employees are subject to the
"no work-no pay" principle.

3.7b "Completion of Project" N o t Valid Reason to Separate a Project

Employee W h o has Become Regular
W h e n a project e m p l o y e e w h o has gained regular status is separated from
e m p l o y m e n t on the alleged g r o u n d of completion of project, such separation is
for an invalid reason, hence unwarranted. Because the termination is unjustified
the employee is entitled to reinstatement with backwages, without loss of seniority
1
rights and other benefits that may have accrued.

3.7c Computing the Backwages of Project Employee W h o has Become

Regular; **No work, No Pay" Rule Applicable
Following the principles of "suspension of work" and "no pay" between
the e n d of o n e project and the start of a new o n e , in computing petitioners'
backwages, the amounts corresponding to what could have been earned during
the periods from the date petitioners were dismissed until their reinstatement
when petitioners' respective Shooting Units were not undertaking any movie
2
projects, should be deducted.
Petitioners were dismissed on July 20, 1992, at a time when Republic Act
N o . 6715 was already in effect. Pursuant to Section 34 thereof which amended
Section 279 of the L a b o r C o d e of the Philippines and Bustamante vs. NLRC (265
S C R A 61 [ 1 9 9 6 ] ) , petitioners are entitled to receive full backwages from the
date of their dismissal up to the time of their reinstatement, without deducting
whatever earnings derived elsewhere during the period of illegal dismissal,
3
subject, however, to the above observations.

4. SEASONAL EMPLOYMENT; "REGULAR SEASONAL" AFTER ONE SEASON

Seasonal employees are considered regular employees. Regular seasonal
employees are those called to work from time to time. T h e nature of their
relationship with the employer is such that during off season they are temporarily
laid o f f but during summer season they are reemployed, or when their services
may be n e e d e d . T h e y are not, strictly speaking, separated from the service
but are merely considered as on leave of absence without pay until they are

'See Maraguinot and Enero vs. N L R C and Viva Films, G.R. N o . 120969, January
22, 1998.
Ibid.
Ibid.

721
 POST-EMPLOYMENT
ART. 280

reemployed. Their employment relationship is never severed but only suspended.

As such those employees can be considered as in the regular employment of the
1
employer.
A l t h o u g h the e m p l o y e r s have shown that respondents [ e m p l o y e e s ]
performed work that was seasonal in nature, they failed to prove that the latter
worked only for the duration of one particular season. In fact, petitioners do not
deny that these workers have served them for several years already. H e n c e , they
are regular — not seasonal — employees. For respondents to be excluded from
those classified as regular employees, it is not enough that they p e r f o r m work or
services that are seasonal in nature. T h e y must have also been e m p l o y e d only for
the duration of one season. T h e evidence proves the existence of the first, but not of
the second, condition. T h e fact that respondents repeatedly worked as sugarcane
workers for petitioners for several years is not denied by the latter. Evidently,
petitioners employed respondents for m o r e than o n e season. T h e r e f o r e , the
2
general rule of regular employment is applicable.

Visayan Stevedore Trans. Co., et al. vs. CIR, et al, G.R. N o . L-21696, February
25, 1967 —
Facts: The Visayan Stevedore Transportation Company was engaged in the
loading and unloading of vessels. Its workers were supplied by the United Workers
and Farmers Association ( U W F A ) , a labor organization; they have regularly worked as
laborers of the company during milling seasons since after the war up to the milling
season preceding Nov. 11, 1955, when the company refused to engage the services
of 139 of the workers. These workers filed a complaint for unfair labor practice
with the CIR. The Company maintains that it had never had an employer-employee
relationship with the complainants, the latter's services having been engaged by the
UWFA, not by the Company, and that in any event whatever contractual relation
existed between the Company and the complainants ceased at the end of the milling
season.
Ruling: The contention of the company is untenable. Although complainants,
through the labor union to which they belong, form part of the UWFA, there was no
independent contract between the latter, as an organization, and the Company. After
the first milling season subsequent to the liberation, complainants merely reported
for work at the beginning of each succeeding milling season and their services were
invariably availed of by the company, although an officer of the U W F A or union
concerned determined the laborers who would work at a given time, following a
rotation system arranged therefor. Complainants worked under the direction and
control of the officers of the company, whose paymaster paid the corresponding

'Manila Hotel Co. vs. CIR, et al., G.R. N o . L-18875, September 30, 1963;
Industrial Commercial Agricultural Workers Organizations vs. CIR, et al., G.R. N o .
L-21465, March 31, 1966.
2
Hacienda Fatima, et al. vs. National Federation of Sugarcane Workers etc.,
G.R. N o . 149440, January 28, 2003.

722
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

compensation directly to said complainants. Hence, laborers working under these

conditions are employees of the Company. Employer-employee relationship exists
between a milling company and the workers during off season. During that period,
the workers are considered not separated from the service, but merely on leave of
absence, without pay, their employer-employee relationship being merely deemed
suspended, not severed in the meanwhile.

4.1 Employer-Employee Relationship Exists Between Milling Company

and Its Workers Even During O f f Season
T h e cessation of the Central's milling activities at the e n d of the season
is certainly n o t p e r m a n e n t or definitive; it is a foreseeable suspension of
work, both Central and laborers have reason to e x p e c t that such activities will
be resumed, as they are in fact resumed, when sugar cane ripe for milling
is again available. T h e r e is, therefore, merely a temporary cessation of the
manufacturing process due to passing shortage of raw material that by itself
alone is not sufficient, in the absence of other justified reasons, to sever the
e m p l o y m e n t or labor relationship between the parties, since the shortage is not
permanent. T h e p r o o f of this assertion is the u n d e n i e d fact that many of the
petitioner m e m b e r s of the I C A W O U n i o n have been laboring for the Central,
and r e e n g a g e d for many seasons without interruption. N o r does the Central
interrupt c o m p l e t e l y its operations in the interval between milling seasons;
the office and sales force are maintained, precisely because operations are to
1
be later resumed.

4.2 Seasonal "Pakiao"Employees

Zamudio vs. National Labor Relations Commission, G.R. N o . 76723, March 25,
1990 —
T h e nature of their employment, i.e., "pakiao" basis, does not make petitioners
independent contractors. Pakiao workers are considered employees as long as the
employer exercises control over the means by which such workers are to perform
their work. Considering that petitioners did their work inside private respondent's
farm, the latter necessarily exercised control over the work performed by petitioners.
Petitioners rendered services essential for the cultivation of respondent's farm.
While the services were not continuous in the sense that they were not rendered
every day throughout the year, as is the nature of farm work, petitioners had never
stopped working for respondent from year to year from the time he hired them to
the time he dismissed them.
T h e seasonal nature of petitioner's work does not detract from the conclusion
that employer-employee relationship exists. Seasonal workers whose work is not

'Industrial-Commercial-Agricultural Workers' Union vs. CIR, et al, L-21465,

March 31, 1966. See also: Tacloban Sagkahan Rice, et al. vs. N L R C , G.R. N o . 73806,
March 21, 1990.

723
 POST-EMPLOYMENT
ART. 280

merely for the duration of the season, but who are rehired every working season are
considered regular employees. The circumstance that petitioners do not appear in
respondent's payroll does not destroy the employer-employee relationship between
them. Omission of petitioners in the payroll was not within their control; they had
no hand in the preparation of the payroll. This circumstance, even if true, cannot
be taken against petitioners.

4.3 T h e Mercado Ruling: Project Employees Do N o t B e c o m e Regular

Although Service Exceeds O n e Year
T h e Mercado ruling, penned by Justice Padilla, refused to apply the element
of time mentioned in the second paragraph of Article 280. It said essentially
that the one-year duration on the j o b is pertinent to deciding whether a casual
employee has become regular or not. But it is not pertinent to a seasonal or
project employee. In other words, passage of time does not make a seasonal
worker regular or permanent.
Mercado, Sr., et al. vs. National Labor Relations Commission (NLRC), et al., G.R.
N o . 79869, September 5, 1991 —
Facts: Petitioners alleged in their complaint that they were agricultural
workers utilized by private respondents in all the agricultural phases of work on the
7 1/2 hectares of rice land and 10 hectares of sugar land owned by the latter. Their
employment individually started between 1949 and 1979. In any case, their individual
employment exceeds one year.
Private respondent Cruz denied that said petitioners were her regular
employees and instead averred that she engaged their services, through Spouses F.
and R. Mercado, their "mandarols," that is, persons who take charge in supplying the
number of workers needed by owners of various farms, but only to do a particular
phase of agricultural work necessary in rice production and/or sugar cane production,
after which they would be free to render services to other farm owners who need
their services.
The dispute in this case revolves around the issue of whether or not petitioners
are regular and permanent farmworkers and therefore entitled to the benefits which
they pray for. And corollary to this, whether or not said petitioners were illegally
dismissed by private respondents.
Petitioners contend that the Labor Arbiter and the N L R C erred when
both ruled that petitioners are not regular and permanent employees of private
respondents based on the terms and conditions of their hiring, for said findings
are contrary to the provisions of Article 280 of the Labor Code. They submit that
petitioners' employment, even assuming said employment were seasonal, continued
for so many years such that, by express provision of Article 280 of the Labor Code,
as amended, petitioners have become regular and permanent employees.
Moreover, they argue that Policy Instructions N o . 12 of the Department of
Labor and Employment clearly lends support to this contention, when it states:

724
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

PD 830 has defined the concept of regular and casual employment.

What determines regularity or casualness is not the employment contract,
written or otherwise, but the nature of the j o b . If the j o b is usually necessary
or desirable to the main business of the employer, then employment is regular.
If not, then the employment is casual. Employment for a definite period
which exceeds one (1) year shall be considered regular for the duration of
the definite period.
Ruling: T h e petition is not impressed with merit.
T h e contention of petitioners that the second paragraph of Article 280 of the
Labor Code should have been applied in their case presents an opportunity to clarify
the aforementioned provision of law.
Article 280 of the Labor Code reads in full: x x x
T h e first paragraph answers the question of who are regular employees. It
states that, regardless of any written or oral agreement to the contrary, an employee
is deemed regular where he is engaged in necessary or desirable activities in the usual
business or trade of the employer, except for project ^employees.
A project employee has been defined to be one whose employment has been
fixed for a specific project or undertaking, the completion or termination of which
has been determined at the time of the engagement of the employee, or where the
work or service to be performed is seasonal in nature and the employment is for the
duration of the season, as in the present case.
T h e second paragraph of Article 280 demarcates as "casual" employees, all
other employees who do not fall under the definition of the preceding paragraph.
T h e proviso, in said second paragraph, deems as regular employees those "casual"
employees who have rendered at least one year of service regardless of the fact that
such service may be continuous or broken.
Petitioners, in effect, contend that the proviso in the second paragraph
of Article 280 is applicable to their case and that the Labor Arbiter should have
considered them regular by virtue of said proviso. T h e contention is without merit.
Policy Instructions N o . 12 of the Department of Labor and Employment
discloses that the concept of regular and casual employees was designed to put an
end to casual employment in regular jobs, which has been abused by many employers
to prevent so-called casuals from enjoying the benefits of regular employees or to
prevent casuals from joining unions. T h e same instructions show that the proviso in
the second paragraph of Article 280 was not designed to stifle small-scale businesses
nor to oppress agricultural landowners to further the interests of laborers, whether
agricultural or industrial. What it seeks to eliminate are abuses of employers against
their employees and not, as petitioners would have us believe, to prevent small-scale
businesses from engaging in legitimate methods to realize profit. Hence, the proviso
is applicable only to the employees who are deemed "casuals" but not to the "project
employees nor the regular employees treated in paragraph one of Article 280.
Clearly, therefore, petitioners being project employees, or, to use the correct
term, seasonal employees, their employment legally ends upon completion of the

725
 POST-EMPLOYMENT
ART. 280

project or the season. T h e termination of their employment cannot and should not
constitute an illegal dismissal.

4.3a Mercado Reconciled with Earlier Rulings

T h e Mercado ruling does not reverse the earlier rulings that seasonal
employees are regular and merely on leave without pay during o f f seasons. Mr.
Justice Panganiban explains this in the 1998 Philippine Tobacco case.
T h e facts in the above-mentioned cases (Manila Hotel, Visayas Stevedore,
Tacloban Sagkahan) are different from those in Mercado vs. NLRC and in Magcalas
vs. NLRC. In Mercado, although r e s p o n d e n t constantly availed herself of
petitioners' services from year to year, it was clear from the facts therein that they
were not in her regular employ. Petitioners therein p e r f o r m e d different phases
of agricultural work in a given year. However, during that period, they were free
to work for other farm owners, and in fact they did. In other words, they worked
for respondent, but were nevertheless free to contract their services with other
farm owners. T h e Court was thus emphatic when it ruled that petitioners were
mere project employees, w h o could be hired by other farm owners. As such, their
employment would naturally end upon the completion of each project or each
phase of farm work which has been contracted. In Magcalas vs. NLRC, the Court
merely cited the aforequoted ruling to explain the difference a m o n g regular,
project and seasonal employees. In fact, it concluded that the employees therein
1
were regular and not project employees.
From the peculiar facts of Mercado and Magcalas, it is clear that the ruling
therein is not inconsistent with Manila Hotel, Gaco and other cases. It is noteworthy
that the ponente in Mercado concurred in the Court's ruling in Gaco awarding to
2
the seasonal employee separation pay for every year of service.
To reiterate, the doctrine that seasonal employees are regular and merely
considered on leave of absence without pay during off-season, still stands. Since
they are regular, as reiterated by Mr. Justice Panganiban in this Philippine Tobacco
case, their employment did not e n d with the 1993 season and because they were
not rehired in 1994, they are d e e m e d to have been illegally terminated.
T h e effects of illegal dismissal of regular seasonal employees are taken up
in Consequences of Termination in this B o o k V I .

4.4 "Regular Contractuals" entitled to Benefits of Regular Employees

Cinderela Marketing Corp. vs. NLRC, et al., G.R. Nos. 112535 and 113758, June
22, 1998 —
Facts: Private respondents are employed by petitioner as "regular contractuals,"
performing work as salesladies, wrappers, stockmen, pressers, as required by the

'Philippine Tobacco Flue-curing and Redrying Corp. vs. N L R C , et al., G.R. N o .

127395, December 10, 1998.
Ibid.
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 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

regular business of petitioner which maintains stores engaged in the sale of dresses.
They are seasonal employees who are hired by petitioner at the start of the peak
season of the year, which normally runs from September until January. As soon as
the demand for their services ends, their employment is terminated. T h e temporary
hiring of additional employees within the five-month peak season was practiced by
petitioner until the 1988 CBA negotiations, in which the Union proposed that the
employees who are hired during the peak season be allowed to stay. Negotiations
between petitioner and its employees resulted in the retention of seasonal employees
as "regular contractuals," who would enjoy all the benefits of regular employees,
including security of tenure, minimum wage, overtime pay and all benefits provided
for in the Code for a regular employee. Accordingly, as soon as a "regular contractual"
is promoted or "regularized" to a position in a newly-opened branch of petitioner, said
employee is automatically included in the bargaining unit represented by the union,
and is entitled to the benefits of the CBA thereafter. Pursuant to this arrangement,
until a regular contractual is "regularized," he, although regarded as a regular
employee, is excluded from the bargaining unit.
N o t satisfied with their exclusion from the bargaining unit, and the concomitant
deprivation of the benefits granted to members thereof, the employees continually
demanded their inclusion in the bargaining unit. Because their demand was
repeatedly denied, they filed a complaint with the N L R C praying, among others, that
they be granted all benefits granted to regular employees in the Collective Bargaining
Agreement ( C B A ) from the time they are regularized.
T h e Labor Arbiter declared complainants as regular rank-and-file employees,
with the additional right to membership in the bargaining unit defined under the
CBA. It also ordered respondent to pay all benefits thereunder accorded to regular
employees, with back benefits. On appeal the N L R C affirmed the questioned decision.
Petitioner corollarily contests the inclusion of private respondents as regular
contractual employees within the scope of the bargaining unit, thus entitling them
to benefits under the CBA. Although it admits that once private respondents become
regular employees, they shall be entitled to the benefits provided under the CBA, it
contends that they are not entitled to the "regularization differential" covering the
period from the time they rendered one year of service until their promotion or
regularization because they were still "seasonal employees. "
Ruling: Petitioner has engaged in a semantic interplay of words in distorting
the definition of a "regular employee" as provided by the Labor Code.
It is undeniable that private respondents have rendered at least one year of
service to petitioner as sales clerks, an activity which is necessary or desirable in the usual
business or trade of the employer. Therefore, they are regular employees under the CBA
who are entitled to the benefits granted to all other regular employees of petitioner
under the CBA.

5. FIXED-PERIOD E M P L O Y M E N T , W H E N VALID
Article 280 or any other provision of the Labor C o d e does not mention
"fixed-period employment" or employment for a term.
727
 POST-EMPLOYMENT
ART. 280

Is it the legislative intention to prohibit contracts that fix a definite period

of employment? A r e such stipulations contrary to public policy?
On the one, hand, there is the gradual and progressive elimination of
references to term or fixed-period e m p l o y m e n t in the L a b o r C o d e . T h e r e is,
on the other hand, the Civil C o d e , which has always r e c o g n i z e d and continues
to recognize, the validity and propriety of contracts and obligations with a fixed
or definite period, and imposes no restraints on the f r e e d o m of the parties to
fix the duration of a contract, whatever its object, be it specie, foods or services,
except the general admonition against stipulations contrary to law, morals, g o o d
customs, public order or public policy. U n d e r the Civil C o d e , therefore, and
as a general proposition, fixed-term e m p l o y m e n t contracts are not limited, as
they are under present L a b o r C o d e , to those by nature seasonal or for specific
projects with p r e d e t e r m i n e d dates of c o m p l e t i o n ; they also include those to
1
which the parties by free choice have assigned a specific date of termination.

Brent School, Inc. vs. Zamora, G.R. N o . 48494, February 5, 1990 —

Facts: Alegre was engaged as athletic director by Brent School for a specific
term of five (5) years from July 18, 1971 to July 17, 1976. Subsequent subsidiary
agreements reiterated the same terms and conditions, including the expiry date as
those contained in the original contract of July 18, 1971.
When the employment contract was signed on July 18,1971 [before the Labor
Code was passed], it was perfectly legitimate for them to fix the duration of the
employment.
Some three months before the expiration of the stipulated period, i.e., on April
20,1976, Alegre was given a copy of the report filed by Brent School with the Labor
Department advising of the termination of his services to be effected on July 16,1976.
The stated ground for the termination was ^completion of contract, expiration of
the definite period of employment.'' Alegre received and signed a receipt indicating
"full payment of [his] services."
T h e Regional Director considered Brent School's report as an application for
clearance to terminate employment (not a report of termination), and refused to
give such clearance and instead required Alegre's reinstatement, as a "permanent
employee." T h e Director declared that the ground cited by the School was not
sanctioned by PD 442.
Ruling: T h e Supreme Court set aside the Decision, declared that Alegre's
contract of employment with Brent School was lawfully terminated and that therefore
he was not entitled to reinstatement. T h e Court explained:
Article 280 of the Labor Code, under a narrow and literal interpretation, not
only fails to exhaust the gamut of employment contracts to which the lack of a fixed
period would be an anomaly, but would also appear to restrict, without reasonable
distinctions, the right of an employee to freely stipulate with his employer the duration

•Brent School, Inc. vs. Zamora, G.R. N o . 48494, February 5, 1990.

728
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

of his engagement, it logically follows that such a literal interpretation should be

eschewed or avoided. T h e law must be given a reasonable interpretation, to preclude
absurdity in its application.
Since the entire purpose behind the development of legislation culminating
in the present Article 280 of the Labor Code is to prevent circumvention of the
employee's right to be secure in his tenure, the clause in said article indiscriminately
and completely ruling out all written or oral agreements conflicting with the concept
of regular employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out: agreements entered into precisely
to circumvent security of tenure.
It should have no application to instances where a fixed period of employment
was agreed upon knowingly and voluntarily by the parties, without any force, duress
or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent, or where it satisfactorily appears that the
employer and employee dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter. Unless thus
limited in its purview, the law would be made to apply to purposes other than those
explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its
effects and apt to lead to absurdity and unintended consequences.
Alegre's employment was terminated upon the expiration of his last contract
with Brent School on July 16, 1976 without the necessity of any notice.

5.1 Brent Doctrine Summarized

A r t i c l e 280 o f the L a b o r C o d e d o e s n o t p r o s c r i b e o r p r o h i b i t a n
e m p l o y m e n t contract with a fixed period, provided the same is entered into
by the parties without any force, duress or improper pressure being brought to
bear upon the e m p l o y e e and absent any other circumstance vitiating consent.
It does not necessarily follow that where the duties of the employee consist of
activities usually necessary or desirable in the usual business of the employer, the
parties are forbidden from agreeing on a period of time for the performance of
such activities. T h e r e is thus nothing essentially contradictory between a definite
p e r i o d of e m p l o y m e n t and the nature of the employee's duties.
It goes without saying that contracts of employment govern the relationship
of the parties. In this case, private respondent's contract provided for a fixed
term of nine ( 9 ) months, from June 1,1991 to March 31,1992. Such stipulation,
not being contrary to law, morals, g o o d customs, public order and public policy,
1
is valid, binding and must be respected.

'St. Theresa's School of Novaliches Foundation and Adoracion Roxas vs.

National Labor Relations Commission and Esther Reyes, G.R. N o . 122955, April 15,
1998. See also: Labayog, et al. vs. M.Y. San Biscuits, G.R. N o . 148102, July 11, 2006.

729
 POST-EMPLOYMENT
ART. 280

5.2 Pretermination of Fixed-Period Employment, Liability of Employer

A fixed-period employee is not regular because his job, as anticipated and
agreed, will exist only for a specified period of time. In other words, it is not
permanent. But he is d e e m e d regular in two senses: ( 1 ) the nature of his work
is necessary or desirable in the principal business of the employer; and ( 2 ) he
enjoys security of tenure during the limited time of his employment. Before the
end of the agreed period he cannot be r e m o v e d without a valid cause. If this is
done, the employer commits illegal dismissal. In fact, he commits a breach of
contract, in which case, the Court has ruled, the employee is entitled to payment
1
of his salaries corresponding to the unexpired portion of his contract.

5.3 Illegal "Fixed Period Employment;" Brent Ruling Clarified

Cielo vs. The Honorable National Labor Relations Commission, etc., G . R . N o .
78693, January 28, 1991 —
Facts: The petitioner was a truck driver who claimed he was illegally dismissed
by the respondent, Henry Lei Trucking Company. T h e Labor Arbiter found for him
and ordered his reinstatement with backwages. On appeal, the decision was reversed
by the N L R C which held that the petitioner's employment had expired under a valid
contract.
In his own Comment, the Solicitor General defended the N L R C and agreed
that the contract between the petitioner and the respondent was a binding agreement,
not contrary to law, morals or public policy. T h e petitioner's services could be legally
terminated upon the expiration of the period agreed upon, which was only six months.
The said agreement read in part:
"1. That the term of this Agreement is six (6) months from and after the
execution hereof, unless otherwise earlier terminated at the option of either party;
xxx
The agreement was supposed to have commenced on June 30, 1984, and to
end on December 31, 1984. On December 22, 1984, however, the petitioner was
formally notified of the termination of his services on the ground of expiration of
their contract. The petitioner complained of illegal dismissal.
It appears from the records that all the drivers of the respondent company have
been hired on a fixed contract basis, as evidenced by the mimeographed form of the
agreement and of the affidavit. T h e respondent merely filled in the blanks with the
corresponding data, such as the driver's name and address, the amount received by
him, and the date of the document. Each driver was paid through individual vouchers
rather than a common payroll, as is usual in companies with numerous employees.

'See Vinta Maritime Co., Inc. and Elkano Ship Management, Inc. vs. National
Labor Relations Commission and Leonides C. Basconcillo, G.R. N o . 113911, January
23, 1998; Also: Tierra International Construction, et al vs. N L R C , et al, G.R. N o .
101825, April 2, 1996.

730
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

Ruling: T h e employer's intention is obvious. It is remarkable that neither the

N L R C nor the Solicitor General recognized it. There is no question that the purpose
behind these individual contracts was to evade the application of the labor laws
by making it appear that the drivers of the trucking company were not its regular
employees.
Under these arrangements, the private respondent hoped to be able to
terminate the services of the drivers without the inhibitions of the Labor Code. All
it had to do was refuse to renew the agreements, which, significantly, were uniformly
limited to a six-month period. No cause had to be established because such renewal
was subject to the discretion of the parties. In fact, the private respondent did not
even have to wait for the expiration of the contract as it was there provided that it
could be "earlier terminated at the option of either party."
By this clever scheme, the private respondent could also prevent the drivers
from becoming regular employees and thus be entitled to security of tenure and
other benefits, such as a minimum wage, cost-of-living allowances, vacation and sick
leaves, holiday pay, and other statutory requirements.
We accept the factual finding of the Labor Arbiter that the petitioner was a
regular employee of the private respondent. T h e private respondent is engaged in the
trucking business as a hauler of cattle, crops and other cargo for the Philippine Packing
Corporation. This business requires the services of drivers, and continuously because
the work is not seasonal, nor is it limited to a single undertaking or operation. Even
if ostensibly hired for a fixed period, the petitioner should be considered a regular
employee of the private respondent, conformably to Article 280 of the Labor Code.
In Brent School, Inc. vs. Zamora (G.R. N o . L-48494, February 5,1990) [see above]
the Court affirmed the general principle that "where from the circumstances it is
apparent that periods have been imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or disregarded as contrary to public
policy, morals, etc."
T h e agreement in question had such a purpose and so was null and void ah
initio.

5.3a Effect of Retention of Employee Beyond the Period of Employment

T h e g e n e r a l rule is that w h e n , upon the expiration of a contract of
employment for a definite term, the e m p l o y e e continues to render the same
services as he rendered during the term of the contract without explicitly entering
into any new agreement, it will be presumed prima facie that he is serving under
a new contract having the same terms and conditions as the original one.xxx This
presumption obtains with respect to the duration of the continued employment
and the remuneration for services rendered. This presumption may, of course,
be rebutted by evidence showing a change of the terms of the contract, or by
p r o o f of facts and circumstances showing that the parties understood that the
1
terms of the o l d contract were not to apply to the continued service.

'35 Am Jur 454.

731
 POST-EMPLOYMENT
ART. 280

Viernes vs. National Labor Relations Commission (Third Division), and Benguet
Electric Cooperative, Inc. (BENECO), G.R. N o . 108405, April 2003 —
Facts: BENECO contracted the services of the fifteen complainants as meter
readers for 24 days, from October 8 to 31,1990. Their employment contracts, couched
in identical terms, read:
You are hereby appointed as METER READER ( A P P R E N T I C E ) under
BENECO-NEA Management with compensation at the rate of SIXTY-SIX
PESOS A N D SEVENTY-FIVE CENTAVOS (P66.75) per day from October 08
to 31, 1990.
The said term notwithstanding, the complainants were allowed to work beyond
October 31,1990, or until January 2,1991. On January 3,1991, they were each served
their identical notices of termination dated December 29, 1990. T h e same read:
Please be informed that effective at the close of office hours of December
31,1990, your services with the BENECO will be terminated. Your termination
has nothing to do with your performance. Rather, it is because we have to
retrench on personnel as we are already overstaffed.
On the same date, the complainants filed separate complaints for illegal
dismissal.
T h e complainants contend that they were not apprentices but regular
employees whose services were illegally and unjustly terminated in a manner that
was whimsical and capricious. On the other hand, the respondent invokes Article
283 of the Labor Code in defense of the questioned dismissal.
Ruling: We sustain petitioners' claim that they should be reinstated to their
former position as meter readers, not on a probationary status, but as regular
employees.
A review of the records shows that petitioners have never been probationary
employees. There is nothing in the letter of appointment to indicate that their
employment as meter readers was on a probationary basis. It was not shown that
petitioners were informed by [ B E N E C O ] , at the time of the employment, of the
reasonable standards under which they could qualify as regular employees. Instead,
petitioners were initially engaged to perform their j o b for a limited duration, their
employment being fixed for a definite period, from October 8 to 31, 1990.
Private respondent's reliance on the case of Brent School, Inc. vs. Zamora, x x x
is misplaced.
T h e principle we have enunciated in Brent applies only with respect to fixed
term employments. While it is true that petitioners were initially employed on a fixed
term basis as their employment contracts were only for October 8 to 31, 1990, after
October 31,1990, they were allowed to continue working in the same capacity as meter
readers without the benefit of a new contract or agreement or without the term of
their employment being fixed anew. After October 31, 1990, the employment of petitioners
is no longer on a fixed term basis. T h e complexion of the employment relationship
of petitioners and private respondent is thereby totally changed. Petitioners have
attained the status of regular employees.

732
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

Under Article 280 of the Labor Code, a regular employee is one who is engaged
to perform activities which are necessary or desirable in the usual business or trade
of the employer, or a casual employee who has rendered at least one year of service,
whether continuous or broken, with respect to the activity in which he is employed.
Herein petitioners fall under the first category. They were engaged to perform
activities that are necessary to the usual business of private respondent. We agree with
the labor arbiter's pronouncement that the j o b of a meter reader is necessary to the
business of private respondent because unless a meter reader records the electric
consumption of the subscribing public, there could not be a valid basis for billing
the customers of private respondent. T h e fact that the petitioners were allowed to
continue working after the expiration of their employment contract is evidence of
the necessity and desirability of their service to private respondent's business.

Note: N o t only reinstatement but also full backwages and indemnity were
granted by the Court. See in Part 7, Consequences of termination.

5.3b W h e n "Five-Month Contractuals" Considered Regular Employees;

the Purefoods Precedent
Purefoods Corp. vs. NLRC, et al, G.R. N o . 122653, December 12, 1997 —
In the leading case of Brent School, Inc. vs. Zamora, 181 SCRA 702 [1990] which
was reaffirmed in numerous subsequent cases, this Court has upheld the legality of
fixed-term employment. It ruled that the decisive determinant in term employment
should not be the activities that the employee is called upon to perform but the
day certain agreed upon by the parties for the commencement and termination
of their employment relationship. But, the Court went on to say that where from
the circumstances it is apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy and morals.
Brent also laid down the criteria under which term employment cannot be said
to be in circumvention of the law on security of tenure:
1) T h e fixed period of employment was knowingly and voluntarily agreed
upon by the parties without any force, duress, or improper pressure
being brought to bear upon the employee and absent any other
circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with
each other on more or less equal terms with no moral dominance
exercised by the former or the latter.
N o n e of these criteria had been met in the present case. As pointed out by the
private respondents:
[I]t could not be supposed that private respondents and all other so-called
"casual" workers of [the petitioner] K N O W I N G L Y and V O L U N T A R I L Y
agreed to the 5-month employment contract. Cannery workers are never on
equal terms with their employers. Almost always, they agree to any terms of

733
 POST-EMPLOYMENT
ART. 280

an employment contract just to get employed considering that it Is difficult

to find work given their ordinary qualifications. Their freedom to contract is
empty and hollow because theirs is the freedom to starve if they refuse to work
as casual or contractual workers. Indeed, to the unemployed, security of tenure
has no value. It could not then be said that petitioner and private respondents
"dealt with each other on more or less equal terms with no moral dominance
whatever being exercised by the former over the latter."
The petitioner does not deny or rebut private respondents' averments: (1) that
the main bulk of its workforce consisted of its so-called "casual" employees; ( 2 ) that
as of July 1991, "casual" workers numbered 1,835, and regular employees, 263; ( 3 )
that the company hired "casual" every month for the duration of five months, after which
their services were terminated and they were replaced by other "casual" employees on the same
five-month duration; and (4) that these "casual" employees were actually doing work
that were necessary and desirable in petitioner's usual business.
This scheme of the petitioner was apparently designed to prevent the private
respondents and the other "casual" employees from attaining the status of a regular
employee. It was a clear circumvention of the employees' right to security of tenure and to
other benefits like minimum wage, cost-of-living allowance, sick leave, holiday pay,
and 13th month pay. Indeed, the petitioner succeeded in evading the application
of labor laws. Also, it saved itself from the trouble or burden of establishing a just
cause for terminating employees by the simple expedient of refusing to renew the
employment contracts.
The five-month period specified in private respondents' employment contracts
having been imposed precisely to circumvent the constitutional guarantee on security
of tenure should, therefore, be struck down or disregarded as contrary to public
1
policy or morals.

5.3c Effect of Renewals of F i x e d - P e r i o d Employment in Regular Jobs

W h e r e the direct-hired e m p l o y e e is d o i n g necessary or desirable j o b , the
three-month fixed term of the employment, renewed several times e x c e e d i n g o n e
year, establishes her being a regular e m p l o y e e . Such contractual e m p l o y m e n t
on "as n e e d e d " basis contravenes the employee's right to security of tenure. T h e
two criteria so that "term employment" may not violate the law on security of
tenure are: (1) T h e fixed p e r i o d e m p l o y m e n t was knowingly and freely agreed
upon by the parties; no circumstance such as force, duress or i m p r o p e r pressure
vitiates the employee's consent; and ( 2 ) T h e employer and the e m p l o y e e dealt
with each other on more or less equal terms with no moral dominance exercised
2
by the former over the latter.

'See also: Romares vs. N L R C and Pilmico Foods Corp., G.R. N o . 122327, August
19, 1998.
2
Philips Semiconductors (Phils.), Inc. vs. Fadriquela, G.R. N o . 141717, April
4, 2004.

734
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 280

But in the next case the five-month fixed term e m p l o y m e n t was not
renewed, and the Court ruled differently.
Employees have not attained regular status and they are not illegally
terminated if they worked under fixed term employment contracts none of which
was extended beyond the initial five-month period, even if they are doing jobs
necessary or desirable to the employer's business. T h e r e is nothing essentially
contradictory between a definite p e r i o d of employment and the nature of the
employee's duties. This conclusion assumes that the fixed term contracts meet
1
the two criteria [ m e n t i o n e d a b o v e ] as laid down in Brent School vs. Zamora.

5.3d Seafarers are Contractuals

Millares and Lagda vs. NLRC, et al., G.R. N o . 110524, July 29, 2002 —
It has been held in Brent School, Inc. vs. Zamora, that Article 280 of the Labor
Code does not apply to overseas employment:
Again, in Coyoca vs. NLRC, the Court also held that a seafarer is not a regular
employee and is not entitled to separation pay. His employment is governed by the
P O E A Standard Employment Contract for Filipino Seamen.
From the foregoing cases, it is clear that seafarers are considered contractual
employees. They can not be considered as regular employees under Article 280
of the Labor C o d e . T h e i r employment is governed by the contracts they sign
everytime they are rehired and their employment is terminated when the contract
expires. T h e i r employment is contractually fixed for a certain period of time.
They fall under the exception of Article 280 whose employment has been fixed
for a specific project or undertaking the completion or termination of which has
been determined at the time of engagement of the employee or where the work
or services to be performed is seasonal in nature and the employment is for the
duration of the season. We need not depart from the rulings of the Court in the
two aforementioned cases which indeed constitute stare decisis with respect to the
employment status of seafarers.
Moreover, it is an accepted maritime industry practice that employment of
seafarers is for a fixed period only. Constrained by the nature of their employment
which is quite peculiar and unique in itself, it is for the mutual interest of both the
seafarer and the employer why the employment status must be contractual only or
for a certain period of time.
From all the foregoing, we hereby state that petitioners are not considered
regular or permanent employees under Article 280 of the Labor Code. Petitioners'
employment have automatically ceased upon the expiration of their contracts of
enlistment ( C O E ) .

T h e Court reiterated the Millares ruling in Gu-Miro vs. Adorable (G.R. N o .

160952, August 20, 2004) where it held that a radio officer on board a vessel cannot

•Pangilinan, et al. vs. General Milling corp., G.R. N o . 149329, July 12, 2004.

735
 POST-EMPLOYMENT
ART. 281

be considered as a regular employee although the work he performs is necessary

and desirable in the business of the company.
In Coyoca vs. NLRC (312 Phil. 1137 [1995]) which involves a claim for
separation pay, the Court held:
Furthermore, petitioner's contract did not provide for separation
benefits. In this connection, it is important to note that neither does
P O E A standard employment contract for Filipino seamen provide for such
benefits.
As a Filipino seaman, p e t i t i o n e r is g o v e r n e d by the Rules and
Regulations Governing Overseas Employment and the said Rules do not
provide for separation or termination pay. x x x (Petroleum Shipping, et al.
vs. NLRC, G.R No. 148130, June 16, 2006).

ART. 281. PROBATIONARY EMPLOYMENT

Probationary employment shall not exceed six ( 6 ) months f r o m the
date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer p e r i o d . T h e services of an employee w h o has
been engaged on a probationary basis may be terminated f o r a just cause or
when he fails to qualify as a regular employee in accordance with reasonable
standards m a d e known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after a probationary period
shall be considered a regular employee.

C O M M E N T S A N D CASES
1. PROBATIONARY EMPLOYMENT
A probationary e m p l o y e e under Article 282 ( n o w 281) of the L a b o r C o d e
is o n e w h o is on trial by an employer during which the e m p l o y e r determines
whether or not he is qualified for p e r m a n e n t e m p l o y m e n t . A probationary
appointment is made to afford the e m p l o y e r an opportunity to observe the
fitness of a probationary e m p l o y e e while at work, and to ascertain whether he
will b e c o m e a proper and efficient e m p l o y e e . T h e w o r d probationary as used to
describe the period of e m p l o y m e n t implies the purpose of the term or period,
1
but not its length.
Being in the nature of a "trial period," the essence of a probationary period
of employment fundamentally lies in the purpose or objective sought to be
attained by both the employer and the e m p l o y e e during said period. T h e length
of time is immaterial in determining the correlative rights of both in dealing
with each other during said period. W h i l e the employer observes the fitness,
propriety and efficiency of a probationer to ascertain whether he is qualified for

'International Catholic Migration Commission vs. National Labor Relations

Commission, G.R. N o . 72222, January 30, 1989.

736
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 281

permanent employment, the probationer, on the other hand, seeks to prove to

the employer that he has the qualifications to meet the reasonable standards for
1
permanent employment.
T h e employer has the right or is at liberty to choose who will be hired and
w h o will be denied employment. It is within the exercise of the right to select his
employees that the employer may set or fix a probationary period within which
the latter may test and observe the conduct of the former before hiring him
2
permanently.

2. E M P L O Y E R ' S R I G H T T O SELECT; T H E NEED F O R P R O B A T I O N

T h e r e is nothing under Article 281 of the Labor C o d e that would preclude
the e m p l o y e r from e x t e n d i n g a regular or p e r m a n e n t appointment to an
e m p l o y e e once the employer finds that the e m p l o y e e is qualified for regular
e m p l o y m e n t even before the expiration of the probationary period. Conversely,
if the purpose sought by the employer is neither attained nor attainable within
the said period, Article 281 of the L a b o r C o d e does not likewise preclude the
3
employer from terminating the probationary employment on justifiable causes.

Manila Electric Company vs. National Labor Relations Commission, G.R. N o . 83751,
September 29, 1989 —
Facts: Ramon was hired by Meralco as a probationary employee for five months
as a messenger. His work, among others, was to file pleadings in court, serve summons
for execution, verify or follow up cases in court and other related matters under
the legal department. His superiors were dissatisfied with his performance. He was
neglectful of his duties. He frequently "played hooky," taking the rest of the day off and
not returning to the office after having performed his errands. His superiors exerted
reasonable efforts to instruct him and apprise him of the "standard of performance
required and explained to him" but "he frequently did not follow what was instructed
for him to accomplish." Notwithstanding efforts and instructions his performance
was way below what was required of him. He was also uncooperative toward his co-
employees and disrespectful to his superiors. After four months, Ramon received a
memorandum from the personnel division advising him of the termination of his
probationary employment
T h e Labor Arbiter ordered Meralco to reinstate Ramon. T h e N L R C sustained
the Labor Arbiter. T h e Company appealed.
Ruling: The National Labor Relations Commission gravely abused its discretion
in holding that the dismissal of Ramon after a probationary period of five months
instead of six, as provided in Article 280 of the Labor Code, was illegal, and in
ordering his reinstatement as probationary employee for a period of five months or

'International Catholic Migration Commission vs. National Labor Relations

Commission, G.R. N o . 72222, January 30, 1989.
Ibid.
Ibid.

737
 POST-EMPLOYMENT
ART. 281

a total of nine months of probationary employment. There was sufficient cause for
terminating his probationary employment after only four months.

International Catholic Migration Commission vs. National Labor Relations

Commission, G.R. N o . 72222, January 30, 1989 —
Facts: The International Catholic Migration Commission (ICMC) engaged the
services of Bernadette on January 24, 1983 as a probationary cultural orientation
teacher. Three months later, the I C M C informed her, orally and in writing, that her
services were being terminated for her failure to meet the prescribed standards
as reflected in the performance evaluation by her supervisors. Bernadette filed
a complaint for illegal dismissal and prayed for reinstatement with backwages,
exemplary and moral damages. T h e labor arbiter dismissed the complaint as well
as the complaint for damages but ordered I C M C to pay her P6,000 as payment for
the last three (3) months of the agreed employment period pursuant to her verbal
contract of employment. Both parties appealed.
The N L R C dismissed both appeals and sustained the labor arbiter's decision.
Must ICMC pay Bernadette her salary for the unexpired portion of her six-
month probationary employment?
Ruling: There was no circumvention of the rights of Bernadette when she was
informed of her termination. Her dismissal was not arbitrary, fanciful or whimsical.
She was duly notified that her services were terminated for failure to meet the
prescribed standards. The dissatisfaction of ICMC over her performance is a legitimate
exercise of its prerogative to select whom to hire or refuse employment for the success
of its program or undertaking.
The N L R C committed grave abuse of discretion in ordering I C M C to pay
Bernadette her salary for the unexpired three-month portion of her six-month
probationary employment when she was validly terminated during her probationary
period. To sanction such action would not only be unjust, but oppressive.
Failure to qualify as a regular employee in accordance with the reasonable
standards of the employer is a just cause for terminating a probationary employee
specifically recognized under Article 282 (now Article 281) of the Labor Code.
The termination of a probationary employee predicated on a just cause negates
the application of the rule on the right of security of tenure of a probationary
employee.

3. R I G H T S O F P R O B A T I O N A R Y EMPLOYEE; T E R M I N A T I O N O N L Y F O R
CAUSE
If an employee hired allegedly on probationary basis was not informed
of the standards that should qualify her as a regular employee, the e m p l o y e e is
1
d e e m e d to have been hired from day o n e as a regular employee.

^ i e l o vs. N L R C , 193 SCRA 410 (1991); Clarion Printing House, Inc., et al. vs.
NLRC, G.R. N o . 148372, June 27, 2005.

738
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 281

Probationary employees, notwithstanding their limited tenure, are also

entitled to security of tenure. Thus, except for just cause as provided by law, or
1
under the employment contract, a probationary employee cannot be terminated.

A.M. Oreta & Co., Inc. vs. National Labor Relations Commission, et al., G.R. N o .
74004, August 10, 1989 —
In all cases involving employees engaged on probationary basis, the employer
shall make known to the employee at the time he is hired, the standards by which he
will qualify as a regular employee. Nowhere in the employment contract executed
by the company and Grulla is there a stipulation that the latter shall undergo a
probationary period for three months before he can qualify as a regular employee.
T h e r e is no evidence on record showing that Grulla had been apprised of his
probationary status and the requirements he should comply with in order to be a
regular employee. Absent these requisites, there is justification in concluding that
Grulla was a regular employee at the time he was dismissed by the company. As such,
he is entitled to security of tenure during his period of employment. His services
cannot be terminated except for just and authorized causes enumerated under the
Labor Code and under the employment contract.
A probationary employee cannot be removed except for cause during the
period of probation. Although a probationary or temporary employee has limited
tenure, he still enjoys security of tenure. During his tenure of employment or before
his contract expires, he cannot be removed except for cause as provided for by law.

Manila Hotel Corporation vs. National Labor Relations Commission and Cruz, G.R.
N o . L-53453, January 22, 1986 —
Facts: R. L. Cruz was employed as gardener by Manila Hotel on "probation
status" effective September 22, 1976. T h e appointment signed by Cruz provided,
inter alia:
"3. This employment is for a probationary period of six (6) months
and subject to your submitting all necessary work permits and clearances such
as medical and security clearances. Your j o b performance and efficiency upon
the expiration of your probation shall be reviewed and appraised in accordance
with the H O T E L ' S and other generally accepted work standards. If you have
satisfactorily passed your probation, you will be reclassified to the regular roll.
"4. As soon as you become a regular employee, you will be entitled to
(a) number of benefits and privileges that have been instituted."
On March 20,1977, or a day before the expiration of the probationary period,
Cruz's position was "abolished" by Manila Hotel allegedly due to economic reverses or
business recession, and to salvage the enterprise from imminent danger of collapse.
Claiming that his dismissal was illegal and constitutes unfair labor practice,
Cruz filed a complaint against petitioner Manila Hotel.

'Phil. Federation of Credit Cooperatives, Inc. [PFCCI], et al. vs. NLRC, et al

mber 11, 1998, citing Agoy vs. NLRC, 252 SCRA 588 [1996].
G.R. N o . 121071, December

739
 POST-EMPLOYMENT
ART. 281

The Labor Arbiter ordered Manila Hotel to reinstate Cruz without loss of
seniority rights and other privileges, with backwages. Respondent was likewise ordered
to immediately reclassify him as a regular or permanent employee and issue the
corresponding appointment.
Petitioner appealed to the N L R C which later affirmed in toto the decision of
the Labor Arbiter.
Petitioner Manila Hotel now contends that respondent Commission (1)
unwarrantedly disregarded the fact that private respondent was a mere probationary
employee whose position could be abolished for cause; ( 2 ) unjustifiably refused to
consider the serious business reverses and uneconomic operation as a valid and
just cause for terminating the services of a probationary employee or abolishing his
position upon the expiration of the probationary employment.
Ruling: There is no dispute that as a probationary employee, private respondent
Cruz had but a limited tenure. Although on probationary basis, however, Cruz still
enjoys the constitutional protection on security of tenure. During his tenure of
employment, therefore, or before his contract expires, respondent Cruz cannot be
removed except for cause as provided for by law. This is categorically provided for
by Article 282 [now 281] of the Labor Code, which states: x x x
This security of tenure of a probationary employee finds added support in
the Biboso vs. Victorias Milling case for even as this Court ruled in that case that the
respondent public official did not commit grave abuse of discretion in dismissing
the teachers' claim for reinstatement following the expiration of their contracts, it
nevertheless held that —
This is by no means to assert that the security of tenure protection of
the Constitution does not apply to probationary employees. T h e Labor Code
has wisely provided for such a case thus: 'the termination of employment of
probationary employees and those employed with a fixed period shall be subject
to such regulations as the Secretary of Labor may prescribe to prevent the
circumvention of the right of die employees to be secured in their employment
as provided herein.' There is no question here as noted in the assailed order
of Presidential Executive Assistant Clave, that petitioners did not enjoy a
permanent status. During such period they could remain in their position and
any circumvention of their rights, in accordance with the statutory scheme, is
subject to inquiry and thereafter correction by the Department of Labor. Thus,
there was the safeguard as to their duration of employment being respected.
To that extent, their tenure was secure, x x x
What makes Cruz's dismissal highly suspicious is that it took place at a time when
he needs only but a day to be eligible as a regular employee. That he is competent finds
support in his being promoted to a lead gardener in so short span of less than six (6)
months. There is that strong presumption in his favor that his performance had been
satisfactory. By terminating his employment and/or abolishing his position with but
only one day remaining in his probationary appointment, petitioner deprived Cruz
of qualifying as a regular employee with its concomitant rights and privileges. Cruz

740
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 281

was also deprived of his only means of livelihood upon a vague and empty assertion
of "retrenchment."

4. LIMITATIONS TO T E R M I N A T I O N OF P R O B A T I O N ; REGULAR STATUS

AFTER P R O B A T I O N A R Y PERIOD
T h e employer's power to terminate a probationary employment contract
is subject to the limitations that: ( 1 ) it must be exercised in accordance with the
specific requirements of the contract; ( 2 ) if a particular time is prescribed, the
termination must be within such time and if formal notice is required, then that
f o r m must be used; ( 3 ) the employer's dissatisfaction must be real and in g o o d
faith, not feigned so as to circumvent the contract or the law; ( 4 ) there must be
1
no unlawful discrimination in the dismissal.
T h e standards of performance should be explained and accepted, and the
p e r f o r m a n c e should be appraised against those standards.
In the absence of any evaluation or valid extension, we cannot conclude
that respondent failed to m e e t the standards of performance set by the hotel for
a chief steward. Gatbonton had b e c o m e a regular employee. It is an elementary
rule in the law on labor relations that a probationary e m p l o y e e engaged to work
beyond the probationary p e r i o d of six months, as provided under Article 281
of the L a b o r C o d e , or for any length of time set forth by the employer (in this
case, three m o n t h s ) , shall be considered a regular employee. This is clear in the
2
last sentence of Article 281.

5. NO SUCCESSIVE P R O B A T I O N S
An e m p l o y e e w h o is allowed to work after a probationary period shall be
considered a regular e m p l o y e e . Thus, it was held in o n e case that the employee
( L i n a ) should be c o n s i d e r e d a regular e m p l o y e e on all counts. First, the
nature of her j o b as a parts clerk required her to p e r f o r m activities which are
d e e m e d necessary and desirable in the usual business of General Diesel Power
Corporation, in connection with dealing in parts, sales, and services. Second,
her e m p l o y m e n t was not covered by any apprenticeship agreement. Third, she
was rehired on May 22, 1985 and on February 20, 1986. This fact of rehiring
negates management's claim that she failed to qualify as a regular employee.
On the contrary, management p r o m o t e d her to parts clerk. Finally, at the risk
of being repetitious, Lina had been rehired to work not only after her first six-
month probationary p e r i o d from N o v e m b e r 21, 1984 to May 21, 1985, she had

•Manila Hotel Corporation vs. National Labor Relations Commission, G.R. N o .

53453, January 22, 1986.
2
Dusit Hotel Nikko vs. R.M. Gatbonton, G.R. N o . 161654, May 5,2006; See also:
Cebu Royal Plant (San Miguel Corporation) vs. T h e Honorable Deputy Minister of
Labor, et al, G.R. N o . L-58639, August 12, 1987.

741
 POST-EMPLOYMENT
ART. 281

been also rehired to work immediately after her second six-month probationary
period from May 22, 1985 to N o v e m b e r 21, 1985; and then again on January
20, 1986, she was rehired on a probationary status—her third—and was again
terminated on June 5, 1986.
Thus, we can readily see that Lina had been hired and again and again
rehired and again and again fired. We perceive these successive hirings and
firings as a ploy to avoid the obligations imposed by law on employers for the
protection and benefit of probationary employees, w h o , m o r e often than not,
are kept in the bondage, so to speak, of unending probationary e m p l o y m e n t
without any complaint due to the serious unemployment p r o b l e m besetting our
1
country today.

5.1 Probation in Sister Company

On the issue as to whether the private respondent is a probationary or
regular employee, the Court holds that the latter became a regular e m p l o y e e
upon completion of his six-month period of probation. Private respondent started
working on January 30, 1988 and c o m p l e t e d the said p e r i o d of probation on
July 27, 1988. Thus, at the time private respondent was dismissed on August 1,
1988, he was already a regular e m p l o y e e with a security of tenure. He could only
be dismissed for a just and authorized cause.
T h e Court cannot sanction the practice of some companies which, shortly
after a worker has b e c o m e a regular e m p l o y e e , effects the transfer of the same
employee to another entity whose owners are the same, or identical, in order to
deprive subject e m p l o y e e of the benefits and protection he is entitled to under
the law.
T h e r e is no basis for subjecting an e m p l o y e e to a new probationary or
temporary employment where he had already b e c o m e a regular e m p l o y e e when
2
absorbed by a sister company.

6. PERIOD OF P R O B A T I O N N O T NECESSARILY SIX M O N T H S

T h e provision of Article 281 that "probationary e m p l o y m e n t shall n o t
exceed six ( 6 ) months" means that the probationary e m p l o y e e may be dismissed
for cause at any time before the expiration of six ( 6 ) months after hiring.
But if he continues to be e m p l o y e d b e y o n d six ( 6 ) months, he ceases being a
probationary e m p l o y e e and b e c o m e s a regular or p e r m a n e n t e m p l o y e e . Six-
month probation, however, is a general rule. Probation l o n g e r than six months
can be justified.

'Octaviano vs. National Labor Relations Commission and General Diesel Power
Corporation, G.R. N o . 88636, October 3,1991. See also Cebu Royal Plant [San Miguel
Corporation] vs. Deputy Minister of Labor, G.R. N o . 58639, August 12, 1987.
2
A ' Prime Security Services, Inc. vs. N L R C , G.R. N o . 107320, January 19, 2000.

742
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 281

Buiser, et al. vs. Hon Vicente Leogardo, Jr. And General Telephone Directory Co.,
G.R. N o . L-63316, July 31, 1984 —
Generally, the probationary period of employment is limited to six (6) months.
T h e exception to this general rule is when the parties to an employment contract
may agree otherwise, such as when the same is established by company policy or
when the same is required by the nature of work to be performed by the employee.
In the latter case, there is recognition of the exercise of managerial prerogative in
requiring a longer period of probationary employment, such as in the present case
where the probationary period was set at eighteen (18) months, i.e., from May 1980
to October 1981 inclusive, especially where the employee must learn a particular
kind of work such as selling, or when the j o b requires certain qualifications, skills,
experience, or training.
In the case at bar, it is shown that private respondent Company needs at least
eighteen (18) months to determine the character and selling capabilities of the
petitioners as sales representatives. T h e Company is engaged in advertisement and
publication in the Yellow Pages of the P L D T Telephone Directories. Publication of
solicited ads are only made a year after the sale has been made and only then will
the company be able to evaluate the efficiency, conduct, and selling ability of its
sales representatives, the evaluation being based on the published ads. Moreover, an
eighteen-month probationary period is recognized by the Labor Union in the private
respondent company which is Article V of the Collective Bargaining Agreement, x x
x And as indicated earlier, the very contracts of employment signed and acquiesced
to by the petitioners specifically indicate that "the company hereby employs the
employee as telephone sales representative on probationary status for a period of
eighteen (18) months, i.e., from May 1980 to October 1981, inclusive." This stipulation
is not contrary to law, morals and public policy.
T h e practice of a company in laying off workers because they failed to make
1
the work quota has been recognized in this jurisdiction. In the case at bar, the
petitioners' failure to meet the sales quota assigned to each of them constitutes a
just cause of their dismissal, regardless of the permanent or probationary status of
their employment.

7. E X T E N S I O N OF P R O B A T I O N
M a y the e m p l o y e r a n d the e m p l o y e e validly a g r e e t o e x t e n d the
probationary p e r i o d beyond six months?
Mariwasa Manufacturing, Inc. vs. Hon. V. Leogardo, Jr., G.R. N o . 74246, January
26, 1989 —
Facts: Dequila was hired on probation by Mariwasa as a general utility worker on
January 10,1979. Upon expiration of the probationary period of six months, Dequila
was informed by his employer that his work had proved unsatisfactory and had failed

'Philippine American Embroideries vs. Embroidery and Garment Workers,

SCRA 634, 639.

743
 POST-EMPLOYMENT
ART. 281

to meet the required standards. To give him a chance to improve his performance
and qualify for regular employment, instead of dispensing with his service then and
there, Mariwasa, with his written consent, extended his probation period for another
three months. His performance, however, did not improve. On that account Mariwasa
terminated his employment at the end of the extended period.
Dequila's complaint for illegal dismissal was dismissed by the Director of the
Ministry's National Capital Region, who ruled that the termination of Dequila's
employment was justified.
T h e Minister of Labor, however, held that Dequila was already a regular
employee when he was dismissed, and therefore, could not have been lawfully
dismissed for failure to meet company standards as a probationary worker.
Ruling: The extension of Dequila's probation was ex gratia, an act of liberality
on the part of his employer affording him a second chance to make g o o d after having
initially failed to prove his worth as an employee. Such an act cannot now unjustly
be turned against said employer's account to compel it to keep on its payroll one
who could not perform according to its work standards. T h e law was never meant to
produce such an inequitable result.
By voluntarily agreeing to an extension of the probationary period, Dequila in
effect waived any benefit attaching to the completion of said period if he still failed
to make the grade during the period of extension. Nothing in the law prohibits such
a waiver. No public policy protecting the employee and the security of his tenure is
served by prescribing voluntary agreements which, by reasonably extending the period
of probation, actually improve and further a probationary employee's prospects of
demonstrating his fitness for regular employment.

8. LAST DAY OF P R O B A T I O N
W h e n the probationary period of an employee is, for example, "six months,"
when is its last day?
T h e Supreme Court has so far used two different computation methods in
three cases. Under the first method, a probation of, say, six months, ends on the
same date it started six months before. U n d e r the second m e t h o d it ends 180 days
from the starting date. T h e first method was followed in the CALS Poultry and Alcira
cases. T h e second method, the more recent, was adopted in Mitsubishi Motors.

CALS Poultry vs. Roco, G.R. N o . 150660, July 30, 2002 —

The probation was from May 16,1995 to November 15,1995; the 180th day was
November 11,1995. But the Court ruled that November 15,1995 (184th day) was still
within the 6-month period because the "computation of the 6-month probationary
period is reckoned from the date of appointment up to the same calendar date of the 6th
month following."

Alcira vs. NLRC and Middleby, G.R. N o . 149859, June 9, 2004 —

The probation was for 6 months starting May 20, 1996. T h e 180th day was
November 15,1996. But the Court ruled that on November 20,1996 (the 185th day)

744
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 281

when the employer terminated the probation the employee was still probationary.
Alcira quotes and reiterates the formula and the ruling in CALS Poultry.

T h e "180th day" m e t h o d which the Court rejected in CALS and Alcira was
adopted, however, in Mitsubishi.

Mitsubishi Motors vs. Chrysler Phil. Labor Union, G.R. N o . 148738, June 29,
2004 —
T h e Court explained that "the probationary period of six months means 180
days," in conformity with Article 13 of the Civil Code which provides that a "month"
undesignated by name is understood to consist of 30 days. Hence, the formula for 6
months probation is 30 days times 6 months equals 180 days. Using this formula in this
case of Mitsubishi the probation that started on May 27, 1996 ended on November
23, 1996, the 180th day. Thus, when the employer served the termination letter
dated November 25, 1996 on the employee at 3:00 A . M . on November 26, 1996 the
employee was, according to the Court, already "regular."

Mitsubishi, it should be noticed, is the latest of the three cases.

9. P R O B A T I O N OF TEACHERS
A c c o r d i n g to Policy Instructions N o . 11 issued by the Department of Labor
and Employment, "the probationary e m p l o y m e n t of professors, instructors and
teachers shall be subject to standards established by the Department of Education
1
and Culture."
Said standards are e m b o d i e d in paragraph 75 of the Manual of Regulations
for Private Schools, to wit: "Full time teachers w h o have r e n d e r e d three
2
consecutive years of satisfactory services shall be considered permanent."
T h e legal requisites, therefore, for acquisition by a teacher of permanent
employment, or security of tenure, are as follows: ( a ) the teacher is a full-time
teacher; ( b ) the teacher must have rendered three consecutive years of service;
3
and ( c ) such service must have been satisfactory.
T h e Manual of R e g u l a t i o n s also states that "a full-time teacher" is
"one whose total working day is devoted to the school, has no other regular
remunerative employment, and is paid on a regular monthly basis regardless of
the number of teaching hours;" and that in college "the normal teaching load
4
of a full-time instructor shall be eighteen hours a month."

'University of Sto. Tomas, et al. vs. National Labor Relations Commission, G.R.
N o . 85519, February 15, 1990.
Ibid.
Ibid.
Ibid.

745
 POST-EMPLOYMENT
ART. 281

A part-time member of the faculty cannot acquire permanent employment

1
under the Manual of Regulations in relation to the Labor C o d e .
T h e policy of the Bureau of Private Schools extending the probationary
employment of teachers to three years did not repeal or render inoperative
Article 282 [now 281] of the Labor C o d e which provides that "the services of
an employee who has been engaged on a probationary basis may be terminated
for a just cause or when he fails to qualify as a regular e m p l o y e e in accordance
with reasonable standards made known to the e m p l o y e e at the time of his
2
engagement."

9.1 Reversion from Full-time to Part-time Teacher

Bongar vs. National Labor Relations Commission and AMA Computer College, G.R.
No. 107234, August 24, 1998 —
Facts: Mr. Bongar was employed as instructor by respondent A M A Computer
College ( A M A ) . His employment contract, which was renewed several times,
commenced on November 28,1986 and ended on May 31,1990 when A M A decided
not to renew his contract which was due to expire on June 2, 1990.
Having served for more than three years, which is the probationary period for
teachers as provided for by the Manual of Regulations for Private Schools, petitioner
claimed that he had acquired the status of a permanent employee, hence entitled to
tenurial security. A M A , however, asserted that petitioner was hired on a contractual
basis and upon the termination of said contract without the same being renewed,
the employer-employee relation between them has ceased. Hence, petitioner could
not be considered to have been dismissed.
Furthermore, A M A contended that petitioner could not be classified as a
regular employee as he has served as full-time instructor only for two years and nine
and a half months, short of the three-year full-time service required by law.
The labor arbiter found the dismissal illegal and ordered the payment of
separation pay and backwages, but he did not order reinstatement because of
"strained relations" nor award damages. Both parties appealed to the N L R C which
later affirmed the arbiter's decision.
Ruling: It must be noted that the principal cause of petitioner's dismissal was
the alleged expiration of his teaching contract. This contention, however, is negated
by the fact that petitioner, as the record shows, had rendered service for nearly four
(4) years. AMA's contention that petitioner could not qualify as a regular employee
for failure to comply with the three-year full-time service rule is likewise unavailing.
On this point, we concur with the opinion laid down by the N L R C , to wit:
"If this line of reasoning (which we perceive to be too technical to serve
the ends of justice) is adopted in the process of determining the regularity of

'University of Sto. Tomas, et al vs. National Labor Relations Commission, G.R.

N o . 85519, February 15, 1990.
Ibid.

746
 TERMINATION OF EMPLOYMENT
[Part 2. Kinds of Employment]
ART. 281

a teacher's employment, the possibility of a teacher becoming infinitely non-

regular is not too far-fetched to expect. For all that an unscrupulous school has
to do to negate or render meaningless the rule on probationary employment, is
to inflexibly confine the recruitment or employment of its teachers to part-time
basis, or to revert as what happened to the complainant herein, an originally
full-time status to mere part-time basis to prevent in any way the incumbent
teacher from becoming regular, a subtle way of circumventing the Labor Code
provisions on probationary employment."

10. E M P L O Y M E N T C O N T R A C T S MOSTLY A D H E S I O N CONTRACTS

W h e t h e r the e m p l o y e e is probationary, contractual, regular, or even
a casual, the e m p l o y m e n t contract, m o r e often than not, is prepared by the
employer. This fact works against the employer, in a sense, because obscurity in
the contract is d e e m e d his fault. T h e civil law rule on interpretation of contracts
applies.
Article 1377 of the Civil C o d e provides:
T h e interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity."
This rule of interpretation is applicable to contracts of adhesion where
there is already a prepared f o r m containing the provisions of the employment
contract. T h e e m p l o y e e "takes it or leaves it. " T h e presumption is that there was
an imposition by o n e party against the other and that the employee signed the
contract out of necessity. (Cadalin, et al. vs. POEA, NLRC, et al, G.R Nos. 104776,
104911-14 and 105029-32, December 5, 1994.)
Thus, in Villanueva vs. NLRC, the Court ruled:
Notably, the respondent company prepared the contract of employment.
It was a contract of adhesion, and petitioner had only to adhere to it by signing
it. Its terms should be construed strictly against the party who prepared it.
Any ambiguity therein must be resolved against the respondent company,
especially because under Article 1702 of the Civil Code, in case of doubt, all
labor contracts shall be construed in favor of the laborer. We cannot allow the
respondent company to construe otherwise what appears to be clear from the
wordings of the contract. T h e interpretation which the respondent company
seeks to wiggle out is wholly unacceptable, as it would result in a violation of
petitioner's right to security of tenure guaranteed in Section 3 of Article XIII
of the Constitution and in Articles 279 and 281 of the Labor Code. (Villanueva
vs. NLRC, et al, G.R No. 127448, September 10, 1998.)

747
 Title I
TERMINATION OF EMPLOYMENT (Cont'd)
[Part 3 . MANAGEMENT RIGHTS AND THE JUST
CAUSES OF TERMINATION]
O v e r v i e w / K e y Questions B o x 22
1. "Serious misconduct" as a valid reason of dismissal
require certain elements. What are those?
2. If an employee, on ground of inconvenience, disobeys
an order transferring him to another location or j o b ,
may such e m p l o y e e be dismissed?
3. Is ignorance an excuse for having violated a company
policy or regulation?
4. U n d e r what c o n d i t i o n s or circumstances may an
employee be dismissed on ground of loss of confidence?

ART. 282. TERMINATION BY EMPLOYER

An employer may terminate an employment f o r any of the following
causes:
( a ) Serious misconduct or willful disobedience by the employee of
the lawful orders of his employer or representative in connection with his
work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in
him by his employer or duly authorized representative;
( d ) Commission of a crime or offense by the employee against the
person of his employer or any immediate m e m b e r of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
C O M M E N T S A N D CASES
I. MANAGEMENT RIGHTS
Whereas the preceding three articles emphasize the employee's right
to tenurial security, the next three articles uphold the employer's right to
terminate that tenure as circumstances warrant. H e r e are two differing rights.
This converse exemplifies the overarching character of labor relations: It is an

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[Part 3. Management Rights and the Just "
Causes of Termination]

unending challenge to balance the rights and interests of both the employer
and the employee. In law and management practice the wisdom in labor-
management relations lies in the Aristotelian G o l d e n Mean.
B e f o r e focusing on management's right to terminate employment, it
may be helpful to survey quickly some basic rights of management related to
management o f p e o p l e .

1. R I G H T TO MANAGE PEOPLE, IN GENERAL

Except as limited by special laws, an employer is free to regulate, according
to his own discretion and judgment, all aspects of employment, including hiring,
work assignments, working methods, time, place and manner of work, tools to
be used, processes to be followed, supervision of workers, working regulations,
transfer of employees, work supervision, layoff of workers and the discipline,
1
dismissal and recall of workers.
Every business enterprise endeavors to increase its profits. In the process,
it may adopt or devise means designed towards that goal. Even as the law is
solicitous of the welfare of the employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. T h e free will of
management to conduct its own business affairs to achieve its purpose cannot
2
be d e n i e d .
So l o n g as a company's prerogatives are exercised in g o o d faith for the
advancement of the employer's interest and not for the purpose of defeating
or circumventing the rights of the employees under special laws or under valid
3
agreements, the Supreme Court will u p h o l d them.
Equality of right exists between the employer and the employee. T h e rights
of a laborer to sell his labor to such persons as he may choose is, in its essence,
the same as the right of an employer to purchase labor from any person whom
it chooses. T h e employer and the e m p l o y e e have an equality of right guaranteed
by the Constitution. If the employer can c o m p e l the employee to work against
the latter's will, this is servitude. If the employee can c o m p e l the employer to
4
give him work against the employer's will, this is oppression.
T h e employer's obligation to give his workers just compensation and
treatment carries with it the corollary right to expect from the workers adequate
5
work, diligence, and g o o d conduct.

•San Miguel Brewery Sales vs. Ople, G.R. N o . 53515, February 8, 1989.
2
Ibid.
Ibid.
international Catholic Migration Commission vs. National Labor Relations
Commission, G.R. N o . 72222, January 30, 1989.
5
Coca-Cola Bottlers Philippines, Incorporated vs. National Labor Relations
Commission, et al, G.R. N o . 82580; Vega vs. National Labor Relations Commission,
et al, G.R. N o . 84075, April 25, 1989.
749
 POST-EMPLOYMENT
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2. THE RIGHT TO DISCIPLINE

T h e employer has the prerogative to instill discipline in his employees
and to impose reasonable penalties, including dismissal, on erring employees
1
pursuant to company rules and regulations.
It will be highly prejudicial to the interests of the employer to impose on him
the services of an employee w h o has been shown to be guilty of the charges that
warranted his dismissal. It will demoralize the rank-and-file if the undeserving,
2
if not undesirable, remains in the service.

3. THE R I G H T TO TRANSFER EMPLOYEES

First, some general principles on transfer. In a number of cases, the Court
has recognized and upheld the prerogative of m a n a g e m e n t to transfer an
employee from one office to another within the business establishment, provided
that there is no demotion in rank or a diminution of his salary, benefits and other
privileges. This is a privilege inherent in the employer's right to control and
manage its enterprise effectively. Even as the law is solicitous of the employees'
welfare, it cannot ignore the right of the employer to exercise what are clearly and
obviously management prerogatives. T h e freedom of management to conduct
3
its business operations to achieve its purpose cannot be d e n i e d .
It is the employer's prerogative, based on its assessment and perception of
its employees' qualifications, aptitudes, and c o m p e t e n c e , to m o v e them around
in the various areas of its business operations in order to ascertain where they will
function with maximum benefit to the company. An employee's right to security
of tenure does not give him such a vested right in his position as would deprive
the company of its prerogative to change his assignment or transfer him where
he will be most useful. W h e n his transfer is not unreasonable, nor inconvenient,
nor prejudicial to him, and it does not involve a d e m o t i o n in rank or diminution
of his salaries, benefits, and other privileges, the e m p l o y e e may not complain
4
that it amounts to a constructive dismissal.

'San Miguel Corporation vs. National Labor Relations Commission, G.R. N o .

87277, May 12, 1989.
2
Shoemart, Inc. vs. National Labor Relations Commission, G.R. N o . 74229,
August 11, 1989.
^ c o Chemical Industries vs. Ministry of Labor, G.R. N o . 75656, May 28, 1990.
Philippine Telegraph and Telephone Corporation, petitioner vs. Laplana,
Hon. Ricardo Encarnacion, and National Labor Relations Commission, respondents,
G.R. N o . 76645, July 23, 1991.

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[Part 3. Management Rights and the Just
Causes of Termination]

4. THE R I G H T TO DEMOTE
Petrophil Corporation vs. National Labor Relations Commission, A.B. Encarnacion
and Gersher Engineering Works, G.R. N o . L-64048, August 29, 1986 —
Encarnacion was working in Petrophil premises as a casual employee of Campos,
an independent contractor. In March 1976, Gersher Engineering Works replaced
Campos but retained Encarnacion in its (Gersher's) payroll.
On March 28, 1977, Gersher received a letter from Petrophil Corporation
complaining about the unsatisfactory performance of Encarnacion. As a result,
Gersher decided to reassign Encarnacion to Caltex Phil., Inc. with whom Gersher
had a contract also. But Encarnacion refused to be reassigned to Caltex unless he
would be given the same position of warehouseman as in Petrophil Corporation.
Ruling: Encarnacion was not dismissed but was only demoted and transferred
to Caltex Phil., Inc. because of his failure to observe proper diligence in his work,
and also because of his indolence, habitual tardiness and absences. But following his
demotion and transfer, Encarnacion refused to report for work anymore.
T i m e and again, this Office has sustained the view that it is management
prerogative to transfer, demote, discipline and even to dismiss an employee to protect
its business, provided it is not tainted with unfair labor practice.
T h e record, however, is bereft of any evidence to show that the demotion and
transfer of Encarnacion was due to unfair labor practice acts defined under Article
249 [now 248], hence the act of Gersher Engineering Works in transferring and
demoting complainant Encarnacion is anchored on just and valid grounds.

Note: On the power to d e m o t e , see also the International Harvester case (May
18, 1987) under the topic of Retrenchment.

5. T H E R I G H T T O DISMISS
T h e law in protecting the rights of the laborer authorizes neither oppression
nor self-destruction of the employer. W h i l e the Constitution is committed to
the policy of social justice and the protection of the working class, it should not
be supposed that every labor dispute will be automatically decided in favor of
labor. Management also has its own rights, which as such are entitled to respect
and enforcement in the interest of simple fair play. Out of its concern for those
with less privileges in life, the Supreme Court has inclined m o r e often than not
toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded the Court to rule that justice is in every
case for the deserving, to be dispensed in the light of the established facts and
1
applicable law and doctrine.

'Mercury Drug Corporation vs. National Labor Relations Commission, G.R.

N o . 75662, September 15, 1989. See also: Makati Haberdashery, Inc. vs. National
Labor Relations Commission, G.R. Nos. 83380-81, November 15, 1989.

751
 POST-EMPLOYMENT
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T h e right of the company to dismiss its employees is a measure of self-

1
protection.
5.1 Power to Dismiss N o t Absolute
T h e power to dismiss is the normal prerogative of the employer. An
employer, generally, can dismiss or lay off an employee for just and authorized
causes enumerated under Articles 282 and 283 of the L a b o r C o d e . However, the
right of an employer to freely discharge his employees is subject to regulation
by the State, basically in the exercise of its paramount police power. This is so
because the preservation of the lives of the citizens is a basic duty of the State,
2
more vital than the preservation of corporate profits.
T h e employer is bound to exercise caution in terminating the services
of his employees especially so when it is made upon the request of a labor
union pursuant to the Collective Bargaining A g r e e m e n t . Dismissals must not
be arbitrary and capricious. Due process must be observed in dismissing an
employee because it affects not only his position but also his means of livelihood.
Employers should, therefore, respect and protect the rights of their employees,
3
which include the right to labor.

II. J U S T CAUSES O F DISMISSAL

In the following pages the discussion will follow this sequence: the causes
of dismissal and separation, the procedure to terminate employment, and the
consequences of termination.

1. CAUSES OF DISMISSAL IN GENERAL

A company has the right to dismiss its erring employees if only as a measure
4
of self-protection against acts inimical to its interest.
Concededly, the employer's right to freely select or discharge his employees
is subject to regulation by the State basically in the exercise of its paramount
police power. But the employer cannot be legally c o m p e l l e d to continue with the
employment of a person w h o admittedly was guilty of misfeasance towards his
employer and whose continuance in the service of the latter is patently inimical
to his interest. T h e law in protecting the rights of the laborer authorizes neither
5
oppression nor self-destruction of the employer.

'Reyes vs. Minister of Labor, G.R. N o . 48705, February 9, 1989.

2
Manila Electric Company vs. National Labor Relations Commission, G.R. N o .
78763, July 12, 1989.
3
Rance, et al. vs. National Labor Relations Commission, G.R. N o . 68147, June
30, 1988.
"Filipro, Inc. vs. National Labor Relations Commission, G.R. N o . 70546, October
16, 1986.
b
Ibid.

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 TERMINATION OF EMPLOYMENT ART. 282
[Part 3. Management Rights and the Just
Causes of Termination]

T h e valid causes are called "just" under Article 282 and "authorized"
under Articles 283 and 284. T h e immediately following topics concentrate on
the just causes. Removal of e m p l o y e e under Article 282 is called "dismissal" or
"discharge"; if under Article 283 or 284, it is called "separation."

2. JUST CAUSE: SERIOUS M I S C O N D U C T

Misconduct is i m p r o p e r or w r o n g conduct. It is the transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere error in judgment.
T h e misconduct to be serious within the meaning of the A c t must be of such
a grave and aggravated character and not merely trivial or unimportant. Such
misconduct, however serious, must, nevertheless, be in connection with the
1
employee's work to constitute just cause for his separation.
Fitness for continued e m p l o y m e n t cannot be compartmentalized into
tight little cubicles or aspect of character, conduct, and ability separate and
independent of each other. A series of irregularities when put together may
constitute serious misconduct which, under Article 283 of the Labor C o d e , is a
2
just cause for dismissal.
T h e e m p l o y e r may dismiss an e m p l o y e e if the f o r m e r has reasonable
grounds to believe, or to entertain the moral conviction, that the latter is
responsible for the misconduct and the nature of his participation therein
renders him absolutely unworthy of the trust and confidence demanded by his
3
position.

2.1 Examples of Misconduct

T h e pressure and influence exerted by the petitioner (a college teacher)
on his colleague to change a failing g r a d e to a passing o n e , as well as his
misrepresentation that the student is his nephew, constitute serious misconduct,
4
which is a valid g r o u n d for dismissing an e m p l o y e e .
An e m p l o y e e w h o utters obscene, insulting or offensive words against a superior
may be dismissed. His act is a sufficient g r o u n d for dismissal. It is not only
destructive of his co-employees' morale and a violation of the company rules
and regulations, but also constitutes gross misconduct, a ground provided by
5
law for terminating an employee's services.

'Dept. of Labor Manual, Sec. 4343.01.

2
Piedad vs. Lanao del Norte Electric Cooperative, Inc., G.R. N o . 73735, August
31, 1987.
3
Filipro, Inc. vs. National Labor Relations Commission, G.R. N o . 70546, October
16, 1986.
4
Padilla vs. N L R C and San Beda College, G.R. N o . 114764, June 13, 1997.
5
Asian Design and Manufacturing Corporation vs. Hon. Deputy Minister of
Labor, G.R. N o . 70552, May 12, 1986.
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As a general rule, immorality on the part of an employee does not justify a

discharge therefor unless such conduct is prejudicial or in some way detrimental
to the employer's interests. T h e test is not morality in the abstract, but whether,
taking the nature of the employment into account, the immoral acts complained
of were such as to render the servant incapable of performing the service properly
or were calculated to injure the employer's business. In o n e case, it was held that
a railroad company was not bound to retain in its employ, as a conductor, a man
who brought disrepute upon himself or his employer by association with and
visits to an illicit bar, or w h o owned and leased a boat used with his knowledge
1
for purposes of prostitution.
In one case, the appellant, prior to his discharge was holding a responsible
position in the factory of the appellee. As supervisor, he had under him a number
of men. Because of his position, he was expected to set a g o o d example for his
men to follow and to exhibit such conduct worthy of emulation. Instead of living
up to these reasonable expectations, he g o t himself a young concubine and
virtually drove away the members of his family from the conjugal dwelling. T h e
2
Court held his separation justified.
Sleeping in post, gross insubordination, dereliction of duty and challenging
superior officers to a fight are grave offenses, considering the function of a
security guard which is to protect company property from pilferage or loss.
Challenging superior officers to a fight and insubordination on the part of the
employee are acts inimical to the interest of his employer. For having committed
such offense, Luzon Stevedoring had all the right to dismiss its erring employees
if only as a measure of self-protection. T h e suspensions were justified and we
3
cannot see how it could be a valid or justifiable cause for a strike.
T h e law implies various obligations and undertakings by an e m p l o y e e in
entering into a contract of employment. An e m p l o y e e w h o sells the product of
4
a competitor may be justifiably dismissed.

2.1a Illustrative Case: Sexual Harassment

Villarama vs. NLRC and Golden Donuts, Inc., G.R. N o . 106341, September 2,
1994 —
Facts: On July 15, 1989, petitioner Villarama (materials manager) was
charged with sexual harassment by Ms. D., a clerk-typist on probation assigned in his
department. The humiliating experience compelled her to resign from work. Her
letter-resignation, dated July 15, 1989, read: x x x

]
Adams vs. Southern P. Co., 204 Cal. 63, 266, p. 541, 57 A L R 1066.
2
Sanchez vs. Ang Tibay, 54 O.G. 4515.
'Luzon Stevedoring Corp. vs. CIR, et al, L-18683, December 31, 1965.
4
Elizalde International [Philippines], Inc. vs. Court of Appeals, 103 SCRA 247
[1981]. ™

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[Part 3. Management Rights and the Just *
Causes of Termination]

Last Friday, July 7, 1989, Mr. Villarama and Mr. de Jesus invited all the
girls of Materials Department for a dinner when in (sic) the last minute the
three (3) girls decided not to join the group anymore. I do (sic) not have
second thought(s) in accepting their invitation for they are my colle(a)gues
and I had nothing in mind that would in any manner prompt me to refuse to
what appeared to me as a simple and cordial invitation. We went to a restaurant
along Makati Avenue where we ate our dinner. Mr. Villarama, Mr. Olaybar and
Mr. de Jesus were drinking while we were eating and (they) even offered me a
few drinks and when we were finished, they decided to bring me home. While
on my way, I found out that Mr. Villarama was not driving the way to my house.
I was wondering why we were taking the wrong way until I found out that we
were entering a motel. I was really shock(ed). x x x
Ruling: Sexual harassment abounds in all sick societies. It is reprehensible
enough but more when inflicted by those with moral ascendancy over their victims.
We rule that it is a valid cause for separation from service.

In a similar case where the acts complained of occurred before the passage
of R . A . N o . 7877, the Court ruled that the manager's act of fondling the hand,
massaging the shoulder and caressing the nape of his secretary constitutes sexual
harassment viewed in its " c o m m o n connotation as it is generally understood by
the public." T h e Court upheld the L a b o r Arbiter's decision w h o observed that
the manager should w e l c o m e that his penalty was only 30-day suspension and
1
not termination as in Villarama vs. NLRC and Golden Donuts.

(Note: On February 14, 1995, RA. No. 7877orthe "Anti-Sexual Harassment Act
of 1995," was signed into law.)

2.2 Cause Found Inadequate

W h e r e the fisticuffs are plainly a private matter between two employees
which had no apparent deleterious effect on the substantial interests of the
company, the penalty of dismissal is not commensurate with the employee's
2
alleged misconduct.
T h e acts committed by an employee (a first offender) of vending, soliciting,
engaging in usurious activities do not warrant the drastic remedy of dismissal,
since the company rules and regulations merely provide the penalty of written
reprimand for the first offense, six (6) days suspension for the second offense,
3
and discharge for the third offense.

'Libres vs. N L R C , National Steel Corp., et al., G.R. N o . 123737, May 28, 1999.
^ o r t h Camarines Lumber Co., Inc. vs. Francisco Barreda, et al., G.R. N o .
75436, August 21, 1987.
3
Pacific Products vs. Pacific Products, Inc., G.R. N o . 51592, September 18,1987.

755
 POST-EMPLOYMENT
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Note: Contrast this case with Stanford Mirosystems, where dismissal, instead
of suspension for a first offense, was imposed and upheld. (See in Book VI
under the topic Appropriate Penalty.)

A shipmaster's statement in his report that he considered an employee to

be hot-tempered, and he was apprehensive said employee might get into trouble,
1
is not a ground for dismissal.
In another case, the Court held that borrowing money is neither dishonest,
nor immoral nor illegal, much less criminal. Private respondent (a hospital
e m p l o y e e ) paid the money she b o r r o w e d from a hospital patient. She was even
r e c o m m e n d e d for permanent appointment from her probationary status, from
clerk to secretary, by her immediate superior. T h e Court further said:
It may be added that she must have been compelled to borrow P50.00
from her patient because of economic necessity, which circumstance should
evoke sympathy from this Court, the very constitutional organ mandated
by the fundamental law to i m p l e m e n t the social justice guarantee for the
protection of the lowly, efficient and honest employee, w h o is economically
disadvantaged, like herein petitioner." (Medical Doctors, Inc. [Makati Medical
Center] vs. NLRC, Labor Arbiter Conrado Maglaya and Evelyn Elona, G.R No.
56633, April 24, 1985.) Note: This case was d e c i d e d en banc. Four Justices
dissented from the majority decision.

2.2a Teacher in Love with Student: The Heart has Reasons which Reason
Does Not Know
Chua-Qua vs. Hon. Jacobo C. Clave, et al., G.R. N o . L-49549, August 30, 1990 —
Facts: Evelyn had been employed in an educational institution in Bacolod City
as a teacher since 1963 and, in 1976 when this dispute arose, was the class adviser in
the sixth grade where one Bobby was enrolled. T h e teacher and the student (about
half the teacher's age) fell in love and eventually got married in accordance with the
rites of their religion.
On February 4, 1976, private respondent (school) filed with the sub-regional
office of the Department of Labor at Bacolod City an application for clearance
to terminate the employment of petitioner on the ground that her "abusive and
unethical conduct (is) unbecoming of a dignified school teacher and that her
continued employment is inimical to the best interest, and would downgrade the
high moral values, of the school."
Rulings: (1) Teacher falling in love with student, not immoral. — Even the labor
arbiter conceded that there was no direct evidence to show that immoral acts were
committed. Nonetheless, indulging in a patently unfair conjecture, he concluded
that "it is however enough for a sane and credible mind to imagine and conclude

'Abacast Shipping and Management Agency vs. National Labor Relations

Commission, G.R. N o . 81124, June 23, 1988.

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Causes of Termination]

what transpired during those times." In reversing his decision, the National Labor
Relations Commission observed that the assertions of immoral acts or conducts are
gratuitous and that there is no direct evidence to support such claim.
With the finding that there is no substantial evidence of the imputed immoral
acts, it follows that the alleged violation of the Code of Ethics governing school teachers
would have no basis. Private respondent (school) utterly failed to show that petitioner
took advantage of her position to court her student. If the two eventually fell in love,
despite the disparity of their ages and academic levels, this only lends substance to
the truism that the heart has reasons of its own which reason does not know. But,
definitely, yielding to this gentle and universal emotion is not to be so casually equated
with immorality. T h e deviation of the circumstances of their marriage from the usual
societal pattern cannot be considered as a defiance of contemporary social mores.
It would seem quite obvious that the avowed policy of the school in rearing
and educating children is being unnecessarily bannered to justify the dismissal of
petitioner. This policy, however, is not at odds with and should not be capitalized on
to defeat the security of tenure granted by the Constitution to labor. In termination
cases, the burden of proving just and valid cause for dismissing an employee rests
on the employer and his failure to do so would result in a finding that the dismissal
is unjustified.
( 2 ) Reinstatement, not possible. — T h e charge against petitioner not having
been substantiated, we declare her dismissal as unwarranted and illegal. It being
apparent, however, that the relationship between petitioner and private respondent
has been inevitably and severely strained, we believe that it would neither be to the
interest of the parties nor would any prudent purpose be served by ordering her
reinstatement.

2.3 Extra-marital Relationship as Immorality

In the p r e c e d i n g case the lovers are both unmarried. In another case, they
are both married teachers. T h e Supreme Court considers the affair immoral.
Sustaining the dismissal of the complainant employee, the Court said: "A teacher,
both in his personal and official conduct, must display exemplary behavior...
W h e n a teacher engages in extra-marital relationship, especially when the parties
are both married, such behavior amounts to immorality, justifying his dismissal
1
from employment."

2.3a Immoral Conduct Defined

Immoral conduct has been defined as that conduct which is so willful,
flagrant, or shameless as to show indifference to the o p i n i o n of g o o d and
respectable members of the community. Furthermore, such conduct must not
only be immoral, but grossly immoral. That is, it must be so corrupt as to constitute
a criminal act or so unprincipled as to be reprehensible to a high degree or committed under
such scandalous or revolting circumstances as to shock the common sense of decency.

'Santos, Jr. vs. N L R C and Hagonoy Institute, G.R. N o . 115795, March 6, 1998.
2
Narag vs. Narag, A C . N o . 3405, June 29, 1998.
757
 POST-EMPLOYMENT
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2.4 Being the Spouse of a Co-employee

May an employee be dismissed for being married to a co-employee?
Respondents (complainant employees) were hired after they were found
fit for the j o b , but were asked to resign when they each married co-employees.
They resisted and assailed the alleged company policy.
T h e employer contends that its policy will apply only when o n e employee
marries a co-employee, but employees remain free to marry persons other than
co-employees.
T h e questioned policy may not facially violate Article 136 of the Labor
C o d e , but it creates a disproportionate effect and under the disparate impact
theory, the only way it could pass judicial scrutiny is a showing that it is reasonable
despite the discriminatory, albeit disproportionate, effect. T h e failure of [the
employer] to prove a legitimate business concern in imposing the questioned policy
cannot prejudice the employee's right to be free from arbitrary discrimination
based upon stereotypes of married persons working together in o n e company.
Lastly, the absence of a statute expressly prohibiting marital discrimination
in our jurisdiction cannot benefit the petitioners. T h e protection given to labor
in our jurisdiction is vast and extensive that we cannot prudently draw inferences
from the legislature's silence that married persons are n o t protected under
our Constitution and declare valid a policy based on a prejudice or stereotype.
Thus, for failure of [the e m p l o y e r ] to present undisputed p r o o f of a reasonable
business necessity, we rule that the questioned policy is an invalid exercise of
1
management prerogative.

3. JUST CAUSE: WILLFUL DISOBEDIENCE

It is the e m p l o y e r ' s p r e r o g a t i v e to p r e s c r i b e r e a s o n a b l e rules a n d
regulations necessary or proper for the conduct of its business, to provide certain
disciplinary measures to i m p l e m e n t said rules and to assure that the same be
complied with.
In order that the willful disobedience by the employee may constitute a just
cause for terminating his employment, the orders, regulations, or instructions
of the employer or representative must be:
(1) reasonable and lawful;
( 2 ) sufficiently known to the e m p l o y e e ; and
( 3 ) in connection with the duties which the e m p l o y e e has been engaged
to discharge.
Where an order or rule is not reasonable, in view of the terms of the contract
of employment and the general rights of the parties, a refusal to obey does not
constitute a just cause for the employee's discharge. As to what is a reasonable

'Star Paper Corp., et al. vs. Simbol, et al, G.R. N o . 164774, April 12, 2006.

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[Part 3. Management Rights and the Just
Causes of Termination]

order or rule will d e p e n d on the circumstances of each case. Reasonableness,

however, has reference not only to the kind and character of directions and
commands, but also to the manner in which they are made. T h e employee's
disobedience, in order to justify his dismissal under this provision, must relate
to substantial matters, not merely to trivial or unimportant matters. Further,
disobedience to be considered willful must be resorted to without regard to its
1
consequences.
A n y employee may be dismissed for violation of a reasonable company
rule or regulation for the conduct of the latter's business, such as a rule which
prohibits employees from using company vehicles for private purpose without
2
authority from m a n a g e m e n t or rules and regulations of the company designed
for the safety of the laborers themselves. Thus, in o n e case where a painter in
the company's factory was dismissed for having smoked in the painting booth,
contrary to rules and regulations prescribed by the company, the Court held his
3
dismissal justified.

3.1 Valid Termination: Employer's Policy Enforceable Despite Union's

Objection
GTE Directories Corp. vs. Sanchez, et. al., G.R. N o . 76219, May 27, 1991 —
Fourteen sales representatives of GTE deliberately refused to submit the reports
required by the company's sales policy, which policy was being objected to by the
union. While the dispute was under conciliation by D O L E , the employer proceeded
with the dismissal of the disobedient sales representatives. T h e Minister of Labor
declared that the employer acted in bad faith, so he invalidated the dismissal. GTE
brought the case to the High Court.
Disagreeing with the Minister, the Court observed that, in fine, the Minister's
thesis is that an employer may lay down policies and rules but may not demand
compliance when employees question the propriety or feasibility of those rules or
policies. T h e High Court further said:
It does not follow that just because the employees or their union are
unable to realize or appreciate the desirability of the employer's policies or
rules, the latter were laid down to oppress the former and subvert legitimate
labor union activities. Indeed, the employees' defiance of the authority of their
employer left the latter with no alternative except to impose sanctions. The
sanction of suspension having proved futile, termination of employment was
the only option left to the employer.
"It would be a dangerous doctrine indeed to allow employees to refuse to
comply with rules and regulations, policies and procedures laid down by their

'Dept. of Labor Manual, Sec. 4343.01 [ 2 ] .

