Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 101738

April 12, 2000

PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES, petitioner, vs.HON. BIENVENIDO E. LAGUESMA,

Undersecretary of Labor and Employment, HON. HENRY PABEL, Director of the Department of Labor and
Employment Regional Office No. XI and/or the Representation Officer of the Industrial Relations Division who will
act for and in his behalf, PCOP- BISLIG SUPERVISORY AND TECHNICAL STAFF EMPLOYEES UNION, ASSOCIATED
LABOR UNION and FEDERATION OF FREE WORKERS, respondents.
Before us is a petition for certiorari seeking to annul the Resolution1 and the Order2 dated April 17, 1991 and August 7, 1991,
respectively, of public respondent Bienvenido E. Laguesma, acting then as Undersecretary, now the Secretary, of the
Department of Labor and Employment (DOLE), which reversed the Order dated March 27, 1990 3 of Med-Arbiter Phibun D.
Pura declaring that supervisors and section heads of petitioner under its new organizational structure are managerial
employees and should be excluded from the list of voters for the purpose of a certification election among supervisory and
technical staff employees of petitioner.4
The facts of the case are the following:
Petitioner Paper Industries Corporation of the Philippines (PICOP) is engaged in the manufacture of paper and
timber products, with principal place of operations at Tabon, Bislig, Surigao del Sur. It has over 9,0005 employees, 9446 of
whom are supervisory and technical staff employees. More or less 487 of these supervisory and technical staff
employees are signatory members of the private respondent PICOP-Bislig Supervisory and Technical Staff
Employees Union (PBSTSEU).7
On August 9, 1989, PBSTSEU instituted a Petition8 for Certification Election to determine the sole and exclusive
bargaining agent of the supervisory and technical staff employees of PICOP for collective bargaining agreement
(CBA) purposes.
In a Notice9 dated August 10, 1989, the initial hearing of the petition was set on August 18, 1989 but it was reset to August
25, 1989, at the instance of PICOP, as it requested a fifteen (15) day period within which to file its comments and/or position
paper. But PICOP failed to file any comment or position paper. Meanwhile, private respondents Federation of Free
Workers (FFW) and Associated Labor Union (ALU) filed their respective petitions for intervention.
On September 14, 1989, Med-Arbiter Arturo L. Gamolo issued an Order 10 granting the petitions for interventions of the
FFW and ALU. Another Order 11 issued on the same day set the holding of a certification election among PICOP's
supervisory and technical staff employees in Tabon, Bislig, Surigao del Sur, with four (4) choices, namely: (1)
PBSTSEU; (2) FFW; (3) ALU; and (4) no union.
On September 21, 1989, PICOP appealed 12 the Order which set the holding of the certification election contending
that the Med-Arbiter committed grave abuse of discretion in deciding the case without giving PICOP the opportunity
to file its comments/answer, and that PBSTSEU had no personality to file the petition for certification election.
After PBSTSEU filed its Comments 13 to petitioner's appeal, the Secretary of the Labor 14 issued a Resolution 15 dated
November 17, 1989 which upheld the Med-Arbiter's Order dated September 17, 1989, with modification allowing the
supervising and staff employees in Cebu, Davao and Iligan City to participate in the certification election.
During the pre-election conference on January 18, 1990, PICOP questioned and objected to the inclusion of some
section heads and supervisors in the list of voters whose positions it averred were reclassified as managerial
employees in the light of the reorganization effected by it. 16 Under the Revised Organizational Structure of the PICOP,
the company was divided into four (4) main business groups, namely: Paper Products Business, Timber Products Business,
Forest Resource Business and Support Services Business. A vice- president or assistant vice-president heads each of these
business groups. A division manager heads the divisions comprising each business group. A department manager heads the
departments comprising each division. Section heads and supervisors, now called section managers and unit managers,
head the sections and independent units, respectively, comprising each department. 17 PICOP advanced the view that
considering the alleged present authority of these section managers and unit managers to hire and fire, they are classified
as managerial employees, and hence, ineligible to form or join any labor organization. 18
Following the submission by the parties of their respective position papers 19 and evidence 20 on this issue, Med-Arbiter
Phibun D. Pura issued an Order 21 dated March 27, 1990, holding that supervisors and section heads of the petitioner
are managerial employees and therefore excluded from the list of voters for purposes of certification election.
PBSTSEU appealed 22 the Order of the Med-Arbiter to the Office of the Secretary, DOLE. ALU likewise appealed. 23 PICOP
submitted evidence militating against the appeal. 24 Public respondent Bienvenido E. Laguesma, acting as the then
Undersecretary of Labor, issued the assailed Order 25 dated April 17, 1991 setting aside the Order dated March 27, 1990
of the Med-Arbiter and declaring that the subject supervisors and section heads are supervisory employees eligible
to vote in the certification election.
PICOP sought 26 reconsideration of the Order dated April 7, 1991. However, public respondent in his Order
7, 1991 denied PICOP's motion for reconsideration.

27

dated August

Hence, this petition.

PICOP anchors its petition on two (2) grounds, to wit:
I.
THE PUBLIC RESPONDENT HONORABLE BIENVENIDO E. LAGUESMA, UNDERSECRETARY OF LABOR AND
EMPLOYMENT, IN A CAPRICIOUS, ARBITRARY AND WHIMSICAL EXERCISE OF POWER ERRED AND COMMITTED
GRAVE ABUSE OF DISCRETION, TANTAMOUNT TO ACTING WITHOUT OR IN EXCESS OF JURISDICTION WHEN HE
DENIED YOUR PETITIONER'S PLEA TO PRESENT ADDITIONAL EVIDENCE TO PROVE THAT SOME OF ITS
MANAGERIAL EMPLOYEES ARE DISQUALIFIED FROM JOINING OR FORMING A UNION REPRESENTED BY CORESPONDENT PBSTSEU, IN VIEW OF A SUPERVENING EVENT BROUGHT ABOUT BY THE CHANGES IN THE
ORGANIZATIONAL STRUCTURE OF YOUR PETITIONER WHICH WAS FULLY IMPLEMENTED IN JANUARY 1991
AFTER THE CASE WAS ELEVATED ON APPEAL AND SUBMITTED FOR DECISION.
II.
THE PUBLIC RESPONDENT, HONORABLE BIENVENIDO E. LAGUESMA, ALSO ERRED AND COMMITTED GRAVE
ABUSE OF DISCRETION, TANTAMOUNT TO ARBITRARILY ACTING WITHOUT OR IN EXCESS OF JURISDICTION
WHEN HE TOTALLY DISREGARDED THE DOCUMENTARY EVIDENCE SO FAR SUBMITTED BY YOUR PETITIONER
AND RELIED MAINLY ON THE UNSUBSTANTIATED CLAIM AND MERE ALLEGATIONS OF PRIVATE RESPONDENT,
PBSTSEU, THAT THE REORGANIZATION OF YOUR PETITIONER WAS A SHAM AND CALCULATED MERELY TO
FRUSTRATE THE UNIONIZATION OF YOUR PETITIONER'S SUPERVISORY PERSONNEL; AND SOLELY ON THIS
BASIS, DENIED YOUR PETITIONER'S URGENT MOTION FOR RECONSIDERATION. 28
PICOP's main thesis is that the positions Section Heads and Supervisors, who have been designated as Section Managers
and Unit Managers, as the case may be, were converted to managerial employees under the decentralization and
reorganization program it implemented in 1989. Being managerial employees, with alleged authority to hire and fire
employees, they are ineligible for union membership under Article 245 29 of the Labor Code. Furthermore, PICOP contends
that no malice should be imputed against it for implementing its decentralization program only after the petition for
certification election was filed inasmuch as the same is a valid exercise of its management prerogative, and that said
program has long been in the drawing boards of the company, which was realized only in 1989 and fully implemented in
1991. PICOP emphatically stresses that it could not have conceptualized the decentralization program only for the purpose of
"thwarting the right of the concerned employees to self-organization."
The petition, not being meritorious, must fail and the same should be as it is hereby dismissed.
First. In United Pepsi-Cola Supervisory Union (UPSU) v. Laguesma, 30 we had occasion to elucidate on the term "managerial
employees." Managerial employees are ranked as Top Managers, Middle Managers and First Line Managers. Top and
Middle Managers have the authority to devise, implement and control strategic and operational policies while the
task of First-Line Managers is simply to ensure that such policies are carried out by the rank-and- file employees of
an organization. Under this distinction, "managerial employees" therefore fall in two (2) categories, namely, the
"managers" per se composed of Top and Middle Managers, and the "supervisors" composed of First-Line
Managers. 31 Thus, the mere fact that an employee is designated "manager" does not ipso facto make him one.
Designation should be reconciled with the actual job description of the employee, 32 for it is the job description that
determines the nature of employment. 33
In the petition before us, a thorough dissection of the job description 34 of the concerned supervisory employees and section
heads indisputably show that they are not actually managerial but only supervisory employees since they do not lay down
company policies. PICOP's contention that the subject section heads and unit managers exercise the authority to hire and
fire 35 is ambiguous and quite misleading for the reason that any authority they exercise is not supreme but merely advisory in
character. Theirs is not a final determination of the company policies inasmuch as any action taken by them on matters
relative to hiring, promotion, transfer, suspension and termination of employees is still subject to confirmation and approval by
their respective superior. 36 Thus, where such power, which is in effect recommendatory in character, is subject to evaluation,
review and final action by the department heads and other higher executives of the company, the same, although present, is
not effective and not an exercise of independent judgment as required by law. 37
Second. No denial of due process can be ascribed to public respondent Undersecretary Laguesma for the latter's denial to
allow PICOP to present additional evidence on the implementation of its program inasmuch as in the appeal before the said
public respondent, PICOP even then had already submitted voluminous supporting documents. 38 The record of the case is
replete with position papers and exhibits that dealt with the main thesis it relied upon. What the law prohibits is the lack of
opportunity to be heard. 39 PICOP has long harped on its contentions and these were dealt upon and resolved in detail by
public respondent Laguesma. We see no reason or justification to deviate from his assailed resolutions for the reason that
law and jurisprudence aptly support them.
Finally, considering all the foregoing, the fact that PICOP voiced out its objection to the holding of certification election,
despite numerous opportunities to ventilate the same, only after respondent Undersecretary of Labor affirmed the holding
thereof, simply bolstered the public respondents' conclusion that PICOP raised the issue merely to prevent and thwart the
concerned section heads and supervisory employees from exercising a right granted them by law. Needless to stress, no
obstacle must be placed to the holding of certification elections, for it is a statutory policy that should not be circumvented. 40
WHEREFORE, the petition is hereby DISMISSED, and the Resolution and Order of public respondent Bienvenido E.
Laguesma dated April 17, 1991 and August 17, 1991, respectively, finding the subject supervisors and section heads as
supervisory employees eligible to vote in the certification election are AFFIRMED. Costs against petitioner. SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 122226 March 25, 1998

UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), petitioner, vs.HON. BIENVENIDO E. LAGUESMA and PEPSICOLA PRODUCTS, PHILIPPINES, INC. respondents.

MENDOZA, J.:
Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the union filed a petition for certification
election on behalf of the route managers at Pepsi-Cola Products Philippines, Inc. However, its petition was denied by the
med-arbiter and, on appeal, by the Secretary of Labor and Employment, on the ground that the route managers are
managerial employees and, therefore, ineligible for union membership under the first sentence of Art. 245 of the Labor
Code, which provides:
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 a
labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own.
Petitioner brought this suit challenging the validity of the order dated August 31, 1995, as reiterated in the order dated
September 22, 1995, of the Secretary of Labor and Employment. Its petition was dismissed by the Third Division for lack of
showing that respondent committed grave abuse of discretion. But petitioner filed a motion for reconsideration, pressing for
resolution its contention that the first sentence of Art. 245 of the Labor Code, so far as it declares managerial employees to
be ineligible to form, assist or join unions, contravenes Art. III, 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.
For this reason, the petition was referred to the Court en banc.
The Issues in this Case
Two questions are presented by the petition: (1) whether the route managers at Pepsi-Cola Products Philippines,
Inc. are managerial employees and (2) whether Art. 245, insofar as it prohibits managerial employees from forming,
joining or assisting labor unions, violates Art. III, 8 of the Constitution.
In resolving these issues it would be useful to begin by defining who are "managerial employees" and considering the types
of "managerial employees."
Types of Managerial Employees
The term "manager" generally refers to "anyone who is responsible for subordinates and other organizational resources." 1 As
a class, managers constitute three levels of a pyramid:
Top management

Middle
Management

First-Line
Management
(also called
Supervisor)

====================
Operatives
or
Operating
Employees
FIRST-LINE MANAGERS The 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 The term middle management 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 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. 2
As can be seen from this description, a distinction exists between those who have the authority to devise, implement
and control strategic and operational policies (top and middle managers) and 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. 3
The first question is whether route managers are managerial employees or supervisors.
Previous Administrative Determinations of the Question Whether Route Managersare Managerial Employees
It appears that this question was the subject of two previous determinations by the Secretary of Labor and Employment, in
accordance with which this case was decided by the med-arbiter.
In Case No. OS-MA-10-318-91, entitled Worker's Alliance Trade Union (WATU) v. Pepsi-Cola Products Philippines, Inc.,
decided on November 13, 1991, the Secretary of Labor found:
We examined carefully the pertinent job descriptions of the subject employees and other documentary evidence on
record vis-a-vis paragraph (m), Article 212 of the Labor Code, as amended, and we find that only those employees
occupying the position of route manager and accounting manager are managerial employees. The rest i.e. quality
control manager, yard/transport manager and warehouse operations manager are supervisory employees.
To qualify as managerial employee, there must be a clear showing of the exercise of managerial attributes under
paragraph (m), Article 212 of the Labor Code as amended. Designations or titles of positions are not controlling. In
the instant case, nothing on record will support the claim that the quality control manager, yard/transport manager and
warehouse operations manager are vested with said attributes. The warehouse operations manager, for example, merely
assists the plant finance manager in planning, organizing, directing and controlling all activities relative to development and
implementation of an effective management control information system at the sale offices. The exercise of authority of the
quality control manager, on the other hand, needs the concurrence of the manufacturing manager.
As to the route managers and accounting manager, we are convinced that they are managerial employees. Their job
descriptions clearly reveal so.
On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92. entitled In Re: Petition for Direct Certification and/or
Certification Election-Route Managers/Supervisory Employees of Pepsi-Cola Products Phils. Inc., as follows:
The issue brought before us is not of first impression. At one time, we had the occasion to rule upon the status of route
manager in the same company vis a vis the issue as to whether or not it is supervisory employee or a managerial employee.
In the case of Workers Alliance Trade Unions (WATU) vs. Pepsi Cola Products, Phils., Inc. (OS-MA-A-10-318-91 ), 15
November 1991, we ruled that a route manager is a managerial employee within the context of the definition of the law, and
hence, ineligible to join, form or assist a union. We have once more passed upon the logic of our Decision aforecited in the
light of the issues raised in the instant appeal, as well as the available documentary evidence on hand, and have come to the

view that there is no cogent reason to depart from our earlier holding. Route Managers are, by the very nature of their
functions and the authority they wield over their subordinates, managerial employees. The prescription found in Art. 245 of
the Labor Code, as amended therefore, clearly applies to them. 4
Citing our ruling in Nasipit Lumber Co. v. National Labor Relations Commission, 5 however, petitioner argues that these
previous administrative determinations do not have the effect of res judicata in this case, because "labor relations
proceedings" are "non-litigious and summary in nature without regard to legal technicalities." 6 Nasipit Lumber Co. involved a
clearance to dismiss an employee issued by the Department of Labor. The question was whether in a subsequent
proceeding for illegal dismissal, the clearance was res judicata. In holding it was not, this Court made it clear that it was
referring to labor relations proceedings of a non-adversary character, thus:
The requirement of a clearance to terminate employment was a creation of the Department of labor to carry out the Labor
Code provisions on security of tenure and termination of employment. The proceeding subsequent to the filing of an
application for clearance to terminate employment was outlined in Book V, Rule XIV of the Rules and Regulations
Implementing the Labor Code. The fact that said rule allowed a procedure for the approval of the clearance with or without
the opposition of the employee concerned (Secs. 7 & 8), demonstrates the non-litigious and summary nature of the
proceeding. The clearance requirement was therefore necessary only as an expeditious shield against arbitrary dismissal
without the knowledge and supervision of the Department of Labor. Hence, a duly approved clearance implied that the
dismissal was legal or for cause (Sec. 2). 7
But the doctrine of res judicata certainly applies to adversary administrative proceedings. As early as 1956, in Brillantes v.
Castro, 8 we sustained the dismissal of an action by a trial court on the basis of a prior administrative determination of the
same case by the Wage Administration Service, applying the principle of res judicata. Recently, in Abad v. NLRC 9 we applied
the related doctrine of stare decisis in holding that the prior determination that certain jobs at the Atlantic Gulf and Pacific Co.,
were project employments was binding in another case involving another group of employees of the same company. Indeed,
in Nasipit Lumber Co., this Court clarified toward the end of its opinion that "the doctrine of res judicata applies . . . to judicial
or quasi judicial proceedings and not to the exercise of administrative powers." 10 Now proceedings for certification election,
such as those involved in Case No. OS-M-A-10-318-91 and Case No. OS-A-3-71-92, are quasi judicial in nature and,
therefore, decisions rendered in such proceedings can attain finality. 11
Thus, we have in this case an expert's view that the employees concerned are managerial employees within the purview of
Art. 212 which provides:
(m) "managerial employee" is one who is vested with powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer, effectively recommend 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.
At the very least, the principle of finality of administrative determination compels respect for the finding of the Secretary of
Labor that route managers are managerial employees as defined by law in the absence of anything to show that such
determination is without substantial evidence to support it. Nonetheless, the Court, concerned that employees who are
otherwise supervisors may wittingly or unwittingly be classified as managerial personnel and thus denied the right of selforganization, has decided to review the record of this case.
DOLE's Finding that Route Managers areManagerial Employees Supported bySubstantial Evidence in the Record
The Court now finds that the job evaluation made by the Secretary of Labor is indeed supported by substantial evidence. The
nature of the job of route managers is given in a four-page pamphlet, prepared by the company, called "Route Manager
Position Description," the pertinent parts of which read:
A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan; and you achieve this objective through the skillful
MANAGEMENT OF YOUR JOB AND THE MANAGEMENT OF YOUR PEOPLE.
These then are your functions as Pepsi-Cola Route Manager. Within these functions managing your job and managing
your people you are accountable to your District Manager for the execution and completion of various tasks and activities
which will make it possible for you to achieve your sales objectives.
B. PRINCIPAL ACCOUNTABILITIES
1.0 MANAGING YOUR JOB
The Route Manager is accountable for the following:
1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.