2
Soco vs. Mercantile Corporation, G.R. Nos. 53364-65, March 16, 1987.
'Northern Motors, Inc. vs. National Labor Union, G.R. N o . L-l0022, January
31, 1958.

759
 POST-EMPLOYMENT
ART. 282

employer by the simple expedient of formally challenging their reasonableness

or the motives which inspired them, or by filing a notice of strike with the Labor
Secretary, or what amounts to the same thing, to give employees the power
to suspend compliance with company rules and policies by requesting that
they be first subject to collective bargaining. It would be well nigh impossible
under these circumstances for any employer to maintain discipline in its
establishment."

3.2 Elements of Disobedience

Gold City Integrated Port Services, Inc. vs. National Labor Relations Commission, et
al., G.R. N o . 86000, September 21, 1990 —
Facts: The management, suspecting undermeasuring of cargo, ordered two
other admeasurers to remeasure three (3) pallets of bananas already measured by
Bacalso. The remeasurement revealed that Bacalso under-measured the bananas by
1.427 cubic meter.
Bacalso felt insulted by the remeasurement. In the office of the Chief
Admeasurer, Mr. G u a n g c o , he c o n f r o n t e d Mabalacad, o n e of the two ( 2 )
admeasurers who had rechecked his work. A quarrel ensued between Bacalso and
Mabalacad in the presence of Guangco, their immediate superior. Guangco told
Bacalso to stop provoking Mabalacad and asked them that, being in his office, they
should behave properly. Bacalso ignored this oral directive and a fistfight erupted
then and there between him and Mabalacad. Both were eventually pacified by their
co-workers.
Bacalso was charged with assaulting a co-employee and falsifying reports and
records of the company relative to the performance of his duties, and was preventively
suspended pending investigation of his case. On April 11, 1987, Bacalso received a
notice of termination of services upon the grounds of assaulting a co-employee and
of insubordination.
Rulings: (1) Willful Disobedience.—Willful disobedience of the employer's lawful
orders, as a just cause for the dismissal of an employee, envisages the concurrence
of at least two (2) requisites: the employee's assailed conduct must have been willful
or intentional, the will-fulness being characterized by a "wrongful and perverse
attitude"; and the order violated must have been reasonable, lawful, made known to
the employee and must pertain to the duties which he had been engaged to discharge.
Both requisites are present in the instant case.
Bacalso completely disregarded the courtesy and respect due from a subordinate
to his superior. Indeed, he may have been, consciously or otherwise, precisely sending
a signal to his superior officer in whose presence he provoked and then engaged
in physical violence with his co-worker. Prior to the fistfight, Guangco had warned
Bacalso to desist from further provoking his co-worker with insulting language. This
warning constituted an order from Bacalso's immediate superior not to breach the
peace and order of the Surveyors (Admeasurers') Division; Guangco was obviously
attempting to maintain basic employee discipline in the workplace.

760
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[Part 3. Management Rights and the Just
Causes of Termination]

(2) Suspension, Not Dismissal. — It does not follow, however, that Bacalso's
services were lawfully terminated either under Article 282(a) of the Labor Code or
under the CBA Schedule of penalties. We believe that not every case of insubordination
or willful disobedience by an employee of a lawful work-connected order of the employer or its
representative is reasonably penalized with dismissal Article 282(a) refers to "serious
misconduct or willful disobedience." There must be reasonable proportionality between
the offense and the penalty imposed therefor.

3.3 Disobeying an O r d e r to Transfer

T h e p r e c e e d i n g Gold City case has enumerated two requisites that must
concur so that willful disobedience may serve as an adequate and valid reason
to dismiss an e m p l o y e e . T h o s e two requisites pertain to ( 1 ) the employee's
attitude — wrongful and perverse, and ( 2 ) the qualities of the order — lawful,
reasonable, m a d e known to the e m p l o y e e , and pertain to the duties of the
employee.
T h e s e requisites n e e d to be observed — perhaps with greater prudence —
before dismissing an e m p l o y e e w h o disobeys an order transferring him from one
j o b or o n e location to another. T h e disobedience and the consequent dismissal
may or may not be valid d e p e n d i n g on the presence of those two requisites.
Disobedience of a valid transfer o r d e r may justify dismissal; disobedience of an
invalid transfer o r d e r does not.

3.3a Valid Transfer

M a n a g e m e n t has the right to transfer or reassign an employee.
T h i s right flows f r o m ownership and f r o m the established rule that
labor d o e s n o t authorize the substitution of j u d g m e n t of the e m p l o y e r in
the c o n d u c t of his business, unless it is shown to be contrary to law, morals
1
or public policy.
T h e right of the employer to transfer the employees in the interest of the
efficient and e c o n o m i c operation of its business cannot be seriously challenged.
That is its prerogative. T h e only limitation on the discretion of management in
this regard is its mala fides. T h e only time the employer cannot exercise this right
is where it is vitiated by i m p r o p e r motive and is merely a disguised attempt to
2
remove or punish the e m p l o y e e sought to be transferred.

'Abbot Laboratories vs. National Labor Relations Commission, G.R. N o . 76959,

October 12, 1987.
2
Bank of the Philippine Islands vs. National Labor Relations Commission, G.R.
Nos. 69746-47; Bank of the Philippine Islands Employees Union vs. National Labor
Relations Commission, G.R. Nos. 78842-44; Associated Labor Unions vs. National
Labor Relations Commission, G.R. Nos. 76916-17, March 31, 1983.

761
 POST-EMPLOYMENT
ART. 282

T h e d e m o t i o n of an e m p l o y e e and his transfer to another place of

work because of his failure to observe proper diligence in his work, and of his
1
indolence, habitual tardiness and absences do not constitute dismissal.

Abbot Laboratories vs. National Labor Relations Commission, G.R. N o . 76959,

October 12, 1987 —
Facts: AB, employed in Abbot in May 1982 as a medical representative, received
instruction in 1983 transferring him from Manila to Cagayan Valley. AB objected.
The company explained that it was company practice to reassign its "med reps" from
one territorial area to another. Moreover, in his application for employment AB had
agreed to accept assignment anywhere in the Philippines. Still AB did not comply.
Ultimately he was dismissed for disobedience.
Is the transfer order valid? Is the disobedience justified?
Ruling: AB had no valid reason to disobey the order of transfer. He had
tacitly given his consent to the transfer when he acceded to the employer's policy of
hiring sales staff who are willing to be assigned anywhere in the Philippines which is
demanded by the employer's business.
By the very nature of his employment, a drug salesman or medical representative
is expected to travel. He should anticipate reassignment according to the demands
of the business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to
areas where the need for pushing its products is great. More so if such reassignments
are part of the employment contract.

3.3b Invalid Transfer

Like other rights, there are limits to the managerial prerogative to transfer
personnel. It must be exercised without grave abuse of discretion, putting to
mind the basic elements of justice and fair play. Having the right should not be
confused with the manner in which that right must be exercised. Thus, it cannot
be used as a subterfuge by the employer to rid himself of an undesirable worker.
N o r when the real reason is to penalize an e m p l o y e e for his union activities and
thereby defeat his right to self-organization. But the transfer can be upheld when
there is no showing that it is unnecessary, inconvenient and prejudicial to the
2
displaced employee.
T h e Yuco Chemicalc3.se, contrasted to Abbot, illustrates an invalid exercise of
the power to transfer. T h e employees' right to unionize appears to be superior
to the management's right to transfer employees.

'Petrophil Corporation vs. National Labor Relations Commission, G.R. N o .

64048, August 29, 1986.
2
See Pocketbell Philippines, Inc. vs. N L R C and Arthur Alinas, G.R. N o . 106843,
January 20, 1995.

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[Part 3. Management Rights and the Just *
Causes of Termination]

Yuco Chemical Industries, Inc. vs. Ministry of Labor and Employment, et al., G R
N o . 75656, May 28, 1990 —
T h e reassignment of complainant employees Halili and Magno to Manila is
legally indefensible on several grounds. Firstly, it was grossly inconvenient to them.
They are working students. When they received the transfer memorandum directing
their relocation to Manila within seven days from notice, classes had already started.
T h e move from Tarlac to Manila at such time would mean a disruption of their
studies. Secondly, there appears to be no genuine business urgency that necessitated
their transfer. As well pointed out by private respondents' counsel, the fabrication
of aluminum handles for ice boxes does not require special dexterity. Many workers
could be contracted right in Manila to perform that particular line of work.
Altogether, there is a strong basis for public respondent's conclusion that the
controversial transfer was not prompted by legitimate reasons. Petitioner company
had indeed discriminated against Magno and Halili when the duo was selected for
reassignment to Manila. T h e transfer was timed at the height of union concerted
activities in the firm, deliberately calculated to demoralize the other union members.
Under such questionable circumstances, private respondents had a valid reason to
refuse the Manila reassignment. Public respondent did not err or abuse his discretion
in upholding the employees' cause.

3.3c M a y an E m p l o y e e Disobey an Inconvenient Transfer?

It is now clear that an employee's transfer is invalid if it is d o n e for an
illicit or underhanded purpose, such as to defeat the employees' right of self-
organization, or to penalize an e m p l o y e e for union activities, or to remove an
undesirable e m p l o y e e . To r e m o v e an e m p l o y e e requires a valid reason and a
valid procedure. Dismissal disguised as transfer is not the legal m o d e to dismiss
a worker.
T h e difficulty lies in the situation w h e r e no such illicit, i m p r o p e r or
underhanded purpose can be ascribed to the employer, but the employee is
opposing the transfer on ground of inconvenience or hardship that the transfer
will cause to the e m p l o y e e or his family. In such a situation may the employer
insist on enforcing the transfer order to the extent of dismissing the objecting
employee? Or may the e m p l o y e e disobey the order as unlawful or unreasonable
and charge the employer with illegal dismissal?
These questions the Court resolved, through Mr. Justice Hermosisima, in
Homeowners Savings.
Homeowners Savings and Loan Association, Inc. vs. NLRC and M. Cabatbat, G.R.
N o . 97067, September 26, 1996 —
Facts: T h e complainant employee ( M . Cabatbat) has been assigned as an
accountant in the employer bank's branch at San Carlos (Pangasinan). She received
a memorandum from the head office transferring her to Urdaneta (Pangasinan). She
would be reimbursed the cost of transportation and would receive a salary increase.

763
 POST-EMPLOYMENT
ART. 282

She asked that the transfer be deferred because she was sixth-month pregnant.
The request was granted. But after the delivery she still refused to comply with the
transfer order. She reasoned that the transfer would entail additional expenses and
physical exhaustion since San Carlos is only about five or six kilometers away from
her residence in Calasiao (Pangasinan) while Urdaneta is thirty kilometers away. T h e
bank explained why her services were needed in Urdaneta.
She still did not comply with the transfer order. Eventually the Bank terminated
her employment.
The transfer, admittedly, would inconvenience the complainant. Was her non-
compliance justified? T h e labor arbiter said no, the N L R C said yes.
Ruling: This was the very same situation we faced in Phil. Telegraph and Telephone
Corp. vs. Laplana. In that case, the employee, A. Laplana, was a cashier at the Baguio
City Branch of P T & T who was directed to transfer to the company's branch office at
Laoag City. In refusing the transfer, the employee averred that she had established
Baguio City as her permanent residence and that such transfer will involve additional
expenses on her part, plus the fact that an assignment to a far place will be a big
sacrifice for her as she will be kept away from her family which might adversely affect
her efficiency. In ruling for the employer, the Court upheld the transfer from one
city to another within the country as valid as long as there is no bad faith on the part
of the employer. We held then:
"Certainly the Court cannot accept the proposition that when an
employee opposes his employer's decision to transfer him to another workplace,
there being no bad faith or underhanded motives on the part of either party,
it is the employee's wishes that should be made to prevail."
Surely, private respondent Cabatbat is better situated than Laplana in the
above-cited case. T h e distance between her new assignment in Urdaneta, Pangasinan,
and her place of residence in Malabago, Calasiao, Pangasinan, is only about thirty
(30) kilometers. On the other hand, the distance between Baguio City and Laoag
City is definitely beyond thirty (30) kilometers. Since we ruled that the transfer of
Laplana from Baguio to Laoag was valid, we see no reason to resolve that the transfer
of Marilyn from San Carlos to Urdaneta is improper, absent any showing of bad faith
on the part of petitioner corporation in effecting the transfer. Private respondent's
refusal to obey the transfer order constitutes willful disobedience of a lawful order of her
employer sanctioned under Article 282 of the Labor Code and, therefore, warrants
dismissal.

In the cases of Abbot ( 1 9 8 7 ) , of Philippine-Japan Active Carbon ( 1 9 8 9 ) ,

of PT&T ( 1 9 8 9 ) , and of Homeowners' Savings ( 1 9 9 6 ) , the transfer orders all
meant i n c o n v e n i e n c e ( e v e n embarrassment) to the e m p l o y e e s c o n c e r n e d ,
and yet the C o u r t sustained the validity and enforceability of the transfer
order, hence, the disobeying e m p l o y e e s w e r e validly dismissed. But in the
case of Escobin (1998) w h e r e the e m p l o y e e guards in M i n d a n a o w e r e told
to report to the Manila office for reassignment in M e t r o Manila, the Court

764
 TERMINATION OF EMPLOYMENT ART 282
[Part 3. Management Rights and the Just *
Causes of Termination]

invalidated the o r d e r ; that is, the e m p l o y e e s should not have been dismissed.
W h a t explains the difference?

Escobin, et al. vs. NLRC, Peftok Integrated Services, Inc. (PISI), et al, G.R. N o
118159, April 15, 1998 —
Facts: Some seventy security guards of PISI were assigned to UP-NDC Basilan
Plantation. When placed under the agrarian reform program, the plantation had to
reduce the number of security guards. Fifty-seven of them were placed on "floating
status." While in that status they were instructed to report to PISI head office at San
Juan, M . M . for posting to clients in Metro Manila. T h e guards did not reply nor
comply. PISI reiterated the instruction and threatened the guards with disciplinary
action. Still, no reply or compliance. PISI terminated their employment on ground
of insubordination or willful disobedience. Late in the day, they wrote the PISI
general manager that they had no intention to abandon their employment, nor to
defy fair, reasonable and lawful orders. They complained of illegal termination by
way of constructive dismissal.
Labor Arbiter Rhett Julius J. Plagata found that complainants are residents
of Basilan, have families in Basilan, have never been assigned beyond Mindanao
or Visayas, were not provided with fare money. Neither were they assured of
compensation similar to what they used to receive in Basilan, nor of continued
posting while in Manila. Their transfer would surely entail great inconvenience to
complainants and their families.
Thus, the labor arbiter held that the transfer order was unreasonable and,
therefore, could not be sustained. On appeal the N L R C reversed the Labor Arbiter's
decision, holding that petitioners' refusal to comply with said Order and their "wanton
disregard of the order to explain their inability to x x x comply and obey lawful orders
from their employer" constituted the "proximate cause for their dismissal."
Ruling: T h e Court set aside the N L R C decision and reinstated that of the Labor
Arbiter. In the distinctive decision-writing style of Mr. Justice (later Chief Justice)
Panganiban the Court said:
First, it was grossly inconvenient for petitioners, who were residents and
heads of families residing in Basilan, to commute to Manila.
Second, petitioners were not provided with funds to defray their
transportation and living expenses. Petitioners, not unknown to their employer,
earned only P I ,500 to P2.500 a month before they were placed on reserve status,
after which they remained jobless. Furthermore, being residents of Basilan,
petitioners would have required living arrangements in Manila which, in turn,
would have entailed additional expenses on their part.
Third, private respondent argues that it sent transportation money to
petitioners. However, the recipients of such funds are not parties in this case.
Moreover, the alleged transportation allowance was given only after petitioners
had already been terminated from service. T h e letter purportedly granting
transportation allowance to other security guards was dated August 12, 1991,
which was after petitioners had been dismissed June 28, 1991.

765
 POST-EMPLOYMENT
ART. 282

Fourth, no reason was given by private respondent company explaining

why it had failed to inform petitioners of their specific security assignments
prior to their departure from Basilan. If indeed the postings were to be made in
Basilan, there would have been no necessity for petitioners to report to Manila
and no justification for respondent's insistence on their compliance with its
directive. Since private respondent did not provide transportation and living
allowances, and since, in the first place, petitioners could have been easily
informed of their new assignments right there in Basilan, there was no reason
for petitioners to travel all the way to Manila.
x x x It is obvious to us that the dismissal was effected with mala fides, as
it was intended to punish petitioners for their refusal to heed their employer's
unreasonable directive, [emphasis supplied]. Respondent Commission therefore
committed grave abuse of discretion in holding that petitioners were dismissed
for a just cause.

To summarize: I n c o n v e n i e n c e to the e m p l o y e e d o e s n o t necessarily

invalidate a transfer order, as shown in the Homeowners' Savings and the other
cases already mentioned. But inconvenience caused by unreasonableness of the
transfer order makes the order itself invalid, and disobedience thereof is not a
reason to dismiss the worker. In other words, although m e r e inconvenience does
not justify disobedience to a transfer order, the transfer o r d e r itself becomes
flawed and unenforceable if it fails the criteria of lawfulness and reasonableness.
This conclusion we deduce from the Escobin case. Also in Escobin the Court repeats
this reminder:
T h e reasonableness and lawfulness of a rule, o r d e r or instruction
depend on the circumstances availing in each case. Reasonableness pertains
to the kind or character of directives and commands and to the manner
in which they are made.
In the Escobin case, the order to report to the Manila office fails to meet
this standard.
American jurisprudence provides pertinent precedents. T h e courts have
occasionally given consideration to disputes as to whether the e m p l o y e e is
obligated by his contract of employment to p e r f o r m service at a place other than
that at which he was hired or c o m m e n c e d work. T h e question is to be resolved,
of course, with a view to the terms of the contract of employment, the nature
of the service to be p e r f o r m e d , and the attending circumstances which disclose
the intention of the parties. In c o m e cases, the decision is controlled by the
showing as to whether the stipulated work relates to the employer's person or
household, or merely to his business. W h e r e the contract of employment requires,
or is understood to require, that the employee's services are to be p e r f o r m e d
in a certain city or locality, he cannot be required to work elsewhere. W h e r e a
contract—such as that of a commercial traveler—expressly specifies the territory

766
 TERMINATION OF EMPLOYMENT ART 282
[Part 3. Management Rights and the Just *
Causes of Termination]

within which the services are to be rendered, it contemplates the performance

of work only in the places mentioned, and the employee is not bound to do any
1
work outside the stipulated boundary.

3.3d Change of Position and Work

Similar to the p r o b l e m of relocation is the issue of position change or j o b
redefinition, say from cashier to collector or from clerk to technician.
T h e e m p l o y e e , a female, complained of constructive dismissal because
she was o r d e r e d by her employer to assume the j o b of Bill Distributor which,
she claimed, was a substantial d e m o t i o n in rank. She pointed out that the bill
distributor j o b was fit for a male because it requires travel to distribute electric
bills to consumers, something she did not have to do in her position as Property
Custodian under the general manager's office. Because she continued to defy
the order, the employer dismissed her.
T h e S u p r e m e C o u r t h e l d the dismissal valid. T h e records show the
e m p l o y e r ' s explanation and e v i d e n c e that there was a restructuring of the
organization after a t h o r o u g h review by m a n a g e m e n t of the indispensable
and unessential positions. It was undertaken to address the requirements of
an automated system and to streamline operations. T h e revamp abolished the
property custodian position, and in fact, its functions had already been absorbed
by other offices about two years before complainant was told to assume the bill
distributor j o b . T h e Court was satisfied that the abolition of the position was done
in g o o d faith, for valid and legitimate grounds. T h e employer, the Court said,
was able to m e e t its burden of proving that the transfer was not unreasonable,
inconvenient or prejudicial to the e m p l o y e e and that it did not involve demotion
in rank or diminution of salary, privileges or other benefits. T h e Court refused
to invalidate the employer's transfer just because it was against her wishes and
2
not commensurate to her self-worth or personal qualifications.
Likewise lawful was the e m p l o y e r ' s transfer of an e m p l o y e e from the
position of "Appraiser" to "Clerk-Meralco Collection" without change in salary,
allowances and other benefits. T h e employer was able to prove that the reshuffle
of personnel was intended "to familiarize the bank employees with the various
phases of operation, and to further strengthen the existing internal control
system of the bank." T h e court did not find that the transfer was motivated by
discrimination or bad faith or that it was d o n e as a punishment or demotion
without sufficient cause. T h e complainant e m p l o y e e was not dismissed nor
constructively dismissed. It was the e m p l o y e e w h o , while on extended leave of
absence, in effect separated himself from the bank's employ by filing the illegal
dismissal complaint.

'35 Am Jur. P. 455.

2
Benguet Electric Cooperative vs. J. Flanza, G.R. N o . 158606, March 9, 2004.

767
 POST-EMPLOYMENT
ART. 282

In upholding the employer's transfer order to the employee, the Court

reiterated the "test for determining the validity of transfer" of employees as
explained in the 1999 case of Blue Dairy Corp. vs. NLRC}

3.3e Test of Validity of Transfer

Blue Dairy Corp. vs. NLRC and E.R Recalde, G.R. N o . 129843, September 14,
1999 —
Indeed, it is the prerogative of management to transfer an employee from
one office to another within the business establishment based on its assessment and
perception of the employee's qualifications, aptitudes and competence, and in order
to ascertain where he can function with maximum benefit to the company. This is
a privilege inherent in the employer's right to control and manage his enterprise
effectively. The freedom of management to conduct its business operations to achieve
its purpose cannot be denied.
But, like other rights, there are limits thereto. T h e managerial prerogative
to transfer personnel must be exercised without grave abuse of discretion, bearing
in mind the basic elements of justice and fair play. Having the right should not
be confused with the manner in which that right is exercised. Thus, it cannot be
used as a subterfuge by the employer to rid himself of an undesirable worker. In
particular, the employer must be able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; nor does it involve a demotion in rank
or a diminution of his salaries, privileges and other benefits. Should the employer
fail to overcome this burden of proof, the employee's transfer shall be tantamount
to constructive dismissal, which has been defined as a quitting because continued
employment is rendered impossible, unreasonable or unlikely; as an offer involving a
demotion in rank and diminution in pay. Likewise, constructive dismissal exists when
an act of clear discrimination, insensibility or disdain by an employer has become
so unbearable to the employee leaving him with no option but to forego with his
continued employment.
In the present case, petitioners failed to justify Recalde's transfer from the
position of food technologist in the laboratory to a worker in the vegetable processing
section. We recall that what triggered Recalde's transfer was the 21 October incident
where she was found to have allegedly utilized company vehicle in looking for a new
residence during office hours without permission from management. In petitioners'
view, she was dishonest such that they lost their trust and confidence in her, Yet, it
does not appear that Recalde was provided an opportunity to refute the reason for
the transfer.
As food technologist in the laboratory, she occupied a high technical position
requiring use of her mental faculty. As a worker in the vegetable processing section,
she performed mere mechanical work. It was virtually a transfer from a position of dignity
to a servile or menial j o b . We agree with the observation of the Office of the Solicitor
General that the radical change in Recalde's nature of work unquestionably resulted

'Mendoza vs. Rural Bank of Lucban, G.R. N o . 155421, July 7, 2004.

768
 TERMINATION OF EMPLOYMENT ART 2B9
4 4
[Part 3. Management Rights and the Just *
Causes of Termination]

in, as rightly perceived by her, a demeaning and humiliating work condition. The
transfer was a demotion in rank, beyond doubt.

Before the right to transfer or re-assign employee can be d e e m e d to have

been waived or contracted away, the stipulation to that effect must be clearly
stated so as to leave no r o o m to doubt the intentions of the parties. We find
nothing in the "Special Contract of Employment" wherein [the employer] had
waived its right to transfer or re-assign [the e m p l o y e e ] to any other position in
the company. T h e m e r e specification in the employment contract of the position
1
to be held by the e m p l o y e e is not such stipulation.

3.3f Invalid Change of Position

I n a n o t h e r case w h e r e the Assistant V i c e - P r e s i d e n t o f the Pension
department and Trust Officer was o r d e r e d to transfer as A V P of the L e g a l
Department, the Court, after review of the facts and evidence, concluded that
the transfer order amounted to constructive dismissal. T h e Court opined that
the employer failed to substantiate the ineptness of the employee which allegedly
was the reason for the transfer. T h e Court, after reviewing the circumstances,
concluded that the employer's action did not pass the "test in determining the
validity of employee's transfer" as enunciated in Blue Dairy Corp. and quoted and
2
reiterated in Mendoza vs. Rural Bank of Lucban.
Regarding change of character of services, American jurisprudence cites
rulings to the effect that the e m p l o y e r cannot, without a breach of the contract,
discharge the employee or refuse to compensate him according to the agreement
because of the employee's refusal to p e r f o r m duties differing substantially from
those which he has agreed to perform or which are of an inferior or less important
character. A contract employing o n e as manager of a sales department has been
held to be violated by the master [ e m p l o y e r ] in reducing the employee to the
status of a sales clerk.
On the other hand, as l o n g as the e m p l o y e e is permitted to perform the
contemplated services, he cannot treat a m e r e request or direction to perform
additional services as a discharge. It is otherwise where there has been a refusal
to permit the servant [ e m p l o y e e ] to p e r f o r m the substantial or principal service
which is shown to have been contemplated by the contract of employment and a
direction to substitute a different service, In such case, the employee may treat
3
the contract as terminated.

•Chu vs. National Labor Relations Commission, 764 SCRA 232 [ 1994].
2
See T h e Philippine American Life and General Insurance Co. vs. A.S. Gramaje,
G.R. N o . 156963, November 11, 2003.
s
35 Am Jur. P. 455.

769
 POST-EMPLOYMENT
ART. 282

3.3g Transfer with Promotion of a Manager

A transfer becomes unenforceable if the transfer is coupled with or is in
the nature of a promotion, where the promotion is rejected by the employee.

Dosch vs. NLRC and Northwest Airlines, G.R. N o . 51182, July 5, 1983 —
Facts: Petitioner Dosch, an American citizen, married to a Filipina, was the
resident Manager of Northwest Airlines, Inc. in the Philippines for nine years. He
received an inter-office communication from Northwest's Vice President for Orient
Region, promoting him to the position of Director of International Sales and
transferring him to Northwest's General Office in Minneapolis, USA.
He acknowledged receipt of the above memo, expressed appreciation for the
promotion but at the same time regretted that "for personal reasons and reasons
involving my family, I am unable to accept a transfer from the Philippines."
The Vice President for the Orient Region advised petitioner that "in view of
the foregoing, your status as an employee of the company ceased on the close of
business on August 31, 1975" and "the company therefore considers your letter of
August 28, 1975, to be a resignation without notice."
Northwest filed a Report on Resignation of Managerial Employee, i.e., Mr.
Dosch, before the Regional Office of D O L E .
The Report was contested by the petitioner and the case was certified to the
Executive Labor Arbiter, for compulsory arbitration.
The Labor Arbiter directed Northwest Airlines to reinstate complainant Dosch
to his former position with full backwages, without loss of seniority rights and other
benefits.
Northwest appealed to the N L R C assigning the following errors: (a) the Labor
Arbiter erred in not holding that petitioner had "resigned" his employment; ( b ) the
Labor Arbiter erred in not holding that petitioner could be dismissed for failure/
refusal to comply with the valid transfer order and for the employer's loss of trust
and confidence of his employee.
The decision en banc of the N L R C reversed the Labor Arbiter's decision and
dismissed the case for lack of merit, holding that:
The hiring, firing, transfer, demotion and promotion of employees has
been traditionally identified as a management prerogative. This is a function
associated with the employer's inherent right to control and manage effectively
its enterprise. The free will of management to conduct its own business affairs
to achieve its purpose cannot be denied. This exercise finds support not only
in actual management practice but has become a part of our jurisprudence
in labor relations law.
Dosch petitioned the Supreme Court to review the N L R C decision.
Rulings: (1) Employer cannot shift cause of separation from resignation to dismissal.
—As indicated earlier, Northwest on appeal to N L R C changed its stand and claimed
that petitioner was guilty of "insubordination" when he refused to comply with the
transfer order made by Vice President Jenkins. And for such act of insubordination,

770
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[Part 3. Management Rights and the Just
Causes of Termination]

Northwest claimed it lost confidence in the petitioner. Since "resignation" was the
particular cause alleged by Northwest in terminating petitioner's employment,
Northwest is restricted to the ground specified and may not invoke any other cause
for the discharge.
(2) Manager may decline a promotion. — We must rightly treat the Jenkins letter
as directing the promotion of the petitioner from his position as Philippine Manager
to Director of International Sales in Minneapolis, USA. It is not merely a transfer
order alone but as the Solicitor General correctly observes, "It is more in the nature
of a promotion than a transfer, the latter being merely incidental to such promotion."
T h e inter-office communication of Vice President Jenkins is captioned "Transfer"
but it is basically and essentially a promotion, for the nature of an instrument is
characterized not by the title given to it but by its body and contents.
T h e communication informed the petitioner that effective August 18, 1975,
he was to be promoted to the position of Director of International Sales, and his
compensation would be upgraded and the payroll accordingly adjusted. Petitioner
was, therefore, advanced to a higher position and rank and his salary was increased
and that is a promotion. It has been held that promotion denotes a scalar ascent of
1
an officer or an employee to another position, higher either in rank or salary.
There is no law that compels an employee to accept a promotion, as a promotion
is in the nature of a gift or a reward, which a person has a right to refuse. When
petitioner refused to accept his promotion to Director of International Sales, he was
exercising a right and he cannot be punished for it as qui jure suo utitur neminem laedit.
He who uses his own legal right injures no one.
While it may be true that the right to transfer or reassign an employee is an
employer's exclusive right and the prerogative of management, such right is not
absolute.
(3) Managers security of tenure. — T h e fact that petitioner is a managerial
employee does not itself exclude him from the protection of the constitutional
guarantee of security of tenure.
(4) No insubordination. — We cannot agree to Northwest's submission
that petitioner was guilty of disobedience and insubordination which respondent
Commission sustained. T h e only piece of evidence on which Northwest bases the
charge of contumacious refusal is petitioner's letter dated August 28, 1975 to R.C.
Jenkins wherein petitioner acknowledged receipt of the former's memorandum
dated August 18,1975, appreciated his promotion to Director of International Sales
but at the same time regretted "that at this time for personal reasons and reasons of
my family, I am unable to accept the transfer from the Philippines" and thereafter
expressed his preference to remain in his position, saying: "I would, therefore, prefer
to remain in my position of Manager-Philippines until such time that my services in
that capacity are no longer required by Northwest Airlines." From this evidence, We
cannot discern even the slightest hint of defiance, much less imply insubordination
on the part of petitioner.

'Millares vs. Subido, 20 SCRA 954.

771
 POST-EMPLOYMENT
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(5) Dismissal loo severe. — Indeed, the outright dismissal of petitioner from
his position as Manager-Philippines of Northwest Airlines is much too severe,
considering the length of service that petitioner has rendered for eleven (11) faithful
and loyal years, a strong and vital factor that must be taken into account in labor law
determinations.
Dissenting Opinions:

Melencio-Herrera, J.
In the instant case, I believe that petitioner is a managerial employee, with
both executive and administrative functions. His transfer and promotion was a valid
exercise of management's prerogative.

Teehankee, J.
The Labor Arbiter's ruling, in upholding petitioner, that "petitioner did not
resign or relinquish his position as Manager-Philippines" and could not therefore be
terminated is patently shown in Mme. Justice Herrera's separate dissent to be "based
on semantics, and not on the substance of the problem, if problem there actually
was." His presumptuous act announcing that he was resuming the managership of
respondent company when he well knew that it had designated a new manager was
a vain blow of defiance and insubordination.
If we hold that "such an order ( o f transfer) constitutes removal without just
cause and is illegal" (notwithstanding that there is no factual basis for the statement
therein that such transfer would be "away from his family"), as the majority decision
does, this would be to reverse the roles of employer and manager and to permit such
managers to dictate their own situs of service or country and place of assignment
in usurpation of the employer's exclusive prerogative and in gross violation of
their contractual undertakings accepting the employer's right to determine their
assignments.

3.3h Transfer Distinguished from Promotion

A transfer is a m o v e m e n t from o n e position to another of equivalent rank,
level or salary, without break in the service. P r o m o t i o n , on the other hand, is
the advancement from o n e position to another with an increase in duties and
responsibilities as authorized by law, and usually accompanied by an increase in
salary. Whereas promotion denotes a scalar ascent of a senior officer or e m p l o y e e
to another position higher either in rank or salary, transfer refers to lateral
1
movement from o n e position to another of equivalent rank, level or salary.

Philippine Telegraph & Telephone Corp. vs. Court of Appeals, et al., G.R. No.
152057, September 29, 2003 —
Facts: In 1997, P T & T initiated a Relocation and Restructuring Program
that aimed to "decongest surplus workforce in some branches" but at the same

'Millares vs. Subido, 20 SCRA 954.

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 TERMINATION OF EMPLOYMENT ART 282
[Part 3. Management Rights and the Just *
Causes of Termination]

time, to "avoid retrenchment of employees occupying redundant positions." The

company offered relocation benefits/allowances to employees who would agree to
be transferred to new P T & T branches in the provinces. Moreover, employees who
would agree to the transfer would be considered promoted.
Pursuant to the program, seven employees were directed by P T & T to "relocate"
to their new P T & T branches. However, the employees rejected PT&T's offer on the
ground that the transfers involved distant places which would require their separation
from their families. T h e company considered this refusal as insubordination and
willful disobedience to a lawful order, hence, the seven employees were dismissed.
T h e labor union, in behalf of the employees, filed with the Labor Arbiter a complaint
for unfair labor practice and illegal dismissal against PT&T. T h e company raised the
defense that the transfers were valid exercise of management prerogative. The LA
dismissed the complaint, but, on appeal, the N L R C declared the employees' dismissal
as illegal. T h e N L R C was affirmed by the CA.
Ruling: T h e employees' transfers are promotions in nature even if they were
not accompanied by an increase in salary. As was held in Homeowners Savings and Loan
Association, Inc. vs. NLRC, "the indispensable element for there to be promotion is that
there must be an advancement from one position to another or an upward vertical
movement of the employee's rank or position. Any increase in salary should only
be considered incidental but never determinative of whether or not a promotion is
bestowed upon an employee."
An employee cannot be promoted, even if merely as a result of transfer, without
his consent. Therefore, the exercise by the seven dismissed employees of their right
to refuse cannot be considered as insubordination or willful disobedience.

4. JUST CAUSE: NEGLECT OF DUTIES

T h e e m p l o y e r cannot rightfully discharge an e m p l o y e e for trivial and
unimportant acts of negligence and thus relieve himself from the requirements
imposed by the Act. It is difficult, however, to lay down any general rule as a guide
on the question whether, in a particular case, the act of negligence is gross or not.
Generally, gross neglect means an absence of that diligence that an ordinarily
1
prudent man would use in his own affairs.
In order to constitute a just cause for the employee's dismissal, the neglect
of duties must not only be gross but also habitual. Thus, the single or isolated acts
2
of negligence do not constitute a just cause for the dismissal of the employee.
To justify the dismissal of an employee for neglect of duties, however, it
does not seem necessary that the employer show that he has incurred actual loss,
damage, or prejudice by reason of the employee's conduct. It is sufficient that
the gross and habitual neglect by the employee of his duties tends to prejudice
the employer's interest since it would be unreasonable to require the employer

'Department of Labor Manual, Sec. 4343.01 [27].

Ibid.
773
 POST-EMPLOYMENT
ART. 282

to wait until he is materially injured before removing the cause of the impending
1
evil.
A n e m p l o y e e may b e dismissed because o f inefficiency, n e g l e c t o r
carelessness. T h e law implies a stipulation or undertaking by an employee in
entering into a contract of employment that he is competent to p e r f o r m the
work undertaken and is possessed of the requisite skill and knowledge to enable
him to do so, and that he will do the work of the employer in a careful manner.
If he is not qualified to do the work which he undertakes, if he is incompetent,
unskillful or inefficient, or if he executes his work in a negligent manner or is
otherwise guilty of neglect of duty, he may lawfully be discharged before the
2
expiration of his term of employment.
T h e degree of skill, care, diligence, and attention imposed by the implied
possession of competency, knowledge, skillfulness, etc., of the e m p l o y e e is that
of ordinary and reasonable skill, care, and diligence. He cannot be discharged
on the ground of incompetency, negligence, etc., merely because he fails to
employ the highest d e g r e e of skillfulness and care known in the trade, unless
the contract of employment expressly stipulates for such d e g r e e of skill and
care, or unless the employee represents that he possesses such. However, if the
parties have specially contracted that the employee's services shall be warranted
or agreed to give satisfaction, the e m p l o y e r is vested with p o w e r to determine
the question whether the work is satisfactory; and the reasonableness of the
grounds of dissatisfaction cannot be inquired into by the court in an action by
3
the employee for damages for his discharge.
Unsatisfactory performance is not o n e of the just causes for dismissal under
4
the Labor C o d e .

4.1 Gross Negligence Defined; Examples

Gross negligence has been defined as the want or absence of or failure
to exercise slight care or diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid
5
them. A bank employee was found grossly negligent when she delivered newly
approved credit cards to a person she had not even seen before and she did
not even ask for receipts, thereby enabling fictitious persons to use those cards,
6
causing P740,000.00 loss to the bank. H e r dismissal was held valid.

'Department of Labor Manual, Sec. 4343.01 [27].

2
35 Am. Jur. 376.
Ibid.
'Orient Express Placement Phil. vs. NLRC, et al, G.R N o . 113713, June 11, 1997
citing A.M. Oreta vs. NLRC, G.R N o . 74004, August 10,1989.
'Citibank vs. Gatchalian, et al, G.R. N o . 111222, January 18,1995. Also: National
Bookstore vs. CA, et al, G.R. N o . 146741, February 27, 2002.
Ibid.

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[Part 3. Management Rights and the Just
Causes of Termination]

Associated Bank vs. National Labor Relations Commission, G.R. N o . 86023, June
19, 1989 —
"S" worked as a credit investigator functioning as an appraiser. On his first
appraisal j o b , he submitted a report on a property which was to serve as a collateral
for a loan. He gave the property an estimated fair market value of P769.545. The
loan was granted based on this report.
When the loan became due and demandable and the debtor asked for the
restructuring of the loan, the property was reappraised by another appraiser. The new
report stated that the property had an estimated fair market value of only P142,915
and an appraised value of only P I 14,332. These values were later confirmed to be
just and reasonable appraisals.
The bank dismissed "S" for the overstatement of the value of the subject property
and betrayal of trust and confidence. He filed a complaint for unfair labor practice
and illegal dismissal.
Ruling: "S" was guilty of gross negligence which warrants his dismissal. The
huge disparity in the values arrived at is itself proof indicative of his gross negligence.
Moreover, he admittedly went to appraise the property on a Sunday and merely
asked the people residing thereat for the land valuation without confirming it with
the City Assessor's office. If employees are allowed to do their work in the same way
U
S" discharged his assignment, no bank would survive. He did not exercise ordinary
diligence and care.

4.2 Abandonment
A b a n d o n m e n t of j o b is a f o r m of neglect of duty.
To constitute abandonment, there must be a clear and deliberate intent
1
to discontinue one's e m p l o y m e n t without any intention of returning back.
A n e m p l o y e e may b e dismissed o n the g r o u n d o f a b a n d o n m e n t o r
negligence of duty where said e m p l o y e e had been absent for a period of one
year and the p r o l o n g e d absence from work was without any valid notice or leave
2
from the company, and said absence is not by reason of any illness or disease.

4.2a Elements of Abandonment; Immediate filing of Dismissal Complaint

Labor, et al vs. NLRC and Gold City Commercial Complex, Inc., and Uy, G.R. N o .
110388, September 14, 1995 —
To constitute abandonment, two elements must concur: (1) the failure to report
for work or absence without valid or justifiable reason, and (2) a clear intention to
sever the employer-employee relationship, with the second element as the more
determinative factor and being manifested by some overt acts. Mere absence is not
sufficient. It is the employer who has the burden of proof to show a deliberate and

'Flores vs. Funeraria Nuestro, G.R. N o . 66890, April 15, 1988.

2
Shoemart, Inc. vs. National Labor Relations Commission, G.R. N o . 74229,
August 11, 1989.
775
 POST-EMPLOYMENT
ART. 282

unjustified refusal of the employee to resume his employment without any intention
of returning. Respondent Gold City failed to discharge this burden. It did not adduce
any proof of some overt act of the petitioners that clearly and unequivocally show
their intention to abandon their posts. On the contrary, the petitioners lost no time
in filing the case for illegal dismissal against them, taking only four days from the
time most of them were prevented from entering their workplace on August 22,1991
to the filing of the complaint on August 26, 1991. They cannot, by any reasoning, be
said to have abandoned their work, for as we have also previously ruled, the filing
by an employee of a complaint for illegal dismissal is proof enough of his desire to
return to work, thus negating the employer's charge of abandonment.

4.2b Immediate Filing of Complaint Negates Abandonment; Exception

As reiterated in Labor, above, the immediate filing of a complaint for illegal
dismissal against the employer with a prayer for reinstatement shows that the
1
employee was not abandoning his work.
But, certainly, peculiar circumstances can arise where the immediate filing
of illegal dismissal complaint does not disprove abandonment of work. In o n e
case, the employee was laid o f f during the plant shutdown. W h e n it resumed
operation the employee was called back to work but he d i d not do so. In the
meantime the employer filed a criminal complaint for qualified theft against
the employee. Still not reporting to work, the e m p l o y e e was eventually dismissed
on ground of abandonment of work. T h e e m p l o y e e filed a complaint for illegal
dismissal.
T h e Supreme Court, reversing both the L a b o r Arbiter and the N L R C ,
noted an "over-reliance" on the notion that the filing of a complaint for illegal
dismissal is inconsistent with abandonment by the e m p l o y e e of his work. H e r e ,
the evidence revealed instead that the illegal dismissal complaint was intended to
gain leverage for the e m p l o y e e to induce the e m p l o y e r to withdraw the criminal
charge filed against the e m p l o y e e . A b a n d o n m e n t not having been disproved,
2
the employee's dismissal on that g r o u n d was held valid.

4.3 Tardiness and Absenteeism

Generally, tardiness and absenteeism, like abandonment, are a f o r m of
neglect of duty.
Acts of insubordination, coupled with habitual tardiness, are sufficient
causes for petitioners' dismissal, especially considering the fact that the employees
involved were not mere rank-and-file employees but supervisors w h o o w e d m o r e

Flores vs. Funeraria Nuestro, G.R. N o . 66890, April 15,1988. See Asphalt and
Cement Pavers, Inc. vs. Leogardo, Jr., G.R. N o . 74563, June 20, 1988; Egyptair, et al
vs. National Labor Relations Commission, et al., G.R. N o . 63185, February 27, 1989.
2
Arc-Men Food Industries Corp. vs. N L R C and F. Alcomendras, G.R. N o . 113721,
May 7, 1997.

776
 TERMINATION OF EMPLOYMENT ART 282
[Part 3. Management Rights and the Just *
Causes of Termination]

than the usual fealty to the organization and were therefore expected to adhere
to its rules in an exemplary manner. Petitioners did not even reflect upon and
consider the undesirable example that they were setting to those who were under
1
their supervision.
An e m p l o y e e w h o consistently receives promotions in rank and salary
must be a highly efficient worker, and therefore should be retained despite
occasional lapse in punctuality and attendance. Perfection cannot after all be
2
demanded.

4.3a Illustrative Case: Valid Dismissal Due to Unauthorized Absences of

a Union Officer
Cando vs. National Labor Relations Commission and Filipinos Bank, G.R. N o .
91344, September 14, 1990 —
Facts: Petitioner Cando was a senior distributing clerk in Filipinas Bank and a
ranking officer of the employees' union.
In September 1984, the union declared a strike which lasted for about a month.
T h e Ministry of Labor and Employment issued a return-to-work order which the
striking employees obeyed, except Cando.
He filed an application to go on official leave from November 5 to 21, 1984,
but, actually he did not report for work from October 29,1984 to the end of February
1985. His time cards for the months of December 1984 and January 1985 recited
entries like "union matters" and "hearing." His time card for February 1985 showed
no entries.
T h e bank instructed him to explain in writing, why appropriate disciplinary
measures should not be taken against him in view of his numerous absences. He
submitted his written explanation, contending that his numerous absences were
prompted by various matters affecting the union which needed immediate attention.
After an administrative investigation done by a committee, the bank terminated
his employment.
He filed a complaint for illegal dismissal which the Labor Arbiter dismissed.
Rulings: (1) Dismissal of employee (the union president) based on unauthorized absences,
justified. — T h e dismissal of the petitioner is based on his unjustified absences for
a number of months. As an employee the petitioner is expected to be aware of the
rules and regulations of the bank regarding leaves of absences. As observed by the
Commission, the absences of the petitioner were not authorized. On this score, his
dismissal appears to be warranted.
It is understandable for respondent's officers to just verbally remind or warn
complainant to follow bank rules on leave of absences, instead of issuing him written

'Sajonas vs. National Labor Relations Commission, G.R. N o . 49286, March 15,
1990.
2
Rizal Empire Insurance Group vs. National Labor Relations Commission, G.R.
N o . 73140, May 29, 1989.
777
 POST-EMPLOYMENT
ART. 282

warnings, as complainant was the Union President, who is presumed to be the most
knowledgeable among the rank-and-files of what to do and not to do.
(2) That the petitioner-employee's absences were due to his having to attend to union
matters, belied by his own testimony. — We quote with approval the following portion of
the decision of the labor arbiter:
Anent the second question of whether complainant's (the herein peti-
tioner's) x x x absences are justified, the undersigned finds that the reasons
'union matter' and 'hearing' were being alluded to by complainant as an antici-
pated shield against respondent's (the herein private respondent's) reactions
on his absences. Indeed, on cross-examination on the entries in his time cards,
complainant grossly and glaringly betrayed his insincerity since he could not
recall any single case, criminal, administrative or labor or any subject matter
discussed and taken up in the reasoned out 'union matter' or 'hearing.'

4.4 Is "Attitude Problem" a just Cause to Dismiss an Employee?

An employee w h o cannot get along with his co-employees is detrimental
to the company, for he can upset and strain the working environment. W i t h o u t
the necessary teamwork and synergy, the organization cannot function well.
Thus, management has the prerogative to take the necessary action to correct
the situation and protect its organization. W h e n personal differences between
employees and management affect the work environment, the peace of the
company is affected. Thus, an employee's attitude p r o b l e m is a valid g r o u n d
for his termination. It is a situation analogous to loss of trust and confidence
that must be duly proved by the employer. Similarly, compliance with the twin
requirement of notice and hearing must also be proven by the employer.
However, we are not convinced that in the present case, petitioners have
shown sufficiently clear and convincing evidence to justify [the e m p l o y e e ' s ]
termination. T h o u g h they are correct in saying that in this case, p r o o f beyond
reasonable doubt is not required, still there must be substantial evidence to
support the termination on the ground of attitude. T h e mere mention of negative
feedback from her team members, and the letter dated February 23, 1999, are
not p r o o f of her attitude problem. Likewise, her failure to refute petitioners'
allegations of her negative attitude does not amount to admission. Technical
rules of procedure are not binding in labor cases. Besides, the burden of p r o o f is
not on the employee but on the employer w h o must affirmatively show adequate
1
evidence that the dismissal was for justifiable cause.

5. JUST CAUSE: DISHONESTY, LOSS OF C O N F I D E N C E

T h e third "just cause" of dismissal, under Article 282 ( c ) , is "fraud or willful
breach by the employee of the trust reposed in him by his employer or duly
authorized representative."

'Heavylift Manila vs. CA, et al., G.R. N o . 154410, October 20, 2005.

778
 TERMINATION O F EMPLOYMENT A p T 900
4 8 4
[Part 3. Management Rights and the Just '
Causes of Termination]

To constitute a just cause for terminating the employee's services, the fraud
must be committed against the employer or representative and in connection with
the employee's work. Thus, the fraud committed by an employee against third
persons not in connection with his work and which does not in anyway involve
his employer is not a g r o u n d for the dismissal of the employee. Furthermore
since fraud implies willfulness or wrongful intent, the innocent nondisclosure
of facts by the e m p l o y e e to the employer will not constitute a just cause for the
1
dismissal of the e m p l o y e e .

5.1 Examples of Dishonesty: Falsification of T i m e Cards

San Miguel Corporation vs. National Labor Relations Commission, G.R. N o . 82467,
June 29, 1989 —
Facts: Complainants were former security guards of San Miguel Corporation
which dismissed them for falsification of their time cards. They had made false entries
showing that they reported for work on February 19 and 20, 1983, but the truth was
they went on a hunting trip to San Juan, Batangas, with their Chief, then head of
the Administrative Services Department of the Security Directorate of SMC. Besides
falsification of entries in time cards, complainant Misolas was caught red-handed
punching in not only his own time card but also those of two other employees.
T h e Labor Arbiter directed the company to reinstate complainants to their
respective former positions without loss of seniority. T h e N L R C affirmed the Labor
Arbiter's decision.
Ruling: T h e Supreme Court set aside the decision of the N L R C .
Although it may be conceded that the complainants acted under some degree
of moral compulsion when they agreed to accompany their chief, they were certainly
under no compulsion from him to falsify their time cards and thereby defraud the
company by collecting wages for the dates when they did not report for work.
In order for obedience to be considered as an exempting circumstance, it must
be in compliance with a lawful order not opposed to a higher positive duty of the
subaltern, and that the person commanding act within the scope of his authority.
As a general rule, an inferior should obey his superior. But between a general law
which enjoins obedience to a superior giving just orders, etc., and a prohibitive law
which plainly forbids what the superior commands, the choice is not doubtful.
In order to be exempted on the ground of obedience, it must be shown that
both the person who gives the order and the person who executes it are acting within
the limitations prescribed by law.
T h e falsification and fraud which the private respondents committed against
their employer are inexcusable. Their chiefs initials on the false entries in their
time cards did not purge the documents of their falsity. Their acts constituted
dishonesty and serious misconduct, lawful grounds for their dismissal under Article
282, subparagraphs (a) and ( c ) , of the Labor Code.

'Dept. of Labor Manual, Sec. 4343.01 [ 3 ] .

779
 POST-EMPLOYMENT
ART. 282

5.1a Theft of Company Property

Firestone Tire and Rubber Company of the Philippines vs. Lariosa, G.R. N o . 70479,
February 27, 1987 —
Facts: As a tire builder CL was entrusted with certain materials for use in his
job. On the day in question, he was given two bundles of wool flannel swabs [ten
pieces per bundle] for cleaning disks. He used four swabs from one pack and kept
the rest [sixteen pieces] in his blue traveling bag. CL could not satisfactorily explain
why he placed the swabs in his personal bag, which was not the usual receptacle for
company property.
Ruling: It was held that if CL, by his own wrongdoing, could no longer be trusted
it would be an act of oppression to compel the company to retain him, fully aware that
such an employee could, in the long run, endanger its very viability. T h e employer's
obligation to give his workers just compensation and treatment carries with it the
corollary right to expect from the workers adequate work, diligence and good conduct.
Theft committed by an employee is a valid reason for his dismissal by the
employer. Although as a rule the Supreme Court leans over backwards to help workers
and employees continue with their employment or to mitigate the penalties imposed
on them, acts of dishonesty in the handling of company property are a different
matter.
Thus, under Article 283 [now 282] of the Labor Code, an employer may
terminate an employment for "serious misconduct" or for "fraud or willful breach
by the employee of the trust reposed in him by his employer or representative."
If there is sufficient evidence that an employee has been guilty of a breach
of trust or that his employer has ample reasons to distrust him, the labor tribunal
cannot justly deny to the employer the authority to dismiss such employee.

T h e use by a P A L e m p l o y e e of a w e i g h i n g scale which he knew to be

defective (possibly tampered) at the time of the shipment in order to benefit the
shipper and defraud the airline, constituted serious misconduct and dishonesty
1
justifying his dismissal from the service.

5.2 Loss of Confidence

While the right of an employer to freely select or discharge his employees
is subject to regulation by the State basically in the exercise of its paramount
police power, nonetheless an employer cannot be c o m p e l l e d to continue in
employment an employee guilty of acts inimical to the interest of the employer
2
and justifying loss of confidence in him.

•Philippine Airlines, Inc. vs. National Labor Relations Commission, et al., G.R.
N o . 83834, June 30, 1989.
^abacalera Insurance Co., Inc. vs. National Labor Relations Commission,
G.R. N o . 72555, July 31, 1987; San Miguel Corporation vs. National Labor Relations
Commission, et al, G.R. N o . 70177, June 25, 1986.

780
 TERMINATION OF EMPLOYMENT ART 282
[Part 3. Management Rights and the Just
Causes of Termination]

But to be a valid reason of dismissal, loss of confidence must be genuine.

In o n e leading case, the e m p l o y e e , working as a linen girl in a hotel in Baguio,
was dismissed. In her illegal dismissal complaint she also dared expose her
employer's violations of labor standards laws. T h e employer, in turn, charged
her criminally with qualified theft. In a supplemental answer filed eleven months
after the e m p l o y e e filed her complaint of illegal dismissal, the employer alleged
loss of confidence as reason for dismissing her. Such allegation, the Court said,
should hardly warrant a serious consideration. Quoting an earlier ruling, the
Court (through Mr. Justice Kapunan) emphasized:
M o r e importantly, we have repeatedly held that loss of confidence
should not be simulated in o r d e r to justify what would otherwise be,
under the provisions of law, an illegal dismissal. "It should not be used as
a subterfuge for causes which are illegal, improper and unjustified. It must
be genuine, not a m e r e afterthought to justify an earlier action taken in
bad faith." (N. Mabeza vs. NLRC and Hotel Supreme, G.R No. 118506, April
18, 1997.)
M o r e o v e r , in o r d e r to constitute a "just cause" for dismissal, the act
complained of must be related to the performance of the duties of the employee
such as would show him to be thereby unfit to continue working for the employer.
In o n e case, the grievances of the lawyers, in main, refer to what are perceived
to be certain objectionable character traits of private respondent (the dismissed
company lawyer). A l t h o u g h petitioners have charged private respondent with
allegedly mishandling two cases in his l o n g service with the bank, it is quite
apparent that private respondent would not have been asked to resign had it
1
not been for the letter-complaint of his associates in the Legal Department. T h e
alleged loss of confidence should have arisen from the performance of his j o b .

5.2a To W h o m Applicable; "Position of Trust" Explained

Loss of confidence as a just cause for dismissal was never intended to
provide employers with a blank check for terminating their employees. Such a
vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the
seal of approval by this Court, could readily reduce to barren form the words of
the constitutional guarantee of security of tenure. Having this in mind, loss of
confidence should ideally apply only (1) to cases involving employees occupying
positions of trust and confidence, or ( 2 ) to those situations where the employee
is routinely charged with the care and custody of the employer's money or
property. To the first class belong managerial employees, i.e., those vested with
the powers or prerogatives to lay down management policies a n d / o r to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees or
effectively r e c o m m e n d such managerial actions. To the second class belong
cashiers, auditors, property custodians, etc., or those who, in the normal and

'Equitable Banking Corp. vs. N L R C , et al., G.R. N o . 102467, June 13, 1997.

781
 POST-EMPLOYMENT
ART. 282

routine exercise of their functions, regularly handle significant amounts of

money or property. An ordinary chambermaid in a hotel does not fall under
1
either category.
T h e retention or stay of o n e w h o occupies a managerial position depends
on his retention of the trust and confidence of the m a n a g e m e n t and on the
need for his services. Thus, although some vindictive motivation may have
impelled the abolition of a manager's position, nonetheless the corporation-
employer's board of directors possessed the p o w e r to r e m o v e him and to
determine whether the interest of the company justified the existence of his
2
department.
For more examples of position of trust, see Salas v. Aboitiz One, Inc., G.R.
N o . 178236, June 27, 2008.

5.2b Conflict of Interest; Employment with C o m p e t i t o r

Is it lawful to prohibit e m p l o y m e n t with a competitor?
In cases where an e m p l o y e e assails a contract containing a provision
prohibiting him or her from accepting competitive e m p l o y m e n t as against
public policy, the employer has to adduce evidence to prove that the restriction
is reasonable and not greater than necessary to protect the employer's legitimate
business interests. T h e restraint may not be unduly harsh or oppressive in
curtailing the employee's legitimate efforts to earn a livelihood and must be
reasonable in light of sound public policy.
Courts should carefully scrutinize all contracts limiting a man's natural right
to follow any trade or profession anywhere he pleases and in any lawful manner.
But it is just as important to protect the enjoyment of an establishment in trade
or profession, which its employer has built up by his own honest application to
every day duty and the faithful performance of the tasks which every day imposes
upon the ordinary man. What o n e creates by his own labor is his. Public policy
does not intend that other than the producer shall reap the fruits of labor;
rather, it gives to him w h o labors the right by every legitimate means to protect
the fruits of his labor and secure the enjoyment of them to himself. F r e e d o m to
contract must not be unreasonably abridged. N e i t h e r must the right to protect
by reasonable restrictions that which a man by industry, skill and g o o d j u d g m e n t
3
has built up, be denied.

5.3 P r o o f Required
Loss of confidence is a valid g r o u n d for dismissing an e m p l o y e e and p r o o f
beyond reasonable doubt of the employee's misconduct is not required. It is

' N . Mabeza vs. N L R C and Hotel Supreme, G.R. N o . 118506, April 18, 1997.
international Harvester Macleod, Inc. vs. Intermediate Appellate Court, G.R.
N o . 73287, May 18, 1987.
3
Rivera vs. Solidbank, G.R. N o . 163269, April 19, 2006.

782
 TERMINATION O F EMPLOYMENT A1|T 9 f t 9

[Part 3. Management Rights and the Just '

Causes of Termination]

sufficient if there is some basis for such loss of confidence or if the employer
has reasonable g r o u n d to believe or to entertain the moral conviction that the
e m p l o y e e c o n c e r n e d is responsible for the misconduct and that the nature of
his participation therein r e n d e r e d him unworthy of the trust and confidence
1
d e m a n d e d by his position.
A charge of dishonesty involves serious misconduct on the part of the
e m p l o y e e , a breach of the trust reposed by the employer upon him. T h e rule
that p r o o f beyond reasonable doubt is not required to terminate an employee on
the charge of loss of confidence and that it is sufficient that there is some basis
for such loss of confidence is not absolute. T h e right of an employer to dismiss
employees on the g r o u n d that it has lost its trust and confidence in him must not
be exercised arbitrarily and without just cause. For loss of trust and confidence
to be a valid g r o u n d for an employee's dismissal, it must be substantial and not
arbitrary, and must be f o u n d e d on clearly established facts sufficient to warrant
the employee's separation from work. Unfortunately for respondent G o l d City,
the evidence it adduced is insubstantial, inadequate, and unreliable to support
a conclusion that the petitioners are even remotely guilty of the acts they are
2
accused of committing.
Unsupported by sufficient proof, loss of confidence is without basis and
may n o t be successfully invoked as a g r o u n d for dismissal. Loss of confidence as
a ground for dismissal has never b e e n intended to afford an occasion for abuse
by the employer of its prerogative, as it can easily be subject to abuse because of
3
its subjective nature.

5.4 Guidelines Summarized

W h i l e loss of confidence is o n e of the just causes for termination of an
e m p l o y e e , the dismissal must rest on an actual breach of duty committed by the
e m p l o y e e . T h e guidelines for applying the doctrine of loss of confidence are:
1. loss of confidence should not be simulated;
2. it should not be used as a subterfuge for causes which are improper,
illegal, or unjustified;
3. it may not be arbitrarily asserted in the face of overwhelming evidence
to the contrary;
4. it must be genuine, not a m e r e afterthought to justify earlier action
taken in bad faith; and
5. the e m p l o y e e involved holds a position of trust and confidence.

•Reyes vs. Minister of Labor, G.R. N o . 47805, February 9, 1989.

2
Artemio Labor, et al. vs. N L R C , Gold City Commercial Complex, Inc., and
Rudy Uy, G.R. N o . 110388, September 14, 1995.
3
Hernandez vs. National Labor Relations Commission, G.R. N o . 84302, August
10, 1989. See also: Salas vs. Aboitiz One, Inc., G.R. N o . 178236, June 27, 2008.

783
 POST-EMPLOYMENT
ART. 282

While p r o o f beyond reasonable doubt is not required, still substantial

1
evidence is vital and the burden rests on the employer to establish it.

6. JUST CAUSE: COMMISSION OF A CRIME OR OFFENSE

A n o t h e r just cause of terminating an e m p l o y m e n t is the e m p l o y e e ' s
commission of a crime or offense against the person of his employer or against
2
any immediate m e m b e r of the employer's family.
T h e immediate members of the family referred to are limited to spouse,
ascendants, descendants, or legitimate, natural, or adopted brothers or sisters
of the employer or of his relative by affinity in the same degrees, and those by
3
consanguinity within the fourth civil d e g r e e .

6.1 Conviction or Prosecution N o t Required

T h e conviction of an e m p l o y e e in a criminal case is not indispensable to
warrant his dismissal by his employer and the fact that a criminal complaint
against the employee has been d r o p p e d by the city fiscal is not binding and
4
conclusive upon the labor tribunal.
An employer may dismiss an employee for breach of trust in the handling of
funds in spite of his having been acquitted in the course of criminal prosecution.
Conviction for a crime involving the loss of such funds is not necessary before
the employee may be dismissed. T h e r e is m o r e reason for dismissal where the
acts of misconduct and willful breach of trust are repeatedly committed by an
5
employee.
An employee w h o has been exonerated from a criminal charge of theft of
gasoline on the basis of technicality may still be dismissed from employment if the
employer has ample reason to mistrust him. If acquittal from the criminal charge
does not negate the existence of a g r o u n d for loss of trust and confidence, with
6
more reason should conviction for such criminal charge fortify said mistrust.

7. A N A L O G O U S CAUSES
T h e determination of whether the cause for terminating e m p l o y m e n t is
analogous to any of those enumerated in Article 282 of the C o d e will d e p e n d
on the circumstances of each case.

•Midas Touch Food Corp. vs. N L R C and Iris Fe Isaac, G.R. N o . 111639, July 29,
1996.
2
Article 282 [ d ] .
3
See Article 11, subsection 2, Revised Penal Code.
4
Starlite Plastic Industrial Corporation vs. National Labor Relations Commission,
G.R. N o . 78491, March 16, 1989.
5
Iedad vs. Lanao del Norte Electric Cooperative, Inc., G.R. N o . 73735, August
B
31,1987.
6
Mercury Drug Corporation vs. National Labor Relations Commission, G.R.
N o . 75662, September 15, 1989.

784
 TERMINATION OF EMPLOYMENT ART. 282
[Part 3. Management Rights and the Just
Causes of Termination]

To be considered analogous to the just causes enumerated, however, a cause

1
must be due to the voluntary a n d / o r willful act or omission of the employee.
In o n e case, the e m p l o y e r ( V i o l a g o Trucks) could not continue the
e m p l o y m e n t of four of the complainant employees because Petrophil had
prohibited them from entering Petrophil's premises as they were suspected of
2
illegally diverting gasoline. This is an example of "analogous cause" as a just
cause of dismissal.
Similarly, the refusal of the employer (Marquez, Inc.) to allow an employee
to drive cargo truck due to the ban imposed against the employee by San Miguel
Corporation to enter Coca-Cola plant premises w h o had found the employee
3
guilty of theft of empty coke bottle, is valid.
T h e f t committed by an e m p l o y e e against another employee (not against
the e m p l o y e r ) is not work-related, hence, not serious misconduct under Article
2 8 2 ( a ) . But it maybe considered an "Analogous cause" under Article 2 8 2 ( e ) .
A cause analogous to serious misconduct is a voluntary a n d / o r willful act or
omission attesting to an employee's moral depravity. T h e theft, if proven by
4
substantial evidence, is analogous to serious misconduct.

•See Nadura vs. Benguet Consolidated, Inc., G.R. N o . L-17780, August 24,1962.
2
M.F. Violago Oiler Tank Trucks vs. N L R C , 117 SCRA 544 [1982].
3
A . Marquez, Inc. vs. Leogardo, Jr., 128 SCRA 244 [1984].
4
John Hancock Life Insurance Corp. vs. J. Davis, G.R. N o . 169549, September
3, 2008.
785
 Title I
TERMINATION OF EMPLOYMENT (Cont'd)
[Part 4. AUTHORIZED CAUSES
OF TERMINATION]

O v e r v i e w / K e y Questions Box 23
1. In what respects are the "authorized causes" and the
"just causes" the same and different?
2. What are the authorized causes and the corresponding
rates of separation pay? What authorized cause does not
entail payment of separation pay?
3. H o w does preventive retrenchment differ from
redundancy?
4. Explain the four standards of a valid retrenchment.

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF

PERSONNEL
T h e 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 provi-
sions of this Title, by serving a written notice on the worker and the Ministry
of L a b o r 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 to 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 establish-
ment or undertaking not due to serious business losses or financial reverses,
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 as one ( 1 ) whole year.

A R T . 284. DISEASE AS GROUND FOR TERMINATION

An employer may terminate the services of an employee who has been
found to be suffering from any disease and whose continued employment

786
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

is prohibited by law or is prejudicial to his health as well as to the health of

his co-employees: Provided, That he is paid separation pay equivalent to at
least one ( 1 ) month salary or to one-half ( 1 / 2 ) month salary for every year
of service, whichever is greater, a fraction of at least six ( 6 ) months being
considered as one ( 1 ) whole year.

C O M M E N T S A N D CASES
1. A U T H O R I Z E D CAUSES IN GENERAL
A r t i c l e s 283 and 284 deal with the so-called "authorized" causes of
termination, as differentiated from the "just" causes in Article 282. But this
differentiation in name is not always observed. Even the Supreme Court calls
an "authorized" cause, like closure of business, a 'just" cause, and termination
of e m p l o y m e n t is sometimes called a "dismissal." See, for instance, Shoppers
Gain Supermart vs. NLRC, G.R. N o . 110731, July 26, 1996 and AHS/Philippines,
G.R. N o . 73721, March 30, 1987. I n d e e d , if something is "just" why should it
not be authorized, and why authorize something if it is unjust? Indicative of
the overlapping demarcation, the o l d law ( R . A . N o . 1787) included among the
"just causes" the "closing" or "cessation of operation" of the enterprise which
are a m o n g the present-day "authorized" causes.
U n d e r Article 283 of the C o d e , an employer may terminate the employment
of any e m p l o y e e due to the following causes: ( 1 ) installation of labor-saving
devices; ( 2 ) redundancy; ( 3 ) retrenchment to prevent losses; and ( 4 ) the closing
or cessation of operation of the establishment or undertaking, unless the closing
is for the purpose of circumventing the provisions of law.

1.1 Many other A u t h o r i z e d Causes

Article 283, it should again be noted, is not a complete enumeration of
authorized causes of e m p l o y m e n t termination. Many other causes are lawful
and therefore allowed. A m o n g them are the total and permanent disability of
an e m p l o y e e , disease not curable in six months, valid application of a union
security clause, e x p i r a t i o n o f p e r i o d i n term e m p l o y m e n t , c o m p l e t i o n o f
project in project employment, failure in probation, sale amounting to closure
of business, relocation of business to a distant place, defiance of return-to-work
order, commission of illegal acts in a strike, non-feasible reinstatement, floating
status or off-detail beyond six months, resignation, violation of a contractual
commitment such as being a consultant to a competitor, retirement, and, of
course, death of the e m p l o y e e .

1.2 Separation Pay

As will be explained in the topic Consequences of Termination, "separation
pay" is used in four senses:
(1) as a statutory benefit,
(2) as employment benefit voluntarily granted or required by contract,

787
 POST-EMPLOYMENT
ARTS. 283-284

(3) as alternative to reinstatement of an illegally dismissed employee,

and
(4) as financial assistance to a legally dismissed worker.
Articles 283 and 284 are the only provisions of the L a b o r C o d e that
specifically relate to and require the payment of separation pay, the kind that is
properly called statutory separation or severance pay.
In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to separation pay
equivalent to at least o n e ( 1 ) month pay or to at least o n e month pay for every
year of service, whichever is higher. However, in case of retrenchment to prevent
losses and in case of closure or cessation of operations of the establishment
or undertakings not due to serious business losses or financial reverses, the
separation pay shall be equivalent to o n e ( 1 ) month pay or at least one-half
1
( 1 / 2 ) month pay for every year of service, whichever is higher.
Article 284 treats of disease as another authorized cause of employment
termination.

1.3 Backwages Incompatible with Statutory Separation Pay

Article 279 of the L a b o r C o d e applies to e m p l o y e e s w h o are unjustly
dismissed from work. In contrast, Article 283 governs termination for causes such
as installation of labor-saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of establishment or undertaking. T h e
two provisions accord different reliefs. U n d e r Article 279, an e m p l o y e e w h o is
unjustly dismissed from work is "entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and
to his other benefits or their monetary equivalent c o m p u t e d from the time his
compensation was withheld up to the time of his actual reinstatement." On the
other hand, an employee whose e m p l o y m e n t is terminated due to any of the
causes under Article 283 (except closure or cessation because of serious losses)
is "entitled to a separation pay."
x x x It is absurd for the L a b o r A r b i t e r to declare a finding of
redundancy, on o n e hand, and to c o n c l u d e , on the other, that the
termination of private r e s p o n d e n t s ' services is i l l e g a l . T h e r e b e i n g
redundancy, the dismissal of private respondents is valid. Thus, private
respondents are entitled to separation pay only. T h e award of backwages
to them has no basis in law. (Philippine Airlines, Inc. vs. NLRC, et al, G.R
No. 114775, September 25, 1998.)

2. I N T R O D U C T I O N OF LABOR-SAVING DEVICES
Reduction of the number of workers in a company's factory made necessary
by the introduction of machinery in the manufacture of its products is justified.

'International Hardware, Inc. vs. National Labor Relations Commission, G.R.

N o . 80770, August 10, 1989.

788
 TERMINATION OF EMPLOYMENT ARTS
[Part 4. Authorized Causes of Termination]

T h e r e can be no question as to the right of the manufacturer to use new labor-

saving devices with a view to effecting m o r e economy and efficiency in its method
1
o f production.
T h e right to reduce personnel should, of course, not be abused. It should
not be made a pretext for easing out laborers on account of their union activities.
But neither should it be d e n i e d when it is shown that they are not discharging
their duties in a m a n n e r consistent with g o o d discipline and the efficient
2
operation of an industrial enterprise.

3. REDUNDANCY
U n d e r Article 283 of the L a b o r C o d e , the employer may terminate an
employee due to redundancy, a m o n g others. However, the employer must comply
with the procedural requirement of a written notice to the Minister of Labor
3
[and the e m p l o y e e c o n c e r n e d ] at least o n e month prior to the dismissal.
Redundancy, for purposes of our L a b o r C o d e , exists where the services
of an e m p l o y e e are in excess of what is reasonably d e m a n d e d by the actual
requirements of the enterprise. Succinctly put, a position is redundant where it
is superfluous, and superfluity of a position or positions may be the outcome of a
number of factors, such as overhiring of workers, decreased volume of business, or
d r o p p i n g of a particular product line or service activity previously manufactured
or undertaken by the enterprise. T h e employer has no legal obligation to keep in
4
its payroll m o r e employees that are necessary for the operation of its business.
We do not believe that redundancy in an employer's personnel force
necessarily or even ordinarily refers to duplication of work. That no other person
was holding the same position that private respondent held prior to the termination
of his services, does not show that his position had not become redundant. Indeed,
in any well-organized business enterprise, it would be surprising to find duplication
5
of work and two or m o r e people doing the work of one person.
It is of no legal m o m e n t that the financial troubles of the company were not
of private respondent's making. Private respondent cannot insist on the retention
of his position upon the g r o u n d that he had not contributed to the financial
problems of Wiltshire. T h e characterization of private respondent's services as
no longer necessary or sustainable, and therefore properly terminable, was an
exercise of business j u d g m e n t on the part of petitioner company. T h e wisdom or
soundness of such characterization or decision was not subject to discretionary

'Philippine Sheet Metal Workers' Union vs. CIR, 83 Phil. 453.

2
Ibid.
3
Solid Lines Corporation vs. National Labor Relations Commission, et al., G.R.
N o . 74482, November 5, 1986.
Wiltshire File Co., Inc. vs. N L R C , G.R. N o . 82249, February 7,1991; Escareal
vs. N L R C , G.R. N o . 99359, September 2, 1992.
Ibid.
789
 POST-EMPLOYMENT
ARTS. 283-284

review on the part of the Labor Arbiter nor of the N L R C so long, of course, as
violation of law or merely arbitrary and malicious action is not shown. It should
also be noted that the position held by private respondent, Sales Manager, was
1
clearly managerial in character.

SUBCONTRACTING IN THE GLOBAL ECONOMY

The increasing globalization of our economies is an indisputable fact: money,

technology, communications and the production of goods no longer have fixed roots
and are transcending national frontiers with ever-growing ease. These frontiers have,
in fact, ceased to exist.
An American who buys a Pontiac Le Mans from General Motors is unaware that,
of the 10,000 dollars he paid for it, 3,000 will go to South Korea for routine operations
and assembly, 1,750 to Japan for high-tech equipment (in the engine and electronic
instruments), 750 to Germany for styling and design engineering, 400 to Taiwan,
Singapore and again Japan for small components, 250 to the United Kingdom for
advertising and marketing, and 50 to Ireland and Barbados for data processing. The
remainder (some 4,000 dollars) will go to the creative managers and their colleagues
in Detroit, to lawyers and bankers in New York, to lobbyists in Washington, to insurance
companies and health workers in the USA, and to shareholders, some of whom
live in the USA but an ever-increasing number of whom live abroad. Thus, General
Motors operates a global network. It offers a typical example: nowadays, most trading
transactions take place between individuals who are operating within a given network.
Either they belong to the same multinational, or they work for different companies
which have formed a parent company or simply have their own network.
Fila, the fast-growing sportswear and shoe maker based in the north Italia textile
town of Biella, has found one way of coping with a fundamental problem of European
manufacturing. It is trying not to have any.
Fila's production is now carried out by about 50 independent low-cost
subcontractors around the world. Roughly 85 per cent of output came from the Far
East last year, with just under 10 per cent of its good made in Italy.
Fila has switched to Asian production as part of "globalization of sales, sourcing
and creativity."
Staff in Italy, which totalled 2,500 in the 1950s and 1,800 in the 1960s, has now
declined to 270, with a further 670 employed abroad — mainly in quality control,
design, distribution and marketing. Turnover has rocketed 10-fold since the late 1980s.
Making up a track suit in an Indonesian or Chinese garment factory costs L5.000,
against L35.000 to L40,000 in Italy. Even South Korea is now a relatively high-cost site,
with production about 40 per cent more expensive than in China.
With 70 per cent of its cost and revenues in dollars, Fila has become progressively
less Italian.

PROF. ROGER BLANPAIN

Will I Still Have a Job Tomorrow?
(Peeters, Leuven, 1994)

'Wiltshire File Co., Inc. vs. N L R C , G.R. N o . 82249, February 7, 1991; Escareal
vs. N L R C , G.R. N o . 99359, September 2, 1992.

790
 TERMINATION OF EMPLOYMENT ARTS
[Part 4. Authorized Causes of Termination]

A b o l i t i o n of departments or positions in the company is o n e of the

recognized management prerogatives. Noteworthy is the fact that the private
respondent does not question the validity of the business move of petitioner. In
the absence of p r o o f that the act of petitioner was ill-motivated, it is presumed
that petitioner San Miguel Corporation acted in g o o d faith. In fact, petitioner
acceded to the demands of the private respondent union by redeploying most
1
of the employees involved.

3.1 Creadon of Positions with Functions Related or Similar to Those

of the Abolished Positions Does N o t Necessarily Invalidate the Declaration of
Redundancy
Santos, et al. vs. CA, Pepsi Cola Products Phil., et al., G.R. N o . 141947, July 5,
2001 —
Facts: In December 1994, PEPSI informed its employees that due to poor
performance of its Metro Manila Sales Operations it would restructure and streamline
certain physical and sales distribution systems to improve its warehousing efficiency.
Certain positions, including that of petitioners, were declared redundant and
abolished.
However, before the end of 1995, petitioners [the employees who were
separated on ground of redundancy] learned that PEPSI created new positions
called Account Development Managers ( A D M ) with substantially the same duties and
responsibilities as the CDS. They filed a complaint with the Labor Arbiter for illegal
dismissal with a prayer for reinstatement, backwages, etc.
They alleged that the creation of the new positions belied PEPSI's claim of
redundancy. They further alleged that the qualifications for both the CDS and A D M
positions were similar and that the employees hired for the latter positions were even
less qualified than they were.
PEPSI, on the other hand, maintained that the redundancy program was made
in g o o d faith and was not implemented to purposely force certain employees out of
their employment. It also claimed that a close perusal of the j o b descriptions of both
the CDS and A D M positions would show that the two (2) were very different in terms
of the nature of their functions, areas of concerns, responsibilities and qualifications.
Ruling: T h e question of whether the duties and responsibilities of the CDS
and A D M positions are similar is a question properly belonging to both the Labor
Arbiter and the N L R C . In fact, the N L R C merely affirmed the finding of the Labor
Arbiter on this point and further elaborated on the differences between the two (2).
Thus it ruled —
x x x x We cannot subscribe to the complainants' assertion that the positions
have similar j o b descriptions. First, CDS report to a CD Manager, whereas the ADMs
do not report to the CD Manager, leading us to believe that the organizational setup
of the sales department has been changed.

'San Miguel Corporation vs. N L R C , G.R. N o . 99266, March 2, 1999.

791
 POST-EMPLOYMENT
ARTS. 283-284

Second, CDS are field personnel who drive assigned vehicles and deliver stocks
to "dealers" who, under the j o b description are those who sell and deliver the same
stocks to smaller retail outlets in their assigned areas. T h e ADMs are not required to
drive trucks and they do not physically deliver stocks to wholesale dealers. Instead,
they help "dealers" market the stocks through retail. This conclusion is borne out
by the fact (that) ADMs are tasked to ensure that the stocks are displayed in the best
possible locations in the dealer's store, that they have more shelf space and that
dealers participate in promotional activities in order to sell more products.
It is clear to us that while CDS are required to physically deliver, sell and collect
payments for softdrinks, they do so not primarily to retail outlets but to wholesale
dealers who have retail customers of their own. They are not required to assist the
dealers they deliver to in selling the softdrinks more effectively whereas ADMs sell
softdrinks to big retail outlets (groceries and malls who have shelves and display cases
and who require coolers and other paraphernalia). They do not only sell but they
have to effectively market the products or put them in the best and most advantageous
light so that the dealers who sell the softdrinks retails can sell more softdrinks. T h e
main thrust of the ADMs j o b is to ensure that the softdrinks products ordered from
them are marketed in a certain manner ("Pepsi-Way standards") in keeping with the
promotional thrust of the company.
Therefore, the two (2) positions being different, it follows that the redundancy
program instituted by PEPSI was undertaken in g o o d faith. Petitioners have not
established that the title Account Development Manager was created in order to
maliciously terminate their employment. N o r have they shown that PEPSI had any ill
motive against them. It is therefore apparent that the restructuring and streamlining
of PEPSI's distribution and sales systems were an honest effort to make the company
more efficient.
[Absence or Inadequacy of Criteria Should be Raised before the LA or the
NLRC]
[I]n a last ditch effort to plead their case, petitioners [employees] would want
us to believe that their termination was illegal since PEPSI [the employer] did not
employ fair and reasonable criteria in implementing its redundancy program. This
issue was not raised before the Labor Arbiter nor with the N L R C . As it would be
offensive to the basic rules of fair play and justice to allow a party to raise a question
which has not been passed upon by both administrative tribunals, it is now too late
to entertain it.

3.2 Valid Abolition of Position and Transfer to Lower Position

Great Pacific Life Assurance Corp. vs. NLRC, G.R. N o . 88011, July 30, 1990 —
Facts: Ms. Allado was transferred to Makati, Metro Manila, because of the
abolition of her position as Regional Cashier in Baguio City. That it has in fact been
abolished is not disputed. It is also not disputed that the Regional Administrator had
assumed the function of Regional Cashier and GREPALIFE has not hired anyone in
Allado's stead. In fact, there is no serious challenge at all to the decision of GREPALIFE
deleting Allado's item.

792
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

Ruling: It is, of course, a management prerogative to abolish a position which

it deems no longer necessary and this Court, absent any findings of malice on the
part of management, cannot erase that initiative simply to protect the person holding
the office, and We do not see anything that would indicate that Allado's position was
abolished to ease her out of employment. T h e deletion of Allado's office, therefore,
should be accepted as a valid exercise of management prerogative.
But GREPALIFE sought to accommodate Allado by ordering her to transfer to
a position recently vacated. Whether that position is two grades lower than Regional
Cashier is immaterial because GREPALIFE could have then terminated Allado's
services when it abolished her position. H e r proposed transfer was merely an
accommodation. It is erroneous, therefore, to conclude that a situation was created
by GREPALIFE to force Allado to resign.
Based on the premises, however, that Allado's services could have been
terminated after her position as Regional Cashier was abolished, We adopt by
analogy Article 283 of the Labor Code which provides that in case of termination of
employment due to installation of labor-saving devices or redundancy, the worker
affected shall be entitled to a separation pay of at least one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. We took
consideration of the fact that Allado's proposed transfer to Makati, Metro Manila
would indeed entail much sacrifice on her part and the finding of the N L R C that
the position which Allado was to assume is two grades lower than a Regional Cashier
so much so that GREPALIFE's accommodation of her is almost illusory. Thus, in the
interest of justice, Allado should be entitled to receive one (1) month pay for every
year of service as her separation pay. Since Allado was already paid one-half ( 1 / 2 )
month pay for every year of service, she is only entitled to the balance.

International Harvester Macleod, Inc. vs. Intermediate Appellate Court and Joson,
G.R. N o . 73287, May 18,1987 —
W h o determines the need for the existence of a department in the employer
corporation and the reduction of personnel?
Facts: There was no dispute that, as claimed by petitioner, the sole function
of its government sales department of which private respondent [employee] was
the government relations officer, a managerial position, was to take charge of sales
of trucks, equipment and spare parts to the government. Such function, originally
handled by the Asia Pacific Corporation as special government dealer, was taken
over by International Heavy Equipment corporation with bigger manpower and
resources. Eventually, the government sales department was phased out and [the
complainant] was offered a lesser position in the fleet account sales with less salary
and without allowance, although with commission, on the ground that his position
has become redundant. Respondent [employee] refused to transfer, which refusal
resulted in the termination of his services.
Ruling: A searching review of the records fails to show that petitioner in
demoting private respondent and later terminating his services acted oppressively,
unjustly or arbitrarily. T h e lower court, observing that the phasing out of the

793
 POST-EMPLOYMENT
ARTS. 283-284

department in question was preceded by a bitter discussion between private

respondent and his superiors, alluded to the latter as the probable cause of the
alleged illegal dismissal. But such is only a surmise in the absence of any concrete
evidence that the reorganization being undertaken by petitioner company is for any
other purpose than its declared objective — as a labor and cost-saving device. Indeed,
there is no argument against the fact that with the hiring of IHEC, it was no longer
economical to retain the services of private respondent; so much so that despite the
findings of the trial court that on many occasions, petitioner company undertook
direct sales to the Philippine government despite engagement of the Asia Pacific
Corporation as government dealer, it is not precluded from adopting a new policy
conducive to a more economical and effective management.
Moreover, the issue as to whether or not his employer has the right to demote
him has been laid to rest in Petrophil vs. NLRC (143 SCRA 704 [1986]), where the
Supreme Court quoted with approval the ruling of the Labor Arbiter in this regard:
Time and again, this office has sustained the view that it is management
prerogative to transfer, demote, discipline and even to dismiss an employee
to protect its business, provided it is not tainted with unfair labor practice.
Neither can he complain of arbitrariness because even his senior officer
[Mr. Gomez] has been transferred to head the sales project department, after
which the department in question ceased to operate.

3.3 Replacing a Regular Employee with an Independent Contractor

Serrano vs. National Labor Relations Commission and Isetann Department Store,
G.R. N o . 117040, January 27, 2000 —
Facts: Petitioner was hired by private respondent Isetann Department Store as
a security checker to apprehend shoplifters and prevent pilferage of merchandise.
Initially hired on October 4,1984 on contractual basis, he eventually became a regular
employee on April 4,1985. In 1988, he became head of the Security Checkers Section.
But on October 11, 1991 he received from his employer this letter-memorandum:
October 11, 1991
MR. [ x ] SERRANO
PRESENT
Dear Mr. Serrano,

In view of the retrenchment program of the company, we hereby reiterate our

verbal notice to you of your termination as Security Section Head effective October
11, 1991.

Please secure your clearance from this office.

Very truly yours,

[Sgd.] (Name)
Human Resources Division Manager

794
 TERMINATION OF EMPLOYMENT ARTS
[Part 4. Authorized Causes of Termination]

Losing his employment, the petitioner filed a complaint for illegal dismissal,
illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of
salary and overtime pay.
T h e Labor Arbiter found the petitioner to have been illegally dismissed. He
ruled that the company failed to justify the retrenchment of its security section and
that it failed to accord due process to petitioner.
T h e company appealed to the N L R C which reversed the decision of the Labor
Arbiter but ordered that petitioner be given separation pay equivalent to one month
pay for every year of service, unpaid salary and proportionate 13th month pay. The
employee filed a motion for reconsideration, but his motion was denied.
T h e N L R C held that the phase-out of the security section and the hiring of
an independent security agency constituted an exercise of "[a] legitimate business
decision whose wisdom we do not intend to inquire into and for which we cannot
substitute our judgment";
Hence this petition, raising the following issue: Is the hiring of an independent
security agency by the employer to replace its current security section a valid ground
to dismiss the employees in that section?
Petitioner [employee] contends that abolition of private respondent's Security
Checkers Section and the employment of an independent security agency do not
fall under any of the authorized causes for dismissal under Article 283 of the Labor
Code.
Ruling: Petitioner's contention has no merit. Article 283 provides: x x x
In De Ocampo vs. National Labor Relations Commission, this Court upheld the
termination of employment of three mechanics in a transportation company and
their replacement by a company rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as part of the
company's cost-saving program, the services rendered by the mechanics became
redundant and superfluous, and therefore properly terminable. T h e company
merely exercised its business judgment or management prerogative. And in the
absence of any proof that the management abused its discretion or acted in
a malicious or arbitrary manner, the court will not interfere with the exercise
of such prerogative."
In Asian Alcohol Corporation vs. National Labor Relations Commission, (G.R. N o .
131108, March 25, 1999, 305 SCRA 416) the Court likewise upheld the termination
of employment of water pump tenders and their replacement by independent
contractors. It ruled that an employer's good faith in implementing a redundancy
program is not necessarily put in doubt by the availment of the services of an
independent contractor to replace the services of the terminated employees to
promote economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a company]
cannot be denied the faculty of promoting efficiency and attaining economy by a study
of what units are essential for its operation. To it belongs the ultimate determination
of whether services should be performed by its personnel or contracted to outside

795
 POST-EMPLOYMENT
ARTS. 283-284

agencies" [While there] should be mutual consultation, eventually deference is to

be paid to what management decides Shell Oil Workers Union v. Shell Company of the
Philippines, Ltd., 39 SCRA 276, 284-285 (1971). Consequently, absent proof that
management acted in a malicious or arbitrary manner, the Court will not interfere
with the exercise of judgment by an employer.
In the case at bar, we have only the bare assertion of petitioner that, in abol-
ishing the security section, private respondent's real purpose was to avoid payment
to the security checkers of the wage increases provided in the collective bargaining
agreement approved in 1990. Such an assertion is not a sufficient basis for conclud-
ing that the termination of petitioner's employment was not a bona fide decision
of management to obtain reasonable return from its investment, which is a right
guaranteed to employers under the Constitution. Indeed, that the phase-out of the
security section constituted a "legitimate business decision" is a factual finding of an
administrative agency which must be accorded respect and even finality by this Court
since nothing can be found in the record which fairly detracts from such finding.
Accordingly, we hold that the termination of petitioner's services was for an
authorized cause, i.e., redundancy. Hence, pursuant to Article 283 of the Labor Code,
petitioner should be given separation pay at the rate of one month pay for every year
of service.

3.4 Invalid Declaration of Redundancy; Illustrative Case

Jurisprudence holds that it is the m a n a g e m e n t that determines what
services are no l o n g e r necessary. This is an exercise of business j u d g m e n t whose
soundness or enforcement is generally not subject to unsolicited review of the
labor court or labor administrators.
But, as always, law and the fundamentals of g o o d faith should be observed.
Redundancy is not the way to remove an unwanted e m p l o y e e . T h e r e are
prescribed causes and procedure for that. This precept appears to have been
breached in the Asufrin case where the e m p l o y e e complains that he was singled
out.

Asufrin vs. San Miguel Corp., G.R. N o . 156658, March 10, 2004 —
Facts: San Miguel Beer Corp. adopted a "pre-selling" operations scheme that
resulted in all route and warehouse positions being declared "redundant." SMC
offered an early retirement package (250% of regular pay) to the affected employees.
The complainant employee did not avail himself of the package and requested that
he be retained in any position. Nonetheless, his employment was terminated on
ground of redundancy.
Ruling: The Supreme Court ordered his reinstatement with full backwages. The
Court cited four reasons why it was not convinced about the alleged redundancy:
(1) Of the 14 employees who did not avail of the retirement package, only
the complainant was not redeployed to other offices or outlets; he
therefore appeared to have been singled out;

796
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

(2) Complainant was in the payroll of Sta. Fe Brewery although actually

posted at the Sum-ag Warehouse where his post was declared redundant;
he could have been retained in Sta. Fe;
(3) Despite contrary allegation, warehousing activities continued in Sum-
ag as transit point where dealers got their stocks;
(4) No criteria, e.g., employee status, efficiency, and seniority was adopted
in determining the employees to be laid of.
T h e Court concluded: "We do not treat our workers as merchandise and their
right to security of tenure cannot be valued in precise peso-and-centavo terms."

In another case the Court again concluded that the position itself of the
complainant was not redundant. Private respondent P R C had no valid and
acceptable basis to declare the position of Pollution Control and Safety Manager
redundant as the same may not be considered as superfluous; by the express
mandate of the provisions earlier cited, said positions are required by law. Thus,
it cannot be gainsaid that the services of the petitioner are in excess of what is
reasonably required by the enterprise. Otherwise, P R C would not have allowed
ten (10) l o n g years to pass before o p e n i n g its eyes to that fact; neither would it
have increased the petitioner's salary to P23,100.00 a month effective April 1,
1988. T h e latter by itself is an unequivocal admission of the specific and special
n e e d for the position and an o p e n recognition of the valuable services rendered
by the petitioner. Such admission and recognition are inconsistent with the
1
proposition that petitioner's positions are redundant.