1.1.2 Achieve all distribution and new account objectives.

1.1.3 Develop new business opportunities thru personal contacts with dealers.
1.1.4 Inspect and ensure that all merchandizing [sic] objectives are achieved in all outlets.
1.1.5 maintain and improve productivity of all cooling equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for possible adjustments to maximize utilization of
resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before check-out and the proper sorting of bottles before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other related reports and forms required on an accurate and timely
basis.
1.2.3 Ensure proper implementation of the various company policies and procedures incl. but not limited to shakedown; route
shortage; progressive discipline; sorting; spoilages; credit/collection; accident; attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0 MANAGING YOUR PEOPLE
The Route Manager is accountable for the following:
2.1 Route Sales Team Development
2.1.2 Conduct route rides to train, evaluate and develop all assigned route salesmen and helpers at least 3 days a week, to
be supported by required route ride documents/reports & back check/spot check at least 2 days a week to be supported by
required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training should focus on the enhancement of effective sales and
merchandizing [sic] techniques of the salesmen and helpers. Conduct group training at least 1 hour each week on a
designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company's reputation through strict adherence to PCPPI's code of conduct and the universal standards of
unquestioned business ethics. 12
Earlier in this opinion, reference was made to the distinction between managers per se (top managers and middle managers)
and supervisors (first-line managers). That distinction is evident in the work of the route managers which sets them apart
from supervisors in general. 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.
The 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. An idea
of the role of route managers as managers per se can be gotten from a memo sent by the director of metro sales operations
of respondent company to one of the route managers. It reads: 13
03 April 1995
To : CESAR T . REOLADA
From : REGGIE M. SANTOS
Subj : SALARY INCREASE
Effective 01 April 1995, your basic monthly salary of P11,710 will be increased to P12,881 or an increase of 10%. This

represents the added managerial responsibilities you will assume due to the recent restructuring and streamlining of Metro
Sales Operations brought about by the continuous losses for the last nine (9) months.
Let me remind you that for our operations to be profitable, we have to sustain the intensity and momentum that your group
and yourself have shown last March. You just have to deliver the desired volume targets, better negotiated concessions,
rationalized sustaining deals, eliminate or reduced overdues, improved collections, more cash accounts, controlled operating
expenses, etc. Also, based on the agreed set targets, your monthly performance will be closely monitored.
You have proven in the past that your capable of achieving your targets thru better planning, managing your group as a
fighting team, and thru aggressive selling. I am looking forward to your success and I expect that you just have to exert your
doubly best in turning around our operations from a losing to a profitable one!
Happy Selling!!
(Sgd.) R.M. SANTOS
The plasticized card given to route managers, quoted in the separate opinion of Justice Vitug, although entitled "RM's Job
Description," is only a summary of performance standards. It does not show whether route managers are managers per se
or supervisors. Obviously, these performance standards have to be related to the specific tasks given to route managers in
the four-page "Route Manager Position Description," and, when this is done, the managerial nature of their jobs is fully
revealed. Indeed, if any, the card indicates the great latitude and discretion given to route managers from servicing and
enhancing company goodwill to supervising and auditing accounts, from trade (new business) development to the discipline,
training and monitoring of performance of their respective sales teams, and so forth, if they are to fulfill the company's
expectations in the "key result areas."
Article 212(m) says that "supervisory employees are those who, in the interest of the employer, effectively recommend such
managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of
independent judgment." Thus, their only power is to recommend. Certainly, the route managers in this case more than
merely recommend effective management action. They perform operational, human resource, financial and marketing
functions for the company, all of which involve the laying down of operating policies for themselves and their teams. For
example, with respect to marketing, route managers, in accordance with B.1.1.1 to B.1.1.9 of the Route Managers Job
Description, are charged, among other things, with expanding the dealership base of their respective sales areas,
maintaining the goodwill of current dealers, and distributing the company's various promotional items as they see fit. It is
difficult to see how supervisors can be given such responsibility when this involves not just the routine supervision of
operating employees but the protection and expansion of the company's business vis-a-vis its competitors.
While route managers do not appear to have the power to hire and fire people (the evidence shows that they only
"recommended" or "endorsed" the taking of disciplinary action against certain employees), this is because thisis a function of
the Human Resources or Personnel Department of the company. 14 And neither should it be presumed that just because they
are given set benchmarks to observe, they are ipso facto supervisors. Adequate control methods (as embodied in such
concepts as "Management by Objectives [MBO]" and "performance appraisals") which require a delineation of the functions
and responsibilities of managers by means of ready reference cards as here, have long been recognized in management as
effective tools for keeping businesses competitive.
This brings us to the second question, whether the first sentence of Art. 245 of the Labor Code, prohibiting managerial
employees from forming, assisting or joining any labor organization, is constitutional in light of Art. III, 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.
As already stated, whether they belong to the first category (managers per se) or the second category (supervisors),
managers are employees. Nonetheless, in the United States, as Justice Puno's separate opinion notes, supervisors have no
right to form unions. They are excluded from the definition of the term "employee" in 2(3) of the Labor-Management
Relations Act of 1947. 15 In the Philippines, the question whether managerial employees have a right of self-organization has
arisen with respect to first-level managers or supervisors, as shown by a review of the course of labor legislation in this
country.
Right of Self-Organization of ManagerialEmployees under Pre-Labor Code Laws
Before the promulgation of the Labor Code in 1974, the field of labor relations was governed by the Industrial Peace Act
(R.A. No. 875).
In accordance with the general definition above, this law defined "supervisor" as follows:
Sec. 2. . . .
(k) "Supervisor" means 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 requires the use of independent judgment. 16
The right of supervisors to form their own organizations was affirmed:

Sec. 3. Employees' Right to Self-Organization. Employees shall have the right to self-organization and to form, join or
assist labor organizations of their own choosing for the purpose of collective bargaining through representatives of their own
choosing and to engage in concerted activities for the purpose of collective bargaining and other mutual aid and protection.
Individuals employed as supervisors shall not be eligible for membership in a labor organization of employees under their
supervision but may form separate organizations of their own. 17
For its part, the Supreme Court upheld in several of its decisions the right of supervisors to organize for purposes of labor
relations. 18
Although it had a definition of the term "supervisor," the Industrial Peace Act did not define the term "manager." But, using the
commonly-understood concept of "manager," as above stated, it is apparent that the law used the term "supervisors" to refer
to the sub-group of "managerial employees" known as front-line managers. The other sub-group of "managerial employees,"
known as managers per se, was not covered.
However, in Caltex Filipino Managers and Supervisors Association v. Court of Industrial Relations,
managerial employees to self-organization was upheld as a general proposition, thus:

19

the right of all

It would be going too far to dismiss summarily the point raised by respondent Company that of the alleged identity of
interest between the managerial staff and the employing firm. That should ordinarily be the case, especially so where the
dispute is between management and the rank and file. It does not necessarily follow though that what binds the managerial
staff to the corporation forecloses the possibility of conflict between them. There could be a real difference between what the
welfare of such group requires and the concessions the firm is willing to grant. Their needs might not be attended to then in
the absence of any organization of their own. Nor is this to indulge in empty theorizing. The record of respondent Company,
even the very case cited by it, is proof enough of their uneasy and troubled relationship. Certainly the impression is difficult to
erase that an alien firm failed to manifest sympathy for the claims of its Filipino executives. To predicate under such
circumstances that agreement inevitably marks their relationship, ignoring that discord would not be unusual, is to fly in the
face of reality.
. . . The basic question is whether the managerial personnel can organize. What respondent Company failed to take into
account is that the right to self-organization is not merely a statutory creation. It is fortified by our Constitution. All are free to
exercise such right unless their purpose is contrary to law. Certainly it would be to attach unorthodoxy to, not to say an
emasculation of, the concept of law if managers as such were precluded from organizing. Having done so and having been
duly registered, as did occur in this case, their union is entitled to all the rights under Republic Act No. 875. Considering what
is denominated as unfair labor practice under Section 4 of such Act and the facts set forth in our decision, there can be only
one answer to the objection raised that no unfair labor practice could be committed by respondent Company insofar as
managerial personnel is concerned. It is, as is quite obvious, in the negative. 20
Actually, the case involved front-line managers or supervisors only, as the plantilla of employees, quoted in the main opinion,
21
clearly indicates:
CAFIMSA members holding the following Supervisory Payroll Position Title are Recognized by the Company
Payroll Position Title
Assistant to Mgr. National Acct. Sales
Jr. Sales Engineer
Retail Development Asst.
Staff Asst. 0 Marketing
Sales Supervisor
Supervisory Assistant
Jr. Supervisory Assistant
Credit Assistant
Lab. Supvr. Pandacan
Jr. Sales Engineer B
Operations Assistant B
Field Engineer
Sr. Opers. Supvr. MIA A/S
Purchasing Assistant

Jr. Construction Engineer

Sr. Sales Supervisor
Deport Supervisor A
Terminal Accountant B
Merchandiser
Dist. Sales Prom. Supvr.
Instr. Merchandising
Asst. Dist. Accountant B
Sr. Opers. Supervisor
Jr. Sales Engineer A
Asst. Bulk Ter. Supt.
Sr. Opers. Supvr.
Credit Supervisor A
Asst. Stores Supvr. A
Ref. Supervisory Draftsman
Refinery Shift Supvr. B
Asst. Supvr. A Operations (Refinery)
Refinery Shift Supvr. B
Asst. Lab. Supvr. A (Refinery)
St. Process Engineer B (Refinery)
Asst. Supvr. A Maintenance (Refinery)
Asst. Supvr. B Maintenance (Refinery)
Supervisory Accountant (Refinery)
Communications Supervisor (Refinery)
Finally, also deemed included are all other employees excluded from the rank and file unions but not classified as managerial
or otherwise excludable by law or applicable judicial precedents.
Right of Self-Organization of ManagerialEmployees under the Labor Code
Thus, the dictum in the Caltex case which allowed at least for the theoretical unionization of top and middle managers by
assimilating them with the supervisory group under the broad phrase "managerial personnel," provided the lynchpin for later
laws denying the right of self-organization not only to top and middle management employees but to front line managers or
supervisors as well. Following the Caltex case, the Labor Code, promulgated in 1974 under martial law, dropped the
distinction between the first and second sub-groups of managerial employees. Instead of treating the terms "supervisor" and
"manager" separately, the law lumped them together and called them "managerial employees," as follows:
Art. 212. Definitions . . . .
(k) "Managerial Employee" is one who is vested with powers or prerogatives 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 this
Book. 22
The definition shows that it is actually a combination of the commonly understood definitions of both groups of managerial
employees, grammatically joined by the phrase "and/or."

This general definition was perhaps legally necessary at that time for two reasons. First, the 1974 Code denied supervisors
their right to self-organize as theretofore guaranteed to them by the Industrial Peace Act. Second, it stood the dictum in the
Caltex case on its head by prohibiting all types of managers from forming unions. The explicit general prohibition was
contained in the then Art. 246 of the Labor Code.
The practical effect of this synthesis of legal concepts was made apparent in the Omnibus Rules Implementing the Labor
Code which the Department of Labor promulgated on January 19, 1975. Book V, Rule II, 11 of the Rules provided:
Supervisory unions and unions of security guards to cease operation. All existing supervisory unions and unions of
security guards shall, upon the effectivity of the Code, cease to operate as such and their registration certificates shall be
deemed automatically canceled. However, existing collective agreements with such unions, the life of which extends beyond
the date of effectivity of the Code, shall be respected until their expiry date insofar as the economic benefits granted therein
are concerned.
Members of supervisory unions who do not fall within the definition of managerial employees shall become eligible to join or
assist the rank and file labor organization, and if none exists, to form or assist in the forming of such rank and file
organization. The determination of who are managerial employees and who are not shall be the subject of negotiation
between representatives of the supervisory union and the employer. If no agreement is reached between the parties, either
or both of them may bring the issue to the nearest Regional Office for determination.
The Department of Labor continued to use the term "supervisory unions" despite the demise of the legal definition of
"supervisor" apparently because these were the unions of front line managers which were then allowed as a result of the
statutory grant of the right of self-organization under the Industrial Peace Act. Had the Department of Labor seen fit to
similarly ban unions of top and middle managers which may have been formed following the dictum in Caltex, it obviously
would have done so. Yet it did not, apparently because no such unions of top and middle managers really then existed.
Real Intent of the 1986 Constitutional Commission
This was the law as it stood at the time the Constitutional Commission considered the draft of Art. III, 8. Commissioner
Lerum sought to amend the draft of what was later to become Art. III, 8 of the present Constitution:
MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to insert between the words "people" and "to" the
following: WHETHER EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS. In other words, the section will now
read as follows: "The right of the people WHETHER EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS to form
associations, unions, or societies for purposes not contrary to law shall not be abridged." 23
Explaining his proposed amendment, he stated:
MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is granted to all persons whether or not they are
employed in the government. Under that provision, we allow unions in the government, in government-owned and controlled
corporations and in other industries in the private sector, such as the Philippine Government Employees' Association, unions
in the GSIS, the SSS, the DBP and other government-owned and controlled corporations. Also, we have unions of
supervisory employees and of security guards. But what is tragic about this is that after the 1973 Constitution was approved
and in spite of an express recognition of the right to organize in P.D. No. 442, known as the Labor Code, the right of
government workers, supervisory employees and security guards to form unions was abolished.
And we have been fighting against this abolition. In every tripartite conference attended by the government, management
and workers, we have always been insisting on the return of these rights. However, both the government and employers
opposed our proposal, so nothing came out of this until this week when we approved a provision which states:
Notwithstanding any provision of this article, the right to self-organization shall not be denied to government employees.
We are afraid that without any corresponding provision covering the private sector, the security guards, the supervisory
employees or majority employees [sic] will still be excluded, and that is the purpose of this amendment.
I will be very glad to accept any kind of wording as long as it will amount to absolute recognition of private sector employees,
without exception, to organize.
THE PRESIDENT. What does the Committee say?
FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by Commissioner Rodrigo is well-taken. Perhaps,
we can lengthen this a little bit more to read: "The right of the people WHETHER UNEMPLOYED OR EMPLOYED BY
STATE OR PRIVATE ESTABLISHMENTS.
I want to avoid also the possibility of having this interpreted as applicable only to the employed.
MR. DE LOS REYES. Will the proponent accept an amendment to the amendment, Madam President?
MR. LERUM. Yes, as long as it will carry the idea that the right of the employees in the private sector is recognized. 24
Lerum thus anchored his proposal on the fact that (1) government employees, supervisory employees, and security guards,
who had the right to organize under the Industrial Peace Act, had been denied this right by the Labor Code, and (2) there

was a need to reinstate the right of these employees. In consonance with his objective to reinstate the right of government,
security, and supervisory employees to organize, Lerum then made his proposal:
MR. LERUM. Mr. Presiding Officer, after a consultation with several Members of this Commission, my amendment will now
read as follows: "The right of the people INCLUDING THOSE EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS to
form associations, unions, or societies for purposes not contrary to law shall not be abridged. In proposing that amendment I
ask to make of record that I want the following provisions of the Labor Code to be automatically abolished, which read:
Art. 245. Security guards and other personnel employed for the protection and security of the person, properties and
premises of the employers shall not be eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any labor organization.
THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?
FR. BERNAS. The Committee accepts.
THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the amendment, as amended.
Is there any objection? (Silence) The Chair hears none; the amendment, as amended, is approved. 25
The question is what Commissioner Lerum meant in seeking to "automatically abolish" the then Art. 246 of the Labor Code.
Did he simply want "any kind of wording as long as it will amount to absolute recognition of private sector employees, without
exception, to organize"? 26 Or, did he instead intend to have his words taken in the context of the cause which moved him to
propose the amendment in the first place, namely, the denial of the right of supervisory employees to organize, because he
said, "We are afraid that without any corresponding provision covering the private sector, security guards, supervisory
employees or majority [of] employees will still be excluded, and that is the purpose of this amendment"? 27
It would seem that Commissioner Lerum simply meant to restore the right of supervisory employees to organize. For even
though he spoke of the need to "abolish" Art. 246 of the Labor Code which, as already stated, prohibited "managerial
employees" in general from forming unions, the fact was that in explaining his proposal, he repeatedly referred to
"supervisory employees" whose right under the Industrial Peace Act to organize had been taken away by Art. 246. It is
noteworthy that Commissioner Lerum never referred to the then definition of "managerial employees" in Art. 212(m) of the
Labor Code which put together, under the broad phrase "managerial employees," top and middle managers and supervisors.
Instead, his repeated use of the term "supervisory employees," when such term then was no longer in the statute books,
suggests a frame of mind that remained grounded in the language of the Industrial Peace Act.
Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial employees to organize, despite the
fact that the Industrial Peace Act did not expressly provide for the right of top and middle managers to organize. If Lerum was
aware of the Caltex dictum, then his insistence on the use of the term "supervisory employees" could only mean that he was
excluding other managerial employees from his proposal. If, on the other hand, he was not aware of the Caltex statement
sustaining the right to organize to top and middle managers, then the more should his repeated use of the term "supervisory
employees" be taken at face value, as it had been defined in the then Industrial Peace Act.
At all events, that the rest of the Commissioners understood his proposal to refer solely to supervisors and not to other
managerial employees is clear from the following account of Commissioner Joaquin G. Bernas, who writes:
In presenting the modification on the 1935 and 1973 texts, Commissioner Eulogio R. Lerum explained that the modification
included three categories of workers: (1) government employees, (2) supervisory employees, and (3) security guards. Lerum
made of record the explicit intent to repeal provisions of P.D. 442, the Labor Code. The provisions referred to were:
Art. 245. Security guards and other personnel employed for the protection and security of the person, properties and
premises of the employers shall not be eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any labor organization. 28
Implications of the Lerum Proposal
In sum, Lerum's proposal to amend Art. III, 8 of the draft Constitution by including labor unions in the guarantee of
organizational right should be taken in the context of statements that his aim was the removal of the statutory ban against
security guards and supervisory employees joining labor organizations. The approval by the Constitutional Commission of
his proposal can only mean, therefore, that the Commission intended the absolute right to organize of government workers,
supervisory employees, and security guards to be constitutionally guaranteed. By implication, no similar absolute
constitutional right to organize for labor purposes should be deemed to have been granted to top-level and middle managers.
As to them the right of self-organization may be regulated and even abridged conformably to Art. III, 8.
Constitutionality of Art. 245
Finally, the question is whether the present ban against managerial employees, as embodied in Art. 245 (which superseded
Art. 246) of the Labor Code, is valid. This provision reads:
Art. 245. 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 a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations
of their own. 29
This provision is the result of the amendment of the Labor Code in 1989 by R.A. No. 6715, otherwise known as the HerreraVeloso 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 employees," as follows:
Art. 212. Definitions. . . .
(m) "managerial employee" is one who is vested with powers or prerogatives to lay down and execute management policies
and/or to hire transfer, suspend, lay off, recall, discharge, assign or discipline employees. Supervisory employees are those
who, in the interest of the employer, effectively recommend 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.
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 are carried out by the rank and file, is articulated in the present definition. 30 When
read in relation to this definition in Art. 212(m), it will be seen that Art. 245 faithfully carries out the intent of the Constitutional
Commission in framing Art. III, 8 of the fundamental law.
Nor is the guarantee of organizational right in Art. III, 8 infringed by a ban against managerial employees forming a union.
The right guaranteed in Art. III, 8 is subject to the condition that its exercise should be for purposes "not contrary to law." In
the case of Art. 245, there is a rational basis for prohibiting managerial employees from forming or joining labor
organizations. As Justice Davide, Jr., himself a constitutional commissioner, said in his ponencia in Philips Industrial
Development, Inc. v. NLRC: 31
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 joint a labor union equally applies to them.
In Bulletin Publishing Co., Inc. v. 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 conflict of
interests. The Union can also become company-dominated with the presence of managerial employees in Union
membership. 32
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. It is hardly
necessary to point out that to say that the first sentence of Art. 245 is unconstitutional would be to contradict the decision in
that case.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION
G.R. No. 94045 September 13, 1991
CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO), petitioner, vs.HONORABLE SECRETARY,
DEPARTMENT OF LABOR AND EMPLOYMENT, and CENECO UNION OF RATIONAL EMPLOYEES (CURE),
respondents.
Enrique S. Tabino for petitioner.
Edmundo G. Manlapao for private respondent.

REGALADO, J.:p
In this special civil action for certiorari, petitioner Central Negros Electric Cooperative, Inc. (CENECO) seeks to annul the
order 1 issued by then Acting Secretary of Labor Bienvenido E. Laguesma on June 6, 1990, declaring the projected
certification election unnecessary and directing petitioner CENECO to continue recognizing private respondent CENECO
Union of Rational Employees (CURE) as the sole and exclusive bargaining representative of all the rank-and-file employees
of petitioner's electric cooperative for purposes of collective bargaining.
It appears from the records that on August 15, 1987, CENECO entered into a collective bargaining agreement with
CURE, a labor union representing its rank-and-file employees, providing for a term of three years retroactive to April
1, 1987 and extending up to March 31, 1990. On December 28, 1989, CURE wrote CENECO proposing that negotiations
be conducted for a new collective bargaining agreement (CBA).
On January 18, 1990, CENECO denied CURE's request on the ground that, under applicable decisions of the
Supreme Court, employees who at the same time are members of an electric cooperative are not entitled to form or
join a union. 2
Prior to the submission of the proposal for CBA renegotiation, CURE members , in a general assembly held on
December 9, 1989, approved Resolution No. 35 whereby it was agreed that 'tall union members shall withdraw,
retract, or recall the union members' membership from Central Negros Electric Cooperative, Inc. in order to avail (of)
the full benefits under the existing Collective Bargaining Agreement entered into by and between CENECO and
CURE, and the supposed benefits that our union may avail (of) under the renewed CBA. 3 This was ratified by 259 of
the 362 union members. CENECO and the Department of Labor and Employment, Bacolod District, were furnished copies of
this resolution.
However, the withdrawal from membership was denied by CENECO on February 27, 1990 under Resolution No. 90 "for
the reason that the basis of withdrawal is not among the grounds covered by Board Resolution No. 5023, dated
November 22, 1989 and that said request is contrary to Board Resolution No. 5033 dated December 13, 1989, ..." 4
By reason of CENECO's refusal to renegotiate a new CBA, CURE filed a petition for direct recognition or for
certification election, supported by 282 or 72% of the 388 rank-and-file employees in the bargaining unit of CENECO.
CENECO filed a motion to dismiss on the ground that there are legal constraints to the filing of the certification election, citing
the ruling laid down by this Court in Batangas I Electric Cooperative Labor Union vs. Romeo A. Young, 5 (BATANGAS case)
to the effect that "employees who at the same time are members of an electric cooperative are not entitled to form or join
unions for purposes of collective bargaining agreement, for certainly an owner cannot bargain with himself or his co-owners."
Med-Arbiter Felizardo T. Serapio issued an order, 6 granting the petition for certification election which, in effect, was a
denial of CENECO's motion to dismiss, and directing the holding of a certification election between CURE and No
Union.
CENECO appealed to the Department of Labor and Employment which issued the questioned order modifying the
aforestated order of the med-arbiter by directly certifying CURE as the exclusive bargaining representative of the rank-andfile employees of CURE.
Hence, this petition.
Petitioner CENECO argues that respondent Secretary committed a grave abuse of discretion in not applying to the present
case the doctrine enunciated in the BATANGAS case that employees of an electric cooperative who at the same time are
members of the electric cooperative are prohibited from forming or joining labor unions for purposes of a collective bargaining
agreement. While CENECO recognizes the employees' right to self-organization, it avers that this is not absolute. Thus, it
opines that employees of an electric cooperative who at the same time are members thereof are not allowed to form or join
labor unions for purposes of collective bargaining. However, petitioner does not hesitate to admit that the prohibition does not
extend to employees of an electric cooperative who are not members of the cooperative.
The issue, therefore, actually involves a determination of whether or not the employees of CENECO who withdrew

their membership from the cooperative are entitled to form or join CURE for purposes of the negotiations for a
collective bargaining agreement proposed by the latter.
As culled from the records, it is the submission of CENECO that the withdrawal from membership in the cooperative and, as
a consequence, the employees' acquisition of membership in the union cannot be allowed for the following reasons:
1. It was made as a subterfuge or to subvert the ruling in the BATANGAS case:
2. To allow the withdrawal of the members of CENECO from the cooperative without justifiable reason would greatly affect
the objectives and goals of petitioner as an electric cooperative;
3. The Secretary of Labor, as well as the Med-Arbiter, has no jurisdiction over the issue of the withdrawal from membership
which is vested in the National Electrification Administration (NEA) which has direct control and supervision over the
operations of electric cooperatives; and
4. Assuming that the Secretary has jurisdiction, CURE failed to exhaust administrative remedies by not referring the matter of
membership withdrawal to the NEA.
The petition is destitute of merit; certiorari will not lie.
We first rule on the alleged procedural infirmities affecting the instant case. CENECO avers that the med-arbiter has no
jurisdiction to rule on the issue of withdrawal from membership of its employees in the cooperative which, it claims, is
properly vested in the NEA which has control and supervision over all electric cooperatives.
From a perusal of petitioner's motion to dismiss filed with the med-arbiter, it becomes readily apparent that the sole basis for
petitioner's motion is the illegality of the employees' membership in respondent union despite the fact that they allegedly are
still members of the cooperative. Petitioner itself adopted the aforesaid argument in seeking the dismissal of the petition for
certification election filed with the med-arbiter, and the finding made by the latter was merely in answer to the arguments
advanced by petitioner. Hence, petitioner is deemed to have submitted the issue of membership withdrawal from the
cooperative to the jurisdiction of the med-arbiter and it is now estopped from questioning that same jurisdiction which it
invoked in its motion to dismiss after obtaining an adverse ruling thereon.
Under Article 256 of the Labor Code, to have a valid certification election at least a majority of all eligible voters in the unit
must have cast their votes. It is apparent that incidental to the power of the med-arbiter to hear and decide representation
cases is the power to determine who the eligible voters are. In so doing, it is axiomatic that the med-arbiter should determine
the legality of the employees' membership in the union. In the case at bar, it obviously becomes necessary to consider first
the propriety of the employees' membership withdrawal from the cooperative before a certification election can be had.
Lastly, it is petitioner herein who is actually questioning the propriety of the withdrawal of its members from the cooperative.
Petitioner could have brought the matter before the NEA if it wanted to and. if such remedy had really been available, and
there is nothing to prevent it from doing so. It would be absurd to fault the employees for the neglect or laxity of petitioner in
protecting its own interests.
The argument of CENECO that the withdrawal was merely to subvert the ruling of this Court in the BATANGAS case is
without merit. The case referred to merely declared that employees who are at the same time members of the cooperative
cannot join labor unions for purposes of collective bargaining. However, nowhere in said case is it stated that memberemployees are prohibited from withdrawing their membership in the cooperative in order to join a labor union.
As discussed by the Solicitor General, Article I, Section 9 of the Articles of Incorporation and By- Laws of CENECO
provides that "any member may withdraw from membership upon compliance with such uniform terms and
conditions as the Board may prescribe." The same section provides that upon withdrawal, the member is merely
required to surrender his membership certificate and he is to be refunded his membership fee less any obligation
that he has with the cooperative. There appears to be no other condition or requirement imposed upon a
withdrawing member. Hence, there is no just cause for petitioner's denial of the withdrawal from membership of its
employees who are also members of the union. 7
The alleged board resolutions relied upon by petitioner in denying the withdrawal of the members concerned were never
presented nor their contents disclosed either before the med-arbiter or the Secretary of Labor if only to prove the ratiocination
for said denial. Furthermore, CENECO never averred non-compliance with the terms and conditions for withdrawal, if any. It
appears that the Articles of Incorporation of CENECO do not provide any ground for withdrawal from membership which
accordingly gives rise to the presumption that the same may be done at any time and for whatever reason. In addition,
membership in the cooperative is on a voluntary basis. Hence, withdrawal therefrom cannot be restricted
unnecessarily. The right to join an organization necessarily includes the equivalent right not to join the same.
The right of the employees to self-organization is a compelling reason why their withdrawal from the cooperative
must be allowed. As pointed out by CURE, the resignation of the member- employees is an expression of their
preference for union membership over that of membership in the cooperative. The avowed policy of the State to
afford fall protection to labor and to promote the primacy of free collective bargaining mandates that the employees'
right to form and join unions for purposes of collective bargaining be accorded the highest consideration.
Membership in an electric cooperative which merely vests in the member a right to vote during the annual meeting becomes
too trivial and insubstantial vis-a-vis the primordial and more important constitutional right of an employee to join a union of
his choice. Besides, the 390 employees of CENECO, some of whom have never been members of the cooperative,
represent a very small percentage of the cooperative's total membership of 44,000. It is inconceivable how the withdrawal of

a negligible number of members could adversely affect the business concerns and operations of CENECO.
We rule, however, that the direct certification ordered by respondent Secretary is not proper. By virtue of Executive Order No.
111, which became effective on March 4, 1987, the direct certification originally allowed under Article 257 of the Labor Code
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 certification which is no longer available now under the
change in said provision. 8
We have said that where a union has filed a petition for certification election, the mere fact that no opposition is made does
not warrant a direct certification. 9 In said case which has similar features to that at bar, wherein the respondent Minister
directly certified the union, we held that:
... As pointed out by petitioner in its petition, what the respondent Minister achieved in rendering the assailed orders was to
make a mockery of the procedure provided under the law for representation cases because: ... (c) By directly certifying a
Union without sufficient proof of majority representation, he has in effect arrogated unto himself the right, vested naturally in
the employee's to choose their collective bargaining representative. (d) He has in effect imposed upon the petitioner the
obligation to negotiate with a union whose majority representation is under serious question. This is highly irregular because
while the Union enjoys the blessing of the Minister, it does not enjoy the blessing of the employees. Petitioner is therefore
under threat of being held liable for refusing to negotiate with a union whose right to bargaining status has not been legally
established.
While there may be some factual variances, the rationale therein is applicable to the present case in the sense that it is not
alone sufficient that a union has the support of the majority. What is equally important is that everyone be given a
democratic space in the bargaining unit concerned. The most effective way of determining which labor organization
can truly represent the working force is by certification election. 10
WHEREFORE, the questioned order for the direct certification of respondent CURE as the bargaining representative of the
employees of petitioner CENECO is hereby ANNULLED and SET ASIDE. The med-arbiter is hereby ordered to conduct a
certification election among the rank-and- file employees of CENECO with CURE and No Union as the choices therein.
SO ORDERED.

G.R. No. 79025. December 29, 1989.

BENGUET ELECTRIC COOPERATIVE, INC., petitioner, vs.HON. PURA FERRER-CALLEJA, Director of the Bureau of
Labor Relations, and BENECO EMPLOYEES LABOR UNION, respondents.
E.L. Gayo & Associates for petitioner.

CORTES, J.:
On June 21, 1985 Beneco Worker's Labor Union-Association of Democratic Labor Organizations (hereinafter referred
to as BWLU- ADLO) filed a petition for direct certification as the sole and exclusive bargaining representative of all
the rank and file employees of Benguet Electric Cooperative, Inc. (hereinafter referred to as BENECO) at Alapang, La
Trinidad, Benguet alleging, inter alia, that BENECO has in its employ two hundred and fourteen (214) rank and file
employees; that one hundred and ninety-eight (198) or 92.5% of these employees have supported the filing of the petition;
that no certification election has been conducted for the last 12 months; that there is no existing collective bargaining
representative of the rank and file employees sought to represented by BWLU- ADLO; and, that there is no collective
bargaining agreement in the cooperative.
An opposition to the petition was filed by the Beneco Employees Labor Union (hereinafter referred to as BELU)
contending that it was certified as the sole and exclusive bargaining representative of the subject workers pursuant
to an order issued by the med-arbiter on October 20,1980; that pending resolution by the National Labor Relations
Commission are two cases it filed against BENECO involving bargaining deadlock and unfair labor practice; and, that the
pendency of these cases bars any representation question.
BENECO, on the other hand, filed a motion to dismiss the petition claiming that it is a non-profit electric cooperative
engaged in providing electric services to its members and patron-consumers in the City of Baguio and Benguet
Province; and, that the employees sought to be represented by BWLU-ADLO are not eligible to form, join or assist
labor organizations of their own choosing because they are members and joint owners of the cooperative.
On September 2, 1985 the med-arbiter issued an order giving due course to the petition for certification election.
However, the med-arbiter limited the election among the rank and file employees of petitioner who are non-members
thereof and without any involvement in the actual ownership of the cooperative . Based on the evidence during the
hearing the med-arbiter found that there are thirty-seven (37) employees who are not members and without any involvement
in the actual ownership of the cooperative. The dispositive portion of the med-arbiter's order is as follows:
WHEREFORE, premises considered, a certification election should be as it is hereby ordered to be conducted at the
premises of Benguet, Electric Cooperative, Inc., at Alapang, La Trinidad, Benguet within twenty (20) days from receipt hereof
among all the rank and file employees (non-members/consumers and without any involvement in the actual ownership of the
cooperative) with the following choices:
1. BENECO WORKERS LABOR UNION-ADLO
2. BENECO EMPLOYEES LABOR UNION
3. NO UNION
The payroll for the month of June 1985 shall be the basis in determining the qualified voters who may participate in the
certification election to be conducted.
SO ORDERED. [Rollo, pp. 22-23.]
BELU and BENECO appealed from this order but the same was dismissed for lack of merit on March 25,1986. Whereupon
BENECO filed with this Court a petition for certiorari with prayer for preliminary injunction and /or restraining order, docketed
as G.R. No. 74209, which the Supreme Court dismissed for lack of merit in a minute resolution dated April 28, 1986.
The ordered certification election was held on October 1, 1986. Prior to the conduct thereof BENECO's counsel verbally
manifested that "the cooperative is protesting that employees who are members-consumers are being allowed to vote when .
. . they are not eligible to be members of any labor union for purposes of collective bargaining; much less, to vote in this
certification election." [Rollo, p. 28]. Petitioner submitted a certification showing that only four (4) employees are not members
of BENECO and insisted that only these employees are eligible to vote in the certification election. Canvass of the votes
showed that BELU garnered forty-nine (49) of the eighty-three (83) "valid" votes cast.
Thereafter BENECO formalized its verbal manifestation by filing a Protest. Finding, among others, that the issue as to
whether or not member-consumers who are employees of BENECO could form, assist or join a labor union has been
answered in the affirmative by the Supreme Court in G.R. No. 74209, the med-arbiter dismissed the protest on February 17,
1987. On June 23, 1987, Bureau of Labor Relations (BLR) director Pura Ferrer-Calleja affirmed the med-arbiter's order and
certified BELU as the sole and exclusive bargaining agent of all the rank and file employees of BENECO.