4. RETRENCHMENT
Retrenchment is o n e of the e c o n o m i c grounds resorted to by an employer
to terminate e m p l o y m e n t primarily to avoid or minimize business losses. T h e
law recognizes this under Article 283 of the L a b o r C o d e . However, the employer
bears the burden to prove his allegation of e c o n o m i c or business reverses. T h e
employer's failure to prove it necessarily means that the employee's dismissal
2
was not justified.
L o n g before the L a b o r C o d e appeared, the Supreme Court had held that
"where it becomes necessary for an employer to reduce its personnel due to losses
in the operation of its business, its right to determine w h o among its employees
should be retained or dismissed should not be interfered with unless it could
be shown that the employer, under cover of this right, is proceeding against the
3
employees in an unjust or capricious manner."

'Escareal vs. National Labor Relations Commission, Philippine Refining Co.,

et al, G.R. N o . 99359, September 2, 1992.
Precision Electronics Corporation vs. National Labor Relations Commission,
G.R. N o . 86657, October 23, 1989.
'Northern Luzon Transportation, Inc. v. CIR, et al, SC-No. 47768, June 30,1941.
797
 POST-EMPLOYMENT
ARTS. 283-284

In many instances, the Supreme Court has "affirmed the right of an

employer to lay off or dismiss employees because of losses in the operation of its
1
business, lack of work and considerable reduction in the volume of his business."
Concededly, retrenchment to prevent losses is considered a just cause for
terminating employment and the decision whether to resort to such move or
2
not is a management prerogative.
Basic, however, in human relations is the precept that "every person must,
in the exercise of his rights, and in the performance of his duties, act with justice,
3
give everyone his due and observe honesty and g o o d faith."

4.1 Causes of Retrenchment

Various causes lead to retrenchment, such as lack of work or business
recession.

Lack of Work
Lack of work is a justifiable cause for t e r m i n a t i o n of e m p l o y m e n t .
Protection to labor does not mean oppression or self-destruction of capital.
W h e r e the continuation of the m e n in the service is patently inimical to the
interest of the employer, there is no alternative but for the court to authorize
the e m p l o y e r to lay o f f such n u m b e r of workers as the circumstances may
warrant. But the court may impose the c o n d i t i o n that the e m p l o y e r shall not
admit any new laborer in case of available work in the future b e f o r e the laid-off
men w h o are able, willing and available to do the same shall have been recalled
4
to work.
In another case, where there was no m o r e work for two of its salesmen and
one radio mechanic because the articles that they used to sell and repair could
no longer be imported because the company was unable to secure the necessary
license for importation, the Court found justification in the laying-off of said
5
employees.

Business Recession
Where the management found it unnecessary to continue employing some
of its laborers because of a business recession, lack of materials to work on due
to government control or due to lack of d e m a n d for its products, the Court

•Columbia Development Corporation vs. Minister of Labor and Employment,

et al., G.R. N o . 57769, December 29, 1986.
2
AHS/Philippines Employees Union vs. National Labor Relations Commission,
G.R. N o . 73721, March 30, 1987.
Ibid.
4
Mayon Engineering Workers' Union vs. Mayon Engineering and Machine
Shop, CIR N o . 150-V, October 28, 1948.
5
Union of Philippine Education Employees vs. Philippine Education Co., G.R.
N o . 1-7161 May 19, 1955.

798
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

upheld management's right to dismiss its laborers, specially when the dismissal
1
was only temporary.

Fire
In case w h e r e the return-to-work o r d e r issued by the National Labor
Relations Commission pursuant to Article 264 cannot be implemented because
of a supervening event, i.e., a fire that destroyed the e m p l o y e r ' s business
establishment, so that the employer's functions were reduced to a considerable
extent, and therefore the resumption of e m p l o y m e n t would be unwarranted
and a waste of labor and add heavy burden to the already distressed business of
the employer, the Supreme Court may consider and apply Article 284 [283] of
2
the L a b o r C o d e , as a m e n d e d .

Conservatorship
T h e retrenchment of personnel as a consequence of conservatorship
proceedings against an insurance company in financial difficulties is a cost-saving
measure resorted to by the Conservator to preserve the assets of the company
for the protection not only of the policyholders and creditors but also of the
investors and the public in general. Conservatorship proceedings contemplate,
not the liquidation of the company involved, but a conservation of company assets
and business during the p e r i o d of stress by the Commissioner of Insurance, who
3
thereafter yields control to the regular officers of the company.

4.2 Basic Requisites of Valid Retrenchment

U n d e r Article 283, there are three basic requisites for valid retrenchment:
(1) the retrenchment is necessary to prevent or minimize losses and such
losses are proven;
( 2 ) written notice is given to the employees and the Department of Labor
and Employment at least o n e month before the intended date of retrenchment;
and
(3) separation pay is paid.
As for the first requisite, whether or not an employer would imminently
suffer serious or substantial losses for e c o n o m i c reasons is essentially a question
4
of fact for the Labor Arbiter and the N L R C to determine.
Regarding the second requisite, the Court found in o n e case that the
employees were given notice of the temporary lay-off, but there is no evidence

'Arte Español vs. Pedret, 53 O.G. 3753.

2
Bagong Bayan Corporation Realty Investors and Developers vs. Hon. Bias
Ople, et al, G.R. N o . 73334, December 8, 1986.
'Garcia vs. National Labor Relations Commission, G.R. N o . 67825, September
4, 1987.
4
Lopez Sugar Corp. vs. Federation of Free Workers, 189 SCRA 179 [1990].
799
 POST-EMPLOYMENT
ARTS. 283-284

that any written notice to permanently retrench them was given at least o n e
month prior to the date o f the intended retrenchment. T h e N L R C found that
G T I conveyed to the petitioners the impossibility of recalling them due to the
continued unavailability of work. But what the law requires is a written notice to
1
D O L E and to the employees concerned, and that requirement is mandatory.
T h e notice must be given at least o n e month in advance of the intended date of
retrenchment to enable the employees to look for other means of employment
and to ease the impact of the loss of their j o b s and income. T h a t they were
already on temporary lay-off at the time the notice should have b e e n given to
them is not an excuse to f o r e g o the one-month written notice because by this
time, their lay-off is to b e c o m e permanent and they were definitely losing their
employment.
As to the third requisite, Article 283 requires the employer to pay the
employee a separation pay equivalent to o n e ( 1 ) month pay or at least one-half
2
( 1 / 2 ) month pay for every year of service, whichever is higher.
In o n e case, some of the retrenched employees opposed the retrenchment
by staging a strike. T h e retrenchment was found justified and the strike was
declared illegal. consequently, the leaders of the strike, including the retrenched
employees, were declared to have lost their e m p l o y m e n t status. Should they still
be paid separation pay because of the retrenchment? T h e Court resolved that
they should be, inasmuch as the retrenchment occurred much ahead of the
strike. T h e declaration that they had lost their e m p l o y m e n t status produced no
real significance to them since their retrenchment p r e c e d e d the declaration of
3
strike.
To the three requisites m e n t i o n e d above should be a d d e d two m o r e ,
namely:
( 4 ) the employer exercises its prerogative to retrench employees in g o o d
faith for the advancement of its interest and not to defeat or circumvent the
employee's right to security of tenure; and
( 5 ) the employer uses fair and reasonable criteria in ascertaining w h o
will be dismissed or retained a m o n g the employees, such as status (i.e., whether
they are temporary, casual, or regular), efficiency, seniority, physical fitness, age
4
and financial hardship for certain workers.

•See Union of Filipro Workers vs. N L R C , 221 SCRA 267 [1993].

2
University of the East vs. Minister of Labor, G.R. N o . 74007, July 31, 1987.
3
Asionics Phil., Inc. and/or Frank Yih vs. N L R C , Y Boaquina and J. Gayola,
G.R. N o . 124950, May 19, 1998.
"Asian Alcohol Corporation vs. N L R C , 305 SCRA 416 [1999].

800
 TERMINATION OF EMPLOYMENT ARTS 2ft^.9Rd
[Part 4. Authorized Causes of Termination] *O0-40*

4.2a Criteria; Whom to Lay Off

T h e r e must be fair and reasonable criteria to be used in selecting employees
to be dismissed, on account of retrenchment, such as ( a ) less preferred status
1
(i.e., temporary employees); ( b ) efficiency rating; and ( c ) seniority.
W h e n there is n e e d to reduce the workforce, the management has the right
to choose w h o m to lay off, d e p e n d i n g on the work still required to be done and
2
the qualities of the workers to be retained.

4.2b Seniority Rights

An e m p l o y e e has no inherent right to seniority. He has only such rights
as may be based on a contract, a statute, or an administrative regulation relative
thereto. Seniority rights, which are acquired by an e m p l o y e e through long-time
e m p l o y m e n t , are contractual and not constitutional. H e n c e , the discharge
of such e m p l o y e e , thereby terminating such rights, w o u l d not violate the
3
Constitution.
But in selecting the employees to retrench, the employer cannot completely
4
disregard seniority as a factor.

4.3 Four Standards of Retrenchment

Retrenchment is r e c o g n i z e d as a preventive and curative measure. Actual
losses or profuse bleeding of the business does not have to happen before the
employer may do the saving act. Preventive retrenchment is lawful. But certain
standards or pre-conditions must be met, otherwise the extreme recourse to
retrenchment may be invalidated. T h e Court explains these guidelines in the
precedent-setting ruling p e n n e d by Mr. Justice Feliciano in Lopez Sugar.

Lopez Sugar Corporation vs. Federation of Free Workers, et al, G.R. Nos. 75700-01,
August 30, 1990 —
Facts: Petitioner employer, allegedly to prevent losses due to major economic
problems, and exercising its privilege under the collective bargaining agreement,
retrenched and retired a number of its employees.
Petitioner filed a combined report on retirement and application for clearance
to retrench 86 of its employees. Meanwhile, private respondent filed a complaint
for unfair labor practice stating that the terminations undertaken by petitioner were
violative of security of tenure and were intended to bust the union.
Rulings: (1) "To prevent losses "justifies retrenchment. — In its ordinary connotation,
the phrase "to prevent losses" means that retrenchment or termination of the services
of some employees is authorized to be undertaken by the employer sometime before
the losses anticipated are actually sustained or realized. It is not, in other words, the

^ i a w o r l d Publishing House, Inc. vs. Ople, G.R. N o . 56398, July 23, 1987.
2
Almoite vs. Pacific Architects, etc., G.R. N o . 73680, July 10, 1986.
9
Enriquez vs. Zamora, G.R. N o . 51382, December 29, 1986.
4
See Philippine Tuberculosis case in the subject of retrenchment criteria.

801
 POST-EMPLOYMENT
ARTS. 283-284

intention of the lawmaker to compel the employer to stay his hand and keep all his
employees until sometime after losses shall have been materialized; if such an intent
were expressly written into the law, that law may well be vulnerable to constitutional
attack as taking property from one man to give to another.
At the other end of the spectrum, it seems equally clear that not every asserted
possibility of loss is sufficient legal warrant for reduction of personnel. In the nature
of things, the possibility of incurring losses is constantly present, in greater or lesser
degree, in the carrying on of business operations, since some, indeed many, of the
factors which impact upon the profitability or viability of such operations may be
substantially outside the control of the employer.
(2) Standards which justify retrenchment. — We consider it may be useful to
sketch the general standards in terms of which the acts of petitioner employer must
be appraised. Firstly, the losses expected should be substantial and not merely de
minimis in extent. If the loss purportedly sought to be forestalled by retrenchment
is clearly shown to be insubstantial and inconsequential in character, the bona fide
nature of the retrenchment would appear to be seriously in question.
Secondly, the substantial loss apprehended must be reasonably imminent, as
such imminence can be perceived objectively and in g o o d faith by the employer.
There should, in other words, be a certain degree of urgency for the retrenchment,
which is, after all, a drastic recourse with serious consequences for the livelihood of
the employees retired or otherwise laid-off.
Because of the consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the expected losses. T h e
employer should have taken other measures prior or parallel to retrenchment to
forestall losses, i.e., cut other costs than labor costs. An employer who, for instance,
lays off substantial number of workers while continuing to dispense fat executive
bonuses and perquisites or so-called "golden parachutes," can scarcely claim to be
retrenching in good faith to avoid losses. To impart operational meaning to the
constitutional policy of providing "full protection" to labor, the employer's prerogative
essentially as a measure of last resort, after less drastic means — e.g., reduction of
both management and rank-and-file bonuses and salaries, going on reduced time,
improving manufacturing efficiencies, trimming of marketing and advertising costs,
etc. — have been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if already realized, and
the expected imminent losses sought to be forestalled, must be proven by sufficient
and convincing evidence. T h e reason for requiring this quantum of proof is readily
apparent: any less exacting standard of proof would render too easy the abuse of this
ground for termination of services of employees.
(3) Determination of loss lies with the Labor Arbiter and NLRC. — Whether or
not an employer would imminently suffer serious or substantial losses for economic
reasons is essentially a question of fact for the Labor Arbiter and the N L R C to
determine. In the instant case, the Labor Arbiter found no sufficient and convincing
evidence to sustain petitioner's essential contention that it was acting in order to
prevent substantial and serious losses.

802
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

(4) Effect of quitclaims. — T h e fact that several workers signed quitclaims will
not by itself bar them from joining in the complaint. Quitclaims executed by laborers
are commonly frowned upon as contrary to public policy and ineffective to bar claims
for the full measure of the worker's legal rights.
(5) Effect of unjustified retrenchment. — W e conclude that because the attempted
retrenchment on the part of the petitioner was legally ineffective, all retrenched
employees should be reinstated and backwages paid them x x x . Upon the other
hand, we find valid the retirement of those employees who were retired by petitioner
pursuant to the applicable provisions of the CBA.

4.4 Evidence to Prove Losses: "Modicum of Admissibility''

In Uichico, et al vs. NLRC and Santos, et al, G.R. N o . 121434, June 2, 1997,
the L a b o r Arbiter sustained the company's submission that it suffered serious
business losses in 1991, thus necessitating the retrenchment of the complaining
employees. But on appeal the N L R C reversed the L a b o r Arbiter's conclusion
and adjudged the e m p l o y e r liable for illegal dismissal. T h e N L R C reexamined
the evidence of financial losses, then ruled:
"We observe that the basis of the L a b o r Arbiter in sustaining the
a r g u m e n t of financial reverses is the Statement of Profit and Losses
submitted by the respondent employer. The same, however, does not bear the
signature of a certified public accountant or audited by an independent auditor.
Briefly stated, it has no evidentiary value. As such, the alleged financial
losses which caused the temporary closure of respondent Crispa, Inc., has
not been sufficiently established. In the case of Lopez Sugar Corp. vs. FFW, 189
SCRA 179, the Supreme Court held that 'alleged losses if already realized
and the expected losses sought to be forestalled must be proved by sufficient
and c o m m e n c i n g (sic) evidence. Consequently, there being no financial
reverses for (sic) m e n (sic) the termination of herein complainants from
their e m p l o y m e n t is perforce illegal."
Reviewing the decisions, the S u p r e m e Court upheld that o f the N L R C .
It pointed out that evidence presented in N L R C proceedings must have
1
modicum of admissibility.
T h e retrenchment of some 5,000 employees of the Philippine Airlines was
declared invalid. P A L failed to submit its audited financial documents to prove
severe losses in the several years preceding the retrenchment. Furthermore, m
deciding w h o to retrench, P A L in effect disregarded the seniority factor because
it used as basis the employee's performance rating for only one year. It also used
2
"other reasons" which, however, were never specified.

'See comments to Article 221.

2
Flight Attendants, etc. vs. Phil. Airlines, etc., G.R. N o . 178083, July 22, 2008.

803
 POST-EMPLOYMENT
ARTS. 283-284

4.5 Hiring of Replacements after Retrenchment

Retrenchments are allowed for all unnecessary positions based on the
employer's own reorganization program. However, the reorganization cannot be
used as a convenient device to get rid of existing personnel in order to replace
them with new ones. For this purpose, the regular rules and procedures on
1
dismissal will have to be followed.
In o n e case the employer retrenched seven employees allegedly to prevent
losses but hired new employees to replace them. Such act, the Court ruled,
"clearly belies petitioners' [employers'] contention that the retrenchment was
necessary to prevent or offset the expected losses effectively." T h r o u g h Mr. Justice
Panganiban, the H i g h Court concurred with the opinion of the N L R C .
Certain persons w e r e h i r e d or r e h i r e d after the complainant-
employees were dismissed. W h y would [the e m p l o y e r ] take in additional
workers if it had to retrench? It becomes immaterial whether the persons
hired had previously worked for the employer. T h e fact that there was
hiring of additional personnel right after the complainants were retrenched
is enough to destroy whatever pretense the e m p l o y e r h a [ d ] with respect
to retrenchment. W h e t h e r those hired w e r e i n t e n d e d to replace the
retrenched e m p l o y e e s or not is immaterial. T h e crucial p o i n t is that
immediately after the so-called retrenchment, [the employer Association]
hired other workers. Such actuation is inconsistent with retrenchment and
merely strengthen [s] the observation that there was an orchestrated move
to terminate the [ e m p l o y e e s ] on account of their union activities. (See
Bogo-Medellin Supercane Planters Association vs. NLRC, et al., G.R No. 97846,
September 25, 1998.)
In other words, r e t r e n c h m e n t does n o t substitute for dismissal of an
e m p l o y e e . Dismissal results from an intolerable act of the e m p l o y e e , and
dismissal has its own procedure and effects. Retrenchment, on the other hand,
arises from an e c o n o m i c condition — the p o o r financial health of the business.
Retrenchment is not an escape route to i m p l e m e n t a secret desire to remove an
unwanted person. In fine, retrenchment (like redundancy) is justified by ethical,
good-faith business motive. This is the reason an e m p l o y e r may be challenged
to prove the alleged losses of the business.

4.6 Contracting out After Retrenchment/Redundancy

In Asian Alcohol Crop. vs. NLRC, G.R. N o . 131108, March 25,1999, the Court
upheld the termination of employees on g r o u n d of redundancy and subsequent
hiring of an independent contractor to p r o m o t e e c o n o m y and efficiency. This
ruling is consistent with that in De Ocampo (September 4,1992) and cited as well
in Serrano (June 27, 2000).

'Gregorio Araneta University vs. National Labor Relations Commission, G.R.

Nos. 75925-26, October 29, 1987.

804
 TERMINATION OF EMPLOYMENT ARTS 9 » * 0 « M
[Part 4. Authorized Causes of Termination] 433-^84

4.7 Redundancy Distinguished from Retrenchment; Temporary Versus

Permanent Retrenchment
Redundancy should be carefully distinguished from retrenchment. Their
causes and effects are different. As to cause, redundancy results from the fact
that the position of the e m p l o y e e has b e c o m e superfluous, an excess over what
is actually needed, even if the business has not suffered reverses. Retrenchment
is linked with losses; it is a cost-cutting measure made immediately necessary by
business reduction or reverses.
As to effect, the separation pay for redundancy is higher than that for
retrenchment.
Retrenchment is either permanent or temporary. Permanent retrenchment
is contemplated in Article 283; temporary retrenchment is included in Article
286. W h e n the six-month p e r i o d m e n t i o n e d in Article 286 is over and the
e m p l o y e e (still willing to w o r k ) is n o t recalled, he is d e e m e d separated or
constructively dismissed. ("Constructive" dismissal is o n e inferred or construed
from the employer's action; at first glance, it does not look like a dismissal, but
upon interpretation, the action amounts anyway to dismissal.)
T h e Sebuguero decision p e n n e d by Mr. Justice (later Chief Justice) Davide,
is highly instructive for its explanation of redundancy and retrenchment.

Sebuguero, et al. vs. NIRC, G.T.I. Sportswear Corp., et al., G.R. N o . 115394,
September 27, 1995 —
Facts: T h e petitioners were among the thirty-eight (38) regular employees
of G T I Sportswear Corporation, which manufactures and exports ready-to-wear
garments. They were given "temporary lay-off" notices by the employer on January
22, 1991 due to alleged lack of work and heavy losses caused by the cancellation of
orders from abroad and by the garments embargo of 1990.
Believing that their "temporary lay-off" was a ploy to dismiss them, resorted to
because of their union activities and was in violation of their right to security of tenure
since there was no valid ground therefor, the 38 laid-off employees filed complaints
for illegal dismissal, unfair labor practice, underpayment of wages under Wage Orders
Nos. 01 and 02, and non-payment of overtime pay and 13th-month pay.
Private respondent G T I denied the charge of illegal dismissal and asserted that
it was its prerogative to lay-off its employees temporarily for a period not exceeding
six months to prevent losses due to lack of work or j o b orders from abroad, and
that the lay-off affected both union and non-union members. It justified its failure
to recall the 38 laid-off employees after the lapse of six months because of the
subsequent cancellations of j o b orders made by its foreign principals, a fact which was
communicated to the petitioners and the other complainants who were all offered
severance pay. Twenty-two (22) of the 38 complainants accepted the separation pay.
T h e petitioners herein did not.
In his decision, Labor Arbiter Pablo C. Espiritu, Jr. found respondent, GTI
Sportswear Corporation, liable for constructive dismissal, underpayment of wages
under N C R 01 and 02, and 13th-month pay differentials.

805
 POST-EMPLOYMENT
ARTS. 283-284

In support of the disposition, the Labor Arbiter gave the following explanation:
On the validity of the temporary lay-off, this Arbitration Branch finds
that there was ample justification on the part of Respondent company to lay-off
temporarily some of its employees to prevent losses as a result of the reduction
of the garment quota allocated to Respondent company due to the garment
embargo of 1990.
In this case, respondent company was justified in the temporary lay-off
of some of its employees. However, Respondent company should have recalled
them after the end of the six-month period or at the least reasonably informed
them (complainants) that the Respondent company is still not in a position
to recall them due to the continuous drop of demand in the export market
(locally or internationally), thereby extending the temporary lay-off with a
definite period of recall and if the same cannot be met, then the company
should implement retrenchment and pay its employees separation pay. Failing
in this regard, respondent company chose not to recall nor send notice to
the complainants after the lapse of the six (6)-month period. Hence, there is
in this complaint a clear case of constructive dismissal. While there is a valid
reason for the temporary lay-off, the same is also limited to a duration of six
months. Thereafter the employees, complainants herein, are entitled under
the law (Article 286) to be recalled back to work.
T h e Labor Arbiter found no sufficient evidence to prove the petitioners'
charges of unfair labor practice, overtime pay, and for moral and exemplary
damages.
Private respondent G T I seasonably appealed the decision to the N L R C .
In its challenged decision, the N L R C concurred with the findings of the Labor
Arbiter that there was a valid lay-off due to lack of work, but disagreed with the ruling
granting backwages. T h e N L R C justified its postulation as follows:
However, we cannot sustain the findings of the Labor Arbiter in awarding
the complainants backwages after July 22,1991 in view of constructive dismissal,
it being acknowledged by him that "x x x during the trial it was proven, as
testified by the Vice-President for marketing and personnel manager, that the
lack of work and selection of personnel continued to persist x x x . "
Having established lack of work, it necessarily follow [s] that retrenchment
did take place and not constructive dismissal. Dismissal, by its term, presupposes
that there was still work available and that the employer terminated the services
of the employee therefrom. T h e same cannot be said of the case at bar. T h e
complainants did not question the evidence of lack of work on account of
reduction of government quota or cancellation of orders.
Article 286 of the Labor Code is precised [sic] in this regards [sic] when
it provided that:
"Article 286. When employment not deemed terminated. — T h e bona fide
suspension of the operation of a business or undertaking for a period not
exceeding six (6) months, x x x shall not terminate employment x x x."

806
 TERMINATION OF EMPLOYMENT ARTS
[Part 4. Authorized Causes of Termination]

It is only after the six-month period that an employee can be presumed

to have been terminated.
Unable to accept the N L R C judgment, the petitioners filed this special civil
action for certiorari. They contend that the N L R C acted without or in excess of
jurisdiction or with grave abuse of discretion when it ruled that there was a valid and
legal reduction of business and in sustaining the theory of redundancy in justifying
the dismissal of the petitioners.
Ruling: T h e petitioners' first contention is based on a wrong premise or on
a miscomprehension of the statement of the N L R C . What the N L R C sustained
and affirmed is not redundancy, but retrenchment as a ground for termination of
employment. They are not synonymous but distinct and separate grounds under
Article 283 of the Labor Code, as amended.
Redundancy exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise. A position is
redundant where it is superfluous, and superfluity of a position or positions may be
the outcome of a number of factors, such as overhiring of workers, decreased volume
of business, or dropping of a particular product line or service activity previously
1
manufactured or undertaken by the enterprise.
Retrenchment, on the other hand, is used interchangeably with the term "lay-
off." It is the termination of employment initiated by the employer through no fault
of the employees and without prejudice to the latter, resorted to by management
during periods of business recession, industrial depression, or seasonal fluctuations,
or during lulls occasioned by lack of orders, shortage of materials, conversion of
the plant for a new production program or the introduction of new methods or
more efficient machinery, or of automation. Simply put, it is an act of the employer
of dismissing employees because of losses in the operation of a business, lack of
work, and considerable reduction on the volume of his business, a right consistently
recognized and affirmed by this Court.
Article 283 speaks of a permanent retrenchment as opposed to a temporary
lay-off as is the case here. There is no specific provision of law which treats of a
temporary retrenchment or lay-off and provides for the requisites in effecting it or
a period or duration therefor. These employees cannot forever be temporarily laid-
off. To remedy this situation or fill the hiatus, Article 286 may be applied but only by
analogy to set a specific period that employees may remain temporarily laid-off or in
floating status. Six months is the period set by law that the operation of a business or
undertaking may be suspended, thereby suspending the employment of the employees
concerned. T h e temporary lay-off wherein the employees likewise cease to work
should also not last longer than six months. After six months, the employees should
either be recalled to work or permanently retrenched following the requirements of
the law, and that failing to comply with this would be tantamount to dismissing the
employees and the employer would thus be liable for such dismissal.

•Tierra International Construction Corp. vs. N L R C , 211 SCRA 73 [1992];

Escareal vs. N L R C , 213 SCRA 972 [1992]; De Ocampo vs. N L R C , 213 SCRA 652
[1992]; Almodiel vs. N L R C , 223 SCRA 341 [1993].

807
ARTS. 283-284 POST-EMPLOYMENT

To determine, therefore, whether the petitioners were validly retrenched or

were illegally dismissed, we must determine whether there was compliance with the
law regarding a valid retrenchment at anytime within the six-month period that they
were temporarily laid-off.

4.8 The Puzzle: Redundancy or Preventive Retrenchment?

It should be observed that Article 283 recognizes "retrenchment to prevent
losses." In its ordinary connotation, this phrase means that retrenchment may
be undertaken by the e m p l o y e r before losses are actually sustained. T h e
Court has interpreted the law to mean that the e m p l o y e r n e e d n o t k e e p all
his employees until after his losses shall have materialized. Otherwise, the law
could be vulnerable to attack as undue taking of property for the benefit of
1
another.
But a problem emerges: preventive personnel reduction blurs the line
between retrenchment and redundancy.
What, really, is the dividing line between preventive retrenchment and
redundancy? Take a company which is suffering from substantial losses because
of drastic drop in sales of a particular product line. For that reason it abolished
the department producing or handling that product. W i l l the removal o f the
affected employees be treated as retrenchment because further losses should be
stopped? Or is it redundancy because those positions are no l o n g e r needed? Just
to illustrate with numbers, let us assume that ten purchase orders or ten clients
are handled by ten employees. W h e n the purchase orders or clients go down
from ten to five and there is real n e e d to r e m o v e five p e o p l e , is their separation
to be considered redundancy or retrenchment?
In an actual unreported case, for instance, the airline company discontinued
certain flights because of very low number of passengers. T h e affected personnel
claimed redundancy pay while the e m p l o y e r insisted on retrenchment pay.
Understandable, because retrenchment pay is only half the redundancy pay.
In Asian A l c o h o l losses have bled the company for several years. A new
management took over whose mission was to save the company from bankruptcy.
It had to reorganize and, pursuing a cost-saving program, r e m o v e d m o r e than
100 personnel. In describing the management's action the Court skirted around
the difference between redundancy and retrenchment and e n d e d up saying
that some employees were terminated on the "twin grounds of redundancy and
retrenchment."
In the Edge Apparel case, below, the labor arbiter saw the m a n p o w e r
reduction as retrenchment; the N L R C said it was redundancy. T h e H i g h Court
sided with the arbiter. Despite the ruling, however, the puzzle persists because

'Asian Alcohol Corp. vs. N L R C , 305 SCRA 416 [1999].

808
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

"decrease in volume of business" is acceptable reason to justify redundancy as

well as retrenchment.

Edge Apparel, Inc. vs. NLRC, et al., G.R. N o . 121314, February 12, 1998 —
Redundancy exists where the services of an employee are in excess of what would
reasonably be demanded by the actual requirements of the enterprise. A position
is redundant when it is superfluous, and superfluity of a position or positions could
be the result of a number of factors, such as the overhiring of workers, a decrease
in the volume of business or the dropping of a particular line or service previously
1
manufactured or undertaken by the enterprise [emphasis supplied]. An employer
has no legal obligation to keep on the payroll employees more than the number
2
needed for the operation of the business.
Retrenchment, in contrast to redundancy, is an economic ground to reduce
the number of employees. In order to be justified, the termination of employment by
reason of retrenchment must be due to business losses or reverses which are serious,
3
actual and real. N o t every loss incurred or expected to be incurred by the employer
will justify retrenchment, since, in the nature of things, the possibility of incurring
losses is constantly present, in greater or lesser degree, in carrying on the business
operations. Retrenchment is normally resorted to by management during periods of
business reverses and economic difficulties occasioned by such events as recession,
4
industrial depression, or seasonal fluctuations. It is an act of the employer of reducing
the workforce because of losses in the operation of the enterprise, lack of work, or
5
considerable reduction on the volume of business. [emphasis supplied]. Retrenchment is,
in many ways, a measure of last resort when other less drastic means have been tried
and found to be inadequate. A lull caused by lack of orders or shortage of materials
must be of such nature as would severely affect the continued business operations
of the employer to the detriment of all and sundry if not properly addressed. The
institution of "new methods or more efficient machinery, or of automation" is technically
a ground for termination of employment by reason of installation of labor-saving
devices but where the introduction of these methods is resorted to not merely to effect
greater efficiency in the operations of the business but principally because of serious
business reverses and to avert further losses, the device could then verily be considered
one of retrenchment.
T h e N L R C , unfortunately, went further by holding that the dismissal of
private respondents could likewise be considered to have been occasioned by

•American H o m e Assurance Co. vs. N L R C , 259 SCRA 280.

Wiltshire File Co., Inc. vs. N L R C , 193 SCRA 665; AG & P United Rank and
File Association vs. N L R C , 265 SCRA 159.
'Guerrero vs. N L R C , 261 SCRA 301.
4
See Sebuguero vs. N L R C , 248 SCRA 532, citing Jose Agaton Sibal, Philippine
Legal Encyclopedia, 502.
Ibid., citing LVN Pictures Employees and Workers Association vs. LVN Pictures,
Inc., 35 SCRA 147 and Columbia Development Corp. vs. Minister of Labor and
Employment, 146 SCRA 421.
809
 POST-EMPLOYMENT
ARTS. 283-284

redundancy since it was only private respondents' line of work which was phased
out by petitioner.
The Court agrees with the Solicitor General that here the N L R C has gravely
abused its discretion. The law acknowledges the right of every business entity to
reduce its workforce if such measure is made necessary or compelled by economic
factors that would otherwise endanger its stability or existence. In exercising its right
to retrench employees, the firm may choose to close all, or a part of, its business to
avoid further losses or mitigate expenses. In Caffco International Limited vs. Office of the
Minister-Ministry of Labor and Employment, 212 SCRA 351 the Court has aptly observed
that —
Business enterprises today are faced with the pressures of economic
recession, stiff competition, and labor unrest. Thus, businessmen are always
pressured to adopt certain changes and programs in order to enhance their
profits and protect their investments. Such changes may take various forms.
Management may even choose to close a branch, a department, a plant, or a
shop. (Phil. Engineering Corp. vs. CIR, 41 SCRA 89 [1971].)
Clearly, the fact alone that a mere portion of the business of an employer, not
the whole of it, is shut down does not necessarily remove that measure from the
ambit of the term "retrenchment" within the meaning of Section 283(c) of the
Labor Code.

In still another redundancy-versus-retrenchment case, the Court explains

that both retrenchment and redundancy are forms of downsizing. T h e y are often
resorted to during periods of business recession, industrial depression, or
seasonal fluctuations, and during lulls in p r o d u c t i o n occasioned by lack of
orders, shortage of materials, conversion of the plant for a new production
program, or introduction of new methods or m o r e efficient machinery or
1
automation.
In this case the employer hotel suffered business slump alongside local and
international e c o n o m i c slowdown. It d e c i d e d to cut costs through energy-saving
schemes, forced vacation leaves, hiring moratorium and outsourcing of jobs.
Because of these terminations, the union held a strike. T h e L a b o r Arbiter held
the strike legal, but the N L R C disagreed; on appeal the Court of Appeals agreed
with the labor arbiter and called the employer's action invalid redundancy. T h e
Supreme Court, in turn, held the strike illegal because the retrenchment was
valid. T h e Court's decision e n d e d up saying: "Some positions had to be declared
redundant to cut losses. In this context, what may technically be considered as
redundancy may verily be considered as a retrenchment measure."

'Hotel Enterprises of the Philippines (Owner of Hyatt Regency Manila) vs.

SAMASAH-NUWHRAIN, G.R. N o . 165756, June 5, 2009.

810
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

4.9 Reduction of Work Days; Constructive Retrenchment

International Hardware, Inc. vs. NLRC, G.R. N o . 80770, August 10, 1989
Facts: Pedroso was employed by International Hardware from 1966 until 1984
when the number of his working days was reduced to just two days a week due to the
financial losses suffered by International's business. He claimed he was retrenched
and should be paid separation pay. T h e Labor Arbiter ruled that inasmuch as the
working days of Pedroso were rotated in such a way that the number of his working
days had been substantially reduced for more than six months since December 1984,
and since the financial crisis of International has not ceased, Pedroso is entitled to
the payment of separation pay as if he was actually retrenched.
T h e N L R C affirmed the Labor Arbiter's decision. The employer appealed to
the Supreme Court.
Ruling: Admittedly, Pedroso had not been terminated or retrenched by the
employer but that due to financial crisis the number of working days of Pedroso was
reduced to just two days a week. T h e employer could not have been expected to
notify D O L E of the retrenchment of Pedroso under the circumstances for there was
no intention to do so on the part of the employer.
Nevertheless, considering that Pedroso has been rotated by the employer for
over six (6) months due to the serious losses in the business so that Pedroso had
been effectively deprived of a gainful occupation thereby, and considering further
that the business of the employer was ultimately closed and sold off, the Court finds
and holds that the N L R C correctly ruled that Pedroso was thereby constructively
dismissed or retrenched from employment.
Thus, Pedroso is entitled to one (1) month pay or at least one-half ( 1 / 2 ) month
pay for every year of service, whichever is higher.

R e d u c t i o n of w o r k days, the reasons for which were not specifically

explained and which was applied only to union officers, was an act that amounted
1
to constructive dismissal and U L P .

5. C L O S U R E OF BUSINESS
5.1 Closure Because of Losses
Article 283 allows an employer to terminate the services of his employees in
case of closure of business as a result of grave financial losses. But the employer
must comply with the clearance or report required under the Labor C o d e and
2
its implementing rules before terminating the employment of the employees.
Note: D O L E clearance to terminate is no longer required.
For instance, the total closure of a company's bottling business without
prior clearance is justified if the company had no choice but to effect a closure

•Unicorn Safety Glass vs. Basarte, et al, G.R. N o . 154689, November 25, 2004.
2
Needle Queen Corporation vs. Nicolas, et al, G.R. Nos. 60741-43, December
22, 1989.
811
ARTS. 283-284 POST-EMPLOYMENT

upon cancellation of its franchise. It could no longer handle the soft drinks
1
products it was franchised to bottle.
But employers who contemplate terminating the services of their workers
cannot be so arbitrary and ruthless as to find flimsy excuses for their decisions.
This must be so, considering that the dismissal of an employee from work involves
2
not only the loss of his position but m o r e important, his means of livelihood.
A firm which faces serious business decline and loss is entitled to close its
business in order to avoid further e c o n o m i c loss, and a court has no power to
3
require such firm to continue operating at a loss.

5.1a Losses must be Shown

But while business reverses can be a just cause for terminating employees,
the losses must be sufficiently proven by the employer. This is mandated under
paragraph ( b ) of Article 277 (formerly 278) of the L a b o r C o d e which states, in
part, that "the burden of proving that the termination was for a valid or authorized
cause shall rest on the employer." T h e failure of the employer to show p r o o f
of its actual and imminent losses that would justify drastic cuts in personnel or
4
costs, is fatal to its cause.
Cessation of operation and separation of e m p l o y e e s for alleged financial
losses were held invalid and e m p l o y e e s w e r e h e l d illegally dismissed w h e r e the
corporation, which closed in June 1998, d i d not p r o v e the alleged losses during
the hearings b e f o r e the L a b o r A r b i t e r n o r b e f o r e the N L R C . Evidence, such
as reports of financial conditions for the years p r e c e d i n g the closure cannot
be entertained b e f o r e the C o u r t of A p p e a l s or the Supreme Court. M o r e o v e r ,
the alleged reason for cessation of operation is r e n d e r e d even m o r e doubtful
by the fact that the corporation resumed o p e r a t i o n barely a m o n t h after the
supposed folding up and only after obtaining an a g r e e m e n t with the remaining
union officers that they w o u l d n o t o r g a n i z e a u n i o n if they are readmitted to
work. Such act constitutes U L P . Financial losses are a question of fact that
must b e proven b e f o r e the L A o r the N L R C ; therefore the C A ' s affirmation o f
N L R C ' s decision that the closure was n o t due to a l l e g e d losses d i d constitute
5
abuse of discretion.

•Santiago, Syjuco, Inc. vs. Amado Gat Inciong, G.R. Nos. 49479-80, June 30,
1986.
2
Indino vs. National Labor Relations Commission, G.R. N o . 80352, September
29, 1989.
3
L V N Pictures Employees and Workers Assn. vs. L V N Pictures, Inc., G.R. Nos.
L-23496 and L-26432, September 30, 1970.
4
Indino vs. National Labor Relations Commission, G.R. N o . 80352, September
29, 1989.
5
M e Shurn Corp. vs. Me Shurn-FSM, G.R. N o . 156292, January 11, 2005.

812
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

5.2 Right to Close Whether Losing or Not

T h e p r e c e d i n g discussion does not mean that closure is allowed only in
case the business is losing. If the business is not losing but its owner, for reasons
of his own, wants to g e t out of the business, he in g o o d faith can lawfully do
so anytime. Just as no law forces anyone to go into business, no law compels
anybody to stay in business. But the employees should be paid the severance
1
pay.

Catatista, et al. vs. NLRC and Victorias Milling Co., Inc., G.R. N o . 102422, August
3, 1995 —
T h e termination of employment of the employees of Hacienda Binanlutan
brought about by the closure is to be considered as retrenchment as Hacienda
Binanlutan is only one of the six haciendas of private respondent. Clearly, private
respondent's purpose in converting said hacienda into an ipil-ipil plantation and
terminating the service of petitioners is to cut down on losses which it had adequately
shown to have suffered through an income statement for the fiscal year which ended
August 31, 1984. x x x
In any case, Article 283 of the Labor Code is clear that an employer may
close or cease his business operations or undertaking even if he is not suffering
from serious business losses or financial reverses, as long as he pays his employees
their termination pay in the amount corresponding to their length of service. It
would, indeed, be stretching the intent and spirit of the law if we were to unjustly
interfere in management's prerogative to close or cease its business operations
just because said business operation or undertaking is not suffering from any
2
loss.

U n d e r Article 284 [ n o w 283] of the Labor C o d e (as it existed in 1983),

cessation of business operations not due to business reverses, must meet three
( 3 ) requirements namely: ( a ) service of a written notice to the employees and
to the M O L E at least o n e ( 1 ) month before the intended date thereof; ( b ) the
cessation of or withdrawal from business operations must be bona fide in character;
and ( c ) payment to the employees of termination pay amounting to at least one-
half ( 1 / 2 ) month pay for each year of service, or one ( 1 ) month pay, whichever
3
is higher.

'Quoted in Mac Adams Metal Engineering Workers Union, et al. vs. Mac Adams,
etc., G.R. N o . 141615, October 24, 2003.
2
See also Industrial Timber Corp. vs. N L R C , et al, G.R. Nos. 107302 and
107306, June 10, 1997.
3
Mobil Employees Association [ M E A ] and Inter-Island Labor Organization
[ I L O ] vs. National Labor Relations Commission, et al, G.R. N o . 79329, March 28,
1990.
813
ARTS. 283284 POST-EMPLOYMENT

5.2a Closure Contrasted to Downsizing

J.A.T. General Services, et al. vs. NLRC, et al., G.R. N o . 148340, January 26,2004 —
While "closure of business" and "retrenchment" are often used interchangeably
and are interrelated, they are actually two separate and independent authorized
causes for termination of employment—termination of employment may be
predicated on one without need of resorting to the other. Closure of business, on
one hand, is the reversal of fortune of the employer whereby there is a complete
cessation of business operations a n d / o r an actual locking-up of the doors of
establishment, usually due to financial losses. Closure of business as an authorized
cause for termination of employment aims to prevent further financial drain upon
an employer who cannot pay anymore his employees since business has already
stopped. On the other hand, retrenchment is reduction of personnel usually due to
poor financial returns so as to cut down on costs of operations in terms of salaries
and wages to prevent bankruptcy of the company. It is sometimes also referred to as
downsizing. Retrenchment is an authorized cause for termination of employment
which the law accords an employer who is not making g o o d in its operations in
order to cut back on expenses for salaries and wages by laying off some employees.
T h e purpose of retrenchment is to save a financially ailing business establishment
from eventually collapsing.
A careful examination of Articles 283 of the Labor Code shows that closure
or cessation of business operation as a valid and authorized ground of terminating
employment is not limited to those resulting from business losses or reverses. Said
provision in fact provides for the payment of separation pay to employees terminated
because of closure of business not due to losses, thus implying that termination of
employees other than closure of business due to losses may be valid.
In the present case, while petitioners did not sufficiently establish substantial
losses to justify closure of the business, its income statement shows declining sales
in 1998, prompting the petitioners to suspend its business operations sometime
in March 1998, eventually leading to its permanent closure in December 1998.
apparently, the petitioners saw that declining sales figures and the unsustainable
business environment with no hope of recovery during the period of suspension as
indicative of bleak business prospects, justifying a permanent closure of operation to
save its business from further collapse. On this score, we agree that undue interference
with an employer's judgment in the conduct of his business is uncalled for.

5.3 Partial Closure

In the above Catatista case the Court upheld the legality of partial closure.
In Dangan vs. NLRC [127 SCRA 706], the Court had another occasion to
reiterate management's prerogative to close or abolish a department or section
of the establishment for e c o n o m i c reasons. T h e Court reasoned out that since
the greater right to close the entire establishment and cease operations due to
adverse economic conditions is granted an employer, the closure of a part thereof
to minimize expenses and reduce capitalization should similarly be recognized.

814
 TERMINATION OF EMPLOYMENT ARTS
[Part 4. Authorized Causes of Termination]

Ordinarily, the closing of a warehouse facility and the termination of the

services of employees there assigned is a matter that is left to the determination
of the employer in the g o o d faith exercise of its management prerogatives. T h e
applicable law in such a case is Article 283 of the Labor C o d e , which permits
"closure or cessation of operation of an establishment or undertaking not due
to serious business losses or financial reverses," which, in our reading, includes
both the complete cessation of operations and the cessation of only part of a
1
company's activities.

5.4 Temporary Shutdown

T e m p o r a r y shutdown of o n e of the furnaces of a glass plant is not a g o o d
reason to terminate employees, where operations continued after such repairs,
and it is apparent that the closure of the company's warehouse was merely a ploy
to g e t rid of the employees w h o were then agitating the company for benefits,
reforms and collective bargaining as a union. T h e r e is no showing that petitioners
had been remiss in their obligations and inefficient in their j o b s to warrant their
2
separation.

5.5 Should Separation Pay be Paid in Case of Closure Because of Serious

Business Losses?
In the case of Banco Filipino Savings and Mortgage Bank, etc. vs. NLRC, et
al, G.R. N o . 82135, August 20, 1990, the e m p l o y e r bank was placed under
receivership and later o r d e r e d liquidated by the Monetary Board. T h e chief
operating officer, whose e m p l o y m e n t was terminated, filed a complaint against
the bank for recovery of termination pay under Article 283 of the Labor C o d e ,
moral damages and other claims.
T h e bank argued that the officer was not entitled to separation pay, citing
Article 283 [ n o w 282] of the L a b o r C o d e . It was the bank's interpretation of the
law that when an institution was closed due to serious business losses or financial
reverses, its workers are not entitled to separation pay.
T h e Supreme Court ruled: We disagree. We instead quote with approval
the opinion of respondent L a b o r Arbiter, thus:
[Article 282] of the L a b o r C o d e enumerates the just causes for
an employer to terminate an employee. If an employee is dismissed for
just cause, he is not entitled to termination pay. However, in [Article
283], in case of closure of establishment, the employee is always given
termination pay. T h e reason for the closure is taken into consideration

'Coca-Cola Bottlers [Phils.], Inc., petitioner vs. National Labor Relations

Commission and Coca-Cola Warehouse bottlers Employees Association [CCWBEA-
PASSLU], respondents, G.R. Nos. 93530-36, February 27, 1991.
2
"Brotherhood" Labor Unity Movement of the Philippines, et al. vs. Zamora,
G.R. N o . 48645, January 7, 1987.
815
 POST-EMPLOYMENT
ARTS. 283-284

only to determine whether to give one (1) month or one-half ( 1 / 2 ) month

pay for every year of service. This provision is based on social justice and
equity, x x x .
Such was Our ruling in International Hardware, Inc. vs. NLRC, G.R.
N o . 80770, August 10, 1989.

5.5a Contrary Jurisprudence

T h e Supreme Court appears to have modified the foregoing 1990 Banco
Filipino ruling. In 1992 in an en banc decision in three consolidated cases led by
State Investment House, Inc. vs. Court of Appeals, et al, G.R. N o . 89767 promulgated
on February 19,1992, the Supreme Court agreed with the N L R C in not requiring
separation pay for the employees of a business closed down by financial losses.
A n d then in 1993 in Victor Mendoza, et al. vs. NLRC, G.R. N o . 11079
(Resolution dated September 27,1993), the Supreme Court again sustained the
N L R C in holding that "the closure o f a business establishment due to serious
losses or financial reverses negates the grant of separation pay to employees
whose services are terminated. It is only when the closure is for reasons other
than business reverses or losses that separated personnel are entitled to separation
pay, which is computed at o n e ( 1 ) month or one-half ( 1 / 2 ) month pay for every
year of service, whichever is higher."
In 1994 in Mindanao Terminal and Brokerage Service, Inc. vs. Honorable Minister
of Labor and Employment (G.R. N o . 75374, N o v e m b e r 14,1994), the Supreme Court
reiterated that the law commands the employer to pay separation benefits to
employees "where the closure of the employer's business was 'not due to serious
business losses or financial services.'"
T h e rulings in State Investment House, in Mendoza and in Mindanao Terminal
which are all m o r e recent than the 1990 ruling in Banco Filipino, support the
conclusion that separation pay n e e d not be paid to employees if the business
has closed or ceased operations because of serious losses or financial reverses
duly proven.

5.5b The Final Word: Rulings in North Davao and Reahs Corporation
A n y remaining doubt or confusion on this question has been dispelled by
an en banc decision of the Court in the case of N o r t h Davao mining corporation.
T h e corporation, owned and managed by the Philippine Government, had to
close in 1992 because in the preceding five years it had been incurring — in the
words of the Supreme Court — "mind-boggling" losses averaging three billion
(P3,000,000,000.00) per year. A l l told, as of D e c e m b e r 31, 1991 (five months
before it closed), its total liabilities had exceeded its assets by 20,392 billion pesos.
Must it still pay separation pay to its employees? Speaking through Mr.
Justice (later Chief Justice) Panganiban, the Court replied no. "...Article 283
governs the grant of separation benefits 'in case of closures or cessation of

816
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

operation' of business establishments N O T due to serious business losses or

financial reverses x x x . " W h e r e , however, the closure was due to business losses
— as in the instant case, in which the aggregate losses amounted to over P20
billion — the L a b o r C o d e does not impose any obligation upon the employer to
1
pay separation benefits, for obvious reasons.
M o r e recently, the Court further explained that the grant of separation
pay under Article 283 is a statutory obligation on the part of the employer and
a demandable right on the part of the employee, except only where the closure
or cessation of operations was due to serious business losses or financial reverses
and there is sufficient p r o o f of this fact or condition. In the absence of such p r o o f
of serious business losses or financial reverses, the employer closing his business
2
is obligated to pay his employees and workers their separation pay.

5.5c Does Previous Generosity Obligate the Company?

In the same North Davao case, another question arose: Must the company
pay the same generous separation benefits that it paid its other employees before
its closure? In other words, if the company paid a generous separation pay to
batch o n e , must it do the same to batch two of the separated employees?
W h e n the mining company ceased operations due to losses, its remaining
employees were separated and given the equivalent of only 2.5 days' pay for
every year of service, c o m p u t e d on their basic monthly pay, in addition to the
commutation to cash of their unused vacation and sick leaves. In prior years, in
contrast, it had been giving separation pay equivalent to thirty (30) days' pay for
every year of service.
T h e separated employees contended that, by denying the 30-day separation
benefits to them and the others similarly situated, the company discriminated
against them. T h e y therefore d e m a n d e d 27.5 days' pay differential, citing the
Court's ruling in Businessday Information Systems and Service Inc. (BISSI) vs. NLRC
(221 S C R A 9 , 1 2 , A p r i l 5 , 1 9 9 3 ) . In said case, BISSI, after experiencing financial
reverses, decided "as a retrenchment measure" to lay-off some employees on May
16, 1988 and gave their separation pay equivalent to one-half month pay for every
year of service. BISSI retained some employees in an attempt to rehabilitate its
business. However, barely two and a half months later, these remaining employees
were likewise discharged. Unlike the earlier terminated employees, the second
batch received separation pay equivalent to a full months salary for every year
of service, plus a mid-year bonus. T h e first batch complained of discrimination.
This Court ruled that indeed "there was impermissible discrimination against
the [complainant employees] in the payment of their separation benefits. T h e
law requires an employer to extend equal treatment to its employees. It may not,

'North Davao Mining Corporation vs. N L R C , et al, G.R. N o . 112546, March

13, 1996.
2
Reahs Corp., et al. vs. N L R C , et al, G.R. N o . 117473, April 15, 1997.

817
 POST-EMPLOYMENT
ARTS. 283-284

in die guise of exercising management prerogatives, grant greater benefits to

some and less to others, x x x"
In short, in BISSI the later batch of employees received more retrenchment
pay than the previous batch. In North Davao the later batch g o t less than the
previous one. Must North Davao equalize the pay? T h e Court, through Mr. Justice
Panganiban, said no and gave this explanation:
"The factual circumstances of BISSI are quite different from the
current case [ o f N o r t h D a v a o ] . T h e Court noted that BISSI continued to
suffer losses even after the retrenchment of the first batch of employees;
clearly, business did not i m p r o v e despite such drastic measure. T h a t
notwithstanding, when BISSI finally shut down, it could well afford to
(and actually d i d ) pay off its remaining employees with M O R E separation
benefits as compared with those earlier laid off; obviously, then, there
was no reason for BISSI to skimp on separation pay for the first batch of
discharged employees. That it was able to pay one-month separation benefit
for employees at the time of closure of its business meant that it must have
been also in a position to pay the same amount to those w h o were separated
prior to closure. That it did not do so was a wrongful exercise of management
prerogatives. That is why the Court correctly faulted it with "impermissible
discrimination." Clearly, it exercised its management prerogatives contrary
to "general principles of fair play and justice."
In the North Davao case, however, the company's practice of giving o n e
month's pay for every year of service could no l o n g e r be continued precisely
because the c o m p a n y c o u l d not afford it a n y m o r e . It was f o r c e d to close
down on account of accumulated losses of over P20 billion. T h i s could not
be said of BISSI. In the case of N o r t h Davao, it gave 30-days' separation pay
to its employees when it was still a g o i n g c o n c e r n even if it was already losing
heavily. As a g o i n g concern, its cash flow could still have sustained the payment
of such separation benefits. But when a business enterprise completely ceases
operations, i.e., upon its death as a g o i n g business c o n c e r n , its vital lifeblood
— its cashflow — literally dries up. T h e r e f o r e , the fact that less separation
benefits w e r e g r a n t e d w h e n the c o m p a n y finally m e t its business death
cannot be characterized as discrimination. Such action was dictated not by a
discriminatory m a n a g e m e n t o p t i o n but by its c o m p l e t e inability to continue
its business life due to accumulated losses. I n d e e d , o n e cannot squeeze b l o o d
out of a dry stone. N o r water out of parched land.

5.6 Justification for Closure N o t Credible; Unfair Labor Practice

Other than the amount of separation pay, another question about closure
is whether it is bona fide or merely an evasion of the obligation to deal with the
employees' union. T h e closure, in other words, may turn out to be U L P in
disguise.

818
 TERMINATION OF EMPLOYMENT ARTS 283-
[Part 4. Authorized Causes of Termination]

Carmelcraft Corporation, etc. vs. NLRC, et al, G.R. Nos. 90634-35, June 6,1990
Facts: After its registration as labor union, the Carmelcraft Employees Union
sought but did not get recognition from the petitioner. consequently, it filed a
petition for certification election. T h e employer announced to its employees that
it would cease operations due to serious financial losses. Operations did cease as
announced. T h e union filed a complaint with the Department of Labor against the
petitioner for illegal lockout, unfair labor practice and damages, followed the next
day with another complaint for payment of unpaid wages, emergency cost of living
allowances, holiday pay and other benefits. Thereafter, the Labor Arbiter declared
the shutdown illegal and violative of the employees' right to self-organization. The
claim for unpaid benefits was also granted. T h e N L R C , on appeal, modified the
labor arbiter's decision by declaring that in addition to the underpayment in wages,
emergency living allowance, 13th-month pay, legal holiday pay and premium pay for
holidays for a period of three years, the respondents should also pay complainants
their separation pay equivalent to one-half month's pay for every year of service.
Hence, this petition by the employer.
Rulings: T h e petition is dismissed and the challenged decision is affirmed.
(1) Justification for Closure, Not Credible. — T h e reason invoked by the
petitioner company to justify the cessation of its operations is hardly credible; in fact,
it is preposterous when viewed in the light of the other relevant circumstances. Its
justification is that it sustained losses in the amount of PI,603.88 as of December 31,
1986. There is no report, however, of its operations during the period after that date,
that is, during the succeeding seven and a half months before it decided to close its
business. Significantly, the company is capitalized at P3 million. Considering such
a substantial investment, we hardly think that a loss of the paltry sum of less than
P2,000.00 could be considered serious enough to call for the closure of the company.
We agree with the public respondent that the real reason for the decision of
the petitioners to cease operations was the establishment of respondent Carmelcraft
Employees Union. It was apparently unwelcome to the corporation, which would
rather shut down than deal with the union. There is the allegation from the private
respondent that the company had suggested that it might decide not to close the
business if the employees were to affiliate with another union which the management
preferred. This allegation has not been satisfactorily disproved. At any rate, the
finding of the N L R C is more believable than the ground invoked by the petitioners.
Notably, this justification was made only eight months after the alleged year-end loss
and shortly after the respondent union filed a petition for certification election.
(2) Unfair Labor Practice; Violation of Constitutional Guarantee. — The act of
the petitioners was unfair labor practice prohibited by Article 248 of the Labor Code.
More importantly, it was a defiance of the constitutional provision guaranteeing to
workers the right to self-organization and to enter into collective bargaining with
management through the labor union of their own choice and confidence.
(3) State Intervention in Business Closure, When Justified. — The determination
to cease operations is a prerogative of management that is usually not interfered with
by the State as no business can be required to continue operating at a loss simply to

819
ARTS. 283-284 POST-EMPLOYMENT

maintain the workers in employment. That would be a taking of property without

due process of law which the employer has a right to resist. But where it is manifest
that the closure is motivated not by a desire to avoid further losses but to discourage
the workers from organizing themselves into a union for more effective negotiations
with the management, the State is bound to intervene.

5.7 Closure by Operation of the Agrarian Reform Law

National Federation of Labor, et al. vs. NLRC, et al., G.R. N o . 127718, March 2,
2000 —
The Patalon Coconut Estate was closed down because a large portion of the
said estate was acquired by the D A R pursuant to the CARP. Hence, the closure of the
Patalon Coconut Estate was not effected voluntarily by the estate who even filed a
petition to have said estate exempted from the coverage of R.A. 6657. Unfortunately,
their petition was denied by the Department of Agrarian Reform. Since the closure
was due to the act of the government to benefit the petitioners, as members of the
Patalon Estate Agrarian Reform Association, by making them agrarian lot beneficiaries
of said estate, the petitioners are not entitled to separation pay. T h e termination of
their employment was not caused by the private respondents. T h e blame, if any, for
the termination of petitioner's employment can even be laid upon the petitioner-
employees themselves inasmuch as they formed themselves into a cooperative, PEARA,
ultimately to take over, as agrarian lot beneficiaries, of private respondents' landed
estate pursuant to R.A. 6657. T h e resulting closure of the business establishment,
Patalon Coconut Estate, when it was placed under CARP, occurred through no fault
of the private respondents.
The closure contemplated under Article 283 of the Labor Code is a unilateral
and voluntary act on the part of the employer to close the business establishment as
may be gleaned from the wording of the said legal provision that "The employer may
also terminate the employment of any employee due to . . . ." T h e use of the word
"may," in a statute, denotes that it is directory in nature and generally permissive only.
The "plain meaning rule" or verba legis in statutory construction is thus applicable
in this case. Where the words of a statute are clear, plain and free from ambiguity, it
must be given its literal meaning and applied without attempted interpretation. In
other words, Article 283 of the Labor Code does not contemplate a situation where
the closure of the business establishment is forced upon the employer and ultimately
for the benefit of the employees.

5.7a Expiration of Lease

If the workers' tenure of e m p l o y m e n t is coterminous with the lease of the
hacienda, their employment expires as soon as the lease expires and the lessee
turns over the hacienda to the owner. W h a t severs the employer-employee
relationship is not the worker's dismissal but the expiration of their working
relationship with the lessee. H e n c e , even if it is assumed that a gap existed

820
 TERMINATION OF EMPLOYMENT ARTS 283-
[Part 4. Authorized Causes of Termination]

between the expiration of their employment and the resumption of the operation
by the owner, the workers are not entitled to any separation pay as the case entails
1
expiration of tenure, not dismissal.

6. SALE IN G O O D F A I T H
No law prohibits bona fide sale of a g o i n g enterprise. W h e n that happens,
the purchaser, unless he agrees to do so, has no legal obligation to continue
employing the employees of the seller. T h e seller, as employer, is obliged to
pay his employees separation pay and other benefits founded on law, policy, or
contract. T h e transferee may, but is not o b l i g e d to, give employment preference
to the former employees; if hired, they may be required to pass probation. If
the sale is tinged with bad faith, however, the law and rulings on unfair labor
practice and the doctrine of successor e m p l o y e r may apply.
These, in a nutshell, are the rulings exemplified by the next two cases.

San Felipe Neri School of Mandaluyong, Inc., et al. vs. NLRC, Roman Catholic
Archbishop of Manila, et al., G.R. N o . 78350, September 11, 1991 —
Facts: San Felipe Neri School of Mandaluyong, Inc. sold its properties and
assets to the Roman Catholic Archbishop of Manila ( R C A M ) on April 18, 1981.
Immediately thereafter, R C A M , as the transferee-purchaser, continued the operation
of the school, but applied for a new permit to operate the same.
R C A M required the respondent teachers to apply as new employees subject
to the usual probation. Demoted to probationary status and their past services not
recognized by the new employer, the teachers inquired about their rights from the
former school owners (herein petitioners), but to no avail. Instead, they were referred
to the new owners of the school, supposedly as the proper party who should answer
for and adjust private respondents' demands and grievances.
T h e teachers then filed a complaint before the Labor Arbiter against all the
petitioners, including the R C A M , the vendee or transferee, as alternative defendant
for separation pay, differential pay and other claims.
T h e main issue is whether the respondent teachers' employment was terminated
by the sale and transfer of San Felipe Neri School of Mandaluyong, Inc. to the
Archbishop of Manila that would entitle them to separation pay.
Ruling: A close scrutiny of the pertinent Deed of Sale dated April 18, 1981
reveals no express stipulation whatsoever relative to the continued employment
by the transferee, R C A M , of the teacher-employees (herein private respondents)
of the erstwhile employer (petitioner). On the contrary, records show that RCAM
expressly manifested its unwillingness to absorb the petitioner school's employees
or to recognize their prior service. As correctly found by the Labor Arbiter and the
N L R C , respondent teachers' employment has been effectively terminated and there
was in effect a closure. Obviously, therefore, the fate of private respondents under

•Hilado vs. Leogardo, Jr., G.R. N o . 65863, June 11, 1986.

821
 POST-EMPLOYMENT
ARTS. 283-284

the new owner ( R C A M ) appeared unprovided for. And there is no law which requires
1
the purchaser to absorb the employees of the selling corporation.
As there is no such law, the most that the purchasing company may do, for
purposes of public policy and social justice, is to give preference to the qualified
separated employees of the selling company, who in their judgment are necessary in
2
the continued operation of the business establishment. This, R C A M did. It required
private respondents to reapply as new employees as a condition for rehiring subject to
the usual probationary status, the latter's past services with the petitioners-transferors
not recognized.
On all fours with the instant case is the ruling in Central Azucarera del Danao vs.
Court of Appeals, 137 SCRA 295, 306 [1985], pertinent portions of which read:
The records further reveal that the negotiations for the sale of the assets
and properties of Central Danao to Dadeco were held behind the back of the
employees who were taken by surprise upon the consummation of the sale.
They were not formally notified of the impending sell-out to Dadeco and its
attendant consequences with respect to their continued employment status
under the purchasing company. As such, they were uncertain of being retained,
hired, or absorbed by the new owner and its management. Technically then,
the employees were actually terminated a n d / o r separated from the service
on the date of the sale, or on July 7, 1961. Worse, they were not at all given
the required notice of their termination. Inasmuch as there was no notice of
termination whatsoever given to the employees of Central Danao coupled with
the fact that no efforts were exerted by Central Danao to apprise its employees
of the consequences of the sale or disposition of its assets to Dadeco, justice
and equity dictate that private respondents be entitled to their termination or
separation pay corresponding to the number of years of service with Central
Danao until June 7, 1961.
Hence, petitioners' contention that private respondents are not entitled to
separation pay on the ground that there was no termination of the latter's employment
but a mere change of ownership in the assets and properties of the school is untenable.
Neither can the flimsy excuse that at the time of their alleged termination, there
was no employer-employee relationship between them (private respondents) and
petitioners, be sustained.

6.1 Sale of Business: Is it "Closure" or "Cessation of Business"?

Why does the sale of the business terminate employment? N o w h e r e does the
C o d e mention change of ownership as a valid cause of employment termination.
Is sale a "closure" or is it "cessation of business"? T h e r e was in effect a closure, said
the Court in San Felipe Neri. It was a cessation and closure of business, observed

•MDII Supervisors and Confidential Employees Association [ F F W ] vs.

Presidential Assistant on Legal Affairs, 79 SCRA 40 [1977].
Ibid.

822
 TERMINATION OF EMPLOYMENT ARTS 283-
[Part 4. Authorized Causes of Termination]

the Court in Associated vs. Mobil. But in the following Manlimos case the Court
declared that whether it is closure or cessation is "not material." In any case, the
employees lose their j o b s (with post-employment benefits) unless the new owner
opts to retain or rehire them.

Manlimos, et al. vs. NLRC and Super Mahogany Plywood Corp., Albert Go, G.R.
N o . 113337, March 2, 1995 —
The issue of whether there was a closing or cessation of business operations which
could have operated as a just cause for the termination of employment was not material.
T h e change in ownership of the management was done bona fide and the petitioners
did not for any moment before the tiling of their complaints raise any doubt on the
motive for the change. On the contrary, upon being informed thereof and of their
eventual termination from employment, they freely and voluntarily accepted their
separation pay and other benefits and individually executed the Release or Waiver
which they acknowledged before no less than a hearing officer of the DOLE.
1
A change of ownership in a business concern is not proscribed by law. In this
Sunio case the Court sums up the rule.
In a number of cases on this point, the rule has been laid down that the sale
or disposition must be motivated by g o o d faith as an element of exemption from
liability. Indeed, an innocent transferee of a business establishment has no liability
to the employees of the transferor to continue employing them. N o r is the transferee
liable for past unfair labor practices of the previous owner, except when the liability
therefor is assumed by the new employer under the contract of sale, or when liability
arises because of the new owner's participation in thwarting or defeating the rights
of the employees.
Where such transfer of ownership is in g o o d faith, the transferee is under no
legal duty to absorb the transferor's employees as there is no law compelling such
absorption. T h e most that the transferee may do, for reasons of public policy and
social justice, is to give preference to the qualified separated employees in the filling
of vacancies in the facilities of the purchaser.
Since the petitioners were effectively separated from work due to a bona fide
change of ownership and they were accordingly paid their separation pay, which
they freely and voluntarily accepted, the private respondent corporation was under
no obligation to employ them; it may, however, give them preference in the hiring.
T h e private respondent in fact hired, but on probationary basis, all the petitioners,
except R. Cuarto. T h e non-hiring of Cuarto was legally permissible.
T h e hiring of employees on a probationary basis is an exclusive management
prerogative. T h e employer has the right or privilege to choose who will be hired
and who will be denied employment. It is within the exercise of this right that the
employers may set or fix a probationary period within which it may test and observe
the employee's conduct before hiring him permanently.

'Sunio vs. N L R C , 127 SCRA 390 [1984].

823
ARTS. 283-284 POST-EMPLOYMENT

GLOBAL COMPETITION IN LABOR COST

T h e following figures given in a financial newspaper spell out the

differences between the cost of labour in the industrialized countries
of the West and in the developing countries. At present, the cost of
o n e man-hour in manufacturing industry in West Germany is 24.87
US dollars (1 dollar = 35 Belgian francs and 6 French francs). In the
Netherlands the corresponding cost is 19.83 dollars, in the former East
Germany 17.34 dollars, in Japan 16.91 dollars and in the U S A 16.40
dollars. Alongside these costs, we have to compare those found in Taiwan
(5.46 dollars), South Korea (4.93 dollars), M e x i c o (2.41 dollars), Poland
(1.40 dollars), China (0.44 dollar) and Indonesia, where the figure of
0.28 dollar represents barely 1.12% of the wage cost in the West. It is
therefore not surprising to find that textile goods, metal g o o d s and
other products manufactured in low-wage countries are f l o o d i n g our
markets i n Western Europe, x x x

We also have to r e m e m b e r that there are considerable differences

between wage costs within the European Community itself. A British
study places West Germany at the top of the scale with an average wage
cost of 25.34 dollars per hour, i.e., even higher than Switzerland with
its figure of 22.36 dollars. At the opposite e n d of the scale, the figure
for Great Britain is 12.90 dollars, representing wages 50% lower than
those in Germany and o n e third lower than the European average.

If the European countries are ranked by w a g e level, the o r d e r

is as follows: the Federal Republic of Germany, Switzerland, Norway,
Belgium, the Netherlands, Denmark, Sweden and Austria, f o l l o w e d by
France, Italy, Finland, the U n i t e d K i n g d o m , Ireland and Spain and, at
the bottom of the scale Greece and Portugal, the wage cost in this last
country being only 4.49 dollars per hour.

W h e n we add to this fact that Germany is preparing to introduce

the 35-hour week, whereas Portugal still has a working week of close on
44 hours, it is readily apparent that "social dumping" may present real
problems.

PROF. R O G E R B L A N P A I N
Will I Still Have a Job Tomorrow?
Peeters, Leuven (1994)

824
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

6.2 Successor-in-interest, Contractual Obligation to Employ

If the transferee contractually committed itself to retain the employees of
the transferor, such contractual c o m m i t m e n t must be honored.

Marina Port Services, Inc. vs. Hon. Cresencio R. Iniego, et al., G.R. N o . 77853,
January 22, 1990 —
Facts: On January 14,1986, a complaint entitled "Associated Skilled and Technical
Employees Union-PTGWO, and Marcelino Jose, Jr., and Ramon Dequinia, complainants
vs. Metro Port Service, Inc. (MPSI for brevity) and Gregorio L. him, General Manager,
Respondents" was filed with the National Labor Relations Commission, National
Capital Region.
Pending hearing of the case, the contract of the Metro Port Services, Inc. as
operator of the Arrastre Service in the South Harbor, was cancelled by the Philippine
Ports Authority. Said contract was awarded by the Philippine Ports Authority to the
M A R I N A Port Services, Inc. with the condition that it shall absorb all the employees
and shall be liable for all benefits provided for under the existing Collective
Bargaining Agreement.
On February 17,1987, respondent Labor Arbiter rendered a decision ordering
Metro Port Services and the M A R I N A Port Services to pay private respondents
backwages.
Petitioner M A R I N A filed a petition for certiorari before the Supreme Court.
Ruling: This Court is convinced that M A R I N A never had a chance to defend
itself, not having been furnished any notice, summons, or pleadings in the case,
except the assailed decision. But despite this fact, it is clear from the "contract to
operate the Arrastre Service in the South Harbor" as awarded by the Philippine Ports
Authority to petitioner M A R I N A Port Services, Inc. that:
"7. Labor and personnel of previous operator, except those positions
of trust and confidence, shall be absorbed by grantee. Labor or employees'
benefits provided for under existing CBA shall likewise be honored.
xxx xxx xxx
14. Grantee shall be responsible for all obligations, liabilities or claims
arising out of any transactions or undertaking in operations as of the actual
date of transfer thereof to grantee."
When the words and language of documents are clear and plain or
readily understandable by an ordinary reader thereof, there is absolutely no
room for interpretation or construction anymore. And therefore, when said
contract was accepted by the grantee-petitioner, it had stepped in the shoes of
its predecessor. Accordingly, petitioner had bound itself to whatever judgment
that awaited M A R I N A in the labor case.

7. MERGER
Sale, of course, is not the same as merger and the effects of merger are far
different from those of sale.

825
ARTS. 283-284 POST-EMPLOYMENT

By the fact of merger, succession of employment rights and obligations

occurs between the absorbing corporation and the employees of the absorbed
corporation. N o t only must the absorbing corporation retain the employees;
it should likewise recognize the length of service in the previous employer. In
merger, like in sale in bad faith, the "successor employer" principle applies.
A leading case about merger is Filport which the Supreme Court has to
decide en banc because its First and Second divisions earlier had made conflicting
decisions.
Filipinos Port Services, Inc. vs. NLRC, et al, G.R. N o . 97237, August 16,1991 —
Facts: In compliance with government policy, the different stevedoring and
arrastre corporations operating in the Port of Davao were integrated into a single
dockhandlers corporation, known as the Davao Dockhandlers, Inc., which was
registered with the Securities and Exchange Commission, but subsequently renamed
Filport, and actually started its operation on February 16, 1977.
Section 118, Article X of the General Guidelines on the Integration of
Stevedoring/Arrastre Services ( P P A Administrative Order N o . 13-77) mandated
Filport to draw its personnel complements from the merging operators. Thus, Filport's
labor force was mostly taken from the integrating corporations, among them the
private respondents.
In 1987, Liboon and 18 other employees filed a complaint with the Department
of Labor and Employment, alleging that although they were employees of Filport
since 1955 through 1958 up to December 31,1986 when they retired, they were paid
retirement benefits computed only from February 16, 1977. They claimed that they
were entitled to retirement benefit from the time they started working in 1955 with
the predecessors of Filport.
T h e Labor Arbiter upheld the employees' claim. N L R C affirmed the decision,
so the employer went up to the Supreme Court, contending that Filport was not
a successor employer and therefore not liable for the obligations of the previous
employer. To bolster its stand, Filport presented a memorandum from the Philippine
Ports Authority assistant general manager which says in part:
' T h e new organization's liability shall be the payment of salaries, benefits
and all other money due the employee as a result of his employment, starting
on the date of his service in the newly integrated organization."
Meanwhile, J. Silva, another employee of Filport, filed a suit substantially the
same as that of Liboon. The Labor Arbiter upheld Silva's claim and, again, the NLRC
affirmed the judgment. subsequently, the Supreme Court's First Division reversed
the N L R C and therefore denied Silva's claim. In so ruling, the First Division relied
heavily on the case of Fernando vs. Angat Labor Union (5 SCRA 248) where it was held
that unless expressly assumed, labor contracts are not enforceable against a transferee
of an enterprise, labor contracts being in personam.
But in the Liboon case the Second Division dismissed Filport's petition, and
therefore granted, Liboon's claim.

826
 TERMINATION OF EMPLOYMENT ARTS
[Part 4. Authorized Causes of Termination]

Ruling: T h e Supreme Court en banc ruled in favor of the employees' claim. It

reiterated the Second Divison's Resolution.
In the case filed by private respondent Paterno Liboon, et al. against Filport,
the findings of the N L R C in its November 27, 1987 decision are categorical:
xxx xxx XXX

"We are in full accord with, and hereby sustain, the findings and
conclusions of the Labor Arbiter. Under the circumstances, respondent-
appellant is a successor-employer. As a successor entity, it is answerable
to the lawful obligations of the predecessor employers, herein integrees.
This commission has so held under the principle of 'substitution' that the
successor firm is liable to (sic) the obligations of the predecessor employer,
notwithstanding the change in management or even personality, of the new
contracting employer." (Lakas Ng Manggagawang Filipino (LAKAS) vs. Tarlac
Electrical Cooperative, Inc., et al, NLRC Case No. RBIII-157-75, January 28,1978, En
Banc.) x x x T h e Supreme Court earlier upheld the "Substitutionary" doctrine
in the case of Benguet Consolidated, Inc. vs. BOI Employees and Workers Union (G.R.
N o . L-24711, April 30, 1968.)
Said findings were reiterated in the case filed by Silva against Filport where
the N L R C , in its decision dated January 19, 1988, further ruled that:
"x x x As We have ruled in the similar case involving herein appellant,
the latter is deemed a survivor entity because it continued in an essentially
unchanged manner the business operations of the predecessor arrastre and
port service operators, hiring substantially the same workers, including herein
appellee, of the integree predecessors, using substantially the same facilities,
with similar working conditions and line of business, and employing the
same corporate control, although under a new management and corporate
personality."
T h e alleged memorandum of the PPA Assistant General Manager exonerating
Filport from any liability arising from and as a result of the merger is contrary to public
policy and is violative of the workers' right to security of tenure. Said memorandum
was issued in response to a query of the P M U Officer-in-Charge and was not even
published nor made known to the workers who came to know of its existence only
at the hearing before the N L R C .
T h e principle involved in the case cited by the First Division (Fernando vs. Angat
Labor Union) applies only when the transferee is an entirely new corporation with a
distinct personality from the integrating firms and N O T where the transferee was
found to be merely an alter ego of the different merging firms, as in this case. Thus,
Filport has the obligation not only to absorb the workers of the dissolved companies
but also to include the length of service earned by the absorbed employees with
their former employees as well. To rule otherwise would be manifestly less than fair,
certainly, less than just and equitable.

827
 POST-EMPLOYMENT
ARTS. 283-284

8. CONSOLIDATION
In the same Filport case the Court, supporting its conclusion, quoted the
applicable law not only to merger but also consolidation. T h e Court said:
Thus, granting that Filport had no contract whatsoever with the
private respondents regarding the services rendered by them prior to
February 16, 1977, by the fact of the merger, a succession of employment
rights and obligations had o c c u r r e d between Filport and the private
respondents. T h e law enforced at the time of the m e r g e r was Section 3 of
Act N o . 2772 which took effect on March 6, 1918. Said law provides:
"Sec. 3. U p o n the perfecting, as aforesaid, of a consolidation made
in the manner herein provided, the several corporations parties thereto
shall be d e e m e d and taken as o n e corporation, u p o n the terms and
conditions set forth in said agreement; or, upon the perfecting of a merger,
the corporation m e r g e d shall be d e e m e d and taken as absorbed by the
other corporation and incorporated in it; and all and singular rights,
privileges, and franchises of each of said corporations, and all property,
real and personal, and all debts due on whatever account, b e l o n g i n g to
each of such corporations, shall be taken and d e e m e d as transferred to
and vested in the new corporation f o r m e d by the consolidation, or in the
surviving corporation in case of merger, without further act or deed; and
the title to real estate, either by d e e d or otherwise, under the laws of the
Philippine Islands vested in either corporation, shall not be d e e m e d in
any way impaired by reason of this Act: Provided, however, T h a t the rights
of creditors and all liens upon the property of either of said corporations
shall be preserved unimpaired; and all debts, liabilities, and duties of said
corporations shall thenceforth attach to the new corporation in case of a
consolidation, or to the surviving corporation in case of a merger, and be
enforced against said new corporation or surviving corporation as if said
debts, liabilities, and duties had been incurred or contracted by it."

9. A I L M E N T OR DISEASE
T h e last of the authorized causes of e m p l o y m e n t termination is disease in
Article 284.
If the employee suffers from a disease and his continued e m p l o y m e n t is
prohibited by law or prejudicial to his health or to the health of his co-employees,
the employer shall not terminate his e m p l o y m e n t unless there is a certification
by a competent public health authority that the disease is of such nature or at
such a stage that it cannot be cured within a p e r i o d of six months even with
1
proper medical treatment.
T h e burden of proving the validity of the dismissal rests on the employer.
As such, the employer must prove that the requisites for a valid dismissal due to
l
Sec. 8, Rule 1, Book V I , Rules and Regulations Implementing the Labor Code.

828
 TERMINATION OF EMPLOYMENT ARTS. 283-284
[Part 4. Authorized Causes of Termination]

a disease have been c o m p l i e d with. In the absence of the required certification

by a competent public health authority, this Court has ruled against the validity
of the employee's dismissal.
In Triple Eight Integrated Services, Inc. v. NLRC, we held that:
T h e requirement for a medical certificate under Article 284 of the
L a b o r C o d e cannot be dispensed with; otherwise, it would sanction the
unilateral and arbitrary determination by the employer of the gravity or
extent of the employee's illness and thus defeat the public policy on the
protection of labor... (Manly Express, Inc. vs. R Payong, Jr., G.R No. 167462,
October 25, 2005.)
A medical certificate issued by the company's own physician is not a
1
certificate by "competent public health authority."
Even if there is no illegal dismissal, there may be an award for separation
pay. Thus under Article 285 [ n o w 284] of the Labor C o d e , an employer may
terminate the services of an e m p l o y e e w h o has been found to be suffering from
a disease and whose continued e m p l o y m e n t is prohibited by law or is prejudicial
to his health as well as to the health of his co-employees; Provided, That he is paid
separation pay equivalent to at least o n e ( 1 ) month salary or to one-half ( 1 / 2 )
m o n t h salary for every year of service, whichever is greater, a fraction of at least
2
six ( 6 ) months being considered as o n e ( 1 ) whole year.
T h e e m p l o y e e whose services are terminated on account of sickness or
absences may be granted financial assistance equivalent to separation pay of
one-half ( 1 / 2 ) month for every year of service.
Even voluntary resignation due to ill health may be paid termination pay
for reasons analogous to those contemplated under Article 284 (disease) of
the L a b o r C o d e . T h e e m p l o y e e was in the e m p l o y of the company for almost a
3
quarter of a century; he deserves the full measure of the laws' benevolence.

'Cebu Royal Plant [San Miguel Corporation] vs. Deputy Minister of Labor,
G.R. N o . 58639, August 12, 1987.
2
Baby Bus, Inc. vs. Minister of Labor, G.R. N o . 54223, February 26, 1988.
s
Abaquin Security and Detective Agency, Inc. vs. Atienza, G.R. N o . 72971,
October 15, 1990.

829
 Title I
TERMINATION OF EMPLOYMENT (Cont'd)
[Part 5. PROCEDURE TO TERMINATE
EMPLOYMENT]
O v e r v i e w / K e y Questions Box 24
1. In e m p l o y m e n t termination what d o e s procedural
due process consist of — for the just causes? for the
authorized causes?
2. If the termination is justified by a valid cause but d o n e
without observance of due process, is the termination
legal?
3. What is constructive dismissal? Is preventive suspension
exceeding thirty days considered constructive dismissal?
4. W h o has the burden of p r o o f in dismissal cases?

T h e p r e c e d i n g discussions have all b e e n about the causes or reasons

o f termination. N o w w e take u p the m a n n e r o r p r o c e d u r e o f terminating
employment.
T h e cause and the procedure of dismissal are important, but they are not
of equal importance in legal effect. Lack of a valid cause makes the dismissal
illegal and invalid, thus generally entitling the e m p l o y e e to reinstatement. Lack
of proper procedure, on the other hand, does not invalidate the dismissal which
means that the e m p l o y e e remains dismissed, but the e m p l o y e r becomes liable
for indemnity for violating the employee's right to due process. In short, what
makes a dismissal "illegal" is the absence of valid cause, not the nonobservance
of procedural due process. This is the substance of the rulings beginning with
the Wenphil doctrine promulgated in February 1989. This ruling has the effect of
abandoning the earlier rulings that non-observance of procedural due process
1
makes the dismissal illegal and void.

1. P R O C E D U R E U N D E R T H E RULES
Although employment termination is the subject of B o o k VI of the C o d e ,
the procedure to terminate e m p l o y m e n t is, inexplicably, in B o o k V, Article 277.

'The Wenphil case, followed by Serrano and other cases, will be taken up in a
forthcoming topic.

830
 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

Likewise, the corresponding implementing rules are partly in Book V and partly
in Book VI of the Omnibus Rules. It is Rule X X I I I , in Book V as amended by
D . O . N o . 9 (June 21,1997) which D . O . N o . 40, issued in February 2003, has not
superseded.

2. P R O C E D U R A L D U E PROCESS; AMPLE O P P O R T U N I T Y TO BE HEARD

Substantive due process mandates that an employee can only be dismissed
based on just or authorized causes. Procedural due process requires further that he
can only be dismissed after he has been given an opportunity to be heard. T h e
1
import of due process necessitates the compliance with these two aspects.
W h e r e the e m p l o y e e denies the charges against him, a hearing is necessary
to thresh out all doubts. T h e failure of the employer to give the employee the
benefits of a hearing and an investigation before his termination constitutes an
2
infringement of his constitutional right to due process of law.
Mr. Justice Panganiban, in an en banc decision, states:
To constitute a completely valid and faultless dismissal, it is well-
settled that the e m p l o y e r must show not only sufficient ground therefor
but it must also prove that it observed procedural due process by giving the
e m p l o y e e two notices: o n e , of the intention to dismiss, indicating therein
his acts or omissions c o m p l a i n e d against, and two, notice of the decision
to dismiss; and an opportunity to answer and rebut the charges against
him, in between such notices. (MGG Marine Services, Inc., et al. vs. NLRC
and E.A. Molina, G.R No. 114313, July 29, 1996.)
T h e right to labor is a constitutional as well as a statutory right. Every
man has a natural right to the fruits of his own industry. A man w h o has been
e m p l o y e d to undertake certain labor and has put into it his time and effort
is entitled to be protected. T h e right of a person to his labor is d e e m e d to be
property within the m e a n i n g of constitutional guarantees. T h a t is his means
of l i v e l i h o o d . He cannot be d e p r i v e d of his labor or work without due process
3
of law.
T h e guarantee of due process applies to all workers, including managerial
4
employees.

J
Maneja vs. N L R C and Manila Midtown Hotel, G.R. N o . 124013, June 5,1998.
Also: Robusta A g r o Marine Products, Inc. vs. Gorombalem, G.R. N o . 80500, July 5,
1989; Broadway Motors, Inc. vs. National Labor Relations Commission, G.R. N o .
78382, December 14, 1987.
2
Roche [Philippines], et al. vs. National Labor Relations Commission, G.R. N o .
83335, October 5, 1989.
3
Offshore Industries, Inc. vs. National Labor Relations Commission, G.R. N o .
83108, August 29, 1989; BLTB Bus Co. vs. Court of Appeals, 71 SCRA 470 [1976].
4
Offshore Industries, Inc. vs. National Labor Relations Commission, G.R. N o .
83108, August 29, 1989.
831
 POST-EMPLOYMENT

T h e rules laid down by the company for the investigation of an employee

before his termination n e e d not be observed to the letter. It is e n o u g h that
there was due notice and a hearing before a j u d g m e n t or resolution thereof is
made. Due process contemplates freedom from arbitrariness. What is required is
fairness or justice; the substance rather than the form, being paramount. W h e n
a party has been given the opportunity to be heard, then he was afforded due
1
process.
Summary proceedings may be conducted. This is to correct the c o m m o n
but mistaken p e r c e p t i o n that procedural due process entails lengthy oral
arguments. Non-verbal devices such as written explanation, affidavits, position
papers or other pleadings can establish just as clearly and concisely an aggrieved
party's defenses. What is essential is ample opportunity to be heard. Management
must accord the e m p l o y e e every kind of assistance to prepare adequately for his
2
defense.
T h e Supreme Court has ruled that the employee's right to due process
prevails over the company rules that allow "immediate dismissal" of the erring
3
employee.

2.1 Standards of Procedural Due Process

T h e implementing rules for B o o k VI are e m b o d i e d in Rules I, I I , and II-A
of the Omnibus Rules Implementing the L a b o r C o d e as well as in Rule X X I I I
in D . O . N o . 9, series of 1997. This department o r d e r prescribes the standards
of due process, varying according to the cause of the termination.
I. For termination of e m p l o y m e n t based on just causes as defined in
Article 282 of the C o d e :
( a ) A written notice served on the e m p l o y e e specifying the ground
or grounds for termination, and giving to said e m p l o y e e reasonable
opportunity within which to explain his side;
(b) A hearing or c o n f e r e n c e during which the e m p l o y e e
concerned, with the assistance of counsel if the e m p l o y e e so desires, is
given opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and
( c ) A written n o t i c e o f t e r m i n a t i o n s e r v e d o n the e m p l o y e e
indicating that upon due consideration of all the circumstances, grounds
have been established to justify his termination.

'Mendoza vs. National Labor Relations Commission, San Miguel Corporation,

Magnolia Division, et al, G.R. N o . 94294, March 22, 1991.
2
Homeowners Savings and Loan Association, Inc. vs. N L R C and M. Cabatbat,
G.R. N o . 97067, September 26, 1996.
3
Acesite Corp., et al vs. N L R C and Gonzales, G.R. N o . 152308, January 26,
2005.

832
 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

In case of termination, the f o r e g o i n g notices shall be served on the

employee's last known address.
II. For termination of employment based on authorized causes defined
in Article 283 of the C o d e , the requirements of due process shall be deemed
c o m p l i e d with u p o n service of a written notice to the e m p l o y e e and the
appropriate Regional Office of the Department at least thirty days before the
effectivity of the termination, specifying the g r o u n d or grounds for termination.
I I I . If the termination is brought about by the completion of the contract
or phase thereof, no prior notice is required. If the termination is brought about
by the failure of an e m p l o y e e to m e e t the standards of the employer in the case
of probationary employment, it shall be sufficient that a written notice is served
the e m p l o y e e within a reasonable time from the effective date of termination.
T h e Court has ruled that the employee's right to due process prevails over
1
the company rules that allow "immediate dismissal" of the erring employee.

2.2 Two-Notice Requirement for the "Just" and the "Authorized" Causes
T h e law requires that the e m p l o y e r must furnish the worker sought to be
dismissed with two written notices before termination of employment can be
legally effected: ( 1 ) notice which apprises the e m p l o y e e of the particular acts
or omissions for which his dismissal is sought; and ( 2 ) the subsequent notice
which informs the e m p l o y e e of the employer's decision to dismiss him. Failure to
comply with the requirements taints the dismissal with illegality. This procedure
is mandatory, in the absence of which any j u d g m e n t reached by management is
2
v o i d and inexistent.
For the authorized causes under Articles 283 and 284, two notices are also
required: o n e to the e m p l o y e e to be separated and another to the Department
of L a b o r and Employment. Each such notice must be served thirty days before
the employee's separation takes effect. M o r e on this later.

2.3 Preventive Suspension and Investigation Do N o t Replace "Two-

Notice" Requirement of D u e Process; Defect N o t Cured by N L R C Hearings
De Vera vs. National Labor Relations Commission and Bank of the Philippine Islands,
Inc., G.R. N o . 93070, August 9, 1991 —
Definitely, the Notice of Preventive Suspension cannot be considered adequate
notice since the objectives of the petitioner's preventive suspension, as stated in the
notice, were merely to ascertain the extent of the loss to the bank and to pinpoint
responsibility of the parties involved, and not to apprise the petitioner of the
causes of his desired dismissal. Likewise, the subsequent interview is not the "ample
opportunity to be heard" contemplated by law. Ample opportunity to be heard is

'Acesite Corp. et al. vs. N L R C and Gonzales, G.R. N o . 152308, January 26,2005.
^ingson, Jr. vs. NLRC, 185 SCRA 498 [1990]; National Service Corp. vs. NLRC,
168 SCRA 122 [1988]; Ruffy vs. NLRC, 182 SCRA 365 [1990].
833
 POST-EMPLOYMENT

especially accorded to the employee sought to be dismissed after he is informed of

the charges against him in order to give him an opportunity to refute the accusations
levelled against him, and it certainly does not consist of an inquiry conducted merely
for the purpose of filing a criminal case against another person.
Similarly, the respondents' position that the petitioner, with his education and
position, should have realized, after going through some rigorous interrogations,
that he himself was being suspected and investigated for possible complicity in the
anomalies is unacceptable. T h e petitioner as an assistant cashier is not expected to
be proficient with the intricacies of law and procedure. He should not be faulted
if he relied on the statement of the private respondent that the investigation was
being conducted in connection with the criminal case filed against Martines, and
consequently failed to realize that he himself was being suspected for possible
involvement in the fraud. In fact, the private respondent should be admonished
for provoking self-incriminating statements from the petitioner under the guise of
conducting an investigation for some other reason.
Furthermore, this Court has repeatedly held that the employer is mandated
to furnish the employee sought to be dismissed two notices, the written charge, and
the notice of dismissal, if, after hearing, dismissal is indeed warranted.
T h e respondents then claim that the alleged defects in due process were
cured when the petitioner presented his case and arguments before the N L R C .
This is untenable. T h e case before the N L R C is the petitioner's complaint for illegal
dismissal. At that time, he had already been terminated. What the Labor Code sets
forth is the procedure prior to dismissal. "Fire the employee, and let him explain
later" is not in accord with the due process under the law.

2.4 Consultation with Union, Insufficient Notice

Century Textile Mills, Inc., et al. vs. National Labor Relations Commission, et al.,
G.R. N o . 77859, May 25, 1988 —
T h e employer's "prior consultation" with the labor union with which the
employee is affiliated is legally insufficient. T h e rights of an employee whose services
are sought to be terminated to be informed beforehand of his proposed dismissal
(or suspension) as well as of the reasons therefor, and to be afforded an adequate
opportunity to defend himself from the charges levelled against him, are rights
personal to the employee. Those rights are not satisfied by the employer's obtaining
the consent of or consulting with the labor union. Such consultation or consent is
not a substitute for actual observance of those rights of the employee. T h e employee
can waive those rights, if he chooses, but the union cannot waive them for him.
That the employee simply "kept silent" all the while, is not adequate to show an
effective waiver of his rights. Notice and opportunity to be heard must be accorded
by an employer even though the employee does not affirmatively demand them.
A finding of the employee's participation in an alleged criminal conspiracy
cannot be made to rest solely on the unilateral declaration of one who is himself
a confirmed "co-conspirator." Such declaration must be corroborated by other

834
 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

competent and convincing evidence. In the absence of such other evidence, a "co-
conspirator's confession" implicating the dismissed employee must be received with
considerable caution.

2.5 Illustrative Case: "Ample Opportunity" for Employee's Defense

Ruffy vs. National Labor Relations Commission and Central Azucarera Don
Pedro, G . R . N o . 84193, February 15, 1990 —
An employee must be given notice and an ample opportunity prior to his dismissal to
adequately prepare for his defense. — As we can see, the law lays down the procedure
prior to the dismissal of an employee. It need not be observed to the letter, but at
least, it must be done in the natural sequence of notice, hearing and judgment.
In the case at bar, there is no doubt that at the very outset, that is, prior to
investigation, the petitioner was informed that his services had been terminated.
He was made to air his side subsequently, it is true, yet the stubborn fact remains
that notwithstanding such an opportunity, if an opportunity it was, he had been
dismissed from the firm. It does not matter that the petitioner's termination, given
on December 19, 1984, was effective on January 1, 1985, which, so the respondent
Commission insists, gave him enough chance to present his side. This is not the
"ample opportunity" referred to by the labor relations law of 1981.
By "ample opportunity" is meant every kind of assistance that management
must accord to the employee to enable him to prepare adequately for his defense.
Under the rules indeed, the worker may be provided with a representative. In this
case, although the interregnum between the date of the notice of dismissal and the
date of its effectivity ostensibly provided the petitioner time within which to defend
himself, there really was nothing to defend, because the fact is, he had been fired.
We cannot countenance such a situation. We reiterate that the process set forth by
the law need not be obeyed according to its letter, but rather, according to its spirit,
as a due process measure. "Fire the employee, and let him explain later" is not in
accord with that expedient.

2.5a At least Five Days

"Reasonable opportunity" should be construed as a period of at least five (5)
calendar days from receipt of the notice to give the employees an opportunity to
study the accusation against them, consult a union official or lawyer, gather data
1
and evidence, and decide on the defenses they will raise against the complaint.

2.5b Participation of Counsel

D o e s the e m p l o y e e ' s c o u n s e l have the r i g h t to participate in the
investigatory hearing?

•King of Kings Transport vs. Mamac, et al, G.R. N o . 166208, June 29, 2007.

835
 POST-EMPLOYMENT

Lorlene A. Gonzales vs. Ateneo De Davao University, G.R. N o . 125735, August

26, 1999 —
Facts: Sometime in 1991 the Ateneo Grade School Headmaster sent a letter to
petitioner Gonzales about the complaints of two parents for alleged use of corporal
punishment on her students. petitioner claimed that she was not, informed of the
identity of the parents. She likewise claimed that she was not confronted about it by
Ateneo in 1991 and that it was only two years after the complaints were made that
she discovered, through her students and their parents, that Ateneo had solicited
complainants to lodge written complaints against her.
She wrote a letter to the headmaster that she be formally informed of the
complaint and be duly investigated.
An investigative committee was organized.
But petitioner Gonzales refused to take part in the investigation unless the rules
of procedure laid down by the Committee be revised, contending that the same were
violative of her right to due process. Petitioner specifically objected to the provision
which stated: x x x 3) Counsel for Ms. Lorlene Gonzales shall not directly participate
in the investigation but will merely advise Ms. Gonzales x x x (par. 3 ) .
But the Committee was steadfast in its resolve to adopt the aforementioned
rules. Over the objection of petitioner the Committee commenced its investigation
without petitioner's participation.
On 10 November 1993 [the employer] served a Notice of Termination on [the
employee] pursuant to the findings and recommendation of the Committee.
Petitioner filed a complaint before the Labor Arbiter for illegal dismissal.
Ruling: T h e N L R C , in our view, appears to have skirted several important issues
raised by petitioner foremost of which is the absence of due process. U p o n being
notified of her termination, she has the right to demand compliance with the basic
requirements of due process. Compliance entails the twin requirements of procedural
and substantial due process. Ample opportunity must be afforded the employee
to defend herself either personally a n d / o r with assistance of a representative; to
know the nature of her offense; and, to cross examine and confront face to face the
witnesses against her. Likewise, due process requires that the decision must be based
on established facts and on a sound legal foundation.
It is precisely to demand compliance with these requirements that petitioner
at the very onset of the investigation demanded the revision of the rules laid down
by the Investigative Committee. T h e adamant refusal of the Committee to accede
to this demand resulted in her failure to confront and cross-examine her accusers.
This is not "harping at technicalities" as wrongfully pointed out by the N L R C but a
serious violation of petitioner's statutory and constitutional right to due process that
ultimately vitiated the investigation.
Moreover, the failure of Ateneo to refute the contention of petitioner that
the joint affidavits executed by the students and parents were "pre-prepared" raises
serious doubts as to the probative value of this evidence. As correctly pointed out by
the Executive Labor Arbiter, "there is more reason to disregard it especially where

836
 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

the same was challenged and has remained unexplained." Hearsay evidence, in the
strict sense, has no probative value whether objected to or not.
In the instant case, Ateneo failed to prove by substantial evidence that petitioner
had inflicted corporal punishment on her students. In Ang Tibay vs. CIR, the Court
set the measure of evidence to be presented in an administrative investigation when
it said, "substantial evidence is more than mere scintilla. It means such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion."
T h e evidence of private respondent did not measure up to this standard.

2.5c Formal Hearing N o t Required

Gatus vs. Quality House, Inc., et al., G.R. N o . 156766, April 16, 2009 —
We note and stress once more for everyone's guidance that the law itself
only requires "ample opportunity to be heard." T h e essence of this requirement as
an element of due process in administrative proceedings is the chance to explain
one's side. Jurisprudence has amply clarified that administrative due process cannot
be fully equated with due process in the strict judicial sense, and that there is no
violation of due process even if no formal or actual hearing was conducted, provided
a party is given a chance to explain his side. What is frowned upon is the denial of
the opportunity to be heard. We have decisively settled this issue in Felix B. Perez and
Amante G. Doria v. Philippine Telegraph and Telephone Company and Jose Luis Santiago, a
decision penned by Mr. Justice Renato C. Corona, where we held:
Article 277(b) of the Labor Code provides that, in cases of termination for
a just cause, an employee must be given "ample opportunity to be heard and to
defend himself." Thus, the opportunity to be heard afforded by law to the employee
is qualified by the word "ample" which ordinarily means "considerably more than
adequate or sufficient." In this regard, the phrase "ample opportunity to be heard" can
be reasonably interpreted as extensive enough to cover actual hearing or conference.
To this extent, Section 2 ( d ) , Rule I of the Implementing Rules of Book VI of the
Labor Code is in conformity with Article 277(b).
Nonetheless, Section 2 ( d ) , Rule I of the Implementing Rules of Book VI
of the Labor Code should not be taken to mean an actual hearing or conference
is a condition sine qua non for compliance with the due process requirement in
termination of employment. T h e test for the fair procedure guaranteed under Article
277(b) cannot be whether there has been a formal pretermination confrontation
between the employer and the employee. T h e "ample opportunity to be heard
standard is neither synonymous nor similar to a formal hearing. To confine the
employee's right to be heard to a solitary form narrows down that right. It deprives
him of other equally effective forms of adducing evidence in his defense. Certainly,
such an exclusivist and absolutist interpretation is overly restrictive. The "very nature
of due process negates any concept of inflexible procedures universally applicable
to every imaginable situation."
A hearing means that a party should be given a chance to adduce his evidence to
support his side of the case and that the evidence should be taken into account in the

837
 POST-EMPLOYMENT

adjudication of the controversy. ' T o be heard" does not mean verbal argumentation
inasmuch as one may be heard just as effectively through written explanations,
submissions or pleadings. Therefore, while the phrase "ample opportunity to be
heard" may in fact include an actual hearing, it is not limited to a formal hearing
only. In other words, the existence of an actual, formal "trial type" hearing, although
preferred is not absolutely necessary to satisfy the employee's right to be heard.

2.6 Procedural Due Process N o t W i p e d Away by Union Security Clause

Carino vs. NLRC, G.R. N o . 91086, May 8, 1990 —
The company, upon being formally advised in writing of the expulsion of Carino
from the union, in turn simply issued a termination letter to him, the termination
being made effective the very next day. T h e company should have given Carino a
chance to explain his side of the controversy with the union. Notwithstanding the
union's security clause in the CBA, the Company should have reasonably satisfied
itself by its own inquiry that the Union had not been merely acting arbitrarily and
capriciously in impeaching and expelling Carino.
T h e company had acted in bad faith in dismissing Carino without giving him
a chance to present his side in his controversy with his own union. T h e company's
precipitate action in dismissing Carino is an indication of lack of g o o d faith. The
company had failed to accord Carino the latter's right to procedural due process. The
right of an employee to be informed of the charges against him and to reasonable
opportunity to present his side in a controversy with either the company or his
union, is not wiped away by a union security clause or a union shop clause in a CBA.
An employee is entitled to be protected not only from a company which disregards
his rights but also from his own union the leadership of which could yield to the
temptation of swift and arbitrary expulsion from membership and, hence, dismissal
from his j o b .

Ferrer, et al. vs. NLRC, G.R. N o . 100898, July 5, 1993 —

Facts: On January 5,1989, the Samahang Manggagawa ng Occidental Foundry
Corporation-FFW ( S A M A H A N ) and the OFC entered into a collective bargaining
agreement (CBA) which would be effective for the three-year period between October
1,1988 and September 30,1991. Article II thereof provides for a union security clause,
thus:
Section 1 — T h e company agrees that all permanent and regular factory
workers in the company who are members in g o o d standing of the union
or who thereafter may become members, shall, as a condition of continued
employment, maintain their membership in the union in g o o d standing for
the duration of the agreement.
xxx xxx xxx
Section 3 — T h e parties agree that failure to retain membership in good
standing with the U N I O N shall be ground for the operation of paragraph 1
hereof and the dismissal by the company of the aforesaid employee upon
written request by the union. T h e aforesaid request shall be accompanied by a

838
 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

verified carbon original of the Board of (sic) Resolution by the U N I O N signed

by at least a majority of its officers/directors.
Invoking this clause in the CBA, the union, headed by its president Mr. Capitle,
expelled Mr. Ferrer and four others from the union, and then asked the management
to terminate their employment. T h e management complied with the union's request.
Alex Ferrer, et al., questioned their expulsion and subsequent dismissal. In this
petition against NLRC, Ferrer contends that the Commission gravely abused its discre-
tion in affirming the decision of the labor arbiter which is allegedly in defiance of the
elementary principles of procedural due process. Petitioners were summarily dismissed
from employment without an investigation having been conducted by the OFC on the
veracity of the allegation of the SAMAHAN-FFW that they violated the CBA.
Ruling: A CBA is the law between the company and the union and compliance
therewith is mandated by the express policy to give protection to labor. Said policy
1
should be given paramount consideration unless otherwise provided for by law.
A CBA provision for a closed shop is a valid form of union security and it is not a
2
restriction on the right or freedom of association guaranteed by the Constitution.
However, in the implementation of the provisions of the CBA, both parties thereto
should see to it that no right is violated or impaired. In the case at bar, while it is
true that the CBA between OFC and the S A M A H A N provided for the dismissal of
employees who have not maintained their membership in the union, the manner in
which the dismissal was enforced left much to be desired in terms of respect for the
right of petitioners to procedural due process.
Quoting from Carino vs. NLRC (185 SCRA 177 [1990]), the Court further
explained the obligation of the employer to observe due process by conducting its
own inquiry. T h e Court concluded:
T h e need for a company investigation is founded on the consistent ruling
of this Court that the twin requirements of notice and hearing, which are essential
elements of due process, must be met in employment-termination cases. T h e
employee concerned must be notified of the employer's intent to dismiss him and of
the reason or reasons for the proposed dismissal. T h e hearing affords the employee
an opportunity to answer the charge or charges against him and to defend himself
3
therefrom before dismissal is effected. Observance to the letter of the company rules
on investigation of an employee about to be dismissed is not mandatory. It is enough
4
that there is due notice and hearing before a decision to dismiss is made. But even
if no hearing is conducted, the requirement of due process would have been met
5
where a chance to explain a party's side of the controversy had been accorded him.

•Meycauayan College vs. Drilon, 185 SCRA 50 [1990].

2
Lirag Textile Mills, Inc. vs. Blanco, 109 SCRA 87 [1981].
3
Kwikway Engineering Works vs. N L R C , 195 SCRA 526 [ 1991 ] ; Salaw vs. NLRC,
202 SCRA 7 [1991].
4
Mendoza vs. N L R C , 195 SCRA606 [1991].
Philippine Airlines, Inc. vs. N L R C , 198 SCRA 748 [1991].
839
 POST-EMPLOYMENT

In terminating the employment of an employee by enforcing the union

security clause, the employer needs only to determine and prove that: (1) T h e
union security clause is applicable; ( 2 ) T h e union is requesting for enforcement
of the union security provisions in the CBA; and ( 3 ) T h e r e is sufficient evidence
1
to support the union's decision to expel the employee from the union.

2.7 When Hearing Not Required

No hearing is needed if the employee has admitted his guilt. Mr. Justice
Bellosillo says for the Court:
Both the N L R C and the Labor Arbiter found that n o formal hearing was
conducted regarding petitioner's dismissal. A l t h o u g h a hearing is essential to
due process, in Bernardo vs. NLRC, G.R. N o . 105819, March 15,1996 we did hold
that no formal hearing was necessary when the petitioner had already admitted
2
his responsibility for the act he was accused of.
A l l that is n e e d e d is to i n f o r m the e m p l o y e e of the findings of the
3
management.
But there must be admission of guilt. If the e m p l o y e e merely narrated and
explained what he did, without admitting his guilt, then conducting a hearing
is required; otherwise, there is failure of due process. T h e Court observed:
R e s p o n d e n t L o a d s t a r insists that p e t i t i o n e r ' s h a n d w r i t t e n
explanation is a categorial admission of his guilt. We are n o t persuaded.
A cursory reading of the said letter w o u l d show that petitioner was merely
explaining his actions, but d i d n o t categorically admit having stolen the
item. In any case, the fact remains that no hearing was m a d e to hear
petitioner's side. R e s p o n d e n t Loadstar virtually m a d e an assumption
on the basis of petitioner's letter alone that considering the time and
the manner in which the taking was m a d e , then petitioner is guilty of
stealing and, therefore, should be dismissed. No notice was ever given
to i n f o r m petitioner that his dismissal is b e i n g sought and by which he
could be apprised on the full c o n s e q u e n c e of his acts. A n d neither was
a hearing conducted, in o r d e r that he be given an opportunity to refute
the accusations leveled against h i m . (Loadstar Shipping Co. vs. R Mesano,
G.R No. 138956, August 7, 2003.)

2.8 Due Process in Authorized Causes; T w o Notices Required but not a

Hearing
In employment terminations due to authorized causes, the due process
requirement is not completely d o n e away with. Investigation and hearing need

•Alabang Country Club vs. N L R C , G.R. N o . 170287, February 14, 2008.

2
Magos vs. N L R C , et al, G.R. N o . 123421, December 28, 1998.
3
China Banking Corp. vs. Borromeo, G.R. N o . 156515, October 19, 2004.

840
 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

1
not be d o n e by the employer. But the one-month advance notices ( 1 ) to the
affected e m p l o y e e and ( 2 ) to D O L E must be c o m p l i e d with under Article 283.
W h e r e , as in the instant case, the ground for dismissal or termination of
services does not relate to a blameworthy act or omission on the part of the
e m p l o y e e , there appears to us no n e e d for an investigation and hearing to be
conducted by the e m p l o y e r w h o does not, to begin with, allege any malfeasance
or nonfeasance on the part of the employee. In such case, there are no allegations
which the e m p l o y e e should refute and defend himself from. Thus, to require
petitioner Wiltshire to h o l d a hearing, at which private respondent would
have had the right to be present, on the business and financial circumstances
compelling retrenchment and resulting in redundancy, would be to impose upon
the e m p l o y e r an unnecessary and inutile hearing as a condition for legality of
2
termination.
This is not to say that the e m p l o y e e may not contest the reality or g o o d
faith character of the retrenchment or redundancy asserted as grounds for
termination of services. T h e appropriate forum for such controversion would,
however, be the Department of L a b o r and Employment and not an investigation
3
or hearing to be held by the employer itself.

2.8a Individual, N o t Collective, Notice

In Shoppers Gain Supermart vs. NLRC, et al., G.R. N o . 110731, July 26,1996,
the lease contract over the premises which the employer supermart was using
was not renewed, hence, the business had to close. Thirty days before closing,
the employer posted a notice of closure on the employees' bulletin board. Such
notice, according to the Supreme Court, is "not sufficient compliance with the
statutory requirement." Sustaining the N L R C , the Court said that "the law is very
clear that an e m p l o y e r w h o seeks to terminate the employment of its employee
must notify him in writing at least 30 days before the intended dismissal."

2.8b Voluntary Arbitration as Notice

Voluntary arbitration is substantial compliance with the one-month manda-
tory notice required under Article 283. "The purpose of this notice requirement
is to enable the proper authorities to ascertain whether the closure of the busi-
ness is being d o n e in g o o d faith and is not just a pretext for evading compliance
with the just obligations of the employer to the affected employees. In fact, the
voluntary arbitration proceedings m o r e than satisfied the intendment of the
law considering that the parties were accorded the benefit of a hearing, in ad-
dition to the right to present their respective position papers and documentary
4
evidence."

•Withshire File Co. vs. N L R C , G.R. N o . 82249, February 7, 1991.

Ibid.
Ibid.
4
Revidad vs. N L R C and A G 8c P, G.R. N o . 111105, June 27, 1995.
841
 POST-EMPLOYMENT

2.8c When Notice N o t N e e d e d

By the same token, if an employee consented to his retrenchment or
voluntarily applied for retrenchment with the employer due to the installation of
labor-saving devices, redundancy, closure or cessation of operation or to prevent
financial losses to the business of the employer, the required previous notice to
the D O L E is not necessary as the employee thereby acknowledged the existence
1
of a valid cause for termination of his employment.

2.9 Burden of P r o o f
In termination cases, the burden of p r o o f rests upon the employer to show
that the dismissal is for just and valid cause. Failure to do so would necessarily
mean that the dismissal was not justified and, therefore, was illegal. W h e r e the
termination cases involve all Filipino workers recruited and deployed to overseas
employment, the burden devolves upon both the foreign-based employer and
the employment agency or recruitment entity which recruited the worker, for
the latter is not only the agent of the former, but is also solidarity liable with the
foreign principal for any claims or liabilities arising from the dismissal of the
2
workers.
In an unlawful dismissal case, the e m p l o y e r has the burden of proving the
lawful cause sustaining the dismissal of the e m p l o y e e . Equipoise is not enough.
T h e employer must affirmatively show rationally adequate evidence that the
3
dismissal was for a justifiable cause.
P r o o f b e y o n d reasonable d o u b t of the e m p l o y e e s ' misconduct is not
required, it being sufficient that there is some basis for the same or that the
employer has reasonable g r o u n d to believe that the e m p l o y e e is responsible for
the misconduct and his participation therein renders him unworthy of the trust
4
and confidence d e m a n d e d by his position.
Substantial Evidence Defined. — I t is true that in administrative proceedings,
the guilt of a party n e e d not be shown by p r o o f "beyond reasonable doubt"
required by our penal laws, yet, there must be substantial evidence to support
it. In this connection, "substantial evidence" has b e e n defined as follows:
Substantial evidence is m o r e than m e r e scintilla. It means such relevant
5
evidence as a reasonable mind might accept as adequate to support a conclusion.

•International Hardware, Inc. vs. N L R C , G.R. N o . 80770, August 10, 1989; see
also: Santos vs. Pepsi Cola, et al., G.R. N o . 141947, July 5, 2001.
2
Royal Crown Internationale vs. National Labor Relations Commission, G.R.
N o . 78085, October 16, 1989.
3
Dizon vs. National Labor Relations Commission, G.R. N o . 79554, December
14, 1989.
4
Riker vs. Ople, G.R. N o . 50492, October 27, 1987.
5
Ang Tibay vs. CIR, 69 Phil. 635.

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 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

2.10 Condonation
An e m p l o y e r may, by c o n d o n a t i o n or waiver of the c o n d u c t of his
employees, preclude himself from subsequently asserting the right to discharge
them for cause. Having c o n d o n e d the misconduct of the employee and pardoned
the latter, he is d e e m e d to have lost or waived his right to insist on the employee's
acts as ground for dismissal. T h e m e r e fact that a considerable period has elapsed
between the commission of a breach of duty by an employee and its discovery
by his employer, will not of itself preclude him from relying upon the breach as
a g r o u n d of dismissal. T h e retention of an e m p l o y e e , however, after the actual
discovery of an act of misconduct on his part will, in some circumstances, warrant
the inference that the act has been c o n d o n e d , so as to be no longer available as
1
a g r o u n d of dismissal.
A g a i n , if there has been a repetition of offenses, the employer has a right
to take the entire record into account, the c o n d o n i n g and pardoning of the
employee's misconduct being d e e m e d to have been conditioned upon future
g o o d conduct. In case of a continuing breach of the contract of employment,
there can be no waiver or condonation that will prevent the employer from
discharging the e m p l o y e e at any time. T h e fact that an employer has paid the
wages or salary of an e m p l o y e e to the time of his discharge does not amount to
such a condonation of a violation by the e m p l o y e e of his duties as will deprive
2
the e m p l o y e r of his right to terminate the contract of employment.
However, a conclusion that the employee's misconduct was c o n d o n e d is
sustainable where it appears that the employer retained him in the service after
having had knowledge of the facts, and paid to him the stipulated wages or salary
3
without objection or protest.

3. PREVENTIVE SUSPENSION
T h e authority of an e m p l o y e r to place an e m p l o y e e under preventive
suspension is not found in the L a b o r C o d e but in the rules implementing the
C o d e , specifically Book V, Rule X X I I I , as a m e n d e d by D . O . N o . 9, June 21,1997
quoted below in part:
SEC. 8. Preventive suspension. — T h e employer may place the worker
concerned under preventive suspension if his continued employment poses
a serious and imminent threat to the life or property of the employer or
of his co-workers.

3.1 Invalid Preventive Suspension

In o n e case, the employer placed the employee on preventive suspension
"for having violated company rules and regulations by incurring repeated

'35 Am. Jur. 481,482.

Ibid.
3
35 Am. Jur. 482.
843
 POST-EMPLOYMENT

absences and tardiness" and subsequently dismissed her. T h e Department of

Labor (through Regional Office N o . 4) which at that time, 1976, could decide
termination disputes, ruled on the preventive suspension of the employee, thus:
x x x , [ I ] t appears that the continued presence o f the subject
employee does not pose a serious and imminent threat to the life or
property of the employer or co-employees. H e r tardiness does not in any
way pose serious threat to the property of the employer. As sales clerk, she
was required to prepare reports and submit them before closing of office
hours in the afternoon. Herein complainant managed to comply with such
requirement without prejudice to company's interest.
T h e Supreme Court sustained the decision of the Department, saying:
As petition held by Asst. Secretary L e o g a r d o Jr. (Officer-in-charge of
Regional Office N o . I V of the Ministry of L a b o r ) , the continued presence of
Ms. Rosal never posed a serious and imminent threat to the life or property
of the employer or co-employees as would warrant her preventive suspension.
(Global Incorporated vs. Atienza, G.R Nos. L-51612-13, July 22, 1986.)

3.2 Valid Preventive Suspension

Globe-Mackay Cable And Radio Corporation vs. National Labor Relations Commission
and Salazar, G.R. No. 82511, March 3, 1992 —
Facts: Acting on reports that some of its expensive equipment and spare
parts were missing, G M C R conducted an investigation of Saldivar, the manager for
technical operations support. He was also investigated over the report that he formed
a partnership with Yambao, a supplier of GMCR.
Another employee, Salazar, was also under investigation because she signed
as a witness to the Articles of Partnership between Yambao and Saldivar. She shared
with Saldivar a private apartment where a GMRC-owned airconditioning unit was
found. Salazar, being closely associated with Saldivar, was placed under preventive
suspension, an action that prompted Salazar to file a complaint.
Ruling: On the matter of preventive suspension, we find for petitioner GMCR.
The findings of the auditor, which pointed to Saldivar's acts in conflict with
his position as technical operations manager, necessitated immediate and decisive
action on any employee closely associated with Saldivar. T h e suspension of Salazar was
further impelled by the discovery of the missing Fedders airconditioning unit inside
the private apartment which she shared with Saldivar. Under such circumstances,
preventive suspension was the proper remedial recourse available to the company
pending Salazar's investigation. By itself, preventive suspension does not signify
that the company has adjudged the employee guilty of the charges she was asked to
answer and explain. Such disciplinary measure is resorted to for the protection of the
company's property pending investigation of any alleged malfeasance or misfeasance
1
committed by the employee.

•Soriano vs. N L R C , G.R. N o . 75510, October 27, 1987.

844
 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

Thus, it is not correct to conclude that petitioner G M C R had violated

Salazar's right to due process when she was promptly suspended. If at all, the
fault lay with [ h e r ] when she ignored petitioner's memorandum of October 8,
1984 giving her ample opportunity to present ( h e r ) side to the Management.
Instead, she went directly to the Labor Department and filed her complaint for
illegal suspension without giving her employer a chance to evaluate her side of
the controversy.
But while we agree with the propriety of Salazar's preventive suspension, we
hold that her eventual separation from employment was not for cause.

3.3 Period of Suspension

Preventive suspension, being only an intermediate protective measure,
cannot last for an indefinite period. T h e Code's implementing rules provide
that no preventive suspension shall last l o n g e r than thirty (30) days. After that
p e r i o d the employer shall reinstate the worker in his former position or in a
substantially equivalent position, or the employer may extend the period of
suspension, provided that during the period of suspension, he pays the wages and
other benefits due to the worker. In such case the worker shall not be bound to
reimburse the amount paid to him during the extension if the employer decides,
after c o m p l e t i o n of the hearing, to dismiss the worker.
Thirty-day preventive suspension applies to employment in general. For
project and nonproject. employees in the construction industry, the preventive
suspension cannot be l o n g e r than 15 days. Beyond that the employee is entitled
1
to wages and other benefits.

3.4 Preventive Suspension Exceeding 30 Days; Constructive Dismissal

Section 4, Rule X I V , B o o k V of the Omnibus Rules provides that preventive
suspension cannot be m o r e than the m a x i m u m p e r i o d of 30 days. H e n c e ,
after the 30-day p e r i o d of suspension, the e m p l o y e e must be reinstated to his
f o r m e r position because suspension b e y o n d this m a x i m u m p e r i o d amounts to
constructive dismissal. Constructive dismissal does not always involve forthright
dismissal or diminution in rank, compensation, benefit and privileges. T h e r e
may be constructive dismissal if an act of clear discrimination, insensibility, or
disdain by an e m p l o y e r b e c o m e s so unbearable on the part of the employee
that it c o u l d foreclose any c h o i c e by him e x c e p t to f o r e g o his continued
2
employment.

4. APPROPRIATE PENALTY
T h e cause may be valid and due process may have been followed, but still
the dismissal may be questioned and eventually nullified if the penalty itself is not

d e p a r t m e n t Order N o . 19, series of 1993, Section 4.

2
Hyatt Taxi Services, Inc. vs. Catinoy, G.R. N o . 143204, June 26, 2001.

845
 POST-EMPLOYMENT

appropriate. T h e fundamental rule is that the penalty must be commensurate to

the offense. Court rulings, no less than management studies, insist on adherence
to the principle of progressive disciplining: light offenses deserve light penalties
and only grave offenses deserve grave penalties. However, diverse factors should
be considered, such as the employee's long years of otherwise satisfactory service,
the penalty imposed in previous similar offenses, and even the amount of money
or value involved.
Article 282 mentions the causes for which the e m p l o y e r may "dismiss"
an e m p l o y e e . But the penalty does not always have to be dismissal. Court
rulings frown upon dismissals. N o t every case of serious misconduct, willful
disobedience, neglect of duty, or even dishonesty will justify dismissal. Dismissal
is the supreme penalty at the workplace. It should be i m p o s e d only as a last
recourse.
T h e Supreme Court in many dismissal cases has e c h o e d and r e e c h o e d this
thoughtful reminder:
W h e r e a penalty less punitive would suffice, whatever missteps may be
committed by labor ought n o t to be visited with a consequence so severe.
It is not only because of the law's concern for workingmen. T h e r e is, in
addition, his family to consider. U n e m p l o y m e n t brings untold hardships
and sorrows on those d e p e n d e n t on the wage-earner. T h e misery and pain
attendant on the loss of j o b s then could be avoided if there be acceptance
of the view that under all circumstances of a case, the workers should not
be deprived of their means of livelihood. N o r is this to c o n d o n e what had
been d o n e by them. For all this while, since the e m p l o y e r considered
them separated from the service, they had n o t b e e n paid. F r o m the
strictly juridical standpoint, it cannot be t o o strongly stressed that where
a decision may be made to rest on i n f o r m e d j u d g m e n t rather than rigid
rules, all the equities of the case must be accorded their weight. L a b o r law
determinations should not be only secundum rationem but also secundum
caritatem. (Almira, 58 SCRA 120 [1974].)

In short, dismissal is a harsh penalty. If at all avoidable, without oppressing

the employer, it should be avoided.

4.1 Value of Property

In determining the appropriate penalty, the value of the property taken
is a pertinent factor.
Theft is wrong per se. But must every theft be punished with dismissal?
Should the value of the stolen item be considered in determining the penalty
to be imposed? "Dishonesty is dishonesty regardless of amount." This is a g o o d
motto and a motherly teaching worth remembering. But the motto pertains to
the character of the act; it does not say what the penalty should be. T h e penalty
should be appropriate or proportionate to the offense. Appropriateness of

846
 TERMINATION OF EMPLOYMENT
[Part 5. Procedure to Terminate Employment]

penalty depends on several factors, o n e of which is the amount involved. Thus

the motto is ignored by courts in reexamining the penalty imposed. T h e juridical
guideline, rather, is that there are degrees of dishonesty and degrees of penalty
under both the penal and the labor laws.

Gelmart Industries Phils., Inc. vs. National Labor Relations Commission, G.R. N o .
85668, August 10, 1989 —
Facts: Felix started working as an auto-mechanic for Gelmart since 1971. On
April 11,1987, he was caught by security guards taking out of Gelmart's premises one
plastic container filled with about 16 ounces of "used" motor oil, without the necessary
gate pass as required under Gelmart's rule and regulations. He was placed under
preventive suspension pending investigation. Under said Rules, theft or pilferage of
company property merits outright termination from employment. After investigation,
he was found guilty of theft and was dismissed.
Ruling: Be it of big or small commercial value, intended to be reused or
altogether disposed of or wasted, the "used" motor oil still remains the property of
Gelmart. To take the same out of its premises without the corresponding gate pass
is a violation of the company rule on theft or pilferage of company property.
However, where a penalty less punitive would suffice, whatever missteps may be
committed by labor ought not to be visited with a consequence so severe as dismissal.
T h e suspension imposed upon Felix is a sufficient penalty for the misdemeanor
committed. Considering that Felix has no previous derogatory record in his fifteen
(15) years of service with Gelmart, [and considering that] the value of the property
pilfered (16 ounces of used motor oil) is very minimal, plus the fact that Gelmart
failed to reasonably establish that nondismissal of Felix would work undue prejudice
to the validity of their operation or is patently inimical to the company's interest, it
is more in consonance with the policy of the State, as embodied in the Constitution,
to resolve all doubts in favor of labor.

4.2 Past Offenses

May past offenses of an employee be "tacked o n " to the latest offense to
justify the penalty of dismissal?
T h e correct rule has always been that such previous offenses may be so used
as valid justification for dismissal from work only if the infractions are related
to the subsequent offense upon which basis the termination of employment is
1
decreed. T h e previous infraction, in other words, may be used if it has a bearing
2
to the proximate offense warranting dismissal.

•Filipro vs. Ople, 182 SCRA 1 [1990].

2
Stellar Industrial Services, Inc. vs. N L R C , 252 SCRA 323; La Carlota Planters
Assn. vs. N L R C and F. Compacion, G.R. N o . 126689, October 27, 1998.
847
 POST-EMPLOYMENT

5. FILING OF ILLEGAL DISMISSAL COMPLAINT; VENUE AND TIME

A n y decision taken by the employer shall be without prejudice to the
right of the worker to contest the validity or legality of his dismissal by filing a
1
complaint with the Regional Branch of the Commission.
T h e "regional branch" refers to the branch comprising the workplace.

Note: See Dayag case in the discussion of labor arbiter's jurisdiction in

Article 217.
T h e complaint should be filed within four ( 4 ) years from the time the
2
employee is dismissed.

6. CLEARANCE NO LONGER REQUIRED

On the matter of clearance requirement of the law, Article 278, Section
( b ) of the Labor C o d e , then in force stated: ( b ) W i t h or without a collective
agreement, no employer may shut down his establishment or dismiss or terminate
the employment of employees with at least o n e year of service during the last
two years, whether such service is continuous or broken, without prior, written
authority issued in accordance with such rules and regulations as the Secretary
3
may promulgate.
Batas Pambansa Big. 130, approved on August 21, 1981 abolished the
clearance requirement.

]
Book V, Rule X X I I I , Sec. 3 of the Rules Implementing the Labor Code, as
amended by D.O. N o . 9, June 21, 1997.
2
See Article 290 and comments.
3
Needle Queen Corporation vs. Nicolas, G.R. Nos. 60741-45, December 22,
1989.
 Title I
TERMINATION OF EMPLOYMENT (Cont'd)
[Part 6. CONSEQUENCES OF TERMINATION]
O v e r v i e w / K e y Questions Box 25
1. If the termination is based on any authorized cause, the
e m p l o y e e is entitled to separation pay, and nothing if
it is due to a just cause. What are the exceptions?
2. W h a t are the kinds of separation pay?
3. May backwages be awarded on appeal if the employee
did not appeal its denial?
4. In what situations may reinstatement be denied even if
the termination is invalid?
5. In termination disputes, what is indemnity? May it be
imposed in addition to backwages?
6. Is a manager personally liable for the illegal dismissal
of an employee?

After examining the causes and the procedure of employment termination

we now focus on its consequences. T h e consequences vary as to whether the
termination is legal or illegal which in turn depends on whether there is valid
reason in dismissing the e m p l o y e e .
We shall closely analyze separation pay, backwages, reinstatement, damages,
indemnity, and attorney's fees, as consequences of dismissal or separation.

1. S E P A R A T I O N PAY
1.1 Background: O l d L a w
T h e previous termination pay law (Republic Act 1052, as amended) has been
consistently construed by the Supreme Court as granting to the employer the right
to terminate the employment of an employee with or without just cause. T h e only
condition imposed was that if the dismissal was without just cause, the employer
should serve notice on the employee at least one month in advance or pay one-half
month salary for every year of service of the employee, whichever is longer. It was
the failure to serve such notice that rendered the employer liable for separation pay
1
and not the fact that the employment was severed without just cause.

'National Labor Union vs. Secretary of Labor, G.R. N o . 41459, December 18,
1987.

849
 POST-EMPLOYMENT

Under that law, even if the employee's dismissal was found to be without
just cause, without due notice, and abusive on the part of the employer, the latter
could only be liable for separation pay and moral damages, but the dismissed
1
employee could not demand reinstatement.
T h e Labor C o d e changed all that.

1.2 Under Present Law; Four Kinds of Separation Pay

Unlike the previous law the Labor C o d e requires a valid reason to terminate
an employment — no valid reason, no termination. Lack of valid reason is not
rectified by plenty of notice or plenty of separation pay. What the law prefers is
the employee's continued possession of his job, which is considered a property,
and not mere advance notice or monetary help towards finding another j o b . In
other words, the general rule is continuance on the j o b ; payment of separation
pay in lieu of the j o b is the exception.
U n d e r present law and jurisprudence separation pay may be viewed in
four ways or contexts:
( a ) separation pay as employer's statutory obligation in cases of legal
termination due to authorized causes under Article 283 or 284;
( b ) separation pay as financial assistance, as an act of social justice, even
in cases of legal dismissal under Article 282;
( c ) separation pay in lieu of reinstatement in illegal dismissal cases where
the employee is o r d e r e d reinstated but reinstatement is not feasible;
( d ) separation pay as an e m p l o y m e n t benefit g r a n t e d in a C B A or
company policy.

1.3 First kind of Separation Pay: As a Statutory Requirement for

Authorized Causes U n d e r Article 283 and 284
T h e first kind of separation pay refers to the monetary liability of the
employer to the employees, as required by Articles 283 and 284, Only in these two
articles does the Labor C o d e explicitly impose "separation pay." This therefore is
statutory separation pay. W h e n the e m p l o y m e n t has to be terminated because of
the so-called "authorized" causes, such termination is legal. But since those causes
are not faults of the e m p l o y e e but exigencies of the business ( e x c e p t disease), it
is only fair in the context of social justice that the e m p l o y e r give separation pay
to the employee.

1.3a Amount of Separation Pay for Authorized Causes

T h e amounts of separation pay specified in Articles 283 and 284 vary
a c c o r d i n g to the cause of the t e r m i n a t i o n . F o r t e r m i n a t i o n s because of
introduction of labor saving device or of redundancy, the separation pay is

'Philippine Refining Co. vs. Garcia, 18 SCRA 108; National Labor Union vs.
Secretary of Labor, G.R. N o . 41459, December 18, 1987.

850
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

equivalent to whichever is higher of either ( a ) one-month pay or ( b ) one-month

pay multiplied by the employee's years of service, a fraction of at least six months
being counted as o n e year.
For terminations caused by r e t r e n c h m e n t or closure or cessation of
operations not due to serious business losses, the separation pay is lower than
that for the preceding two causes precisely because the business is caught in
financial straits. T h e separation pay is equivalent to whichever is higher of either
( a ) one-month pay or ( b ) one-half month pay multiplied by the employee's years
of service, a fraction of at least six months being considered as one year. This
also is the formula applicable to separation due to disease under Article 284.
If the closure or cessation of business is due to serious business losses or
financial reverses, no separation n e e d be paid at all, as ruled in North Davao
Mining case. (See preceding chapter.)

1.3b Computation of Statutory Separation Pay; Inclusion of Regular

Allowance
It is e r r o r not to integrate the allowance with the basic salary in the
computation of the separation pay. T h e salary base properly used in computing
the separation pay should include not just the basic salary but also the regular
1
allowances that an e m p l o y e e has been receiving.
In the computation of backwages and separation pay, account must be
taken not only of the basic salary of the e m p l o y e e but also of her transportation
2
and emergency living allowances.
But commissions ("override commissions" plus "net deposit incentive") may
not be included in such base figure since such commissions must be earned by
actual market transactions attributable to the e m p l o y e e . Neither should "travels
equivalent" (an unusual and unexplained t e r m ) and "commission in trading
3
personal clients" be included in such base figure.

1.4 Second Kind of Separation Pay: As Financial Assistance in Legal

Dismissal U n d e r Article 282
T h e second concept of separation pay serves as an exception to Article 282.
U n d e r that article an e m p l o y e e who commits any of the acts enumerated may
be dismissed. Such dismissal for a "just cause" is legal and therefore, ordinarily,
no separation pay n e e d be paid to the e m p l o y e e . However, if the act committed
by the e m p l o y e e does not amount to serious misconduct or does not reflect on

'Planters Products, Inc. vs. National Labor Relations Commission, G.R. N o .

78524, January 20, 1989.
2
Santos vs. National Labor Relations Commission, G.R. N o . 76721, September
21, 1987.
3
Soriano vs. National Labor Relations Commission, G.R. N o . 75510, October
27, 1989.
851
 POST-EMPLOYMENT

the employee's moral character, the Court may require the employer to pay as a
measure of social justice, "separation pay" or "financial assistance" ( o r whatever
name) to the employee.
This kind of separation pay is not a statutory requirement. Rather, it
is an exception crafted by the Court to clothe with compassion a stiff and
indiscriminating dismissal action based on the so-called "just causes." Mr. Justice
Isagani Cruz expounds on this "discerning compassion" doctrine in the en banc
decision in the PLDT case given below.
Philippine Long Distance Telephone Co. vs. NLRC and M. Abucay, G.R. N o . 80609,
August 23, 1988 —
Facts: Ms. Abucay, a traffic operator of the Philippine Long Distance Telephone
Company, was accused by two complainants of having demanded and received from
them the total amount of P3.800.00 in consideration of her promise to facilitate
approval of their applications for telephone installation. Investigated and heard,
she was found guilty as charged and accordingly separated from the service. At the
Ministry of Labor and Employment she claimed she had been illegally removed.
After hearings, the dismissal was sustained and the complaint was dismissed for lack
of merit. Nevertheless, the labor arbiter required the company to give complainant,
who worked with the company for 10 years, one month's pay for every year of service
as financial assistance.
Both the petitioner and the private respondent appealed to the N L R C which
upheld the decision in toto and dismissed the appeals. T h e employee took no further
action, thereby impliedly accepting the validity of her dismissal. T h e company,
however, is now before the Supreme Court to question the grant of "financial
assistance" as having been made with grave abuse of discretion.
Issue: The only issue presented is the legality of the award of financial assistance
to an employee who is validly dismissed for cause.
The position of the petitioner is simply stated: It is conceded that an employee
illegally dismissed is entitled to reinstatement and backwages as required by the labor
laws. However, an employee dismissed for cause is entitled to neither reinstatement
nor backwages and is not allowed any relief at all because his dismissal is in accordance
with law. In the case of the private respondent, she has been awarded financial
assistance equivalent to ten months' pay corresponding to her 10-year service in
the company despite her removal for cause. She is, therefore, in effect rewarded
rather than punished for her dishonesty, and without any legal authorization or
justification. T h e award is made on the ground of equity and compassion, which
cannot be a substitute for law. Moreover, such award puts a premium on dishonesty
and encourages instead of deterring corruption.
For its part, the N L R C claims that the employee is sufficiently punished with
her dismissal. The grant of financial assistance is not intended as a reward for her
offense but merely to help her for the loss of her employment after working faithfully
with the company for ten years. In support of his position, the Solicitor General cites
the cases of Firestone Tire and Rubber Company of the Philippines vs. Lariosa and Soco vs.

852
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

Mercantile Corporation of Davao, where the employees were dismissed for cause but
were nevertheless allowed separation pay on grounds of social and compassionate
justice.
Rulings: ( 1 ) Rule in the Labor Code; Exception. — T h e rule embodied in the
Labor Code is that a person dismissed for cause as defined therein is not entitled to
separation pay. T h e cases cited [where separation pay was allowed] constitute the
exception, based upon considerations of equity. Equity has been defined as justice
outside law, being ethical rather than jural and belonging to the sphere of morals
than of law. It is grounded on the precepts of conscience and not on any sanction of
positive law. Hence, it cannot prevail against the expressed provision of the labor laws
allowing dismissal of employees for cause and without any provision for separation
pay.
T h e Court notes, however, that where the exception has been applied, the
decisions have not been consistent as to the justification for the grant of separation
pay and the amount or rate of such award.
T h e Court feels that distinctions are in order. We note that heretofore the
separation pay, when it was considered warranted, was required regardless of the
nature or degree of the ground proved, be it mere inefficiency or something graver
like immorality or dishonesty. T h e benediction of compassion was made to cover a
multitude of sins, as it were, and to justify the helping hand to the validly dismissed
employee whatever the reason for his dismissal. This policy should be reexamined. It
is time we rationalized the exception, to make it fair to both labor and management,
especially to labor.
(2) Award of separation pay distinguished. — There should be no question that
when it comes to such valid but not iniquitous causes as failure to comply with work
standards, the grant of separation pay to the dismissed employee may be both just
and compassionate, particularly if he has worked for some time with the company. For
example, a subordinate who has irreconcilable policy or personal differences with his
employer may be validly dismissed for demonstrated loss of confidence, which is an
allowable ground. A working mother who has to be frequently absent because she has
also to take care of her child may also be removed because of her poor attendance,
this being another authorized ground. It is not the employee's fault if he does not
have necessary aptitude for his work but, on the other hand, the company cannot be
required to maintain him just the same at the expense of efficiency of its operations.
He too may be validly replaced. Under these and similar circumstances, however,
the award to the employee of separation pay would be sustainable under the social
justice policy even if the separation is for cause.
But where the cause of the separation is more serious than mere inefficiency, the
generosity of the law must be more discerning. There is no doubt it is compassionate
to give separation pay to a salesman if he is dismissed for his inability to fill his quota
but surely he does not deserve such generosity if his offense is misappropriation of
the receipts of his sales. This is no longer mere incompetence but clear dishonesty.
A security guard found sleeping on the j o b is doubtless subject to dismissal but may
be allowed separation pay since his conduct, while inept, is not depraved. But if

853
 POST-EMPLOYMENT

he was in fact not really sleeping but sleeping with a prostitute during his tour of
duty and in the company premises, the situation is changed completely. This is not
only inefficiency but immorality and the grant of separation pay would be entirely
unjustified.
(3) Financial Assistance Now Depends on Cause of Dismissal. — We hold that
henceforth separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the
valid dismissal is, for example, habitual intoxication or an offense involving moral
turpitude, like theft or illicit sexual relations with a fellow worker, the employer may
not be required to give the dismissed employee separation pay, or financial assistance,
or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect of
rewarding rather than punishing the erring employee for his offense, x x x
(4) For Whom Is Social Justice. — T h e policy of social justice is not intended
to countenance wrongdoing simply because it is committed by the underprivileged.
At best it may mitigate the penalty of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be
permitted to be refuge of scoundrels any more than can equity be an impediment to
the punishment of the guilty. Those who invoke social justice may do so only if their
hands are clean and their motives blameless and not simply because they happen
to be poor. This great policy of our Constitution is not meant for the protection of
those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character.
Applying the above considerations, we hold that the grant of separation pay
in the case at bar is unjustified. T h e private respondent has been dismissed for
dishonesty, as found by the labor arbiter and affirmed by the N L R C , and as she herself
has impliedly admitted. T h e fact that she has worked with the P L D T for more than
a decade, if it is to be considered at all, should be taken against her as it reflects a
regrettable lack of loyalty that she should have strengthened instead of betraying
during all of her 10 years of service with the company. If regarded as a justification
for moderating the penalty of dismissal, it will actually become a prize for disloyalty,
perverting the meaning of social justice and undermining the efforts of labor to
cleanse its ranks of all undesirables.

1.4a More Exceptions: No Financial Assistance

T h e P L D T precedent gives separation pay, in the name of compassionate
justice, to an employee dismissed for a "just cause" under Article 282, with two
exceptions: (1) serious misconduct and ( 2 ) other offense reflecting on his moral
character.
These two exceptions have been expanded as they now include the other
offenses from clause ( a ) to ( d ) of Article 282. Dismissal under these clauses
precludes separation pay or financial assistance. However, for the analogous

854
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

causes (clause e ) , the labor court "may opt to grant separation pay anchored
1
on social justice."
Financial assistance is d e n i e d to an administrative manager w h o was
dismissed, after two years and nine months of service, for having shown arrogant,
uncompromising, and hostile behavior toward her employer. She asked for
financial help on g r o u n d of "equity"; the Court denied it, saying: "For all its
c o n c e d e d merit, equity is available only in the absence of law and not as its
replacement. Equity as an exceptional extenuating circumstance does not favor,
nor may it be used to reward, the indolent or the wrongdoer, for that matter.
This Court will not allow a party, in the guise of equity, to benefit from its own
2
fault."

1.4b Dishonesty Doubted: Financial Assistance may be Granted

W h e n there is doubt that dishonesty was committed, financial assistance
may still be awarded an e m p l o y e e w h o has rendered long years of service. T h e
doubt is resolved in e m p l o y e e ' s favor, hence, despite the nature of offense,
financial assistance on g r o u n d of compassionate justice may still be given.

Manggagawa ng Komunikasyon sa Filipinos and A. L. Cruz vs. National Labor

Relations Commission and Philippine Long Distance Telephone Company, G.R. N o .
90964, February 10, 1992 —
Facts: Petitioner A. L. Cruz had been an employee of respondent Philippine
L o n g Distance Telephone Company ( P L D T ) for sixteen years (since 1971) at the
time his employment was terminated. He was an Installer/Repairman.
Sometime in August 1985, Cruz and co-repairman Moldera were instructed
by their supervisor to repair old and substandard installations located at N o . 325
Acacia Lane, Mandaluyong. Respondent P L D T claimed that in the course of a
periodic inspection it was discovered that telephone numbers previously installed
at N o . 325 Acacia Lane, Mandaluyong, were actually reinstalled and functioning
at N o . 323 Acacia Lane, Mandaluyong. This "out-move" of the telephones was
considered illegal by the company, there being no service order issued by it for
such "out-move."
Petitioner Cruz denied the illegality of the "out-move" or transfer of the subject
telephones, as he had merely effected routinary work in compliance with a lawful
order; that both telephones were in the same compound; that there was no monetary
consideration involved.
P L D T dismissed Cruz effective April 1,1987 on the ground of fraud and serious
misconduct.

'Toyota Motor Phil. Corp. Workers Association, et al vs. N L R C , et al, G.R. N o .

158786 and 156789, October 19, 2007.
^irazona vs. Philippine Eds Technoservice, et al, G.R. N o . 169712, January
20, 2009.
855
 POST-EMPLOYMENT

Finding no fraud or serious misconduct in the performance of dudes, the labor

arbiter ordered the reinstatement of Cruz with full backwages and other benefits
without loss of seniority rights.
On appeal, the N L R C reversed the Labor Arbiter's decision but allowed
separation pay of one-half ( 1 / 2 ) month salary for every year of service.
Ruling: The N L R C cannot be faulted for reversing the Labor Arbiter. P L D T
complied with procedural due process prior to the termination of petitioner's
employment for a serious violation of company rules involving what can be considered
fraud and dishonesty. His dismissal has to be sustained.
However, in lieu of separation pay equal to one-half month salary for every year
of service or approximately P33,000.00 awarded by the N L R C to petitioner Cruz, a
financial assistance of P10,000.00 only is awarded to Cruz.
1
To obviate confusion with the decision in a previous case which ruled out
awards of separation pay when the worker's dismissal is due to dishonesty, it must
be pointed out that in the [L-80609] case, the dismissed employee was a P L D T
traffic operator for ten (10) years who impliedly admitted that she received P3,800.00
in consideration of her promise to facilitate approval of application for telephone
installation, an amount which she should not have collected or received. Both the
Labor Arbiter and the N L R C unequivocally arrived at the conclusion that said
employee should be dismissed although with financial assistance. T h e award of
financial assistance was questioned by P L D T (not by the employee, as in the present
case) before the Supreme Court.
In the present case, there was never an admission from petitioner Cruz that he
solicited/received money from complainant/phone subscriber Mr. Gochiaco. There
is thus some doubt as to petitioner's culpability; in fact he claims he was not shown
complainant's affidavit implicating him and that the P L D T legal department did
not conduct the usual formal investigation. T h e Labor Arbiter found him innocent,
the N L R C found him guilty. There is a question on the certainty of dishonesty. In
criminal law, this could be reasonable doubt. We are, however, dealing here with a
quasi-judicial body where substantial evidence suffices and whose factual findings
are binding on the Supreme Court absent showing of grave abuse of discretion.
It is also significant that both the labor arbiter and the N L R C concur in awarding
Cruz monetary assistance, i.e., the arbiter, in the form of backwages, the N L R C , in the
form of separation pay of one-half ( 1 / 2 ) month pay per year of service. PLDT did not
question the award of financial assistance by the N L R C in the form of separation pay.
It was, in other words, willing to pay separation pay had not the employee elevated the
case to this Court for review of his dismissal from employment, but with separation
pay. Furthermore, Cruz served P L D T for sixteen (16) years without adverse record;
the subject telephone line was eventually legalized and re-connected without damage
to the company and, in fact, the questioned telephone remained transferred from
#325 to #323 Acacia Lane both in the same compound. Unlike in the Abucay case
where the employee performed an act completely unrelated to her duties as traffic

'PLDT vs. N L R C , G.R. N o . L-80609, August 23, 1988. See Above.

856
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

operator and demanded money from a would-be subscriber, herein petitioner was in
fact instructed to repair old and substandard installations. H e , however, transgressed
company rules by effecting an "out-move" of telephones without a company service
order. Although dishonesty is a vice or propensity hardly susceptible of gradation,
the award of financial assistance to Cruz in the amount of P10,000.00 only for his
sixteen (16) years of service is not a condonation of his act which was clearly violative
of company rules, but anchored on equitable considerations.

1.4c Financial Assistance for an Uncovered Retiree

Financial assistance based on "compassionate justice" was granted even to
an e m p l o y e e w h o was not dismissed but w h o had to retire without being covered
by the company's retirement plan. T h e P200,000.00 grant was neither arbitrary
n o r excessive, considering the circumstances, such as his unblemished service
1
for almost 24 years.

1.4d Grant of Financial Assistance, Although not Objected to, may be

Revoked
In the case of Chua vs. Nestle [whose facts are narrated under Article 282
regarding commission of c r i m e ] , the labor arbiter upheld the dismissal of the
violent striker but at the same time awarded "financial assistance" in the form of
backwages and separation pay, for a total of m o r e than P85,000.00. T h e employer
d i d not question this monetary award. Despite this, the Court said: We disagree
with the award by the Labor Arbiter of "financial assistance" to petitioner and with
the N L R C ' s affirmance of that portion of the award. U n d e r the circumstances
of this case, the Court considers that such award of "financial assistance" was
obviously unjustified.
We are aware that in the instant case, private respondent did not
appeal from the decisions of the Labor Arbiter and the N L R C . Nevertheless,
because the resolution of the issue of the lawfulness of the award of
"financial assistance" to petitioner is essential if this Court is to render
substantial justice as between the parties in this case, this Court feels
c o m p e l l e d to pass upon that issue and has ruled accordingly.

1.4e Amount of Financial Assistance

T h e grant of financial assistance in lawful dismissal cases is based on equity,
on compassionate justice. Such being the basis, there is and there can be no
fixed formula to "determine" the amount of the financial assistance. It rests
on the sound j u d g m e n t of the adjudicating authority, weighing the peculiar
circumstances of each case. In the Manggagawa ng Komunikasyon case, above,
involving repairman Mr. Cruz, w h o has sixteen years of service, the amount given
was PI0,000.00.

'Eastern Shipping Lines, et al. vs. Sedan, G.R. N o . 159354, April 7, 2006.

857
 POST-EMPLOYMENT

Parenthetically, "financial assistance" may resolve not only dismissal

disputes. Because of the state policy promoting the "primacy of ... mediation
and conciliation ..." (Article 211) and encouraging "compromise settlements"
(Article 227), there are myriad situations where the parties "buy peace" and
settle their disputes by agreeing on some form of "financial assistance." Subject
to legal limitations of waivers and quitclaims, such settlements have the force of
law between them.

1.5 Third Kind of Separation Pay. As Substitute for Reinstatement in

Illegal Dismissal Cases
Unlike the p r e c e d i n g two which both involve legal terminations, the
third concept of separation pay is an alternative relief after a finding of illegal
dismissal. W h e r e there is illegal dismissal there should ordinarily be an order to
reinstate the employee. But situations do arise where reinstatement is neither
possible nor advisable such as when the employee's position no longer exists, or
the company has closed down, or severely strained relations has set in between
the parties. As an alternative to reinstatement, payment of separation pay may
be ordered.
As this kind of separation pay is closely related to reinstatement, it will be
dealt with further under that topic.

1.6 Fourth Kind of Separation Pay: As Employment Benefit from

Employer
T h e fourth and last m e a n i n g o f separation pay u n d e r present law
and j u r i s p r u d e n c e does n o t arise f r o m legal or illegal dismissal but from
nonadversarial m o d e of leaving one's employment, such as resignation. It is in
the form of a perquisite or e m p l o y m e n t benefit whose demandability depends
on the terms of its grant through a collective bargaining agreement or voluntary
company policy or established practice. It may be called resignation pay or
gratuity. Its standard requisite is that the e m p l o y e e has r e n d e r e d a specified
minimum length of service to the employer. In a pertinent case, the Court said:
"Even if an e m p l o y e e has voluntarily resigned, he shall be given a
separation pay equivalent to o n e month for every year of service, if there
is a company policy to that effect." (Philippine Overseas-Drilling and Oil
Development Corporation vs. Ministry of Labor, G.R No. 55703, November 27,
1986.)
T h e rule is that an e m p l o y e e w h o voluntarily resigns from employment is
not entitled to separation pay, except when it is stipulated in the employment
contract or collective bargaining a g r e e m e n t ( C B A ) , o r it is sanctioned by
1
established employer practice or policy.

•Hinatuan Mining Corp. v. N L R C , G.R. N o . 117394, February 21, 1997; also:

"J" Marketing Corp. vs. Taran, G.R. N o . 163924, June 18, 2009.

858
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

An employer w h o agrees to e x p e n d separation benefit as an incident

of the resignation should not be allowed to renege on the fulfillment of such
1
commitment.
Indeed, there is nothing illegal with the practice in some companies of
allowing an e m p l o y e e to resign, instead of being terminated, so as not to smear
2
the employee's e m p l o y m e n t record.
But even if not granted by a company policy or practice, resignation pay
may still be awarded for equitable reason. An instance is the case of a security
guard w h o , after a service of almost a quarter of a century, had to resign
for health reason. T h e court awarded separation pay, applying Article 284
3
analogously.

2. BACKWAGES
Backwages and reinstatement are two reliefs given to an illegally dismissed
e m p l o y e e . T h e y are separate and distinct from each other. However, in the
event that reinstatement is no l o n g e r possible, separation pay is awarded to the
e m p l o y e e . Thus, the award of separation pay is in lieu of reinstatement and not
of backwages. In other words, an illegally dismissed e m p l o y e e is entitled to (1)
either reinstatement, if viable, or separation pay if reinstatement is no longer
4
viable and ( 2 ) backwages.
Backwages, in general, are granted on grounds of equity for earnings which
a worker or e m p l o y e e has lost due to his illegal dismissal. Reinstatement, on the
other hand, means restoration to a state of condition from which o n e had been
5
r e m o v e d or separated.
Backwages presupposes illegal termination. It is restitution of earnings
unduly withheld from the e m p l o y e e because of illegal termination. H e n c e
where there is no illegal termination there is no basis for claiming or awarding
of backwages. Said the Court:
Backwages may be granted only when there is a finding of illegal
dismissal. N e i t h e r the L a b o r A r b i t e r nor the N L R C made such a find-
ing, and considering that the absence of such finding is supported by
the records of the case, backwages cannot be allowed. (Industrial Timber
Corporation-Stanply Operations vs. NLRC, G.R. No. 112069, February 14,
1996.)

'Alfaro v. Court of Appeals, G.R. N o . 140812, August 28, 2001.

2
Samaniego vs. N L R C , G.R. N o . 93059, June 3, 1991; "J" Marketing Corp. vs.
Taran, G.R. N o . 163924, June 18, 2009.
3
Abaquin Security vs. Atienza, G.R. N o . 72971, October 15, 1990.
Torillo vs. Leogardo, G.R. N o . 77205, May 27, 1991.
Ibid.
859
 POST-EMPLOYMENT

While generally an order of reinstatement carries with it an award of

backwages, the court may not only mitigate, but also absolve the employer from
1
liability for backwages where g o o d faith is evident.
In short, where there is no illegal dismissal, there can be no award of
backwages. But there can be an illegal dismissal finding without a grant of
backwages.

2.1 Backwages Distinguished from Separation Pay

Payment of separation pay is not inconsistent with payment of backwages.
Separation pay is granted where reinstatement is no longer advisable because
of strained relations between the e m p l o y e e and employer. Backwages represent
compensation that should be earned but not collected because of the unjust
dismissal. T h e basis for computing the two are different, the first being usually
the length of the employee's service and the second, the actual p e r i o d when
2
he was unlawfully prevented from working. Separation pay here is of the third
kind mentioned in the preceding topic.
T h e distinction between separation pay and backwages is exhaustively
discussed in Santos vs. NLRC, et al, G.R. N o . 76721, September 21,1987, wherein
it was held:
As the term suggests, separation pay is the amount that an employee
receives at the time of his severance from the service and, as correctly
noted by the Solicitor General in his C o m m e n t , is designed to provide
the employee with "the wherewithal during the p e r i o d that he is looking
for another employment." In the instant case, the grant of separation pay
was a substitute for immediate and continued r e e m p l o y m e n t with the
private respondent Bank. T h e grant of separation pay did not redress the
injury that is intended to be relieved by the second remedy of backwages,
that is, the loss of earnings that w o u l d have accrued to the dismissed
employee during the p e r i o d between dismissal and reinstatement. Put a
little differently, payment of backwages is a f o r m of relief that restores the
income that was lost by reason of unlawful dismissal; separation pay, in
contrast, is oriented towards the immediate future, the transitional period
the dismissed e m p l o y e e must u n d e r g o before locating a replacement j o b .
(Torillo vs. Leogardo, G.R No. 77205, May 27, 1991.)
Separation pay and backwages being distinct and separate, a labor arbiter
3
cannot order that the separation pay be deducted from the backwages.

•Durabilt Recapping Plant Company vs. National Labor Relations Commission,

G.R. N o . 76746, July 27, 1987.
2
Lim vs. National Labor Relations Commission, G.R. N o . 79907 and Sweet Lines
Inc. vs. National Labor Relations Commission, G.R. N o . 79975, March 16, 1989.
3
Solis vs. N L R C , G.R. N o . 116175, October 27, 1996.

860
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

If the dismissal is illegal, the employee is entitled to reinstatement (see

further explanation b e l o w ) as well as to backwages. Backwages therefore
presupposes illegal dismissal. But there may be award of backwages without an
o r d e r of reinstatement such as, for instance, when the dismissal is illegal but
1
reinstatement is not feasible.

2.1a Backwages Distinguished from Unpaid Salary

Unpaid salaries refer to those earned prior to dismissal, whereas backwages
2
refer to those earnings lost after [and because o f ] illegal dismissal.
Oftentimes, but not always, an order of reinstatement carries with it an
award of backwages; payment of unpaid salary, on the other hand, is only ordered
if there are still salaries collectible by the e m p l o y e e from the employer by reason
of services already rendered.

2.2 Complainant's Failure to Claim Backwages

It is evident that the award of backwages resulting from the illegal dismissal
of an e m p l o y e e is a substantive right. Thus, the failure to claim backwages in
a complaint for illegal dismissal has been held to be a m e r e procedural lapse
3
which cannot defeat a right granted under substantive law.
Both the labor arbiter and the N L R C c o n c l u d e d that petitioner was
illegally dismissed. Conformably then with Article 279 of the Labor C o d e , he is
entitled to an award of backwages since the Article expressly mandates that an
e m p l o y e e w h o is unjustly dismissed shall be entitled to reinstatement without
loss of seniority rights and other privileges and to full backwages, inclusive of
allowances, and to other benefits or their monetary equivalent computed from
the time compensation was withheld up to the time of actual reinstatement.
T h e provision gives meaning to the laborer's constitutional guaranty of security
of tenure and finds solid basis on the universal principles of justice and equity.
T h e grant of backwages allows the unjustly and illegally dismissed employee to
recover from the employer that which the f o r m e r lost by way of wages as a result
4
of his dismissal from e m p l o y m e n t .

2.3 Labor Arbiter's Failure to Award Backwages

Suppose an employee was found to have been illegally dismissed but was not
awarded backwages, can the higher court, in an appeal filed only by the employer,
grant backwages to the employee w h o did not appeal? Earlier court decisions
gave different answers: o n e i g n o r e d technicality and granted the backwages,
the other denied backwages because of technicality. By 2001 the more liberal
decision has prevailed.

•Fuentes vs. N L R C , G.R. N o . 110017, January 2, 1997.

2
General Baptist Bible College vs. N L R C , G.R. N o . 85534, March 5, 1993.
Ibid.
4
D e la Cruz vs. N L R C and E. L o , G.R. N o . 121288, November 20, 1998.

861
 POST-EMPLOYMENT

In a 1995 case the Labor Arbiter failed to award backwages despite its ruling
that the petitioners were illegally dismissed. We [the Court] thus deem it proper
to make such an award here in addition to the money claims for labor standards
violations and for the separation pay. As a rule, full backwages are computed
from the time of the employee's illegal dismissal until his actual reinstatement,
but since in this case, reinstatement is not possible, the backwages must be
computed from the time of the petitioners' illegal dismissal until the finality of
1
our decision herein.
T h e ruling in the Labor case is repeated in Aurora Land Projects Corp. vs.
NLRC, G.R. N o . 114733, January 2, 1997, where the Court elaborated:
W h i l e as a general rule, a party w h o has not appealed is not entitled
to affirmative relief other than the ones granted in the decision of the
court below, law and jurisprudence authorize a tribunal to consider errors,
although unassigned, if they involve ( 1 ) errors affecting the lower court's
jurisdiction over the subject matter, ( 2 ) plain errors not specified and ( 3 )
clerical errors. In this case, the failure of the L a b o r Arbiter and the public
respondent N L R C to award backwages to the private respondent, w h o is
legally entitled thereto having been illegally dismissed, amounts to a "plain
error" which we may rectify in this petition, although private respondent
Dagni did not bring any appeal regarding the matter in the interest of
substantial justice....
Unfortunately, in a 1998 case, the Arbiter's decision again did not award
backwages to the illegally dismissed e m p l o y e e , and since the e m p l o y e e did not
appeal the decision, it became final and executory. In the appeal brought up only
by the employer the H i g h Court refused to grant backwages although it affirmed
2
that the employee's dismissal was i n d e e d illegal. T h e Court said:
Notably, the March 27, 1991 decision of the labor arbiter, while
o r d e r i n g the r e i n s t a t e m e n t o f r e s p o n d e n t , e x c l u d e d the award o f
backwages. On this point, we rule that the labor arbiter e r r e d in omitting
such award. T h e law provides that an illegally dismissed employee is "entitled
to reinstatement without loss of seniority rights and other privileges and
to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent c o m p u t e d from the time his compensation was
withheld from him up to the time of his actual reinstatement." Having
b e c o m e final and executory, however, we are constrained to uphold this
decision, albeit deficient, for failure of the respondent himself to question
the inadequacy of the remedy due him.

•Labor, et al. vs. N L R C , Gold City Commercial Complex, Inc., et al, G.R. No.
110388, September 14, 1995.
industrial and Transport Equipment, Inc., et al. vs. N L R C , et al, G.R. No.
113592, January 15, 1998.

862
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

This ruling in the case of Industrial and Transport Equipment is lamentable

We c o m m e n t e d (in the 1999 edition) that the Court could have ignored the
procedural lapse so as to uphold the employee's substantive right to backwages as
it already did in 1995. Subsequent to this c o m m e n t (but not necessarily because
of i t ) , the Court in 2001 in the case of St. Michael's Institute reinstated the earlier
precedent.

St Michael's Institute, et al. vs. Santos, et al., G.R. N o . 145280, December 4,2001
Facts: T h e employer [St. Michael's Institute] dismissed three of its regular
classroom teachers allegedly on grounds of "serious disrespect" to their superior and
"serious misconduct." T h e Labor Arbiter dismissed the employees' complaints for
"lack of merit." On appeal, the N L R C reversed the arbiter and ordered the employees'
reinstatement, but it did not award backwages. T h e employer appealed to the Court
of Appeals, the employees did not. T h e CA sustained the N L R C and in addition,
awarded backwages. This, the employer argued in the Supreme Court, was a serious
error because the CA cannot grant backwages to employees who did not appeal the
denial of backwages by the N L R C .
Ruling: T h e Court disagreed by saying:
"The fact that the N L R C did not award backwages to the respondents or that
the respondents themselves did not appeal the N L R C decision does not bar the
Court of Appeals from awarding backwages. While as a general rule, a party who has
not appealed is not entitled to affirmative relief other than the ones granted in the
decision of the court below, the Court of Appeals is imbued with sufficient authority
and discretion to review matters, not otherwise assigned as errors on appeal, if it finds
that their consideration is necessary in arriving at a complete and just resolution of
the case or to serve the interests of justice or to avoid dispensing piecemeal justice.
Article 279 of the Labor Code, as amended, mandates that an illegally dismissed
employee is entitled to the twin reliefs of (a) either reinstatement or separation
pay, if reinstatement is no longer viable, and ( b ) backwages. Both are distinct reliefs
given to alleviate the economic damage suffered by an illegally dismissed employee
and, thus, the award of one does not bar the other. Both reliefs are rights granted by
substantive law which cannot be defeated by mere procedural lapses. Substantive rights
like the award of backwages resulting from illegal dismissal must not be prejudiced
by a rigid and technical application of the rules. T h e order of the Court of Appeals
to award backwages being a mere legal consequence of the finding that respondents
were illegally dismissed by petitioners, there was no error in awarding the same."

2.4 Basis of Computation of Backwages

An unqualified award of backwages means that the employee is paid at
the wage rate at the time of his dismissal. A n d the Court has declared that the
base figure to be used in the computation of backwages due to the employee
should include not just the basic salary, but also the regular allowances that he
had been receiving such as the emergency living allowances and the 13th-month
pay mandated under the law. In his computation of the amount of backwages,
863
 POST-EMPLOYMENT

the Labor Arbiter without legal basis excluded the E C O L A . It is on this score
alone that the Labor Arbiter's order dated N o v e m b e r 27, 1985 should be set
aside. T h e Court holds that notwithstanding the belated appeal by the union, the
assailed order should be modified with respect to the incorrect salary base used
by the Labor Arbiter in his computation of backwages. W h e r e there is a patently
improper application and interpretation of the law on the part of administrative
officers who are tasked to perform quasi-judicial functions, the Court will not
hesitate to disregard procedural rules so as to effect faithful adherence to that
1
mandated under the law.
T h e ruling in Paramount Vinyl [see above] is relied upon by the Court in
the following case of Evangelista. Incidentally, this case shows that even in labor
cases the wheels of justice sometimes grind unbelievably slow.

Evangelista vs. NLRC and Mendoza, G.R. N o . 93915, October 11, 1995 —
Facts: Eighteen years ago, in April 1977, Mendoza filed a complaint for illegal
dismissal against employer Evangelista. Eventually, the case reached the Supreme
Court on July 30,1990 through Evangelista's petition for certiorari which was decided
on March 22, 1991 in Mendoza's favor. T h e decision became final upon denial of
Evangelista's motion for reconsideration on May 13, 1991.
Thereafter, Mendoza filed a motion seeking clarification with respect to the
salary scale which should be applied in computing the three years' backwages. He
cited the decision in De Jesus vs. Philippine National Construction Corporation (195 SCRA
468 [1991 ] ) wherein the award of backwages was based on the latest pay scale of the
employee's position.
On July 24, 1991, the Court, through the First Division, issued a resolution
granting Mendoza's motion for clarification and modified the decretal portion of
the decision to read as follows:
WHEREFORE, the petition is DISMISSED, with costs against petitioner.
T h e computation of the three ( 3 ) years' backwages awarded to private
respondent shall be based at the current rate of wage levels.
As a result of the aforecited modification, Evangelista, in turn, filed the
instant motion for reconsideration seeking the reversal of the Resolution dated
July 24, 1991.
Petitioner Evangelista alleged that he was not furnished a copy of the motion
for clarification and neither was there a resolution issued by the Court requiring him
to comment thereto, thereby depriving him of his right to due process. Moreover, he
disputed the computation of the award of backwages based on the current wage levels
and maintained that the same should instead be computed based on the rate of the
wage level in 1977 when private respondent was illegally dismissed, in accordance
with the prevailing jurisprudence.

'Paramount Vinyl Product C o r p o r a t i o n vs. National L a b o r Relations

Commission, et al., G.R. N o . 81200, October 17, 1990.

864
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

Ruling: We find merit in petitioner's motion.

As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC (190 SCRA 525,
537 [1990]), the determination of the salary base for the computation of backwages
requires simply an application of judicial precedents defining the term "backwages."
An unqualified award of backwages means that the employee is paid at the wage
1
rate at the time of his dismissal. Furthermore, the award of salary differentials is
not allowed, the established rule being that upon reinstatement, illegally dismissed
employees are to be paid their backwages without deduction and qualification as to
any wage increases or other benefits that may have been received by their co-workers
2
who were not dismissed or did not go on strike.

T h e r e is no ambivalence in Paramount. T h e base figure to be used in the

the computation of backwages is p e g g e d at the wage rate at the time of the
employee's dismissal, inclusive of regular allowances that the employee had
been receiving such as the e m e r g e n c y living allowances and the 13th month pay
3
mandated under the law.
Article 279 mandates that an employee's full backwages shall be inclusive
of allowances and other benefits or their monetary equivalent. Contrary to the
ruling of the Court of Appeals, we [the Supreme Court] do not see that a salary
increase can be interpreted as either an allowance or benefit. Indeed, if the intent
were to include salary increase as basis in the computation of backwages, the
same should have been explicitly stated in the manner that the law used clear
and unambiguous terms in expressly providing for the inclusion of allowances
and other benefits. T h e annual general salary increases, which allegedly the
e m p l o y e e could have received during the p e r i o d of his illegal termination,
4
cannot be included in computing the backwages.
T h e last salary should be based on Philippine peso if the employee was
assigned in the Philippines at the time of dismissal.
In o n e case, the C o u r t h e l d that the N L R C abused its discretion in
computing private respondent's backwages based on his salary abroad. T h e
records show that private respondent was not illegally dismissed while working

•Paramount Vinyl Product Corporation vs. National Labor Relations Com-

mission, et al., G.R. N o . 81200, October 17, 1990, citing Davao Free Workers Front
vs. Court of Industrial Relations, 67 SCRA 418; Capital Garments Corp. vs. N L R C ,
117 SCRA 473; Durabilt Recapping Plant and Co. vs. N L R C , 152 SCRA 328.
2
Insular Life Assurance Co., Ltd. vs. N L R C , 156 SCRA 740, 749 (1987) citing
Durabilt Recapping Plant and Co., Inc. vs. N L R C , 152 SCRA 328; Insular Life Assurance
Co., Ltd. Employees Association-NATU vs. Insular Life Co., Ltd., 77 SCRA 5.
3
Equitable Banking Corp. vs. Sadac, G.R. N o . 164772, June 8, 2006.
*Ibid.; see also: Paquio vs. PLDT, 441 Phil. 679 (2002); Acesite Corp. vs. NLRC,
G.R. N o . 152308, January 26, 2005.

865
 POST-EMPLOYMENT

in the Middle East project of the petitioner. His overseas assignment was a
specific project and for a definite period. U p o n the completion of the project
in 1984, he received all the benefits due him under the overseas contract. He
then voluntarily returned to the Philippines to await his deployment in the local
projects of the petitioner. Clearly, he was not illegally dismissed while working
in the Middle East. T h e backwages should be computed based on his salary in
1
the Philippines.
Salary scales reflect the standard of living prevailing in the country and
2
the purchasing power of the domestic currency.
Petitioner objects to the inclusion of gasoline, car and representation
allowances in the computation of backwages on the ground that these are but
operating expenses to the company. However, while these may be operating
expenses to petitioner they are, on the other hand, still allowances/benefits to
private respondent and hence included in the computation of her back wages
under Article 279 of the L a b o r C o d e , to wit:
x x x x An employee w h o is unjustly dismissed from work shall be entitled
to reinstatement x x x and to his full back wages, inclusive of allowances,
and to his other benefits or their monetary equivalent from the time
his compensation was withheld from him up to the time of his actual
reinstatement (underscoring ours) (Consolidated Rural Bank vs. NLRC, et al.,
G.R No. 123810, January 20, 1999.)

2.4a Reckoning of Backwages

T h e backwages should be c o m p u t e d from the time of the illegal dismissal
which is usually also the time the employee's salary started to be withheld. T h e
computation does not begin from the time the employee filed the illegal dismissal
complaint, even if filing was delayed by about three years.
A r t i c l e 279 o f the L a b o r C o d e p r o v i d e s that a n i l l e g a l l y dismissed
e m p l o y e e shall be entitled, inter alia, to the payment of his full backwages,
inclusive of allowances and to his o t h e r benefits or their m o n e t a r y equivalent
computed from the time that his compensation was withheld from him, i.e.,
from the time of his illegal dismissal, up to the time of his actual reinstatement.
Thus, where reinstatement is adjudged, the award of backwages and other
benefits continues b e y o n d the date of the L a b o r Arbiter's Decision ordering
reinstatement and extends up to the time said o r d e r of reinstatement is actually
3
carried out.

'Philippine National Construction vs. N L R C and F. Dagasdas, G.R. N o . 122440,

February 12, 1998.
2
Grolier International, Inc. vs. Amansec, G.R. N o . 83523, August 31, 1989.
3
Pheschem Industrial Corporation v. Moldez, G.R. N o . 161158, May 9, 2005.

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[Part 6. Consequences of Termination]

T h e C o u r t was m o r e emphatic in Philippine Industrial Security Agency

Corporation v. Dapiton, 377 Phil. 951, 966 (1999), when it ruled that backwages
had to be paid by the employer as part of the price or penalty he had to pay for
illegally dismissing his e m p l o y e e . It was to be computed from the time of the
employee's illegal dismissal (or from the time his compensation was withheld
from him) up to the time of his reinstatement.
T h e payment of backwages allows the e m p l o y e e to recover from the
employer that which he has lost by way of wages as a result of his dismissal.
Logically, it must be c o m p u t e d from the date of petitioner's illegal dismissal up
to the time of actual reinstatement. T h e r e can be no gap or interruption, lest
we defeat the very reason of the law in granting the same. That petitioner did
not immediately file his Complaint should not affect or diminish his right to
backwages, for it is a right clearly granted to him by law — should he be found
to have been illegally dismissed — and for as l o n g as his cause of action has not
1
been barred by prescription.
T h e law fixes the period of time within which petitioner could seek remedy for
his illegal dismissal and for as long as he filed his Complaint within the prescriptive
period, he shall be entitled to the full protection of his right to backwages. In illegal
dismissal cases, the employee concerned is given a period of four years from the
time of his illegal dismissal within which to institute the complaint. This is based
on Article 1146 of the N e w Civil C o d e which states that actions based upon an
injury to the rights of the plaintiff must be brought within four years. T h e four-year
prescriptive period shall c o m m e n c e to run only upon the accrual of a cause of
action of the worker. H e r e , petitioner was dismissed from service on 15 September
2001. He filed his complaint for illegal dismissal on 14, June 2004. Clearly, then,
2
the instant case was filed within the prescriptive period.

2.5 "Full'' Backwages: The Rule Before R . A . 6715; The Mercury Drug
Rule
Prior to the adoption of the Mercury Drug rule in 1974, the award of
backwages to an e m p l o y e e could be reduced by subtracting the wages actually
earned by him from e m p l o y m e n t during the period of his separation, or the
wages which he could have earned had he been diligent enough to find a
j o b . T h e e m p l o y e r would be allowed to adduce evidence on these matters,
and consequently cause suspension of execution of a j u d g m e n t directing
reinstatement of a worker and payment to him of back salaries a n d / o r other
pecuniary benefits until such evidence could be presented and a conclusion
3
made from the award. T h e computation and deduction of interim earnings
not only reduced the awarded backwages but also delayed its payment.

'Reyes vs. N L R C , et al., G.R. N o . 180551, February 10, 2009.

Ibid.
'Mariners Polytechnic School vs. Leogardo, Jr., G.R. N o . 74271, March 31,1989.

867
 POST-EMPLOYMENT

It was in Mercury Drug Co., Inc. vs. Court of Industrial Relations (56 SCRA 694
[1974]) that the court first found occasion, in order to preclude recurrence of
this situation and speed up the process of execution, to provide a remedy. T h e
Supreme Court, in the interest of justice and expediency, adopted the policy of
granting backwages for a maximum period of three (3) years without qualification
1
and deduction. This policy became known as the "Mercury Drug rule."

2.5a Backwages: The Rule after R A . 6715; "Full" Backwages but with
Deductions; Mercury Drug Rule Abandoned
Republic Act N o . 6715, which took effect on March 21, 1989, amended
Article 279, in part, to entitle an illegally dismissed employee to "full backwages."
T h e Court acknowledged in July 1993 that with the passage of R . A . N o .
6715, it would seem that the Mercury Drug Rule "is no longer applicable" for
2
illegal dismissals that occurred after March 21,1989. In this Ferrer case, however,
the Court still allowed the employer to deduct any amount which the employee
may have earned during the period of his illegal termination.
If the earnings elsewhere have to be deducted from the backwages, are
the recovered backwages "full"? N o , and this is the crux of Mr. Justice Padilla's
dissenting opinion in Pines City Educational Center vs. NLRC ( G . R . N o . 96779,
N o v e m b e r 10,1993) which reiterates the r^erraruling. Justice Padilla believes the
interim earnings should not be deducted from the awarded backwages. These
are his reasons:
T h e amendment to Article 279 of the L a b o r C o d e introduced by Rep.
A c t N o . 6715 inserted the qualification "full" to the w o r d "backwages." T h e
intent of the law seems to be clear. T h e plain words of the statute provide
that an employee w h o is unjustly dismissed is entitled to FULL backwages
from the time of his dismissal to actual reinstatement. T h e law provides
no qualification nor does it state that i n c o m e earned by the employee
during the period between his unjust dismissal and reinstatement should
be deducted from such backwages. W h e n the law does not provide, the
Court should not improvise.
It is further my view that the principle of unjust enrichment (if no
deduction is allowed from backwages) does not apply in this case, for the
following reasons:
1. T h e applicable provision of law should be construed in favor
of labor.
2. T h e Labor C o d e is a special law which should prevail over the
Civil C o d e provisions on unjust enrichment.

'Mariners Polytechnic School vs. Leogardo, Jr., G.R. N o . 74271, March 31,1989.
2
Alex Ferrer, et al. vs. N L R C , G.R. N o . 100898, July 5, 1993.

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[Part 6. Consequences of Termination]

3. T h e language employed by the statute and, therefore, its intent

are clear. W h e r e the unjust dismissal occurs after R e p . A c t N o . 6715 took
effect, backwages must be awarded from the time the employee is unlawfully
dismissed until the time he is actually reinstated. T h e r e is no provision
authorizing deduction of any i n c o m e earned by the employee during that
period.

2.5b Full Backwages without Deduction; Pines City Ruling Abandoned in

Bustamante
Justice Padilla's well-reasoned dissent in the 1993 Pines City case finally
b e c a m e the Supreme Court's unanimous view in 1996 in the case Osmalik
Bustamante, et al vs. NLRC and Evergreen Farms, G.R. N o . 111651, N o v e m b e r
28, 1996. In its en banc Resolution, p e n n e d by Mr. Justice Padilla himself, the
Court announced that it was reconsidering the Pines City ruling. T h e Court
momentously declared:
T h e Court deems it appropriate, however, to reconsider such earlier
ruling on the computation of backwages as enunciated in said Pines City
Educational Center case, by now holding that comformably with the evident
legislative intent as expressed in Rep. A c t N o . 6715, above-quoted backwages
to be awarded to an illegally dismissed e m p l o y e e , should not, as a general
rule, be diminished or reduced by the earnings derived by him elsewhere
during the p e r i o d of his illegal dismissal. T h e underlying reason for this
ruling is that the e m p l o y e e , while litigating the legality (illegality) of his
dismissal, must still earn a living to support himself and family, while full
backwages have to be paid by the employer as part of the price or penalty
he has to pay for illegally dismissing his employee. T h e clear legislative
intent of the a m e n d m e n t in R e p . A c t N o . 6715 is to give m o r e benefits to
workers than was previously given them under the Mercury Drug rule or the
"deduction of earnings elsewhere" rule. Thus, a closer adherence to the
legislative policy behind R e p . A c t N o . 6715 points to "full backwages" as
meaning exactly that, i.e., without deducting from back-wages the earnings
derived elsewhere by the c o n c e r n e d e m p l o y e e during the period of his
illegal dismissal. In other words, the provision calling for "full backwages"
to illegally dismissed employees is clear, plain and free from ambiguity and,
therefore, must be applied without attempted or strained interpretation.
T h e Bustamante ruling is reiterated in Ala Mode Garments, Inc. vs. NLRC, et
al, G.R. N o . 122165, February 17, 1997 and other cases.

2.6 Full Backwages Amendment Not Retroactive

T h e "full backwages" amendment by R . A . N o . 6715 has no retroactive
effect; it applies only prospectively. Thus, the rule is: where the illegal dismissal
happened before the effectivity of R . A . N o . 6715, that is, before March 21,
1989, the award of backwages is limited to three years without deduction or

869
 POST-EMPLOYMENT

1
qualification. If the illegal dismissal occurred on or after March 21, 1989, the
full backwages rule under Bustamante is applicable.

2.7 Backwages Up to Retirement Age Only

If the ordered reinstatement is no longer feasible because the employee has
reached retirement age, the Court will not insist on reinstatement and even the
backwages will not extend beyond the employee's retirement date. In Equitable
the Court made this pronouncement:
T h e controversy spawning this case has generated not too little
personal animosities. Reinstatement, which is the consequence of illegal
dismissal, has markedly been rendered undesirable. Private respondent
shall, instead, be entitled to backwages from the time of his dismissal until
reaching sixty (60) years of age (1995) and, thereupon, to retirement
benefits in accordance with Article 287 of the L a b o r C o d e and Section 14,
Rule 1, Book V I , of the Implementing Rules of the L a b o r C o d e . (Equitable
Banking Corp. vs. NLRC and R.L. Sadac, G.R No. 102467, June 13, 1997.)

2.8 Inflation
Regarding the argument that the inflation that has supervened justifies
the imposition of interest, the Court has held that the effects of extraordinary
inflation are not to be applied without an agreement between the parties and
2
without an official declaration thereof by competent authorities.

2.9 Dismissal for Cause But Without Due Process: The Wenphil Doctrine
T h e Wenphil doctrine says essentially that a dismissal for a valid reason
is legal and valid, but the e m p l o y e r w h o does not observe procedural due
process must pay some indemnity. But Serrano has m o d i f i e d Wenphil, and yet,
Serrano is not the last w o r d on this matter. T h e Agabon and JAKA rulings must
be read through in the succeeding pages to appreciate the active debate and
the prevailing view.

Wenphil Corporation vs. National Labor Relations Commission, G.R. N o . 80587,

February 8, 1989 —
The policy of ordering the reinstatement to the service of an employee without
loss of seniority and the payment of his wages during the period of his separation
until his actual reinstatement but not exceeding three (3) years without qualification
or deduction, when it appears that he was not afforded due process, although his
dismissal was found to be for just and authorized cause in an appropriate proceeding
in the Ministry of Labor and Employment, should be reexamined. It will be highly
prejudicial to the interests of the employer to impose on him the services of an
employee who has been shown to be guilty of the charges that warranted his dismissal

'Maranaw Hotels vs. CA, G.R. N o . 103215, November 6, 1992.

2
Lantion, et al. vs. NLRC, Gregorio Araneta University, G.R. N o . 82028, January
29,1990.

870
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

from employment. Indeed, it will demoralize the rank-and-file if the undeserving, if

not undesirable, remains in the service.
Although belatedly, the employee was afforded due process before the labor
arbiter wherein the just cause of his dismissal had been established, it would be
arbitrary and unfair to order his reinstatement with backwages.
Thus, the employee who appears to be of violent temper, caused trouble dur-
ing office hours and even defied his superiors as they tried to pacify him, should
not be rewarded with reemployment and backwages. It may encourage him to do
even worse and will render a mockery of the rules of discipline that employees are
required to observe. Under the circumstances, the dismissal of the employee for just
cause should be maintained. He has no right to return to his former employment.
However, the employer must nevertheless be held to account for failure to
extend to the employee his right to an investigation before causing his dismissal. T h e
dismissal of an employee must be for (1) just or authorized cause and (2) after due
process. Where the employer committed an infraction of the second requirement,
a sanction must be imposed upon such employer for failure to give a formal notice
and conduct an investigation as required by law before dismissing the employee from
employment. An indemnity of PI,000 may be awarded. T h e measure of this award
depends on the facts of each case and the gravity of the omission committed by the
employer.

Note:The Wenphil doctrine has been discussed also in the chapter on Procedures
to Terminate Employment.

2.9a Amount of Penalty for not Observing Due Process

For failure to observe the due process requirement, the Court imposed
on the e m p l o y e r a penalty of PI,000.00 in Wenphil Corp. vs. NLRC. But in Reta
vs. NLRC ( G . R . N o . 112100, May 2 7 , 1 9 9 4 ) , the amount imposed was P10,000.00
because the e m p l o y e e was given his walking papers and was forced to leave his
ship in a foreign port. But this particular circumstance was absent in the case
of Alhambra Industries, Inc. vs. NLRC ( G . R . N o . 106771, N o v e m b e r 18,1994), yet
the Court imposed again P10,000.00 as "fair, reasonable and realistic" amount
of penalty on the employer.
Less than a month later on Dec. 3, 1994, in Segismundo vs. NLRC (G.R. N o .
112203), the Court reverted to PI,000.00 and repeated the pronouncement in
Wenphil th.3X "the measure o f this award depends on the facts o f each case and the
gravity of the omission committed by the employer." A l o n g this line, the court in
a 1995 case stressed that "the Court did not intend to fix a value or price on such
right of an e m p l o y e e , for rights, especially the right to due process, cannot be
translated in monetary value. T h e amount awarded in such cases was intended
to serve as a penalty to the employer w h o violated an employee's right as well as
to serve as an example for other employers inclined to violate their employees
rights. Considering the importance of said right to procedural due process,

871
 POST-EMPLOYMENT

petitioners should indemnify private respondent the amount of Five Thousand

M1
Pesos (P5,000.00). In another 1995 case, Fe Sebuguero vs. NLRC and GTI Sportswear
Corp. (cited in the topic of retrenchment), the Court imposed P2,000.00. Aware
of the varying amounts imposed in past cases, the Court reiterated the guideline
that the amount of the sanction "depends on the facts of each case and the gravity
of the omission committed by the employer."
T h e damages which an employer should pay if he violates an employee's
right to procedural due process prior to his dismissal for cause is in the nature of
nominal damages. This means that the purpose of the damages is not to penalize
2
the employer but to vindicate or recognize the right of the employee.

2.9b No Just Cause and No Due Process — The Wenphil Doctrine does
not Apply; Dismissal Illegal
Hellenic Philippine Shipping, Inc. vs. E. Siete And National Labor Relations
Commission, G.R. N o . 84082, March 13, 1991 —
Facts: On July 8, 1985 Lim relieved Siete as Master of M / V H o n d a for
unexplained reason.
Siete filed a complaint against the petitioner for illegal dismissal and non-
payment of his salary and other benefits under their employment contract. T h e
employer answered that the complainant had been dismissed because of his failure
to comply with the instruction of Sultan Shipping to erase the timber load line on the
vessel and for his negligence in the discharge of the cargo at Tripoli that endangered
the vessel and the stevedores. Siete denied these averments and reiterated that he
had not earlier been informed of the cause of his dismissal and repatriation, either
in Cyprus or later in Manila.
T h e P O E A dismissed the complaint, holding that there was valid cause for
Siete's removal. Siete appealed to the N L R C , contending that the records presented
by the employer were prepared long after his dismissal and were especially suspect
because they came from persons in the employ of Sultan Shipping. He insisted that
he was dismissed without even being informed of the charges against him or given
an opportunity to refute them. He added that, even assuming he was negligent in
the unloading of the cargo at Tripoli, this shortcoming did not warrant such a severe
penalty as his dismissal.
The NLRC reversed the POEA Administrator, holding that the dismissal violated
due process and that the documents submitted by the petitioner were hearsay, self-
serving, and not verified.
T h e petitioner employer now assails the N L R C decision as grave abuse of
discretion.