Alleging that the BLR director committed grave abuse of discretion amounting to lack or excess of jurisdiction BENECO filed
the instant petition for certiorari. In his Comment the Solicitor General agreed with BENECO's stance and prayed that the
petition be given due course. In view of this respondent director herself was required by the Court to file a Comment. On April
19, 1989 the Court gave due course to the petition and required the parties to submit their respective memoranda.
The main issue in this case is whether or not respondent director committed grave abuse of discretion in certifying
respondent BELU as the sole and exclusive bargaining representative of the rank and file employees of BENECO.
Under Article 256 of the Labor Code [Pres. Decree 442] to have a valid certification 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 workers in the unit." Petitioner BENECO asserts that the certification election held on
October 1, 1986 was null and void since members-employees of petitioner cooperative who are not eligible to form and join a
labor union for purposes of collective bargaining were allowed to vote therein.
Respondent director and private respondent BELU on the other hand submit that members of a cooperative who are also
rank and file employees are eligible to form, assist or join a labor union [Comment of Respondent Director, p. 4; Rollo, p. 125;
Comment of BELU, pp. 9-10; Rollo pp. 99-100].
The Court finds the present petition meritorious.
The issue of whether or not employees of a cooperative are qualified to form or join a labor organization for purposes of
collective bargaining has already been resolved and clarified in the case of Cooperative Rural Bank of Davao City, Inc. vs.
Ferrer Calleja, et al. [G.R. No. 7795, September 26,1988] and reiterated in the cases of Batangas-Electric Cooperative Labor
Union v. Young, et al. [G.R. Nos. 62386, 70880 and 74560 November 9, 1988] and San Jose City Electric Service
Cooperative, Inc. v. Ministry of Labor and Employment, et al. [G.R. No. 77231, May 31, 1989] wherein the Court had stated
that the right to collective bargaining is not available to an employee of a cooperative who at the same time is a
member and co-owner thereof. With respect, however, to employees who are neither members nor co-owners of the
cooperative they are entitled to exercise the rights to self-organization, collective bargaining and negotiation as
mandated by the 1987 Constitution and applicable statutes.
Respondent director argues that to deny the members of petitioner cooperative the right to form, assist or join a labor union
of their own choice for purposes of collective bargaining would amount to a patent violation of their right to self-organization.
She points out that:
Albeit a person assumes a dual capacity as rank and file employee and as member of a certain cooperative does not militate,
as in the instant case, against his/her exercise of the right to self-organization and to collective bargaining guaranteed by the
Constitution and Labor Code because, while so doing, he/she is acting in his/her capacity as rank and file employee thereof.
It may be added that while the employees concerned became members of petitioner cooperative, their status employment as
rank and filers who are hired for fixed compensation had not changed. They still do not actually participate in the
management of the cooperative as said function is entrusted to the Board of Directors and to the elected or appointed
officers thereof. They are not vested with the powers and prerogatives to lay down and execute managerial policies; to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees; and/or to effectively recommend such managerial
functions [Comment of Respondent Director, p. 4; Rollo, p. 125.]
Private respondent BELU concurs with the above contention of respondent director and, additionally, claims that since
membership in petitioner cooperative is only nominal, the rank and file employees who are members thereof should not be
deprived of their right to self-organization.
The above contentions are untenable. Contrary to respondents' claim, the fact that the members-employees of petitioner
do not participate in the actual management of the cooperative does not make them eligible to form, assist or join a
labor organization for the purpose of collective bargaining with petitioner. The Court's ruling in the Davao City case
that members of cooperative cannot join a labor union for purposes of collective bargaining was based on the fact
that as members of the cooperative they are co-owners thereof. As such, they cannot invoke the right to collective
bargaining for "certainly an owner cannot bargain with himself or his co-owners." [Cooperative Rural Bank of Davao
City, Inc. v. Ferrer-Calleja, et al., supra]. 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 for the purpose of collective bargaining.
Respondent union further claims that if nominal ownership in a cooperative is "enough to take away the constitutional
protections afforded to labor, then there would be no hindrance for employers to grant, on a scheme of generous profit
sharing, stock bonuses to their employees and thereafter claim that since their employees are not stockholders [of the
corporation], albeit in a minimal and involuntary manner, they are now also co-owners and thus disqualified to form unions."
To allow this, BELU argues, would be "to allow the floodgates of destruction to be opened upon the rights of labor which the
Constitution endeavors to protect and which welfare it promises to promote." [Comment of BELU, p. 10; Rollo, p. 100].
The above contention of respondent union is based on the erroneous presumption that membership in a cooperative is the
same as ownership of stocks in ordinary corporations. While cooperatives may exercise some of the rights and privileges
given to ordinary corporations provided under existing laws, such cooperatives enjoy other privileges not granted to the latter
[See Sections 4, 5, 6, and 8, Pres. Decree No. 175; Cooperative Rural Bank of Davao City v. Ferrer-Calleja, supra]. Similarly,
members of cooperatives have rights and obligations different from those of stockholders of ordinary corporations. It was
precisely because of the special nature of cooperatives, that the Court held in the Davao City case that members-employees
thereof cannot form or join a labor union for purposes of collective bargaining. The Court held that:

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.
As above stated, irrespective of the number of shares owned by each member they are entitled to cast one vote each in
deciding upon the affairs of the cooperative. Their share capital earn limited interest. They enjoy special privileges asexemption from income tax and sales taxes, preferential right to supply their products to State agencies and even exemption
from the minimum wage laws.
An employee therefore 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.
It is important to note that, in her order dated September 2, 1985, med-arbiter Elnora V. Balleras made a specific finding that
there are only thirty-seven (37) employees of petitioner who are not members of the cooperative and who are, therefore, the
only employees of petitioner cooperative eligible to form or join a labor union for purposes of collective bargaining [Annex "A"
of the Petition, p. 12; Rollo, p. 22]. However, the minutes of the certification election [Annex "C" of the Petition: Rollo, p. 28]
show that a total of eighty-three (83) employees were allowed to vote and of these, forty-nine (49) voted for respondent
union. Thus, even if We agree with respondent union's contention that the thirty seven (37) employees who were originally
non-members of the cooperative can still vote in the certification election since they were only "forced and compelled to join
the cooperative on pain of disciplinary action," the certification election held on October 1, 1986 is still null and void since
even those who were already members of the cooperative at the time of the issuance of the med-arbiter's order, and
therefore cannot claim that they were forced to join the union were allowed to vote in the election.
Article 256 of the Labor Code provides, among others, that:
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 workers
in the unit . . . [Italics supplied.]
In this case it cannot be determined whether or not respondent union was duly elected by the eligible voters of the
bargaining unit since even employees who are ineligible to join a labor union within the cooperative because of their
membership therein were allowed to vote in the certification election. Considering the foregoing, the Court finds
that respondent director committed grave abuse of discretion in certifying respondent union as the sole and
exclusive bargaining representative of the rank and file employees of petitioner cooperative.
WHEREFORE, the petition is hereby GRANTED and the assailed resolution of respondent director is ANNULLED. The
certification election conducted on October 1, 1986, is SET ASIDE. The Regional Office No. 1 of San Fernando, La Union is
hereby directed to immediately conduct new certification election proceedings among the rank and file employees of the
petitioner who are not members of the cooperative.
SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION
G.R. No. 77951 September 26, 1988
COOPERATIVE RURAL BANK OF DAVAO CITY, INC., petitioner, vs.PURA FERRER-CALLEJA, DIRECTOR, BUREAU OF
LABOR RELATIONS, MOLE, MANILA; FELIZARDO T. SERAPIO, MED-ARBITER DESIGNATE, REGIONAL OFFICE NO.
XI, MOLE, DAVAO CITY; and FEDERATION OF FREE WORKERS, respondents.
Herbert P. Artes for petitioner.
The Solicitor General for Public respondent.

GANCAYCO, J.:
This is a Petition for certiorari under Rule 65 of the Rules of Court where the issue is whether or not the employees of a
cooperative can organize themselves for purposes of collective bargaining.
The record of the case discloses that the herein petitioner Cooperative Rural Bank of Davao City, Inc. is a cooperative
banking corporation operating in Davao City. It is owned in part by the Government and its employees are members
and co-owners of the same. The petitioner has around 16 rank-and-file employees. As of August, 1986, there was no
existing collective bargaining agreement between the said employees and the establishment. On the other hand, the
herein private respondent Federation of Free Workers is a labor organization registered with the Department of
Labor and Employment. It is interested in representing the said employees for purposes of collective bargaining.
On August 27, 1986, the private respondent filed with the Davao City Regional Office of the then Ministry of Labor and
Employment a verified Petition for certification election among the rank-and-file employees of the petitioner. 1 The
same was docketed as Case No. R-325 ROXI MED-UR-73-86. On September 18, 1986, the herein public respondent issued
an Order granting the Petition for certification election.
On October 3, 1986, the petitioner filed an Appeal Memorandum and sought a reversal of the Order of the MedArbiter. 2 The petitioner argues therein that, among others, a cooperative is not covered by the Rules governing
certification elections inasmuch as it is not an institution operating for profit. The petitioner also adds that two of the
alleged rank-and-file employees seeking the certification election are managerial employees disqualified from joining
concerted labor activities. In sum, the petitioner insists that its employees are disqualified from forming labor
organizations for purposes of collective bargaining.
On October 8, 1986, the private respondent filed a "Motion to Dismiss the Appeal." On October 15, 1986, the petitioner filed
its opposition to the said Motion.
On February 11, 1987, the herein public respondent Bureau of Labor Relations Director Pura Ferrer-Calleja issued a
Resolution affirming the Order of the Med-Arbiter and dismissing the Appeal. 3 The pertinent portions of the said
Resolution are as follows
It is beyond doubt that respondent-appellant, Cooperative Rural Bank of Davao City falls within the purview of Article 212,
paragraph C of the Labor Code, acting as such in the interest of an employer. To argue otherwise would amount to closing
one's eyes to the realities of today's cooperative banking institutions. ....
Moreover, basic is the right of every worker in any establishment whether operated for profit or not to organize and engage in
concerted activity, mutually beneficial to their interest. Such right is sacredly enshrined and protected in our fundamental law,
granting every worker the right to organize into a collective group and engage in concerted activities for purposes of
promoting their well being, subject only to such limitations as may be provided for by law.
xxx xxx xxx
As this Office has consistently ruled and applied in various cases, being a member of a cooperative organization does not
preclude one from forming or joining a labor union provided that such person or persons are not among those disqualified by
law. Nowhere in the records can we find any piece of evidence showing that the signatories in the petition are among those
disqualified to form or join a union.
Finally, we cannot give credence to (the) employer's allegation that two of the signatories thereof, are managerial employees,
since no evidence showing such fact can be found from the records.
xxx xxx xxx
In a Motion dated March 2, 1987, the petitioner asked for a reconsideration of the said Resolution. 4 The petitioner reiterated
therein its view that its employees are disqualified from forming the labor organization so contemplated. The petitioner also
called attention to an Opinion rendered by then Solicitor General and Minister of Justice Estelito P. Mendoza dated August
14, 1981. 5 The Opinion states that employees of an electric cooperative who are themselves members/co-owners of the

same cannot form or join labor organizations for purposes of collective bargaining. The Opinion also states that the duty to
bargain exists only between an employer and his/its employees, and that an employer has no duty to bargain with his coowners of a corporation who are also its employees. The petitioner submits that the said Opinion calls for application in the
present controversy.
On March 26, 1987, director Calleja issued a Resolution denying the reconsideration sought by the petitioner. 6 Thus, the
certification election was scheduled in the morning of April 23, 1987.
Finding the action taken by the Bureau unsatisfactory, the petitioner brought the case directly to this Court on April
9, 1987 by way of the instant Petition for certiorari. The petitioner maintains that the public respondents both acted
without jurisdiction or in excess thereof, or with grave abuse of discretion amounting to lack of jurisdiction, in allowing the
certification election sought by the private respondent despite the arguments of the petitioner in opposition thereto. The
petitioner reiterates its argument that employees of cooperatives who are members and co-owners of the same cannot form
and join labor organizations for purposes of collective bargaining.
On April 15, 1987, this Court issued a temporary restraining order enjoining the Bureau of Labor Relations from
proceeding with the certification election scheduled on April 23, 1987. 7 The certification election nonetheless pushed
through as scheduled for the alleged reason that the temporary restraining order was not seasonably transmitted to
Davao City. 8
This court also required the respondents to file their Comment on the Petition. The respondents complied as instructed. The
Office of the Solicitor General represented the public respondents.
The Solicitor General intimated to this Court that the instant Petition has been rendered moot and academic inasmuch as the
certification election sought to be enjoined had already been conducted. The Solicitor General added that the public
respondents did not commit any jurisdictional error. 10
In due time, the parties submitted other pleadings. On January 6, 1988, the case was deemed submitted for decision.
After a careful examination of the entire record of the case, We find the instant Petition meritorious.
Contrary to the view espoused by the Solicitor General, this case cannot be considered moot and academic simply because
the certification election sought to be enjoined went on as scheduled. The instant Petition is one for certiorari as a special
civil action. Errors of jurisdiction on the part of the public respondents are alleged in the Petition itself. If the public
respondents had indeed committed jurisdictional errors, the action taken by both the Med-Arbiter and the Bureau Director will
be deemed null and void ab initio. 11 And if this were so, the certification election would, necessarily, have no legal
justification. The arguments raised in the instant Petition strike at the very heart of the validity of the certification election
itself.
We come now to the main aspect of the case.
Article 243 of the Labor Code
collective bargaining, to wit

12

enumerates who are eligible to form, join, or assist labor organizations for purposes of

ART. 243. Coverage and employees' right to self-organization. All persons employed in commercial, 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. ....
The recognized exception to this enumeration is found in Article 245 of the same code, which provides for the ineligibility of
managerial employees to join any labor reorganization, vizART. 245. Ineligibility of managerial employees to join any labor organization. Managerial employees are not eligible to join,
assist or form any labor organization.
From the foregoing provisions of law it would appear at first blush that all the rank and file employees of a cooperative who
are not managerial employees are eligible to form, join or assist any labor organization of their own choosing for the purpose
of collective bargaining.
However, under Section 2 of P.D. No. 175, a cooperative is defined to mean "organizations composed primarily of small
producers and of consumers who voluntarily join together to form business enterprises which they themselves own, control,
and patronize." Its creation and growth were declared as a policy of the State as a means of increasing the income and
purchasing power of the low-income sector of the population in order to attain a more equitable distribution of income and
wealth . 13 The principles governing it are:
a) Open membership"Should be voluntary and available without artificial restriction, or any social, political, racial or
religious discrimination, to all persons who can make use of its services and are willing to accept responsibilities of
membership;"
b) Democratic control."Irrespective of the number of shares owned, each member can only cast one vote in deciding upon
the affairs of the cooperative;"
c) Limited interests to capital. "Share capital shall earn only limited interest, the maximum rate of interest to be established

by the Department of Local Government and Community Development from time to time;" and
d) Patronage refund "Net income after the interest on capital has been paid shall be redistributed among the members in
proposition to their patronage." 14
While cooperatives may exercise the same rights and privileges given to persons, partnership and corporations provided
under existing laws, operate business enterprises of all kinds, establish rural banks, enjoy all the privileges and incentives
granted by the NACIDA Act and other government agencies to business organizations under existing laws, to expropriate idle
urban or rural lands for its purposes, to own and dispose of properties, enter into contracts, to sue and be sued and perform
other acts necessary to pursue its objectives, 15 such cooperatives enjoy such privileges as:
a) Exemption from income tax and sales taxes;
b) Preferential right to supply rice, corn and other grains, and other commodities produced by them to State agencies
administering price stabilization program; and
c) In appropriate cases, exemption from application of minimum wage law upon recommendation of the Bureau of
Cooperative Development subject to the approval of the Secretary of Labor. 16
A cooperative development loan fund has been created for the development of the cooperative movement. 17
It may be, further stated that the Department of Local Govemment and Community Development through the Bureau of
Cooperative Development is vested with full authority to promulgate rules and regulations to cover the promotion,
organization, registration, regulation and supervision of all types of cooperatives. 18 Electric cooperatives, however, are under
the regulation and supervision of the National Electrification Ad. Administration, 19 while it is the Monetary Board of the
Central Bank that has exclusive responsibility and authority over the banking functions and operations of cooperative banks .
20

A cooperative, therefore, 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. As above stated, irrespective of the number of shares owned by each member they are entitled to cast
one vote each in deciding upon the affairs 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 the minimum wages laws.
An employee therefore 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. In the opinion of August 14,
1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members of the
cooperative have no right to form or join labor organizations for purposes of collective bargaining for being
themselves co-owners of the cooperative. 21
However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly
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. 22
The questioned ruling therefore of public respondent Pura Ferrer-Calleja must be upheld insofar as it refers to the employees
of petitioner who are not members or co-owners of petitioner. It cannot extend to the other employees who are at the same
time its members or co-owners.
The Court upholds the findings of said public respondent that no persuasive evidence has been presented to show that two
of the signatories in the petition for certification election are managerial employees who under the law are disqualified from
pursuing union activities.
WHEREFORE, the herein petition is hereby GRANTED and the resolution of public respondent Pura Ferrer-Calleja, Director,
Bureau of Labor Relations, of February 11, 1987 is hereby MODIFIED to the effect that only the rank and file employees of
petitioner who are not its members or co-owners are entitled to self-organization, collective bargaining, and negotiations,
while the other employees who are members or co-owners thereof can not enjoy such right.
SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 110399 August 15, 1997

SAN MIGUEL CORPORATION SUPERVISORS AND EXEMPT UNION AND ERNESTO L. PONCE, President, petitioners,
vs.HONORABLE BIENVENIDO E. LAGUESMA IN HIS CAPACITY AS UNDERSECRETARY OF LABOR AND
EMPLOYMENT, HONORABLE DANILO L. REYNANTE IN HIS CAPACITY AS MED-ARBITER AND SAN MIGUEL
CORPORATION, respondents.

ROMERO, J.:
This is a Petition for Certiorari with Prayer for the Issuance of Preliminary Injunction seeking to reverse and set aside the
Order of public respondent, Undersecretary of the Department of Labor and Employment, Bienvenido E. Laguesma, dated
March 11, 1993, in Case No. OS MA A-2-70-91 1 entitled "In Re: Petition for Certification Election Among the Supervisory and
Exempt Employees of the San Miguel Corporation Magnolia Poultry Plants of Cabuyao, San Fernando and Otis, San Miguel
Corporation Supervisors and Exempt Union, Petitioner." The Order excluded the employees under supervisory levels 3 and 4
and the so-called exempt employees from the proposed bargaining unit and ruled out their participation in the certification
election.
The antecedent facts are undisputed:
On October 5, 1990, petitioner union filed before the Department of Labor and Employment (DOLE) a Petition for
Direct Certification or Certification Election among the supervisors and exempt employees of the SMC Magnolia
Poultry Products Plants of Cabuyao, San Fernando and Otis.
On December 19, 1990, Med-Arbiter Danilo L. Reynante issued an Order ordering the conduct of certification election
among the supervisors and exempt employees of the SMC Magnolia Poultry Products Plants of Cabuyao, San Fernando and
Otis as one bargaining unit.
On January 18, 1991, respondent San Miguel Corporation filed a Notice of Appeal with Memorandum on Appeal,
pointing out, among others, the Med-Arbiter's error in grouping together all three (3) separate plants, Otis, Cabuyao
and San Fernando, into one bargaining unit, and in including supervisory levels 3 and above whose positions are
confidential in nature.
On July 23, 1991, the public respondent, Undersecretary Laguesma, granted respondent company's Appeal and
ordered the remand of the case to the Med-Arbiter of origin for determination of the true classification of each of the
employees sought to be included in the appropriate bargaining unit.
Upon petitioner-union's motion dated August 7, 1991, Undersecretary Laguesma granted the reconsideration prayed for on
September 3, 1991 and directed the conduct of separate certification elections among the supervisors ranked as
supervisory levels 1 to 4 (S1 to S4) and the exempt employees in each of the three plants at Cabuyao, San Fernando
and Otis.
On September 21, 1991, respondent company, San Miguel Corporation filed a Motion for Reconsideration with Motion to
suspend proceedings.
On March 11, 1993, an Order was issued by the public respondent granting the Motion, citing the doctrine enunciated in
Philips Industrial Development, Inc. v. NLRC 2 case. Said Order reads in part:
. . . Confidential employees, like managerial employees, are not allowed to form, join or assist a labor union for purposes of
collective bargaining.
In this case, S3 and S4 Supervisors and the so-called exempt employees are admittedly confidential employees and
therefore, they are not allowed to form, join or assist a labor union for purposes of collective bargaining following
the above court's ruling. Consequently, they are not allowed to participate in the certification election.
WHEREFORE, the Motion is hereby granted and the Decision of this Office dated 03 September 1991 is hereby modified to
the extent that employees under supervisory levels 3 and 4 (S3 and S4) and the so-called exempt employees are not allowed
to join the proposed bargaining unit and are therefore excluded from those who could participate in the certification election. 3
Hence this petition.
For resolution in this case are the following issues:
1. Whether Supervisory employees 3 and 4 and the exempt employees of the company are considered confidential
employees, hence ineligible from joining a union.