'Worldwide Paper Mills, Inc. vs. N L R C and Edwin Sabuya, G.R. N o . 113081,
May 12, 1995.
2
Better Buildings, Inc., et al. vs. N L R C , et al, G.R. N o . 109714, December 15,

1997.

872
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

Ruling: It is not denied that Siete was not informed of the charges beforehand
or that he was given an opportunity to refute them. Even after his arrival in Manila,
he was kept in the dark about the reason for his dismissal.
T h e petitioner argues that whatever defects might have tainted the private
respondent's dismissal were subsequently cured when the charges against him were
specified and sufficiently discussed in the position papers submitted by the parties
to the POEA. That argument is unacceptable. T h e issue before the POEA was in fact
the lack of due process in Siete's dismissal. T h e law requires that the investigation
be conducted before the dismissal, not after. That omission cannot be corrected by
the investigation later conducted by the P O E A . As the Solicitor General correctly
maintained, the due process requirement in the dismissal process is different from
the due process requirement in the P O E A proceeding. Both requirements must be
separately observed.
While it is true that in Wenphil Corp. vs. NLRC (170 SCRA 69) and Rubber-world
(Phils.) vs. NLRC (183 SCRA 421), the lack of due process before the dismissal of
the employee was deemed corrected by the subsequent administrative proceedings
where the dismissed employee was given a chance to be heard, those cases involved
dismissals that were later proved to be for a valid cause. T h e doctrine in those cases
is not applicable to the case at bar because our finding here is that the dismissal was
not justified.
It is not correct to say that managerial employees may be arbitrarily dismissed at
any time and without cause as established in an appropriate investigation. Managerial
employees, no less than rank-and-file laborers, are entitled to due process. Loss of
confidence, which is the usual ground for the removal of the managerial employee,
must be established like any other lawful cause. Even if it be assumed that Siete was
a managerial employee — an issue which, incidentally, was not earlier raised or
resolved — the petitioner has not satisfactorily proved the reason for its supposed
loss of confidence in him.

2.10 Objections to Wenphil: Indemnity Only Too Niggardly?

Violation of due process, Mr. Justice (later C h i e f Justice) Panganiban
believes, should be sanctioned not only with indemnity but also separation pay.
This is the substance of his dissent in Better Buildings, Inc. vs. NLRC ( G . R . N o .
109714, D e c e m b e r 15, 1997) which he reiterates in Del Val vs. NLRC, Legend
Hotel, et al ( G . R . N o . 121806, September 25,1998). He notes that the indemnity
has been increased from PI,000 to P5,000 and to as much as P10,000, but still
he wants a stiffer penalty. He bewails that, "the price that the Court has set is
too insignificant, too niggardly, and sometimes even too late a sanction for the
violation of a sacred right." ( T h e g o o d Justice mentions that he expressed this
reservation in MGG Marine Services vs. NLRC (July 29,1996), a decision he himself
wrote for the Court en banc.) What therefore does he propose? He spells it out
in Better Buildings:

873
 POST-EMPLOYMENT

Hence, I propose that—as a rule—where due process is violated,

the dismissal should still be c o n d e m n e d as illegal even if the cause for
the termination is legally justified. A n d the employer should be made to
pay not only indemnity or nominal damages but likewise separation pay. I
would concede that reinstatement will no longer be proper, because there
is just and valid cause for dismissal, and thus, it would be unconscionable
to force an employer to retain the erring employee in his service. This
would be derogatory to the discipline and management prerogatives of
the employer. I would also concede against payment of backwages, because
a worker who commits a malfeasance or any act giving rise to loss of trust
and confidence necessarily forfeits his right to continue working in the
same company. Consequently, he is not entitled to wages for the period
in which he did not render any service.

2.11 Illegal or Merely Defective?

But see Sebuguero and Magnolia cases below where the dismissal that did
not follow due process was held not illegal but merely defective.
Sebuguero, et al vs. NLRC, G.T.I. Sportswear Corp., et al, G.R. N o . 115394,
September 27, 1995 —
The lack of written notice to the petitioners and to the D O L E does not, however,
make the petitioners' retrenchment illegal such that they are entitled to the payment
of backwages and separation pay in lieu of reinstatement as they contend. Their
retrenchment, for not having been effected with the required notices, is merely
defective. In those cases where we found the retrenchment to be illegal and ordered
the employees' reinstatement and the payment of backwages, the validity of the cause
for retrenchment, that is the existence of imminent or actual serious or substantial
losses, was not proven. But here, such a cause is present as found by both the Labor
Arbiter and the N L R C . There is only a violation by G T I of the procedure prescribed
in Article 283 of the Labor Code in effecting the retrenchment of the petitioners.
It is now settled that where the dismissal of an employee is in fact for a just and
valid cause and is so proven to be but he is not accorded his right to due process,
i.e., he was not furnished the twin requirements of notice and the opportunity to
be heard, the dismissal shall be upheld but the employer must be sanctioned for
noncompliance with the requirements of or for failure to observe due process.

Magnolia Dairy Products Corporation vs. National Labor Relations Commission and
Calibo, G.R. N o . 114952, January 29, 1996 —
The law authorizes an employer, like the herein petitioner, to terminate the
employment of any employee due to the installation of labor saving devices. The
installation of these devices is a management prerogative, and the courts will not
interfere with its exercise in the absence of abuse of discretion, arbitrariness, or
maliciousness on the part of management, as in this case. Nonetheless, this did not
excuse petitioner from complying with the required written notice to the employee
and to the Department of Labor and Employment ( D O L E ) at least one month before

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 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

the intended date of termination. This procedure enables an employee to contest

the reality or good-faith character of the asserted ground for the termination of his
services before the DOLE.
T h e failure of petitioner to serve the written notice to private respondent and
to the D O L E , however, does not ipso facto make private respondent's termination
from service illegal so as to entitle her to reinstatement and payment of backwages.
If at all, her termination from service is merely defective because it was not tainted with
bad faith or arbitrariness and was due to a valid cause. [Emphasis supplied — C A A ]
T h e well settled rule is that the employer shall be sanctioned for non-compliance
with the requirements of, or for failure to observe due process in terminating from
service its employee. In Wenphil Corp. vs. NLRC, we sanctioned the employer for this
failure by ordering it to indemnify the employee the amount of PI,000.00. Under
the attendant facts, we find the amount of P5,000.00 to be just and reasonable.

2.12 Serrano Modifies Wenphil: Where Due Process is Disregarded, Full

Backwages must be Awarded
In 2000 the Serrano ruling m o d i f i e d Wenphil by awarding full backwages to
penalize violation of due process. But Serrano itself is already obsolete in view of
the ruling in Agabon vs. NLRC, see below. Still Serrano is here reported for the
reader to appreciate the drift of judicial thinking in this hotly debated issue.
Contrast Serrano later with Agabon.

Serrano vs. NLRC and Isetann Department Store, G.R. N o . 117040, January 27,
2000 —
( T h e facts of the landmark case Serrano vs. NLRC and Isetann are recited in
the topic on redundancy). After holding that the replacement of Serrano by an
independent contractor, for reasons of economy and efficiency, was valid, the court
next tackled the issue of procedure.
Serrano was given a notice of termination on October 11, 1991, the same
day his services were terminated. He was thus denied his right to be given notice,
as required by Article 283, thirty days before the termination of his employment.
Where the termination is for a valid cause but proper procedure is not followed, is
the termination legal and valid? What "penalty" if any should be imposed on the
erring employer? In Wenphil the termination is held valid, but the employer must
pay indemnity. But, in Serrano the Court after reiterating the rationale of the Wenphil
doctrine, raised the sanction on the employer from "indemnity" to "full backwages."
T h e Court's majority, through Mr. Justice Mendoza, announced:
Today, we once again consider the question of appropriate sanctions
for violations of the notice requirement in light of our experience during the
last decade or so with the Wenphil doctrine. T h e number of cases involving
dismissals without the requisite notice to the employee, although effected for
just or authorized causes, suggests that the imposition of fine for violation of
the notice requirement has not been effective in deterring violations of the
notice requirement. Justice Panganiban finds the monetary sanctions "too

875
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insignificant, too niggardly, and sometimes even too late." On the other hand,
Justice Puno says there has in effect been fostered a policy of "dismiss now, pay
later" which moneyed employers find more convenient to comply with than
the requirement to serve a 30-day written notice (in the case of termination
of employment for an authorized cause under Arts. 283-284) or to give notice
and hearing (in the case of dismissals for just causes under Article 232).
For this reason, they regard any dismissal or layoff without the requisite
notice to be null and void even though there are just or authorized causes for
such dismissal or layoff. consequently, in their view, the employee concerned
should be reinstated and paid backwages.
After reviewing the arguments of the two justices, Justice Mendoza continued:
We agree with our esteemed colleagues, Justices Puno and Panganiban,
that we should rethink the sanction of fine for an employer's disregard of the
notice requirement We do not agree, however, that disregard of this requirement
by an employer renders the dismissal or termination of employment null and
void. Such a stance is actually a reversion to the discredited pre- Wenphil rule
of ordering an employee to be reinstated and paid backwages when it is shown
that he has not been given notice and hearing although his dismissal or layoff
is later found to be for a just or authorized cause. Such rule was abandoned in
Wenphil because it is really unjust to require an employer to keep in his service
one who is guilty, for example, of an attempt on the life of the employer or
the latter's family, or when the employer is precisely retrenching in order to
prevent losses.
T h e need is for a rule which, while recognizing the employee's right to
notice before he is dismissed or laid off, at the same time acknowledges the
right of the employer to dismiss for any of the just causes enumerated in Article
282 or to terminate employment for any of the authorized causes mentioned
in Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is
found to have dismissed an employee for cause without prior notice is deemed
ineffective in deterring employer violations of the notice requirement, the
remedy is not to declare the dismissal void if there are just or valid grounds
for such dismissal or if the termination is for an authorized cause. That would
be to uphold the right of the employee but deny the right of the employer to
dismiss for cause. Rather, the remedy is to order the payment to the employee
of full backwages from the time of his dismissal until the court finds that the dismissal
was for a just cause. But, otherwise, his dismissal must be upheld and he should not be
reinstated. This is because his dismissal is ineffectual [Italics supplied]
For the same reason, if an employee is laid off for any of the causes in
Arts. 283-284, i.e., installation of a labor-saving device, but the employer did
not give him and the D O L E a 30-day written notice of termination in advance,
then the termination of his employment should be considered ineffectual and
he should be paid backwages. However, the termination of his employment
should not be considered void but he should simply be paid separation pay as
provided in Article 283 in addition to backwages. x x x

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Indeed, under the Labor Code, only the absence of a just cause for the
termination of employment can make the dismissal of an employee illegal.
This is clear from Article 279. x x x

Thus, Serrano modifies but does not junk Wenphil. T h e employee, dismissed
for a valid reasons, remains dismissed, but the employer w h o disregarded proper
procedure, must pay full backwages in addition to separation pay, if applicable,
and indemnity.

2.13 From Wenphil to Serrano to Viernes: N o t Only Full Backwages but also
Indemnity
T h e Serrano ruling which grants full backwages is not meant to do away
with indemnity to the e m p l o y e e whose right to due process was violated; that is,
the indemnity is aside from the full backwages.
In the case of Viernes vs. NLRC and Benguet Electric Cooperation (see in Part
2, Kinds of E m p l o y m e n t ) the Court held that the meter readers had become
regular employees when they continued to work after their term employment
e n d e d . In addition to reinstatement the Court also o r d e r e d the payment of
full backwages because their termination was invalid. Furthermore, because
the termination did not follow due process the employer was held liable for
indemnity. This portion of the decision is quoted below. By this ruling the Court
therefore further clarifies the Wenphil-Serrano doctrine.

Viernes vs. NLRC and Benguet Electric Cooperation Inc. (BENECO), G.R. N o .
108405, April 4, 2003 —
With respect to the third issue, an employer becomes liable to pay indemnity
to an employee who has been dismissed if, in effecting such dismissal, the employer
fails to comply with the requirements of due process. T h e indemnity is in the form of
nominal damages intended not to penalize the employer but to vindicate or recognize
the employee's right to procedural due process which was violated by the employer.
Under Article 2221 of the Civil Code, nominal damages are adjudicated in order that
a right of the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plaintiff for
any loss suffered by him.
We do not agree with the ruling of the N L R C that indemnity is incompatible
with the award of backwages. These two awards are based on different considerations.
Backwages are granted on grounds of equity to workers for earnings lost due to their
illegal dismissal from work. On the other hand, the award of indemnity, as we have
earlier held, is meant to vindicate or recognize the right of an employee to due
process which has been violated by the employer.
In the present case, the private respondent [ B E N E C O ] , in effecting the
dismissal of petitioners [complainant meter readers] from their employment, failed
to comply with the provisions of Article 283 of the Labor Code which requires an
employer to serve a notice of dismissal upon the employees sought to be terminated

877
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and to the Department of Labor, at least one month before the intended date of
termination. Petitioners were served notice on January 3, 1991 terminating their
services, effective December 29, 1990, or retroactively, in contravention of Article
283. This renders the private respondent liable to pay indemnity to petitioners.
Thus, we find that the N L R C committed grave abuse of discretion in deleting
the award of indemnity. In Del Val vs. NLRC, we held that the award of indemnity
ranges from PI,000.00 to P10,000.00 depending on the particular circumstances of
each case. In the present case, the amount of indemnity awarded by the labor arbiter
is P2,590.50, which is equivalent to petitioners' one-month salary. We find no cogent
reason to modify said award, for being just and reasonable.

2.14 Agabon Discards Serrano and Partially Restores Wenphil

T h e spirited debate about the consequence of e m p l o y m e n t termination
with valid cause but invalid procedure is far from over. Prior to 1989 the rule
was to declare the termination outright illegal and the e m p l o y e e should be
reinstated. T h e n came Wenphil in 1989 which declared the termination valid
but the employer should pay indemnity for not respecting the employee's right
to due process.
T h e n came Serrano in 2000 which stiffened the penalty to "full backwages,"
followed by Viernes in 2003 which imposed both backwages and indemnity.
N o w comes Agabon. T h e Court changes its m i n d again by saying in effect:
"Let's discard Serrano and essentially restore Wenphil." T h a t is, the termination is
valid, the e m p l o y e e remains dismissed, but the e m p l o y e r must pay an indemnity
heavier than that imposed in Wenphil but lighter than full backwages.

Agabon vs. NLRC, Reviera Home Improvements, et al., G.R. N o . 158693, November
17, 2004 —
T h e complaining employees were cornice installers of a company whose
business was selling and installing of ornamental construction materials. They were
hired on January 2,1992 until February 23,1999 when they were dismissed because
they refused to work on "pakyaw" basis as proposed by their employer. In their
complaint they asserted that they were dismissed without notice and hearing. The
employer, on the other hand, maintained that they were not dismissed, but that they
abandoned their work. They refused to work on a new assignment involving 40,000 sq.
m. of cornice installation; instead they sub-contracted installation work for another
company. On appeal, the Court of Appeals ruled that petitioners' dismissal was for a
just cause. In fact they had abandoned their employment and were already working
for another employer.
T h e Supreme Court did not disturb the findings of facts but lengthily dealt on
the dismissal procedure, particularly the non-observance of due process.
Ruling: Procedurally, (1) if the dismissal is based on a just cause under Article
282, the employer must give the employee two written notices and a hearing or
opportunity to be heard if requested by the employee before terminating the

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employment: a notice specifying the grounds for which dismissal is sought [sic] a
hearing or an opportunity to be heard and after hearing or opportunity to be heard,
a notice of the decision to dismiss; and (2) if the dismissal is based on authorized
causes under Articles 283 and 284, the employer must give the employee and the
Department of Labor and Employment written notices 30 days prior to the effectivity
of his separation.
From the foregoing rules four possible situations may be derived: (1) the
dismissal is for a just cause under Article 282 of the Labor Code, for an authorized
cause under Article 283, or for health reasons under Article 284, and due process
was observed; (2) the dismissal is without just or authorized cause but due process
was observed; ( 3 ) the dismissal is without just or authorized cause and there was no
due process; and (4) the dismissal is for just or authorized cause but due process was
not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will
not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279
mandates that the employee is entitled to reinstatement without loss of seniority
rights and other privileges and full backwages, inclusive of allowances, and other
benefits or their monetary equivalent computed from the time the compensation
was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the
employer should be held liable for non-compliance with the procedural requirements of due
process.
T h e present case squarely falls under the fourth situation. T h e dismissal should
be upheld because it was established that the petitioners [employees] abandoned
their jobs to work for another company. Private respondent, [the employer], however,
did not follow the notice requirements and instead argued that sending notices to
the last known addresses would have been useless because they did not reside there
anymore. Unfortunately for the private respondent, this is not a valid excuse because
the law mandates the twin notice requirements to the employee's last known address.
Thus, it should be held liable for non-compliance with the procedural requirements of due
process.
A review and re-examination of the relevant legal principles is appropriate
and timely to clarify the various rulings on employment termination in the light of
Serrano v. National Labor Relations Commission. Serrano was confronting the practice
of employers to "dismiss now and pay later" by imposing full backwages. We believe,
however, that the ruling in Serrano did not consider the full meaning of Article 279
of the Labor Code which states: [read Article 279]
This means that the termination is illegal only if it is not for any of the justified
or authorized causes provided by law. Payment of backwages and other benefits,
including reinstatement, is justified only if the employee was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited
strong dissent has prompted us to revisit the doctrine.
879
 POST-EMPLOYMENT

Due process under the Labor Code, like Constitutional due process, has two
aspects: substantive, i.e., the valid and authorized causes of employment termination
under the Labor Code, and procedural, i.e., the manner of dismissal. Procedural
due process requirements for dismissal are found in the Implementing Rules of P.D.
442, as amended, otherwise known as the Labor Code of the Philippines in Book V I ,
Rule 1, Sec. 2, as amended by Department Order Nos. 9 and 10. Breaches of these
due process requirements violate the Labor Code. Therefore statutory due process
should be differentiated from failure to comply with constitutional due process.
After carefully analyzing the consequences of the divergent doctrines in the law
on employment termination, we believe that in cases involving dismissals for cause
but without observance of the twin requirements of notice and hearing, the better
rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the
dismissal was for just cause but imposing sanctions on the employer. Such sanctions,
however, must be stiffer than that imposed in Wenphil. By doing so, this Court would
be able to achieve a fair result by dispensing justice not just to employees, but to
employers as well.
T h e unfairness of declaring illegal or ineffectual dismissals for valid or
authorized causes but not complying with statutory due process may have far-reaching
consequences.
This would encourage frivolous suits, where even the most notorious violators
of company policy are rewarded by invoking due process. This also creates absurd
situations where there is a just or authorized cause for dismissal but a procedural
infirmity invalidates the termination. Let us take for example a case where the
employee is caught stealing or threatens the lives of his co-employees or has become a
criminal, who has fled and cannot be found, or where serious business losses demand
that operations be ceased in less than a month. Invalidating the dismissal would
not serve public interest. It could also discourage investments that can generate
employment in the local economy.
This is not to say that the Court was wrong when it ruled the way it did in
Wenphil, Serrano and related cases. Social justice is not based on rigid formulas set in
stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to
labor-management relations and dispense justice with an even hand in every case:
We have repeatedly stressed that social justice - or any justice for the
matter - is for the deserving, whether he be a millionaire in his mansion or a
pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt
the balance in favor of the poor to whom the Constitution fittingly extends its
sympathy and compassion. But never is it justified to give preference to the
poor simply because they are poor, or reject the rich simply because they are
rich, for justice must always be served for the poor and the rich alike, according
to the mandate of the law.
Justice in every case should only be for the deserving party. It should not be
presumed that every case of illegal dismissal would automatically be decided in favor
of labor, as management has rights that should be fully respected and enforced by

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[Part 6. Consequences of Termination]

this Court. As interdependent and indispensable partners in nation-building, labor

and management need each other to foster productivity and economic growth;
hence, the need to weigh and balance the rights and welfare of both the employee
and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of statutory
due process should not nullify the dismissal, or render it illegal, or ineffectual.
However, the employer should indemnify the employee for the violation of his
statutory rights, as ruled in Reta v. National Labor Relations Commission. T h e indemnity
to be imposed should be stiffer to discourage the abhorrent practice of "dismiss now,
pay later," which we sought to deter in the Serrano ruling. T h e sanction should be
in the nature of indemnification or penalty and should depend on the facts of each
case, taking into special consideration the gravity of the due process violation of the
employer.
As enunciated by this Court of Viernes v. National Labor Relations Commissions,
employer is liable to pay indemnity in the form of nominal damages to an employee
who has been dismissed if, in effecting such dismissal, the employer fails to comply
with the requirements of due process. T h e Court, after considering the circumstances
therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's
one month salary. This indemnity is intended not to penalize the employer but to
vindicate or recognize the employee's right to statutory due process which was violated
by the employer.
T h e violation of the petitioners' right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal damages. T h e
amount of such damages is addressed to the sound discretion of the court, taking
into account the relevant circumstances. Considering the prevailing circumstances
in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of
damages would serve to deter employers from future violations of the statutory due
process rights of employees.

2.14aJAKA Revises Agabon: Higher Indemnity in the Authorized Causes

In a nutshell, Agabon holds that a dismissal attended by a valid cause,
either under Article 282, or 283, or 284, is legal and valid, but as penalty for not
observing due process the employer must pay indemnity. Just about five months
after its promulgation, this ruling came under review by the Supreme Court.
T h e Jaka Food decision does not overturn Agabon but, in a manner of speaking,
fine-tunes it.
Whereas Agabon s award of nominal damages does not distinguish whether
the employee's termination is based either on "just" or on "authorized" causes,
JAKA now makes a distinction, thus:
(1) if the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction
to be imposed upon him should be tempered because the dismissal
process was, in effect, initiated by an act imputable to the employee;

881
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(2) if the dismissal is based on an authorized cause under Article 283

but the employer failed to comply with the notice requirement, the
sanction should be stiffer because the dismissal was initiated by the
employer's exercise of his management prerogative.
Since it was shown that the removal of the employees was because of
serious business losses, the employer does not have to pay separation pay under
Article 293, following the ruling in Reah's Corp. vs. NLRC. But for not complying
with statutory due process, the employer must pay each complainant-employee
1
P50,000.00 as nominal damages.
In San Miguel Corp. vs. Aballa, et al, G.R. N o . 149011, June 28, 2005.
(discussed also under Article 106 on the issue of labor-only contracting), the
workers supplied by the service cooperative were informed by the manager only
one day before the closure of the processing plant. Since the closure, considered
as retrenchment, was found justified but the required notice was deficient, the
Court applied the J A K A precedent.

2.14b JAKA Refined Further by Industrial Timber

JAKA has refined Agabon but JAKA itself, just a year after promulgation, is
further refined by Industrial Timber. Unlike JAKA, Industrial Timber does not lump
the authorized causes altogether but subdivides them into: (1) due to losses and
( 2 ) not due to losses. If the authorized cause that terminates employment arises
from losses, the penalty to the employer w h o disregarded due process may be
lighter than if the authorized cause has no relation to losses.
T h e Court likewise mentions some other factors to consider in assessing
the penalty to the employer. Said the Court:
In the determination of the amount of nominal damages which is
addressed to the sound discretion of the court, several factors are taken into
account: ( 1 ) the authorized cause invoked, whether it was a retrenchment
or a closure or cessation of operation of the establishment due to serious
business losses or financial reverses or otherwise; ( 2 ) the number of
employees to be awarded; ( 3 ) the capacity of the employers to satisfy the
awards, taking into account their prevailing financial status as b o r n e by
the records; ( 4 ) the employer's grant of other termination benefits in
favor of the employees; and ( 5 ) whether there was a bona fide attempt to
comply with the notice requirements as o p p o s e d to giving no notice at all.
(Industrial Timber Corp., et al. vs. Ababan, et al, G.R No. 164518, March 30,
2006.)
In the case at bar, there was valid authorized cause considering the
closure or cessation of I T C ' s business which was d o n e in g o o d faith and
due to circumstances beyond I T C ' s control. Moreover, I T C had ceased to

'JAKA Food vs. Pacot, et al, G.R. N o . 151378, March 28, 2005.

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 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

generate any i n c o m e since its closure on August 17,1990. Several months

prior to the closure, I T C experienced diminished income due to high
production costs, erratic supply of raw materials, depressed prices, and
p o o r market conditions for its w o o d products. It appears that I T C had given
its employees all benefits in accord with the C B A upon their termination.
(Ibid.)
Thus, considering the circumstances obtaining in the case at bar,
we d e e m it wise and just to reduce the amount of nominal damages to be
awarded for each employee to PI0,000.00 each instead of P50,000.00 each.
(Ibid.)

3. REINSTATEMENT
T h e normal consequences of a finding that an employee has been illegally
dismissed [there b e i n g no valid cause,] are that the employee becomes entitled
to reinstatement to his f o r m e r position without loss of seniority rights and the
payment of backwages. Reinstatement restores the e m p l o y e e w h o was unjustly
dismissed to the position from which he was removed, that is, to his status quo ante
dismissal; while the grant of backwages allows the same employee to recover from
the e m p l o y e r that which he had lost by way of wages as a result of his dismissal.'
T h e s e twin remedies — reinstatement and payment of backwages — make
the dismissed e m p l o y e e w h o l e w h o can then l o o k forward to continued employ-
ment. Thus, do these two remedies give meaning and substance to the consti-
tutional right of labor to security of tenure. T h e two forms of relief are distinct
and separate, o n e from the other. T h o u g h the grant of reinstatement commonly
carries with it an award of backwages, the inappropriateness or nonavailability of
2
o n e does not carry with it the inappropriateness or nonavailability of the other.
Reinstatement is incompatible with a finding of guilt. In o n e case, the
Supreme Court explains: T h e Minister of Labor's order to reinstate the employees
w h o were found guilty of the charges against them is not in conformity with the
law. W h e r e the totality of the evidence is sufficient to warrant the dismissal of
the employees, the law warrants their dismissal without making any distinction
between a first offender and a habitual delinquent. T h e law, in protecting the
rights of the laborer, authorizes neither oppression nor self-destruction of the
employer. To order the reinstatement of erring employees would encourage
unequal protection of the laws where a managerial employee involved in the
3
same incident had already been dismissed and was not ordered reinstated.
Conversely, when the employer is guilty of unfair labor practice, the Minister
of Labor's order for reinstatement follows as a matter of course. T h e employer,

'Santos vs. National Labor Relations Commission, G.R. N o . 76721, September

21, 1987.
Ibid.
3
Colgate Palmolive Philippines, Inc. vs. Ople, G.R. N o . 73681, June 30, 1988.

883
 POST-EMPLOYMENT

guilty of unfair labor practice, may be required to reinstate with full backwages
1
the workers affected by such act.
In certain circumstances reinstatement without backwages may be justified.

3.1 Reinstatement without Backwages

Manila Electric Co. vs. National Labor Relations Commission, G.R. N o . 78763,
July 12, 1989 —
Facts: "S," a supervisor-leadman of Meralco, facilitated the processing of an
application for electrical services as well as the required documentation for said
application, in consideration of the amount of P7,000. At that time, the area where
the residence of the applicant was located was not yet within the serviceable point
of Meralco. "S" was found guilty of breach of trust and violation of company rules,
the penalty for which ranges from reprimand to dismissal depending on the gravity
of the offense. H e , however, had been with the company for 20 years without any
previous derogatory record, in addition to the fact that the company had awarded
him two commendations for honesty.
Ruling: T h e reinstatement of "S" is proper in the instant case, but without
the award of backwages, considering the g o o d faith of the employer in dismissing
him.

This ruling shows that while an award of backwages presupposes a finding of

illegal dismissal, not every case of illegal dismissal entails an award of backwages.

3.2 Reinstatement N o t Feasible Due to Changed Circumstances

In an order of reinstatement, the e m p l o y e r may not be c o m p e l l e d to
reemploy m o r e persons than the e c o n o m i c operation of his business requires.
If between the time the wrongful discharge occurred and the reinstatement
order was issued, the employer's commercial or financial circumstances have
changed, the court cannot c o m p e l the employer, despite the latter's unfair labor
practice, to reinstate such number of employees as may e x c e e d his needs under
the altered conditions. W h i l e the court, under such circumstances, may not be
e m p o w e r e d to order present reinstatement, it does have the right to order that
2
those w h o were not reinstated be given precedence in future hiring.
Thus, reinstatement of an illegally dismissed e m p l o y e e will not be insisted
upon an employer who, while the illegal dismissal complaint was pending, had to
resort to retrenchment due to losses adequately proven. Instead of being reinstated
the illegally dismissed e m p l o y e e should be paid full backwages from the time
of his dismissal up to the time his retrenchment would have taken effect. He

'National Federation of Labor Union vs. Bias Ople, G.R. N o . 68661, July 22,
1986.
^alisay Employees' Laborers' Association vs. Court of Industrial Relations,
G.R. N o . 39844, July 31, 1986.

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should also be paid separation pay due to retrenchment under Article 283 of
1
the Labor C o d e .
W h e r e an employer suffered business recession such that its commercial
or financial circumstances have changed, forcing it to close one outlet or branch
(and subsequently all other outlets also closed), the National Labor Relations
Commission, assuming that the employer was guilty of unfair labor practice,
cannot c o m p e l the employer to reinstate the employee if such reinstatement
2
may e x c e e d the employer's needs under the altered conditions.
Similarly, an illegally dismissed employee who is approaching or has reached
the retirement age shall not be o r d e r e d reinstated. Instead, he shall be entitled
not only to separation pay and full backwages, but additionally, to his retirement
benefits pursuant to any collective bargaining agreement in the workplace or,
in the absence thereof, as provided in Section 14, Book VI of the Implementing
3
Rules of the L a b o r C o d e .
In another case the complainant employee has not yet reached retirement
a g e . But again the C o u r t a l l o w e d p a y m e n t o f separation pay i n lieu o f
reinstatement because "considerable time" has lapsed between the dismissal
4
and the resolution of the case. In AIUP, the case dragged on for eight years, in
Lambo for ten years.

3.2a Contrast: Reinstatement Enforced Despite Closure of Original

Employer
Pepsi-cola Bottling Co., et al. vs. NLRC, Encabo, et al, G.R. N o . 101900, June
23, 1992 —
Issue: Pepsi-Cola Products Philippines, Inc. (PCPPI) filed a manifestation with the
N L R C stating that it received a writ of execution dated February 18,1991, addressed to
Pepsi-Cola Bottling Co. (PBC) and ordering Pepsi-Cola Distributors of the Philippines
(PCD) to reinstate Oscar T. Encabo. PCPPI further stated that it was returning the writ
unsatisfied since it is a corporation separate and distinct from PBC or PCD, making it
an inappropriate party to which the writ of execution should be served.
In the motion for reconsideration filed with the N L R C , the petitioners alleged
that reinstatement is no longer possible since the petitioner company closed down
its business on July 24, 1989 and the new franchise holder, Pepsi-Cola Products
Philippines ( P C P P I ) is a new entity.

•Mitsubishi Motors vs. Chrysler Phil. Labor Union, G.R. N o . 148738, June 29,
2004.
2
Pizza Inn vs. N L R C , G.R. N o . 74531, June 28, 1988.
3
Bongar vs. N L R C and A M A Computer College, G.R. N o . 107234, August 24,
1998.
"Association of Independent Unions in the Philippines [ A I U P ] vs. N L R C , G.R.
N o . 1205051, March 25,1999; also: Lambo vs. National Labor Relations Commission,
G.R. N o . 111042, October 26, 1999.

885
 POST-EMPLOYMENT

Further, PCPPI claims that the public respondent ( N L R C ) committed grave

abuse of discretion in holding it liable for the reinstatement of the private respondent
considering that PCPPI is an entirely separate and distinct entity from the PCD.
On the ground of serious business losses, PCD alleged that it ceased to operate
on July 24, 1989 and PCPPI, a company separate and distinct from PCD, acquired
the franchise to sell the Pepsi-Cola products.
Ruling: Pepsi-Cola Distributors of the Philippines may have ceased business
operations and Pepsi-Cola Products Philippines, Inc. may be a new company but
it does not necessarily follow that no one may now be held liable for illegal acts
committed by the earlier firm. The complaint was filed when PCD was still in existence.
Pepsi-Cola never stopped doing business in the Philippines. T h e same soft drinks
products sold in 1988 when the complaint was initiated continue to be sold now. The
sale of products, purchases of materials, payment of obligations, and other business
acts did not stop at the time PCD bowed out and PCPPI came into being. There is no
evidence presented showing that PCPPI, as the new entity or purchasing company,
is free from any liabilities incurred by the former corporation.
In fact, we agree with the public respondent's observation that in the surety
bond put up by the petitioners as appeal bond, both P C D and P C P P I bound
themselves to answer the monetary awards of the private respondent in case of an
adverse decision of the appeal, which clearly implies that the PCPPI as a result of
the transfer of the franchise bound itself to answer for the liability of PCD to its
employees.
Moreover, the liability of petitioners A . C . Sian and V. Castillo as Plant General
Manager and Manufacturing Manager, respectively, of PCD is beyond question as
they are the architects of the dismissal of private respondent. T h e petitioners acted
arbitrarily and wantonly in dismissing the private respondent on the mere basis of
loss of trust and confidence. T h e records reveal that they were the ones responsible
for bypassing the private respondent in the rehabilitation of the soaker machine and
at the end, blaming the latter for the company's financial losses. Castillo's affidavit
is not only self-serving but baseless. While a manager's right to fire an employee is
recognized as an inherent part of the position such right must be exercised with
1
utmost prudence and with humane consideration. T h e petitioners dismally failed
in this respect.
However, to order reinstatement at this juncture would serve no prudent
purpose considering the supervening facts and circumstances of the case. N o t only
is PCPPI a new corporation continuing the business and operations of PCD, there is
also no doubt that the relationship between the petitioners and the private respondent
has been strained by reason of their respective imputations of bad faith which is
quite evident from the vehement and consistent stand of the petitioners in refusing
to reinstate the private respondent. Thus, in order to prevent further delay in the
execution of the decision to the prejudice of the private respondent and to spare
him the agony of having to work anew with the petitioners under an atmosphere of

•Sibal vs. Notre Dame of Greater Manila, 182 SCRA 538 [1990].

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antagonism, and so that the latter do not have to endure the continued services of
the private respondent in whom they have lost liking and, at this stage, confidence,
the private respondent should be awarded separation pay as an alternative to
1
reinstatement.

3.3 Reinstatement N o t Feasible Due to Strained Relations

W h e r e the relationship of employer to employee is so strained and ruptured
as to preclude a harmonious working relationship should reinstatement of the
employee be decreed, the latter should be afforded the right to separation pay so
that he can be spared the agony of having to work anew with the employer under
an atmosphere of antipathy and antagonism and the employer does not have to
2
endure the continued services of the e m p l o y e e in w h o m it has lost confidence.
T h e dismissal of a female teacher in a Catholic school for concealing the
immoral acts of her husband and for allegedly threatening to kill a student, the
alleged victim of her husband's immoral act, has no valid basis, especially if the
husband had not been investigated. But the teacher may not be reinstated in
said school, a Catholic institution serving the educational and moral needs of its
Catholic studentry. W h i l e she may be innocent, her continued presence in the
school may well be m e t with antipathy and antagonism by some sectors in the
school community. But the school may be o r d e r e d to pay the teacher separation
3
pay equivalent to o n e month pay for every year of service plus backwages.
T h e antagonism between the employer and the employee brought about
by the filing of complaint by the e m p l o y e e , plus the fact that a new employee
had been hired to take over the place of the dismissed employee, and there is
no equivalent position available to the latter, militate against the propriety of
4
reinstating the said dismissed e m p l o y e e .
T h e r e may be no p r o b l e m in ordering the reinstatement with facility of a
laborer, clerk or other rank-and-file e m p l o y e e . But an officer in a key position
such as o n e w h o is a vice president for marketing can work effectively only if said
5
e m p l o y e e enjoys the full trust and confidence of top management.
Respondent employee's demand for separation pay was an
acknowledgment by him that because of the strain in his relation with his
6
employer, reinstatement was no longer feasible.

Zealand Services, Inc. vs. N L R C , 190 SCRA 347 [1990].

2
Esmalin vs. National Labor Relations Commission, G.R. N o . 67880, September
15, 1989.
3
See Divine Word High School vs. National Labor Relations Commission, G.R.
N o . 72207, August 6, 1986.
4
Asiaworld Publishing House, Inc. vs. Ople, G.R. N o . 56398, July 23, 1987.
"Ibid.
6
FRF Enterprises vs. N L R C and R. Soriano, G.R. N o . 105998, April 21, 1995.
887
 POST-EMPLOYMENT

3.3a Qualifications to the "Strained Relations" Principle

In the case of Globe-Mackay, below, the Supreme Court (through M m e .
Justice R o m e r o ) refused to be swayed by "strained relations" as enough reason
to bar reinstatement. Instead, it indicated certain limitations or qualifications
to the applicability of the "strained relations" principle.

Globe-Mackay Cable and Radio Corp. vs. NLRC And Salazar, G.R. N o . 82511,
March 3, 1992 —
If in the wisdom of the Court, there may be a ground or grounds for non-
application of the above-cited provision [Article 279] this should be by way of
exception, such as when the reinstatement may be inadmissible due to ensuing
strained relations between the employer and the employee.
In such cases, it should be proved that the employee concerned occupies a
position where he enjoys the trust and confidence of his employer; and that it is likely
that if reinstated, an atmosphere of antipathy and antagonism may be generated as
to adversely affect the efficiency and productivity of the employee concerned.
A few examples will suffice to illustrate the Court's application of the above
principle: where the employee is a Vice-President for Marketing and as such, enjoys
the full trust and confidence of top management; or is the Officer-in-Charge of the
extension office of the bank where he works; or is an organizer of a union who was in
a position to sabotage the union's efforts to organize the workers in commercial and
industrial establishments; or is a warehouseman of a nonprofit organization whose
primary purpose is to facilitate and maximize voluntary gifts by foreign individuals
and organizations to the Philippines; or is a manager of its Energy Equipment Sales.
Obviously, the p r i n c i p l e o f "strained r e l a t i o n s " c a n n o t b e a p p l i e d
indiscriminately. Otherwise, reinstatement can never be possible simply because
some hostility is invariably engendered between the parties as a result of litigation.
That is human nature.
Besides, no strained relations should arise from a valid and legal act of
asserting one's right; otherwise, an employee who shall assert his right could be easily
separated from the service, by merely paying his separation pay on the pretext that
his relationship with his employer had already become strained.
Here, it has not been proved that the position of private respondent as systems
analyst is one that may be characterized as a position of trust and confidence such that
if reinstated, it may well lead to strained relations between employer and employee.
Hence, this does not constitute an exception to the general rule.

T h e rule that "strained relations" may be invoked only against employees

whose positions demand trust and confidence, or whose differences with their
employer are of such nature or degree as to preclude reinstatement, is reiterated
in the case of Maranaw Hotels vs. Court of Appeals, G.R. N o . 103215, decided on
November 6,1992. To the employer's argument that "strained relations" between
the parties bar reinstatement, the Court replied: " T h e relationship between the

888
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

e m p l o y e e , a roomboy, and management was clearly on an impersonal level. T h e

e m p l o y e e did not occupy such a sensitive position as would require complete
trust and confidence, where personal ill will would preclude his reinstatement "
In a case of a dismissed salesman, Justice Chico-Nazario in justifying
reinstatement, said:
Neither can we sustain the N L R C ' s conclusion that petitioner's position
is confidential in nature. Receipt of proceeds from sales of respondent CCBP's
products does not make petitioner a confidential e m p l o y e e . A confidential
e m p l o y e e is o n e w h o ( 1 ) assists or acts in a confidential capacity, in regard to
( 2 ) persons w h o formulate, determine, and effectuate management policies
specifically in the field of labor relations. Verily, petitioner's j o b as a salesman
1
does not fall under this qualification.
Mr. Justice [later C h i e f Justice] P u n o likewise initiated a re-examination
of the "strained relations" precedents. In MGG Marine Services, (July 29, 1996)
d e c i d e d en banc, he gave this suggestion in his dissenting opinion:
"Strained relationship" is a question of fact, xxx
At the very least, I suggest that henceforth, we should require that
the alleged "strained relationship" must be pleaded and proved if either the
e m p l o y e r or the e m p l o y e e does not want the employment tie to remain.
By making "strained relationship" a triable issue of fact before the Arbiter
or the N L R C we will eliminate rulings on "strained relationship" based on
impression alone. (Emphasis in original.)
Justice Puno's suggestion has b e c o m e a ruling. In 2004, the Court (through
Mr. Justice C o r o n a ) ruled that "strained relations are a factual issue which must
be raised before the labor arbiter for the p r o p e r reception of evidence." If raised
only on appeal, there w o u l d be no evidentiary basis to support the assertion
that peaceful working relationship was no longer possible. This ruling should
2
be observed even if the e m p l o y e e involved is a manager.
In Quijano vs. Mercury the Court (through Chief Justice Puno again) strongly
declares that the "overgrowth" of the "strained relations" principle should not
be taken advantage of by employers. T h e principle should not be given an
overarching interpretation.

D.V. Quijano vs. Mercury Drug Corp. and NLRC, G.R. N o . 126561,July 8,1998 —
Well-entrenched is the rule that an illegally dismissed employee is entitled to
reinstatement as a matter of right. Over the years, however, the case law developed
that where reinstatement is not feasible, expedient or practical, as where reinstatement
would only exacerbate the tension and strained relations between the parties, or where

'Reyes vs. N L R C , et al., G.R. N o . 180551, February 10, 2009.

Philippine Long Distance Telephone Co., et al., G.R. N o . 143171, September
21,2004.
889
 POST-EMPLOYMENT

the relationship between the employer and employee has been unduly strained by
reason of their irreconcilable differences, particularly where the illegally dismissed
employee held a managerial or key position in the company, it would be more prudent
to order payment of separation pay instead of reinstatement. Some unscrupulous
employers, however, have taken advantage of the overgrowth of this doctrine of "strained
relations" by using it as a cover to get rid of its employees and thus defeat their right
to j o b security.
To protect labor's security of tenure, we emphasize that the doctrine of "strained
relations" should be strictly applied so as not to deprive an illegally dismissed employee
of his right to reinstatement. Every labor dispute almost always results in "strained
relations," and the phrase cannot be given an overarching interpretation, otherwise,
an unjustly dismissed employee can never be reinstated.
In the case at bar, the N L R C refused to reinstate the petitioner and relied
on the contents of the November 19, 1991 notice of termination of management
to petitioner detailing the alleged five ( 5 ) charges of misconduct against him and
on petitioner's September 14, 1991 written explanation. From them, the N L R C
deduced an antagonism between the parties and concluded that there would be
no harmonious working relationship between them. T h e N L R C then ruled that
petitioner's reinstatement was impractical and that he should instead be given
separation pay.
We reject these ratiocinations.
For one, respondent's charges of misbehavior against petitioner cannot serve
as basis to justify petitioner's dismissal, let alone his non-reinstatement. These charges
had been found to be baseless and both the labor arbiter and the N L R C agreed that
there was no just cause for petitioner's dismissal. It can even be granted in arguendo
that a certain antagonism may characterize the relationship of petitioner and the
respondents. However, the antagonism was caused substantially if not solely by the
misdeeds of respondent's superiors. T h e arbiter found as a fact that the false charges
were filed against petitioner by two of his superiors to punish him for exposing their
usurious loan operations. Hence, to deny petitioner's reinstatement due to the
"strained relations" with his accusers whose charges were found to be false would
result in rewarding the accusers and penalizing petitioner, the victim. This would set a
bad precedent, for no employer should be allowed to profit from his own misdeed. In
addition, it is most inequitable to rule that the antagonism engendered by petitioner's
performance of his legal right to expose the usurious lending operations of some
warehouse officers will cause him to lose the security of his job.

3.4 W h e n Reinstatement N o t Feasible; Separation Pay in Lieu of

Reinstatement
Although reinstatement (with or without backwages) is a legal right of
an illegally dismissed employee, there are supervening events that may bar the
reinstatement, such as justified redundancy, retrenchment, closure, attainment
of retirement age, strained relations or similar justifications.

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 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

In the event that reinstatement is no longer feasible, or if the employee

chooses not to be reinstated, the employer shall pay him separation pay in lieu
of reinstatement, such separation pay to be computed according to the formula
1
used in earlier cases.
An e m p l o y e e w h o is separated f r o m his e m p l o y m e n t on a false or
nonexistent cause is entitled to be reinstated to his former position because
the separation is illegal. But if the employer has already hired a replacement,
reinstatement of the illegally dismissed e m p l o y e e to his former position would
be neither fair nor just. T h e employer's remedy is to reinstate the employee to
2
a substantially equivalent position.

3.4a "Separation Pay in lieu of Reinstatement" Different from Backwages

T h e grant of separation pay in lieu of reinstatement is a substitute for
i m m e d i a t e and c o n t i n u e d r e e m p l o y m e n t with the employer. T h e grant of
separation pay does not redress the injury that is intended to be relieved by the
second remedy of backwages, i.e., the loss of earnings that would have accrued to
3
the dismissed employee during the period between dismissal and reinstatement.
Payment of backwages is a f o r m of relief that restores the income that
was lost by reason of unlawful dismissal; separation pay, in contrast, is oriented
towards the immediate future, the transitional period the dismissed employee
4
must u n d e r g o before locating a replacement j o b .
It is grievous error amounting to grave abuse of discretion on the part
of the National L a b o r Relations Commission to have considered the award of
separation pay as equivalent to the aggregate relief constituted by reinstatement
plus payment of backwages under Article 280 [now 279] of the Labor C o d e . T h e
grant of separation pay is a proper substitute only for reinstatement. It could not
5
be an adequate substitution both for reinstatement and for backwages.

3.4b "Separation Pay in lieu of Reinstatement'' Different from Separation

Pay in Legal Terminations
It bears emphasizing that the separation pay in lieu of reinstatement is
different from the separation pay required under Articles 283 and 284 (the
"authorized" causes) and likewise different from the separation pay allowed in
compassionate exception under Article 282 (the "just" causes). Separation pay in
lieu of reinstatement proceeds from an illegal dismissal wherein reinstatement is

'Starlite Plastic Industrial Corporation vs. National Labor Relations Commission,

G.R. N o . 78491, March 16, 1989.
2
Sec. 4[a] of Rule I, Book VI of the Rules and Regulations Implementing the
Labor Code; Pedroso, et al. vs. Castro, G.R. N o . 70361, January 30, 1986.
3
Santos vs. N L R C , G.R. N o . 76721, September 21, 1987.
Ibid.
Ibid.

891
 POST-EMPLOYMENT

ordered but cannot be carried out. Mr. Justice (later Chief Justice) Panganiban
emphasizes this distinction in Philippine Tobacco Flue-Curing (see b e l o w ) . After
ruling that seasonal agricultural employees are "in regular employment" and
should have been rehired for the 1994 season because their employment did not
terminate with the end of the 1993 season, the Justice concluded that therefore
there was illegal dismissal and the workers deserve reinstatement. However, he
continued...
However, since reinstatement is no longer possible as petitioner has
already closed its Balintawak plant, respondent members of the said group
should instead be awarded normal separation pay (in lieu of reinstatement)
equivalent to at least o n e month pay, or o n e month pay for every year of
service, whichever, is higher. It must be stressed that the separation pay
being awarded to the Lubat g r o u p is due to illegal dismissal; hence, it is
different from the amount of separation pay provided for in Article 283 in
case of retrenchment to prevent losses or in case of closure or cessation of
the employer's business, in either of which the separation pay is equivalent
to at least o n e (1) month or one-half ( 1 / 2 ) month pay for every year of
since whichever is higher.

3.4c H o w much is the Separation Pay in lieu of Reinstatement?

In the above Philippine Tobacco r u l i n g the separation pay in lieu of
reinstatement is computed at o n e month pay, or o n e m o n t h pay per year of
service, whichever is higher. In some other decisions, the formula is different.
In Bagong Bayan Corporation Realty ( d e c i d e d on D e c e m b e r 8,1986) and in Manila
Midtown (March 25, 1988), it was one-half month pay for every year of service;
in Pure Foods (March 21, 1989) and in Grolier International (August 31 1989) it
was o n e month salary for every year of service.
Nonetheless, preponderant jurisprudence favors o n e month pay for each
year of service; in fact, the Court said in 1994:
"Again, we sustain the ruling of the Labor Arbiter granting separation
pay in the amount of o n e ( 1 ) month pay for every year of service. This
has been our consistent ruling in numerous decisions awarding separation
pay to an illegally dismissed e m p l o y e e in lieu of reinstatement..." (Gaco vs.
NLRC, et al, G.R No. 104690, February 23, 1994.)

3.4d Separation Pay in lieu of Reinstatement of Seasonal Worker

H o w is the separation pay of seasonal (on-and-off) workers computed?
An employer claims "serious business losses" as justification for nonpayment
of separation pay to terminated seasonal employees. But the alleged losses were
not adequately proven, hence the termination was declared illegal. Problem:
What is the formula to compute the separation pay of a seasonal worker who was
illegally dismissed but cannot be reinstated because the plant has been closed?
Mr. Justice Panganiban answers this in Philippine Tobacco.

892
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

Philippine Tobacco Flue-curing And Redrying Corp. vs. NLRC, et al, G.R. N o .
127395, December 10, 1998 —
Petitioner posits that the separation pay of a seasonal worker, who works for
only a fraction of a year, should not be equated with that of a regular worker. Positing
that the total number of working days in one year is 303 days, petitioner [employer]
submits the following formula for the computation of a seasonal worker's separation
pay:

T o t a l N o . of Days Actually Worked

x Daily Rate x 15 days"
Total N o . of Working Days in One Year
Agreeing with the labor arbiter and the N L R C , [the employees], on the other
hand, claim that their separation pay should be based on the actual number of years
they have been in petitioner's service. They cite the law on service incentive leave,
the implementing rules regarding the 13th month pay, Manila Hotel vs. CIR, and
Chartered Bank vs. Ople which allegedly stated that "each season in a year should be
construed as one year of service."
T h e amount of separation pay is based on two factors: the amount of monthly
salary and the number of years of service. Although the Labor Code provides different
definitions as to what constitutes "one year of service" Book Six does not specifically
define "one year of service" for purposes of computing separation pay. However,
Articles 283 and 284 both state in connection with separation pay that a fraction of
at least six months shall be considered one whole year. Applying this to the case at
bar, we hold that the amount of separation pay which respondent members of the
Lubat and Luris groups should receive is one-half (1/2) their respective average monthly
pay during the last season they worked multiplied by the number of years they actually rendered
service, provided that they worked for at least six months during a given year. (Italics supplied
— CAA)
T h e formula that petitioner proposes, wherein a year of work is equivalent
to actual rendered for 303 days, is both unfair and inapplicable, considering that
Articles 283 and 284 provide that in connection with separation pay, a fraction of
at least six months shall be considered one whole year. Under these provisions, an
employee who worked for only six months in a given year — which is certainly less
that 303 days — is considered to have worked for one whole year.

3.5 Objection: Disproportionate Substitution

But this substitution looks objectionable. O n e month's pay per year of
service is a very p o o r substitute for reinstatement. H o w can a whole j o b , the
regular source of the employee's livelihood, be equivalent to only one month's
pay for every year of service? If reinstated, the employee would again have a
regular source of income; he would get at least his regular pay (every week or
every m o n t h ) as well as employment benefits granted by law, policy or contract,
such as paid leave, holiday pay, thirteenth month pay, group insurance, or
perhaps one sack of rice per month. In addition, he would regain opportunities

893
 POST-EMPLOYMENT

for development and advancement aside from the psychological income from
authority or prestige. Regrettably, he loses all this, even his sense of security, when
he is illegally dismissed. A n d since the dismissal is found illegal, he deserves to
be restored to his post and perquisites. But if reinstatement is not possible for
reasons he does not cause, why will he be given only o n e month's pay for every
twelve months he has worked? Of course, if he were actually reinstated, no one
knows how long or how short he would stay on the j o b . But in any case the one
month's pay per year of service seems to be a greatly disproportionate reduction.
T h e formula is no substitute for a whole j o b that the employee may hold for
years and years.
Reinstatement carries with it, according to Article 279, the restoration of
the employee's seniority rights and other privileges, full backwages, allowances
and other benefits. A l l these he loses, if he is not reinstated.
Moreover, in Philippine Amusement and Gaming Corporation vs. R.M. Salas,
G.R. N o . 138756, August 1, 2002, the Court, quoting a 1965 case, said: "When
an official or employee was illegally dismissed and his reinstatement has later
been ordered, for all legal purposes, he is considered as not having left his office.
Therefore, he is entitled to all the rights and privileges that accrue to him by
virtue of the office he held."
If that is the meaning and extent of reinstatement, why then, if reinstatement
cannot be done, the employee's entitlements are suddenly reduced to just one-
month pay for every twelve months of service? T h e e m p l o y e e thereby is not
restored. He is severely shortchanged.
T h e Court itself noted:
"Indeed, a j o b is m o r e than the salary that it carries. Payment of thirty
days salary cannot compensate for the psychological effect of the stigma
of immediately finding one's self laid o f f from work." (Serrano vs. NLRC,
G.R No. 117040, May 4, 2000.)
If 30 days' pay does not substitute for 30 days' notice, how can 30 days' pay
for every 12 months of service substitute for a j o b completely lost without the
employee's fault?
Some forty-two years ago, the court exacted the payment of full backwages
1
in lieu of reinstatement. This relief seems m o r e just and equitable.

4. REMEDY D7 REINSTATEMENT IS THWARTED

If the employer fails or is unable to comply with a final and executory
j u d g m e n t for the reinstatement of an e m p l o y e e , the plain and obvious remedy
is simply to compel the employer by writ of execution to effect the reinstatement
and pay the amounts decreed. T h e employer's claim of inability to reinstate the
employee has to be overruled. If there be valid and unsuperable cause for such

•See Coronel vs. CIR, 23 SCRA 990 [1968].

894
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

inability to reinstate, this factor must be taken into account in the process of
directing and effectuating the award of relief to the employee consistent with
the judgment. T h e remedy is certainly never the institution of a separate action,
whether in the regular courts or the labor arbiters' branch. Such a recourse would
violate the well-settled principle of res judicata. It would give rise to multiplicity
1
of actions which the law abhors and exerts every effort to eschew.
T h e single, particular act of the e m p l o y e r in refusing or professing
inability to c o m p l y with the e x e c u t o r y j u d g m e n t to reinstate an employee
cannot be made the subject of two proceedings: o n e , execution; and two, a
new separate action, instituted by the e m p l o y e e in the N L R C for damages
(compensatory, moral and e x e m p l a r y ) and attorney's fees. A m o r e striking
e x a m p l e of "having one's cake and eating it t o o , " can hardly be conceived — if
2
such p r o c e d u r e w e r e a l l o w e d .
Thus, the Court of first Instance [Regional Trial Court] is not the proper
tribunal to pass u p o n [the e m p l o y e e ' s ] complaint against the failure of the
L a b o r Arbiter to enforce the N L R C ' s decision to reinstate him to his former
position. His remedy against the refusal or inaction of the Labor Arbiter, who is
in charge of executing the awards of the N L R C , is to call the N L R C ' s attention
to the alleged nonfeasance and not to file a mandamus action in the Court of
First Instance which has no jurisdiction to interfere with the execution of a final
3
j u d g m e n t o f the N L R C .
T h e remedy for refusal of the employer to reinstate the employee despite
several writs of execution is not the grant of additional backwages to serve as
4
damages but to file a m o t i o n to cite the employer for contempt.
In the case Dandy V. Quijano vs. Mercury Drug (see preceding topic about
strained relations) the e m p l o y e e was o r d e r e d reinstated in the Supreme Court
decision of July 8,1998. ( T h e dismissal complaint was filed in 1991). Four years
after the Supreme Court's decision Quijano's reinstatement has not happened
not only because of the unwillingnes of the e m p l o y e r but also because of
technicalities in the execution process which the Labor Arbiter himself and an
N L R C commissioner cited as reasons why Quijano could not be reinstated despite
finality of the Court's decision. Exasperated and cursing "the rotten system,"
Quijano tried a last ditch effort: he filed before the Supreme Court a complaint
(in Filipino, he being only a high school graduate) against the Labor Arbiter
and the N L R C commissioner.

' M A I Philippines, Inc. vs. National Labor Relations Commission, et al, G.R.
N o . 73662, June 18, 1987.
Ibid.
3
Merano vs. Judge C. Tutaan, San Miguel Corporation et al, N o . L-56833, July
20, 1982.
"Christian Literature Crusade vs. N L R C , 171 SCRA 712 [1989].

895
 POST-EMPLOYMENT

Dandy V. Quijano vs. GA. Bartolabac and A.R. Quimpo, A . C . N o . 5649, January
27, 2006 —
Facts: Complainant relates that he filed with Labor Arbiter Bartolabac a motion
for execution on 9 December 1998 but despite the final resolution of his case,
Bartolabac issued an order that in effect changed the tenor of the final judgment.
While the decision of the Supreme Court had mandated complainant's reinstatement,
Bartolabac instead awarded backwages and separation pay.
For his part, Commissioner Quimpo alleges that his inclusion in the present
administrative case was due to his participation in disposing of the corporation's
appeal on the issue of complainant's reinstatement as self-service attendant. He
asserts that by law, the Commissioner has exclusive appellate jurisdiction to hear and
decide all decisions, awards or orders rendered by the labor arbiter.
The Court referred this case to the Integrated Bar of the Philippines (IBP)
for investigation, report and recommendation. On 6 May 2003, the IBP submitted
its resolution recommending dismissal of the complaint against respondents.
Rulings: T h e Court is unyielding in its adjudication that complainant must be
reinstated to his former position as warehouseman or to a substantially equivalent
position. This was stated in its Decision dated 8 July 1998, reiterated in the Resolution
dated 5 July 1999, and again stressed in the Resolution dated 17 November 1999. In
the latter resolution, it was particularly expressed that:
Indeed, private respondent's [Mercury Drug Corporation] contention,
as erroneously upheld by the labor arbiter, that there is no substantially
equivalent position for petitioner's reinstatement has been categorically
discounted by this Court. We took judicial notice of the fact that private
respondent Mercury D r u g Corporation operates nationwide and has
numerous branches all over the Philippines. Petitioner, as warehouseman,
occupied a clerical/rank and file position in said company and we find it
highly inconceivable that no other substantially equivalent position exists to
effect his reinstatement.
Clearly, the Court is unwilling to accept the corporation and respondent labor
arbiter's reason that reinstatement is no longer feasible because the position of
warehouseman had already been abolished and there is no substantially equivalent
position in the corporation.
Both respondents labor arbiter and commissioner do not have any latitude
to depart from the Court's ruling. T h e Decision in G.R. N o . 126561 is final and
executory and may no longer be amended. It is incumbent upon respondents to order
the execution of the judgment and implement the same to the letter. Respondents
have no discretion on this matter, much less any authority to change the order of
the Court. T h e acts of respondents cannot be regarded as acceptable discretionary
performance of their functions as labor arbiter and commissioner of the N L R C ,
respectively, for they do not have any discretion in executing a final decision. The
implementation of the final and executory decision is mandatory.

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 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

In the dispositive portion of the decision, the Court, applying the C o d e

o f Professional Responsibility, declares the L a b o r A r b i t e r and the N L R C
Commissioner "suspended from the practice of law for a period of three ( 3 )
months."
In another case of resistance to reinstatement, the employer's lawyer was
cited for contempt of court for maneuvering to block the reinstatement of an
e m p l o y e e found to have been illegally dismissed. His reinstatement had been
o r d e r e d by the L a b o r Arbiter and affirmed by the N L R C , the C A , and the SC.
T h e H i g h Court's decision became final, entry of final j u d g m e n t was done, and
the e m p l o y e e m o v e d for execution of j u d g m e n t . But the employer's counsel
again filed an appeal with the N L R C , trying this time to prevent the issuance of
a writ of execution.
T h e employee asked the Supreme Court to declare the counsel in contempt
of court. T h e Court did so, as it said:
Atty. Q u e v e d o ' s act of filing a baseless appeal with the N L R C was
obviously intended to defeat the implementation of a final and executory
decision. Elementary is the rule that an order granting a motion for a writ of
execution is not appealable. Thus, Atty. Quevedo's deceptively "innocent"
appeal constituted either a willful disregard or gross ignorance of basic
rules of procedure resulting in the obstruction of justice.
By this act, Atty. Q u e v e d o has tried to prevent Embang [the dismissed
e m p l o y e e ] from enjoying the fruits of her hard earned legal victory. In
effect, he has b e e n tying the hands of justice and preventing it from
taking its due course. His conduct has thwarted the due execution of a
final and executory decision. By appealing an order which he knew to be
unappealable, he abused court processes and hindered the dispensation
of justice. His dilatory tactics were an affront to the dignity of the Court,
clearly constituting indirect contempt.
We therefore refer the complaint against Atty. Quevedo's behavior to
the C o m m i t t e e on Bar Discipline of the Integrated Bar of the Philippines
for an investigation of his possible liabilities under Canon 12 and Rule 12.04
of the C o d e of Professional Responsibility.
[ T h e Court found the counsel guilty of indirect contempt and fined him
1
P30,000.00.]

4.1 Backwages Continue to Accrue until Employer Complies with

Reinstatement O r d e r
T h e award of backwages, 13th month pay and other benefits subsists, and
those monetary obligations continue to accumulate, as long as the employer has
not c o m p l i e d with the order to reinstate (at work or in payroll) the employees
who were illegally dismissed.

'Mariano Y. Siy vs. N L R C and Elena Embang, G.R. N o . 158971, August 25,2005.

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Triad Security & Allied Services, et al. vs. Ortega, et al., G.R. N o . 160871, February
6, 2006 —
In this case, the labor arbiter ordered [in February 2000] the reinstatement
of respondents [employees] and the payment of their backwages until their actual
reinstatement and in case reinstatement is no longer viable, the payment of separation
pay... It bears emphasizing that the law [Article 223, Labor C o d e ] mandates the
prompt reinstatement of the dismissed or separated employee. This, the petitioners
[employer] failed to heed. They are now before this Court insisting that they have
fully disposed of their legal obligation to respondents when they paid the latter's
separation pay. We do not agree.
It should be pointed out that an order of reinstatement by the labor arbiter is
not the same as actual reinstatement of a dismissed or separated employee. Thus, until
[sic] the employer continuously fails to actually implement the reinstatement aspect
of the decision of the labor arbiter, their [sic] obligation to respondents, insofar as
accrued backwages and other benefits are concerned, continues to accumulate. It is
only when the illegally dismissed employee receives the separation pay that it could be
claimed with certainty that the employer-employee relationship has formally ceased
thereby precluding the possibility of reinstatement. In the meantime, the illegally
dismissed employee's entitlement to backwages, 13th month pay, and other benefits
subsists. Until the payment of separation pay is carried out, the employer should not
be allowed to remain unpunished for the delay, if not outright refusal, to immediately
execute the reinstatement aspect of the labor arbiter's decision.
The records of this case are bereft of any indication that respondents were
actually reinstated to their previous jobs or to the company payroll. Instead, they were
given, albeit with much resistance from petitioners, the full amount of the money
judgment stated in the 28 February 2000 decision of the labor arbiter, inclusive of
separation pay, more than two years after the labor arbiter had issued his decision on
the illegal dismissal case filed by respondents. As the law clearly requires petitioners
to pay respondents' backwages until actual reinstatement, we resolve that petitioners
are still liable to respondents for accrued backwages and other benefits from 25 February
2000 until 16 December 2002, the day before the labor arbiter ordered the release
to respondents of P603.794.77 representing the full satisfaction of 28 February 2000
judgment, including separation pay.

5. SALARY RATE U P O N REINSTATEMENT

Reinstatement means restoration to a state of condition from which one
had been removed or separated. O n e w h o is reinstated assumes the position he
had occupied prior to the dismissal and is, ordinarily, entitled only to the last
salary in that position.

Grolier International, Inc. vs. Executive Labor Arbiter, et al., G . R . N o . 83523,

August 31, 1989 —
Facts: Fernandez was occupying the position of comptroller of Grolier with
a basic monthly salary of P4,000 when he left for Australia. There he worked for

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Grolier of Australia for seven years and received a salary of AUS$8,000 per annum.
He returned to Manila to follow up his application for immigration to Australia, but
his immigrant visa was disapproved. He sought reinstatement to his former position,
but Grolier [Manila] denied his request. Losing in the N L R C , he appealed to the
Supreme Court.
In its resolution, the Supreme Court ordered Grolier to reinstate Fernandez,
or if that is not feasible, to grant him separation pay.
Since reinstatement was not feasible, the Labor Arbiter ordered Grolier to give
the separation pay computed on the basis of AUS$8,000 per annum. Grolier claims
that the computation should be based on his monthly salary of P4,000.
Ruling: Grolier is correct. Had Fernandez been reinstated either upon his initial
request or as required by the Supreme Court, he would have occupied his former
position in Grolier in the Philippines as Comptroller, and as such would have been
entitled only to his previous salary of P4,000 per month.
Salary scales are based upon or reflect, as economic facts, the standard of living
prevailing in the country and the purchasing power of the domestic currency. The
P4,000 monthly salary which Fernandez received from Grolier prior to his stay in
Australia was presumably a reasonable and satisfactory remuneration for the work
done by him, taking into account the standard of living and the cost of living in the
Philippines then. It cannot be supposed that he was promoted when he was sent to
Australia offices of Grolier. He went to Australia on company business, which means
that his trip was related to the duties of the position he was then holding in the
Philippines. T h e apparently higher salary given to him while working in Australia must
be viewed in the light of the fact that the costs of living in Australia are higher than
those prevailing in the Philippines. T h e AUS$8,000 per annum salary of Fernandez
while in Australia was equivalent to his P4,000 per month salary he had been receiving
in the Philippines.

6. REINSTATEMENT IMMEDIATELY EXECUTORY; EMPLOYER'S OPTIONS

It should be recalled that under Article 223, third paragraph, the decision
of the L a b o r Arbiter reinstating a dismissed e m p l o y e e is immediately executory
even while the case is on appeal. T h e reinstatement may be actual or merely in
payroll, at the employer's option.
This provision — an a m e n d m e n t made by R . A . 6715, effective March
21, 1989 — means that if execution pending appeal is granted, the employee
c o n c e r n e d shall be admitted back to work under the terms and conditions
prevailing prior to his dismissal or separation. However, instead of doing so, the
employer is granted the option to merely reinstate the employee in the payroll.
This would simply mean that although not admitted back to work, the employee
would nevertheless be included in the payroll and entitled to receive her salary
1
and other benefits as if she were in fact working.

•Maranao Hotel vs. N L R C , G.R. N o . 110027, November 16, 1994.

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 POST-EMPLOYMENT

T h e N L R C rules on reinstatement of an illegally dismissed employee state:

xxx
In case the d e c i s i o n of the L a b o r A r b i t e r includes an o r d e r
of reinstatement, it shall likewise contain: ( a ) a statement that the
reinstatement aspect is immediately executory; and ( b ) a directive for the
employer to submit a report of compliance within ten (10) calendar days
from receipt of the said decision." (Sec. 14, Rule V, Revised NLRC Rules of
Procedure, 2005)
"In case the decision includes an o r d e r of reinstatement and the
employer disobeys the directive under the second paragraph of Section 14
of Rule V [ q u o t e d a b o v e ] or refuses to reinstate the dismissed employee,
the L a b o r Arbiter shall immediately issue [ a ] writ of execution, even
p e n d i n g appeal, directing the e m p l o y e r to immediately reinstate the
dismissed e m p l o y e e either physically or in the payroll, and to pay the
accrued salaries as a c o n s e q u e n c e of such reinstatement at the rate
specified in the decision.
T h e Sheriff shall serve the Writ of execution upon the employer or
any other person required by law to obey the same. If he disobeys the writ,
such employer or person may be cited for contempt in accordance with
Rule 9." (Sec. 6, Rule XI, Ibid.)

6.1 May an Employee Lose the Right to Reinstatement?

Within how many days must the employees c o m e to their employer to have
themselves reinstated?
In Buenviaje vs. CA ( G . R . N o . 147805, N o v e m b e r 12, 2002) the employer,
complying with the N L R C ' s order of reinstatement, gave the employees five days
to report for work. W h e n they failed to do so, the employer declared them to have
lost their employment status. Is this act of the e m p l o y e r legal? H o w much time
do the employees have to appear to secure their reinstatement? T h e Supreme
Court, ruling on the employees' petition, faulted the e m p l o y e r for not giving
the employees ample time to explain why they failed to report to work at once.
But what is "ample time"? Focusing on the third paragraph of Article 223, the
Court explains:
T h e f o r e g o i n g provision is intended for the benefit of the employee
and cannot be used to defeat their own interest. T h e law mandates the
e m p l o y e r to either admit the dismissed e m p l o y e e back to work under
the same terms and conditions prevailing prior to his dismissal or to
reinstate him in the payroll to abate further loss of i n c o m e on the part of
the e m p l o y e e during the pendency of the appeal. But we cannot stretch
the language of the law so as to give the e m p l o y e r the right to remove
an e m p l o y e e w h o fails to immediately c o m p l y with the reinstatement
order, especially when there is reasonable explanation for the failure. If

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Cottonway [the e m p l o y e r ] were really sincere in its offer to immediately

reinstate petitioners to their f o r m e r positions, it should have given
them reasonable time to w i n d up their current preoccupation or at
least to explain why they could not return to work at Cottonway at once.
Cottonway d i d not do either. Instead, it gave them only five days to report
to their posts and w h e n the petitioners failed to do so, it lost no time in
serving them their individual notices of termination. We are, therefore,
not impressed with the claim of respondent company that petitioners have
b e e n validly dismissed on August 1,1996 [when the employer wrote them
that they had lost their e m p l o y m e n t status] and hence their backwages
should only be c o m p u t e d up to that time. W e h o l d that petitioners
are entitled to receive full backwages c o m p u t e d from the time their
compensation was actually withheld until their actual reinstatement, or
if reinstatement is no l o n g e r possible, until the finality of the decision, in
accordance with the Decision of the N L R C dated March 26, 1996 which
has attained finality.

Roquero vs. Philippine Airlines, Inc., G.R. N o . 152329, April 22, 2003 —
Facts: "R" and "P," equipment mechanics of Philippine Airlines, were caught
red-handed possessing and using shabu in a raid conducted by PAL and N A R C O M
security personnel. They were charged administratively and placed under preventive
suspension. "R" and "P" assailed their arrest and asserted that they did not voluntarily
indulge in the said act but were instigated by certain PAL personnel. Dismissed by
PAL, "R" and "P" filed a case for illegal dismissal.
T h e Labor Arbiter found both parties at fault — PAL for applying means to
entice the complainants into committing the infraction, and the complainants for
giving in to the temptation and eventually indulging in the prohibited activity. In
other words, the dismissal was valid, but the Labor Arbiter awarded separation pay
and attorney's fees to the complainants.
While the case was on appeal with the N L R C , the complainants were acquitted
by the Regional Trial Court in the criminal case on the ground of instigation.
T h e N L R C ruled that the dismissal was invalid as it likewise found PAL guilty
of instigation. It ordered reinstatement but without backwages. Complainants did
not appeal from the decision but filed a motion for a writ of execution of the order
of reinstatement. T h e Labor Arbiter granted the motion but PAL refused to execute
the said order on the ground that they had filed a Petition for Review which was
referred to the Court of Appeals.
T h e CA, however, reversed the decision of the N L R C and reinstated that of
the Labor Arbiter insofar as it upheld the dismissal of "R." ("P" withdrew from the
case.)
In this petition "R" raises the following issues:
1. Whether the instigated employee shall be solely responsible for an
action arising from the instigation by the employer

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2. Whether the employee's reinstatement can be halted by a petition

filed in higher courts without any restraining order or preliminary
injunction having been ordered in the meantime
Ruling: "R" is guilty of serious misconduct for possessing and using shabu. He
violated Chapter 2, Article V I I , section 4 of the PAL Code of Discipline which states:
"Any employee who, while on company premises or on duty, takes or
is under the influence of prohibited or controlled drugs, or hallucinogenic
substances or narcotics shall be dismissed."
Even if "R" was instigated to take drugs he has no right to be reinstated to his
position. He took the drugs fully knowing that he was on duty and more so that it is
prohibited by company rules. Instigation is only a defense against criminal liability.
It cannot be used as a shield against dismissal from employment especially when the
position involves the safety of human lives.
Petitioner cannot complain he was denied procedural due process. PAL
complied with the twin-notice requirement before dismissing the petitioner.
Article 223 (3rd paragraph) of the Labor Code as amended by Section 12 of
Republic Act N o . 6715, and Section 2 of the N L R C Interim Rules on Appeals under
R.A. N o . 6715, amending the Labor Code, provide that an order of reinstatement
by the Labor Arbiter is immediately executory even pending appeal.
The unjustified refusal of the employer to reinstate a dismissed employee
entitles him to payment of his salaries effective from the time the employer failed to
reinstate him despite the issuance of a writ of execution. Unless there is a restraining
order issued, it is ministerial upon the Labor Arbiter to implement the order of
reinstatement. In the case at bar, no restraining order was granted. Thus, it was
mandatory on PAL to actually reinstate "R" or reinstate him in the payroll. Having
failed to do so, PAL must pay "R" the salary he is entitled to, as if he was reinstated,
from the time of the decision of the N L R C until the finality of the decision of this
(Supreme) Court.

6.2 No Obligation to Reimburse

In the Roquero case, above, ( p e n n e d by Mr. Justice P u n o ) both the CA
and the SC reversed the order of reinstatement as they upheld the employee's
dismissal. Must the e m p l o y e e pay back the salary he r e c e i v e d during the
reinstatement? T h e Court said n o .
"We reiterate the rule that technicalities have no r o o m in labor
cases where the Rules of Court are applied only in a suppletory manner
and only to effectuate the objectives of the L a b o r C o d e and not to defeat
them. H e n c e , even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer to reinstate
and pay the wages of the dismissed e m p l o y e e during the period of appeal
until reversal by the higher court. On the other hand, if the employee has

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been reinstated during the appeal period and such reinstatement order is
reversed with finality, the employee is not required to reimburse whatever
salary he received for he is entitled to such, m o r e so if he actually rendered
services during the period." (Roquero vs. Philippine Airlines, Inc., G.R No.
152329, April 22, 2003.)
T h e no-reimbursement rule was reiterated in a line of cases including Air
Phil. Corp. v. Zamora, G.R. N o . 148247, August 7, 2006 and Composite Enterprises,
Inc. vs. Caparoso, G.R. N o . 159919, August 8, 2007.
But a deviation occurred in Genuino v. NLRC, G.R. N o . 142732-33, December
4, 2007. T h e Court in Genuino said:
If the decision of the labor arbiter is later reversed on appeal upon
the finding that the ground for dismissal is valid, then the employer has the
right to require the dismissed e m p l o y e e on payroll reinstatement to refund
the salaries s/he received while the case was pending appeal, or it can
be deducted from the accrued benefits that the dismissed employee was
entitled to receive from h i s / h e r employer under existing laws, collective
bargaining agreement provisions, and company practices. However, if the
e m p l o y e e was reinstated to work during the pendency of the appeal, then
the e m p l o y e e is entitled to the compensation received for actual services
r e n d e r e d without n e e d of refund.
T h e divergent decisions caused the court to reexamine en banc the question
of reimbursement, and this was d o n e some thirteen months later in Garcia, et al.
v. Philippine Airlines, G.R. N o . 164856, January 20, 2009.

6.2a Garcia Drops Genuino and Reaffirms Roquero

Garcia downplays the "stray posture" of Genuino and reaffirms the no-
reimbursement doctrine in Roquero and conforming rulings. T h e court explains
in Garcia that pursuant to the police power, the state may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated
e m p l o y e e . T h e immediate reinstatement is "a saving act" designed to stop a
continuing threat or danger to the survival or even the life of the employee and
his family. Moreover, the social justice principles of labor law outweigh or render
inapplicable the civil law doctrine of unjust enrichment.
Concurring with the no-reimbursement doctrine, Justice Brion explains
( a m o n g other points) that Article 223 grants the employee the substantive right
to receive his salary when his dismissal, already found illegal by the labor arbiter,
is elevated on appeal by the employer. Such substantive right cannot be treated
as a procedural matter that can be undone and taken back when conditions
change.
In fine, therefore, the no-reimbursement rule remains.

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6.3 Rationale of Payroll Reinstatement

In the Maranaw Hotel case cited above, the Court took occasion to explain
why the law gives the employer the option of physical reinstatement or payroll
reinstatement.
This option is based on practical considerations. T h e employer may
insist that the dismissal of the employee was for a just and valid cause and
the latter's presence within its premises is intolerable by any standard; or
such presence would be inimical to its interest or would demoralize the co-
employees. Thus, while payroll reinstatement would in fact be unacceptable
because it sanctions the payment of salaries to o n e not rendering service,
it may still be the lesser evil compared to the intolerable presence in the
workplace of an unwanted employee.

6.4 Rationale and Constitutionality of Reinstatement During Appeal

In Aris (Phil.) Inc. vs. NLRC, et al. ( G . R . N o . 90501, August 5, 1991), the
petitioner employer urges the Court to declare as unconstitutional that portion of
Article 223 of the Labor C o d e introduced by Section 12 of R . A . N o . 6715, as well
as the implementing provision covered by Section 2 of the N L R C Interim Rules,
allowing immediate execution, even pending appeal, of the reinstatement aspect
of a decision of a labor arbiter. T h e employer argues that said portion violates the
due process clause of the Constitution in that it is oppressive and unreasonable.
It asserts that a reinstatement pending appeal negates the right of the employer
to self-protection for it has been ruled that an e m p l o y e r cannot be compelled
to continue in employment an e m p l o y e e guilty of acts inimical to the interest
of the employer; the right of an e m p l o y e r to dismiss is consistent with the legal
truism that the law, in protecting the rights of the laborer, authorizes neither
the oppression nor the destruction of the employer. For, social justice should be
implemented not through mistaken sympathy for or misplaced antipathy against
any group, but evenhandedly and fairly.
To clinch its case, petitioner tries to demonstrate the oppressiveness of
reinstatement pending appeal by portraying the following consequences: ( a ) the
employer would be c o m p e l l e d to hire additional employees or adjust the duties
of other employees simply to have s o m e o n e watch over the reinstated employee
to prevent the commission of further acts prejudicial to the employer, ( b )
reinstatement of an undeserving, if not undesirable, e m p l o y e e may demoralize
the rank-and-file, and ( c ) it may encourage and e m b o l d e n not only the reinstated
employees but also other employees to c o m m i t similar, if not graver, infractions.
Ruling en banc and speaking through Justice [later C h i e f Justice] Hilario
G. Davide, Jr., the Court ruled that these rationalizations and portrayals are
misplaced and are purely conjectural which, unfortunately, p r o c e e d from a
misunderstanding of the nature and scope of the relief of execution pending
appeal.

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Execution pending appeal is interlinked with the right to appeal. O n e

cannot be divorced from the other. T h e latter may be availed of by the losing
party or a party w h o is not satisfied with a j u d g m e n t , while the former may be
applied for by the prevailing party during the pendency of the appeal. T h e
right to appeal, however, is not a constitutional, natural or inherent right. It is a
statutory privilege of statutory origin and, therefore, available only if granted or
provided by statute. T h e law may then validly provide limitations or qualifications
thereto or relief to the prevailing party in the event an appeal is interposed by
the losing party. Execution pending appeal is o n e such relief long recognized in
this jurisdiction. T h e Revised Rules of Court allows execution pending appeal
and the grant thereof is left to the discretion of the court upon g o o d reasons to
be stated in a special order.
Before its a m e n d m e n t by Section 12 of R . A . N o . 6715, Article 223 of the
L a b o r C o d e already allowed execution of decisions of the N L R C pending their
appeal to the Secretary of L a b o r and Employment.
In authorizing execution pending appeal of the reinstatement aspect of a
decision of the L a b o r Arbiter reinstating a dismissed or separated employee, the
law itself has laid down a compassionate policy which, once more, vivifies and
enhances the provisions of the 1987 Constitution on labor and the workingman.

6.5 Exception to I m m e d i a t e Reinstatement

W h i l e the Court agrees with private respondent [ e m p l o y e e ] that execution
pending appeal may be o r d e r e d by the N L R C , it is equally true, however, that
where the dismissed employee's reinstatement would lead to a strained relation
between the e m p l o y e r and the e m p l o y e e or to an atmosphere of antipathy and
antagonism, the exception to the twin remedies of reinstatement and payment
of backwages can be invoked and reinstatement, which might b e c o m e anathema
1
to industrial peace, could be held back pending appeal.

6.6 Reinstatement Pending A p p e a l Is Enforceable Despite Employer's

Denial o f Employer-Employee Relationship
Philippine Airlines, Inc. vs. NLRC, et al., G.R. N o . 113827, July 5, 1996 —
In its petition, PAL questioned the application by the N L R C of Article 223
of the Labor Code, asserting that "this provision does not apply where there is
no 'reinstatement' to speak of, as in the instant case, where the alleged employer-
employee relationship is contested because the complainants in the case below never
have been employees of the petitioner herein. T h e above provision of the law is only
applicable where (an) employer-employee relationship is supported by clear evidence
or where it is admitted to be existent."

'See Philippine Telegraph and Telephone Corporation ( P T & T) vs. NLRC,

251 SCRA 21; Equitable Banking Corp. vs. N L R C and R.L. Sadac, G.R. N o . 102467,
June 13, 1997.

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 POST-EMPLOYMENT

This argument is untenable.

The intent of the law in making a reinstatement order immediately executory
is much like a return-to-work order, i.e., to restore the status quo in the workplace
in the meantime that the issues raised and the proofs presented by the contending
parties have not yet been finally resolved. It is a legal provision which is fair to both
labor and management because while execution of the order cannot be stayed by the
posting of a bond by the employer, the workers also cannot demand their physical
reinstatement if the employer opts to reinstate them only in the payroll.
Although P A L is challenging the existence of an employer-employee
relationship between it and the complainants below, it is indisputable that prior to
the filing of these numerous cases before the Labor Arbiter, the said complainants
were working for PAL. In fact, Labor Arbiter de Vera, in his decision of March 31,
1992, declared complainants to be regular employees of PAL. So did Labor Arbiter
Reyes, x x x
Hence, applying Article 223 strictly, which is the only way it can truly be given
effect, PAL, as an employer, is given the choice of accepting the complainants back
or simply reinstating them in its payrol until the regularization and illegal dismissal
cases are determined definitively.

6.7 Reinstatement should have been O r d e r e d by Labor Arbiter

If the labor arbiter has not o r d e r e d reinstatement of the e m p l o y e e , the
N L R C cannot award backwages for the p e r i o d when the appeal was pending at
the N L R C .
Reinstatement during appeal is warranted only when the labor arbiter
has ruled that the dismissed e m p l o y e e should be reinstated. In the present
case, neither the dispositive portion nor the text of the labor arbiter's decision
ordered the reinstatement of private respondent. An order for reinstatement
must be specifically declared and cannot be presumed; like backwages, it is
a separate and distinct relief given to an illegally dismissed e m p l o y e e . T h e r e
being no specific order for reinstatement and the order being for complainant's
separation, there can be no basis for the award of salaries/backwages during the
pendency of appeal. Since the dismissal of private respondent was d e e m e d valid,
she cannot be entitled to reinstatement and backwages. An award of backwages
by the N L R C during the p e r i o d of appeal is totally inconsistent with its finding
1
of a valid dismissal.

6.8 Amendment by R A . 6715 N o t Retroactive

T h e amendment by R.A. 6715 making reinstatement immediately executory
has no retroactive effect. In Inciong vs. National Labor Relations Commission (185
SCRA 651, May 21, 1990), the decision of the L a b o r Arbiter was rendered on

'Filflex Industrial and MFG. Corp. vs. N L R C , et al., G.R. N o . 115395, February
12, 1998.

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D e c e m b e r 18, 1988, or three ( 3 ) months before Article 223 of the Labor Code
was amended by Republic A c t 6715 (which took effect on March 21, 1989),
providing that a decision of the Labor Arbiter ordering the reinstatement of a
dismissed or separated e m p l o y e e shall be immediately executory insofar as the
reinstatement aspect is concerned. Since this new law contains no provision giving
it retroactive effect (Article 4, Civil C o d e ) , the Court ruled that the amendment
may not be applied to the decision, hence, the reinstatement could not be
executed immediately.

7. IS R E I N S T A T E M E N T SELF-EXECUTORY?
To the question "Is reinstatement self-executory?" the Court answered no
in 1994, but changed its m i n d in 1997. A n d in 2007 it distinguished between a
reinstatement order by a L a b o r Arbiter and o n e by the N L R C .
In its N o v e m b e r 16, 1994 ruling in Maranao Hotel vs. NLRC ( G . R . N o .
110027), the Court emphasized:
It must be stressed, however, that although the reinstatement aspect of
the decision is immediately executory, it does not follow that it is self-executory.
T h e r e must be a writ of execution which may be issued motu proprio or on
motion of an interested party as stated in Article 224 of the Labor C o d e . In
the absence then of an o r d e r for the issuance of a writ of execution on the
reinstatement aspect of the decision of the Labor Arbiter, the petitioner
[ e m p l o y e r ] is under no legal obligation to admit back to work the private
respondent [ e m p l o y e r ] under the terms and conditions prevailing prior
to her dismissal or, at the petitioner's option, to merely reinstate her in
the payroll, x x x
This 1994 ruling did not take r o o t in Philippine jurisprudence because
the Supreme Court uprooted it in Pioneer Texturizing Corp. vs. NLRC, et al, G.R.
N o . 118651, O c t o b e r 16, 1997.
T h e Court noted that prior to the enactment of Republic Act N o . 6715
which took effect on 21 March 1989, the Labor C o d e contained no provision
dealing with the reinstatement of an illegally dismissed e m p l o y e e . But the
a m e n d m e n t introduced by R . A . N o . 6715 uses the phrase "shall immediately be
executory" without qualification, emphasizing the need for prompt compliance.
A c c o r d i n g to the Court, Article 223, as amended, is clear that an award
for reinstatement shall be immediately executory even pending appeal, and the
posting of a b o n d by the employer shall not stay the execution for reinstatement.
To require the application for and issuance of a writ of execution as prerequisites
for the execution of a reinstatement award would betray and run counter to
the very object and intent of Article 223, i.e., the immediate execution of a
reinstatement order.
T h e Court is of the view that Article 223 would be rendered nugatory if it
rules otherwise because there would be numerous reasons to delay the issuance

907
 POST-EMPLOYMENT

of a writ of execution. For instance, a mere postponement of a scheduled hearing

on the part of the Labor Arbiter could easily delay the issuance of the writ.
T h e Court concluded that henceforth, an award or order of reinstatement is
self-executory. After receipt of the decision or resolution ordering the employee's
reinstatement, the employer has the right to choose whether to re-admit the
employee to work under the same terms and conditions prevailing prior to his
dismissal, or to reinstate the employee in the payroll. In either instance, the
employer has to inform the employee of his choice to apprise the employee if
he has to report to work or not.

7.1 N L R C ' s Reinstatement Order Not Self-Executory

In the 2007 Panuncillo case the Court clarifies that a reinstatement ordered by
a Labor Arbiter is self-executory, but a reinstatement order from the N L R C itself is
not self-executory. To the Labor Arbiter's order, the third paragraph of Article 223
applies; to the N L R C order, the sixth paragraph of the same Article in relation to
Article 224(a).
T h e third paragraph of Article 223 provides that "the decision of the Labor
Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even pending appeal."
On the other hand, Article 224(a), sixth paragraph says "...The decision of the
Commission shall be final and executory after ten (10) calendar days from receipt thereof by the
parties. "And this decision needs a writ of execution as Article 224(a) states:
"Article 224. Execution of decisions, orders, or awards. — ( a ) T h e
Secretary o f L a b o r and E m p l o y m e n t o r any R e g i o n a l Director, the
Commission or any L a b o r Arbiter, or med-arbiter, or voluntary arbitrator
may, motu proprio or on m o t i o n of any interested party, issue a writ of execution
on a j u d g m e n t within five ( 5 ) years from the date it becomes final and executory,
x x x . (Panuncillo vs. CAP Phil., Inc., G.R No. 161305, February 9, 2007.)
To sum up, reinstatement o r d e r e d by a labor arbiter is self-executory; the
one by the N L R C is not.

8. D7 REINSTATEMENT IS N O T PRAYED F O R
Ordinarily, a finding that an e m p l o y e e has been illegally dismissed entities
him to reinstatement to his former position without loss of seniority rights and to
the payment of backwages. But in this case [Labor, et al. vs. NLRC], the petitioners
did not pray for reinstatement in the position paper they filed with the Labor
Arbiter. T h e latter in turn o r d e r e d the payment of separation pay in lieu of
reinstatement... That being the case, and as we have said before, if the employee
decides not to be reinstated, the employer shall pay him separation pay in lieu
of reinstatement. This is only just and practical because reinstatement of the
petitioners will no longer be in the best interest of both the [ e m p l o y e e s ] and
[the e m p l o y e r ] , considering the animosity and antagonism that exists between
them brought about by the filing of charges by both parties against each other

908
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

in the criminal as well as in the labor proceedings. T h e petitioners would then

be entitled to separation pay equivalent to at least o n e month's salary for every
1
year of service in lieu of reinstatement in addition to their full backwages.
It may be noted, however, that the ruling in Labor case — that the employee
will not be reinstated if he does not ask for reinstatement—contradicts the ruling
of the Court in General Baptist College and General Baptist Church of the Philippines
vs. NLRC and Gaudencia Basa ( G . R . N o . 85534, March 5,1993). In this 1993 case,
the Court said: "In resolving whether or not the relief of reinstatement may be
granted to [Academic Dean G a u d e n c i o ] Basa notwithstanding his failure to pray
for the same in his complaint, we rule in the affirmative. We are for the granting
of the relief he is entitled to under the law, although he failed to specifically pray
for the same in his complaint." In other words, the Court o r d e r e d reinstatement
although the complainant did not ask for it.
N o t e that Labor is m o r e recent than Baptist College.

9. DAMAGES
If the evidence adduced by the e m p l o y e e before the L a b o r Arbiter should
establish that the e m p l o y e r d i d i n d e e d terminate the e m p l o y e e ' s services
without just cause or without according him due process, the L a b o r Arbiter's
j u d g m e n t shall be for the e m p l o y e r to reinstate the e m p l o y e e and pay him
backwages, or exceptionally, for the e m p l o y e e simply to receive separation pay.
T h e s e are reliefs explicitly prescribed by the L a b o r C o d e . But any award of
moral damages by the L a b o r A r b i t e r obviously cannot be based on the Labor
C o d e but w o u l d be g r o u n d e d on the Civil C o d e . Such an award cannot be
justified solely u p o n the premise that the e m p l o y e r fired his e m p l o y e e without
2
just cause or due process.
Apart from the reliefs expressly set out in the Labor C o d e flowing from
illegal dismissal from employment, no other damages may be awarded to an
illegally dismissed employee other than those specified by the Civil C o d e . Hence,
the fact that the issue of whether or not moral or other damages were suffered
by an e m p l o y e e and in the affirmative, the amount that should properly be
awarded to him in the circumstances, is determined under the provisions of the
3
Civil C o d e and not the Labor C o d e .

9.1 M o r a l Damages
Moral damages may be awarded to compensate o n e for diverse injuries
such as mental anguish, besmirched reputation, wounded feelings and social
humiliation. It is, however, not enough that such injuries have arisen. It is essential

•A. Labor, et al. vs. N L R C , Gold City Commercial Complex, Inc., et al., G.R. N o .
110388, September 14, 1995.
2
Suario vs. Bank of the Philippine Islands, G.R. N o . 50459, April 25, 1989.
Ibid:

909
 POST-EMPLOYMENT

that they have sprung from a wrongful act or omission of the defendant which
1
was the proximate cause thereof.
T h e employer is liable for moral damages under the provisions of Article
2220 of the Civil C o d e providing for damages for "breaches of contract" where
the employer acted fraudulently or in bad faith. T h e sum o f P5,000 each in favor
2
of the terminated workers, in the concept of moral damages, may be given.
N o t every employee w h o is illegaly dismissed or suspended is entitled to
damages. As a rule, moral damages are recoverable only where the dismissal or
suspension of the employee was attended by bad faith or fraud, or constituted an
act oppressive to labor, or was done in a manner contrary to morals, g o o d customs
or public policy. Bad faith does not simply mean negligence or bad judgment.
It involves a state of mind dominated by ill will or motive. It implies a conscious
and intentional design to do a wrongful act for a dishonest purpose or some
moral obliquity. T h e person claiming moral damages must prove the existence
of bad faith by clear and convincing evidence for the law always presumes good
faith. In the case at bar, there is no showing that the management of petitioner
company was m o v e d by some evil motive in suspending private respondent. It
suspended private respondent on an honest, albeit erroneous, belief that private
respondent's act of leaving the company premises to take his meal at home
constituted abandonment of post which warrants the penalty of suspension.
Also, it is evident from the facts that petitioner gave private respondent all the
opportunity to refute the charge against him and to defend himself. These negate
the existence of bad faith on the part of petitioner. U n d e r the circumstance, we
3
hold that private respondent is not entitled to moral damages.
Malice or bad faith... "implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or moral obliquity; it is different from the
negative idea of negligence in that malice or bad faith contemplates a state of
4
mind affirmatively operating with furtive design or ill will."
Bad Faith is essentially a state of m i n d affirmatively operating with a furtive
5
design or motive of ill will. Bad Faith imports a dishonest purpose of some
moral obliquity and conscious d o i n g of a wrong. It does not simply connote bad
6
j u d g m e n t o r negligence.
A corporation, being an artificial person, has no feelings, no emotions, no
senses. T h e r e f o r e , it cannot experience physical suffering and mental anguish.

•Suario vs. Bank of the Philippine Islands, G.R. N o . 50459, April 25, 1989.
2
C L L C E. G. Gochangco Workers Union, et al. vs. National Labor Relations
Commission, G.R. N o . 67258, May 30, 1988.
3
PAL vs. N L R C , et al, G.R. N o . 132805, February 2, 1999.
"Equitable Banking Corp. vs. N L R C and R.L. Sadac, G.R. N o . 102467, June 13,
1997 citing Far East Bank and Trust Co. vs. CA, 241 SCRA 671.
5
Air France vs. Carruscoso, 18 SCRA 166 [1966].
6
Board of Liquidators vs. Kalaw, 20 SCRA 1007 (1967).

910
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

Mental suffering can be experienced only by o n e having a nervous system, and

flows from real ills, sorrows and griefs of life, all of which cannot be suffered
by an artificial person such as respondent bank. Moral damages are granted
in recompense for physical suffering, mental anguish, fright, serious anxiety
1
besmirched reputation, moral shock, social humiliation and similar injury.
2
H e n c e , moral damages cannot be awarded to a corporation.

9.2 Exemplary Damages

Award of moral and exemplary damages in favor of the employee who was
illegally dismissed shall be upheld where the employee had been harassed by
the employer. H e r treatment during her employment, the delays in the payment
of her commissions, the pressures exerted upon her even when she was sick
in the hospital, the suggestion of o n e of the company officers that she discuss
her complaints with him alone in a private place, her arbitrary separation, the
questionable attempts to get the vehicle from her after her dismissal, among
3
other aggravations, demonstrate the validity of the employee's complaint.
In Ranee vs. National Labor Relations Commission, G.R. N o . 68147, June 30,
1988, the dismissed employees were awarded P500 exemplary damages each, in
addition to the backwages and reinstatement, on a finding that the union and
the employer connived in dismissing the employees on the alleged ground of
disloyalty to the union under the union security clause.
In another instance, the Court agreed with the complaining employee that
the employer was in bad faith in disapproving the employee's claim for gratuity
differential despite the fact that a similar claim by another employee of the same
company had been upheld in a final decision by the Supreme Court. T h e Court
4
allowed moral and exemplary damages of P100,000.00.
T h e Filipino tourist w h o was hired by PNB-Singapore as Branch Credit
Officer but four months later was unceremoniously, capriciously dismissed —
without notice and hearing and without a just and consistent reason — was
5
awarded P200,000.00 as moral damages and PI00,000.00 as exemplary damages.
Exemplary damages may be awarded only if the dismissal was shown to
6
have been effected in a wanton, oppressive or malevolent manner.

'Article 2217, NCC.

2
L B C Express, Inc. vs. Court of Appeals, G.R. N o . 108670, September 21,1994.
3
Lim vs. National Labor Relations Commission, G.R. N o . 79907 and Sweet Lines,
Inc. vs. National Labor Relations Commission, G.R. N o . 79975, March 16, 1989.
"Republic Planters Bank, etc. vs. N L R C and A . G . Santos, G.R. N o . 117460,
January 6, 1997.
5
See in comments under Article 217 the case Philippine National Bank vs.
Cabansag, G.R. N o . 157010, June 21, 2005.
6
Cocoland Development Corp. vs. N L R C and J. Mago, G.R. N o . 98458, July 17,
1996; see also Dee Hua Liong Electrical Equipment Corp. vs. Reyes, 145 SCRA 713,
911
 POST-EMPLOYMENT

10. INDEMNITY TO HOUSEHELPER

An instance of indemnity related to employment termination is provided
for in Article 149 of the Civil C o d e on termination of househelper's services.
Article 149. Indemnity for unjust termination of services. — I f the period
of household service is fixed, neither the employer nor the househelper
may terminate the contract before the expiration of the term, except for a
just cause. If the househelper is unjustly dismissed, he or she shall be paid
the compensation already earned plus that for fifteen (15) days by way of
indemnity.
If the househelper leaves without justifiable reason, he or she shall
forfeit any unpaid salary due him or her not exceeding fifteen (15) days.

11. ATTORNEY'S FEES

In employment termination cases attorney's fees are not recoverable where
there is no sufficient showing of bad faith on the part of private respondent
[ e m p l o y e r ] . T h e r e must always be a factual basis for the award of attorney's fee.
U n d e r Article 2208(2) of the N e w Civil C o d e , the award thereof is justified if
the claimant is c o m p e l l e d to litigate with third persons or to incur expenses to
protect his interest by reason of an unjustified act of the party against w h o m it
1
is sought.
W h e r e an e m p l o y e e was included in a criminal c o m p l a i n t not in his
personal but official capacity, and the case arose in connection with his work as
2
such, his employer is obligated to defray the former's legal expenses.

12. PERSONS LIABLE FOR W R O N G F U L DISMISSAL: GENERAL R U L E — T H E

SUNIO DOCTRINE
W h o must shoulder the liabilities arising from a wrongful dismissal? Is the
manager that r e c o m m e n d e d or approved it liable personally?
" T h e basic rule is still that which can be d e d u c e d f r o m the Court's
pronouncement in Sunio vs. National Labor Relations Commission (127 S C R A 390
[ 1 9 8 4 ] ) ; thus:
"We c o m e now to the personal liability of petitioner, Sunio, w h o was
made jointly and severally responsible with petitioner company and CIPI
for the payment of the backwages of private respondents. This is revers-
ible error. T h e Assistant Regional Director's Decision failed to disclose the
reason why he was made personally liable. Respondents, however, alleged

where it was stressed that exemplary damages may not be recovered where the party
involved is not entitled to moral or compensatory damages.
'Lopez vs. N L R C , Letran College-Manila, et al., G.R. N o . 124548, October 8,
1998; Pepsi Cola Products, et al. vs. E.V. Santos, G.R. N o . 165968, April 14, 2008.
2
Salazar vs. N L R C , G.R. N o . 109210, April 17, 1996.

912
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

as grounds thereof, his being the owner of one-half ( 1 / 2 ) interest of said

corporation, and his alleged arbitrary dismissal of private respondents.
"petitioner Sunio was impleaded in the Complaint in his capacity
as General Manager of petitioner corporation. T h e r e appears to be no
evidence on record that he acted maliciously or in bad faith in terminating
the services of private respondents. His act, therefore, was within the scope
of his authority and was a corporate act.
"It is basic that a corporation is invested by law with a personality
separate and distinct from those of the persons composing it as well
as from that of any other legal entity to which it may be related. M e r e
ownership by a single stock-holder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient
g r o u n d for disregarding the separate corporate personality. Petitioner
Sunio, therefore, should not have been made personally answerable for
the payment of private respondents' back salaries." (Asionics Phil., et al. vs.
NLRC, G.R No. 124950, May 19, 1998.)
T h e m e r e fact that the officer is part of the family corporation does not
mean that all its acts are imputed to him directly and personally, in the absence
of a showing that he acted without or in excess of his authority or was motivated
by personal ill-will against the e m p l o y e e . His acts were official acts, d o n e in his
1
capacity as V i c e President of the company and on its behalf.

12.1 Government as Stockholder N o t directly Liable for Corporate

Indebtedness
Even if the national government owned or controlled 81.8% of the common
stock and 100% of the preferred stock of N o r t h Davao Mining Corporation,
it remains only a stockholder thereof, and under existing laws and prevailing
j u r i s p r u d e n c e , a stockholder as a rule is not directly, individually a n d / o r
personally liable for the indebtedness of the corporation. T h e obligation of
N o r t h Davao cannot be considered the obligation of the national government,
hence, whether the latter be solvent or not is not material to the instant case.
T h e respondents have not shown that this case constitutes o n e of the instances
2
where the corporate veil may be pierced.

12.2 Exception: Piercing the Corporate Veil: Officers Become Personally

Liable
Generally, officers of a corporation are not personally liable for their
official acts unless it is shown that they have e x c e e d e d their authority. However,

'Lim vs. National Labor Relations Commission, G.R. N o . 79907; Sweet Lines,
Inc. vs. National Labor Relations Commission, G.R. N o . 79975, March 16, 1989.
2
North Davao Mining Corporation vs. N L R C , G.R. N o . 112546, March 13,1996.

913
 POST-EMPLOYMENT

the legal fiction that a corporation has a personality separate and distinct from
stockholders and members may be disregarded. W h e r e the incorporators and
directors belong to a single family, the corporation and its members can be
considered as one in order to avoid its being used as an instrument to commit
injustice, or to further an end subversive of justice. T h e shield of corporate
fiction should be pierced when it is deliberately and maliciously designed to
1
evade financial obligations to employees.
W h e n the notion of legal entity is used as a means to perpetuate fraud
or an illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, and or ( t o ) confuse legitimate issues, the veil which
2
protects the corporation will be lifted.
U n d e r Section 31 of the Corporation C o d e , "directors or trustees who
willfully and knowingly vote for or assent to patently unlawful acts of the
corporation or w h o are guilty of gross negligence or bad faith in directing the
affairs of the corporation shall be liable jointly and severally for all damages
resulting therefrom suffered by the corporation, its stockholders or members
or other persons."

A.C. Ransom Labor Union-CCLU vs. National Labor Relations Commission, G.R.
N o . 69494, June 10, 1986 —
Article 265 [now 264] of the Labor Code provides that "any worker whose
employment has been terminated as a consequence of an unlawful lockout shall be
entitled to reinstatement with full backwages."
Any violation of Article 265 [now 264] is punishable under Article 273 [now
272] of said Code by a fine not to exceed five hundred pesos and/or imprisonment
3
for not less than one ( 1 ) day nor more than six ( 6 ) months.
H o w can these two provisions be implemented when the employer is a
corporation?
The answer is found in Article 212(c) of the Labor Code, which says:
"Employer" includes any person acting in the interest of an employer,
directly or indirectly. It does not, however, include any labor organization or
any of its officers or agents except when acting as employer.
The provision was culled from Section 2, Republic Act 602, the Minimum Wage
Act. If the employer is an artificial person, it must have an officer who can be presumed
to be the employer, being "the person acting in the interest of the employer." The
corporation is the employer only in the technical sense.
T h e responsible officer of an employer corporation can be held personally
liable, not to say even criminally liable for nonpayment of backwages. This is the

'Pabalan vs. National Labor Relations Commission, G.R. N o . 898799, April 20,
1990.
2
Ibid.
s
See Article 272 as amended by R.A. N o . 6715, March 21, 1989.

914
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

policy of the law. If it were otherwise, corporate employers would have devious
ways to evade paying backwages.
If no definite p r o o f exists as to w h o is the responsible officer, the presi-
dent of the corporation w h o can be d e e m e d to be its chief operation officer
shall be presumed to be the responsible officer. In R e p . A c t 602, for example,
criminal responsibility is with the "manager" or in his default, the person act-
ing as such.
If the nonpayment of the backwages of the strikers has been a continuing
situation, the employer-corporation president's personal liability at the time
the backwages were o r d e r e d to be paid should also be a continuing j o i n t and
several personal liabilities of all w h o may have thereafter succeeded to the office
of the president; otherwise, the strikers would be deprived of their rights by the
election of a president w h o has no leviable assets.

Chua vs. National Labor Relations Commission, G.R. N o . 81450, February 15,
1990 —
Can the vice-president be held jointly and severally liable with the corporation
for the unpaid wages of the company's former president?
Facts: Jesus Chua and Johnson Chua are brothers, serving as president and
vice-president, respectively, of the family corporation. At the time of the filing of the
complaint for illegal dismissal and unpaid wages or commission by Jesus, Johnson
was the highest and most ranking official of said corporation. Johnson caused the
preparation of and verified the position paper, the appeal memorandum and the
motion for reconsideration of the N L R C decision. He showed personal interest
in the case of Jesus despite the fact that a new corporate president in the person
of Jose Beltran had been elected. Beltran could have handled the case in behalf
of the corporation but he did not do so. T h e records fail to show that Johnson
was authorized by the corporation to pursue or defend the case filed against it by
Jesus and yet Johnson personally acted in the case and showed keen interest in its
progress.
Ruling: Petitioner must be held responsible for its outcome. Personal animosity
existed between these two brothers. With Johnson's manifest interest in the case and
his being the top officer after his brother was eased out, there is enough reason to
believe that Johnson had a hand in the dismissal of Jesus. The National Labor Relations
Commission correctly applied Article 289 of the Labor Code, which provides: "If the
offense is committed by a corporation, trust, firm, partnership, association or any
other entity, the penalty shall be imposed upon the guilty officer or officers of such
corporation, trust, firm, partnership, association or entity."
It is an established principle that when the veil of corporate fiction is made as
a shield to perpetuate a fraud or to confuse legitimate issues (here, the relation of
1
employer-employee), the same should be pierced.

' A D . Santos, Inc. vs. Vasquez, 22 SCRA 1156.

 POST-EMPLOYMENT

Carmelcraft Corporation vs. National Labor Relations Commission, G.R. Nos.

90634-35, June 6, 1990 —
Facts: Carmen contends that she is not liable for the acts of the company,
assuming it had acted illegally, because the Carmelcraft Corporation is a distinct
and separate entity with a legal personality of its own. She claims that she is only an
agent of the company carrying out the decisions of its board of directors.
Ruling: We do not agree. She is, in fact and legal effect, the corporation, being
not only its president and general manager but also its owner. Moreover, she is raising
this issue only at this tardy hour, when she should have invoked this argument earlier,
when the case was being heard before the labor arbiter and later in the N L R C .

12.3 Instances When Corporate Officers Become Solidarily Liable

Uichico, et al. vs. NLRC, Santos, et al., G.R. N o . 121434, June 2, 1997 —
A corporation is a juridical entity with legal personality separate and distinct
from those acting for and in its behalf and, in general, from the people comprising
it. The general rule is that obligations incurred by the corporation, acting through
1
its directors, officers and employees, are its sole liabilities. There are times, however,
when solidary liabilities may be incurred but only when exceptional circumstances
warrant such as in the following cases:
"1. When directors and trustees or, in appropriate cases, the officers of a
corporations: (a) vote for or assent to patently unlawful acts of the corporation; (b)
act in bad faith or with gross negligence in directing the corporate affairs; ( c ) are guilty
of conflict of interest to the prejudice of the corporation, its stockholders or members,
and other persons;
2. When a director or officer has consented to the issuance of watered stocks
or who, having knowledge thereof, did not forthwith file with the corporate secretary
his written objection thereto;
3. When a director, trustee or officer has contractually agreed or stipulated
to hold himself personally and solidarily liable with the corporation; or
4. When a director, trustee or officer is made, by specific provision of law,
2
personally liable for his corporate actions.
In labor cases, particularly, corporate directors and officers are solidarity liable
with the corporation for the termination of employment of corporate employees
done with malice or in bad faith. In this case, it is undisputed that petitioners have a
direct hand in the illegal dismissal of respondent employees. They were the ones, who
as high-ranking officers and directors of Crispa, Inc., signed the Board Resolution
retrenching the private respondents on the feigned ground of serious business losses
that had no basis apart from an unsigned and unaudited Profit and Loss Statement
which, to repeat, had no evidentiary value whatsoever. This is indicative of bad faith

•Santos vs. National Labor Relations Commission, 254 SCRA 673, 681 [1996].
2
M A M Realty Development Corporation vs. N L R C , 244 SCRA 797, 802-803
[1995].

916
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

on the part of petitioners for which they can be held jointly and severally liable with
Crispa, Inc. for all the money claims of the illegally terminated respondent employees
in this case.

At the very least, as held in Pabalan vs. NLRC, to justify solidary liability,
"there must be an allegation or showing that the officers of the corporation
deliberately or maliciously designed to evade the financial obligation of the
corporation to its employees," or a showing that the officers indiscriminately
stopped its business to perpetrate an illegal act, as a vehicle for the evasion of
existing obligations, in circumvention of statutes, and to confuse legitimate
1
issues.
It is true, there were various cases when corporate officers were themselves
held by the Court to be personally accountable for the payment of wages and
m o n e y claims to its employees. In A.C. Ransom Labor Union-CCLUvs. NLRC, for
instance, the Court ruled that under the M i n i m u m W a g e Law, the responsible
officer of an employer corporation could be held personally liable for nonpayment
of backwages for ' ( i ) f the policy of the law were otherwise, the corporation
employer ( w o u l d ) have devious ways for evading payment of backwages.' In the
absence of a clear identification of the officer directly responsible for failure to
pay the backwages, the Court considered the President of the corporation as
such officer. T h e case was cited in Chua vs. NLRC in holding personally liable
the vice-president of the company, being the highest and most ranking official
of the corporation next to the President w h o was dismissed, for the latter's claim
2
for unpaid wages.
A r e v i e w of the a b o v e e x c e p t i o n a l cases w o u l d readily disclose the
attendance of facts and circumstances that could rightly sanction personal liability
on the part of the company officer. In A.C. Ransom, the corporate entity was a
family corporation and execution against it could not be implemented because
of the disposition posthaste of its leviable assets evidently in order to evade its just
and due obligations. T h e doctrine o f 'piercing the veil of corporate fiction' was
thus clearly appropriate. Chua likewise involved another family corporation, and
this time the conflict was between two brothers occupying the highest ranking
positions in the company. T h e r e were incontrovertible facts which pointed to
extreme personal animosity that resulted, evidently in bad faith, in the easing
3
out from the company of o n e of the brothers by the other.

12.4 Limited Liability of Indirect Employer

Articles 106,107, and 109 hold an employer jointly and severally liable with
its contractor or subcontractor, as if it were the direct employer. T h e liability

•Reahs Corp., et al. vs. N L R C , et al, G.R. N o . 117473, April 15, 1997.
2
Asionics Phil., et al. vs. N L R C , G.R. N o . 124950, May 19, 1998.
Ibid.

917
 POST-EMPLOYMENT

under these articles, however, does not extend to the payment of backwages and
separation pay of employees who were constructively or illegally dismissed by
the contractor, e.g., a security agency, where it is not shown that the principal/
indirect employer had conspired with the contractor in effecting the illegal
1
dismissal.
T h e solidary liability for payment of backwages and separation pay is limited
under Article 106 "to the extent of the work p e r f o r m e d under the contract";
under Article 107, to "the performance of any work, task, j o b or project," and
under Article 109 "to the extend of their civil liability under this Chapter (on
2
payment of wages.) "
T h e s e provisions c a n n o t apply t o p e t i t i o n e r [ i n d i r e c t e m p l o y e r ] ,
considering that the complainants were no longer working for or assigned to it
when they were illegally dismissed. Furthermore, an order to pay backwages and
separation pay is invested with a punitive character, such that an indirect employer
should not be made liable without a finding that it had committed or conspired
3
in the illegal dismissal.
In Sentinel Security Agency vs. NLRC, the Court said:
T h e Client [Philippine A m e r i c a n Life Insurance C o . ] did not, as it
could not, illegaly dismiss the complainants. Thus, it should not be held
liable for separation pay and backwages. But even if the Client is not
responsible for the illegal dismissal of the complainants, it is jointly and
severally liable with the A g e n c y for the complainants' service incentive
leave pay. In Rosewood Processing, Inc. vs. National Labor Relations Commission,
( G . R . N o s . 116476-84, May 21, 1998, pp. 17-23.) the Court explained that
notwithstanding the service contract between the client and the security
agency, the two are solidarity liable for the proper wages prescribed by the
Labor C o d e , pursuant to Articles 106, 107 and 109.
U n d e r these provisions, the indirect employer, w h o is the Client in
the case at bar, is jointly and severally liable with the contractor for the
workers' wages, in the same manner and extent that it is liable to its direct
employees. This liability of the Client covers the payment of the service
incentive leave pay of the complainants during the time they were posted
at the Cebu branch of the client. As service had been rendered, the liability
accrued, even if the complainants were eventually transferred or reassigned,
xxx
In the case at bar, the relief and transfer order per se did not sever
the employment relationship between the complainants and the Agency.

•See Rosewood Processing, Inc. vs. N L R C , et al., G.R. Nos. 116476-84, May 21,
1998.
Ibid.
Ibid.

918
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

Thus, despite the fact that complainants were no longer assigned to the
Client, Article 287 of the Labor C o d e , as amended by R.A. 7641, still binds
the A g e n c y to provide them — upon their reaching the retirement age of
sixty to sixty-five years — retirement pay or whatever else was established in
the collective bargaining agreement or in any other applicable employment
contract. On the other hand, the Client is not liable to the complainants
for their retirement pay because of the absence of an employer-employee
relationship between them. (Sentinel Security Agency, Inc. vs. NLRC, et al., G.R
No. 122468, September 3, 1998; Phil. American Life Insurance Co. vs. NLRC, et
al., G.R No. 122716, September 3, 1998.)

13. Q U I T C L A I M ; P U B L I C P O L I C Y PROTECTS LABOR

After resigning and executing a quitclaim, may an employee still file a
claim against the employer?
Generally, o n c e an e m p l o y e e resigns and executes a quitclaim in favor of
the employer, he is estopped from filing any further money claim against the
employer arising from his employment. However, when the voluntariness of the
execution of the quitclaim or release is put in issue, or when it is proved that
there is an unwritten agreement entitling the e m p l o y e e to other remuneration
or benefits, then such a m o n e y claim of the e m p l o y e e may be still given due
1
course.
Even if voluntarily executed, agreements are invalid if they are contrary to
public policy. This is elementary. T h e protection of labor is o n e of the policies
laid down by the Constitution, not only by specific provision, but also as part of
2
social justice.
T h e subordinate position of the e m p l o y e e vis-a-vis management renders
him especially vulnerable to its blandishments and importunings, and even
intimidations. T h e s e may result in the employee's improvidently if reluctantly
signing over benefits to which he is clearly entitled. Recognizing this danger,
we [the Supreme C o u r t ] have consistently held that quitclaims of the workers'
benefits will not stop them from asserting them just the same on the ground
3
that public policy prohibits such waivers.
In the case cited above, the Court observed further:
A l l told, the conduct of the petitioners toward the employees has been
less than c o m m e n d a b l e . I n d e e d , it is reprehensible. First, the company
inveigled them to waive their claims to compensation due them on the
promise that future benefits would be paid (and to make matters worse,

'See: Talla vs. National Labor Relations Commission, G.R. N o . 79913, July 19,
1989.
2
Articles 6 and 1306, Civil Code.
3
See: Carmelcraft Corp. vs. N L R C , et al, G.R. Nos. 90634-35, June 6, 1990.

919
 POST-EMPLOYMENT

there is no showing that they were indeed p a i d ) . Second, it refused to

recognize the respondent union, suggesting to the employees that they
j o i n another union acceptable to management. T h i r d , it threatened the
employees with the closure of the company and then actually did so when
the employees insisted on their demands. A l l these acts reflect on the
bona fides of the petitioners and unmistakably indicate their ill toward the
employees. (Carmelcraft Corp. vs. NLRC, et al., G.R Nos. 90634-35, June 6,
1990.)
But the preceding ruling does not mean that quitclaims and waivers are
illegal and always disallowed. It can be upheld even if a lady wants to invalidate
it.

13.1 Not All Waivers are Against Public Policy; Elements of Validity of
Waivers and Quitclaims
A lady may be fickle-minded in affairs of the heart, but she should not be
so in documents of waiver.

Periquet vs. NLRC and The Philippine National Construction Corporation, G.R.
N o . 91298, June 22, 1990 —
Facts: Petitioner was dismissed as toll collector by private respondent CDCP
(now P N C C ) , for willful breach o f trust and unauthorized possession of accountable
toll tickets allegedly found in her purse during a surprise inspection. Claiming she
had been "framed," she filed a complaint for illegal dismissal and was sustained by
the Labor Arbiter, who ordered her reinstatement and payment of full backwages.
The N L R C affirmed the order.
Petitioner did not demand her reinstatement but instead entered into a
compromise agreement with CDCP where she waived her right to reinstatement
and received from the CDCP the sum of PI4,000.00 representing her backwages.
Thereafter, she secured employment as a kitchen dispatcher in a restaurant. For
unknown reasons, she applied for reemployment with the CDCP and was accepted
as a xerox machine operator. Later, she wrote the new management of the CDCP and
asked that the rights granted her by the decision earlier mentioned, be recognized
because the waiver she had signed was invalid. CDCP offered to pay her P9.544.00
representing the balance of her back pay for 3 years (minus the PI4,000 earlier
paid). Petitioner accepted this additional amount and signed another Quitclaim and
Release.
Almost nine years after the decision in petitioner's favor, she filed a motion
for issuance of a writ of execution of the decision. Initially, petitioner's motion was
granted by the labor arbiter, but on appeal, the N L R C sustained CDCP stating that
the motion for execution was time-barred. Hence, this petition.
Ruling: It is said that a woman has the privilege of changing her mind but this is
usually allowed only in affairs of the heart where the rules are permissibly inconstant.
In the case before us, Ms. Periquet, the herein petitioner, exercised this privilege in
connection with her work, where the rules are not as fickle.

920
 TERMINATION OF EMPLOYMENT
[Part 6. Consequences of Termination]

It is difficult to understand the attitude of the petitioner, who has blown hot
and cold, as if she does not know her own mind. First, she signed a waiver and then
she rejected it; then she signed another waiver which she also rejected, again on
the ground that she had been deceived. In her first waiver, she acknowledged full
settlement of the judgment in her favor, and then in the second waiver, after accepting
additional payment, she again acknowledged full settlement of the same judgment.
But now she is singing a different tune.
In her petition she is now disowning both acknowledgments and claiming that
the earlier payments, both of which she had accepted as sufficient, are insufficient.
They were valid before but they are not valid now. She also claimed she was harassed
and cheated by the past managements of the CDCP and sought the help of the new
management of the P N C C under its "dynamic leadership." But now she is denouncing
the new management for also tricking her into signing the second quitclaim.
N o t all waivers and quitclaims are invalid as against public policy. If the
agreement was voluntarily entered into and represents a reasonable settlement, it is
binding on the parties and may not later be disowned simply because of a change
of mind. It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on
its face, that the law will step in to annul the questionable transaction. But where it is
shown that the person making the waiver did so voluntarily, with full understanding of
what he was doing, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as a valid and binding undertaking. As in this
case.

13.1a "Dire Necessity" does not Nullify Quitclaim

"Dire necessity" is not an acceptable ground for annulling the releases,
especially since it has not b e e n shown that the employees had been forced
to execute them. It has not even b e e n proven that the considerations for the
quitclaims were unconscionably low and that the petitioners had been tricked
into accepting them. W h i l e it is true that the writ of execution dated N o v e m b e r
24, 1987 called for the collection of the amount of P46.267.92 each for the
petitioners, that amount was still subject to recomputation and modification as
the private respondent's motion for reconsideration, as still pending before the
D O L E . T h e fact that the petitioners accepted the lower amounts would suggest
that the original award was exorbitant and they were apprehensive that it would
be adjusted and reduced. In any event, no deception has been established on
the part of the private respondent ( e m p l o y e r ) that would justify the annulment
1
of the petitioners' quitclaim.

Note: See related discussion under Article 227.

'Alfredo Veloso and Edito Liguaton vs. Department of Labor and Employment,
Noah's Ark Sugar Carriers and Wilson T. Go, G.R. N o . 87297, August 5, 1991.

921
 Title I
TERMINATION OF EMPLOYMENT (Cont'd)
[Part 7. TERMINATION BY EMPLOYEE
AND SUSPENSION OF OPERATION]

A R T . 285. TERMINATION BY EMPLOYEE

( a ) An employee may terminate without just cause the employee-
employer relationship by serving a written notice on the employer at least
one (1) month in advance. T h e employer u p o n w h o m no such notice was
served may hold the employee liable f o r damages.
(b) An employee may put an e n d to the relationship without serving
any notice on the employer f o r any of the following just causes:
1. Serious insult by the employer or his representative on the honor
and person of the employee;
2. Inhuman and unbearable treatment accorded the employee by
the employer or his representative;
3. C o m m i s s i o n of a crime or o f f e n s e by the e m p l o y e r or his
representative against the person of the employee or any of the immediate
members of his family; and
4. O t h e r causes analogous to any of the foregoing.

C O M M E N T S A N D CASES
1. RESIGNATION AND RESIGNATION NOTICE
Resignation is the voluntary act of an e m p l o y e e w h o "finds himself in a
situation where he believes that personal reason cannot be sacrificed in favor of
the exigency of the service, then he has no other choice but to dissociate himself
from his employment." T h e employer has no control over resignations and so
the notification requirement was devised in order to insure that no disruption
of work would be involved by reason of the resignation. This practice has been
recognized because "every business enterprise endeavors to increase its profits
1
by adopting a device or means designed towards that goal."
In cases of voluntary resignation, the law affords the e m p l o y e e the right
to resign regardless of whether the company has found an able and competent

'Intertrod Maritime, Inc. vs. National Labor Relations Commission, G.R. No.
81087, June 19, 1991.

922
 TERMINATION OF EMPLOYMENT
[Part 7. Termination by Employee
ART. 285
and Suspension of Operation]

replacement and whether the operation of the company would be affected,

provided he serves a written notice on the employer at least one (1) month in
advance. T h e rule requiring an employee to stay or complete the 30-day period
prior to the effectivity of his resignation becomes discretionary on the part of
management as an e m p l o y e e w h o intends to resign may be allowed a shorter
1
period before his resignation becomes effective.
In a case where the company regulations require a 30-day resignation
notice, the Court ruled that dismissal was too harsh a penalty for an employee
who gave a 15-day notice only. But although such dismissal is illegal, the employee
cannot be awarded separation pay under Article 283 because the Article refers
to termination due to redundancy, retrenchment or business closure. Instead
of that, the e m p l o y e e may be awarded resignation pay under the Company's
policy which grants 40% of o n e m o n t h ' s pay for every year of service in case of
2
voluntary resignation.

2. W I T H D R A W A L OF R E S I G N A T I O N
3
Resignation is withdrawable even if the employee has called it "irrevocable."
But after it is accepted or approved by the employer, its withdrawal needs the
employer's consent.

Intertrod Maritime, Inc. vs. National Labor Relations Commission, G.R. N o . 81087,
June 19, 1991 —
Resignations, once accepted and being the sole act of the employee, may not
be withdrawn without the consent of the employer. In the instant case, the Master
had already accepted the resignation and, although respondent was being required
to serve the thirty (30) days' notice provided in the contract, his resignation was
already approved. Respondent cannot claim that his resignation ceased to be effective
because he was not immediately discharged in Port Pylos, Greece, for he could no
longer unilaterally withdraw such resignation. When he later signified his intention
of continuing his work, it was already up to the employer to accept his withdrawal
of his resignation. T h e mere fact that they did not accept such withdrawal did not
constitute illegal dismissal for acceptance of the withdrawal of the resignation was
the employer's sole prerogative.
Once an employee resigns and his resignation is accepted, he no longer has
any right to the j o b . If the employee later changes his mind, he must ask for approval
of the withdrawal of his resignation from his employer, as if he were reapplying for
the j o b . It will then be up to the employer to determine whether or not his service
would be continued. If the employer accepts said withdrawal, the employee retains
his j o b . If the employer does not, the employee cannot claim illegal dismissal for

'Phimco Industries vs. N L R C and R. Carpio, G.R. N o . 118041, June 11, 1997.
Ibid.
3
Custodio vs. Ministry of Labor and Employment, G.R. N o . 643174, July 19,
1990.

923
 POST-EMPLOYMENT
ART. 285

the employer has the right to determine who his employees will be. To say that an
employee who has resigned is illegally dismissed, is to encroach upon the right of
1
the employers to hire persons who will be of service to them.

3. R E S I G N A T I O N PAY
Is an employee who voluntarily resigned his job entitled to separation pay?

Travelaire & Tours Corp. vs. NLRC &N. Medelyn, G.R. N o . 131523, August 20,
1998 —
The general rule is that an employee who voluntarily resigns from employment
is not entitled to separation pay, unless there is a stipulation for payment of such in
the employment contract or Collective Bargaining Agreement ( C B A ) , or payment
of the amount is sanctioned by established employer practice or policy.
In the case at bar, the public respondent NLRC's finding that there is a company
policy/practice of paying separation pay to its resigning employees, is supported by
substantial evidence. This is shown by the fact that before private respondent resigned
and for the period 1991 to 1996, on separate dates, three (3) resigning employees
were given separation pay, even though the payments given to two of these employees
(namely, Rogelio Abendan, Anastacio Cabate) were termed 'ex-gratia payments.'
Regardless of terminology and amount, the fact exists that upon resignation from petitioner
corporation, the concerned employees were given certain sums of money occasioned by their
separation from the company. While petitioner has denied that such company policy/
practice exists, it nevertheless failed to present countervailing evidence, such as
presenting the records of other resigned employees who were not given separation
pay.

4. C O N S T R U C T I V E DISMISSAL; F O R C E D R E S I G N A T I O N
A constructive discharge is "a quitting because continued employment is
rendered impossible, unreasonable or unlikely, as, an offer involving a demotion
2
in rank and a diminution in pay." Constructive dismissal, in other words, is an
employer's act amounting to dismissal but made to appear as if it were not. In
fact, the employee w h o is the target of constructive dismissed may be allowed to
keep on coming to work. Constructive dismissal is a dismissal in disguise.
For instance, there is constructive dismissal when the reassignment of an
employee involves a demotion in rank or a diminution in pay where there is no
valid reason to do so. A hacienda guard, for instance, was campaigning for agrarian
reform. Sorely displeased, the hacienda management d e m o t e d him. T h e Court
ruled: ' T h e demotion of private respondent is tantamount to a constructive

•Custodio vs. Ministry of Labor and Employment, G.R. N o . 643174, July 19,
1990.
P h i l i p p i n e Japan Active Carbon Corporation and Tukuichi Satofuka vs.
National Labor Relations Commission, G.R. N o . 83239, March 8, 1989.

924
 TERMINATION OF EMPLOYMENT
[Part 7. Termination by Employee
ART. 285
and Suspension of Operation]

dismissal. O n e does not n e e d to stretch his imagination to distinguish the

work of a security guard and that of a c o m m o n agricultural laborer in a sugar
plantation. Likewise, there was a diminution of salary, for a security guard is paid
on a monthly basis while a laborer in the plantation is paid either on a daily or
piece-work basis. Laborers do not work year round but only when needed and
1
on off-season months they are not required to work at all."
In another case, the president claimed that Majaducon stopped teaching
on his own volition supposedly because when he discovered Majaducon was
appearing as collaborating lawyer in a case against the former mayor, Majaducon
was r e m i n d e d that the school o w e d favors to the city g o v e r n m e n t with w h o m
the school had to maintain cordial relations. Eventually, Majaducon was asked
to choose whether to continue as a faculty m e m b e r or to withdraw as a lawyer
against the mayor. Such compulsion to make an unnecessary choice placed
undue and unjustified pressure on the e m p l o y e e w h o otherwise would not
have thought of leaving his e m p l o y m e n t as a teacher. T h e r e was no showing
whatsoever that Majaducon's work as counsel interfered with his duties as a
teacher. His cessation from e m p l o y m e n t could not, therefore, be considered as
voluntary on his part and was in the nature of a contrivance to affect a dismissal
2
without cause.
W h e r e the e m p l o y e r inveigled the e m p l o y e e to resign so it would avoid
paying her separation pay, said e m p l o y e e is constructively dismissed, hence,
3
entitled to reinstatement with backwages.

Reyes vs. NLRC and Kong Hua School, G.R. N o . 78997, August 31, 1989 —
Facts: Veronica started teaching in Kong Hua School in August 1972. She went
on maternity leave effective August 26 to October 10,1982. Because of complications
resulting from the delivery, she asked for a leave extension and filed an application
for indefinite leave of absence. On December 21,1982, she reported for work but was
able to teach only one day because she suffered nervous breakdown. She again filed
an indefinite leave of absence because of poor health but the school disapproved the
application. On September 13,1983, upon advice of the school principal, she wrote:
"I wish to get my two months' vacation salary dated April-May 1982. In connection
with this I am tendering my resignation as advised and wished by the administration
on conditions that I'll be given priority to be accepted when the time comes when I
will be ready to render service to the school."
When the school opened in June 1985, Veronica applied for reinstatement,
but the school refused to rehire her. Her complaint for reinstatement and backwages
was dismissed by the Labor Arbiter. The N L R C upheld the arbiter.

'Ledesma, et al. vs. N L R C and O. Ondon, G.R. N o . 110930, July 13, 1995.
2
Rizal Memorial Colleges Faculty Union, et al. vs. National Labor Relations
Commission, G.R. Nos. 59012-13, October 12, 1989.
3
Reyes vs. National Labor Relations Commission; see below.

925
 POST-EMPLOYMENT
ART. 285

Ruling: The circumstances proved that Veronica was forced to resign. Her
resignation was involuntary. It was procured by her employer on the promise that
she would be given priority for reemployment and in consideration of immediately
paying her two months' vacation which she desperately needed then because she
was ill. The school's refusal in bad faith to re-employ her despite its promise to do
so amounted to illegal dismissal. consequently, she is entitled to be reinstated with
three years' backwages.
The school had no right to disapprove her application for an indefinite leave
of absence due to illness caused by the delivery of her child and to force her to resign
instead. (Article 133 [ b ] , Labor Code.) T h e school must have realized that it could not
dismiss Veronica for health reasons under Article 284 of the Labor Code because her
illness was not "prejudicial as well to the health of her employees" nor the kind that
would have legally prohibited her continued employment and, even if her service
was terminable on account of illness, the school would have been required to pay
separation pay equivalent to at least one-month salary or to one-half month salary
for every year of service, whichever is greater, a fraction of at least six months being
considered as one whole year.

4.1 Constructive Dismissal Even Without Quitting; Preventive Suspension

Beyond 30 Days Amounts to Constructive Dismissal
Hyatt Taxi Services, Inc. vs. Catinoy, G.R. N o . 143204, June 26, 2001 —
Facts: Two union officers, Catinoy and Saturnino, had a fist fight inside the
union office, an act that violates company rules and union by-laws. T h e union
executive board decided to place them on indefinite suspension and requested the
company, Hyatt Taxi Services, Inc., to implement it. T h e company placed the two
on preventive suspension for 30 days.
Catinoy, aggrieved by the preventive suspension since he was not the aggressor,
filed a complaint for illegal suspension, unpaid wages and damages against both the
union and the company. After the lapse of his 30-days preventive suspension, he
reported to work but was not allowed to resume his duties.
He amended his complaint to constructive dismissal.
The Labor Arbiter found Hyatt Taxi guilty of illegal preventive suspension and
illegal constructive dismissal.
T h e employer and the union appealed to the N L R C . At first the N L R C
upheld the Labor Arbiter, but, on motion for reconsideration, the N L R C deleted
the award of backwages because there was "no concrete showing that complainant
was constructively dismissed." Catinoy's motion for reconsideration was denied,
prompting Catinoy to go to CA on certiorari. T h e CA annulled the NLRC's latter
decision and reinstated the earlier one. Hyatt Taxi went up to the SC.
Ruling: We uphold the ruling of the Court of Appeals that there is no
justification for the NLRC's modification of its earlier decision when it deleted the
award of backwages that it had previously awarded. In abandoning its original stance

926
 TERMINATION OF EMPLOYMENT ART 285
[Part 7. Termination by Employee
and Suspension of Operation]

that there was constructive dismissal that would entitle respondent to backwages, the
N L R C reasoned that:
"Upon second review of the case records and after due consideration
of the instant motion, we still maintain the ruling rendered in the case but we
are inclined to make certain modifications relative to the issue of constructive
dismissal. We have to make clarifications on this aspect by following the
jurisprudence on constructive dismissal whereby the Supreme Court held
that constructive dismissal consists in the act of quitting because continued
employment is rendered impossible, unreasonable or unlikely as in the case
of an offer involving demotion in rank and a diminution in pay. Applying the
same in the case at bar, complainant did not resign or quit. On the contrary,
he pursued his employment when he returned to the respondent's officer after
his 30 days suspension. Hence, we cannot sustain the respondent's claim that
complainant abandoned his job. To constitute abandonment of work, it must
be accompanied by overt acts unerringly pointing to the fact that the employee
does not want to work anymore.
We note that respondent expressed willingness to take back complainant,
manifesting that the latter was one of those desirable drivers and it has no
reason to terminate him. Seemingly there was no meeting of the minds
between management and complainant due to the conflict that arose regarding
the latter's suspension. In view thereof, reinstatement is proper taking into
consideration the positions of the management and complainant but we are
deleting the award for payment of backwages as there was no concrete showing
that complainant was constructively dismissed."
T h e foregoing rationale of the N L R C is without basis. First, the evidence on
record runs counter to the ruling of the N L R C that there was no concrete showing
that respondent was constructively dismissed. T h e factual findings of the Labor
Arbiter, which the N L R C initially adopted, show that respondent was not taken
back by petitioner after the 30-day suspension period that petitioner imposed on
respondent had lapsed. T h e Labor Arbiter appreciated the following events as badges
of constructive dismissal:
"Records show that complainant reported for work on September
25, 1995, after the lapse of his suspension but was not able to talk with the
operation manager and this was confirmed by the Respondents in their
position paper (sic) On the following day complainant reported again for
work but was allegedly told by Mr. Caraig (Operation Manager) that if he will
not drop the criminal complainant for physical injuries he filed against Tomas
Saturnino and his complaint for illegal suspension with the National Labor
Relations Commission he will not be able to resume his employment. In fact,
complainant on September 28, 1995 wrote letter addressed to Respondent's
Vice-President, pleading that he be allowed to resume his work. There being
no response or reaction complainant amended his complaint to include
constructive dismissal."

927
 POST-EMPLOYMENT
ART. 285

Clearly, constructive dismissal had already set in when the suspension went
beyond the maximum period allowed by law. Section 4, Rule XIV, Book V of the
Omnibus Rules provides that preventive suspension cannot be more than the
maximum period of 30 days. Hence, we have ruled that after the 30-day period
of suspension, the employee must be reinstated to his former position because
suspension beyond this maximum period amounts to constructive dismissal.
Second, the strict adherence by the N L R C to the definition of constructive
dismissal is erroneous. Apparently, the N L R C ruled out constructive dismissal in
this case mainly because according to it "constructive dismissal consists in the act of
quitting because continued employment is rendered impossible, unreasonable or
unlikely as in the case of an offer involving demotion in rank and a diminution in pay"
Based on this definition, the N L R C concluded that since respondent neither resigned
nor abandoned his j o b and the fact that respondent pursued his reinstatement
negate constructive dismissal. What makes this conclusion tenuous is the fact that
constructive dismissal does not always involve forthright dismissal or diminution in
rank, compensation, benefit and privileges. There may be constructive dismissal if
an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it could foreclose any choice by him
except to forego his continued employment.
From the time that petitioner failed to recall respondent to work after the
expiration of the suspension period, taken together with petitioner's precondition
that respondent withdraw the complaints against the acting president of the union
and against petitioner itself, respondent's security of tenure was already undermined
by petitioner. Petitioner's actions undoubtedly constitute constructive dismissal.

An employee is d e e m e d constructively dismissed where his status is changed

1
from regular to casual.

5. Not Constructive Dismissal: Valid Transfer

Japan Air Lines Local Employees' Association [JALLEA ] and S.B. Quiocho vs. Hon.
Voluntary Arbitrator Teodorico P Calica and Japan Air Lines Co., Ltd., G.R. No.
120718, August 14, 1995 (Resolution) —
Facts: Petitioner Quiocho was transferred from her original assignment as
passenger service agent at the check-in counter of the N A I A to senior accounting
clerk in the main office (a non-front line position) by her employer, JAL, following
numerous complaints from clients of her rudeness and unprofessional behavior.
Voluntary Arbitrator Calica found and ruled that petitioner Quiocho's transfer
was valid and legal, hence, this petition for certiorari filed by Quiocho and JALLEA
(labor organization of Quiocho) solely focusing on such finding.
Ruling: Article 212 ( m ) of the Labor Code, as amended, clearly recognizes
management's right to lay down and execute policies and/or to transfer, assign or
discipline its employees. T h e Court fully agrees with the arbitrator's finding and

'Sy vs. National Labor Relations Commission, G.R. N o . 85365, June 21, 1989.

928
 TERMINATION OF EMPLOYMENT
[Part 7. Termination by Employee
ART. 285
and Suspension of Operation]

conclusion that, in a nutshell, petitioner Quiocho's transfer was a remedial and not
a disciplinary measure intended to forestall further damage to customer relations
of private respondent JAL and thus maintain the goodwill of its clients upon which
its business essentially thrives. That was indeed a valid and justified exercise of
private respondent JAL's management prerogative for self-preservation and is not a
constructive dismissal as petitioners otherwise claim it to be.

5.1 Not Constructive Dismissal: Voluntary Resignation

Concrete Aggregates vs. National Labor Relations Commission, G.R. N o . 82458,
September 7, 1989 —
Facts: In 1985, the Company's General Manager informed Solita that the
company was creating a new secretarial staffing pattern. Solita was transferred to
the special projects committee to conduct feasibility studies on manpower exports.
When Solita learned of her new assignment she handed a letter of resignation. She
was given her separation pay and she signed a quitclaim and waiver. Later, she filed
a complaint for illegal dismissal.
Issue: Whether Solita was constructively dismissed from her employment.
Ruling: Solita voluntarily resigned and signed the quitclaim after receiving all
the benefits for her separation. While her boss appeared to be hostile towards her,
he did not show by his acts any desire to fire her from employment. The company
was suffering losses and had to lay off 54 of its employees. Solita could have been
included in the retrenchment but she was not.
Perhaps Solita felt misplaced when she was reassigned to the special projects
group. But petitioner contends that as she had experience and training in personnel
work, M B A units and connections in the Ministry of Labor she was fit for this
assignment. She was not eased out, much less was she forced to resign. This is a case
of voluntary resignation and not a constructive dismissal.

5.2 Not Constructive Dismissal: Resignation to Avoid Dismissal

T h e r e is nothing illegal with the practice of allowing an employee to resign
instead of being separated for just cause, so as not to smear his employment
record. T h e release and quitclaim of the employee cannot be considered coerced,
especially in the light of the fact that the employee is a lawyer who cannot easily
1
be coerced into signing legal documents.

6. I N T E N T I O N TO RESIGN
An employee may be d e e m e d to have resigned from his position, and such
"resignation" may be accepted and made effective by the management, although
the e m p l o y e e did not mention the w o r d "resign" a n d / o r "resignation." This
happened to the chief investigative reporter (later assistant to the publisher)
of the Philippine Star. He sent a "Memorandum for File" to the Chairman-CEO

^icangco vs. N L R C and Metro Drug, G.R. N o . 110261, August 4, 1994.

929
 POST-EMPLOYMENT
ART. 286

expressing his frustrations and disappointments in the office. Indicative of

the resentful and sarcastic tone of the m e m o r a n d u m was the paragraph which
stated:
"It has never occurred to me that, in my acceptance of the invitation
from no less than the publisher himself, to j o i n him x x x, I was unwittingly
signing my own death warrant as well. T h e insults he had later on hurled
at my person, the malicious innuendoes he had spread around, casting
doubts on my personal and professional integrity, had mercilessly torn at
my soul causing metaphysical death."
T h e addressee responded to the m e m o by saying that the board had decided
to accept the "resignation" and that it would take effect upon expiration of the
employee's one-month leave. Expressing surprise over the "acceptance" of his
"resignation," the employee insisted that he did not resign. He subsequently
complained of illegal dismissal.
T h e Supreme Court sustained the labor arbiter's dismissal of the complaint.
"After a thorough scrutiny of the M e m o r a n d u m for File of Respondent A l e g r e
and a careful deliberation on the peculiar circumstances attendant to its writing
and the antecedent, c o n t e m p o r a n e o u s and subsequent actions of private
respondent, we [the Court, speaking through Mr. Justice Panganiban] hold
that said M e m o r a n d u m juridically constituted a letter of resignation. Further,
the Court said: " C o m m o n sense dictates that A l e g r e meant to resign when he
wrote the memorandum. Otherwise, he should have used a m o r e tempered
language and a less confrontational tone." T h e Court gave significant weight to
the employee's confidential position. "As assistant to the publisher, he performs
administration and operations functions aside from his journalistic duties. It
is a position of evident responsibility requiring the utmost confidence of his
immediate superior." Thus, the Court upheld the employer's acceptance of the
1
employee's "resignation."

ART. 286. WHEN EMPLOYMENT NOT DEEMED TERMINATED

T h e bona fide suspension of the operation of a business or undertaking
for a period not exceeding six (6) months, or the fulfillment by the employee
of a military or civic duty shall not terminate employment. In all such cases,
the employer shall reinstate the employee to his f o r m e r position without
loss of seniority rights if he indicates his desire to resume his work not later
than one (1) month from the resumption of operations of his employer or
from his relief from the military or civic duty.

'Philippines Today, Inc., et al. vs. N L R C , et al., G.R. N o . 112965, January 30,
1997.

930
 TERMINATION OF EMPLOYMENT
[Part 7. Termination by Employee
ART. 286
and Suspension of Operation]

C O M M E N T S A N D CASES
1. SUSPENSION OF O P E R A T I O N S ; " F L O A T I N G STATUS"
U n d e r Article 286 of the L a b o r C o d e , the bona fide suspension of the
operation of a business or undertaking for a period not exceeding six months,
or the fulfillment by the employee of a military or civic duty does not terminate
employment. U n d e r this provision, when the bona fide suspension of the operation
of a business or undertaking exceeds six ( 6 ) months, then the employment of
1
the employee shall be d e e m e d terminated.
T h e so-called "floating status" of an employee should last only for a legally
prescribed period of time. W h e n that "floating status" of an employee lasts for
more than six months, he may be considered to have been illegally dismissed from
the service. Thus, he is entitled to the corresponding benefits for his separation,
and this will apply to the two types of work suspension, that is, either of the entire
business or of a specific c o m p o n e n t thereof.

Agro Commercial Security Services, Agency, Inc. vs. National Labor Relations
Commission, G . R . N o s . 82823-24, July 31, 1989 —
Facts: Respondents were security guards. In early 1986, petitioner's service
contracts with various corporations and government agencies to which respondents
were previously assigned had been terminated, generally due to sequestration by the
government. Many of the private respondents were placed on "floating status" which
means an indefinite period of time when respondents do not receive any salary or
financial benefit provided by law. A number of them later obtained employment in
other security agencies.
Because of the uncertainty of their employment, respondents filed a complaint
for illegal dismissal. T h e Labor Arbiter ruled in favor of respondents, which ruling
the N L R C affirmed.
Ruling: Such floating status is not unusual for security guards employed in
security agencies as their assignments primarily depend on the contracts entered
into by the agency with third parties. Such a stipulated status is therefore lawful. The
"floating status" of such employee should last only for a reasonable time.
Here, the arbiter correctly held that when the "floating status" of the employees
lasts for more than six (6) months, they may be considered to have been constructively
dismissed from the service. Thus, they were entitled to the corresponding benefits
for their separation.

It may be recalled that in the case Sebuguero vs. NLRC, the Court construed
Article 286 as an instance of temporary retrenchment or lay-off. Sebuguero cited
under the topic of retrenchment in Article 283.

'International Hardware, Inc. vs. National Labor Relations Commission, G.

N o . 80770, August 10, 1989.

931
 POST-EMPLOYMENT
ART. 286

May a regular employee be placed on "floating status" for six months

although there is no suspension of operations?

Sentinel Security Agency, Inc. vs. NIRC, et al, G.R. N o . 122468, September 3,1998;
Phil. American Life Insurance Co. vs. NLRC, et al, G.R. N o . 122716, September
3, 1998 —
The Agency now explains that since, under the law, the agency is given a
period of not more than six months to retain the complainants on floating status,
the complaint for illegal dismissal is premature. This contention is incorrect.
A floating status requires the dire exigency of the employer's bona fide
suspension of operation, business or undertaking. In security services, this happens
when the clients that do not renew their contracts with a security agency are more
than those that do and the new ones that the agency gets. However, in the case at
bar, the Agency was awarded a new contract by the client. There was no surplus of
security guards over available assignments. If there were, it was because the agency
hired new security guards. Thus, there was no suspension of operation, business or
undertaking, bona fide or not, that would have justified placing the complainants off-
detail and making them wait for a period of six months. If indeed they were merely
transferred, there would have been no need to make them wait for six months. The
only logical conclusion from the foregoing discussion is that the agency illegally
dismissed the complainants.

U n d e r A r t i c l e 286 of the L a b o r C o d e a b o n a fide suspension of the

operation of a business for a period not exceeding six months does not terminate
employment and no notice [ o f termination] n e e d be given to the employee or
1
to D O L E .

'J.A.T. General Services, et al. vs. N L R C , G.R. N o . 148340, January 26, 2004.

932
 Title II
RETIREMENT FROM THE SERVICE

ART. 287. RETIREMENT

A n y e m p l o y e e may be retired u p o n reaching the retirement age
established in the collective bargaining agreement or other applicable
employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have e a r n e d under existing laws and any
collective bargaining agreement and other agreements: Provided, however,
that an employee's retirement benefits under any collective bargaining and
other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing f o r
retirement benefits of employees in the establishment, an employee upon
reaching the age of sixty (60) years or more, but not beyond sixty-five (65)
years which is hereby declared the compulsory retirement age, who has
served at least five ( 5 ) years in the said establishment, may retire and shall
be entitled to retirement pay equivalent to at least one-half ( 1 / 2 ) month
salary for every year of service, a fraction of at least six (6) months being
considered as one whole year.
Unless the parties provide for b r o a d e r inclusions, the term 'one-half
( 1 / 2 ) month salary' shall mean fifteen (15) days plus one-twelfth ( 1 / 1 2 ) of
the 13th-month pay and the cash equivalent of not more than five (5) days
of service incentive leaves.
An underground mining employee u p o n reaching the age of fifty (50)
years or more, but not beyond sixty (60) years which is hereby declared the
compulsory retirement age for underground mine workers, who has served
at least five (5) years as underground mine worker, may retire and shall be
entitled to all the retirement benefits provided for in this Article. ( R . A . N o .
8558, approved on February 26, 1998.)
Retail, service and agricultural establishments or operations employing
not more than ten (10) employees or workers are exempted from the coverage
of this provision.
Violation of this provision is hereby declared unlawful and subject to
the penal provisions provided under Article 288 of this C o d e .

933
 POST-EMPLOYMENT
ART. 287

C O M M E N T S A N D CASES
1. PREVIOUS LAW A N D ITS A M E N D M E N T S
Article 287, as worded above, incorporates the changes made by R.A.
N o . 7641, approved on December 9, 1992 and by R . A . N o . 8558, approved on
February 26, 1998. T h e previous provision read:
Article 287. Retirement. — A n y employee may be retired upon reaching
the retirement age established in the collective bargaining agreement or
other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining or other agreement.
This old provision has to be amended because the Supreme Court had
interpreted it as not a source of retirement benefit if there was no collective
bargaining a g r e e m e n t or voluntary company policy granting such benefit.
Explained the Court in Llora Motors, Inc. vs. Drilon ( G . R . N o . 82895, N o v e m b e r
7, 1989):
U n d e r Article 287 [before a m e n d m e n t by R . A . 7641] entitlement
to retirement benefits may accrue either ( a ) under existing laws, or ( b )
under a collective bargaining agreement or other e m p l o y m e n t contract.
Said article does not itself purport to impose any obligation upon employers
to set up retirement scheme for their employees over and above that
already established under existing law. It recognizes that existing laws
already provide for a scheme by which retirement benefits may be earned
or accrue in favor of employees, as part of a broader social security system
that provides not only for retirement benefits but also death and funeral
benefits, permanent disability benefits, sickness benefits and maternity
leave benefits.

LI Amendments b y R . A . N o . 7641 and R . A . N o . 8558

R . A . N o . 7641, authored principally by Senator Ernesto F. Herrera, has
amended Article 287 to overturn the effect of the Llora Motors ruling.
T h e consolidated bill that eventually became R . A . N o . 7641, was passed
on October 29, 1992, signed by the President on D e c e m b e r 9, 1992, and took
1
effect on January 7, 1993.
Further amendments came through R . A . N o . 8558, approved on February
26, 1998. T h e fifth paragraph of the present A r t i c l e was a d d e d regarding
underground mine workers. R . A . 8558 lowered the retirement age o f mine
2
workers to 50, thereby amending the SSS law.

'Oro Enterprises vs. N L R C and Loreto Cecilio, G.R. N o . 110861, November

14, 1994.
2
Opinion of Dept. of Justice, October 1, 1999.

934
 RETIREMENT FROM THE SERVICE
ART. 287

1.2 Coverage
T h e retirement pay law under this article applies to private sector employees
w h o have served the employer establishment for at least five years and reached
age sixty (for optional retirement) or sixty-five (for compulsory retirement). It
covers either full-time or part-time employees, regular or non-regular.
But it does not cover g o v e r n m e n t employees and employees of retail,
service and agricultural establishments or operations that regularly employ not
1
m o r e than ten (10) employees.

2. R E T I R E M E N T DEFINED
In the case of Brion vs. South Philippine Union Mission of the Seventh Day
Adventist Church, G.R. N o . 135136, May 19, 1999, M m e . Justice R o m e r o defines
retirement.
Retirement has been defined as a withdrawal from office, public
station, business, occupation, or public duty. It is the result of a bilateral
act of the parties, a voluntary agreement between the employer and the
e m p l o y e e whereby the latter, after reaching a certain age, agrees a n d /
or consents to sever his e m p l o y m e n t with the former. In this connection,
the m o d e r n socio-economic climate has fostered the practice of setting
up pension and retirement plans for private employees, initially through
their voluntary adoption by employers, and lately, established by legislation.
Pension schemes, while initially humanitarian in nature, now concomitantly
serve to secure loyalty and efficiency on the part of employees, and to
increase continuity of service and decrease the labor turnover, by giving
to the employees some assurance of security as they approach and reach
the age at which earning ability and earnings are materially impaired or
at an end.
It must be noted, however, that the nature of the rights conferred by
a retirement or pension plan depends in large measure upon the provisions
of such particular plan. Article 287 of the Labor C o d e provides: x x x
From the above, it can be gleaned that employer and employee are
free to stipulate on retirement benefits, as long as these do not fall below
the floor limits provided by law.

2.1 Conditions f o r Entitlement to Retirement, N o t Continuing

Because retirement ends e m p l o y m e n t , the employer cannot demand
continuing service from the retiree as a condition to the receipt and enjoyment
of the retirement benefit. For instance, a church minister retired after 34 years
of service. In line with practice and the church's retirement plan, the employee
was given monthly retirement benefit. But sometime thereafter, the retiree

'Handbook of Workers' Statutory Monetary Benefits, published by the Bureau

of Working Conditions, 2006, pp. 44-46.

935
 POST-EMPLOYMENT
ART. 287

formed a rival religious group; he disparaged and criticized his former church.
Retaliating, the church excommunicated him, dropped him from the Church
Record Book, and discontinued the monthly retirement benefit. T h e retiree
complained. T h e church insisted that an employee must "devote his life to the
work of the [church]" even after retirement to continue enjoying retirement benefits.
It cited its retirement plan which states that it is "for those who have devoted their
lives to the work of the [church]. . ."
T h e Supreme Court, through the illustrious pen of M m e . Justice R o m e r o ,
ruled that the argument negates the very concept of retirement.
As earlier defined, retirement means to withdraw from one's office,
occupation, or duty. To require petitioner (retiree) to continue "devoting
his life to the work of the Seventh-day Adventist Church" would mean that
petitioner never really withdraws from his office or occupation, that of
working for the church. It is an oxymoron to retire an employee and yet
require him to continue working for the same employer. This Court cannot,
thus, give its imprimatur to SDA's theory. We rule that the conditions of
eligibility for retirement must be met at the time of retirement at which
juncture the right to retirement benefits or pension, if the employee is
eligible, vests in him. (Brion vs. South Philippine Union Mission of the Seventh
Day Adventist Church, et al., G.R. No. 135136, May 19, 1999.)

3. T W O KINDS O F R E T I R E M E N T ; EMPLOYEE'S O P T I O N
A r t i c l e 287, as a m e n d e d , p r o v i d e s for two types of r e t i r e m e n t : ( a )
compulsory, and ( b ) optional. T h e first takes place at age 65, while the second
is primarily d e t e r m i n e d by the collective b a r g a i n i n g a g r e e m e n t or o t h e r
employment contract or employer's retirement plan. In the absence of any
provision on optional retirement in a collective bargaining agreement, other
employment contract, or employer's retirement plan, an employee may optionally
retire upon reaching the age of 60 years or m o r e , but not beyond 65 years,
provided he has served at least five years in the establishment concerned. That
1
prerogative is exclusively l o d g e d in the employee. Thus, in a case where the
employee complained of being retired compulsorily even though he was not yet
65 years old, his complaint was ruled meritorious because the option to retire
at age below 65 is given by law to the e m p l o y e e , not to the employer. However,
the same employee had received from his employer, while the case was pending,
the retirement and other accrued benefits. By such acceptance of retirement
2
benefits, the employee was d e e m e d to have o p t e d to retire.
In another case, the petitioner was told, at the beginning of his employment,
that those who are not covered by the C B A , like the petitioner, would be entitled
to benefits, which would be equivalent to, if not higher than, those provided in

•Capili vs. N L R C , et al., G.R. N o . 120802, June 17, 1997.

Ibid.

936
 RETIREMENT FROM THE SERVICE
ART. 287

the C B A . Such an agreement between the employer and the petitioner (a credit
and collection manager) constitutes the "applicable employment contract"
m e n t i o n e d in the first sentence of Article 287 of the Labor C o d e . H e n c e ,
1
petitioner may claim retirement benefits.

3.1 Employer's Option

W h e r e the C B A itself gives the option to retire to either the employer or the
employee, such provision is valid, and the employer's act of retiring an employee
w h o is of retirable age as defined in the C B A is a valid exercise of the option.
It is not illegal dismissal and not union busting. A n d since the C B A does not
so require, the employer does not have to consult the employee before retiring
him. For the Secretary of L a b o r to impose this condition of prior consultation
is in effect to amend the C B A , an act he is not authorized to do even under the
2
"assumption power" under Article 263(g) of the Labor C o d e .

3.2 Is Compulsory Retirement Below Age 60 Allowable?

Is a C B A provision allowing compulsory retirement before age 60 but after
twenty-five years of service legal and enforceable? T h e answer is in Pantranco
North Express vs. NLRC and U. Suniga, G.R. N o . 95940, July 24, 1996:
A r g u i n g that the law on compulsory retirement age is open-ended,
as indicated by the use of the w o r d "may", the Solicitor General maintains
that there is no prohibition against parties fixing a lower age for compulsory
retirement.
Additionally, the Solicitor General and the petitioner contend that a
C B A provision lowering compulsory retirement age to less than sixty (60)
is not contrary to law because it does not diminish the employee's benefits.
T h e y argue that early retirement constitutes a reward of employment, and
therefore, retirement pursuant to the C B A provision in question cannot
be considered a dismissal, following this Court's ruling in Soberano vs. Clave
(99 SCRA 549, 558-559, August 29, 1989).
T h e Court upheld the view of the petitioner and the Solicitor General.
Article 287 of the Labor C o d e as w o r d e d permits employers and employees to
fix the applicable retirement age at below 60 years. T h e Court explained further:
' T h e amended provision makes clear the intention and spirit of the law to give
employers and employees a free hand to determine and agree upon the terms
and conditions of retirement. Providing in a C B A for compulsory retirement
of employees after twenty-five (25) years of service is legal and enforceable so
long as the parties agree to be governed by such C B A . T h e law presumes that

'Martinez vs. N L R C , GMCR, Inc. and M.A.Javier, G.R. N o . 118743, October

12, 1998.
'^Philippine Airlines, Inc. vs. Airline Pilots Association of the Philippines, G.R.
N o . 14386, January 15, 2002.
937
 POST-EMPLOYMENT
ART. 287

employees know what they want and what is g o o d for them, absent any showing
that fraud or intimidation was employed to secure their consent thereto."
T h e stipulation in the C B A that a pilot will be retired after 20 years of
service or after flying 20,000 hours even though the pilot is less than 60 years
1
old is valid.
Similarly valid is a non-contributory retirement plan under which the
employer may retire an employee, regardless of age, with twenty years of service.
Such retirement plan, made known to the employees and accepted by them,
2
forms part of the employment contract.
T h e management's act of compulsorily retiring an employee below age 60,
pursuant to a C B A provision, does not constitute U L P even if the employee is
an active union officer. Thus, the Supreme Court ruled through the perceptive
pen of Mr. Justice Tinga in a 2006 case.

Cainta Catholic School and Msgr. Mariano T. Balbago vs. Cainta Catholic School-
Employees Union, G.R. N o . 151021, May 4, 2006 —
Ruling: T h e law and this Court frown upon unfair labor practices by
management, including so-called union-busting. Such illegal practices will not be
sustained by the Court, even if guised under ostensibly legal, premises. But with
respect to an active unionized employee who claims having lost his/her j o b for union
activities, there are different considerations presented if the termination is justified
under just or authorized cause under the Labor Code, and if separation from service
is effected through the exercise of a duly accorded management prerogative to retire
an employee. There is perhaps a greater imperative to recognize the management
prerogative on retirement than the prerogative to dismiss employees for just or
authorized causes. For one, there is a greater subjectivity, not to mention factual
dispute, attached to the concepts of just or authorized cause than retirement which
normally contemplates merely the attainment of a certain age or a certain number of
years in the service. It would be easier for management desirous to eliminate pesky
union members to abuse the prerogative of termination for such purpose since the
determination of just or authorized cause is rarely a simplistic question, but involves
facts highly prone to dispute and subjective interpretation.
On the other hand, the exercise by management of its retirement prerogative
is less susceptible to dubitability as to the question whether an employee could be
validly retired. T h e only factual matter to consider then is whether the employee
concerned had attained the requisite age or number of years in service pursuant to
the CBA or employment agreement, or if none, pursuant to Article 287 of the Labor
Code. In fact, the amount of retirement benefits is more likely to be questioned than
the retirement itself. Evidently, it more clearly emerges in the case of retirement

'Philippine Airlines, Inc. vs. Airline Pilots Association of the Philippines, G.R.
N o . 143686January 15, 2002.
Progressive Development Corp., et al. vs. N L R C , et al, G.R. N o . 138826, October
30, 2000.

938
 RETIREMENT FROM THE SERVICE
ART. 287

that management would anyway have the right to retire an employee, no matter the
degree of involvement of said employee in union activities.
There is another point that militates against the Union. A ruling in its favor is
tantamount to a concession that a validly drawn management prerogative to retire its
employees can be judicially interfered on a showing that the employee in question
is highly valuable to the union. Such a rule would be a source of mischief, even if
narrowly carved out by the Court, for it would imply that an active union member or
officer may be, by reason of his/her importance to the union, somehow exempted
from the normal standards of retirement applicable to the other, perhaps less vital
members of the union. Indeed, our law's protection of the right to organize labor
does not translate into perpetual j o b security for union leaders by reason of their
leadership role alone. Should we entertain such a notion, the detriment is ultimately
to the union itself, promoting as it would a stagnating entrenched leadership.
We can thus comfortably uphold the principle, as reiterated in Philippine
Airlines, [cited above] that the exercise by the employer of a valid and duly established
prerogative to retire an employee does not constitute unfair labor practice.

3.2a Employee's Assent to the Retirement Plan

T h e rulings above, upholding company policy of compulsory retirement
below age 60 or 65, presuppose free conformity by the employee affected.
In o n e case the c o m p a n y ' s r e t i r e m e n t plan automatically retires an
employee "upon reaching age 65" or "after 35 years of service." T h e complaining
e m p l o y e e has c o m p l e t e d 35 years of service but she was only 57 years of age.
May she be c o m p e l l e d to retire? Yes, if the employer can prove she has freely
assented to that plan.

Jaculbe vs. Silliman University, G.R. N o . 156934, March 16, 2007 —

In this case, neither the CA nor the [employer University] cited any agreement,
collective or otherwise, to justify the latter's imposition of the early retirement age
in its retirement plan, opting instead to harp on petitioner's [employee's] alleged
"voluntary" contributions to the plan, which was simply untrue. The truth was that
petitioner had no choice but to participate in the plan, given that the only way she
could refrain from doing so was to resign or lose her j o b .
N o t only was petitioner [employee] still a good eight years away from the
compulsory retirement age but she was also still fully capable of discharging her
duties as shown by the fact that respondent's board of trustees seriously considered
rehiring her after the effectivity of her "compulsory retirement."
As already stated, an employer is free to impose a retirement age less than 65
for as long as it has the employees' consent. Stated conversely, employees are free to
accept the employer's offer to lower the retirement age if they feel they can get a better
deal with the retirement plan presented by the employer. Thus, having terminated
petitioner solely on the basis of a provision of a retirement plan which was not freely
assented to by her, respondent [employer] was guilty of illegal dismissal.

939
 POST-EMPLOYMENT
ART. 287

4. NEW RETIREMENT LAW GIVEN R E T R O A C T I V E EFFECT

Oro Enterprises, Inc. vs. NLRC and L. L. Cecilio, G.R. N o . 110861, November
14, 1994 —
Issue: In the instant petition Oro Enterprises ascribes grave abuse of discretion
on the part of the NLRC in applying R.A. N o . 7641. Petitioner argues that the law,
which became effective only on January 7, 1993, cannot be given any such retroactive
effect as to cover private respondent who, at age 65, retired from employment on
September 3, 1990.
The pivotal issue is whether or not R.A. N o . 7641 can favorably apply to private
respondent's case [which was pending resolution at the N L R C when the law took
effect].
Ruling: R.A. 7641 is undoubtedly a social legislation. The law has been enacted
as a labor protection measure and as a curative statute that — absent a retirement
plan devised by, an agreement with, or a voluntary grant from, an employer — can
respond, in part at least, to the financial well-being of workers during their twilight
years soon following their life of labor. There should be little doubt about the
fact that the law can apply to labor contracts still existing at the time the statute
has taken effect, and that its benefits can be reckoned not only from the date of
the law's enactment but retroactively to the time said employment contracts have
started.
Republic Act 7641 took effect on January 7, 1993, while the appeal of private
respondent was still pending consideration by the N L R C . Still for determination at
the time was, among other things, the issue of whether or not private respondent
has, in fact, been effectively retired.
Petitioner asserts that private respondent has never reported for work after the
rejection of her application for retirement benefits. This claim is denied by private
respondent, who avers that she did report for work again but that petitioner has
refused to accept her on the ground of abandonment of duty. T h e Labor Arbiter
[Edilberto J. Pangan] has made these findings:
Sa sinasabi ng isinusumbong na ang nagsusumbong daw ay kusang-loob na
tinalikuran ang paglilingkod (abandonment of work) ay mahirap paniwalaan. Ang
isang manggagawa na iningatan ang matapat niyang paglilingkod sa bob ng mahabang
panahon, ay hindi basta na lamang lilisan at ipahahamak ito. Ang isang manggagawa
na sa kanyang huling taon nang paglilingkod, ay walang dahilan na karaka-raka na
lilisan ito upang ang biyayang tatanggapin ay masalalay sa alinlangan. Ang sinasabing
pag-lisan ay hindi na-aayon sa katotohanan ng pangyayari (natural course of events),
kaya't hindi namin ito masasang-ayunan. xxx
The N L R C supportively said:
After all, the least that could be said here is that the complainant filed
her claim for retirement pay only on January 7, 1993 the date R.A. N o . 7641
took effect and that against the backdrop that she retired only on September
15, 1990, her monetary claim could be treated as well filed within the three
(3) years prescriptive period set by law x x x .

940
 RETIREMENT FROM THE SERVICE
ART. 287

Given the above findings, which must be accorded due respect, we cannot see
our way clear to attributing to N L R C grave abuse of discretion in concluding thereby
that private respondent's claim for retirement benefits should accordingly be held
to fall within the ambit of Republic Act N o . 7641.

4.1 Conditions f o r Retroactive Application

Eight months after the Oro ruling, the Court did not apply it in another
case where the claimant had ceased employment before January 7, 1993. T h e
Court explains:
We read Oro Enterprises as h o l d i n g that R . A . N o . 7641 may be given
retroactive effect where —
(1) the claimant for retirement benefits was still the employee of the
employer at the time the statute took effect; and
( 2 ) the claimant was in compliance with the requirements for eligibility
under the statute for such retirement benefits.
In the instant case, the complaints of private respondents (employees) were
still being resolved on the labor arbiter level when R.A. N o . 7641 took effect.
However, it was quite clear, and both the labor arbiter and the N L R C so held,
that private respondents had ceased to be employees of petitioner, by reason of
voluntary resignation, beTore~the statute went into effect.
Moreover, it appears that private respondents did not qualify for the benefits
of R . A . N o . 7641 under the terms of this law itself... T h e applicable retirement age
is the optional retirement age of 60 years according to Article 287. Unfortunately,
at the time private respondents stopped working for petitioner, they had not yet
1
reached the age of sixty years. T h e Court reiterated the CJC ruling in Philippine
Scout Veterans Security & Investigation Agency vs. NLRC, G.R. N o . 115019, April 14,
1997.

5. A M O U N T OF R E T I R E M E N T PAY
T h e retirement pay is equal to half-month's pay per year of service. But
"half-month's pay" is "expanded" because it means not just the salary for 15
days but also one-twelfth of the 13th-month pay and the cash value of five-day
service incentive leave, totalling 22.5 days. This is the minimum. T h e retirement
pay package can be i m p r o v e d upon by voluntary company policy, or particular
agreement with the employee, or through a collective bargaining agreement.
For instance, in the company-initiated retirement plan at U N I L A B , the
retirement age is 60, and the basis of retirement amount is "monthly basic salary
which excludes commissions, overtime, bonuses, or extra compensation. When a
director of U N I L A B retired at age 60 after 25 years' service, he filed a complaint
to claim the value of thirteenth month pay and service incentive leave which

'CJC Trading vs. N L R C and R. Ausan, et al., G.R. N o . 115884, July 20, 1995.

941
 POST-EMPLOYMENT
ART. 287

under Article 287 of the Labor C o d e are part of the statutory retirement formula.
In fact, however, the complainant had received one and one-half month's pay
per year of service under U N I L A B ' s retirement plan, higher than the 22.5 days
per year under the C o d e . Thus, the court upheld the plan together with the
1
exclusions in its definition of "basic salary."
T h e basis of computation of the retirement amount should be the C B A
between the parties where such C B A or the company's retirement plan provides
2
for retirement benefit greater than that under the Labor C o d e .
For covered workers who are paid by results and do not have a fixed
monthly salary rate, the basis for the determination of the salary for fifteen days
shall be their average daily salary ( A D S ) . T h e A D S can be derived by dividing
the total salary or earnings for the last twelve months reckoned from the date
of retirement by the number of actual working days in the particular period,
provided that the determination of rates of payment by results is in accordance
3
with the regulations.
T h e retirement pay payable under Article 287, as amended, is apart from the
retirement benefit claimable by the qualified e m p l o y e e under the social security
law. This has to be so because R . A . 7641 in its Section 2 states that "Nothing in
this Act shall deprive any employee of benefits to which he may be entitled under
existing law or company policies or practices."
Upon optional or compulsory retirement, the employee is likewise entitled,
under the law, to the proportionate 13th month pay for the calendar year and
4
to the cash equivalent of accrued leave benefits, if demandable.

6. RETIREMENT BENEFITS ASIDE F R O M S E P A R A T I O N PAY; D I S T I N C T I O N

M a y a n e m p l o y e e c l a i m r e t i r e m e n t b e n e f i t s a n d s e p a r a t i o n pay
simultaneously?
T h e Supreme Court ruled affirmatively in the case of University of the East
vs. UE Faculty Association ( G . R . N o . 74007, July 31, 1987).
U E c o n t e n d e d that there can only b e o n e m o d e o f t e r m i n a t i o n o f
employment with o n e and the same e m p l o y e e or a set of employees. It argued
that faculty members of the phased-out units cannot be considered retired and
therefore entitled to retirement benefits and, at the same time, retrenched with
right to separation pay. T h e two modes would doubly enrich them at the expense
of the school.

'Oxales vs. United Laboratories, G.R. N o . 152991, July 21, 2008.

Philippine Airlines, Inc. vs. Airline Pilots Association of the Philippines, G.R.
N o . 1143686, January 15, 2002.
3
Rules Implementing R.A. N o . 7641, Sec. 5.3.
4
BWC Handbook on Workers' Statutory Monetary Benefits, 2010. See: R & E
Transport vs. Latag, G.R. N o . 155214, February 13, 2004; Enriquez Security Services
vs. Cabotaje, G.R. N o . 147993, July 21, 2006.

942
 RETIREMENT FROM THE SERVICE
ART. 287

Ruling in favor of the teachers, the Minister of Labor explained that faculty
members affected by the phase-out were awarded separation pay because UE
failed to show that their termination from employment was due to a valid or
authorized cause. T h e award for retirement benefits was ordered pursuant to
the C B A provisions regardless of the cause of separation.
T h e S u p r e m e C o u r t r u l e d that separation pay arising f r o m f o r c e d
termination on o n e hand, and benefits given as a contractual right due to many
years of faithful service, on the other, do not necessarily exclude each other.
T h e Court noted that the retirement scheme has b e c o m e in effect a part
of UE's policy. It should be enforced separately from the provision of the Labor
Code.
M o r e than 10 years before the above UE case, the Court had already
ruled that an e m p l o y e e dismissed without cause is entitled to separation pay
and to retirement benefits where both Labor A g r e e m e n t and Termination Pay
Law do not preclude said e m p l o y e e from recovering other benefits. "There is
nothing in the labor agreement entered into by the employer with the Batangas
Transportation Employees Association of which the e m p l o y e e is a m e m b e r
barring the latter from recovering whatever benefits he is entitled to under the
law additional to the gratuity benefits under the labor agreement between him
and his employer. N e i t h e r is there any provision in the Termination Pay Law
(Republic A c t N o . 1052, as amended by Republic A c t N o . 1787) that an employee
w h o receives his termination pay upon separation from the service without
cause is precluded from recovering other benefits agreed upon by him and his
employer. In the absence of any such prohibition, both in the aforesaid Labor
A g r e e m e n t and the Termination Pay Law, the e m p l o y e e has the right to recover
from the employer whatever benefits he is entitled to under the Termination
Pay Law in addition to other benefits conferred upon him by the aforesaid labor
1
agreement."
T h e above rulings in BLTB (1976) and UE (1987) were applied in the case
of Aquino vs. Otis Elevator, decided in 1992. T h e Court phrased the issue:
" T h e p e t i t i o n e r s ' services w e r e t e r m i n a t e d o n the g r o u n d o f
retrenchment, and they received separation pay double that required by
the Labor C o d e . Thereafter, they demanded retirement benefits, invoking
the Retirement Plan of the respondent company which they said was
contractual rather than statutory. T h e question eventually submitted to
the labor authorities was, having received the separation pay, were the
petitioners still entitled to the retirement benefits? T h e Labor Arbiter said
they were, but the N L R C reversed him. T h e issue is now before us for final
resolution."

'BLTB Co. vs. Court of Appeals, 71 SCRA 470 [1976].

943
 POST-EMPLOYMENT
ART. 287

T h e Court resolved the issue affirmatively and, quoting past decisions, took
occasion to differentiate separation from retirement benefit. It said:
It is important at the outset to note the distinction between separation
pay and retirement benefits.
Separation pay is required in the cases enumerated in Articles 283
and 284 of the Labor C o d e , which include retrenchment, and is computed
at least one month salary or at the rate of one-half month salary for every
year of service, whichever is higher. We have held that it is a statutory right
designed to provide the employee with the wherewithal during the period
that he is looking for another employment. (Quoting Santos vs. NLRC, 154
SCRA 166, 172.)
On the other hand, retirement benefits, where not mandated by law,
may be granted by agreement of the employees and their employer or as a
voluntary act on the part of the employer. Retirement benefits are intended
to help the employee enjoy the remaining years of his life, lessening the
burden of worrying for his financial support, and are a form of reward
for his loyalty and service to the employer. (Quoting Laginlin vs. WCC, 159
SCRA 91, 99.)
Recalling its decisions in BLTB and UE, the Court concluded:
We have carefully e x a m i n e d the r e c o r d , and particularly the
Collective Bargaining A g r e e m e n t and the R e t i r e m e n t Plan, and have
found no specific prohibition against the payment of both benefits to the
employee.
T h e Court's examination of the C B A of Otis Company and its Retirement
Plan led the Court to make the following observation and advice:
T h e Court feels that if the private respondent really intended to make
the separation pay and the retirement benefits mutually exclusive, it should
have sought inclusion of the corresponding provision in the Retirement
Plan and the Collective Bargaining A g r e e m e n t so as to r e m o v e all possible
ambiguity regarding this matter.
We may presume that the counsel of the respondent company was
aware of the prevailing doctrine e m b o d i e d in the cases earlier cited.
Knowing this, he should have made it a point to categorically provide in
the Retirement Plan and the C B A that an e m p l o y e e w h o had received
separation pay would no longer be entitled to retirement benefits. Or to
put it m o r e plainly, collection of retirement benefits was prohibited if the
employee had already received separation pay.
T h e private respondent argues that it had paid the petitioners
m o r e than what the law requires by giving them separation pay at the
rate of o n e month instead of one-half month for every year of service.
T h e suggestion is that the company had been m o r e than liberal and that

944
 RETIREMENT FROM THE SERVICE
ART. 287

to require it to pay the retirement benefits as well would be a strain on

its b e n e v o l e n c e .
T h e petitioners are not pleading for generosity but demanding
their rights. T h e s e rights are e m b o d i e d in the Collective Bargaining
A g r e e m e n t , which was the result of negotiations between the company
and the employees. (Aquino, et al. vs. National Labor Relations Commission
and Otis Elevator Company, G.R. No. 87653, February 11, 1992.)

Salomon, et al. vs. Association of International Shipping Lines, Inc., G.R. N o . 156317,
April 26, 2005 —
Facts: Petitioner employees contend that the Court of Appeals erred in holding
that they are not entitled to retirement benefits. Petitioners invoke Sections 1 and
3 of the parties' Collective Bargaining Agreement ( C B A ) expressly providing that
retirement benefits may be granted to them in addition to their separation pay.
They likewise call attention to Aquino vs. NLRC [see above] holding that payment of
separation benefits does not exclude payment of retirement benefits.
For its part, respondent employer maintains that the parties' CBA expressly
prohibits the payment of retirement benefits to employees terminated for cause, thus,
petitioners' reliance on Aquino vs. NLRC is misplaced. Moreover, they executed valid
quitclaims.
Ruling: While it is axiomatic that retirement laws are liberally construed in
favor of the persons intended to be benefited, however, such interpretation cannot
be made in this case in light of the clear lack of consensual and statutory basis of the
grant of retirement benefits to petitioner. (Emphasis in original)
T h e parties' CBA provides:
"Section 1. In case of termination due to redundancy, retrenchment,
dissolution of a d e p a r t m e n t / c o n f e r e n c e / s e c t i o n a n d / o r the whole
A S S O C I A T I O N , sickness or physical disability, a regular employee shall be
entitled to a separate [sic] pay equivalent to his one (1) month basic pay for
every year of service. A fraction of at least six (6) months shall be considered as
one (1) whole year and less than six (6) months shall be prorated accordingly,
xxx xxx
Section 3. Optional Retirement — An employee shall have the option
to retire regardless of age provided he/she has rendered at least 15 years of
continuous service to the A S S O C I A T I O N . An employee shall be entitled to
the following benefits.
a. 15 to less than 20 years of service — 50% of the monthly basic
salary for every year of service.
b. 20 years of service — 10% of the monthly basic salary for every
year of service."
Obviously, petitioners, as prescribed by the parties' CBA, are entitled only to
either the separation pay, if they are terminated for cause, or optional retirement
benefits, if they rendered at least 15 years of continuous services.

945
 POST-EMPLOYMENT
ART. 287

Here, petitioners were separated from the service for cause. Consequently,
pursuant to the CBA, what each actually received is a separation pay. Accordingly and
considering their Releases and Quitclaims, they are no longer entitled to retirement
benefits. (Emphasis in original)
It bears stressing that as held by the Labor Arbiter, the N L R C and the Court of
Appeals, there is no provision in the parties' CBA authorizing the grant to petitioners
of retirement benefits in addition to their retrenchment pay; and that there is no
indication that they were forced by respondent to sign the Releases and Quitclaims.

In the Salomon decision above, the Court repeated, through a footnote,

its advice for precision in C B A language — an advice it gave in the Aquino case
thirteen years before. Indeed, how easy it would be to say in the C B A that receipt
of the one benefit excludes the other, if that were the agreement. T h e n divergent
interpretations and disharmonious litigation would not arise.

6.1 Gratuity Pay Distinguished from Retirement Benefit

Gratuity pay is separate and distinct from retirement benefits. It is paid
purely out of generosity. Republic Planters Bank v. NLRC holds:
Gratuity pay x x x is paid to the beneficiary for the past services or
favor rendered purely out of the generosity of the giver or grantor. Gratuity,
therefore, is not intended to pay a worker for actual services rendered
or for actual performance. It is a m o n e y benefit or bounty given to the
worker, the purpose of which is to reward employees w h o have rendered
satisfactory service to the company. (Underscoring supplied)
Retirement benefits, on the other hand, are intended to help the
employee enjoy the remaining years of his life, releasing him from the
burden of worrying for his financial support, and are a f o r m of reward for
his loyalty to the employer. (Producers Bank of the Philippines v. NLRC, 298
SCRA 517, 524 (1998) [citation omitted]. Sta. Catalina College, et al. vs. NLRC
and Tercero, G.R. No. 144483, November 19, 2003.)
A known chain of restaurants, for example, has a gratuity plan for its
personnel. U n d e r the plan an e m p l o y e e w h o leaves the company after at least
five years o f continuous service in full-time, regular status will receive a "gratu-
ity" ranging from 45% to 75% of his monthly pay d e p e n d i n g on his years of
service; the longer the years of service, the bigger the gratuity. It is given when
the employee resigns or leaves for any reason before age 60. By age 60 onwards,
Article 287 of the Labor C o d e will apply. T h e gratuity is also called (voluntary)
resignation pay.

7. UNJUSTD7IED D E N I A L OF R E T I R E M E N T BENEFIT
E. Razon, Jr., et al vs. NLRC, G.R. N o . 80502, May 7, 1990 —
Facts: E. Razon claims that management is vested with discretion to approve
or disapprove an employee's claim for retirement under the Retirement Plan,

946
 RETIREMENT FROM THE SERVICE
ART. 287

which states that "any official and employee who is 65 years old and upon discretion
of the management, shall be qualified to compulsory retirement from the company
with benefits as provided in this plan." Thus, when Razon discovered the loss of
vital books of account and found the employee "guilty of breach of trust," he
claims to have a valid ground to terminate Garzota's services without retirement
benefit.
Ruling: T h e words "upon the discretion of management" are not synonymous
with absolute or unlimited discretion. Management discretion may not be exercised
arbitrarily or capriciously especially with regard to implementation of the retirement
plan. Upon acceptance of employment, a contractual relationship was established,
giving Garzota an enforceable vested interest in the retirement fund. The retirement
scheme became an integral part of his employment package and the benefits to be
derived therefrom constituted a continuing consideration for services rendered,
as well as an effective inducement for remaining with the firm.
Having rendered 20 years of services with Metroport Services, Inc., Garzota
has already acquired a vested right to the retirement fund, and a right which can
only be withheld upon a clear showing of g o o d and compelling reasons.
T h e reported loss of confidence was due to the disappearance of certain books
of account. Simply because Garzota could not produce the needed books on demand,
petitioners found Garzota no longer worthy of trust and confidence and abruptly
dismissed him without giving him a chance to explain his side. There was not the
slightest pretense of fair play. Had petitioners been less hasty and conducted an
investigation, they would have found that in 1982 a fire gutted a portion of Razon's
warehouse destroying books, records and vouchers.
In further support of their refusal to give respondent his retirement benefits, E.
Razon argued that the discharged employee impliedly withdrew his intention to retire
when he joined Marina Port Services, Inc. But the fact that he sought employment
elsewhere should not hinder him from claiming his retirement services. At 65 years,
he reached the mandatory age for retirement, and therefore qualified to retire. We
have here an ironic situation where instead of enjoying the fruits of his retirement,
Garzota was forced to seek reemployment for his survival. Garzota does not deserve
such a pathetic end to his faithful service to Petitioners.