2. If they are not confidential employees, do the employees of the three plants constitute an appropriate single
bargaining unit.
On the first issue, this Court rules that said employees do not fall within the term "confidential employees" who may
be prohibited from joining a union.
There is no question that the said employees, supervisors and the exempt employees, are not vested with the
powers and prerogatives to lay down and execute MANAGEMENT
policies and/or to hire, transfer, suspend,
layoff, recall, discharge or dismiss employees. They are, therefore, not qualified to be classified as managerial
employees who, under Article 245 4 of the Labor Code, are not eligible to join, assist or form any labor organization.
In the very same provision, they are not allowed membership in a labor organization of the rank-and-file employees
but may join, assist or form separate labor organizations of their own. The only question that need be addressed is
whether these employees are properly classified as confidential employees or not.
Confidential employees are those who (1)
determine, and effectuate MANAGEMENT
and both must be met if an employee is to be
must exist between the employee and
responsibilities relating to labor relations. 6

assist or act in a confidential capacity, (2) to persons who formulate,

policies in the field of labor relations. 5 The two criteria are cumulative,
considered a confidential employee that is, the confidential relationship
his supervisor, and the supervisor must handle the prescribed

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 interests. 7 "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." 8
There have been precedents in this regards, thus in Bulletin Publishing Company v. Hon. Augusto Sanchez, 9 the Court held
that "if these managerial employees would belong to or be affiliated with a Union, the latter might not be assured of their
loyalty to the Union in view of evident conflict of interest. The Union can also become company-dominated with the presence
of managerial employees in Union membership." The same rationale was applied to confidential employees in "Golden
Farms, Inc. v. Ferrer-Calleja" 10 and in the more recent case of "Philips Industrial Development, Inc. v. NLRC" 11 which held
that confidential employees, by the very nature of their functions, 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. Therefore, the rationale
behind the ineligibility of managerial employees to form, assist or join a labor union was held equally applicable to them. 12
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
employee's necessary access to confidential labor relations information. 13
It is the contention of respondent corporation that Supervisor employees 3 and 4 and the exempt employees come within the
meaning of the term "confidential employees" primarily because they answered in the affirmative when asked "Do you handle
confidential data or documents?" in the Position Questionnaires submitted by the Union. 14 In the same questionnaire,
however, it was also stated that the confidential information handled by questioned employees relate to product formulation,
product standards and product specification which by no means relate to "labor relations." 15
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. 16 "If 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 bargaining
unit representing employees of the union or association." 17 "Access to information which is regarded by the
employer to be confidential from the business standpoint, such as financial information 18 or technical trade secrets,
will not render an employee a confidential employee." 19
Herein listed are the functions of supervisors 3 and higher:
1. To undertake decisions to discontinue/temporarily stop shift operations when situations require.
2. To effectively oversee the quality control function at the processing lines in the storage of chicken and other products.
3. To administer efficient system of evaluation of products in the outlets.
4. To be directly responsible for the recall, holding and rejection of direct manufacturing materials.
5. To recommend and initiate actions in the maintenance of sanitation and hygiene throughout the plant. 20
It is evident that whatever confidential data the questioned employees may handle will have to relate to their
functions. From the foregoing functions, it can be gleaned that the confidential information said employees have

access to concern the employer's internal business operations. As held in Westinghouse Electric Corporation v.
National Labor Relations Board, 21 "an employee may not be excluded from appropriate bargaining unit merely because he
has access to confidential information concerning employer's internal business operations and which is not related to the field
of labor relations."
It must be borne in mind that Section 3 of Article XIII of the 1987 Constitution mandates the State to guarantee to "all"
workers the right to self-organization. Hence, confidential employees who may be excluded from bargaining unit must be
strictly defined so as not to needlessly deprive many employees of their right to bargain collectively through representatives
of their choosing. 22
In the case at bar, supervisors 3 and above may not be considered confidential employees merely because they
handle "confidential data" as such must first be strictly classified as pertaining to labor relations for them to fall
under said restrictions. The information they handle are properly classifiable as technical and internal business
operations data which, to our mind, has no relevance to negotiations and settlement of grievances wherein the
interests of a union and the MANAGEMENT
are invariably adversarial. Since the employees are not classifiable
under the confidential type, this Court rules that they may appropriately form a bargaining unit for purposes of
collective bargaining. Furthermore, even assuming that they are confidential employees, jurisprudence has
established that there is no legal prohibition against confidential employees who are not performing managerial
functions to form and join a union. 23
In this connection, the issue of whether the employees of San Miguel Corporation Magnolia Poultry Products Plants of
Cabuyao, San Fernando, and Otis constitute a single bargaining unit needs to be threshed out.
It is the contention of the petitioner union that the creation of three (3) separate bargaining units, one each for Cabuyao, Otis
and San Fernando as ruled by the respondent Undersecretary, is contrary to the one-company, one-union policy. It adds that
Supervisors level 1 to 4 and exempt employees of the three plants have a similarity or a community of interests.
This Court finds the contention of the petitioner meritorious.
An appropriate bargaining unit may be defined as "a group of employees of a given employer, comprised of all or
less than all of the entire body of employees, which the collective interest of all the employees, consistent with
equity to the employer, indicate to be best suited to serve the reciprocal rights and duties of the parties under the
collective bargaining provisions of thelaw." 24
A unit to be appropriate must effect a grouping of employees who have substantial, mutual interests in wages,
hours, working conditions and other subjects of collective bargaining. 25
It is readily seen that the employees in the instant case have "community or mutuality of interests," which is the standard in
determining the proper constituency of a collective bargaining unit. 26 It is undisputed that they all belong to the Magnolia
Poultry Division of San Miguel Corporation. This means that, although they belong to three different plants, they perform work
of the same nature, receive the same wages and compensation, and most importantly, share a common stake in concerted
activities.
In light of these considerations, the Solicitor General has opined that separate bargaining units in the three different
plants of the division will fragmentize the employees of the said division, thus greatly diminishing their bargaining
leverage. Any concerted activity held against the private respondent for a labor grievance in one bargaining unit
will, in all probability, not create much impact on the operations of the private respondent. The two other plants still in
operation can well step up their production and make up for the slack caused by the bargaining unit engaged in the
concerted activity. This situation will clearly frustrate the provisions of the Labor Code and the mandate of the Constitution. 27
The fact that the three plants are located in three different places, namely, in Cabuyao, Laguna, in Otis, Pandacan,
Metro Manila, and in San Fernando, 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 v. Calleja-Ferrer where
all non-academic rank and file employee of the University of the Philippines in Diliman, Quezon City, Padre Faura, Manila,
Los Baos, Laguna and the Visayas were allowed to participate in a certification election. We rule that the distance among
the three plants is not productive of insurmountable difficulties in the administration of union affairs. Neither are
there regional differences that are likely to impede the operations of a single bargaining representative.
WHEREFORE, the assailed Order of March 11, 1993 is hereby SET ASIDE and the Order of the Med-Arbiter on December
19, 1990 is REINSTATED under which a certification election among the supervisors (level 1 to 4) and exempt employees of
the San Miguel Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando, and Otis as one bargaining unit is
ordered conducted.
SO ORDERED.

Republic of the PhilippinesSUPREME COURTBaguio City

THIRD DIVISION
G.R. No. 161933

April 22, 2008

STANDARD CHARTERED BANK EMPLOYEES UNION (SCBEU-NUBE), petitioner, vs.STANDARD CHARTERED BANK
and ANNEMARIE DURBIN, in her capacity as Chief Executive Officer, Philippines, Standard Chartered Bank,
respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For resolution is an appeal by certiorari filed by petitioner under Rule 45 of the Rules of Court, assailing the Decision1 dated
October 9, 2002 and Resolution2 dated January 26, 2004 issued by the Court of Appeals (CA), dismissing their petition and
affirming the Secretary of Labor and Employment's Orders dated May 31, 2001 and August 30, 2001.
Petitioner and the Standard Chartered Bank (Bank) began negotiating for a new Collective Bargaining Agreement
(CBA) in May 2000 as their 1998-2000 CBA already expired. Due to a deadlock in the negotiations, petitioner filed a
Notice of Strike prompting the Secretary of Labor and Employment to assume jurisdiction over the labor dispute.
On May 31, 2001, Secretary Patricia A. Sto. Tomas of the Department of Labor and Employment (DOLE) issued an Order
with the following dispositive portion:
WHEREFORE, PREMISES CONSIDERED, the Standard Chartered Bank and the Standard Chartered Bank Employees
Union are directed to execute their collective bargaining agreement effective 01 April 2001 until 30 March 2003
incorporating therein the foregoing dispositions and the agreements they reached in the course of negotiations and
conciliation. All other submitted issues that were not passed upon are dismissed.
The charge of unfair labor practice for bargaining in bad faith and the claim for damages relating thereto are hereby
dismissed for lack of merit.
Finally, the charge of unfair labor practice for gross violation of the economic provisions of the CBA is hereby dismissed for
want of jurisdiction.
SO ORDERED.3
Both petitioner and the Bank filed their respective motions for reconsideration, which were denied by the Secretary per Order
dated August 30, 2001.4
Petitioner sought recourse with the CA via a petition for certiorari, and in the assailed Decision dated October 9, 20025 and
Resolution dated January 26, 2004,6 the CA dismissed their petition and affirmed the Secretary's Orders.
Hence, herein petition based on the following grounds:
I.
THE COURT A QUO ERRED IN DECIDING THAT THERE WAS NO BASIS FOR REVISING THE SCOPE OF EXCLUSIONS
FROM THE APPROPRIATE BARGAINING UNIT UNDER THE CBA.
II.
THE COURT A QUO ERRED IN DECIDING THAT A ONE-MONTH OR LESS TEMPORARY OCCUPATION OF A POSITION
(ACTING CAPACITY) DOES NOT MERIT ADJUSTMENT IN REMUNERATION.7
The resolution of this case has been overtaken by the execution of the parties' 2003-2005 CBA. While this would render the
case moot and academic, nevertheless, the likelihood that the same issues will come up in the parties' future CBA
negotiations is not far-fetched, thus compelling its resolution. Courts will decide a question otherwise moot if it is capable of
repetition yet evading review.[8]
The CBA provisions in dispute are the exclusion of certain employees from the appropriate bargaining unit and the
adjustment of remuneration for employees serving in an acting capacity for one month.
In their proposal, petitioner sought the exclusion of only the following employees from the appropriate bargaining unit all
managers who are vested with the right to hire and fire employees, confidential employees, those with access to labor
relations materials, Chief Cashiers, Assistant Cashiers, personnel of the Telex Department and one Human Resources (HR)
staff.9
In the previous 1998-2000 CBA,10 the excluded employees are as follows:
A. All covenanted and assistant officers (now called National Officers)

B. One confidential secretary of each of the:

1. Chief Executive, Philippine Branches
2. Deputy Chief Executive/Head, Corporate Banking Group
3. Head, Finance
4. Head, Human Resources
5. Manager, Cebu
6. Manager, Iloilo
7. Covenanted Officers provided said positions shall be filled by new recruits.
C. The Chief Cashiers and Assistant Cashiers in Manila, Cebu and Iloilo, and in any other branch that the BANK may
establish in the country.
D. Personnel of the Telex Department
E. All Security Guards
F. Probationary employees, without prejudice to Article 277 (c) of the Labor Code, as amended by R.A. 6715, casuals or
emergency employees; and
G. One (1) HR Staff11
The Secretary, however, maintained the previous exclusions because petitioner failed to show that the employees sought to
be removed from the list qualify for exclusion.12
With regard to the remuneration of employees working in an acting capacity, it was petitioner's position that additional pay
should be given to an employee who has been serving in a temporary/acting capacity for one week. The Secretary likewise
rejected petitioner's proposal and instead, allowed additional pay for those who had been working in such capacity for one
month. The Secretary agreed with the Bank's position that a restrictive provision would curtail management's prerogative,
and at the same time, recognized that employees should not be made to work in an acting capacity for long periods of time
without adequate compensation.
The Secretary's disposition of the issues raised by petitioner were affirmed by the CA.13 The Court sustains the CA.
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 proper issue in a petition for review under Rule 45 of the Rules of Court. 14 This holds more
true in the present case in which petitioner failed to controvert with evidence the findings of the Secretary and the CA.
The disqualification of managerial and confidential employees from joining a bargaining unit for rank and file employees is
already well-entrenched in jurisprudence. While 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.15
In this case, the question that needs to be answered is whether the Bank's Chief Cashiers and Assistant Cashiers,
personnel of the Telex Department and HR staff are confidential employees, such that they should be excluded.
As regards the qualification of bank cashiers as confidential employees, National Association of Trade Unions (NATU)
Republic Planters Bank Supervisors Chapter v. Torres 16 declared that they are confidential employees having control,
custody and/or access to confidential matters, e.g., the branch's cash position, statements of financial condition, vault
combination, cash codes for telegraphic transfers, demand drafts and other negotiable instruments, pursuant to Sec. 1166.4
of the Central Bank Manual regarding joint custody, and therefore, disqualified from joining or assisting a union; or joining,
assisting or forming any other labor organization.17
Golden Farms, Inc. v. Ferrer-Calleja18 meanwhile stated that "confidential employees such as accounting personnel, radio
and telegraph operators who, having access to confidential information, may become the source of undue advantage. Said
employee(s) may act as spy or spies of either party to a collective bargaining agreement."19
Finally, in Philips Industrial Development, Inc. v. National Labor Relations Commission,20 the Court designated personnel
staff, in which human resources staff may be qualified, as confidential employees because 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.
Petitioner insists that the foregoing employees are not confidential employees; however, it failed to buttress its claim. Aside
from its generalized arguments, and despite the Secretary's finding that there was no evidence to support it, petitioner still

failed to substantiate its claim. Petitioner did not even bother to state the nature of the duties and functions of these
employees, depriving the Court of any basis on which it may be concluded that they are indeed confidential employees. As
aptly stated by the CA:
While We agree that petitioner's proposed revision is in accordance with the law, this does not necessarily mean that the list
of exclusions enumerated in the 1998-2000 CBA is contrary to law. As found by public respondent, petitioner failed to show
that the employees sought to be removed from the list of exclusions are actually rank and file employees who are
not managerial or confidential in status and should, accordingly, be included in the appropriate bargaining unit.
Absent any proof that Chief Cashiers and Assistant Cashiers, personnel of the Telex department and one (1) HR
Staff have mutuality of interest with the other rank and file employees, then they are rightfully excluded from the
appropriate bargaining unit. x x x21(Emphasis supplied)
Petitioner cannot simply rely on jurisprudence without explaining how and why it should apply to this case.
Allegations must be supported by evidence. In this case, there is barely any at all.
There is likewise no reason for the Court to disturb the conclusion of the Secretary and the CA that the additional
remuneration should be given to employees placed in an acting capacity for one month. The CA correctly stated:
Likewise, We uphold the public respondent's Order that no employee should be temporarily placed in a position (acting
capacity) for more than one month without the corresponding adjustment in the salary. Such order of the public respondent is
not in violation of the "equal pay for equal work" principle, considering that after one (1) month, the employee performing the
job in an acting capacity will be entitled to salary corresponding to such position.
xxxx
In arriving at its Order, the public respondent took all the relevant evidence into account and weighed both parties arguments
extensively. Thus, public respondent concluded that a restrictive provision with respect to employees being placed in an
acting capacity may curtail management's valid exercise of its prerogative. At the same time, it recognized that employees
should not be made to perform work in an acting capacity for extended periods of time without being adequately
compensated. x x x22
Thus, the Court reiterates the doctrine that:
[T]he office of a petition for review on certiorari under Rule 45 of the Rules of Court requires that it shall raise only questions
of law. The factual findings by quasi-judicial agencies, such as the Department of Labor and Employment, when supported by
substantial evidence, are entitled to great respect in view of their expertise in their respective fields. Judicial review of labor
cases does not go so far as to evaluate the sufficiency of evidence on which the labor official's findings rest. It is not our
function to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties to an
appeal, particularly where the findings of both the trial court (here, the DOLE Secretary) and the appellate court on the matter
coincide, as in this case at bar. The Rule limits that function of the Court to the review or revision of errors of law and not to a
second analysis of the evidence. x x x Thus, absent any showing of whimsical or capricious exercise of judgment, and unless
lack of any basis for the conclusions made by the appellate court be amply demonstrated, we may not disturb such factual
findings.23
WHEREFORE, the petition is DENIED.
SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 110854 February 13, 1995

PIER 8 ARRASTRE & STEVEDORING SERVICES, INC., petitioner, vs.HON. MA. NIEVES ROLDAN-CONFESOR, in her
capacity as Secretary of Labor and Employment, and GENERAL MARITIME & STEVEDORES UNION (GMSU),
respondents.