7.1 Separation Disguised as Retirement

5. Villena vs. NLRC and Batangas, Laguna, Tayabas Bus Co., G.R. N o . 90664,
February 7, 1991 —
Facts: Mr. Villena started working with Batangas, Laguna and Tayabas Bus
Company (BLTB Co.) as a bus conductor when he was only twenty-five years old. He
rose from the ranks until he became the traffic operations manager in 1987 at the
age of fifty-seven (57), directing the traffic operations with three traffic supervisors
under him.
On April 30, 1987 he received the shock of his life when a letter was handed to
him by a company official, advising that he was compulsorily retired from the service
effective immediately. T h e letter read in part:

947
 POST-EMPLOYMENT
ART. 287

Sad to state our company has been incurring big losses since 1985. In
our determination to keep the company going, we have exerted the best of
our efforts and talents to solve the problem but still the losses continued to
grow to the extent that the whole company is now endangered.
Villena filed a complaint of illegal dismissal against the company.
Ruling: Why Villena was singled out for compulsory retirement when he was
only 57 years old and after having served thirty-two (32) years in the company, has
not been explained. While the purpose was allegedly to carry out a retrenchment
program to cut losses, the legal procedure for the retrenchment of personnel was
not followed, to wit: (1) one-month prior notice to the employee as prescribed by
law was not given; (2) no fair and reasonable criteria were used in carrying out the
retrenchment program; such as (a) less-preferred status (i.e., temporary employees),
( b ) efficiency rating, and (c) seniority; and (3) no proof of the alleged financial
losses suffered by the company was produced. It appears, therefore, that the so-called
"compulsory retirement" was a scheme employed by the company to terminate
Villena's employment without complying with the due process requirements of the
law and without regard for his right to security of tenure.
T h e "compulsory retirement" of Villena was in effect a dismissal in violation
of law. He still had a full three years to serve the company when his employment
was peremptorily terminated by his employer. Having been illegally dismissed,
he is entitled to receive full compensation for the remaining three years of his
work life. U p o n reaching age sixty ( 6 0 ) , he may be retired and shall be entitled
to receive the normal retirement benefits under the company's applicable bona
fide retirement plan or established company policy, or, in the absence thereof, as
provided in Section 14, Book VI [ n o w ] of the Implementing Regulations of the
Labor Code.
T h e questioned decision is annulled and set aside and a new one is entered
ordering the private respondent Batangas, Laguna, Tayabas Bus Co., to pay the
petitioner Sabas Villena, his full backwages, allowances and other benefits for a period
of three (3) years after his illegal dismissal from the service on April 24, 1987, until
he reached the compulsory retirement age, plus his retirement benefits equivalent
to his gross monthly pay, allowances and other benefits for every year of service up
to age sixty (60), which is the normal retirement age for him.

7.2 Dismissal to Avoid Retirement Benefits

If it is wrong to ostensibly retire an e m p l o y e e w h o actually is retrenched,
it is likewise wrong, and probably m o r e reprehensible, to dismiss an employee
to avoid paying his retirement benefit.
In a 1981 case, the Supreme Court said that a company should exercise
caution and care in dealing with its employees to prevent suspicion that its
dismissal of an employee is only a scheme to evade its responsibility of granting
retirement benefits. In the case at bar, it should not have waited until petitioner

948
 RETIREMENT FROM THE SERVICE
ART. 287

employee applied for retirement to have taken adverse action against him for a
1
cause it had already knowledge of.

8. E X T E N S I O N OF SERVICE OF RETIREE
Upon the compulsory retirement of an employee or official in the public or
private service, his employment is deemed terminated. The matter of extension
of service of such employee or official is addressed to the sound discretion of the
employer. It is a privilege only the employer can grant. The employer would be the
best judge as to the grounds that may warrant a grant or denial of the extension of
2
service of an employee or official.

'Reyes vs. Philippine Duplicators, Inc., 109 SCRA 489 [1981].

2
UST Faculty Union vs. National Labor Relations Commission, University of
Santo Tomas, G.R. N o . 89885, August 6, 1990.
949
 BOOK SEVEN
TRANSITORY AND FINAL PROVISIONS

Title I
PENAL PROVISIONS AND LIABILITIES

ART. 288. PENALTIES'

Except as otherwise provided in this Code, or unless the acts complained
of hinges on a question of interpretation or implementation of ambiguous
provisions of an existing collective bargaining agreement, any violation of
the provision of this Code declared to be unlawful or penal in nature shall
be punished with a fine of not less than One Thousand Pesos (PI,000.00)
nor more than Ten Thousand Pesos (P10,000.00), or imprisonment of not
less than three months nor more than three years, or both such fine and
imprisonment at the discretion of the court.
In addition to such penalty, any alien found guilty shall be summarily
deported upon completion of service of sentence.
Any provision of law to the contrary notwithstanding any criminal
offense punished in this Code shall be under the concurrent jurisdiction of
the Municipal or City Courts and the Courts of First Instance.

ART. 289. WHO ARE LIABLE WHEN COMMITTED BY OTHER THAN

NATURAL PERSON
If the offense is committed by a corporation, trust, firm, partnership,
association or any other entity, the penalty shall be imposed upon the guilty
officer or officers of such corporation, trust, firm, partnership, association
or entity.

'As amended by Sec. 3, Batas Pambansa Big. 70.

957
 Title II
PRESCRIPTION OF OFFENSES
AND CLAIMS

A R T . 290. OFFENSES
Offenses penalized under this C o d e and the Rules and regulations
issued pursuant thereto shall prescribe in three ( 3 ) years.
All unfair labor practices arising from B o o k V shall be filed with the
appropriate agency within one (1) year f r o m accrual of such unfair labor
practice; otherwise, they shall be forever b a r r e d .

ART. 291. MONEY CLAIMS

All money claims arising f r o m employer-employee relations accruing
during the effectivity of this C o d e shall be filed within three ( 3 ) years from
the time the cause of action accrued; otherwise they shall be forever barred.
All money claims accruing prior to the effectivity of this C o d e shall be
tiled with the appropriate entities established under this C o d e within one (1)
year from the date of effectivity, and shall be processed or determined in
accordance with implementing rules and regulations of the C o d e ; otherwise,
they shall be forever barred.
Workmen's compensation claims accruing prior to the effectivity of
this C o d e and during the period f r o m N o v e m b e r 1,1974 up to D e c e m b e r 31,
1974, shall be filed with the appropriate regional offices of the Department
of L a b o r not later than M a r c h 31, 1975; otherwise, they shall be forever
barred. T h e claims shall be processed and adjudicated in accordance with
the law and rules at the time their causes of action accrued.

ART. 292. INSTITUTION OF MONEY CLAIMS

Money claims specified in the immediately preceding Article shall be
filed before the appropriate entity independently of the criminal action that
may be instituted in the p r o p e r courts.
Pending the final determination of the merits of money claims filed
with the appropriate entity, no civil action arising f r o m the same cause of
action shall be filed with any court. This provision shall not apply to employee
compensation cases which shall be processed and determined strictly in
accordance with the pertinent provisions of this C o d e .

958
 PRESCRIPTION OF OFFENSES AND CLAIMS ARTS. 290-292

C O M M E N T S A N D CASES
1. PRESCRIPTD7E P E R I O D F O R M O N E Y CLAIMS
Prescriptive period refers to the length of time within which an action or
complaint can be filed. After that period the complaint will not prosper.
A l l m o n e y claims arising from employer-employee relations accruing
during the effectivity of the Labor C o d e are covered by the three-year prescriptive
period mandated by Article 291 of the Labor C o d e , and not by Article 1144 of
the Civil C o d e which provides for a ten-year prescriptive period for actions based
1
on written contracts.
T h e language of Article 291 does not limit its application only to "money
claims specifically recoverable under said C o d e " but covers all money claims
arising from employer-employee relations. A collective bargaining agreement is
executed because employer-employee relations exists between the parties. Since
petitioners demand for unpaid retirement/separation benefits arises from C B A
provisions, their action is o n e that comes from employer-employee relations.
H e n c e , Article 291 of the Labor C o d e applies. T h e r e f o r e , petitioners' claim
should be filed within three years from the time their cause of action accrued,
2
or be forever barred by prescription.
Article 291 of the L a b o r C o d e is a special law. It prevails over Art. 1144 of
3
the Civil C o d e , a general law. This follows a basic rule in statutory construction.

1.1 Reckoning of the Three-year Prescription; Accrual of Cause of Action

Article 291 of the L a b o r C o d e states that all money claims arising from
employer-employee relations accruing during the effectivity of this C o d e shall
be filed within three years from the time the cause of action accrued, otherwise
they shall be forever barred.
T h e pivotal question is: when does the cause of action accrue? This will
determine the reckoning date of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements: (1)
a right in favor of the plaintiff by whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or to not violate such
right; and ( 3 ) an act or omission on the part of such defendant to the plaintiff.
T h e problem in this case is the third element. T h e facts show that petitioner
repeatedly demanded payment from respondent Maersk, but Maersk warded
off these demands by saying that it would look into the matter. Years passed by
In October 1993, Serrano finally demanded in writing payment of the unsent

'De Guzman, et al. vs. Court of Appeals and Nasipit Lumber Co., G.R. No.
132257, October 12, 1998.
Ibid.
3
Generalia specialibus non derogant. (Ibid.) Also: Ranees vs. NLRC, G.R. No.
101135, July 14, 1995.
959
ARTS. 290-292 t r a n s i t o r y a n d f i n a l provisions

money orders. Only then was the claim categorically denied by respondent in
its letter dated N o v e m b e r 22, 1993. T h e petitioner's cause of action accrued
upon respondent's definite denial of his claim in N o v e m b e r 1993. T h e action
was filed in April 1994, it was therefore filed within the three-year prescriptive
1
period provided in Article 291 of the Labor C o d e .
In another case the employees formally filed their money claims in January
1995 for employment benefits for the years 1977 through 1987. T h e employer
raised the defense of prescription as the claims were filed beyond the three years
mentioned in Article 291. On appeal, the Court upheld the claimants position
that the three-year period should be reckoned only from the time the obligor
(employer) declared his refusal to comply with his obligations. In this case, the
employer when presented the employees' claims neither denied nor approved
them, but kept on promising "to review the records to determine the validity of
the claims." Thus the Court ruled: W h e r e it is the employer's own action that
prevented the employees from interposing their claims, it will be the height of
2
injustice to deny the employees' claims on g r o u n d of prescription.

Rivera vs. United Laboratories, Inc., G.R. N o . 155639, April 22, 2009 -
The Labor Code has no specific provision on when a monetary claim accrues.
Thus, again the general law on prescription applies. Article 1150 of the Civil Code
provides that -
Article 1150. T h e time for prescription for all kinds of actions, when
there is no special provision which ordains otherwise, shall be counted from
the day they may be brought.
The day the action may be brought is the day a claim started as a legal possibility.
For the petitioner in the present case, this date came when she learned that she was
being paid on the basis of her December 31, 1988 retirement computations for the
retirement that she claimed to have occurred on December 31, 1992.
How prescription operates is another matter that the general law, rather than
the Labor Code, governs since the Labor Code is silent on the matter. Under Article
1155-
The prescription of actions is interrupted when they are filed with the court,
when there is a written extrajudicial demand by the creditors, and when there is any
written acknowledgment of the debt by the debtor.
In the present case, the earliest incident covered by Article 1155 is the
extrajudicial demand which came on January 7,1995. As the CA correctly computed,
the period for prescription started to run on January 15, 1993, and was interrupted
on January 7, 1995. U N I L A B only answered the petitioner's January 7, 1995 letter
on February 26, 1996, with a categorical denial of the petitioner's demand; the

'R. Serrano vs. Court of Appeals, N L R C , Maersk-Filipinas Crewing, Inc. and

A.P. Moller, G.R. N o . 139420, August 15, 2001.
2
Ludo and Luym Corp. vs. Saornido, et al., G.R. N o . 140960, January 20, 2003.

960
 PRESCRIPTION OF OFFENSES A N D CLAIMS ARTS. 290-292

running of the prescription period re-started on the date of this denial, but stopped
again on August 9, 1996, when the complaint before the N L R C was filed. Adding all
the running periods yields a total of less than three (3) years; hence, the petitioner
seasonably filed her monetary claim when she filed her complaint before the N L R C .
In ruling on the prescription issue, the CA cited De Guzman v. Court of Appeals
where we ruled that based on Article 1155, the three-year prescriptive period can be
interrupted by a claim filed at the proper judicial or quasi-judicial forum, an extra-
judicial demand on the employer or the employer's acknowledgment of its debt or
obligation. De Guzman, in turn, cited the case of Manuel L. Quezon University Association
v. Manuel L. Quezon Educational Institution (MLQU) which U N I L A B argues to be a
mere obiter dictum. Whether or not the M L Q U decision controls is a non-issue as
the above discussion of the applicable laws shows and as confirmed by the CA in De
Guzman.
Thus, contrary to respondent's contention that such a pronouncement in the
MLQU case was merely an obiter dictum, this judicial declaration that the prescriptive
period for the labor-related money claims can be interrupted by an extra-judicial
demand on the employer is indeed a controlling principle as confirmed in the
aforesaid De Guzman case.
Therefore, when petitioner made that extra-judicial demand upon respondent
via her January 7, 1995 letter, the running of the filing period was stopped until
February 26, 1996 when respondent answered petitioner's demand such that she
was left with one year and eight days more of the three-year period or up to about
March 5, 1997 within which to file her claim.
When petitioner then brought her case to the N L R C on August 9, 1996 it was
well within the prescriptive period.

1.2 Money Claims Based on a Foreign Law

A number of Filipino contract workers filed with the P O E A money claims
based on a law existing in Bahrain where they worked. U n d e r that law the money
claims should be filed within one year as against three years under Article 291
of the Labor C o d e . T h e Court, invoking the Constitution's provisions on social
justice and protection to labor, ruled that the 3-year period under the Labor
C o d e should prevail. T h e claims, however, were actually filed beyond three years,
and the claimants argued that the prescriptive period applicable was ten years
under Article 1144 of the Civil C o d e of the Philippines since their claims were
based on alleged violation of their employment contracts.
T h e Supreme Court is not convinced. It explains that Article 291 of the
Labor C o d e is broad enough to apply to all "money claims arising for employer-
employee relations" such as the present claims. T h e application of Article 291
is not limited to money claims specifically recoverable under the Labor Code;
neither is it limited to employer's violation of employee's rights under the Labor
C o d e . Article 1144 of the Civil C o d e is not applicable because the basis of the
claims is not violation of their contract but specific provisions of a foreign statute.

961
ARTS. 290-292 TRANSITORY A N D FINAL PROVISIONS

Hence the claims, having been filed beyond three years from accrual of cause
1
of action, are barred by prescription according to Article 291.

1.3 Filing after T h r e e Years: "Promissory Estoppel"

A promise by the employer, relied upon by the employee, may justify filing
of complaint beyond three years.
alabanzagG.R. N o . 168985, July 23, 2008 —
Accessories Specialists, et al. vs. Alabama,
Facts: After working with the company for more than 22 years Jones was
requested by the owner to file his involuntary resignation on the ground that the
company had suffered losses caused by the slump in the market. He agreed, but
demanded that he be paid his salaries for the last eighteen months, separation pay
and 13th month pay.
T h e company, however, informed him that his claims would be settled after
the rank-and-file employees had been paid. Relying on the company's promise, Jones
desisted from filing any complaint but made several demands, only to be assured
that his claim would eventually be paid. He passed away two months before the
fifth anniversary of his involuntary resignation. W h e n the widow filed a complaint
against the company, the company asserted that the employee's cause of action
had already prescribed since the claim was filed more than three years from Jones'
resignation.
Ruling: T h e Supreme Court ruled in favor of the employee, noting that his
reliance on the company's promise prevented him from filing any complaint against
his former employer.
"Promissory estoppel may arise from the making of a promise, even
though without consideration, if it was intended that the promise should
be relied upon, as in fact it was relied upon, and if a refusal to enforce it
would virtually sanction the perpetration of fraud or would result in other
injustice. Promissory estoppel presupposes the existence of a promise on the
part of one against whom estopped is claimed. T h e promise must be plain
and unambiguous and sufficiently specific so that the court can understand
the obligation assumed and enforce the promise according to its terms.
In order to make out a claim of promissory estoppel, a party bears the burden
of establishing the following elements: (1) a promise was reasonably expected to
induce action or forbearance; (2) such promise did, in fact, induce such action or
forbearance; and (3) the party suffered detriment as a result.
All the requisites of promissory estoppel are present in this case .... Thus, we
find ample justification not to follow the prescriptive period imposed under Article
291 of the Labor Code.

'Cadalin vs. POEA Administrator, G.R. N o . 104776, December 5, 1994.

962
 PRESCRIPTION OF OFFENSES A N D CLAIMS ARTS. 290-292

1.4 Money Claim that Accrued Before the Labor Code

T h e one-year prescriptive period under the second paragraph of Article 291
is counted from the date of effectivity of the Labor C o d e . As Article 2 provides
that the Labor C o d e "shall take effect six (6) months after its promulgation" on
May 1, 1974, the employee's monetary claims filed on May 2, 1974, even before
the effectivity of the Labor C o d e on N o v e m b e r 1, 1974, cannot be said to have
1
prescribed.

2. AWARD FOR M O N E T A R Y BENEFITS MAY EXCEED THREE YEARS

W h e r e there is a finding of illegal dismissal, the money value of the service
incentive leave is o n e of the benefits that the employee should be able to recover.
Since a service incentive leave is clearly demandable after o n e year of service —
whether continuous or broken — or its equivalent period, and it is one of the
"benefits" which would have accrued if an employee was not otherwise illegally
dismissed, it is fair and legal that its computation would be up to the date of
reinstatement as provided under Article 279 of the Labor C o d e , as amended.
T h e recoverable value of the SIL does not have to be limited to three years;
otherwise, it will be contrary to the ruling in Bustamante, et al. vs. NLRC, et al.
( G . R . N o . 111651, N o v e m b e r 28,1996) which lifted the three-year restriction on
the amount of backwages and other allowances that may be awarded an illegally
2
dismissed e m p l o y e e .
But the Solicitor General r e c o m m e n d e d that the award of service incentive
leave be limited to three years, citing Article 291 as basis. T h e recommendation
is unacceptable. To limit the award to three years is to unduly restrict the
entitlement to service incentive leave. Article 291 speaks of prescriptive period
within which to file m o n e y claims; it does not fix a m a x i m u m p e r i o d for
computing recoverable money claims.
However, the recoverable SIL cannot date back earlier than December 16,
1975 since the Implementing Rules clearly state that the entitlement to "benefit"
provided under this Rule shall start December 16, 1975, the date the amendatory
3
provision of the C o d e took effect.
This Fernandez precedent was reiterated less than a month later by the
Court, through the ponente, Mr. Justice Panganiban. In Caurdanetaan the labor
arbiter found the complainants' dismissal illegal and, among other things,
awarded 13th month pay, service incentive leave, and underpaid wages for
a maximum period of three years. T h e three-year limit is erroneous, ruled
the Court. "In view of recent jurisprudence, we are correcting some items in
the labor arbiter's decision. T h e thirteenth month pay awarded should be

'Egyptair vs. National Labor Relations Commission, G.R. N o . 63185, February

27, 1987.
2
Fernandez, et al. vs. NLRC, et al, G.R. N o . 105892, January 28, 1998.
3
See Ibid.
963
 TRANSITORY AND FINAL PROVISIONS
ARTS. 290-292

computed for each year of service from the time each employee was hired up
to the date of his actual reinstatement. T h e same computation applies to the
1
award of the service incentive leave and underpaid wages."

3. MONEY CLAIMS INCLUDE INCREMENTAL PROCEEDS ARISING FROM

TUITION FEE INCREASES
T h e three-year prescriptive period within which to file actions involving
money claims arising out of an employer-employee relationship fixed by Article
292 [now 291 ] , Presidential Decree N o . 442, as amended, equally applies to claims
for incremental proceeds arising from tuition fee increases under Presidential
Decree N o . 451. Money claims arising from an employer-employee relationship
2
falls under the coverage of Article 292, Labor C o d e .
Considering that the original complaint was filed only on July 7, 1979,
when Article 292 of the Labor C o d e sets the limit for filing money claims to three
(3) years from the accrual of the cause of action, then, the claims of the faculty
union under Presidential Decree 451 for school year 1974-1975 have indeed
3
prescribed.

4. ACTION FOR REINSTATEMENT PRESCRIBES IN FOUR YEARS

T h e period of prescription mentioned under Article 291 of the Labor
C o d e refers to and is "limited to m o n e y claims," all other cases of injury to
rights of a working man being g o v e r n e d by the Civil C o d e . H e n c e , an action for
reinstatement prescribes in four years, for the injury to the employee's rights as
4
provided under Article 1146 of the Civil C o d e .
T h e four-year prescriptive period under Article 1146 of the N e w Civil C o d e
5
applies by way of supplement.
An action for illegal dismissal and damages filed on July 5, 1982, or three
years, one month and five days after the alleged effectivity date of his dismissal
on June 1, 1979 is well within the four-year prescriptive p e r i o d under Article
6
1146 of the N e w Civil C o d e .
One's employment or profession is a property right and the wrongful
interference therewith is an actionable wrong. T h e right is considered to be
property within the protection of constitutional guarantee of due process of law.
When one is arbitrarily and unjustly deprived of one's j o b or means of livelihood,

'Caurdanetaan Piece Workers Union vs. Laguesma and Corfarm Grains, Inc.,
G.R. N o . 113542, February 24, 1998.
2
Cebu Institute of Technology vs. Ople, G.R. N o . 58870 [and 5 companion
cases], April 15, 1988.
Ibid.
4
Callanta vs. Carnation Philippines, G.R. N o . 70615, October 28, 1986.
Ibid.
Ibid.

964
 PRESCRIPTION OF OFFENSES A N D CLAIMS ARTS. 290-292

the action instituted to contest the legality of the dismissal from employment
constitutes, in essence, an action predicated upon an injury to the rights of the
plaintiff, as contemplated under Article 1146 of the Civil C o d e which must be
1
brought within four years.

4.1 When does the Period Begin?

Baliwag Transit, Inc. vs. Ople, G.R. N o . 57642, March 16, 1989 —
Facts: Romeo was a bus driver who, on August 10,1974, met an accident when
the bus he was driving was hit by a train. His employer sued the railroad company.
Romeo was absolved of contributory negligence but suspended by his employer.
Soon after the judgment was rendered against the railroad company, he renewed
his driver's license and asked for reinstatement. But he was asked to wait until the
criminal case was decided. When the criminal case was dismissed he repeated his
request for reinstatement but his request was ignored, Romeo's lawyer made a formal
demand in writing, which demand the employer denied on May 10, 1980. Romeo
filed a formal complaint on July 29, 1980.
T h e Regional Director dismissed the complaint on the ground that it was filed
beyond the prescriptive period prescribed in Article 291 counted from August 10,
1974, the date of the collision.
Ruling: Since a cause of action requires, as essential elements, not only a legal
right of the plaintiff and a correlative obligation of the defendant but also an act or
omission of the defendant in violation of said legal right, the cause of action does
not accrue until the party obligated refuses, expressly or impliedly, to comply with
its duty.
Romeo's cause of action accrued on May 10,1980, when the employer denied
his demand for reinstatement. T h e earlier requests made by Romeo having been
warded off with indefinite promises, and Romeo not yet having decided to assert his
right, his cause of action could not be said to have then already accrued. As Romeo's
complaint was filed not later than three months only after such rejection, there is no
question that his action has not prescribed, whatever prescriptive period is applied.-

4.2 Prescriptive Period Not Suspended by Criminal Case

T h e filing of the criminal case against the employee does not have the
effect of suspending or interrupting the prescriptive period for the filing of an
action for illegal dismissal. An action for illegal dismissal is an administrative case
which is entirely separate and distinct from a criminal action for estafa. Each
3
may proceed independently of the other.
T h e employee's right to file an action for illegal dismissal was not dependent
upon the outcome of the criminal case. T h e fact that the alleged violations of

'Callanta vs. Carnation Philippines, G.R. N o . 70615, October 28, 1986.

2
Baliwag Transit, Inc. vs. Ople, G.R. N o . 57642, March 16, 1989.
3
Pepsi Cola Bottling Company vs. Guanzon, G.R. N o . 81162, April 19, 1989.

965
ARTS. 290-292 t r a n s i t o r y a n d f i n a l provisions

the company rules and regulations were the same cause for the filing of the
criminal case is of no moment. Guilt or innocence in the criminal case is not
1
determinative of the existence of a just or authorized cause for dismissal.

5. LACHES
Laches is the failure or neglect for an unreasonable or unexplained length
of time to do that which by exercising due diligence, could or should have been
done earlier. Laches, or sleeping on one's right, can defeat an action such as a
complaint for alleged illegal dismissal. T h e reasoning of the law is if o n e has a
right to assert, he should assert it in due time; much delay weakens his action.
But laches cannot be taken against the complainant if there is valid reason
for the delay in filing the action. For instance, in o n e case, the employee could
not have filed earlier her complaint for illegal dismissal because she had to
await the final outcome of her complaint which she submitted to the grievance
machinery. She could not have instituted the complaint for illegal dismissal
prior to such final determination because if she did, her suit would have been
2
premature. She could not therefore be charged with laches.

'Pepsi Cola Bottling Company vs. Guanzon, G.R. N o . 81162, April 19, 1989.
2
Radio Communications of the Phil., Inc. vs. N L R C and Teresita Cansino, G.R.
N o . 102958, June 25, 1993.

966
 Title III
TRANSITORY AND FINAL PROVISIONS

A R T . 293. APPLICATION OF LAW ENACTED PRIOR TO THIS CODE

All actions or claims accruing prior to the effectivity of this C o d e shall
be determined in accordance with the laws in force at the time of then-
accrual.

ART. 294. SECRETARY OF LABOR TO INITIATE INTEGRATION OF

MATERNITY LEAVE BENEFITS
Within six ( 6 ) months after this C o d e takes effect, the Secretary of
L a b o r shall initiate such measures as may be necessary for the integration
of maternity leave benefits into the Social Security System in the case of
private employment and the Government Service Insurance System in the
case of public employment.

ART. 295. FUNDING OF THE OVERSEAS EMPLOYMENT DEVELOP-

MENT BOARD AND THE NATIONAL SEAMEN BOARD
T h e Overseas Development B o a r d and the National Seamen B o a r d
referred to in Articles 17 and 20, respectively, of this C o d e shall initially be
funded out of the u n p r o g r a m m e d f u n d of the Department of L a b o r and
the National M a n p o w e r and Youth Council.

ART. 296. TERMINATION OF THE WORKMEN'S COMPENSATION

PROGRAM
T h e Bureau of Workmen's Compensation, Workmen's Compensation
Commission, and Workmen's Compensation Units in the regional offices of
the Department of L a b o r shall continue to exercise the functions and the
respective jurisdictions over workmen's compensation cases vested upon
them by Act N o . 3428, as amended, otherwise known as the Workmen's
Compensation Act, until March 31, 1976. Likewise, the term of office of
incumbent members of the Workmen's Compensation Commission, including
its Chairman, and any commissioner deemed retired as of December 31,1975,
as well as the present employees and officials of the Bureau of Workmen's
Compensation, Workmen's Compensation Commission and the Workmen's
Compensation Units shall continue up to that date. Thereafter, said offices
shall be considered abolished and all officials and personnel thereof shall
be transferred to and mandatorily absorbed by the Department of Labor,

967
 T R A N S I T O R Y A N D F I N A L PROVISIONS
ARTS. 297-299

subject to Presidential Decree N o . 6, Letters of Instructions N o . 14 and 14-A

and the Civil Service L a w and rules.
Such amount as may be necessary to cover the operational expenses
of the Bureau of Workmen's Compensation, the Workmen's Compensation
Commission and the Workmen's Compensation Units, including the
salaries of incumbent personnel for the period up to March 31, 1976 shall
be appropriated from the unprogrammed funds of the Department of
Labor.
ART. 297. CONTINUATION OF INSURANCE POLICIES AND INDEMNITY
BONDS
All workmen's compensation insurance policies and indemnity bonds
for self-insured employers existing u p o n the effectivity of this C o d e shall
remain in force and effect until the expiration dates of such policies or the
lapse of the period of such bonds, as the case may b e , but in no case beyond
December 31, 1974. Claims may be filed against the insurance carriers a n d /
or self-insured employers for causes of action which accrued during the
existence of said policies or authority to self-insure.

ART. 298. ABOLITION OF THE COURT OF INDUSTRIAL RELATIONS

AND THE NATIONAL LABOR RELATIONS COMMISSION
T h e Court of Industrial Relations and the National L a b o r Relations
Commission established under Presidential Decree N o . 21 are hereby
abolished. All unexpended funds, properties, equipment and records of
the Court of Industrial Relations, and such of its personnel as may be
necessary, are hereby transferred to the Commission and to its regional
branches. All unexpended funds, properties, and equipment of the National
L a b o r Relations Commission established under Presidential Decree N o . 21
are transferred to the Bureau of L a b o r Relations. Personnel not absorbed
by or transferred to the Commission shall enjoy benefits granted under
existing laws.

A R T . 299. DISPOSITION OF PENDING CASES

All cases pending b e f o r e the Court of Industrial Relations and the
National L a b o r Relations Commission established under Presidential Decree
N o . 21 on the date of effectivity of this C o d e shall be transferred to and
processed by the corresponding labor relations divisions or the National
L a b o r Relations Commission created under this C o d e having cognizance
of the same in accordance with the p r o c e d u r e laid d o w n herein and its
implementing rules and regulations. Cases on labor relations on appeal with
the Secretary of L a b o r or the Office of the President of the Philippines as
of the date of effectivity of this C o d e shall remain under their respective

968
 T R A N S I T O R Y A N D F I N A L PROVISIONS ARTS. 300-302

jurisdiction and shall be decided in accordance with the rules and regulations
in force at the time of appeal.
All workmen's compensation cases pending before the Workmen's
Compensation Units in the regional offices of the Department of L a b o r
and those pending b e f o r e the Workmen's Compensation Commission as of
M a r c h 31, 1975, shall be processed and adjudicated in accordance with the
law, rules and procedure existing prior to the effectivity of the Employees'
Compensation and State Insurance Fund.

ART. 300. PERSONNEL WHOSE SERVICES ARE TERMINATED

Personnel of agencies or any of their subordinate units whose services
are terminated as a result of the implementation of this C o d e shall enjoy
the rights and protection provided in Sections 5 and 6 of Republic Act
n u m b e r e d fifty-four hundred and thirty-five and such other pertinent laws,
rules and regulations. In any case, no layoff shall be effected until funds
to cover the gratuity a n d / o r retirement benefits of those laid off are duly
certified as available.

ART. 301. SEPARABILITY PROVISIONS

If any provision or part of this C o d e , or the application thereof to any
person or circumstance, is held invalid, the remainder of this C o d e , or the
application of such provision or part to other persons or circumstances,
shall not be affected thereby.

A R T . 302. REPEALING CLAUSE

All labor laws not adopted as part of this C o d e either directly or by
reference are hereby r e p e a l e d . A l l provisions of existing laws, orders,
decrees, rules and regulations inconsistent herewith are likewise repealed.
D o n e in the City of Manila, this 1st day of May in the year of O u r L o r d ,
nineteen hundred and seventy-four.

969
 IMPLEMENTING RULES OF BOOK V

BOOK V
LABOR RELATIONS
D E P A R T M E N T O R D E R N O . 40-03*
Series of 2003

[This Department Order No. 40-03, dated February 2003 replaces D.O. No. 9, series of
1997, insofar as it pertains to Book V of the Omnibus Rules Implementing the Labor Code.]

A M E N D I N G T H E I M P L E M E N T I N G RULES O F B O O K V
O F T H E L A B O R CODE O F T H E P H I L I P P I N E S

A R T I C L E I. T h e Rules Implementing Book V of the Labor Code are hereby

amended to read as follows:

RULE I
D E F I N I T I O N O F TERMS

SECTION 1. Definition o f Terms. —

(a) "Affiliate" refers to an independent union affiliated with a federation,
national union or a chartered local which was subsequently granted independent
registration but did not disaffiliate from its federation, reported to the Regional
Office and the Bureau in accordance with Rule III, Sections 6 and 7 of these Rules.
( b ) "Appeal" refers to the elevation by an aggrieved party to an agency
vested with appellate authority of any decision, resolution or order disposing the
principal issues of a case rendered by an agency vested with original jurisdiction to
resolve such case, undertaken by filing a memorandum of appeal.
(c) "Audit Examiner" refers to an officer of the Bureau or Labor Relations
Division of the Regional Office authorized to conduct an audit or examination of
the books of accounts, including all funds, assets and other accountabilities of a
legitimate labor organization and workers' association.

*This is an updated and consolidated edition. It incorporates the changes

made by: D.O. N o . 40-A-03, dated March 12, 2003; D.O. N o . 40-B-03, February 12,
2004; D.O. N o . 40-C-05, March 7, 2005; D.O. N o . 40-D-05, September 13, 2005; D.O.
N o . 40-E-05, November 30, 2005; and D.O. N o . 40-F-03, October 30, 2008. The last
mentioned department order implements R.A. N o . 9481 which took effect on June
14, 2007. - C A A

977
 IMPLEMENTING RULES

(d) "Bargaining Unit" refers to a group of employees sharing mutual

interests within a given employer unit, comprised of all or less than all of the entire
body of employees in the employer unit or any specific occupational or geographical
grouping within such employer unit.
( e ) "Board" refers to the National Conciliation and Mediation Board
established under Executive Order N o . 126.
(f) "Bureau" refers to the Bureau of Labor Relations.
( g ) "Cancellation Proceedings" refer to the legal process leading to the
revocation of the legitimate status of a union or workers' association.
(h) "Certification Election" or "Consent Election" refers to the process
of determining through secret ballot the sole and exclusive representative of the
employees in an appropriate bargaining unit for purposes of collective bargaining or
negotiation. A certification election is ordered by the Department, while a consent
election is voluntarily agreed upon by the parties, with or without the intervention
by the Department.
(i) "Chartered Local" refers to a labor organization in the private sector
operating at the enterprise level that acquired legal personality through registration
with the Regional Office in accordance with Rule I I I , Section 2-E of these Rules, (as
amended by D.O. 40-B-03, 16 February 2004).
(j) "Collective Bargaining Agreement" or "CBA" refers to the contract
between a legitimate labor union and the employer concerning wages, hours of
work, and all other terms and conditions of employment in a bargaining unit.
(k) "Conciliator Mediator" refers to an officer of the Board whose principal
function is to assist in the settlement and disposition of labor-management
disputes through conciliation and preventive mediation, including the promotion
and encouragement of voluntary approaches to labor disputes prevention and
settlement.
(1) "Consolidation" refers to the creation or formation of a new union
arising from the unification of two or more unions.
( m ) "Deregistration of Agreement" refers to the legal process leading to the
revocation of CBA registration.
(n) "Department" refers to the Department of Labor and Employment.
(o) "Election Officer" refers to an officer of the Bureau or Labor Relations
Division in the Regional Office authorized to conduct certification elections,
election of union officers and other forms of elections and referenda in accordance
with Rule X I I , Sections 2-5 of these Rules.
(p) "Election Proceedings" refer to the period during a certification
election, consent or run-off election and election of union officers, starting from
the opening to the closing of the polls, including the counting, tabulation and
consolidation of votes, but excluding the period for the final determination of the
challenged votes and the canvass thereof.
(q) "Eligible Voter" refers to a voter belonging to the appropriate bargaining
unit that is the subject of a petition for certification election.
(r) "Employee" refers to any person working for an employer. It includes
one whose work has ceased in connection with any current labor dispute or because

978
 IMPLEMENTING RULES OF BOOK V: RULE I

of any unfair labor practice and one who has been dismissed from work but the
legality of the dismissal is being contested in a forum of appropriate jurisdiction.
(s) "Employer" refers to any person or entity who employs the services of
others, one for whom employees work and who pays their wages or salaries. An
employer includes any person directly or indirectly acting in the interest of an
employer. It shall also refer to the enterprise where a labor organization operates or
seeks to operate.
(t) "Exclusive Bargaining Representative" refers to a legitimate labor union
duly recognized or certified as the sole and exclusive bargaining representative or
agent of all the employees in a bargaining unit.
(u) "Grievance" refers to any question by either the employer or the union
regarding the interpretation or implementation of any provision of the collective
bargaining agreement or interpretation or enforcement of company personnel
policies.
(v) "Improved Offer Balloting" refers to a referendum by secret ballot
involving union members on the improved offer of the employer on or before the
30th day of a strike.
(w) "Independent Union" refers to a labor organization operating at the
enterprise level that acquired legal personality through independent registration
under Article 234 of the Labor Code and Rule I I I , Section 2-A of these Rules.
(x) "Inter-Union Dispute" refers to any conflict between and among
legitimate labor unions involving representation questions for purposes of collective
bargaining or to any other conflict or dispute between legitimate labor unions.
(y) "Interlocutory Order" refers to any order that does not ultimately
resolve the main issue/s in a dispute.
(z) "Interpleader" refers to a proceeding brought by a party against two or
more parties with conflicting claims, compelling the claimants to litigate between
and among themselves their respective rights to the claim, thereby relieving the
party so filing from suits they may otherwise bring against it.
(aa) "Intervention" refers to a proceeding whereby a person, labor
organization or entity not a party to a case but may be affected by a decision therein,
formally moves to make himself/herself/itself a party thereto.
( b b ) Intra-Union Dispute" refers to any conflict between and among
union members, including grievances arising from any violation of the rights and
conditions of membership, violation of or disagreement over any provision of the
union's constitution and by-laws, or disputes arising from chartering or affiliation
of union.
(cc) "Labor Organization" refers to any union or association of employees
in the private sector which exists in whole or in part for the purpose of collective
bargaining, mutual aid, interest, cooperation, protection, or other lawful purposes.
( d d ) "Labor Relations Division" refers to the (1) Labor Organization and
CBA Registration Unit and (2) Med-Arbitration Unit in the Regional Office. The
Labor Organization and CBA Registration Unit is in charge of processing the
applications for registration of independent unions, chartered locals, workers
associations and collective bargaining agreements, maintaining said records and

979
 IMPLEMENTING RULES

all other reports and incidents pertaining to labor organizations and workers'
associations. The Med-Arbitration Unit conducts hearings and decides certification
election or representation cases, inter/intra-union and other related labor relations
disputes.
( e e ) "Legitimate Labor Organization" refers to any labor organization in
the private sector registered or reported with the Department in accordance with
Rules III and IV of these Rules.
(ff) "Legitimate Workers' Association" refers to an association of workers
organized for mutual aid and protection of its members or for any legitimate purpose
other than collective bargaining registered with the Department in accordance with
Rule III, Sections 2-C and 2-D of these Rules.
( g g ) "Lockout" refers to the temporary refusal of an employer to furnish
work as a result of a labor or industrial dispute.
(hh) "Managerial Employee" refers to an employee who is vested with powers
or prerogatives to lay down and execute management policies or to hire, transfer,
suspend, layoff, recall, discharge, assign or discipline employees.
(ii) "Med-Arbiter" refers to an officer in the Regional Office or in the Bureau
authorized to hear and decide representation cases, inter/intra-union disputes and
other related labor relations disputes, except cancellation of union registration cases.
(jj) "Merger" refers to a process where a labor organization absorbs another
resulting in the cessation of the absorbed labor organization's existence, and the
continued existence of the absorbing labor organization.
(kk) "National Union" or "Federation" refers to a group of legitimate labor
unions in a private establishment organized for collective bargaining or for dealing
with employers concerning terms and conditions of employment for their member
unions or for participating in the formulation of social and employment policies,
standards and programs, registered with the Bureau in accordance with Rule III,
Section 2-B of these Rules.
(11) "Organized Establishment" refers to an enterprise where there exists a
recognized or certified sole and exclusive bargaining agent.
( m m ) "Preventive Mediation Cases" refer to labor disputes which are the
subject of a formal or informal request for conciliation and mediation assistance
sought by either or both parties or upon the initiative of the Board.
(nn) "Rank-and-File Employee" refers to an employee whose functions are
neither managerial nor supervisory in nature.
( o o ) "Regional Director" refers to the Head of the Regional Office.
(pp) "Regional Office" refers to the office of the Department of Labor and
Employment at the administrative regional level.
( q q ) "Registration" refers to the process of determining whether the
application for registration of a union or workers' association and collective
bargaining agreement complies with the documentary requirements for registration
prescribed in Rules III, IV, and XVII of these Rules.
(rr) "Related Labor Relations Dispute" refers to any conflict between a
labor union and the employer or any individual, entity or group that is not a labor
union or workers' association.

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 I M P L E M E N T I N G RULES OF B O O K V: RULE II

(ss) "Run-off Election" refers to an election between the labor unions

receiving the two (2) highest number of votes in a certification or consent election
with three (3) or more choices, where such a certified or consent results in none of
the three (3) or more choices receiving the majority of the valid votes cast; provided
that the total number of votes for all contending unions is at least fifty percent
(50%) of the number of votes cast.
(tt) "Secretary" refers to the Head of the Department.
(uu) "Strike" refers to any temporary stoppage of work by the concerted
action of employees as a result of a labor or industrial dispute.
(w) "Strike Area" refers to the establishment, warehouses, depots, plants
or offices including the sites or premises used as run-away shops of the employer, as
well as the immediate vicinity actually used by picketing strikers in moving to and
fro before all points of entrance.
(ww) "Strike Vote Balloting" refers to the secret balloting undertaken by the
members of the union in the bargaining unit concerned to determine whether or
not to declare a strike in meetings or referenda called for that purpose.
( x x ) "Supervisory Employee" refers to an employee who, in the interest of
the employer, effectively recommends managerial actions and the exercise of such
authority is not merely routinary or clerical but requires the use of independent
judgment.
(yy) 'Term of Office" refers to the fixed period of five (5) years during
which the duly elected officers of a labor organization discharge the functions of
their office, unless a shorter period is stipulated in the organization's constitution
and by-laws.
(zz) "Union" refers to any labor organization in the private sector organized
for collective bargaining and for other legitimate purposes.
(aaa) "Voluntary Arbitrator" refers to any person accredited by the Board as
such, or any person named or designated in the collective bargaining agreement by
the parties to act as their voluntary arbitrator, or one chosen by the parties with or
without the assistance of the Board, pursuant to a selection procedure agreed upon
in the collective bargaining agreement.
(bbb) "Voluntary Recognition" refers to the process by which a legitimate
labor union is recognized by the employer as the exclusive bargaining representative
or agent in a bargaining unit, reported with the Regional Office in accordance with
Rule V I I , Section 2 of these Rules.
(ccc) "Workers' Association" refers to an association of workers organized for
the mutual aid and protection of its members or for any legitimate purpose other
than collective bargaining.

RULE II
COVERAGE O F T H E R I G H T T O S E L F - O R G A N I Z A T I O N

SECTION 1. Policy. — It is the policy of the State to promote the free and

responsible exercise of the right to self-organization through the establishment of

a simplified mechanism for the speedy registration of labor unions and workers

981
 IMPLEMENTING RULES

associations, determination of representation status and resolution of inter/intra-

union and other related labor relations disputes. Only legitimate or registered labor
unions shall have the right to represent their members for collective bargaining
and other purposes. Workers' associations shall have the right to represent their
members for purposes other than collective bargaining.
SEC. 2. Who may join labor unions and workers' associations. — All persons
employed in commercial, industrial and agricultural enterprises, including
employees of government-owned or controlled corporations without original
charters establishment under the Corporation Code, as well as employees of religious,
charitable, medical or educational institutions whether operating for profit or not,
shall have the right to self-organization and to form, join or assist labor unions for
purposes of collective bargaining: Provided however, That supervisory employees shall
not be eligible for membership in a labor union of the rank-and-file employees but
may form, join or assist separate labor unions of their own. Managerial employees
shall not be eligible to form, join or assist any labor unions for purposes of collective
bargaining.
Alien employees with valid working permits issued by the Department may
exercise the right to self-organization and join or assist labor unions for purposes
of collective bargaining if they are nationals of a country which grants the same or
similar rights to Filipino workers, as certified by the Department of Foreign Affairs,
or which has ratified either I L O Convention N o . 87 and I L O Convention N o . 98.
For purposes of this section, any employee whether employed for a definite
period or not, shall beginning on the first day of his/her service, be eligible for
membership in any labor organization.
All other workers, including ambulant, intermittent and other workers, the
self-employed, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection and other legitimate
1
purposes except collective bargaining.

RULE III
REGISTRATION OF LABOR ORGANIZATIONS

SECTION 1. Where to file. — Applications for registration of independent

labor unions, chartered locals, workers' associations shall be filed with the Regional
Office where the applicant principally operates. It shall be processed by the Labor
Relations Division at the Regional Office in accordance with Sections 2-A, 2-C, and
2-E of this Rule.
Applications for registration of federations, national unions or workers'
associations operating in more than one region shall be filed with the Bureau or the
Regional Offices, but shall be processed by the Bureau in accordance with Sections
2-Band2-D of this Rule.
SEC. 2. Requirements for application. — A. T h e application for registration
of an independent labor union shall be accompanied by the following documents:

'As amended by D.O. 40-C-05, 7 March 2005.

982
 IMPLEMENTING RULES OF BOOK V: RULE III

1) the name of the applicant labor union, its principal address, the name
of its officers and their respective addresses, approximate number
of employees in the bargaining unit where it seeks to operate, with a
statement that it is not reported as a chartered local of any federation
or national union;
2) the minutes of the organizational meeting(s) and the list of employees
who participated in the said meeting(s);
3) the name of all its members comprising at least 20% of the employees
in the bargaining unit;
4) the annual financial reports if the applicant has been in existence for
one or more years, unless it has not collected any amount from the
members, in which case a statement to this effect shall be included in
the application;
5) the applicant's constitution and by-laws, minutes of its adoption or
ratification, and the list of the members who participated in it. The list
of ratifying members shall be dispensed with where the constitution
and by-laws was ratified or adopted during the organizational meeting.
In such a case, the factual circumstances of the ratification shall be
recorded in the minutes of the organizational meeting(s).
B. T h e application for registration of federations and national unions
shall be accompanied by the following documents:
1) a statement indicating the name of the applicant labor union, its
principal address, the name of its officers and their respective addresses;
2) the minutes of the organizational meeting(s) and the list of employees
who participated in the said meeting(s);
3) the annual financial reports if the applicant union has been in existence
for one or more years, unless it has not collected any amount from the
members, in which case a statement to this effect shall be included in
the application;
4) the applicant union's constitution and by-laws, minutes of its adoption
or ratification, and the list of the members who participated in it. The
list of ratifying members shall be dispensed with where the constitution
and by-laws was ratified or adopted during the organizational
meeting(s). In such a case, the factual circumstances of the ratification
shall be recorded in the minutes of the organizational meeting(s);
5) the resolution of affiliation of at least ten (10) legitimate labor
organizations, whether independent unions or chartered locals, each
of which must be a duly certified or recognized bargaining agent in the
establishment where it seeks to operate; and
6) the name and addresses of the companies where the affiliates operate
and the list of all the members in each company involved.
Labor organizations operating within an identified industry may also apply
for registration as a federation or national union within the specified industry by
submitting to the Bureau the same set of documents.

983
 IMPLEMENTING RULES

C. The application for registration of a workers' association shall be

accompanied by the following documents:
1) the name of the applicant association, its principal address, the name of
its officers and their respective addresses;
2) the minutes of the organizational meeting(s) and the list of members
who participated therein;
3) the financial reports of the applicant association if it has been in
existence for one or more years, unless it has not collected any amount
from the members, in which case a statement to this effect shall be
included in the application;
4) the applicant's constitution and by-laws to which must be attached the
names of ratifying members, the minutes of adoption or ratification of
the constitution and by-laws and the date when ratification was made,
unless ratification was done in the organizational meeting(s), in which
case such fact shall be reflected in the minutes of the organizational
meeting(s).
D. Application for registration of a workers' association operating in more
than one region shall be accompanied, in addition to the requirements in the
preceding subsection, by a resolution of membership of each member association,
duly approved by its board of directors.
E. A duly-registered federation or national union may directly create a
local/chapter by issuing a charter certificate indicating the establishment of the
local/chapter. T h e local/chapter shall acquire legal personality only for purposes
of filing a petition for certification election from the date it was issued a charter
certificate.
The local/chapter shall be entitled to all other rights and privileges of
legitimate labor organization only upon the submission of the following documents
in addition to its charter certificate:
(a) T h e names of the local/chapter's officers, their addresses, and the
principal office of the local/chapter, and
( b ) T h e chapter's constitution and by-laws provided, that where the
chapter's constitution and by-laws are the same as that of the federation
or the national union, this fact shall be indicated accordingly.
The genuineness and due execution of the supporting requirements shall be
certified under oath by the secretary of treasurer of the local/chapter and attested
1
to by its president.
SEC. 3. Notice of change of name of labor organizations; Where to file. — The
notice for change of name of a registered labor organization shall be filed with the
Bureau or the Regional Office where the concerned labor organization's certificate
of registration or certificate of creation of a chartered local was issued.
SEC. 4. Requirements for notice of change of name. — T h e notice for change
of name of a labor organization shall be accompanied by the following documents:

'As amended by D.O. 40-B-03 and further amended by D.O. N o . 40-F-03 dated
30 October 2008.

984
 IMPLEMENTING RULES OF BOOK V: RULE III

(a) proof of approval or ratification of change of name; and

(b) the amended constitution and by-laws.
SEC. 5. Certificate of Registration/Certificate of Creation of Chartered
Local for change of name. — T h e certificate of registration and the certificate of
creation of a chartered local issued to the labor organization for change of name
shall bear the same registration number as the original certificate issued in its favor
and shall indicate the following: (a) the new name of the labor organization; (b)
its former name; ( c ) its office or business address; and ( d ) the date when the labor
organization acquired legitimate personality as stated in its original certificate of
registration/certificate of creation of chartered local.
SEC. 6. Report of Affiliation with federations or national unions; Where to
file. — T h e report of affiliation of an independently registered labor union with a
federation or national union shall be filed with the Regional Office that issued its
certificate of registration.
SEC. 7. Requirements of affiliation. — T h e report of affiliation of independ-
ently registered labor unions with a federation or national union shall be accompa-
nied by the following documents:
(a) resolution of the labor union's board of directors approving the
affiliation;
( b ) minutes of the general membership meeting approving the affiliation;
(c) the total number of members comprising the labor union and the
names of members who approved the affiliation;
( d ) the certificate of affiliation issued by the federation in favor of the inde-
pendently registered labor union; and
( e ) written notice to the employer concerned if the affiliating union is the
incumbent bargaining agent.
SEC. 8. Notice of Merger/Consolidation of labor organizations; Where
to file. — Notice of merger or consolidation of independent labor unions,
chartered locals and workers' associations shall be filed with and recorded by the
Regional Office that issued the certificate of registration/certificate of creation of
chartered local of either the merging or consolidating labor organization. Notice
of merger or consolidation of federations or national unions shall be filed with
and recorded by the Bureau.
SEC. 9. Requirements of notice of merger. — T h e notice of merger of labor
organizations shall be accompanied by the following documents:
(a) the minutes of merger convention or general membership meeting(s)
of all the merging labor organizations, with the list of their respective
members who approved the same; and
( b ) the amended constitution and by-laws and minutes of its ratification,
unless ratification transpired in the merger convention, which fact shall
be indicated accordingly.
SEC. 10. Certificate of Registration. — T h e certificate of registration issued
to merged labor organizations shall bear the registration number of one of the
merging labor organizations as agreed upon by the parties to the merger.

985
 IMPLEMENTING RULES

The certificate of registration shall indicate the following: (a) the new name
of the merged labor organization; (b) the fact that it is a merger of two or more
labor organizations; (c) the name of the labor organizations that were merged;
( d ) its office or business address; and ( e ) the date when each of the merging labor
organizations acquired legitimate personality as stated in their respective original
certificate of registration.
SEC. 11. Requirements of notice of consolidation. — T h e notice of
consolidation of labor organizations shall be accompanied by the following
documents:
(a) the minutes of consolidation convention of all the consolidating labor
organizations, with the list of their respective members who approved
the same; and
(b) the amended constitution and by-laws, minutes of its ratification
transpired in the consolidation convention or in the same general
membership meeting(s), which fact shall be indicated accordingly.
SEC. 12. Certificate of Registration. — T h e certificate of registration issued to
a consolidated labor organization shall bear the registration number of one of the
consolidating labor organizations as agreed upon by the parties to the consolidation.
The certificate of registration shall indicate the following: (a) the new name
of the consolidated labor organization; ( b ) the fact that it is a consolidation of two
or more labor organizations; (c) the name of the labor organizations that were
consolidated; ( d ) its office or business address; and ( e ) the date when each of the
consolidating labor organizations acquired legitimate personality as stated in their
respective original certificates of registration.

R U L E IV
PROVISIONS C O M M O N T O T H E REGISTRATION O F
L A B O R O R G A N I Z A T I O N S A N D WORKERS' ASSOCIATION

SECTION 1. Attestation requirements. — The application for registration of labor

unions and workers' associations, notice for change of name, merger, consolidation
and affiliation including all the accompanying documents, shall be certified under
oath by its Secretary or Treasurer, as the case may be, and attested to by its President.
SEC. 2. Payment of registration fee. — A labor union and workers' association
shall be issued a certificate of registration upon payment of the prescribed
registration fee.
SEC. 3. Accompanying documents. — One (1) original copy and two (2)
duplicate copies of all documents accompanying the application or notice shall be
submitted to the Regional Office or the Bureau.
SEC. 4. Action on the application/notice. — T h e Regional Office or the
Bureau, as the case may be, shall act on all applications for registration or notice
of change of name, affiliation, merger and consolidation within one (1) day from
receipt thereof either by: (a) approving the application and issuing the certificate of
registration/acknowledging the notice/report; or ( b ) denying the application/

986
 IMPLEMENTING RULES OF BOOK V: RULE IV

notice for failure of the applicant to comply with the requirements for registration/
1
notice.
SEC. 5. Denial of Application/Return of Notice. — Where the documents
supporting the application for registration/notice of change of name, affiliation,
merger and consolidation are incomplete or do not contain the required
certification and attestation, the Regional Office or the Bureau shall, within one
(1) day from receipt of the application/notice, notify the applicant/labor organization
concerned in writing of the necessary requirements and complete the same within-
thirty (30) days from receipt of notice. Where the applicant/labor organization
concerned fails to complete the requirements within the time prescribed, the
application for registration shall be denied, or the notice of change of name,
affiliation, merger and consolidation returned, without prejudice to filing a new
2
application or notice.
S E C 6. Form of Denial of Application/Return of Notice; Appeal. — The
notice of the Regional Office or the Bureau denying the application for registration/
returning the notice of change of name, affiliation, merger or consolidation shall
be in writing stating in clear terms the reasons for the denial or return. The denial
may be appealed to the Bureau if denial is made by the Regional Office or to the
Secretary if denial is made by the Bureau, within ten (10) days from receipt of such
notice, on the ground of grave abuse of discretion or violation of these Rules.
SEC. 7. Procedure on appeal. — T h e memorandum of appeal shall be filed
with the Regional Office or the Bureau that issued the denial/return of notice. The
memorandum of appeal together with the complete records of the application for
registration/notice of change of name, affiliation, merger or consolidation, shall be
transmitted by the Regional Office to the Bureau or by the Bureau to the Office of
the Secretary, within twenty-four (24) hours from receipt of the memorandum of
appeal.
T h e Bureau or the Office of the Secretary shall decide the appeal within
twenty (20) days from receipt of the records of the case.
SEC. 8. Effect of registration. — T h e labor union or workers' association shall
be deemed registered and vested with legal personality on the date of issuance of its
certificate of registration or certificate of creation of chartered local.
Such legal personality may be questioned only through an independent
petition for cancellation of union registration in accordance with Rule X I V of
these Rules, and not by way of collateral attack in petition for certification election
proceedings under Rule VIII.
S E C 9. Effect of change of name. — T h e change of name of a labor
organization shall not affect its legal personality. All the rights and obligations of a
labor organization under its old name shall continue to be exercised by the labor
organization under its new name.

'As amended by Section 1, D.O. 40-D-05, 13 September 2005.

Ibid.
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 IMPLEMENTING RULES OF BOOK V: RULE VII

where there is only one legitimate labor organization operating within the bargain-
ing unit, or through certification, run-off or consent election as provided in these
Rules.

RULE VII
VOLUNTARY RECOGNITION

SECTION 1. When and where to file. — In unorganized establishments with

only one legitimate labor organization, the employer may voluntarily recognize the
representation status of such a union. Within thirty (30) days from such recognition,
the employer and union shall submit a notice of voluntary recognition with the
Regional Office which issued the recognized labor union's certificate of registration
or certificate of creation of a chartered local.
SEC 2. Requirements for voluntary recognition. — T h e notice of voluntary
recognition shall be accompanied by the original copy and two (2) duplicate copies
of the following documents:
(a) a joint statement under oath of voluntary recognition attesting to the
fact of voluntary recognition;
( b ) certificate of posting of the j o i n t statement of voluntary recognition
for fifteen (15) consecutive days in at least two ( 2 ) conspicuous places
in the establishment or bargaining unit where the union seeks to op-
erate;
(c) the approximate number of employees in the bargaining unit, accom-
panied by the names of those who support the voluntary recognition
comprising at least a majority of the members of the bargaining unit;
and
( d ) a statement that the labor union is the only legitimate labor organiza-
tion operating within the bargaining unit.
All accompanying documents of the notice for voluntary recognition shall be
certified under oath by the employer representative and president of the recognized
labor union.
SEC 3. Action on the Notice. — Where the notice of voluntary recognition is
sufficient in form, number and substance and where there is no other registered
labor union operating within the bargaining unit concerned, the Regional Office,
through the Labor Relations Division shall, within ten (10) days from receipt of
the notice, record the fact of voluntary recognition in its roster of legitimate labor
unions and notify the labor union concerned.
Where the notice of voluntary recognition is insufficient in form, number
and substance, the Regional Office shall, within the same period, notify the labor
union of its findings and advise it to comply with the necessary requirements. Where
neither the employer nor the labor union failed to complete the requirements for
voluntary recognition under Section 2 of this Rule within thirty (30) days from
receipt of the advisory, the Regional Office shall return the notice for voluntary
recognition together with all its accompanying documents without prejudice to its
re-submission.

989
 IMPLEMENTING RULES

SEC. 4. Effect of recording of fact of voluntary recognition. — From the time

of recording of voluntary recognition, the recognized labor union shall enjoy the
rights, privileges and obligations of an existing bargaining agent of all the employees
in the bargaining unit.
Entry of voluntary recognition shall bar the filing of a petition for certification
election by any labor organization for a period of one (1) year from the date of
entry of voluntary recognition. Upon expiration of this one-year period, any
legitimate labor organization may file a petition for certification election in the
same bargaining unit represented by the voluntarily recognized union, unless a
collective bargaining agreement between the employer and voluntarily recognized
labor union was executed and registered with the Regional Office in accordance
with Rule XVII of these Rules.

R U L E VIII
CERTIFICATION E L E C T I O N

SECTION 1. Who may file. — Any legitimate labor organization, including a

national union or federation that has issued a charter certificate to its local/chapter
or the local/chapter itself, may file a petition for certification election.
A national union or federation tiling a petition in behalf of its local/chapter
shall not be required to disclose the names of the local/chapter's officers and
members, but shall attach to the petition the charter certificate it issued to its local/
chapter.
When requested to bargain collectively in a bargaining unit where no
registered collective bargaining agreement exists, an employer may file a petition
for certification election with the Regional Office.
In all cases, whether the petition for certification election is filed by an
employer or a legitimate labor organization, the employer shall not be considered
a party thereto with a concomitant right to oppose a petition for certification
election. T h e employer's participation in such proceedings shall be limited to: (1)
being notified or informed of petitions of such nature; and (2) submitting the list of
employees during the pre-election conference should the Med-Arbiter act favorably
on the petition.
Any employee has the right to intervene for the protection of his individual
1
right.
SEC 2. Where to file. — A petition for certification election shall be filed with
the Regional Office which issued the petitioning union's certificate of registration/
certificate of creation of chartered local.
T h e petition shall be heard and resolved by the Med-Arbiter.
Where two or more petitions involving the same bargaining unit are filed in
one Regional Office, the same shall be automatically consolidated with the Med-
Arbiter who first acquired jurisdiction. Where the petitions are filed in different
Regional Offices, the Regional Office in which the petition was first filed shall

'As amended by D.O. N o . 40-F-03, 30 October 2008.

990
 IMPLEMENTING RULES OF BOOK V: RULE VIII

exclude all others; in which case, the latter shall indorse the petition to the former
for consolidation.
SEC. 3. When to file. — A petition for certification election may be filed
anytime, except:
(a) when a fact of voluntary recognition has been entered or a valid cer-
tification, consent or run-off election has been conducted within the
bargaining unit within one (1) year prior to the filing of the petition for
certification election. Where an appeal has been filed from the order
of the Med-Arbiter certifying the results of the election, the running of
the one year period shall be suspended until the decision on the appeal
has become final and executory;
( b ) when the duly certified union has commenced and sustained negotia-
tions in g o o d faith with the employer in accordance with Article 250 of
the Labor Code within the one year period referred to in the immedi-
ately preceding paragraph;
( c ) when a bargaining deadlock to which an incumbent or certified bar-
gaining agent is a party had been submitted to conciliation or arbitra-
tion or had become the subject of a valid notice of strike or lockout;
( d ) when a collective bargaining agreement between the employer and a
duly recognized or certified bargaining agent has been registered in
accordance with Article 231 of the Labor Code. Where such collective
bargaining agreement is registered, the petition may be filed only
within sixty (60) days prior to its expiry.
SEC 4. Form and contents of petition. — T h e petition shall be in writing, veri-
fied under oath by the president of petitioning labor organization. Where a federa-
tion or national union files a petition in behalf of its local or affiliate, the petition
shall be verified under oath by the president or duly authorized representative of
the federation or national union. In case the employer filed the petition, the owner,
president or any corporate officer, who is authorized by the board of directors, shall
verify the petition. T h e petition shall contain the following:
(a) the name of petitioner, its address, and affiliation if appropriate, the
date and number of its certificate of registration. If the petition is filed
by a federation or national union, the national president or his/her
duly authorized representative shall certify under oath as to the exis-
tence of its local/chapter in the establishment and attaching thereto
the charter certificate or a certified true copy thereof. If the petition is
filed by a local/chapter it shall attach its charter certificate or a certi-
fied true copy thereof;
( b ) the name, address and nature of employer's business;
( c ) the description of the bargaining unit;
( d ) the approximate number of employees in the bargaining unit;
( e ) the names and addresses of other legitimate labor unions in the bar-
gaining unit;
(f) a statement indicating any of the following circumstances;

991
 IMPLEMENTING RULES

1) that the bargaining unit is unorganized or that there is no regis-

tered collective bargaining agreement covering the employees in
the bargaining unit;
2) if there exists a duly registered collective bargaining agreement,
that the petition is filed within the sixty-day freedom period of
such agreement; or
3) if another union had been previously recognized voluntarily or
certified in a valid certification, consent or runoff election, that
the petition is filed outside the one-year period from date of re-
cording of such voluntary recognition or conduct of certification
or run-off election and no appeal is pending thereon.
( g ) in an organized establishment, the signature of at least twenty-five
percent (25%) of all employees in the appropriate bargaining unit
shall be attached to the petition at the time of its filing; and
1
(h) other relevant facts.
SEC. 5. Raffle of the case. — T h e Regional Director or his/her duly authorized
representative upon receipt of the petition shall immediately assign it by raffle to a
Mediator-Arbiter. T h e raffle shall be done in the presence of the petitioner if the
2
latter so desires.
SEC 6. Notice of preliminary conference. — T h e petition shall immediately
be transmitted to the assigned Mediator-Arbiter who shall immediately prepare and
serve a notice of preliminary conference to be held within ten (10) working days
from the Mediator-Arbiter's receipt of the petition.
The service of the petition to the employer and of the notice of preliminary
conference to the petitioner and the incumbent bargaining agent (if any) shall
be made within three (3) working days from the Mediator-Arbiter's receipt of the
petition. T h e service may be made by personal service, by registered mail or by
courier service.
A copy of the petition and of the notice of preliminary conference shall be
posted within the same three (3) day period in at least two conspicuous places in
the establishment. In multiple-location workplaces, the posting shall be made in at
3
least two conspicuous places in every location.
SEC 7. Forced Intervenor. — T h e incumbent bargaining agent shall
automatically be one of the choices in the certification election as forced intervenor.
S E C 8. Motion for Intervention. — When a petition for certification election
was filed in an organized establishment, any legitimate labor union other than the
incumbent bargaining agent operating within the bargaining unit may file a motion
for intervention with the Med-Arbiter during the freedom period of the collective
bargaining agreement. T h e form and contents of the motion shall be the same as
that of a petition for certification election.

'As amended by D.O. 40-F-03, 30 October 2008.

Ibid.
Ibid.

992
 IMPLEMENTING RULES OF BOOK V: RULE VIII

In an unorganized establishment, the motion shall be filed at any time prior

to the decision of the Med-Arbiter. T h e form and contents of the motion shall
likewise be the same as that of a petition for certification election. T h e motion
for intervention shall be resolved in the same decision issued in the petition for
certification election.
SEC. 9. Preliminary Conference; Hearing. — T h e Med-Arbiter shall conduct
a preliminary conference and hearing within ten (10) days from receipt of the
petition to determine the following:
(a) the bargaining unit to be represented;
( b ) contending labor unions;
( c ) possibility of a consent election;
( d ) existence of any of the bars to certification election under Section 3 of
this Rule; and
( e ) such other matters as may be relevant for the final disposition of the
case.
SEC 10. Consent Election; Agreement. — T h e contending unions may agree
to the holding of an election, in which case it shall be called a consent election. The
Mediator-Arbiter shall forthwith call for the consent election, reflecting the parties'
agreement and the call in the minutes of the conference.
T h e Mediator-Arbiter shall immediately forward the records of the petition to
the Regional Director or his/her authorized representative for the determination of
the Election Officer who shall be chosen by raffle in the presence of representatives
of the contending unions if they so desire.
T h e first pre-election conference shall be scheduled within ten (10) days
from the date of the consent election agreement. Subsequent conferences may be
called to expedite and facilitate the holding of the consent election.
To afford an individual employee-voter an informed choice where a local/
chapter is the petitioning union, the local/chapter shall secure its certificate of
1
creation at least five working days before the date of the consent election.
SEC 11. Number of Hearings; Pleadings. — If the contending unions fail to
agree to a consent election during the preliminary conference, the Med-Arbiter
may conduct as many hearings as he/she may deem necessary, but in no case
shall the conduct thereof exceed fifteen (15) days from the date of the scheduled
preliminary conference/hearing, after which time the petition shall be considered
submitted for decision. T h e Med-Arbiter shall have control of the proceedings.
Postponements or continuances shall be discouraged.
Within the same 15-day period within which the petition is heard, the
contending labor unions may file such pleadings as they may deem necessary for the
immediate resolution of the petition. Extensions of time shall not be entertained.
All motions shall be resolved by the Med-Arbiter in the same order or decision
granting or denying the petition.
SEC 12. Failure to appear despite notice. — T h e failure of any party to appear
in the hearing(s) when notified or to file its pleadings shall be deemed a waiver of

'As amended by D.O. N o . 40-F-O3, 30 October 2008.

993
 IMPLEMENTING RULES

its right to be heard. The Med-Arbiter, however, when agreed upon by the parties
for meritorious reasons may allow the cancellation of scheduled hearing(s). The
cancellation of any scheduled hearing(s) shall not be used as a basis for extending
the 15-day period within which to terminate the same.
SEC. 13. Order/Decision on the petition. — Within ten (10) days from the
date of the last hearing, the Mediator-Arbiter shall formally issue a ruling granting
or denying the petition, except in organized establishments where the grant of the
petition can only be made after the lapse of the freedom period.
The ruling for the conduct of a certification election shall state the following:
(a) the name of the employer or establishment;
( b ) a description of the bargaining unit;
( c ) a statement that none of the grounds for dismissal enumerated in the
succeeding paragraph exists;
( d ) the names of the contending labor unions which shall appear in the
following order: the petitioner unions in the order of the date of filing
of their respective petitions; the forced intervenor; and "no union";
( e ) to afford an individual employee-voter an informed choice where
a local/chapter is one of the contending unions, a directive to
an unregistered local/chapter or a federation/national union
representing an unregistered local/chapter to personally submit to
the election officer its certificate of creation at least five working days
before the actual conduct of the certification election. Non-submission
of this requirement as certified by the election officer shall disqualify
the local/chapter from participating in the certification election; and
(f) a directive upon the employer and the contending union (s) to submit
within ten (10) days from receipt of the order, the certified list of
employees in the bargaining unit, or where necessary, the payrolls
covering the members of the bargaining unit for the last three (3)
1
months prior to the issuance of the order.
SEC 14. Denial of the petition; Grounds. — T h e Mediator-Arbiter may dismiss
the petition on any of the following grounds:
(a) the petitioning union or national union/federation is not listed in the
Department's registry of legitimate labor unions or that its registration
certificate has been cancelled with finality in accordance with Rule XIV
of these Rules;
(b) failure of a local/chapter or national union/federation to submit a duly
issued charter certificate upon filing of the petition for certification
election;
(c) filing the petition before or after the freedom period of a duly
registered collective bargaining agreement; provided that the sixty-day
period based on the original collective bargaining agreement shall not
be affected by any amendment, extension or renewal of the collective
bargaining agreement;

'As amended by D.O. N o . 40-F-03, 30 October 2008.

994
 IMPLEMENTING RULES OF BOOK V: RULE VIII

(d) filing of a petition within one (1) year from the date of recording
of the voluntary recognition, or within the same period from a valid
certification, consent or run-off election where no appeal on the results
of the certification, consent or run-off election is pending;
(e) where a duly certified union has commenced and sustained negotiations
with the employer in accordance with Article 250 of the Labor Code
within the one-year period referred to in Section 14.d of this Rule, or
where there exists a bargaining deadlock which has been submitted to
conciliation or arbitration or has become the subject of a valid notice
of strike or lockout where an incumbent or certified bargaining agent
is a party;
(f) in an organized establishment, the failure to submit the twenty-five
percent ( 2 5 % ) signature requirement to support the filing of the
petition for certification election;
( g ) non-appearance of the petitioner for two consecutive scheduled
conferences before the Mediator-Arbiter despite due notice; and
( h ) absence of employer-employee relationship between all the members
of the petitioning union and the establishment where the proposed
1
bargaining unit is sought to be represented.
SEC. 15. Prohibited ground for the denial/suspension of the petition. — The
inclusion as union members of employees outside the bargaining unit shall not be
a ground for the cancellation of the registration of the union. Said employees are
2
automatically deemed removed from the list of membership of said unions.
S E C 16. Ancillary Issues. — A l l issues pertaining to the existence of employer-
employee relationship, eligibility or mixture in union membership raised before
the Mediator-Arbiter during the hearing (s) and in the pleadings shall be resolved
in the same order or decision granting or denying the petition for certification
election.
All issues pertaining to the validity of the petitioning union's certificate of
registration or its legal personality as a labor organization, validity of registration
and execution of collective bargaining agreements shall be heard and resolved by
the Regional Director in an independent petition for cancellation of its registration
and not by the Mediator-Arbiter in the petition for certification election, unless
the petitioning union is not listed in the Department's roster of legitimate labor
organizations, or an existing collective bargaining agreement is not registered with
3
the Department.
S E C 17. Release of Order/Decision within ten (10) days from the last hearing.
— T h e Med-Arbiter shall release his/her order or decision granting or denying the
petition personally to the parties on an agreed date and time.
S E C 18. Appeal. — T h e order granting the conduct of a certification election
in an unorganized establishment shall not be subject to appeal. Any issue arising

•As amended by D.O. N o . 40-F-03, 30 October 2008.

Ibid.
Ibid.
995
 IMPLEMENTING RULES

therefrom may be raised by means of protest on the conduct and results of the
certification election.
The order granting the conduct of a certification election in an organized
establishment and the decision dismissing or denying the petition, whether in an
organized or unorganized establishment, may be appealed to the Office of the
Secretary within ten (10) days from receipt thereof.
T h e appeal shall be verified under oath and shall consist of a memorandum
of appeal, specifically stating the grounds relied upon by the appellant with the
supporting arguments and evidence.
SEC. 19. Where to file appeal. — T h e memorandum of appeal shall be filed in
the Regional Office where the petition originated, copy furnished the contending
unions and the employer, as the case may be. Within twenty-four (24) hours from
receipt of the appeal, the Regional Director shall cause the transmittal thereof
together with the entire records of the case to the Office of the Secretary.
SEC 20. Finality of Order/Decision. — Where no appeal is filed within the
ten-day period, the Med-Arbiter shall enter the finality of the order/decision in the
records of the case and cause the transmittal of the records of the petition to the
Regional Director.
SEC 21. Period to Reply. — A reply to the appeal may be filed by any party to
the petition within ten (10) days from receipt of the memorandum of appeal. T h e
reply shall be filed directly with the Office of the Secretary.
SEC 22. Decision of the Secretary. — T h e Secretary shall have fifteen (15)
days from receipt of the entire records of the petition within which to decide the
appeal. T h e filing of the memorandum of appeal from the order or decision of the
Med-Arbiter stays the holding of any certification election.
T h e decision of the Secretary shall become final and executory after ten
(10) days from receipt thereof by the parties. No motion for reconsideration of the
decision shall be entertained.
SEC 23. Transmittal of records to the Regional Office. — Within forty-eight
(48) hours from notice of receipt of decision by the parties and finality of the
decision, the entire records of the case shall be remanded to the Regional Office
of origin for implementation. Implementation of the decision shall not be stayed
unless restrained by the appropriate court.
SEC 24. Effects of consent election. — Where a petition for certification
election had been filed, and upon the intercession of the Med-Arbiter, the parties
agree to hold a consent election, the results thereof shall constitute a bar to the
holding of a certification election for one (1) year from the holding of such consent
election. Where an appeal has been filed from the results of the consent election,
the running of the one-year period shall be suspended until the decision on appeal
has become final and executory.
Where no petition for certification election was filed but the parties
themselves agreed to hold a consent election with the intercession of the Regional
Office, the results thereof shall constitute a bar to another petition for certification
election.

996
 IMPLEMENTING RULES OF BOOK V: RULE IX

SEC. 25. Effects of early agreements. — T h e representation case shall not be

adversely affected by a collective bargaining agreement registered before or during
the last sixty (60) days of a subsisting agreement or during the pendency of the
representation case.
SEC 26. Non-availability of Med-Arbiter. — Where there is no Med-Arbiter
available in the Regional Office by reason of vacancy, prolonged absence, or excessive
workload as determined by the Regional Director, he/she shall transmit the entire
records of the case to the Bureau, which shall within forty-eight (48) hours from
receipt assign the case to any Med-Arbiter from any of the Regional Offices or from
the Bureau.

R U L E LX
C O N D U C T O F CERTIFICATION E L E C T I O N

SECTION 1. Raffle of the case. — Within twenty-four (24) hours from receipt of

the notice of entry of final judgment granting the conduct of a certification election,
the Regional Director shall cause the raffle of the case to an Election Officer who
shall have control of the pre-election conference and election proceedings.
SEC 2. Pre-election conference. — Within twenty-four (24) hours from
receipt of the assignment for the conduct of a certification election, the Election
Officer shall cause the issuance of notice of pre-election conference upon the
contending unions, which shall be scheduled within ten (10) days from receipt
of the assignment. T h e employer shall be required to submit the certified list of
employees in the bargaining unit, or where necessary, the payrolls covering the
1
members of the bargaining unit at the time of the filing of the petition.
SEC 3. Waiver of right to be heard. — Failure of any party to appear during
the pre-election conference despite notice shall be considered as a waiver of its right
to be present and to question or object to any of the agreements reached in the pre-
election conference. However, this shall not deprive the non-appearing party of the
2
right to be furnished notices of and to attend subsequent pre-election conferences.
SEC 4. Minutes of pre-election conference. — T h e Election Officer shall keep
the minutes of matters raised and agreed upon during the pre-election conference.
T h e parties shall acknowledge the completeness and correctness of the entries in
the minutes by affixing their signatures thereon. Where any of the parties refuse to
sign the minutes, the Election Officer shall note such fact in the minutes, including
the reason for refusal to sign the same. In all cases, the parties shall be furnished a
copy of the minutes.
T h e pre-election conference shall be completed within thirty (30) days from
the date of the first hearing.
SEC 5. Qualification of voters; inclusion-exclusion. — All employees who
are members of the appropriate bargaining unit sought to be represented by

•As amended by D . O . 40-F-03, 30 October 2008.

Ibid.
997
 IMPLEMENTING RULES

the petitioner at the time of the issuance of the order granting the conduct of a
certification election shall be eligible to vote. An employee who has been dismissed
from work but has contested the legality of the dismissal in a forum of appropriate
jurisdiction at the time of the issuance of the order for the conduct of a certification
election shall be considered a qualified voter, unless his/her dismissal was declared
valid in a final judgment at the time of the conduct of the certification election.
In case of disagreement over the voters' list or over the eligibility of voters,
all contested voters shall be allowed to vote. But their votes shall be segregated and
sealed in individual envelopes in accordance with Sections 10 and 11 of this Rule.
SEC. 6. Posting of Notices. — T h e Election Officer shall cause the posting of
notice of election at least ten (10) days before the actual date of the election in two
(2) most conspicuous places in the company premises. T h e notice shall contain:
(a) the date and time of the election;
( b ) names of all contending unions;
( c ) the description of the bargaining unit and the list of eligible and chal-
lenged voters.
T h e posting of the notice of election, the information required to be included
therein and the duration of posting cannot be waived by the contending unions or
the employer.
SEC 7. Secrecy and sanctity of the ballot. — To ensure secrecy of the ballot,
the Election Officer, together with the authorized representatives of the contending
unions and the employer, shall, before the start of the actual voting, inspect the
polling place, the ballot boxes and the polling booths.
SEC 8. Preparation of ballots. — T h e Election Officer shall prepare the
ballots in English and Filipino or the local dialect. T h e number of ballots should
correspond to the number or voters in the bargaining unit plus a reasonable
number of extra ballots for contingencies. All ballots shall be signed at the back
by the Election Officer and an authorized representative each of the contending
unions. A party who refuses or fails to sign the ballots waives its right to do so and
the Election Officer shall enter the fact of refusal and the reason therefor in the
1
records of the case.
SEC 9. Marking of votes. — T h e voter must put a cross (X) or check ( • ) mark
in the square opposite the name of the union of his choice or "No Union" if he/she
does not want to be represented by any union.
If a ballot is torn, defaced or left unfilled in such a manner as to create doubt
or confusion or to identify the voter, it shall be considered spoiled. If the voter
inadvertently spoils a ballot, he/she shall return it to the Election Officer who shall
destroy it and give him/her another ballot.
SEC 10. Procedure in the challenge of votes. — T h e ballot of the voter who
has been properly challenged during the pre-election conferences, shall be placed
in an envelope which shall be sealed by the Election Officer in the presence of
the voter and the representatives of the contending unions. T h e Election Officer

•As amended by D . O . N o . 40-F-03, 30 October 2008.

998
 IMPLEMENTING RULES OF BOOK V: RULE IX

shall indicate on the envelope the voter's name, the union challenging the voter,
and the ground for the challenge. T h e sealed envelope shall then be signed by the
election Officer and the representatives of the contending unions. The Election
Officer shall note all challenges in the minutes of the election proceedings and
shall have custody of all envelopes containing the challenged votes. The envelopes
shall be opened and the question of eligibility shall be passed upon by the Mediator-
Arbiter only if the number of segregated votes will materially alter the results of the
1
election.
SEC. 11. On-the-spot questions. — T h e Election Officer shall rule on any
question relating to and raised during the conduct of the election. In no case,
however, shall the election officer rule on any of the grounds for challenge specified
in the immediately preceding section.
SEC 12. Protest; when perfected. — Any party-in-interest may file a protest
based on the conduct or mechanics of the election. Such protests shall be recorded
in the minutes of the election proceedings. Protests not so raised are deemed
waived.
T h e protesting party must formalize its protest with the Med-Arbiter, with
specific grounds, arguments and evidence, within five (5) days after the close of
the election proceedings. If not recorded in the minutes and formalized within the
prescribed period, the protest shall be deemed dropped.
SEC 13. Canvassing of votes. — T h e votes shall be counted and tabulated by
the Election Officer in the presence of the representatives of the contending unions.
Upon completion of the canvass, the Election Officer shall give each representative
a copy of the minutes of the election proceedings and results of the election. The
ballots and the tally sheets shall be sealed in an envelope and signed by the Election
Officer and the representatives of the contending unions and transmitted to the
Med-Arbiter, together with the minutes and results of the election, within twenty-
four (24) hours from the completion of the canvass.
Where the election is conducted in more than one region, consolidation of
2
results shall be made fifteen (15) days from the conduct thereof.
SEC 14. Conduct of election and canvass of votes. — T h e election precincts
shall open and close on the date and time agreed upon during the pre-election
conference. T h e opening and canvass of votes shall proceed immediately after the
precincts have closed. Failure of the representative/s of the contending unions to
appear during the election proceedings and canvass of votes shall be considered a
3
waiver of the right to be present and to question the conduct thereof.
SEC 15. Certification of Collective Bargaining Agent. — The union which
obtained a majority of the valid votes cast shall be certified as the sole and exclusive

•D.O. N o . 40-F-03 deleted Section 10. Section 11 was amended and renumbered
to become the present Section 10, by D.O. N o . 40-F-03, 30 October 2008.
2
Sections 11, 12, and 13 are as renumbered by D.O. N o . 40-F-03, 30 October
2008.
3
As amended and renumbered by D.O. N o . 40-F-03, 30 October 2008.

999
 IMPLEMENTING RULES

bargaining agent of all the employees in the appropriate bargaining unit within five
(5) days from the day of the election, provided no protest is recorded in the minutes
1
of the election.
SEC. 16. Failure of election. — Where the number of votes cast in a certification
or consent election is less than the majority of the number of eligible voters and
there are no material challenged votes, the Election Officer shall declare a failure
of election in the minutes of the election proceedings.
Sec. 17. Effect of failure of election. — A failure of election shall not bar the
filing of a motion for the immediate holding of another certification or consent
election within six (6) months from date of declaration of failure of election.
SEC 18. Action on the motion. — Within twenty-four (24) hours from receipt
of the motion, the Election Officer shall immediately schedule the conduct of
another certification or consent election within fifteen (15) days from receipt of
the motion and cause the posting of the notice of certification election at least ten
(10) days prior to the scheduled date of election in two (2) most conspicuous places
in the establishment. T h e same guidelines and list of voters shall be used in the
election.
SEC 19. Proclamation and certification of the result of the election. — Within
twenty-four (24) hours from final canvass of votes, there being a valid election, the
Election Officer shall transmit the records of the case to the Med-Arbiter who shall,
within the same period from receipt of the minutes and results of election, issue
an order proclaiming the results of the election and certifying the union which
obtained a majority of the valid votes cast as the sole and exclusive bargaining agent
in the subject bargaining unit, under any of the following conditions:
(a) no protest was filed or, even if one was filed, the same was not perfected
within the five-day period for perfection of the protest;
( b ) no challenge or eligibility issue was raised or, even if one was raised, the
resolution of the same will not materially change the results of the elec-
tions.
T h e winning union shall have the rights, privileges and obligations of a duly
certified collective bargaining agent from the time the certification is issued.
Where majority of the valid votes cast results in " N o Union" obtaining the
majority, the Med-Arbiter shall declare such fact in the order.
SEC 20. Appeal; finality of decision. — T h e decision of the Med-Arbiter may
be appealed to the Secretary within ten (10) days from receipt by the parties of a
2
copy thereof.
T h e appeal shall be under oath and shall consist of a memorandum of appeal,
specifically stating the grounds relied upon by the appellant with the supporting
arguments and evidence.

'Sections 15 to 24 are as renumbered by D.O. N o . 40-F-03, 30 October 2008.

Sections 20 to 24 (originally numbered 21 to 25) were added by D.O. No.
40-E-05 dated 30 November 2005.

1000
 IMPLEMENTING RULES OF BOOK V: RULE X

Where no appeal is filed within the ten-day period, the order/decision shall
become final and executory and the Med-Arbiter shall enter this fact into the
records of the case.
SEC. 21. Where to file appeal. — T h e memorandum of appeal shall be filed in
the Regional Office where the petition originated, copy furnished the contending
unions and the employer, as the case may be. Within twenty-four (24) hours from
receipt of the appeal, the Regional Director shall cause the transmittal thereof
together with the entire records of the case to the Office of the Secretary.
SEC 22. Period to Reply. — A reply to the appeal may be filed by any party to
the petition within ten (10) days from receipt of the memorandum of appeal. The
reply shall be filed directly with the Office of the Secretary.
SEC 23. Decision of the Secretary. — T h e Secretary shall have fifteen (15)
days from receipt of the entire records or the petition within which to decide the
appeal.
T h e decision of the Secretary shall become final and executory after ten
(10) days from receipt thereof by the parties. No motion for reconsideration of the
decision shall be entertained.
Section 24. Transmittal of records to the Regional Office. — Within forty-
eight (48) hours from notice of receipt of decision by the parties and finality of the
decision, the entire records of the case shall be remanded to the Regional Office
of origin for implementation. Implementation of the decision shall not be stayed
unless restrained by the appropriate court.

RULE X
RUN-OFF ELECTIONS

SECTION 1. When proper. — When an election which provides for three (3) or
more choices results in none of the contending unions receiving a majority of the
valid votes cast, and there are no objections or challenges which if sustained can
materially alter the results, the Election Officer shall motu proprio conduct a run-off
election within ten (10) days from the close of the election proceedings between
the labor unions receiving the two highest number of votes; provided, that the total
number of votes for all contending unions is at least fifty percent (50%) of the
number of votes cast.
"No Union" shall not be a choice in the run-off election.
Notice of run-off elections shall be posted by the Election Officer at least five
( 5 ) days before the actual date of run-off election.
SEC 2. Qualification of voters. — T h e same voters' list used in the certification
election shall be used in the run-off election. T h e ballots in the run-off election shall
provide as choices the unions receiving the highest and second highest number of
the votes cast. T h e labor union receiving the greater number of valid votes cast shall
be certified as the winner, subject to Section 20, Rule I X .

1001
 IMPLEMENTING RULES

RULE XI
I N T E R / I N T R A - U N I O N DISPUTES A N D O T H E R RELATED
LABOR RELATIONS DISPUTES

SECTION 1. Coverage. — A . Inter/intra-union disputes shall include:

(a)
conduct, or nullification of election of officers of unions and workers'
association;
( b ) audit/accounts examination of union or workers' association funds;
( c ) deregistration of collective bargaining agreements;
( d ) validity/invalidity of union affiliation or disaffiliation;
( e ) validity/invalidity of acceptance/non-acceptance for union member-
ship;
(f) validity/invalidity of voluntary recognition;
( g ) opposition to application for union or CBA registration;
(h) violations of or disagreements over any provision of the constitution
and by-laws of a union or workers' association;
(i) disagreements over chartering or registration of labor organizations or
the registration of collective bargaining agreements;
(j) violations of the rights and conditions of membership in a union or
workers' association;
(k) violations of the rights of legitimate labor organizations, except
interpretation of collective bargaining agreements;
(1) validity/invalidity of impeachment/expulsion/suspension or any disci-
plinary action meted against any officer and member, including those
arising from non-compliance with the reportorial requirements under
Rule V;
( m ) such other disputes or conflicts involving the rights to self-organization,
union membership and collective bargaining;
(1) between and among legitimate labor organizations; and
1
(2) between and among members of a union or workers' association.
B. Other labor relations disputes, not otherwise covered by Article 217 of
the Labor Code, shall include:
(a) any conflict between:
1) a labor union and the employer; or
2) a labor union and a group that is not a labor organization; or
3) a labor union and an individual who is not a member of such
union:
( b ) cancellation of registration of unions and workers associations filed
by individual/s other than its members, or group that is not a labor
organization; and
2
( c ) a petition for interpleader involving labor relations.

'As amended by D . O . N o . 40-F-03, 30 October 2008.

2
Section 2 was amended, and integrated as the present paragraph B of Section
1 by D.O. N o . 40-F-03.

1002
 IMPLEMENTING RULES OF BOOK V: RULE XI

SEC. 2. Effects of the filing/pendency of inter/intra-union and other related

labor relations disputes. — T h e rights, relationships and obligations of the parties
litigants against each other and other parties-in-interest prior to the institution
of the petition shall continue to remain during the pendency of the petition and
until the date of finality of the decision rendered therein. Thereafter, the rights,
relationships and obligations of the parties litigants against each other and other
parties-in-interest shall be governed by the decision so ordered.
T h e filing or pendency of any inter/intra-union dispute and other related
labor relations dispute is not a prejudicial question to any petition for certification
election and shall not be a ground for the dismissal of a petition for certification
1
election or suspension of proceedings for certification election.
SEC 3. Who may file. — Any legitimate labor organization or member(s)
thereof specially concerned may file a complaint or petition involving disputes or
issues enumerated in Section 1 hereof. Any party-in-interest may file a complaint or
petition involving disputes or issues enumerated in Section 2 hereof.
Where the issue involves the entire membership of the labor organization,
the complaint or petition shall be supported by at least thirty percent (30%) of its
members.
SEC. 4. Where to file. — Complaints or petitions involving labor unions
with independent registrations, chartered locals, workers' associations, its officers
or members shall be filed with the Regional Office that issued its certificate of
registration or certificate of creation of chartered local. Complaints involving
federations, national unions, industry unions, its officers or member organizations
shall be filed with the Bureau.
Petitions for cancellation of registration of labor unions with independent
registration, chartered locals and workers association and petitions for deregistra-
tion of collective bargaining agreements shall be resolved by the Regional Director.
H e / S h e may appoint a Hearing Officer from the Labor Relations Division.
Other inter/intra-union disputes and related labor relations disputes shall be
heard and resolved by the Med-Arbiter in the Regional Office.
Complaints or petitions involving federations, national or industry unions,
trade union centers and their chartered locals, affiliates or member organizations
shall be filed either with the Regional Office or the Bureau. T h e complaint or
petition shall be heard and resolved by the Bureau.
When two or more petitions involving the same parties and the same causes
of action are filed, the same shall be automatically consolidated.
SEC 5. Formal requirements of the complaint or petition. — The complaint
or petition shall be in writing, verified under oath and shall, among others, contain
the following:
(a) name, address and other personal circumstances of the complainant(s)
or petitioner(s);

'Sections 2 to 22 of Rule XI are as renumbered (from 3 to 23) by D.O. N o .

40-F-03.
1003
 IMPLEMENTING RULES

(b) name, address and other personal circumstances of the respondent(s)

or person (s) charged;
(c) nature of the complaint or petition;
(d) facts and circumstances surrounding the complaint or petition;
(e) cause(s) of action or specific violadon(s) committed;
(f) a statement that the administrative remedies provided for in the consti-
tution and by-laws have been exhausted or such remedies are not read-
ily available to the complainant(s) or petitioner(s) through no fault of
his/her/their own, or compliance with such administrative remedies
does not apply to complainant(s) or petitioner(s);
(g) relief(s) prayed for;
(h) certificate of non-forum shopping; and
(i) other relevant matters.
SEC. 6. Raffle of the case. — Upon the filing of the complaint or petition, the
Regional Director or any of his/her authorized representative in the Regional Office
and the Docket Section of the Bureau shall allow the party filing the complaint or
petition to determine the Med-Arbiter or Hearing Officer assigned to the case by
means of a raffle. Where there is only one Med-Arbiter or Hearing Officer in the
region, the raffle shall be dispensed with and the complaint or petition shall be
assigned to him/her.
SEC. 7. Notice of preliminary conference. — Immediately after the raffle of
the case or receipt of the complaint or petition the same shall be transmitted to the
Med-Arbiter or Hearing Officer, as the case may be, who shall in the same instance
prepare the notice for preliminary conference and cause the service thereof upon
the party filing the petition. T h e preliminary conference shall be scheduled within
ten (10) days from receipt of the complaint or petition.
Within three (3) days from receipt of the complaint or petition, the Med-
Arbiter or Hearing Officer, as the case may be, shall cause the service of summons
upon the respondent(s) named therein, directing h i m / h e r to file his/her answer/
comment on the complaint or petition on or before the scheduled preliminary
conference and to appear before the Med-Arbiter or Hearing Officer on the
scheduled preliminary conference.
SEC 8. Conduct of preliminary conference. — T h e Med-Arbiter or Hearing
Officer, as the case may be, shall conduct a preliminary conference and hearing
within ten (10) days from receipt of the complaint or petition. H e / S h e shall exert
every effort to effect an amicable settlement of the dispute.
Where the parties agree to settle amicably, their agreements shall be specified
in the minutes of the conference and a decision based on compromise shall be
issued by the Med-Arbiter or the Regional Director, as the case may be, within five
(5) days from the date of the mandatory conference.
Where no amicable settlement is reached, the Med-Arbiter or Hearing
Officer, as the case may be, shall proceed with the stipulation of facts, limitation
or definition of the issues, clarificatory questioning and submission of laws and
jurisprudence relied upon in support of each other's claims and defenses.

1004
 IMPLEMENTING RULES OF BOOK V: RULE XI

SEC. 9. Conduct of Hearing(s). — The Med-Arbiter or Hearing Officer, as the

case may be, shall determine whether to call further hearing(s) on the complaint or
petition.
Where the Med-Arbiter or Hearing Officer, as the case may be, decides to
conduct further hearing(s), he/she shall require the parties to submit the affidavits
of their witnesses and such documentary evidence material to prove each other's
claims and defenses. T h e hearing(s) shall be limited to clarificatory questions by
the Med-Arbiter or Hearing Officer and must be completed within twenty-five (25)
days from the date of preliminary conference.
T h e complaint or petition shall be considered submitted for decision after
the date of the last hearing or upon expiration of twenty-five (25) days from date of
preliminary conference, whichever comes first.
SEC. 10. Affirmation of testimonial evidence. — Any affidavit submitted by a
party to prove his/her claims or defenses shall be re-affirmed by the presentation
of the affiant before the Med-Arbiter or Hearing Officer, as the case may be. Any
affidavit submitted without the re-affirmation of the affiant during a scheduled
hearing shall not be admitted in evidence, except when the party against whom the
affidavit is being offered admits all allegations therein and waives the examination
of the affiant.
SEC 11. Filing of pleadings. — T h e parties may file his/her pleadings,
including their respective position papers, within the twenty-five (25) day period
prescribed for the conduct of hearing(s). No other pleading shall be considered or
entertained after the case is considered submitted for decision.
SEC 12. Hearing and resolution of the complaint or petition in the Bureau. —
T h e Bureau shall observe the same process and have the same period within which
to hear and resolve the complaints or petitions filed before it.
SEC 13. Decision. — T h e Bureau and the Med-Arbiter or Regional Director,
as the case may be, shall have twenty (20) days from the date of the last hearing
within which to decide the complaint or petition. T h e decision shall state the facts,
findings, conclusion, and reliefs granted.
SEC 14. Release of Decision. — T h e notice of decision shall be signed by the
Records Officer in the Bureau and by the Med-Arbiter or Hearing Officer in the
Regional Office. Within twenty (20) days from date of last hearing, the decision
shall be released to the parties personally on a date and time agreed upon during
the last hearing.
SEC 15. Appeal. — T h e decision of the Med-Arbiter and Regional Director
may be appealed to the Bureau by any of the parties within ten (10) days from
receipt thereof, copy furnished the opposing party. T h e decision of the Bureau
Director in the exercise of his/her original jurisdiction may be appealed to the
Office of the Secretary by any party within the same period, copy furnished the
opposing party.
T h e appeal shall be verified under oath and shall consist of a memorandum of
appeal specifically stating the grounds relied upon by the appellant, with supporting
arguments and evidence.

1005
 IMPLEMENTING RULES

SEC. 16. Where to file appeal. — T h e memorandum of appeal shall be filed

in the Regional Office or Bureau where the complaint or petition originated.
Within twenty-four (24) hours from receipt of the memorandum of appeal, the
Bureau or Regional Director shall cause the transmittal thereof together with the
entire records of the case to the Office of the Secretary or the Bureau, as the case
may be.
SEC 17. Finality of Decision. — Where no appeal is filed within the ten-day
period, the Bureau and Regional Director or Med-Arbiter, as the case may be, shall
enter the finality of the decision in the records of the case and cause the immediate
implementation thereof.
SEC 18. Period to reply. — A reply to the appeal may be filed by any party to
the complaint or petition within ten (10) days from receipt of the memorandum
of appeal. T h e reply shall be filed directly with the Bureau or the Office of the
Secretary, as the case may be.
SEC 19. Decision of the Bureau/Office of the Secretary. — T h e Bureau
Director or the Secretary, as the case may be, shall have twenty (20) days from receipt
of the entire records of the case within which to decide the appeal. T h e filing of the
memorandum of appeal from the decision of the Med-Arbiter or Regional Director
and Bureau Director stays the implementation of the assailed decision.
T h e Bureau or Office of the Secretary may call the parties to a clarificatory
hearing in aid of its appellate jurisdiction.
SEC 20. Finality of Decision of Bureau/ Office of the Secretary. — The
decision of the Bureau or the Office of the Secretary shall become final and
executory after ten (10) days from receipt thereof by the parties, unless a motion
for its reconsideration is filed by any party therein within the same period. Only one
(1) motion for reconsideration of the decision of the Bureau or the Office of the
Secretary in the exercise of their appellate jurisdiction shall be allowed.
SEC 21. Execution of decision. — T h e decision of the Med-Arbiter and
Regional Director shall automatically be stayed pending appeal with the Bureau.
T h e decision of the Bureau in the exercise of its appellate jurisdiction shall be
immediately executory upon issuance of entry of final judgment.
T h e decision of the Bureau in the exercise of its original jurisdiction shall
automatically be stayed pending appeal with the Office of the Secretary. T h e decision
of the Office of the Secretary shall be immediately executory upon issuance of entry
of final judgment.
SEC 22. Transmittal of records to the Regional Office/Bureau. — Within
forty-eight (48) hours from notice of receipt of decision by the parties and finality
of the decision, the entire records of the case shall be remanded to the Bureau or
Regional Office of origin for implementation. T h e implementation of the decision
shall not be stayed unless restrained by the appropriate court.

1006
 IMPLEMENTING RULES OF BOOK V: RULE XII

RULE XII
E L E C T I O N O F OFFICERS O F L A B O R U N I O N S A N D
WORKERS' ASSOCIATIONS

SECTION 1. Conduct of election of union officers; procedure in the absence

of provisions in the constitution and by-laws. — In the absence of any agreement

among the members or any provision in the Constitution and by-laws of a labor
union or workers' association, the following guidelines may be adopted in the
election of officers.
(a) within sixty (60) days before the expiration of the term of the incum-
bent officers, the president of the labor organization shall constitute a
committee on election to be composed of at least three (3) members
who are not running for any position in the election, provided that if
there are identifiable parties within the labor organization, each party
shall have equal representation in the committee;
( b ) upon constitution, the members shall elect the chairman of the com-
mittee from among themselves, and case of disagreement, the presi-
dent shall designate the chairman;
( c ) within ten (10) days from its constitution, the committee shall, among
others, exercise the following powers and duties:
1) set the date, time and venue of the election;
2) prescribe the rules on the qualification and eligibility of candi-
dates and voters;
3) prepare and post the voters' list and the list of qualified candi-
dates;
4) accredit the authorized representatives of the contending parties;
5) supervise the actual conduct of the election and canvass the votes
to ensure the sanctity of the ballot;
6) keep minutes of the proceedings;
7) be the final arbiter of all election protests;
8) proclaim the winners; and
9) prescribe such other rules as may facilitate the orderly conduct of
election.
SEC 2. Dispute over conduct of election of officers. — Where the terms of
the officers, of a labor organization have expired and its officers failed or neglected
to do so call for an election of new officers or where the labor organization's
constitution and by-laws do not provide for the manner by which the said election
can be called or conducted and the intervention of the Department is necessary,
at least thirty percent (30%) of the members of the labor organization may file a
petition for the conduct of election of their officers with the Regional Office that
issued its certificate of registration or certificate of creation of chartered local.
In the case of federations, national or industry unions and trade union
centers, the petition shall be filed with the Bureau or the Regional Office but shall
be heard and resolved by the Bureau.

1007
 IMPLEMENTING RULES

This rule shall also apply where a conduct of election of officers is an

alternative relief or necessary consequence of a petition for nullification of election
of officers, impeachment/expulsion of officers, or such other petitions.
SEC. 3. Formal requirements and proceedings. — T h e formal requirements,
processes and periods of disposition of this petition stated in Rule XI shall be
followed in the determination of the merits of the petition and appeal.
SEC 4. Pre-election conference and conduct of election. — T h e appointment
of an election officer and the procedures and periods in the conduct of the pre-
election conference and election proceedings prescribed in Rule IX shall also apply
in the conduct of a pre-election conference and election of officers in any labor
organization.
SEC. 5. Applicability of the provisions of the labor organization's constitution
and by-laws. — Where the conduct of election of officers is ordered by the Med-
Arbiter, the Bureau or Office of the Secretary, the rules and regulations governing
the filing of candidacies and conduct of election under the constitution and by-laws
of the labor organization may be applied in the implementation of the decision, or
new and additional rules may be adopted as agreed upon by the parties.
The entire proceedings shall be presided by the Election Officer from the
Labor Relations Division of the Regional Office or the Bureau. H e / S h e shall act as
the COMELEC referred to in the labor organization's constitution and by-laws and
obligate himself/herself to comply with his/her mandate under the decision to be
implemented and the constitution and by-laws.

R U L E XIII
ADMINISTRATION O F TRADE U N I O N F U N D S A N D A C T I O N S
ARISING T H E R E F R O M

SECTION 1. Right of union to collect dues and agency fees. — T h e incumbent

bargaining agent shall continue to be entitled to check-off and collect dues and
agency fees despite the pendency of a representation case, other inter/intra-union
disputes or related labor relations disputes.
SEC 2. Visitorial power under Article 274. — T h e Regional or Bureau Director
may inquire into the financial activities of any legitimate labor organization and
examine their books of accounts and other records to determine compliance with
the law and the organization's constitution and by-laws. Such examination shall be
made upon the filing of a request or complaint for the conduct of an accounts
examination by any member of the labor organization, supported by the written
consent of at least twenty percent (20%) of its total membership.
SEC 3. Where to file. — A request for examination of books of accounts of
independent labor unions, chartered locals and workers associations pursuant
to Article 274 shall be filed with the Regional Office that issued its certificate of
registration or certificate of creation of chartered local.
A request for examination of books of accounts of federations or national
unions and trade union centers pursuant to Article 274 shall be filed with the

1008
 IMPLEMENTING RULES OF BOOK V: RULE XIII

Bureau. Such request or complaint, in the absence of allegations pertaining to

a violation of Article 241, shall not be treated as an intra-union dispute and the
appointment of an Audit Examiner by the Regional or Bureau Director shall not be
appealable.
SEC. 4. Actions arising from Article 241. — Any complaint or petition with
allegations of mishandling, misappropriation or non-accounting of funds in
violation of Article 241 shall be treated as an intra-union dispute. It shall be heard
and resolved by the Med-Arbiter pursuant to the provisions of Rule XI.
SEC. 5. Prescription. — T h e complaint or petition for audit or examination
of funds and book of accounts shall prescribe within three ( 3 ) years from the
date of submission of the annual financial report to the Department or from the
date the same should have been submitted as required by law, whichever comes
earlier.
SEC 6. Decision. — A decision granting the conduct of audit shall include
the appointment of the Audit Examiner and a directive upon him/her to submit
his/her report and recommendations within ten (10) days from termination of
audit T h e decision granting the conduct of audit is interlocutory and shall not
be appealable. T h e decision denying or dismissing the complaint or petition for
audit may be appealed within ten (10) days from receipt thereof pursuant to the
provisions prescribed in Rule X I .
SEC 7. Pre-audit conference. — Within twenty-four (24) hours from receipt of
the decision granting the conduct of audit, the Regional Director shall summon the
parties to a pre-audit conference conducted by the Audit Examiner to determine
and obtain the following:
(a) sources of funds covered by the audit;
( b ) the banks and financial institutions where the labor organization main-
tains its account;
( c ) union books of accounts and financial statements;
( d ) disbursement vouchers with supporting receipts, invoices and other
documents;
( e ) income and revenge receipts;
(f) cash books;
( g ) minutes of general membership meeting and board meetings;
( h ) other relevant matters and documents.
T h e first pre-audit conference shall be scheduled within ten (10) days from
receipt by the Audit Examiner of the decision granting the conduct of an audit.
SEC 8. Issuance of subpoena. — T h e Regional Director may compel any party
to appear or bring the required financial documents in a conference or hearing
through the issuance of a subpoena ad testificandum or subpoena duces tecum. H e /
She may also require the employer concerned to issue certifications of union dues
and other assessments remitted to the union during the period of audit.
SEC. 9. Conduct of audit examination. — Where book of accounts are
submitted by the parties, the Audit Examiner shall:
(a) examine the transactions reflected in the disbursement vouchers;

1009
 IMPLEMENTING RULES

(b) determine the validity of the supporting documents attached to the

vouchers consistent with the union's constitution and by-laws, relevant
resolutions of the union and the Labor Code;
( c ) trace recording and posting in the disbursement book;
( d ) record observations or findings of all financial transactions.
Where no book of accounts are maintained by the officers of the labor
organization, the Audit Examiner shall:
(a) examine the transactions reflected in the disbursement vouchers;
( b ) determine the validity of the supporting documents attached to the
vouchers consistent with the labor organization's constitution and by-
laws, relevant board resolutions, and the Labor Code;
( c ) prepare working papers or worksheet/s;
( d ) record and post all financial transactions reflected in the cash vouchers
in the working papers or worksheet/s; and
( e ) record observations or findings of all financial transactions.
T h e Audit Examiner shall conduct an inventory of all physical assets acquired
by the labor organization, if any, and on the basis of his/her findings prepare his/
her audited financial report or statement reflecting the true and correct financial
accounts and balances of the labor organization with relevant annexes attached.
SEC. 10. Period of audit. — T h e Audit Examiner shall have sixty (60) days
from the date of first pre-audit conference within which to complete the conduct
of audit, unless the volume of financial records, the period covered by the audit
and other circumstances warrant the extension thereof. In such a case, the Audit
Examiner shall notify the Med-Arbiter or the Bureau Director, as the case may be,
of such fact at least ten (10) days before the expiration of the sixty (60) day period.
SEC. 11. Audit Report. — T h e Audit Examiner shall make a report of his/her
findings to the parties involved and the same shall include the following:
(a) name of the labor organization;
( b ) name of complainant(s) or petitioner(s) and respondent(s);
( c ) name of officers of the labor organization during the period covered by
the audit report;
( d ) scope of the audit;
( e ) list of documents examined;
(f) audit methods and procedures adopted; and
( g ) findings and recommendations.
SEC. 12. Completion of audit. — A copy of the audit report shall be forwarded
by the Audit Examiner to the Med-Arbiter or the Bureau Director, as the case may
be, within ten (10) days from termination of the audit, together with the entire
records of the case and all documents relative to the conduct of the audit.
SEC. 13. Decision after audit. — T h e Med-Arbiter or the Bureau Director shall
render a decision within twenty (20) days from receipt of the audit report. All issues
raised by the parties during the conduct of the audit shall be resolved by the Med-
Arbiter. T h e decision shall be released in the same manner prescribed in Section
15, Rule X I .

1010
 IMPLEMENTING RULES OF BOOK V: RULE XIV

When warranted, the Med-Arbiter or Bureau Director shall order the

restitution of union funds by the responsible officer(s) in the same decision.
SEC. 14. Appeal. — A p p e a l from the decision of the Med-Arbiter denying the
conduct of audit and from the results of the audit may be filed by any of the parties
with the Bureau. Decisions rendered by the Bureau after the conduct of audit in the
exercise of its original jurisdiction may be appealed to the Office of the Secretary.
Both shall be resolved in accordance with the provisions of Section 16, Rule X I .
SEC. 15. Period of inquiry or examination. — No complaint for inquiry or
examination of the financial and book of accounts as well as other records of any
legitimate labor organization shall be entertained during the sixty (60) day freedom
period or within thirty (30) days immediately preceding the date of election of
union officers. Any complaint or petition so filed shall be dismissed.

R U L E XIV
C A N C E L L A T I O N O F REGISTRATION O F L A B O R ORGANIZATIONS

SECTION 1. Cancellation of registration; Where to file. — Subject to the re-

quirements of notice and due process, the registration of any legitimate indepen-
dent labor union, local/chapter and workers' association may be cancelled by the
Regional Director upon the filing of a petition for cancellation of union registra-
tion, or application by the organization itself for voluntary dissolution.
T h e petition for cancellation or application for voluntary dissolution shall be
filed in the regional office which issued its certificate of registration or creation.
In the case of federations, national or industry unions and trade union
centers, the Bureau Director may cancel the registration upon the filing of a
petition for cancellation or application for voluntary dissolution in the Bureau of
1
Labor Relations.
SEC 2. Who may file. — Any party-in-interest may commence a petition for
cancellation of registration, except in actions involving violations of Article 241,
which can only be commenced by members of the labor organization concerned.
SEC 3. Grounds for cancellation. — Any of the following may constitute as
ground/s for cancellation of registration of labor organizations:
(a) misrepresentation, false statement or fraud in connection with the
adoption or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification, the list of members who took part
in the ratification;
( b ) misrepresentation, false statements or fraud in connection with the
election of officers, minutes of the election of officers, and the list of
voters; or
2
( c ) voluntary dissolution by the members.

'As amended by D.O. N o . 40-F-03, 30 October 2008.

Ibid.

1011
 IMPLEMENTING RULES

Sec. 4. Voluntary Cancellation of Registration; How Made. — A legitimate

labor organization may cancel its registration provided at least two thirds ( 2 / 3 ) of
its general membership votes to dissolve the organization in a meeting duly called
for that purpose and an application to cancel its registration is thereafter submitted
by the board of the organization to the Regional/Bureau Director, as the case may
1
be. T h e application shall be attested to by the president of the organization.
Sec. 5. Action on the petition/application. — T h e petition/application shall
be acted upon by the Regional/Bureau Director, as the case may be. In case of a
petition for cancellation of registration, the formal requirements, processes and
periods of disposition stated in Rule XI shall be followed in the determination of
2
the merits of the petition.
Sec. 6. Prohibited grounds for cancellation of registration. — T h e inclusion
as union members or employees who are outside the bargaining unit shall not be a
ground to cancel the union registration. T h e ineligible employees are automatically
deemed removed from the list of membership of the union.
T h e affiliation of the rank-and-file and supervisory unions operating within
the same establishment to the same federation or national union shall not be a
3
ground to cancel the registration of either union.

4
RULE X V
REGISTRY OF L A B O R O R G A N I Z A T I O N S
A N D COLLECTIVE B A R G A I N I N G AGREEMENTS

S E C T I O N 1. National Registry. — T h e Bureau shall be the national registry of

labor organizations and collective bargaining agreements. As such it shall:

( a ) maintain a national registry;
( b ) within the month of March following the end of the calendar year,
publish in the Department of Labor and Employment website the lists
of labor organizations and federations which have complied with the
reportorial requirements of Rule V and delinquent labor organizations;
( c ) publish a list of officers of labor organizations with criminal conviction
by final judgment; and
( d ) verify the existence of a registered labor organization with no registered
collective bargaining agreement and which has not been complying
with the reportorial requirements for at least five years. T h e verification
shall observe the following process:
1) T h e Region Office shall make a report of the labor organization's
non-compliance and submit the same to the Bureau for verifica-
tion. T h e Bureau shall send by registered mail with return card
to the labor organization concerned, a notice for compliance in-

1
Added by D . O . N o . 40-F-03, dated 30 October 2008.
2
Renumbered (from previous Section 4) by D . O . N o . 40-F-03,30 October 2008.
^ h i s Section is added by D . O . N o . 40-F-03, 30 October 2008.
4
As amended by D . O . N o . 40-F-03, 30 October 2008.

1012
 IMPLEMENTING RULES OF BOOK V: RULE XVI

dicating the documents it failed to submit and the corresponding

period in which they were required, with notice to comply with
the said reportorial requirements and to submit proof thereof to
the Bureau within ten (10) days from receipt thereof.
Where no response is received by the Bureau within thirty (30)
days from the service of the first notice, it shall send another notice
for compliance, with warning that failure on its part to comply
with the reportorial requirements within the time specified shall
cause its publication as a non-existing labor organization in the
D O L E website.
2) Where no response is received by the Bureau within thirty (30)
days from service of the second notice, the Bureau shall publish
the notice of non-existence of the labor organization/s in the
D O L E website.
3) Where no response is received by the Bureau within thirty (30)
days from date of publication, or where the Bureau has verified
the dissolution of the labor organization, it shall delist the labor
1
organization from the roster of legitimate labor organizations.

RULE XVI
COLLECTIVE BARGAINING

SECTION 1. Policy. — It is the policy o f the State to promote and emphasize

the primacy of free and responsible exercise of the right to self-organization and
collective bargaining, either through single enterprise level negotiations or through
the creation of a mechanism by which different employers and recognized or
certified labor unions in their establishments bargain collectively.
SEC 2. Disclosure of information. — In collective bargaining, the parties
shall at the request of either of them, make available such up-to-date financial
information on the economic situation of the undertaking, which is normally
submitted to relevant government agencies, as is material and necessary for
meaningful negotiations. W h e r e the disclosure of some of this information
could be prejudicial to the undertaking, its communication may be made condi-
tion upon a commitment that it would be regarded as confidential to the extent
required. T h e information to be made available may be agreed upon between
the parties to collective bargaining.
SEC 3. When single enterprise bargaining available. — Any voluntarily
recognized or certified labor union may demand negotiations with its employer for
terms and conditions of work covering employees in the bargaining unit concerned.
SEC 4. Procedure in single enterprise bargaining. — A recognized or certified
labor union that desires to negotiate with its employer shall submit such intention
in writing to the employer, together with its proposals for collective bargaining.

(
As amended by D . O . N o . 40-F-03 dated 30 October 2008.

1013
 IMPLEMENTING RULES

The recognized or certified labor union and its employer may adopt such
procedures and processes they may deem appropriate and necessary for the early
termination of their negotiations. They shall name their respective representatives
to the negotiation, schedule the number and frequency of meetings, and agree on
wages, benefits and other terms and conditions of work for all employees covered
in the bargaining unit.
SEC. 5. When multi-employer bargaining available. — A legitimate labor
union (s) and employers may agree in writing to come together for the purpose of
collective bargaining, provided:
(a) only legitimate labor unions who are incumbent exclusive bargaining
agents may participate and negotiate in multi-employer bargaining;
( b ) only employers with counterpart legitimate labor unions who are in-
cumbent bargaining agents may participate and negotiate in multi-em-
ployer bargaining; and
( c ) only those legitimate labor unions who pertain to employer units who
consent to multi-employer bargaining may participate in multi-employ-
er bargaining.
SEC. 6. Procedure in multi-employer bargaining. — Multi-employer bargaining
may be initiated by the labor unions or by the employers.
(a) Legitimate labor unions who desire to negotiate with their employers
collectively shall execute a written agreement among themselves, which
shall contain the following:
1) the names of the labor unions who desire to avail of multi-em-
ployer bargaining;
2) each labor union in the employer unit;
3) the fact that each of the labor unions are the incumbent exclusive
bargaining agents for their respective employer units;
4) the duration of the collective bargaining agreements, if any,
entered into by each labor union with their respective employers.
Legitimate labor unions who are members of the same reg-
istered federation, national, or industry union are exempt from
execution of this written agreement.
( b ) T h e legitimate labor unions who desire to bargain with multi-employers
shall send a written notice to this effect to each employer concerned.
T h e written agreement stated in the preceding paragraph, or the cer-
tificates of registration of the federation, national, or industry union,
shall accompany said notice.
Employers who agree to group themselves or use their existing
associations to engage in multi-employer bargaining shall send a writ-
ten notice to each of their counterpart legitimate labor unions indicat-
ing their desire to engage in multi-employer bargaining. Said notice
shall indicate the following:
1) the names of the employers who desire to avail of multi-employer
bargaining;
2) their corresponding legitimate labor organizations;

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 IMPLEMENTING RULES OF BOOK V: RULE XVII

3) the fact that each corresponding legitimate union is any incum-

bent exclusive bargaining agent;
4) the duration of the current collective bargaining agreement, if
any, entered into by each employer with the counterpart legiti-
mate labor union.
(c) Each employer or concerned labor union shall express its willingness
or refusal to participate in multi-employer bargaining in writing,
addressed to its corresponding exclusive bargaining agent or employer.
Negotiations may commence only with regard to respective employers
and labor unions who consent to participate in multi-employer
bargaining.
(d) During the course of negotiations, consenting employers and the cor-
responding legitimate labor unions shall discuss and agree on the fol-
lowing:
1) the manner by which negotiations shall proceed;
2) the scope and coverage of the negotiations and the agreement;
and
3) where appropriate, the effect of the negotiations on current
agreements or conditions of employment among the parties.
SEC. 7. Posting and registration of collective bargaining agreement. — Two (2)
signed copies of collective bargaining agreement reached through multi-employer
bargaining shall be posted for at least five ( 5 ) days in two conspicuous areas in each
workplace of the employer units concerned. Said collective bargaining agreement
shall affect only those employees in the bargaining units who have ratified it.
T h e same collective bargaining agreement shall be registered with the
Department in accordance with the following Rule.

RULE XVII
REGISTRATION OF COLLECTIVE B A R G A I N I N G
AGREEMENTS

S E C T I O N 1. Where to file. — Within thirty (30) days from execution of

a collective bargaining agreement, the parties thereto shall submit two (2) duly
signed copies of the agreement to the Regional Office which issued the certificate
of registration/certificate of creation of chartered local of the labor union-party to
the agreement. Where the certificate of creation of the concerned chartered local
was issued by the Bureau, the agreement shall be filed with the Regional Office
which has jurisdiction over the place where it principally operates.
Multi-employer collective bargaining agreements shall be filed with the
Bureau.
S E C 2. Requirements for registration. — T h e application for CBA registration
shall be accompanied by the original and two (2) duplicate copies of the following
documents which must be certified under oath by the representative (s) of the
employer(s) and labor union (s) concerned:
(a) the collective bargaining agreement;
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 IMPLEMENTING RULES

(b) a statement that the collective bargaining agreement was posted in at

least two (2) conspicuous places in the establishment or establishments
concerned for at least five (5) days before its ratification; and
( c ) a statement that the collective bargaining agreement was ratified by the
majority of the employees in the bargaining unit of the employer or
employers concerned.
No other document shall be required in the registration of collective
bargaining agreements.
SEC. 3. Payment of registration fee. — T h e certificate of registration of
collective bargaining agreement shall be issued by the Regional Office upon
payment of the prescribed registration fee.
SEC. 4. Action on the application. — T h e Regional Office and the Bureau
shall act on applications for registration of collective bargaining agreements within
five (5) days from receipt thereof, either by: (a) approving the application and
issuing the certificate of registration; or ( b ) denying the application for failure of
the applicant to comply with the requirements for registration.
Where the documents supporting the application are not complete or are not
verified under oath, the Regional Office or the Bureau shall, within five (5) days
from receipt of the application, notify the applicants in writing of the requirements
needed to complete the application. Where the applicants fail to complete the
requirements within ten (10) days from receipt of notice, the application shall be
denied without prejudice.
SEC. 5. Denial of registration; grounds for appeal. — T h e denial of registration
shall be in writing, stating in clear terms the reasons therefor and served upon
the applicant union and employer within twenty-four (24) hours from issuance.
The denial by the Regional Office of the registration of single enterprise collective
bargaining agreements may be appealed to the Bureau within ten (10) days from
receipt of the notice of denial. T h e denial by the Bureau of the registration of multi-
employer collective bargaining agreements may be appealed to the Office of the
Secretary within the same period.
The memorandum of appeal shall be filed with the Regional Office or the
Bureau, as the case may be. T h e same shall be transmitted, together with the entire
records of the application, to the Bureau or the Office of the Secretary, as the case
may be, within twenty-four (24) hours from receipt of the memorandum of appeal.
SEC. 6. Period and manner of disposition of appeal. — T h e Bureau and the
Office of the Secretary shall resolve the appeal within the same period and in the
same manner prescribed in Rule XI of these Rules.
SEC. 7. Term of representation status; contract bar rule. — T h e representation
status of the incumbent exclusive bargaining agent which is a party to a duly registered
collective bargaining agreement shall be for a term of five ( 5 ) years from the date
of the effectivity of the collective bargaining agreement. No petition questioning
the majority status of the incumbent exclusive bargaining agent or petition for
certification election filed outside of the sixty-day period immediately preceding
the expiry date of such five-year term shall be entertained by the Department.

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 IMPLEMENTING RULES OF BOOK V: RULES XVIII-XIX

T h e five-year representation status acquired by an incumbent bargaining

agent either through single enterprise collective bargaining or multi-employer
bargaining shall not be affected by a subsequent collective bargaining agreement
executed between the same bargaining agent and the employer during the same
five-year period.
SEC. 8. Re-negotiation of collective bargaining agreements. — All provisions
of a collective bargaining agreement, except the representation status of the
incumbent bargaining agent shall, as a matter of right, be renegotiated not later
than three (3) years after its execution.
T h e re-negotiated collective bargaining agreement shall be ratified and
registered with the same Regional Office where the preceding agreement was
registered. T h e same requirements and procedure in the registration of collective
bargaining agreements prescribed in the preceding rules shall be applied.

RULE XVIII
CENTRAL REGISTRY O F L A B O R O R G A N I Z A T I O N S A N D
C O U ^ C T T V E B A R G A I N I N G AGREEMENTS

SECTION 1. Forms for registration. — Consistent with the policy of the State to
promote unionism, the Bureau shall devise or prescribe such forms as are necessary
to facilitate the process of registration of labor organizations and collective
bargaining agreements or of compliance with all documentary or reporting
requirements prescribed in these Rules.
SEC. 2. Transmittal of records; central registry. — T h e Labor Relations
Division of the Regional Offices shall, within forty-eight (48) hours from issuance
of a certificate of creation of chartered locals or certificate of registration of labor
organizations and collective bargaining, transmit to the Bureau a copy of such
certificates accompanied by a copy of the documents supporting registration.
T h e Labor Relations Division of the Regional Office shall also transmit to the
Bureau a copy of every final decision cancelling or revoking the legitimate status of
a labor organization or collective bargaining agreement, indicating therein the date
when the decision became final.
In cases of chartering and affiliation or compliance with the reporting
requirements under Rule V, the Regional Office shall transmit within two (2) days
from receipt thereof the original set of documents to the Bureau, retaining one set
of documents for its file.

RULE XIX
GRIEVANCE MACHINERY A N D V O L U N T A R Y ARBITRATION

SECTION 1. Establishment of grievance machinery. — T h e parties to a collective

bargaining agreement shall establish a machinery for the expeditious resolution
of grievances arising from the interpretation or implementation of the collective
bargaining agreement and those arising from the interpretation or enforcement
of company personnel policies. Unresolved grievances will be referred to voluntary

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 IMPLEMENTING RULES

arbitration and for this purpose, parties to a collective bargaining agreement

shall name and designate in advance a voluntary arbitrator or panel of voluntary
arbitrators, or include in the agreement a procedure for the selection of such
voluntary arbitrator or panel of voluntary arbitrators, preferably from the listing of
qualified voluntary arbitrators duly accredited by the Board.
In the absence of applicable provision in the collective bargaining agreement,
a grievance committee shall be created within ten (10) days from signing of the
collective bargaining agreement. T h e committee shall be composed of at least two
(2) representatives each from the members of the bargaining unit and the employer,
unless otherwise agreed upon by the parties. T h e representatives from among the
members of the bargaining unit shall be designated by the union.
SEC. 2. Procedure in handling grievances. — In the absence of a specific
provision in the collective bargaining agreement or existing company practice
prescribing for the procedures in handling grievances, the following shall apply:
(a) An employee shall present this grievance or complaint orally or in writ-
ing to the shop steward. Upon receipt thereof, the shop steward shall
verify the facts and determine whether or not the grievance is valid.
( b ) If the grievance is valid, the shop steward shall immediately bring the
complaint to the employee's immediate supervisor. T h e shop steward,
the employee and his immediate supervisor shall exert efforts to settle
the grievance at their level.
( c ) If no settlement is reached, the grievance shall be referred to the griev-
ance committee which shall have ten (10) days to decide the case.
Where the issue involves or arises from the interpretation or implementation
of a provision in the collective bargaining agreement, or from any order,
memorandum, circular or assignment issued by the appropriate authority in the
establishment, and such issue cannot be resolved at the level of the shop steward or
the supervisor, the same may be referred immediately to the grievance committee.
SEC. 3. Submission to voluntary arbitration. — Where grievance remains
unresolved, either party may serve notice upon the other of its decision to submit
the issue to voluntary arbitration. T h e notice shall state the issue or issues to be
arbitrated, copy thereof furnished the board or the voluntary arbitrator or panel of
voluntary arbitrators named or designated in the collective bargaining agreement.
If the party upon whom the notice is served fails or refuses to respond
favorably within seven (7) days from receipt thereof, the voluntary arbitrator or
panel of voluntary arbitrators designated in the collective bargaining agreement
shall commence voluntary arbitration proceedings. Where the collective bargaining
agreement does not so designate, the board shall call the parties and appoint a
voluntary arbitrator or panel of voluntary arbitrators, who shall thereafter
commence arbitration proceedings in accordance with the proceeding paragraph.
In instances where parties fail to select a voluntary arbitrator or panel of
voluntary arbitrators, the regional branch of the Board shall designate the voluntary
arbitrator or panel of voluntary arbitrators, as may be necessary, which shall have
the same force and effect as if the parties have selected the arbitrator.

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 IMPLEMENTING RULES OF BOOK V: RULE XIX

SEC. 4. Jurisdiction of voluntary arbitrator or panel of voluntary arbitrators.

— T h e voluntary arbitrator or panel of voluntary arbitrators shall have exclusive
and original jurisdiction to hear and decide all grievances arising from the
implementation or interpretation of the collective bargaining agreements and
those arising from the interpretation or enforcement of company personnel policies
which remain unresolved after exhaustion of the grievance procedure.
They shall also have exclusive and original jurisdiction, to hear and decide
wage distortion issues arising from the application of any wage orders in organized
establishments as well as unresolved grievances arising from the interpretation and
implementation of the productivity incentive programs under R.A. 6971.
T h e National Labor Relations Commission, its regional branches and Regional
Directors of the Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the voluntary
arbitrator or panel of voluntary arbitrators and shall immediately dispose and refer
the same to the appropriate grievance machinery or voluntary arbitration provided
in the collective bargaining agreement.
Upon agreement of the parties, any other labor dispute may be submitted
to a voluntary arbitrator or panel of voluntary arbitrators. Before or at any stage of
the compulsory arbitration process, the parties may opt to submit their dispute to
voluntary arbitration.
SEC. 5. Powers of voluntary arbitrator or panel of voluntary arbitrators. —
T h e voluntary arbitrator or panel of voluntary arbitrators shall have the power to
hold hearings, receive evidence and take whatever action is necessary to resolve the
issue/s subject of the dispute.
T h e voluntary arbitrator or panel of voluntary arbitrators may conciliate or
mediate to aid the parties in reaching a voluntary settlement of the dispute.
SEC. 6. Procedure. — All parties to the dispute shall be entitled to attend
the arbitration proceedings. T h e attendance of any third party or the exclusion of
any witness from the proceedings shall be determined by the voluntary arbitrator
or panel of voluntary arbitrators. Hearing may be adjourned for cause or upon
agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for the voluntary
arbitrator or panel of voluntary arbitrators to render an award or decision within
twenty (20) calendar days from the date of submission for resolution.
Failure on the part of the voluntary arbitrator to render a decision, resolution,
order or award within the prescribed period, shall upon complaint of a party, be
sufficient ground for the Board to discipline said voluntary arbitrator, pursuant to
the guidelines issued by the Secretary. In cases that the recommended sanction is
de-listing, it shall be unlawful for the voluntary arbitrator to refuse or fail to turn
over to the board, for its further disposition, the records of the case within ten (10)
calendar days from demand thereof.
SEC 7. Finality of Award/Decision. — The decision, order, resolution or
award of the voluntary arbitrator or panel of voluntary arbitrators shall be final
and executory after ten (10) calendar days from receipt of the copy of the award or
decision by the parties and it shall not be subject of a motion for reconsideration.
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 IMPLEMENTING RULES

SEC. 8. Execution of Award/Decision. — Upon motion of any interested party,

the voluntary arbitrator or panel of voluntary arbitrators or the Labor Arbiter in
the region where the movant resides, in case of the absence or incapacity for any
reason of the voluntary arbitrator or panel of voluntary arbitrators who issued the
award or decision, may issue a writ of execution requiring either the Sheriff of the
Commission or regular courts or any public official whom the parties may designate
in the submission agreement to execute the final decision, order or award.
SEC 9. Cost of voluntary arbitration and voluntary arbitrator's fee. — The
parties to a collective bargaining agreement shall provide therein a proportionate
sharing scheme on the cost of voluntary arbitration including the voluntary
arbitrator's fee. The fixing of fee of voluntary arbitrators or panel of voluntary
arbitrators, whether shouldered wholly by the parties or subsidized by the Special
Voluntary Arbitration Fund, shall take into account the following factors:
(a) Nature of the case;
( b ) Time consumed in hearing the case;
(c) Professional standing of the voluntary arbitrator;
( d ) Capacity to pay of the parties; and
( e ) Fees provided for in the Revised Rules of Court.
Unless the parties agree otherwise, the cost of voluntary arbitration
proceedings and voluntary arbitrator's fee shall be shared equally by the parties.
Parties are encouraged to set aside funds to answer for the cost of voluntary
arbitration proceedings including voluntary arbitrator's fee. In the event the
said funds are not sufficient to cover such expenses, an amount by way of subsidy
taken out of the Special Voluntary Arbitration fund may be availed of by either or
both parties subject to the guidelines on voluntary arbitration to be issued by the
Secretary.
SEC. 10. Maintenance of case records by the Board. — T h e Board shall
maintain all records pertaining to a voluntary arbitration case. In all cases, the Board
shall be furnished a copy of all pleadings and submitted to the voluntary arbitrator
as well as the orders, awards and decisions issued by the voluntary arbitrator.
The records of a case shall be turned over by the voluntary arbitrator or panel
of voluntary arbitrators to the concerned regional branch of the Board within ten
(10) days upon satisfaction of the final arbitral award/order/decision.

RULE XX
L A B O R E D U C A T I O N A N D RESEARCH

Section 1. Labor education of workers and employees. — T h e Department

shall develop, promote and implement appropriate labor education and research
programs on the rights and responsibilities of workers and employers.
It shall be the duty of every legitimate labor organization to implement a labor
education program for its members on their rights and obligations as unionists and
as employees.
SEC. 2. Mandatory conduct of seminars. — Subject to the provisions of Article
241, it shall be mandatory for every legitimate labor organization to conduct

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 IMPLEMENTING RULES OF BOOK V: RULES XXI-XXII

seminars and similar activities on existing labor laws, collective agreements,

company rules and regulations and other relevant matters. T h e union seminars and
similar activities may be conducted independently of or in cooperation with the
Department and other labor education institutions.
SEC. 3. Special fund for labor education and research. — Every legitimate
labor organization shall, for the above purpose, maintain a special fund for labor
education and research. Existing strike funds may, in whole or in part, be trans-
formed into labor education and research funds. T h e labor organization may also
periodically assess and collect reasonable amounts from its members for such
funds.

R U L E XXI
LABOR-MANAGEMENT A N D OTHER COUNCILS

SECTION 1. Creation of labor management and other councils. — The

Department shall promote the formation of labor-management councils in
organized and unorganized establishments to enable the workers to participate in
policy and decision-making processes in the establishment, insofar as said processes
will directly affect their rights, benefits and welfare, except those which are covered
by collective bargaining agreements or are traditional areas of bargaining.
T h e Department shall promote other labor-management cooperation
schemes and, upon its own initiative or upon the request of both parties, may assist
in the formulation and development of programs and projects on productivity,
occupational safety and health, improvement of quality of work life, product quality
improvement, and other similar scheme.
In line with the foregoing, the Department shall render, among others, the
following services:
(a) Conduct awareness campaigns;
( b ) Assist the parties in setting up labor-management structures, functions
and procedures;
( c ) Provide process facilitators upon request of the parties; and
( d ) Monitor the activities of labor-management structures as may be neces-
sary and conduct studies on best practices aimed at promoting harmo-
nious labor-management relations.
SEC 2. Selection of representatives. — In organized establishments, the
workers' representatives to the council shall be nominated by the exclusive
bargaining representative. In establishments where no legitimate labor organization
exists, the workers representative shall be elected directly by the employees at large.

RULE XXII
C O N C I L I A T I O N , STRIKES A N D L O C K O U T S

SECTION 1. Conciliation of labor-management disputes. — The board

may, upon request of either of both parties or upon its own initiative, provide
conciliation-mediation services to labor disputes other than notices of strikes or

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 IMPLEMENTING RULES

lockouts. Conciliation cases which are not subjects of notices of strike or lockout
shall be docketed as preventive mediation cases.
SEC. 2. Privileged communication. — Information and statements given in
confidence at conciliation proceedings shall be treated as privileged communications.
Conciliators and similar officials shall not testify in any court or body regarding any
matter taken up at conciliation proceedings conducted by them.
SEC 3. Issuance of subpoena. — T h e Board shall have the power to require
the appearance of any parties at conciliation meetings.
SEC 4. Compromise Agreements. — Any compromise settlement, including
those involving labor standard laws, voluntarily agreed upon by the parties with the
assistance of the Board and its regional branches shall be final and binding upon
the parties. T h e National Labor Relations Commission or any court shall not as-
sume jurisdiction over issues involved therein except in case of non-compliance
thereof or if there is prima facie evidence that the settlement was obtained through
fraud, misrepresentation, or coercion. Upon motion of any interested party, the
Labor Arbiter in the region where the agreement was reached may issue a writ of
execution requiring a sheriff of the Commission or the courts to enforce the terms
of the agreement.
SEC 5. Grounds for strike or lockout. — A strike or lockout may be declared
in cases of bargaining deadlocks and unfair labor practices. Violations of collective
bargaining agreements, except flagrant a n d / o r malicious refusal to comply with its
economic provisions, shall not be considered unfair labor practice and shall not be
strikeable. No strike or lockout may be declared on grounds involving inter-union
and intra-union disputes or without first having filed a notice of strike or lockout
or without the necessary strike or lockout vote having been obtained and reported
to the Board. Neither will a strike be declared after assumption of jurisdiction by
the Secretary or after certification or submission of the dispute to compulsory or
voluntary arbitration or during the pendency of cases involving the same grounds
1
for the strike or lockout.
SEC 6. Who may declare a strike or lockout. — Any certified or duly recognized
bargaining representative may declare a strike in cases of bargaining deadlocks and
unfair labor practices. T h e employer may declare a lockout in the same cases. In the
absence of a certified or duly recognized bargaining representative, any legitimate
labor organization in the establishment may declare a strike but only on grounds of
unfair labor practices.
SEC 7. Notice of strike or lockout. — In bargaining deadlocks, a notice
of strike or lockout shall be filed with the regional branch of the Board at least
thirty (30) days before the intended date thereof, a copy of said notice having
been served on the other party concerned. In cases of unfair labor practice,
the period of notice shall be fifteen (15) days. However, in case of unfair
labor practice involving the dismissal from employment of any union officer
duly elected in accordance with the union constitution and by-laws which may

'As amended by D.O. N o . 40-A-03 dated 12 March 2003.

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 IMPLEMENTING RULES OF BOOK V: RULE XXII

constitute union-busting where the existence of the union is threatened, the

fifteen-day cooling-off period shall not apply and the union may take action
immediately after the strike vote is conducted and the results thereof submitted
to the appropriate regional branch of the Board.
SEC. 8. Contents of notice. — T h e notice shall state, among others, the names
and addresses of the employer and the union involved, the nature of the industry to
which the employer belongs, the number of union members and of the workers in
the bargaining unit, and such other relevant data as may facilitate the settlement of
the dispute, such as a brief statement or enumeration of all pending labor disputes
involving the same parties.
In cases of bargaining deadlocks, the notice shall, as far as practicable, further
state the unresolved issues in the bargaining negotiations and be accompanied by
the written proposals of the union, the counter-proposals of the employer and the
proof of a request for conference to settle the differences. In cases of unfair labor
practices, the notice shall, as far as practicable, state the acts complained of and the
efforts taken to resolve the dispute amicably.
In case a notice does not conform with the requirements of this and the
foregoing section/s, the regional branch of the Board shall inform the concerned
party of such fact.
SEC 9. action on Notice. — Upon receipt of the notice, the regional branch
of the Board shall exert all efforts at mediation and conciliation to enable the
parties to settle the dispute amicably. T h e regional branch of the Board may, upon
agreement of the parties, treat a notice as a preventive mediation case. It shall also
encourage the parties to submit the dispute to voluntary arbitration.
During the proceedings, the parties shall not do any act which may disrupt or
impede the early settlement of the dispute. They are obliged, as part of their duty
to bargain collectively in g o o d faith and to participate fully and promptly in the
conciliation meetings called by the regional branch of the Board.
A notice, upon agreement of the parties, may be referred to alternative modes
of dispute resolution, including voluntary arbitration.
SEC 10. Strike or lockout vote. — A decision to declare a strike must be
approved by a majority of the total union membership in the bargaining unit
concerned obtained by secret ballot in meetings or referenda called for the
purpose. A decision to declare a lockout must be approved by a majority of the
Board of Directors of the employer, corporation or association or the partners in a
partnership obtained by a secret ballot in a meeting called for the purpose.
T h e regional branch of the Board may, at its own initiative or upon request of
any affected party, supervise the conduct of the secret balloting. In every case, the
union or the employer shall furnish the regional branch of the Board and the notice
of meetings referred to in the preceding paragraph at least twenty-four (24) hours
before such meetings as well as the results of the voting at least seven (7) days before
the intended strike or lockout, subject to the cooling-off period provided in this Rule.
SEC 11. Declaration of strike or lockout. — Should the dispute remain
unsettled after the lapse of the requisite number of days from the filing of the notice

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 IMPLEMENTING RULES

of strike or lockout and of the results of the election required in the preceding
section, the labor union may strike or the employer may lock out its workers. The
regional branch of the Board shall continue mediating and conciliating.
SEC. 12. Improved offer balloting. — In case of a strike, the regional branch
of the Board shall, at its own initiative or upon the request of any affected party,
conduct a referendum by secret balloting on the improved offer of the employer
on or before the 30th day of strike. When at least a majority of the union members
vote to accept the improved offer, the striking workers shall immediately return
to work and the employer shall thereupon re-admit them upon the signing of the
agreement.
In case of a lockout, the regional branch of the Board shall also conduct a
referendum by secret balloting on the reduced offer of the union on or before the
30th day of the lockout. When at least a majority of the board of directors or trustees
or the partners holding the controlling interest in the case of partnership vote to
accept the reduced offer, the workers shall immediately return to work and the
employer shall thereupon readmit them upon the signing of the agreement.
SEC 13. Peaceful picketing. — Workers shall have the right to peaceful
picketing. No person engaged in picketing shall commit any act of violence,
coercion or intimidation or obstruct the free ingress to or egress from the employer's
premises for lawful purposes, or obstruct public thoroughfares.
No person shall obstruct, impede or interfere with, by force, violence,
coercion, threats or intimidation, any peaceful picketing by workers during any
labor controversy or in the exercise of the right to self-organization or collective
bargaining or shall aid or abet such obstruction or interference. No employer shall
use or employ any person to commit such acts nor shall any person be employed for
such purpose.
SEC 14. Injunctions. — No court or entity shall enjoin any picketing, strike or
lockout, except as provided in Articles 218 and 263 of the Labor Code.
The Commission shall have the power to issue temporary restraining orders
in such cases but only after due notice and hearing and in accordance with its rules.
The reception of evidence for the application of a writ of injunction maybe delegated
by the Commission to any Labor Arbiter who shall submit his recommendations to
the Commission for its consideration and resolution.
Any ex parte restraining order issued by the Commission, or its chairman or
Vice-Chairman where the Commission is not in session and as prescribed by its
rules, shall be valid for a period not exceeding twenty (20) days.
SEC 15. Criminal prosecution. — T h e regular courts shall have jurisdiction
over any criminal action under Article 272 of the Labor Code.

RULE XXIII
CONTEMPT

SECTION 1. Direct contempt; Person guilty o f misbehavior. — A person guilty

of misbehavior in the presence of or so near the Secretary, the Chairman or any

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 IMPLEMENTING RULES OF BOOK V: RULES XXIV-XXV

member of the Commission, Bureau Director or any Labor Arbiter as to obstruct

or interrupt the proceedings before the same, including disrespect toward said
officials, offensive personalities toward others, or refusal to be sworn or to answer
as a witness or to subscribe an affidavit or deposition when lawfully required to do
so may be summarily adjudged in direct contempt by said officials and punished by
fines not exceeding five hundred pesos (P500.00) or imprisonment not exceeding
five (5) days or both, if it be the Secretary, the Commission or members thereof, or
a fine not exceeding one hundred pesos (P100.00) or imprisonment not exceeding
one (1) day or both, if it be the Bureau Director or Labor Arbiter.
T h e person adjudged in direct contempt by a Labor Arbiter may appeal to the
Commission while the person adjudged in direct contempt by the Bureau Director
may appeal to the Secretary. T h e execution of the judgment shall be suspended
pending the resolution of the appeal upon the filing by such person of a bond
on condition that he will abide by and perform the judgment should the appeal
be decided against him. T h e judgment of the Commission and the Secretary is
immediately executory and inappealable.
SEC. 2. Indirect contempt. — Indirect contempt shall be dealt with by the
Secretary, Commission, Bureau Director or Labor Arbiter in the manner prescribed
under Rule 71 of the Revised Rules of Court.

RULE XXIV
E X E C U T I O N O F DECISIONS, AWARDS O R ORDERS

SECTION 1. Execution o f decisions, orders or awards. — (a) T h e Secretary or

the Bureau or Regional Director, the Labor Arbiter, the Med-Arbiter or Voluntary
Arbitrator may, upon his/her own initiative or on motion of any interested party,
issue a writ of execution on a judgment within five (5) years from the date it becomes
final and executory, requiring the Sheriff or the duly deputized officer to execute or
enforce their respective final decisions, orders and awards.
( b ) T h e Secretary and the Chairman of the Commission may designate
special sheriffs and take any measure under existing laws to ensure compliance
with their decisions, orders or awards and those of the Labor Arbiters and
voluntary arbitrators, including the imposition of administrative fines, which
shall not be less than five hundred (P500.00) pesos nor more than ten thousand
(P10,000.00) pesos.
( c ) Alternatively, the Secretary the Commission, any Labor Arbiter, the
Regional Director or the Director of the Bureau of Labor Relations in appropriate
cases may deputize the Philippine National Police or any law enforcement agencies
in the enforcement of final awards, orders or decisions.

RULE XXV
GENERAL P R O V I S I O N S

SECTION 1. Incidental motions will not be given due course. — In all proceedings

at all levels, motions for dismissals or any other incidental motions shall not be given

1025
 IMPLEMENTING RULES

due course, but shall remain as part of the records for whatever they may be worth
when the case is decided on the merits.
SEC. 2. Non-intervention of outsiders in labor disputes. — No person other
than the interested parties, their counsels or representatives may intervene in
labor disputes pending before the Regional Office, the Bureau, Labor Arbiters,
the compulsory or voluntary arbitrators, the Commission and the Secretary. Any
violation of this provision will subject the outsider to the administrative fines and
penalties provided for in the Code.
SEC. 3. When complaint deemed filed. — A complaint is deemed filed upon
receipt thereof by the appropriate agency which has jurisdiction over the subject
matter and over the parties.
SEC. 4. Check-off from non-members. — Pursuant to Article 248(e) of the
Code, the employer shall check-off from non-union members within a collective
bargaining unit the same reasonable fee equivalent to the dues and other fees
normally paid by union members without the need for individual check-off
authorizations.

RULE XXVI
TRANSITORY PROVISIONS

SECTION 1. Rules governing prior applications, petitions, complaints, cases. —

All applications, petitions, complaints, cases or incidents commenced or filed prior

to the effectivity of these amendatory Rules shall be governed by the old rules as
amended by Department Order N o . 9, series of 1997.
SEC 2. Equity of the incumbent. — Industry unions or trade union centers
registered by virtue of the old rules as amended by Department Order N o . 9,
series of 1997, shall maintain their legitimate status, with all rights and obligations
appurtenant thereto.

ARTICLE II. All other rules, regulations, issuances, circulars and administra-
tive orders inconsistent herewith are hereby superseded. If any part or provision
of these Rules shall be held unconstitutional or invalid, other parts or provisions
thereof which are not affected thereby shall continue to be in full force and effect.

ARTICLE III. The foregoing rules shall take effect two weeks after completion
of publication in one (1) newspaper of general circulation.

Manila, Philippines, 17 February 2003.

(Sgd.) PATRICIA A. STO. T O M A S

Secretary

* Published: March 1, 2003

Effective: March 15, 2003

1026
 ADDENDA TO IMPLEMENTING
RULES OF BOOK V
[Reproduced below are two sets of implementing rules on employment
termination issued by the Department of Labor and Employment on different
dates. They are reproduced here because they slightly vary in content although the
codal provisions they are supposed to implement have remained unchanged since
issuance in 1974.]

Addendum V-1: Rule X I V - Termination of Employment

(As amended by Sec. 8, Implementing Rules of BP Big. 130, contained in
the Omnibus Rules Implementing the Labor Code, dated 27 May 1989, signed
by Secretary Franklin M. Drilon.)

Rule X I V
Termination of Employment*

S E C T I O N 1. Security of tenure and due process. — No worker shall be dismissed

except for a just or authorized cause provided by law and after due process.
SEC. 2. Notice of dismissal. — A n y employer who seeks to dismiss a worker shall
furnish him a written notice stating the particular acts or omission constituting the
grounds for his dismissal. In cases of abandonment of work, the notice shall be
served at the worker's last known address.
SEC. 3 Preventive suspension. — T h e employer may place the worker concerned
under preventive suspension if his continued employment poses a serious and
imminent threat to the life or property of the employer or of his co-workers.
SEC. 4 Period of suspension. — No preventive suspension shall last longer
than 30 days. T h e employer shall thereafter reinstate the worker in his former or
in a substantially equivalent position or the employer may extend the period of
suspension provided that during the period of extension, he pays the wages and
other benefits due to the worker. In such case, the worker shall not be bound to
reimburse the amount paid to him during the extension if the employer decides,
after completion of the hearing, to dismiss the worker.
SEC. 5. Answer and hearing. — The worker may answer the allegations stated
against him in the notice of dismissal within a reasonable period from receipt of
such notice. T h e employer shall afford the worker ample opportunity to be heard
and to defend himself with the assistance of his representative, if he so desires.
SEC. 6. Decision to Dismiss. — The employer shall immediately notify a worker
in writing of a decision to dismiss him stating clearly the reasons therefor.

*As amended by Sec. 8, Implementing Rules of BP Big. 130.

1027
 I M P L E M E N T I N G RULES

SEC. 7. Right to contest dismissal. — Any decision taken by the employer

shall be without prejudice to the right of the worker to contest the validity or
legality of his dismissal by filing a complaint with the Regional Branch of the
Commission.
SEC. 8. Period to decide. — Cases involving the dismissal of a worker shall be
decided by the Labor Arbiter within 20 working days from the date of submission of
such cases for decision.
SEC. 9. Reinstatement pending hearing. — T h e Secretary may suspend the effects
of the termination pending resolution of the case in the event of a. prima facie finding
that the termination may cause a serious labor dispute or is in implementation of a
mass lay-off.
SEC 10. Certification of employment. — A dismissed worker shall be entitled
to receive, on request, a certificate from the employer specifying the dates of his
engagement and termination of his employment and the type or types of work on
which he is employed.
SEC. 11. Report of dismissal. — T h e employer shall submit a monthly report to
the Regional Office having jurisdiction over the place of work all dismissals effected
by him during the month, specifying therein the names of the dismissed workers,
the reasons for their dismissal, the dates of commencement and termination of
employment, the positions last held by them and such other information as may be
required by the Department for policy guidance and statistical purposes.

Addendum V-2: Rule X X I I - Termination o f Employment — being part of

Department Order N o . 9, Series of 1997 "Amending the Rules Implementing
Book V of the Labor Code, as amended." D . O . N o . 9, dated 01 May 1997
and signed by Secretary Leonardo A. Quisumbing, took effect on 21 June
1997, two weeks after its complete publication in two newspapers of national
circulation on 06 June 1997.

Rule X X I I I
Termination of Employment

S E C T I O N 1. Security of tenure. — (a) In cases of regular employment,

the employer shall not terminate the services of an employee except for just or
authorized causes as provided by law, and subject to the requirements of due
process.
(b) The foregoing shall also apply in cases of probationary employment;
provided, however, that in such cases, termination of employment due to failure of the
employee to qualify in accordance with the standard of the employer made known
to the former at the time of engagement may also be a ground for termination of
employment.
(c) In cases of project employment or employment covered by legitimate
contracting or subcontracting arrangements, no employee shall be dismissed prior to
the completion of the project or phase thereof for which the employee was engaged,
or prior to the expiration of the contract between the principal and contractor,
unless the dismissal is for just or authorized cause subject to the requirements of

1028
 IMPLEMENTING RULES OF BOOK V
ADDENDA

due process or prior notice, or is brought about the completion of the phase of the
project or contract for which the employee was engaged.
S E C T I O N 2. Standards of due process; requirements of notice. — In all
cases of termination of employment, the following standards of due process shall be
substantially observed:
I. For termination of employment based on just causes as defined in Article 282
of the Code:
(a) A written notice served on the employee specifying the ground or
grounds for termination, and giving to said employee reasonable opportunity
within which to explain his side;
( b ) A hearing or conference during which the employee concerned,
with the assistance of counsel if the employee desires, is given opportunity to
respond to the charge, present his evidence or rebut the evidence presented
against him; and
( c ) A written notice of termination served on the employee
indicating that upon due consideration of all the circumstances, grounds
have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the
employee's last known address.
II. For termination of employment as based on authorized causes defined in
Article 283 of the Code, the requirements of due process shall be deemed com-
plied with upon service of a written notice to the employee and the appropriate
Regional Office of the Department at least thirty days before the effectivity of
the termination, specifying the ground or grounds for termination.
III. If the termination is brought about by the completion of the contract or
phase thereof, no prior notice is required. If the termination is brought about
by the failure of an employee to meet the standards of the employer in the
case of probationary employment, t shall be sufficient that a written notice
is served the employee within a reasonable time from the effective date of
termination.
S E C T I O N 3. Right to contest dismissal. — A n y decision taken by the employer
shall be without prejudice to the right of the worker to contest the validity or legality
of his dismissal by filing a complaint with the Regional Branch of the Commission.
S E C T I O N 4. Period to decide. — Cases involving the dismissal of a worker
shall be decided by the Labor Arbiter within twenty (20) working days from the
dated of submission of such cases for decision.
S E C T I O N 5. Reinstatement pending bearing. — The Secretary may suspend
the effects of the termination pending resolution of the case in the event of a
prima facie finding that the termination may cause a serious labor dispute or is in
implementation of a mass lay-off.
S E C T I O N 6. certification of employment. — A dismissed worker shall be
entitled to receive, on request, a certificate from the employer specifying the dates
of his engagement and termination of his employment and the type or types of work
on which he is employed.
1029
 IMPLEMENTING RULES

S E C T I O N 7. Report of dismissal. — The employer shall submit a monthly

report to the Regional Office having jurisdiction over the place of work all dismissals
effected by it during the month, specifying therein the names of the dismissal workers,
the reasons for their dismissal, the dates of commencement and termination of
employment, the positions last held by them and such other information as may be
required by the Department for policy guidance and statistical purposes.
S E C T I O N 8. Preventive suspension. — T h e employer may place the worker
concerned under preventive suspension if his continued employment poses a
serious and imminent threat to the life or property of the employer or of his co-
workers.
S E C T I O N 9. Period of suspension. — No preventive suspension shall last
longer than thirty (30) days. T h e employer shall thereafter reinstate the worker
in his former or in a substantially equivalent position or the employer may extend
the period of suspension provided that during the period of extension, he pays the
wages and other benefits due to the worker. In such case, the worker shall not be
bound to reimburse the amount paid to him during the extension if the employer
decides, after completion of the hearing, to dismiss the worker.

On 17 February 2003 Secretary Patricia A. Sto. Tomas issued D.O. N o . 40-03

to "replace D.O. N o . 9, series of 1997, insofar as it pertains to Book V of the Omnibus
Rules Implementing the Labor Code." Rule X X I I I of D.O. N o . 9, pertaining to Book
VI of the Code, is still in effect. Portions of it are found also in the Implementing
Rules for Book V I .

1030
 IMPLEMENTING RULES OF BOOK VI

BOOK VI
POST-EMPLOYMENT
Rule I
T E R M I N A T I O N OF EMPLOYMENT A N D RETIREMENT

S E C T I O N 1. Coverage. — This Rule shall apply to all establishments and

undertakings, whether operated for profit or not, including educational, medical,
charitable and religious institutions and organizations, in cases of regular
employment with the exception of the Government and its political subdivisions
including government-owned or -controlled corporations.
SEC. 2. Security of tenure. — " ( a ) In cases of regular employment, the employer
shall not terminate the services of an employee except for just or authorized causes
as provided by law, and subject to the requirements of due process.
" ( b ) T h e foregoing shall also apply in cases of probationary employment;
provided, however, that in such cases, termination of employment due to failure
of the employee to qualify in accordance with the standards of the employer
made known to the former at the time of engagement may also be a ground for
termination of employment.
" ( c ) In cases of employment covered by contracting or subcontracting
arrangements, no employee shall be dismissed prior to the expiration of the
contract between the principal and contractor or subcontractor as defined in Rule
VIII-A, Book I I I o f these Rules, unless the dismissal is for just or authorized cause,
or is brought about by the completion of the phase of the contract for which the
employee was engaged, but in any case, subject to the requirements of due process
or prior notice.
" ( d ) In all cases of termination of employment, the following standards of
due process shall be substantially observed:
"For termination of employment based on just causes as defined in Article
282 of the Labor Code:
" ( i ) A written notice served on the employee specifying the ground or
grounds for termination, and giving said employee reasonable opportunity within
which to explain his side.
" ( i i ) A hearing or conference during which the employee concerned, with
the assistance of counsel if he so desires is given opportunity to respond to the
charge, present his evidence, or rebut the evidence presented against him.
"(hi) A written notice of termination served on the employee, indicating that
upon due consideration of all the circumstances, grounds have been established to
justify his termination.

1031
 I M P L E M E N T I N G RULES

"For termination of employment as defined in Article 283 of the Labor

Code, the requirement of due process shall be deemed complied with upon service
of a written notice to the employee and the appropriate Regional Office of the
Department of Labor and Employment at least thirty days before effectivity of the
termination, specifying the ground or grounds for termination.
"If the termination is brought about by the completion of a contract or phase
thereof, or by failure of an employee to meet the standards of the employer in the
case of probationary employment, it shall be sufficient that a written notice is served
1
the employee within a reasonable time from the effective date of termination."
SEC. 3. Reinstatement. — An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and to backwages.
SEC. 4. Reinstatement to former position. — (a) An employee who is
separated from work without just cause shall be reinstated to his former position,
unless such position no longer exists at the time of his reinstatement, in which
case he shall be given a substantially equivalent position in the same establishment
without loss of seniority rights.
(b) In case the establishment where the employee is to be reinstated has
closed or ceased operations or where his former position no longer exists at the
time of reinstatement for reasons not attributable to the fault of the employer, the
employee shall be entitled to separation pay equivalent to at least one-month salary
or to one-month salary for every year of service, whichever is higher, a fraction of at
least six months being considered as one whole year.
SEC. 5. "(a) Regular employment. — T h e provisions of written agreements to
the contrary notwithstanding and regardless of the oral agreements of the parties,
employment shall be deemed regular for purposes of Book VI of the Labor Code
where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where
the employment has been fixed for a specific project or undertaking the completion
or termination of which has been determined at the time of the engagement of the
employee or where the j o b , work or service to be performed is seasonal in nature
and the employment is for the duration of the season.
"(b) Casual employment. — T h e r e is casual employment where an employee
is engaged to perform a j o b , work or service which is merely incidental to the
business of the employer, and such j o b , work or service is for a definite period made
known to the employee at the time of engagement; provided, that any employee
who has rendered at least one year of service, whether such service is continuous or
not, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists.
"Notwithstanding the foregoing distinctions, every employee shall be entitled
to the rights and privileges, and shall be subject to the duties and obligations,
as may be granted by law to regular employees during the period of their actual
2
employment."

'D.O. N o . 9, Series of 1997.

Ibid.

1032
 IMPLEMENTING RULES OF BOOK VI: RULE I

SEC. 6. "Probationary employment. — There is probationary employment

where the employee, upon his engagement, is made to undergo a trial period during
which the employer determines his fitness to qualify for regular employment, based
on reasonable standards made known to him at the time of engagement.
"Probationary employment shall be governed by the following rules:
"(a) Where the work for which the employee has been engaged is learnable
or apprenticeable in accordance with the standards prescribed by the Department
of Labor and Employment, the period of probationary employment shall be limited
to the authorized learnership or apprenticeship period, whichever is applicable.
" ( b ) Where the work is neither learnable nor apprenticeable, the period of
probationary employment shall not exceed six months reckoned from the date the
employee actually started working.
" ( c ) T h e services of an employee who has been engaged on probationary
basis may be terminated only for a just or authorized cause, when he fails to qualify
as a regular employee in accordance with reasonable standards prescribed by the
employer.
" ( d ) In all cases of probationary employment, the employer shall make
known to the employee the standards under which he will qualify as a regular
employee at the time of his engagement. Where no standards are made known to
1
the employee at that time, he shall be deemed a regular employee."
SEC. 7. Termination of employment by employer. — The just causes for
terminating the services of an employee shall be those provided in Article 282 of
the Code. T h e separation from work of an employee for a just cause does not entitle
him to the termination pay provided in the Code, without prejudice, however, to
whatever rights, benefits and privileges he may have under the applicable individual
or collective bargaining agreement with the employer or voluntary employer policy
or practice.
SEC. 8. Disease as a ground for dismissal. — Where the employee suffers
from a disease and his continued employment is prohibited by law or prejudicial to
his health or to the health of his co-employees, the employer shall not terminate his
employment unless there is a certification by a competent public health authority
that the disease is of such nature or at such a stage that it cannot be cured within
a period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the
employee but shall ask the employee to take a leave. The employer shall reinstate
such employee to his former position immediately upon the restoration of his
normal health.
SEC. 9. Termination pay. — (a) An employee shall be entitled to termination
pay equivalent to at least one month's salary for every year of service, a fraction of
at least six months being considered as one whole year, in case of termination of his
employment due to the installation of labor-saving devices or redundancy.
(b) Where the termination of employment is due to retrenchment to
prevent losses and in case of closure or cessation of operations of establishment or

'D.O. N o . 9, Series of 1997.

1033
 IMPLEMENTING RULES

undertaking not due to serious business losses or financial reverses, or where the
employee suffers from a disease and his continued employment is prohibited by
law or is prejudicial to his health or to the health of his co-employees, the employee
shall be entitled to termination pay equivalent to at least one-half month's pay for
every year of service, a fraction of at least six months being considered as one whole
year.
(c) The termination pay provided in this Section shall in no case be less
than the employee's one month pay.
SEC. 10. Basis of termination pay. — T h e computation of the termination
pay of an employee as provided herein shall be based on his latest salary rate, unless
the same was reduced by the employer to defeat the intention of the Code, in which
case the basis of computation shall be the rate before its reduction.
SEC. 11. Termination of employment by employee. — T h e just causes for
putting an end to the employer-employee relationship by the employee shall be
those provided in Article 285 of the Labor Code.
SEC. 12. Suspension of relationship. — T h e employer-employee relationship
shall be deemed suspended in case of suspension of operation of the business or
undertaking of the employer for a period not exceeding six (6) months, unless the
suspension is for the purpose of defeating the rights of the employees under the
Code, and in case of mandatory fulfillment by the employee of a military or civic
duty. The payment of wages of the employee as well as the grant of other benefits
and privileges while he is on a military or civic duty shall be subject to special laws
and decrees and to the applicable individual or collective bargaining agreement
and voluntary employer practice or policy.

1
Rule I I
R E T I R E M E N T BENEFITS

SECTION 1. General statement on coverage. — This Rule shall apply to all

employees in the private sector, regardless of their position, designation or status
and irrespective of the method by which their wages are paid, except to those
specifically exempted under Section 2 hereof. As used herein, the term "Act" shall
refer to Republic Act N o . 7641 which took effect on January 7, 1993.
SEC. 2. Exemptions. — This Rule shall not apply to the following employees:
2.1 Employees of the National Government and its political subdivisions,
including Government-owned and/or -controlled corporations, if they are covered
by the Civil Service Law and its regulations.
2
2.2 Domestic helpers and persons in the personal service of another.
2.3 Employees of retail, service and agricultural establishment or operations
regularly employing not more than ten (10) employees. As used in this subsection:

'Pursuant to the provisions of Article 287 of the Labor Code as amended by

Republic Act N o . 7641, in relation to Article 5 of the same Code.
Deleted by D.O. N o . 20 issued by Sec. Ma. Nieves Confesor on May 31, 1994.

1034
 IMPLEMENTING RULES OF BOOK VI: RULE II

(a) "Retail establishment" is one principally engaged in the sale

of goods to end-users for personal or household use. It shall lose its retail
character qualified for exemption if it is engaged in both retail and wholesale
sale of goods.
( b ) "Service establishment" is one principally engaged in the sale
of service to individuals for their own or household use and is generally
recognized as such.
(c) "Agricultural establishment/operations" refers to an employer
which is engaged in "agriculture." This term refers to all farming activities
in all its branches and includes, among others, the cultivation and tillage of
the soil, production, cultivation, growing and harvesting of any agricultural
or horticultural commodities, dairying, raising of livestock or poultry, the
culture of fish and other aquatic products in farms or ponds, and any activities
performed by a farmer or on a farm as an incident to or in conjunction
with such farming operations, but does not include the manufacture and/
or processing of sugar, coconut, abaca, tobacco, pineapple, aquatic or other
farm products.
SEC. 3. Retirement under CBA/contract.
3.1 Any employee may retire or be retired by his employer upon reaching
the retirement age established in the collective bargaining agreement or other
applicable employment contract or retirement plan subject to the provisions of
Section 5 hereof on the payment of retirement benefits.
3.2 In case of retirement under this Section, the employee shall be entitled
to receive such retirement benefits as he may have earned under existing laws
and any collective bargaining agreement and other agreements: Provided, however,
That an employee's retirement benefits under any collective bargaining and other
agreements shall not be less than those provided under this Rule, and Provided,
further, That if such benefits are less, the employer shall pay the difference between
the amount due the employee under this Rule and that provided under the
collective or individual agreement or retirement plan.
3.3 Where both the employer and the employee contribute to a retirement
fund in accordance with an individual or collective agreement or other applicable
employment contract, the employer's total contribution thereto shall not be less
than the total retirement benefits to which the employee would have been entitled
had there been no such retirement fund. In case the employer's contribution is less
than the retirement benefits provided under this Rule, the employer shall pay the
deficiency.
SEC. 4. Optional; compulsory retirement.
4.1. Optional retirement. — In the absence of a retirement plan or other
applicable agreement providing for retirement benefits of employees in an
establishment, an employee may retire upon reaching the age of sixty (60) years or
more if he has served for at least five (5) years in said establishment.
4.2. Compulsory retirement. — Where there is no such plan or agreement
referred to in the immediately preceding sub-section, an employee shall be retired
upon reaching the age of sixty-five (65) years.

1035
 IMPLEMENTING RULES

4.3. Upon retirement of an employee, whether optional or compulsory, his

services may be continued or extended on a case to case basis upon agreement of
the employer and employee.
4.4. Service requirement. — The minimum length of service in an
establishment or with an employer of at least five (5) years required for entitlement
to retirement pay shall include authorized absences and vacations, regular holidays
and mandatory fulfillment of a military or civic duty.
SEC. 5. Retirement benefits.
5.1. In the absence of an applicable agreement or retirement plan,
an employee who retires pursuant to the Act shall be entitled to retirement pay
equivalent to at least one-half ( 1 / 2 ) month salary for every year of service, a fraction
of at least six (6) months being considered as one whole year.
5.2. Components of One-half (1/2) Month Salary. — For the purpose of
determining the minimum retirement pay due an employee under this Rule, the
term "one-half-month salary" shall include all the following:
(a) Fifteen (15) days salary of the employee based on his latest salary
rate. As used herein, the term "salary" includes all remunerations paid by
an em plover to his employees for services rendered during normal working
days and hours, whether such payments are fixed or ascertained on a time,
task, piece or commission basis, or other method of calculating the same,
and includes the fair and reasonable value, as determined by the Secretary
of Labor and Employment, of food, lodging, or other facilities customarily
furnished by the employer to his employees. T h e term does not include cost
of living allowance, profit-sharing payments and other monetary benefits
which are not considered as part of or integrated into the regular salary of
the employees.
(b) T h e cash equivalent of not more than five (5) days of service
incentive leave;
(c) One-twelfth of the 13th month pay due the employee.
( d ) All other benefits that the employer and employee may agree
upon that should be included in the computation of the employee's
retirement pay.
5.3. One-half month salary of employees who are paid by results. — For covered
workers who are paid by results and do not have a fixed monthly rate, the basis
for determination of the salary for fifteen days shall be their average daily salary
(ADS), subject to the provisions of Rule VII-A, Book III of the Rules Implementing
the Labor Code on the payment of wages of workers who are paid by results.
The ADS is the average salary for the last twelve (12) months reckoned from the
date of their retirement, divided by the number of actual working days in that
particular period.
SEC. 6. Exemption from tax. — T h e retirement pay provided in the Act may
be exempted from tax if the requirements set by the Bureau of Internal Revenue
under Sec. 2(b) item (1) of Revenue Regulations N o . 12-86 dated August 1, 1986
are met, to wit:

1036
 IMPLEMENTING RULES OF BOOK VI: RULE II

Pensions, retirement and separation pay. — Pensions, retirement and separation

pay constitute compensation subject to withholding, except the following:
(a) Retirement benefits received by officials and employees of private firms
under a reasonable private benefit plan maintained by the employer, if the following
requirements are met:
(i) T h e benefit plan must be approved by the Bureau of Internal
Revenue;
(ii) T h e retiring official or employee must have been in the service of the
same employer for at least ten (10) years and is not less than fifty (50) years of age
at the time of retirement; and
(iii) T h e retiring official or employee shall not have previously availed of the
privilege under the retirement benefit plan of the same or another employer.
SEC. 7. Penal Provision. — It shall be unlawful for any person or entity to
circumvent or render ineffective the provisions of the Act. Violations thereof shall
be subject to the penal provisions provided under Article 288 of the Labor Code of
the Philippines.
SEC. 8. Relations to agreements and regulations. — Nothing in this Rule
shall justify an employer from withdrawing or reducing any benefits, supplements
or payments as provided in existing laws, individual or collective agreements or
employment practices or policies.
All rules and regulations, policy issuances or orders contrary to or inconsistent
with these rules are hereby repealed or modified accordingly.
SEC. 9. Effectivity. — This Rule took effect on January 7, 1993 when the Act
went into force.

1037
 APPENDIX TO THE IMPLEMENTING
RULES OF BOOK VI
Labor Advisory on Retirement Pay Law

To All Employers in the Private Sector

Subject Guidelines for the Effective Implementation of R A . 7641, The
Retirement Pay Law

A. Coverage
Republic Act N o . 7641 or the Retirement Pay Law shall apply to all
employees in the private sector, regardless of their position, designation or status
and irrespective of the method by which their wages are paid. They shall include
part-time employees, employees of service and other j o b contractors and domestic
helpers or persons in the personal service of another.
The law does not cover employees of retail, service and agricultural
establishments or operations employing not more than ten (10) employees or
workers and employees of the National Government and its political subdivisions,
including Government-owned and/or controlled corporations, if they are covered
by the Civil Service Law and its regulations.
B. Computation of Retirement Pay
A covered employee who retires pursuant to R.A. 7641 shall be entitled to
retirement pay equivalent to at least one-half ( 1 / 2 ) month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year.
T h e law is explicit that "one-half month salary shall mean fifteen (15) days
plus one-twelfth ( 1 / 1 2 ) of the 13th month pay and the cash equivalent of not more
than five (5) days service incentive leaves" unless the parties provide for broader
inclusions. Evidently, the law expanded the concept of "one-half month salary"
from the usual one-month salary divided by two.
In reckoning the length of service, the period of employment with the same
employer before the effectivity date of the law on January 7, 1993 shall be included.
C. Substitute Retirement Plan
Qualified workers shall be entitled to the retirement benefit under R.A. 7641
in the absence of any individual or collective agreement, company policy or practice.
In case there is such an agreement, policy or practice providing retirement benefit,
which is equal or superior to that which is provided in the Act, said agreement,
policy or practice will prevail.
As provided in R.A. 7742, a private employer shall have the option to treat the
coverage of the PAG-IBIG Fund as a substitute retirement benefit for the employee
concerned within the purview of the Labor Code as amended; provided, such

1038
 APPENDIX TO THE IMPLEMENTING
RULES OF BOOK VI

option does not in any way contravene an existing collective bargaining agreement.
Thus, the PAG-IBIG Fund can be considered as a substitute retirement plan of the
company for its employees provided that such scheme offers benefits under RA
7641. If said scheme provides less than what the employee is entitled to under RA
7641, the employer is liable to pay the difference.
If both the employee and the employer contribute to a retirement plan,
only the employer's contribution and its increments shall be considered for full
or partial compliance with the benefit under RA 7641. On the other hand, where
the employee is the lone contributor to the PAG-IBIG Fund, the employer being
exempted from its coverage, the employer is under obligation to give his employee
retirement benefits under the Act.
Done in the City of Manila, this 24th day of October 1996.

(SGD.) L E O N A R D O A . Q U I S U M B I N G
Secretary

1039
 Rules Prescribing the Retirement Age for
Underground Mine Employees
Department of Labor and Employment
Department Order No. 09
Series of 1998
Pursuant to the provisions of Article 5 of the Labor Code and Article 287 of
the same Code as amended by the Republic Act N o . 7641 and further by Republic
Act N o . 8558, the following Rule is hereby issued to implement the latter act as
follows:

RULE II-A

SECTION 1. Coverage. - This Rule shall apply to all underground mine em-
ployees as contemplated under Republic Act N o . 8558. For this purpose, an under-
ground mine employee refers to any person employed to extract mineral deposits
underground or to work in excavations or workings such as shafts, winzes, tunnels,
drifts, crosscuts, raises, working places whether abandoned or in use beneath the
earth's surface for the purpose of searching for and extracting mineral deposits.
As used herein, the terms "employee," "employees," or "covered workers"
shall mean underground mine employee/s.
The term "Act" refers to Republic Act 7641 as amended by Republic Act 8558.
SECTION 2. Optional Retirement and Compulsory Retirement. - 2.1 Optional
Retirement. - In the absence of a retirement plan or other applicable agreement
providing for retirement benefits of underground mine employees in the
establishment, any such employee retire upon reaching the age of fifty (50) years or
more if he has served for at least five ( 5 ) years as underground mine employee or
in underground mine of the establishment.
2.2 Compulsory Retirement. - Where there is no such plan or agreement
referred to in the immediately preceding sub-section, an underground mine
employee shall be retired upon reaching the age of sixty (60) years.
2.3 Service Requirement. - T h e minimum length of service of at least five (5)
years required for entitlement to retirement pay shall include authorized absences
and vacations, holidays, and mandatory fulfillment of a military or civic duty.
SECTION 3. Retirement under CBA/contract. 3.1 Any underground mine
employee may retire or be retired by his employer upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment
contract, subject to the provisions of Section 4 hereof on the payment of retirement
benefits.

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 RULES PRESCRIBING T H E RETIREMENT
AGE FOR U N D E R G R O U N D MINE EMPLOYEES

3.2 In case of retirement under this Section, the underground mine

employee shall be entitled to receive such retirement benefits as he may earned
under existing laws and any collective bargaining agreement and other agreements;
provided, however, that the said employee's retirement benefits under any collective
bargaining and other agreements shall not be less than those provided under this
Rule; and provided further that if such benefits are less, the employer shall pay the
difference between the amount due the employer under this Rule and that provided
under the collective bargaining agreement or other applicable employment
contract.
3.3 Where both the employer and the employee contribute to a retirement
fund in accordance with a collective bargaining agreement or other applicable
employment contract, the employer's total contribution thereto shall not be less
than the total retirement benefits to which the employee would have been entitles
had there been no such retirement fund. In case the employer's contribution is less
than the retirement benefits provided under this Rule, the employer shall pay the
deficiency.
S E C T I O N 4. Retirement Benefits. — 4.1 In the absence of an applicable
employment contract, an underground mine employee who retires pursuant to the
Act shall be entitled to retirement pay equivalent to at least one-half ( 1 / 2 ) month
salary for every year of service, a fraction of at least six (6) months being considered
as one whole year.
4.2 Components of One-half (1/2) Month Salary. - For the purpose of
determining the minimum retirement pay due an employee under this Rule, the
term "one-half month salary" shall include all of the following: (a) Fifteen (15)
days salary of the employee based on his latest salary rate. As used herein, the term
"salary" includes all remunerations paid by employer to his employees for services
rendered during the normal working days and hours, whether such payments are
fixed or ascertained on a time, task piece, or commission basis, or other method
of calculating the same, and includes the fair and reasonable value, as determined
by the Secretary of Labor and Employment, of food, lodging or other facilities
customarily furnished by the employer to his employees. T h e term does not include
cost of living allowances, profit-sharing payment and other monetary benefits which
are not considered as part of or integrated into the regular salary of the employees;
( b ) The cash equivalent of five (5) days of service incentive leave;
(c) One-twelfth of the 13th month pay due the employee; and
( d ) All other benefits that the employer and employee may agree upon that
should be included in the computation of the employee's retirement pay.
4.3 One half Month Salary of Employees Who Are Paid by Results. - For covered
workers who are paid by results and do not have a fixed monthly rate, the basis
for determination of the salary for fifteen days shall be their average daily salary
(ADS), subject to the provisions of Rule VII-A, Book III of the rules implementing
the Labor Code on the payment of wages of workers who are paid by results. The
ADS is the average salary for the last twelve (12) month reckoned from the date of
their retirement, divided by the number of actual working days in that particular
period.

1041
 IMPLEMENTING RULES

SECTION 5. Exemption from Tax. - The retirement pay provided in the Act
may be exempted from tax consistent with the requirements set by the Bureau of
Internal Revenue.
SECTION 6. Penal Provision. - It shall be unlawful for any person or entity to
circumvent or render ineffective the provisions provided under Article 288 of the
Labor Code of the Philippines.
SECTION 7. Relation to agreements and regulations. - Nothing in this Rule
shall justify an employer from withdrawing or reducing any benefits, supplements
or payments as provided in existing laws, individual or collective agreements, or
employment practices or policies.
All rules and regulations, policy issuances or orders contrary to or inconsistent
with this Rule are hereby repealed or modified accordingly.
SECTION 8. Effectivity. - This Rule took effect on March 22, 1998 when RA
8558 went into force.

May 4, 1998

(Sgd.) CRESENCIANO B. TRAJANO

Secretary

1042
 IMPLEMENTING RULES OF BOOK VII
BOOK VII
PRESCRIPTION, TRANSITORY AND FINAL
PROVISIONS
Rule I
VENUE OF ACTIONS

S E C T I O N 1. Money claims. — All money claims and benefits arising from

employer-employee relations, except claims for social security benefits, medicare
and workmen's compensation, shall be filed with the Labor Relations Division of
the regional office nearest the place where the cause of action accrued. [But see
Art. 129, as amended]
SEC. 2. Unfair labor practices. — All complaints for unfair labor practices
shall be filed with the Labor Relations Division of the regional office nearest the
place where the acts complained of were committed. [But see Art. 217, as amended]
SEC. 3. Workmen's compensation claims. —
(a) Claims for workmen's compensation accruing prior to January 1, 1975
shall be filed with the appropriate regional offices of the Department of Labor in
accordance with the Rules of the Workmen's Compensation Commission.
(b) Claims for workmen's compensation arising on or after January 1,1975
shall be filed with the Social Security System for employees in the private sector and
with the Government Service Insurance System for employees of the government,
as the case may be, in accordance with such rules and regulations as may be laid
down by the Employees Compensation Commission.

Rule II
PRESCRIPTION OF A C T I O N S

SECTION 1. Money claims. — All money claims and benefits arising from
employer-employee relations shall be filed within three (3) years from the time the
cause of action accrued; otherwise, they shall be forever barred.
SEC. 2. Unfair labor practices. — All complaints involving unfair labor
practices shall be filed within one (1) year from the time the acts complained of
were committed; otherwise, they shall be forever barred.
SEC. 3. Workmen's compensation claims. — Subject to the exceptions
provided under the Code, all claims for workmen's compensation shall be filed
within one (1) year from the occurrence of injury or death; otherwise, they shall be
forever barred.
1043
 IMPLEMENTING RULES

SEC. 4. Claims accruing prior to effectivity of the Code. — (a) All money
claims and benefits arising from employer-employee relations which accrued prior
to the effectivity of the Code shall be filed within one (1) year from the date of the
effectivity of the Code; otherwise, they shall be forever barred.
(b) All workmen's compensation claims accruing prior to January 1, 1975
shall be filed not later than March 31, 1975, otherwise, they shall be forever barred.
SEC. 5. Prescription of action on union funds. — Any action involving the
funds of the organization shall prescribe after three years from the date of submission
of the annual financial report to the Department of Labor and Employment or
from the date the same should have been submitted as required by law, whichever
comes earlier.

Rule III
LAWS REPEALED

SECTION 1. Laws repealed. — Pursuant to the repealing clause of Article 303

of the Code, the following labor laws are deemed repealed by the Code:
(a) Act N o . 1874, or the Employer's Liability Act.
( b ) Act N o . 2473.
( c ) Act N o . 2486, as amended, or the Recruitment for Overseas Employment
Act.
( d ) Act N o . 2549.
( e ) Act N o . 3957, as amended, or the Private Employment Agency Act.
(f) Act N o . 3428, as amended, or the Workmen's Compensation Act.
( g ) Act N o . 3959, or the Contractor's Bond Act.
( h ) Commonwealth Act N o . 103, as amended, or the Court of Industrial
Relations Act.
(i) Commonwealth Act N o . 104, as amended, or the Industrial Safety Act.
(j) Commonwealth Act N o . 213.
(k) Commonwealth Act N o . 303.
(1) Commonwealth Act N o . 444, as amended, or the Eight-Hour Labor
Law.
( m ) Republic Act N o . 602, as amended, or the Minimum Wage Law, except
1
Sections 3 and 7 thereof.
(n) Republic Act N o . 679, as amended, or the Woman and Child Labor
Law.

'Sections 3 and 7 of RA 602, the Minimum Wage Law, as amended mentioned

above as being excepted from the repeal of the law, were superseded by the Labor
Code itself and its implementing rules, PDs 928, 1389, 1614, 1731 and 1751, Wage
Orders Nos. 1, 2, 3, 4, 5 and 6 providing for minimum wage rates, and Republic Act
N o . 6727 (Wage Rationalization A c t ) which took effect on July 1, 1989 creating a
National Wages and Productivity Commission in place of the National Wages Council
under EO N o . 614 and the National Productivity Commission under EO N o . 615
which were abolished.

1044
 IMPLEMENTING RULES OF BOOK VII: RULE IV

( o ) Republic Act N o . 761, or the National Employment Service Law.

(p) Republic Act N o . 875, as amended, or the Industrial Peace Act.
( q ) Republic Act N o . 946, or the Blue Sunday Law.
(r) Republic Act N o . 1052, as amended, or the Termination Pay Law.
(s) Republic Act N o . 1054, or the Emergency Medical and Dental
Treatment Law.
(t) Republic Act N o . 1826, as amended, or the National Apprenticeship
Act.
(u) Republic Act N o . 2646.
(v) Republic Act N o . 2714.
(w) Republic Act N o . 5462, or the Manpower and Out-of-School Youth
Development Act.
( x ) Reorganization Plan N o . 20-A.
All rules and regulations, policy instructions, orders and issuances
implementing Presidential Decree N o . 442, as amended, contrary to or inconsistent
with these Rules are hereby repealed or modified accordingly.
All other laws involving employer-employee relations, including the Sugar Act
of 1952 ( R A 809), are deemed not repealed.

Rule IV
DATE O F E F F E C T I V I T Y

SECTION 1. Effectivity of these rules and regulations. — (a) T h e provisions

of these rules and regulations which were promulgated on January 19, 1975, shall
continue to be in effect as of February 3, 1975, except the following:
1. Those relating to self-executing provisions of the Labor Code
which became effective on November 1, 1974, and
2. Those implementing the pertinent provisions of Presidential
Decree N o . 850 further amending the Labor Code and incorporated as part
of these rules and regulations, which shall take effect on March 2, 1976,
unless they pertain to self-executing provisions of Presidential Decree N o .
850, which took effect on December 16, 1975.
(b) Republic Act N o . 6715 takes effect on March 21, 1989, fifteen (15)
days after the completion of its publication in two (2) newspapers of general
circulation. The Rules implementing this Act shall take effect fifteen (15) days after
the completion of their publication in two (2) newspapers of general circulation,
except those which pertain to self-executing provisions of said Act.
Done in the City of Manila, this 16th day of February, 1976.

1045