PUNO, J.:
Petitioner corporation and private respondent labor union entered into a three-year Collective Bargaining
Agreement (CBA) with expiry date on November 27, 1991. During the freedom period the National Federation of
Labor Unions (NAFLU) questioned the majority status of Private respondent through a petition for certification
election. The election conducted on February 27, 1992 was won by private respondent. On March 19, 1992, private
respondent was certified as the sole and exclusive bargaining agent of petitioner's rank-and-file employees.
On June 22, 1992, private respondent's CBA proposals were received by petitioner. Counter-proposals were made by
petitioner. Negotiations collapsed, and on August 24, 1992, private-respondent filed a Notice of Strike with the
National Conciliation and Mediation Board (NCMB). The NCMB tried but failed to settle the parties' controversy.
On September 30, 1992, public respondent Secretary of Labor assumed jurisdiction over the dispute. She resolved the
bargaining deadlock between the parties through an Order, dated March 4, 1993, which reads, in part:
xxx xxx xxx
A. The non-economic issues
1. Scope/coverage of the CBA. Article I of the 1988 CBA provides:
The Company recognizes the Union as the sole and exclusive collective bargaining representative of all the stevedores,
dockworkers, gang bosses, foremen, rank and file employees working at Pier 8, North Harbor and its offices and said
positions are [sic] listed in ANNEX "A" hereof.
As such representative the UNION is designated as the collective bargaining agent with respect to and concerning the terms
and conditions of employment and the interpretations and implementation of the provisions and conditions of this Agreement.
Annex "A" of the CBA is the listing of positions covered thereby. These are:
1. Foremen;2. Gang bosses;3. Winchmen;4. Signalmen;5. Stevedores;6. Dockworkers;7. Tallymen;8. Checkers;9. Forklift
and crane operators;10. Sweepers;11. Mechanics;12. Utilitymen;13. Carpenters; and14. Other rank and file employees;
The company argues in the first instance that under Article 212(m) in relation to Article 245 of the Labor Code, supervisors
are ineligible for. membership in a labor organization of rank and file. Being supervisors, foremen should be excluded from
the bargaining unit.
The Company likewise seeks the exclusion on the ground of lack of community of interest and divergence in functions, mode
of compensation and working conditions of the following:
1. Accounting clerk;2. Audit clerk;3. Collector;4. Payroll clerk;5. Nurse;6. Chief biller;7. Biller;8. Teller/biller;9. Personnel clerk;
10. Timekeeper;11. Asst. timekeeper;12. Legal secretary;13. Telephone operator;14. Janitor/Utility; and15. Clerk
These positions, the Company argues, cannot be lumped together with the stevedores or dockworkers who mostly comprise
the bargaining unit. Further, notwithstanding the check-off provisions of the CBA, the incumbents in these positions have
never paid union dues. Finally, some of them occupy confidential positions and therefore ought to be excluded from the
bargaining unit.
The Union generally argues that the Company's proposed exclusions retrogressive. . . .
We see no compelling justification to order the modification of Article I of the 1988 CBA as worded. For by lumping together
stevedores and other rank and file employees, the obvious intent of the parties was to treat all employees not disqualified
from union membership as members of one bargaining unit. This is regardless of working conditions, mode of compensation,
place of work, or other considerations. In the absence of mutual agreement of the parties or evidence that the present
compositions of the bargaining unit is detrimental to the individual and organizational rights either of the employees or of the
Company, this expressed intent cannot be set aside.
It may well be that as a consequence of Republic Act No. 6715, foremen are ineligible to join the union of the rank and file.
But this provision can be invoked only upon proof that the foremen sought to be excluded from the bargaining unit are

cloaked with effective recommendatory powers such as to qualify them under the legal definitions of supervisors.
xxx xxx xxx
7. Effectivity of the CBA. The Union demands that the CBA should be fully retroactive to 28 November 1991. The Company is
opposed on the ground that under Article 253-A of the labor code, the six-month period within which the parties must come to
an agreement so that the same will be automatically retroactive is long past.
The Union's demand for full retroactivity, we note, will result in undue financial burden to the Company. On the other hand,
the Company's reliance on Article 253-A is misplaced as this applies only to the renegotiated terms of an existing CBA. Here,
the deadlock arose from negotiations for a new CBA.
These considered, the CBA shall be effective from the time we assumed jurisdiction over the dispute, that is, on 22
September 1992, and shall remain e effective for five (5) years thereafter. It shall be understood that except for the
representation aspect all other provisions thereof shall be renegotiated not later than three (3) years after its effectivity,
consistently with Article 253-A of the Labor Code.
B. The economic issues
The comparative positions of the parties are:

COMPANY

UNION

xxx xxx xxx

5

. Vacation and sick leave

17 days vacation and sick leave

i) For all covered employee

17 days sick leave per year

and 17 days sick than gang

for employment with at least

gang bosses:

five years of service.

15 working days vacation a

15 working days sick leave

for those with at least 1 yea

of service

20 working days vacation a

20 working days sick leave

for those with more than on

year of service up to 5 yea

of service

25 working days vacation a

25 working days sick leave

for those with more than 5
years of service up to 10
years of service

30 working days vacation a

30 working days sick leave

for those with more than 10

years of service

Provided that in the case

Provided that in the case o

of a rotation worker, he

rotation worker, he must ha

must have work for at

worked for 140 days in a

least 160 days in a year

calendar year as a conditio

for availment

for availment.

Provided, further that in the

event a rotation worker fail

to complete 140 days work

a calendar year, he shall st

be entitled to vacation and

sick leave with pay, as follo

139 - 120 days worked: 90

119 - 110 days worked: 50%

ii) For Gang bosses:

Same as the above schedu

except that:

1) the condition that a gang

bosses must have worked

least 120 days in a calenda

year shall be reduced to 11

days; and

2) where the above numbe

days worked is not met, the

gang boss shall still be ent

to vacation and sick leave
pay, as follows:

109 - 90 days worked: 90%

89 - 75 days worked: 50%
xxx xxx xxx
7

. Death aid

P1,500.00 to heirs

P10,000.00 to heirs of cove

of covered employees

employees

P5,000.00 assistance for d

of immediate member of

covered employee's family

xxx xxx xxx
12

. Emergency loan
a) amount of

P700.00 but damage

30 days salary payable through

entitlement

to dwelling by fire shall

payroll deduction in twelve

be included

monthly installments

None

The company shall put up a cash

b) cash bond
for loss, damage

bond of not less than P40,000.00

or accident

for winchmen, crane and forklift

operators.

xxx xxx xxx

Balancing the right of the Company to remain viable and to just returns to its investments with right of the Union members to
just rewards for their labors, we find the following award to be fair and reasonable:
xxx xxx xxx
6

. Vacation and Sick Leave

a) Non-rotation workers

17 days vacation/17 days sick leave

for those with at least 1 year of service

b) Rotation workers other

17 days vacation/17 days sick leave,

xxx xxx xxx

8. Death aid P3,000.00 to the heirs of each covered employee
xxx xxx xxx
12. Emergency loan 30 days pay, payable through payroll deductions of 1/12 of monthly salary
WHEREFORE, the Pier 8 Arrastre and Stevedoring Services and the General Maritime Services Union are hereby ordered to
execute new collective bargaining agreement the incorporating the dispositions herein contained. These shall be in addition
to all other existing terms, conditions and benefits of employment, except those specifically deleted herein, which have
previously governed the relations of the parties. All other disputed items not specifically touched upon herein are deemed
denied, without prejudice to such other agreements as the parties may have reached in the meantime. The collective
bargaining agreement so executed shall be effective from 22 September 1992 and up to five years thereafter, subject to
renegotiation on the third year of its effectivity pursuant to Article 253-A of the Labor Code. 1
Petitioner sought partial reconsideration of the Order. On June 8, 1993, public respondent affirmed her findings, except for
the date of effectivity of the Collective Bargaining Agreement which was changed to September 30, 1992. This is the date
when she assumed jurisdiction over the deadlock.
Petitioner now assails the Order as follows:
I
THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE ABUSE OF DISCRETION IN NOT EXCLUDING
CERTAIN POSITIONS FROM THE BARGAINING AGREEMENT UNIT
II
THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE ABUSE OF DISCRETION IN MAKING THE CBA
EFFECTIVE ON SEPTEMBER 30, 1992 WHEN SHE ASSUMED JURISDICTION OVER THE LABOR DISPUTE AND NOT
MARCH 4, 1993 WHEN SHE RENDERED JUDGMENT OVER THE DISPUTE

III
THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE ABUSE OF DISCRETION IN REDUCING THE
NUMBER OF DAYS AN EMPLOYEE SHOULD ACTUALLY WORK TO BE ENTITLED TO VACATION AND SICK LEAVE
BENEFITS
IV
THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE ABUSE OF DISCRETION IN INCREASING WITHOUT
FACTUAL BASIS THE DEATH AID AND EMERGENCY LOAN 2
The petition is partially meritorious.
Firstly, petitioner questions public respondent for not excluding four (4) foremen, a legal secretary, a timekeeper and an
assistant timekeeper from the bargaining unit composed of rank-and-file employees represented by private respondent.
Petitioner argues that: (1) the failure of private respondent to object when the foremen and legal secretary were prohibited
from voting in the certification election constitutes an admission that such employees hold supervisory/confidential positions;
and (2) the primary duty and responsibility of the timekeeper and assistant timekeeper is "to enforce company rules and
regulations by reporting to petitioner . . . those workers who committed infractions, such as those caught abandoning their
posts." and hence, they should not be considered as rank-and-file employees.
The applicable law governing the proper composition of bargaining unit is Article 245 of the labor Code, as amended, which
provides as follows:
Art. 245. Ineligibility of managerial employees to join any labor organization; 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 a labor organization of the rank-and-file employees but may join, assist or
form separate labor organizations of their own.
Article 212(m) of the same Code, as well as Book V, Rule 1, Section 1(o) of the Omnibus Rules Implementing the Labor
Code, as amended by the Rules and Regulations Implementing R.A.. 6715, differentiate managerial, supervisory, and rankand-file employees, thus:
"Managerial Employee" is one who is vested with powers or prerogatives to lay down and execute management policies
and/or to hire, transfer, suspend, layoff recall, discharge, assign or discipline employees. Supervisory employees are those
who, in the interest of the employer, effectively recommend 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 the Book.
This Court has ruled on numerous occasions that the test of supervisory or managerial status is whether an
employee possesses authority to act in the interest of his employer which authority is not merely routinary or
clerical in nature but requires use of independent judgment. 3 What governs the determination of the nature of
employment is not the employee's title, but his job description. If the nature of the employee's job does not fall
under the definition of "managerial" or "supervisory" in the Labor Code, he is eligible to be a member of the rankand-file bargaining unit. 4
Foremen are chief and often especially-trained workmen who work with and commonly are in charge of a group of
employees in an industrial plant or in construction work. 5 They are the persons designated by the employermanagement to direct the work of employees and to superintend and oversee them. 6 They are representatives of
the employer-management with authority over particular groups of workers, processes, operations, or sections of a
plant or an entire organization. In the modern industrial plant, they are at once a link in the chain of command and the
bridge between the management and labor. 7 In the performance their work, foremen definitely use their independent
judgment and are empowered to make recommendations for managerial action with respect to those employees
under their control. Foremen fall squarely under the category of supervisory employees, and cannot be part of rankand-file unions.
Upon the other hand, legal secretaries are neither managers nor supervisors. Their work is basically routinary and
clerical. However, they should be differentiated from rank-and-file employees because they, are tasked with, among
others, the typing of legal documents, memoranda and correspondence, the keeping of records and files, the giving
of and receiving notices and such other duties as required by the legal personnel of the corporation. 8 Legal
secretaries therefore fall under the category of confidential employees. Thus, to them applies our holding in the case of
Philips Industrial Development, Inv., v. NLRC, 210 SCRA 339 (1992), that:
. . . By the very functions, they assist confidential capacity to, or have access to confidential. matters of, persons to, exercise
managerial functions in the field of labor relations. As such, the rationale behind the ineligibility of managerial employees to
form, assist or join a labor union equally applies to them.
In Bulletin Publishing Co., Inc., vs. Hon. Augusto Sanchez, this Court elaborated on this rationale, thus:
. . . The rationale, for this inhibition has been stated to be, because if these managerial employees would belong to
or be affiliated with Union the latter might not, be assured of their loyalty to the Union in view of evident conflict of
interests. The Union can also become company-dominated with the presence of managerial employees in Union
membership.

In Golden Farms, Inc., vs. Ferrer-Calleja, 9 this court explicitly made this rationale applicable to confidential employees:
This rationale holds true also for confidential employees . . ., who having access to confidential information, may
become the source of undue advantage. Said employee(s) may act as a spy or spies of either party to a collective
bargaining agreement. . . .
We thus hold that public respondent acted with grave abuse of discretion in not excluding the four foremen and
legal secretary from the bargaining unit composed of rank-and-file employees.
As for the timekeeper and assistant timekeeper it is clear from petitioner's own pleadings that they are, neither
managerial nor supervisory employees. They are merely tasked to report those who commit infractions against
company rules and regulations. This reportorial function is routinary and clerical. They do not determine the fate of
those who violate company policy rules and regulations function. It follows that they cannot be excluded from the
subject bargaining unit.
The next issue is the date when the new CBA of the parties should be given effect. Public respondent fixed the effectivity
date on September 30, 1992. when she assumed jurisdiction over the dispute. Petitioner maintains it should be March 4.
1993, when public respondent rendered judgment over the dispute.
The applicable laws are Articles 253 and 253- A of the Labor Code, thus:
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.
and;
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 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 collective bargaining agreement, the parties may
exercise their rights under this Code.
In Union of Filipino Employees v. NLRC, 192 SCRA 414 (1990), this court interpreted the above law as follows:
In light of the foregoing, this Court upholds the pronouncement of the NLRC holding the CBA to be signed by the parties
effective upon the promulgation of the assailed resolution. It is clear and explicit from Article 253-A that any agreement on
such other provisions of the CBA shall be given retroactive effect only when it is entered into within six (6) months from its
expiry date. If the agreement was entered into outside the six (6) month period, then the parties shall agree on the duration of
the retroactivity thereof.
The assailed resolution which incorporated the CBA to be signed by the parties was promulgated June 5, 1989, the expiry
date of the past CBA. Based on the provision of Section 253-A, its retroactivity should be agreed upon. by the parties. But
since no agreement to that effect was made, public respondent did not abuse its discretion in giving the said CBA a
prospective effect. The action of the public respondent is within the ambit of its authority vested by existing law.
In the case of Lopez Sugar Corporation v. Federation of Free Workers, 189 SCRA 179 (1991), this Court reiterated the rule
that although a CBA has expired, it continues to have legal effects as between the parties until a new CBA has been entered
into. It is the duty of both parties to the 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 freedom period and/or until a new agreement is reached by the
parties. 10 Applied to the case at bench, the legal effects of the immediate past CBA between petitioner and private
respondent terminated, and the effectivity of the new CBA began, only on March 4, 1993 when public respondent resolved
their dispute.
Finally, we find no need to discuss at length the merits of the third and fourth assignments of error. The questioned Order
relevantly states:
In the resolution of the economic issues, the Company urges us to consider among others, present costs of living, its
financial capacity, the present wages being paid by the other cargo handlers at the North Harbor, and the fact that the
present average wage of its workers is P127.75 a day, which is higher than the statutory minimum wage of P118.00 a day.
The Company's evidence, consisting of its financial statements for the past three years, shows that its net income was
P743,423.45 for 1989, P2,108,569.03 for 1990, and P1,479,671.84 for 1991, or an average of P1,443,885.10 over the threeyear period. It argues that for just the first year of effectivity of the CBA, the Company's proposals on wages, effect thereof on
overtime, 13th month pay, and vacation and sick leave commutation, will cost about P520,723,44, or 35.19% of its net
income for 1991. The Company likewise urges us to consider the multiplier effect of its proposals on the second and third
years of the CBA. As additional argument, the Company manifests that a portion of its pier will undergo a six-month to one-

year renovation starting January 1993.

On the other hand, the Union's main line of argument that is, aside from being within the financial capacity of the
Company to grant, its demands are fair and reasonable is not supported by evidence controverting the Company's own
presentation of its financial capacity. The Union in fact uses statements of the Company for 1989-1991, although it interprets
these data as sufficient justification for its own proposals. It also draws our attention to the bargaining history of the parties,
particularly the 1988 negotiations during which the company was able to grant wage increases despite operational losses.
Balancing the right of the Company to remain viable and to just returns to its investments with right of the Union members to
just rewards for their labors, we find the following award to be fair and reasonable . . . . 11
It is evident that the above portion of the impugned Order is based on well-studied evidence. The conclusions reached by
public respondent in the discharge of her statutory duty as compulsory arbitrator, demand the high respect of this Court. The
study and settlement of these disputes fall within public respondent's distinct administrative expertise. She is especially
trained for this delicate task, and she has within her cognizance such data and information as will assist her in striking the
equitable balance between the needs of management, labor and the public. Unless there is clear showing of grave abuse of
discretion, this Court cannot and will not interfere with the labor expertise of public respondent Secretary of Labor.
IN VIEW WHEREOF, public respondents Order, dated March 4, 1993, and Resolution, dated June 8, 1993, are hereby
MODIFIED to exclude foremen and legal secretaries from the rank-and-file bargaining unit represented by private respondent
union, and to fix the date of effectivity of the five-year collective bargaining agreement between petitioner corporation and
private respondent union on March 4, 1993. No costs. SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION
G.R. No. 128845

June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs.HON. LEONARDO A. QUISUMBING in his
capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the
Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of
International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos,
cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of course, beside
the point. The point is that employees should be given equal pay for work of equal value. That is a principle long honored in
this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle we uphold
today.1wphi1.nt
Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of foreign diplomatic personnel and other temporary
residents.1 To enable the School to continue carrying out its educational program and improve its standard of instruction,
Section 2(c) of the same decree authorizes the School to employ its own teaching and MANAGEMENT
personnel
selected by it either locally or abroad, from Philippine or other nationalities, such personnel being exempt from otherwise
applicable laws and regulations attending their employment, except laws that have been or will be enacted for the protection
of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into
two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty member should be
classified as a foreign-hire or a local hire:
a. What is one's domicile?
b. Where is one's home economy?
c. To which country does one owe economic allegiance?
d. Was the individual hired abroad specifically to work in the School and was the School responsible for bringing that
individual to the Philippines?2

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire; otherwise,
he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing, transportation,
shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five percent
(25%) more than local-hires. The School justifies the difference on two "significant economic disadvantages"
foreign-hires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave his family and friends, and take the risk
of deviating from a promising career path all for the purpose of pursuing his profession as an educator, but this time in a
foreign land. The new foreign hire is faced with economic realities: decent abode for oneself and/or for one's family, effective
means of transportation, allowance for the education of one's children, adequate insurance against illness and death, and of
course the primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his term: that he will
eventually and inevitably return to his home country where he will have to confront the uncertainty of obtaining suitable
employment after along period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in terms
of attracting competent professionals in the field of international education.3
When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School
Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty members" 4
of the School, contested the difference in salary rates between foreign and local-hires. This issue, as well as the
question of whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock
between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board
to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume
jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order
resolving the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing
subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in
this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that
the grant of higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities other
than Filipino, who have been hired locally and classified as local hires. 5 The Acting Secretary of Labor found that these nonFilipino local-hires received the same benefits as the Filipino local-hires.
The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there are
foreigners who have been hired locally and who are paid equally as Filipino local hires.6
The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:
The Principle "equal pay for equal work" does not find applications in the present case. The international character of the
School requires the hiring of foreign personnel to deal with different nationalities and different cultures, among the student
population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which
system is universally recognized. We agree that certain amenities have to be provided to these people in order to entice
them to render their services in the Philippines and in the process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the local hires who enjoy
security of tenure. To apply parity therefore, in wages and other benefits would also require parity in other terms and
conditions of employment which include the employment which include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and professional compensation
wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof provided that the
Superintendent of the School has the discretion to recruit and hire expatriate teachers from abroad, under terms and
conditions that are consistent with accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The 25%
differential is reflective of the agreed value of system displacement and contracted status of the OSRS as differentiated from
the tenured status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two types of employees,
hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established principle of
constitutional law that the guarantee of equal protection of the laws is not violated by legislation or private covenants based
on reasonable classification. A classification is reasonable if it is based on substantial distinctions and apply to all members of
the same class. Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying only a
limited tenure, having no amenities of their own in the Philippines and have to be given a good compensation package in
order to attract them to join the teaching faculty of the School.7
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy
against these evils. The Constitution 8 in the Article on Social Justice and Human Rights exhorts Congress to "give highest
priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social,
economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good faith.
International law, which springs from general principles of law,9 likewise proscribes discrimination. General principles of law
include principles of equity, 10 i.e., the general principles of fairness and justice, based on the test of what is reasonable. 11
The Universal Declaration of Human Rights, 12 the International Covenant on Economic, Social, and Cultural Rights, 13 the
International Convention on the Elimination of All Forms of Racial Discrimination, 14 the Convention against Discrimination in
Education, 15 the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation 16 all
embody the general principle against discrimination, the very antithesis of fairness and justice. The Philippines, through its
Constitution, has incorporated this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and
discrimination by the employer are all the more reprehensible.
The Constitution 17 specifically provides that labor is entitled to "humane conditions of work." These conditions are not
restricted to the physical workplace the factory, the office or the field but include as well the manner by which employers
treat their employees.
The Constitution 18 also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor Code
19
provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an affront to
both the spirit and letter of these provisions if the State, in spite of its primordial obligation to promote and ensure equal
employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of employment. 20
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits and
penalizes 21 the payment of lesser compensation to a female employee as against a male employee for work of equal value.
Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order to encourage or
discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable
conditions of work, which ensure, in particular:
a. Remuneration which provides all workers, as a minimum, with:
(i) Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being
guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work;
xxx

xxx

xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal
work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar conditions, should
be paid similar salaries. 22 This rule applies to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-hires. 23
The Court finds this argument a little cavalier. If an employer accords employees the same position and rank, the
presumption is that these employees perform equal work. This presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for that employee to explain why he receives less or why the others
receive more. That would be adding insult to injury. The employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform 25% more
efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which they perform under
similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in
salary rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly, the
Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for the rendering of
services." In Songco v. National Labor Relations Commission, 24 we said that:

"salary" means a recompense or consideration made to a person for his pains or industry in another man's business.
Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the
fundamental idea of compensation for services rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to
the prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the
same salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited tenure also
cannot serve as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting
foreign-hires are adequately compensated by certain benefits accorded them which are not enjoyed by local-hires,
such as housing, transportation, shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare," 25 "to afford labor full
protection." 26 The State, therefore, has the right and duty to regulate the relations between labor and capital. 27 These
relations are not merely contractual but are so impressed with public interest that labor contracts, collective bargaining
agreements included, must yield to the common good. 28 Should such contracts contain stipulations that are contrary to
public policy, courts will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the
salary rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction
between the services rendered by foreign-hires and local-hires. The practice of the School of according higher
salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body
of employees, consistent with equity to the employer, indicate to be the best suited to serve the reciprocal rights
and duties of the parties under the collective bargaining provisions of the law." 29 The factors in determining the
appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the
employees' interest, such as substantial similarity of work and duties, or similarity of compensation and working
conditions (Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of
employment status. 30 The basic test of an asserted bargaining unit's acceptability is whether or not it is
fundamentally the combination which will best assure to all employees the exercise of their collective bargaining
rights. 31
It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of
collective bargaining. The collective bargaining history in the School also shows that these groups were always treated
separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to
local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are
reasonably related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include foreignhires in a bargaining unit with local-hires would not assure either group the exercise of their respective collective
bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of the
Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET ASIDE
insofar as they uphold the practice of respondent School of according foreign-hires higher salaries than local-hires.
SO ORDERED.

FIRST DIVISION
ST. JAMES SCHOOL OF QUEZON CITY,
Petitioner,

G.R. No. 151326

Present:

- versus -

Davide, Jr., C.J.,

Chairman,
Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.

SAMAHANG MANGGAGAWA SA
ST. JAMES SCHOOL OF QUEZON CITY,
Respondent.

Promulgated:
November 23, 2005

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review[1] assailing the 5 September 2001 Decision and 3 January 2002 Resolution of
the Court of Appeals[2] in CA-G.R. SP No. 60197. The Court of Appeals sustained the Decision of the Department of Labor
and Employment (DOLE) directing the opening of the challenged ballots cast during the certification election.
The Antecedent Facts
The Samahang Manggagawa sa St. James School of Quezon City (Samahang Manggagawa) filed a petition
for certification election to determine the collective bargaining representative of the motor pool, construction and
transportation employees of St. James School of Quezon City (St. James). On 26 June 1999, the certification
election was held at the DOLE office in Intramuros, Manila. There were 149 eligible voters and 84 voters cast their votes.
St. James filed a certification election protest challenging the 84 votes. St. James alleged that it had 179 rank and
file employees, none of whom voted in the certification election. St. James argued that those who voted were not its
regular employees but construction workers of an independent contractor, Architect Conrado Bacoy (Architect
Bacoy).
In an Order dated 6 January 2000,[3] Med-Arbiter Tomas F. Falconitin (Med-Arbiter Falconitin) ruled that at the time
of the certification election, the 84 voters were no longer working at St. James. Med-Arbiter Falconitin supported his ruling
using the roster of rank and file employees submitted by St. James, which did not include the names of the 84 voters. MedArbiter Falconitin also ruled that since the construction projects have ceased, some of the workers were no longer entitled to
vote in the certification election. Finally, Med-Arbiter Falconitin ruled that even if the 84 workers were to be included in the
179 rank and file employees of St. James, the total number of voters would be 263. Thus, the 84 votes cast would not be
sufficient to constitute a majority of all eligible voters to have a valid certification election. The dispositive portion of the Order

reads:
WHEREFORE, premises considered, the certification election protest is hereby given
due course.
Accordingly, judgment is hereby rendered, declaring the certification election for the
rank and file employees of respondent/protestant St. James School of Quezon City conducted
on June 26, 1999, a failure; and null and void ab initio.
SO ORDERED.[4]
Samahang Manggagawa appealed to the Secretary of Labor. In its Decision[5] dated 5 May 2000, the DOLE[6]
reversed the ruling of Med-Arbiter Falconitin. The DOLE ruled that Samahang Manggagawa seeks to represent the nonacademic personnel or the rank and file employees from the motor pool, construction and transportation departments, and
not all the rank and file employees of St. James. According to the DOLE, Med-Arbiter Falconitin erred in including all the
rank and file employees of St. James, whether teaching or non-teaching personnel, in the computation of the total number of
employees. The DOLE ruled that the list submitted by St. James contained only the administrative, teaching and office
personnel of the school. The dispositive portion of the Decision reads:
WHEREFORE, the appeal is hereby GRANTED and the order dated 06 January 2000 of
the Med-Arbiter is REVERSED and SET ASIDE. In lieu thereof, an order is hereby issued directing
the Election Officer, Lilibeth Cagara, DOLE-National Capital Region to open and canvass the 84
challenged ballots within ten (10) days from receipt hereof, subject to usual notice and representation
by the parties and thereafter to issue the corresponding certification of the results.
SO DECIDED.[7]
St. James filed a motion for reconsideration. The DOLE[8] denied the motion in its 19 June 2000 Resolution.[9] St.
James filed a special civil action before the Court of Appeals.
In a Decision[10] dated 5 September 2001, the Court of Appeals dismissed the petition and ruled that the DOLE did not
commit grave abuse of discretion in reversing the ruling of Med-Arbiter Falconitin. In its 3 January 2002 Resolution,[11] the
Court of Appeals denied St. James motion for reconsideration.
Hence, the petition before this Court.
The Issues
St. James questions the validity of the formation of the labor union and the validity of the certification
election.[12]
The Ruling of the Court
The petition has no merit.
The Validity of the Formation of the Labor Union
St. James argues that majority of the members of Samahang Manggagawa are not its employees but employees of
Architect Bacoy, an independent contractor.
St. James may no longer question the validity of the formation of the labor union.
The records[13] show that prior to the holding of the certification election, St. James filed a petition for
cancellation of Samahang Manggagawas union registration. Among the grounds cited in the petition was the lack of
employer-employee relationship between St. James and Samahang Manggagawas members. The Med-Arbiter
recommended the cancellation of the union registration. DOLE Regional Director IV Romeo Young (Director Young)
adopted the Med-Arbiters recommendation and cancelled Samahang Manggagawas union registration. Samahang
Manggagawa filed an appeal before the Bureau of Labor Relations (BLR). In its Decision[14] dated 22 January 1998, the
BLR[15] reversed Director Youngs Decision. In its Resolution[16] of 12 February 1998, the BLR denied St. James motion
for reconsideration. St. James filed a special civil action before the Court of Appeals. The case was docketed as CA-G.R.
SP
No. 50918. In its 9 February 2001 Decision,[17] the Court of Appeals dismissed St. James petition and affirmed the
BLRs Decision. The Court of Appeals ruled that the construction workers are actually St. James regular employees
in its motor pool, construction and transportation departments. The Court of Appeals also ruled that Architect
Bacoy is a labor-only contractor and thus an agent of St. James, which is the real employer.
St. James filed a petition for certiorari before this Court. The case was docketed as G.R. No. 149648. In a
Resolution dated 10 October 2001, this Court denied the petition for St. James error in the choice or mode of appeal.[18]
The Courts 10 October 2001 Resolution closed any issue on the validity of the formation of the labor union.
The Validity of the Certification Election
Section 13, Rule XII, Book V of the Omnibus Rules Implementing the Labor Code (Omnibus Rules) provides:
Section 13. Proclamation and certification of results by election officer; when proper. Upon
completion of the canvass there being a valid election, the election officer shall proclaim and certify
as winner the union which obtained a majority of the valid votes cast under any of the following
conditions:

a)

No protest had been 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 of eligibility issue was raised or even if one was raised, the resolution
of the same will not materially change the result.

For this purpose, the election officer shall immediately issue the corresponding
certification, copy furnished all parties, which shall form part of the records of the case. The winning
union shall have the rights, privileges and obligations of a duly certified collective bargaining
representative from the time the certification is issued. The proclamation and certification so issued
shall not be appealable.

According to St. James, the certification election was conducted without quorum. St. James alleges that it has
179 rank and file employees in its Quezon City Campus. When the certification election was held, none of these qualified
rank and file employees cast their votes because they were all on duty in the school premises. The 84 voters who cast their
votes are employees of Architect Bacoy. St. James also alleges that it has 570 rank and file employees in all its campuses.
Even if the 84 voters are its employees, the votes do not constitute a majority vote of its rank and file employees because the
quorum should be based on its 570 rank and file employees.
We cannot sustain the argument.
St. James has five campuses the Philamlife and Scout Alcaraz, Quezon City campuses which are pre-schools; the
Paraaque City and Calamba, Laguna campuses which offer elementary, secondary and college education; and the Tandang
Sora, Quezon City campus which offers elementary and secondary education.[19]
The members of Samahang Manggagawa are employees in the Tandang Sora campus. Under its constitution
and by-laws, Samahang Manggagawa seeks to represent the motor pool, construction and transportation
employees of the Tandang Sora campus.[20] Thus, the computation of the quorum should be based on the rank and
file motor pool, construction and transportation employees of the Tandang Sora campus and not on all the
employees in St. James five campuses.
Section 2, Rule XII, Book V of the Omnibus Rules provides:
Section 2. Qualification of voters; inclusion-exclusion proceedings. All employees who
are members of the appropriate bargaining unit sought to be represented by the petitioner at the time
of the certification or consent election shall be qualified to vote. A dismissed employee whose
dismissal is being contested in a pending case shall be allowed to vote in the election.
In case of disagreement over the voters list or over the eligibility of voters, all contested
voters shall be allowed to vote. However, their votes shall be segregated and sealed in individual
envelopes in accordance with Section 9 of these Rules.

The motor pool, construction and transportation employees of the Tandang Sora campus had 149 qualified
voters at the time of the certification election. Hence, the 149 qualified voters should be used to determine the
existence of a quorum. Since a majority or 84 out of the 149 qualified voters cast their votes, a quorum existed in the
certification election.

St. James further alleges that the names of the 84 voters are not on the list of its rank and file employees. On
this score, we sustain the factual finding of the DOLE that the list submitted by St. James consists of its
administrative, teaching and office personnel. These administrative, teaching and office personnel are not members
of Samahang Manggagawa. They do not belong to the bargaining unit that Samahang Manggagawa seeks to
represent. Hence, the list submitted by St. James may not be used as basis to determine the members of Samahang
Manggagawa.
WHEREFORE, we DENY the petition. We AFFIRM the
Resolution of the Court of Appeals in CA-G.R. SP No. 60197.
SO ORDERED.

5 September 2001 Decision and the 3 January 2002

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 100485 September 21, 1994

SAN MIGUEL CORPORATION, petitioner, vs.THE HONORABLE BIENVENIDO E. LAGUESMA and NORTH LUZON
MAGNOLIA SALES LABOR UNION-INDEPENDENT, respondents.
PUNO, J.:
Petitioner San Miguel Corporation (SMC) prays that the Resolution dated March 19, 1991 and the Order dated April 12,
1991 of public respondent Undersecretary Bienvenido E. Laguesma declaring respondent union as the sole and
exclusive bargaining agent of all the Magnolia sales personnel in northern Luzon be set aside for having been
issued in excess of jurisdiction and/or with grave abuse of discretion.
On June 4, 1990, the North Luzon Magnolia Sales Labor Union (respondent union for brevity) filed with the
Department of Labor a petition for certification election among all the regular sales personnel of Magnolia Dairy
Products in the North Luzon Sales Area. 1
Petitioner opposed the petition and questioned the appropriateness of the bargaining unit sought to be represented
by respondent union. It claimed that its bargaining history in its sales offices, plants and warehouses is to have a
separate bargaining unit for each sales office.
The petition was heard on November 9, 1990 with petitionerbeing represented by Atty. Alvin C. Batalla of the Siguion Reyna
law office. Atty. Batalla withdrew petitioner's opposition to a certification election and agreed to consider all the sales offices
in northern Luzon as one bargaining unit. At the pre-election conference, the parties agreed inter alia, on the date, time and
place of the consent election. Respondent union won the election held on November 24, 1990. In an Order dated
December 3, 1990, 2 Mediator-Arbiter Benalfre J. Galang certified respondent union as the sole and exclusive
bargaining agent for all the regular sales personnel in all the sales offices of Magnolia Dairy Products in the North
Luzon Sales Area.
Petitioner appealed to the Secretary of Labor. It claimed thatAtty. Batalla was only authorized to agree to the holding of
certification elections subject to the following conditions: (1) there would only be one general election; (2) in this general
election, the individual sales offices shall still comprise separate bargaining units. 3
In a Resolution dated March 19, 1991, 4 public respondent, by authority of the Secretary of Labor, denied SMC's appeal
and affirmed the Order of the Med- Arbiter.

Hence this petition for certiorari.

Petitioner claims that:
THE HONORABLE UNDERSECRETARY LAGUESMA ACTED WITH GRAVE ABUSE OF DISCRETION WHEN HE
IGNORED AND TOTALLY DISREGARDED PETITIONER'S VALID AND JUSTIFIABLE GROUNDS WHY THE ERROR
MADE IN GOOD FAITH BY PETITIONER'S COUNSEL BE CORRECTED, AND INSTEAD RULED:
A
THAT PRIVATE RESPONDENT IS "THE SOLE AND EXCLUSIVE BARGAINING AGENT FOR ALL THE REGULAR SALES
OFFICES OF MAGNOLIA DAIRY PRODUCTS, NORTH LUZON SALES AREA", COMPLETELY IGNORING THE
ESTABLISHED BARGAINING HISTORY OF PETITIONER SMC.
B
THAT PETITIONER IS ESTOPPED FROM QUESTIONING THE "AGREEMENT" ENTERED INTO AT THE HEARING ON9
NOVEMBER 1990, IN CONTRAVENTION OF THE ESTABLISHED FACTS OF THE CASE AND THE APPLICABLE LAW ON
THE MATTER.
We find no merit in the petition.
The issues for resolution are: (1) whether or not respondent union represents an appropriate bargaining unit, and (2)
whether or not petitioner is bound by its lawyer's act of agreeing to consider the sales personnel in the north Luzon sales
area as one bargaining unit.
Petitioner claims that in issuing the impugned Orders, public respondent disregarded its collective bargaining history which is
to have a separate bargaining unit for each sales office. It insists that its prior collective bargaining history is the most
persuasive criterion in determining the appropriateness of the collective bargaining unit.
There is no merit in the contention.
A bargaining unit is a "group of employees of a given employer, comprised of all or less than all of the entire body
of employees, consistent with equity to the employer, indicate to be the best suited to serve the reciprocal rights
and duties of the parties under the collective bargaining provisions of the law." 5
The fundamental factors in determining the appropriate collective bargaining unit are: (1) the will of the employees
(Globe Doctrine); 6 (2) affinity and unity of the employees' interest, such as substantial similarity of work and duties,
or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective
bargaining history; and (4) similarity of employment status. 7
Contrary to petitioner's assertion, this Court has categorically ruled that the existence of a prior collective bargaining
history is neither decisive nor conclusive in the determination of what constitutes an appropriate bargaining unit. 8
Indeed, the test of grouping is mutuality or commonality of interests. The employees sought to be represented by
the collective bargaining agent must have substantial mutual interests in terms of employment and working
conditions as evinced by the type of work they perform.
In the case at bench, respondent union sought to represent the sales personnel in the various Magnolia sales
offices in northern Luzon. There is similarity of employment status for only the regular sales personnel in the north
Luzon area are covered. They have the same duties and responsibilities and substantially similar compensation and
working conditions. The commonality of interest among he sales personnel in the north Luzon sales area cannot be
gainsaid. In fact, in the certification election held on November 24, 1990, the employees concerned accepted
respondent union as their exclusive bargaining agent. Clearly, they have expressed their desire to be one.
Petitioner cannot insist that each of the sales office of Magnolia should constitute only one bargaining unit. What greatly
militates against this position is the meager number of sales personnel in each of the Magnolia sales office in northern Luzon.
Even the bargaining unit sought to be represented by respondent union in the entire north Luzon sales area consists only of
approximatelyfifty-five (55) employees. 9 Surely, it would not be for the best interest of these employees if they would
further be fractionalized. The adage "there is strength in number" is the very rationale underlying the formation of a
labor union.
Anent the second issue, petitioner claims that Atty. Batalla was merely a substitute lawyer for Atty. Christine Ona, who got
stranded in Legaspi City. Atty. Batalla was allegedly unfamiliar with the collective bargaining history of its establishment.
Petitioner claims it should not be bound by the mistake committed by its substitute lawyer.
We are not persuaded. As discussed earlier, the collective bargaining history of a company is not decisive of what should
comprise the collective bargaining unit. Insofar as the alleged "mistake" of the substitute lawyer is concerned, we find that
this mistake was the direct result of the negligence of petitioner's lawyers. It will be noted that Atty. Ona was under the
supervision of two (2) other lawyers, Attys. Jacinto de la Rosa, Jr. and George C. Nograles. There is nothing in the records to
show that these two (2) counsels were likewise unavailable at that time. Instead of deferring the hearing, petitioner's
counsels chose to proceed therewith. Indeed, prudence dictates that, in such case, the lawyers allegedly actively involved in
SMC's labor case should have adequately and sufficiently briefed the substitute lawyer with respect to the matters involved in

the case and the specific limits of his authority. Unfortunately, this was not done in this case. The negligence of its lawyers
binds petitioner. As held by this Court in the case of Villa Rhecar Bus v. De la Cruz: 10
. . . As a general rule, a client is bound by the mistakes of his counsel. Only when the application of the general rule would
result in serious injustice should an exception thereto be called for.
In the case at bench, petitioner insists that each of the sales offices in northern Luzon should be considered as a separate
bargaining unit for negotiations would be more expeditious. Petitioner obviously chooses to follow the path of least
resistance. It is not, however, the convenience of the employer that constitutes the determinative factor in forming an
appropriate bargaining unit. Equally, if not more important, is the interest of the employees. In choosing and crafting an
appropriate bargaining unit, extreme care should be taken to prevent an employer from having any undue advantage over
the employees' bargaining representative. Our workers are weak enough and it is not our social policy to further debilitate
their bargaining representative.
In sum, we find that no arbitrariness or grave abuse of discretion can be attributed to public respondents certification of
respondent union as the sole and exclusive bargaining agent of all the regular Magnolia sales personnel of the north Luzon
sales area.
WHEREFORE, premises considered, the challenged Resolution and Order of public respondent are hereby AFFIRMED in
toto, there being no showing of grave abuse of discretion or lack of jurisdiction. SO ORDERED.

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

G.R. No. 157117

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

- versus -

DEPARTMENT OF LABOR and EMPLOYMENT OFFICE OF THE

SECRETARY, COASTAL SUBIC BAY TERMINAL, INC. SUPERVISORY
UNION-APSOTEU, and COASTAL SUBIC BAY TERMINAL, INC. RANKAND-FILE UNION-ALU-TUCP,
Respondents.

Promulgated:
November 20, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review on certiorari is the Court of Appeals Decision[1] dated August 31, 2001, in CA-G.R. SP No. 54128 and the
Resolution[2] dated February 5, 2003, denying petitioners motion for reconsideration. The Court of Appeals had affirmed the
Decision[3] dated March 15, 1999 of the Secretary of the Department of Labor and Employment (DOLE) reversing the
Mediator Arbiters dismissal of private respondents petitions for certification election.
The facts are as follows:
On July 8, 1998, private respondents Coastal Subic Bay Terminal, Inc. Rank-and-File Union (CSBTI-RFU) and
Coastal Subic Bay Terminal, Inc. Supervisory Union (CSBTI-SU) filed separate petitions for certification election before
Med-Arbiter Eladio de Jesus of the Regional Office No. III. The rank-and-file union insists that it is a legitimate labor
organization having been issued a charter certificate by the Associated Labor Union (ALU), and the supervisory union
by the Associated Professional, Supervisory, Office and Technical Employees Union (APSOTEU). Private respondents
also alleged that the establishment in which they sought to operate was unorganized.
Petitioner Coastal Subic Bay Terminal, Inc. (CSBTI) opposed both petitions for certification election
alleging that the rank-and-file union and supervisory union were not legitimate labor organizations, and that the
proposed bargaining units were not particularly described.
Without ruling on the legitimacy of the respondent unions, the Med-Arbiter dismissed, without prejudice to refiling,
both petitions which had been consolidated. The Med-Arbiter held that the ALU and APSOTEU are one and the same
federation having a common set of officers. Thus, the supervisory and the rank-and-file unions were in effect
affiliated with only one federation.[4]
The Med-Arbiter ruled as follows:

Viewed in the light of all the foregoing, this Office finds the simultaneous filing of the
instant petitions to be invalid and unwarranted. Consequently, this Office has no recourse but to
dismiss both petitions without prejudice to the refiling of either.
WHEREFORE, PREMISES CONSIDERED, let the instant petitions be, as they are
hereby DISMISSED.
SO ORDERED.[5]
Both parties appealed to the Secretary of Labor and Employment, who reversed the decision of the MedArbiter. The Secretary thru Undersecretary R. Baldoz, ruled that CSBTI-SU and CSBTI-RFU have separate legal
personalities to file their separate petitions for certification election. The Secretary held that APSOTEU is a legitimate
labor organization because it was properly registered pursuant to the 1989 Revised Rules and Regulations implementing
Republic Act No. 6715, the rule applicable at the time of its registration. It further ruled that ALU and APSOTEU are
separate and distinct labor unions having separate certificates of registration from the DOLE. They also have
different sets of locals. The Secretary declared CSBTI-RFU and CSBTI-SU as legitimate labor organizations having been
chartered respectively by ALU and APSOTEU after submitting all the requirements with the Bureau of Labor Relations (BLR).
Accordingly, the Secretary ordered the holding of separate certification election, viz:
WHEREFORE, the decision of the Med-Arbiter, Regional Office No. III is hereby
REVERSED. Let separate certification elections be conducted immediately among the appropriate
employees of CSBTI, after the usual pre-election conference, with the following choices:
I.
For all rank and file employees of CSBTI:
1.
COASTAL SUBIC BAY TERMINAL, INC. RANK-AND-FILE UNION-ALU-TUCP;
and
2.
NO UNION.
II.

For all supervisory employees of CSBTI:

1.
COASTAL SUBIC BAY TERMINAL, INC. SUPERVISORY EMPLOYEES UNIONAPSOTEU; and
2.
NO UNION.
The latest payroll of the employer, including its payrolls for the last three months
immediately preceding the issuance of this decision, shall be the basis for determining the qualified
list of voters.
SO DECIDED.[6]
The motion for reconsideration was also denied.[7]
On appeal, the Court of Appeals affirmed the decision of the Secretary.[8] It held that there was no grave
abuse of discretion on the part of the Secretary; its findings are supported by evidence on record; and thus should be
accorded with respect and finality.[9]
The motion for reconsideration was likewise denied.[10] Hence, the instant petition by the company anchored on
the following grounds:
I
THE HONORABLE COURT OF APPEALS ERRED IN RELYING ON THE 1989
REVISED RULES AND REGULATIONS IMPLEMENTING RA 6715 AS BASIS TO RECOGNIZE
PRIVATE RESPONDENT APSOTEUS REGISTRATION BY THE DOLE REGIONAL DIRECTOR.
II
THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED PUBLIC
RESPONDENTS APPLICATION OF THE PRINCIPLE OF STARE DECISIS TO HASTILY DISPOSE
OF THE LEGAL PERSONALITY ISSUE OF APSOTEU.
III
THE HONORABLE COURT OF APPEALS DID NOT DECIDE IN ACCORD WITH LAW
AND JURISPRUDENCE WHEN IT AFFIRMED PUBLIC RESPONDENTS APPLICATION OF THE
UNION AUTONOMY THEORY.
IV
IN AFFIRMING PUBLIC RESPONDENTS FINDING THAT PRIVATE RESPONDENTS
ARE SEPARATE FEDERATIONS, THE HONORABLE COURT OF APPEALS:
(1)
IGNORED JURISPRUDENCE RECOGNIZING THE BINDING NATURE OF A
MED-ARBITERS FACTUAL FINDINGS; AND
(2)
DISREGARDED EVIDENCE ON RECORD OF ILLEGAL COMMINGLING.[11]
Plainly, the issues are (1) Can the supervisory and the rank-and-file unions file separate petitions for
certification election?; (2) Was the Secretarys decision based on stare decisis correct?; and (3) Were private respondents
engaged in commingling?
The issue on the status of the supervisory union CSBTI-SU depends on the status of APSOTEU, its mother
federation.
Petitioner argues that APSOTEU improperly secured its registration from the DOLE Regional Director and not
from the BLR; that it is the BLR that is authorized to process applications and issue certificates of registration in accordance
with our ruling in Phil. Association of Free Labor Unions v. Secretary of Labor;[12] that the certificates of registration issued
by the DOLE Regional Director pursuant to the rules are questionable, and possibly even void ab initio for being ultra vires;
and that the Court of Appeals erred when it ruled that the law applicable at the time of APSOTEUs registration was the 1989
Revised Implementing Rules and Regulations of Rep. Act No. 6715.
Petitioner insists that APSOTEU lacks legal personality, and its chartered affiliate CSBTI-SU cannot attain the
status of a legitimate labor organization to file a petition for certification election. It relies on Villar v. Inciong,[13] where we
held therein that Amigo Employees Union was not a duly registered independent union absent any record of its registration
with the Bureau.
Pertinent is Article 235[14] of the Labor Code which provides that applications for registration shall be acted upon
by the Bureau. Bureau as defined under the Labor Code means the BLR and/or the Labor Relations Division in the
Regional Offices of the Department of Labor.[15] Further, Section 2, Rule II, Book V of the 1989 Revised Implementing
Rules of the Labor Code (Implementing Rules) provides that:

Section 2. Where to file application; procedure Any national labor organization or labor
federation or local union may file an application for registration with the Bureau or the Regional Office
where the applicants principal offices is located. The Bureau or the Regional Office shall immediately
process and approve or deny the application. In case of approval, the Bureau or the Regional Office
shall issue the registration certificate within thirty (30) calendar days from receipt of the application,
together with all the requirements for registration as hereinafter provided. [16]
The Implementing Rules specifically Section 1, Rule III of Book V, as amended by Department Order No. 9, thus:
SECTION 1. Where to file applications. The application for registration of any
federation, national or industry union or trade union center shall be filed with the Bureau. Where the
application is filed with the Regional Office, the same shall be immediately forwarded to the Bureau
within forty-eight (48) hours from filing thereof, together with all the documents supporting the
registration.
The applications for registration of an independent union shall be filed with and acted
upon by the Regional Office where the applicants principal office is located .
xxxx
The DOLE issued Department Order No. 40-03, which took effect on March 15, 2003, further amending
Book V of the above implementing rules. The new implementing rules explicitly provide that applications for
registration of labor organizations shall be filed either with the Regional Office or with the BLR.[17]
Even after the amendments, the rules did not divest the Regional Office and the BLR of their jurisdiction
over applications for registration by labor organizations. The amendments to the implementing rules merely
specified that when the application was filed with the Regional Office, the application would be acted upon by the
BLR.
The records in this case showed that APSOTEU was registered on March 1, 1991. Accordingly, the law
applicable at that time was Section 2, Rule II, Book V of the Implementing Rules, and not Department Order No. 9
which took effect only on June 21, 1997. Thus, considering further that APSOTEUs principal office is located in
Diliman, Quezon City, and its registration was filed with the NCR Regional Office, the certificate of registration is
valid.
The petitioner misapplied Villar v. Inciong.[18] In said case, there was no record in the BLR that Amigo
Employees Union was registered.[19]
Did the Court of Appeals err in its application of stare decisis when it upheld the Secretarys ruling that APSOTEU
is a legitimate labor organization and its personality cannot be assailed unless in an independent action for cancellation of
registration certificate?[20]
We think not.
Section 5, Rule V, Book V of the Implementing Rules states:
Section 5. Effect of registration The labor organization or workers association shall be
deemed registered and vested with legal personality on the date of issuance of its certificate of
registration. Such legal personality cannot thereafter be subject to collateral attack, but maybe
questioned only in an independent petition for cancellation in accordance with these Rules.[21]
Thus, APSOTEU is a legitimate labor organization and has authority to issue charter to its affiliates. [22] It may
issue a local charter certificate to CSBTI-SU and correspondingly, CSBTI-SU is legitimate.
Are ALU, a rank-and-file union and APSOTEU, a supervisory union one and the same because of the
commonalities between them? Are they commingled?
The petitioner contends that applying by analogy, the doctrine of piercing the veil of corporate fiction, APSOTEU
and ALU are the same federation. Private respondents disagree.
First, as earlier discoursed, once a labor union attains the status of a legitimate labor organization, it continues as
such until its certificate of registration is cancelled or revoked in an independent action for cancellation.[23] In addition, the
legal personality of a labor organization cannot be collaterally attacked.[24] Thus, when the personality of the labor
organization is questioned in the same manner the veil of corporate fiction is pierced, the action partakes the nature of a
collateral attack. Hence, in the absence of any independent action for cancellation of registration against either APSOTEU or
ALU, and unless and until their registrations are cancelled, each continues to possess a separate legal personality. The
CSBTI-RFU and CSBTI-SU are therefore affiliated with distinct and separate federations, despite the commonalities of
APSOTEU and ALU.
Under the rules implementing the Labor Code, a chartered local union acquires legal personality through the
charter certificate issued by a duly registered federation or national union, and reported to the Regional Office in accordance
with the rules implementing the Labor Code.[25] A local union does not owe its existence to the federation with which it is
affiliated. It is a separate and distinct voluntary association owing its creation to the will of its members. Mere affiliation does
not divest the local union of its own personality, neither does it give the mother federation the license to act independently of
the local union. It only gives rise to a contract of agency, where the former acts in representation of the latter. [26] Hence,
local unions are considered principals while the federation is deemed to be merely their agent.[27] As such principals, the
unions are entitled to exercise the rights and privileges of a legitimate labor organization, including the right to seek
certification as the sole and exclusive bargaining agent in the appropriate employer unit.
A word of caution though, under Article 245 of the Labor Code,[28] supervisory employees are not
eligible for membership in a labor union of rank-and-file employees. The supervisory employees are allowed to form
their own union but they are not allowed to join the rank-and-file union because of potential conflicts of interest.[29]
Further, to avoid a situation where supervisors would merge with the rank-and-file or where the supervisors labor
union would represent conflicting interests, a local supervisors union should not be allowed to affiliate with the
national federation of unions of rank-and-file employees where that federation actively participates in the union
activity within the company.[30] Thus, the limitation is not confined to a case of supervisors wanting to join a rankand-file union. The prohibition extends to a supervisors local union applying for membership in a national
federation the members of which include local unions of rank-and-file employees.[31] In De La Salle University
Medical Center and College of Medicine v. Laguesma, we reiterated the rule that for the prohibition to apply, it is not

enough that the supervisory union and the rank-and-file union are affiliated with a single federation. In addition, the
supervisors must have direct authority over the rank-and-file employees.[32]
In the instant case, the national federations that exist as separate entities to which the rank-and-file and
supervisory unions are separately affiliated with, do have a common set of officers. In addition, APSOTEU, the
supervisory federation, actively participates in the CSBTI-SU while ALU, the rank-and-file federation, actively
participates in the CSBTI-RFU, giving occasion to possible conflicts of interest among the common officers of the
federation of rank-and-file and the federation of supervisory unions. For as long as they are affiliated with the
APSOTEU and ALU, the supervisory and rank-and-file unions both do not meet the criteria to attain the status of
legitimate labor organizations, and thus could not separately petition for certification elections.
The purpose of affiliation of the local unions into a common enterprise is to increase the collective
bargaining power in respect of the terms and conditions of labor.[33] When there is commingling of officers of a
rank-and-file union with a supervisory union, the constitutional policy on labor is circumvented. Labor
organizations should ensure the freedom of employees to organize themselves for the purpose of leveling the
bargaining process but also to ensure the freedom of workingmen and to keep open the corridor of opportunity to
enable them to do it for themselves.
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision dated August 31, 2001, in CA-G.R. SP No.
54128 and the Resolution dated February 5, 2003 are SET ASIDE. The decision of the Med-Arbiter is hereby AFFIRMED.
SO ORDERED.

EN BANC
[G.R. No. 142297. June 15, 2004]

HOME DEVELOPMENT MUTUAL FUND, petitioner, vs. COMMISSION ON AUDIT, respondent.

DECISION
AZCUNA, J.:
Before us is a petition for certiorari under Rule 65 of the Rules of Court alleging that the Commission on Audit acted in
excess of its jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction in issuing Resolution No. 2000-086
dated March 7, 2000, which affirmed COA Decision No. 98-245 dated June 16, 1998. COA Decision No. 98-245 affirmed the
audit disallowance of payment of productivity incentive bonus by petitioner Home Development Mutual Fund (HDMF) to its
personnel pursuant to Republic Act No. 6971, otherwise known as the Productivity Incentives Act of 1990.
The facts are as follows:
Republic Act No. 6971, An Act to Encourage Productivity and Maintain Industrial Peace by Providing
Incentives to Both Labor and Capital, was approved on November 22, 1990, and took effect on December 9, 1990.
Section 3 of said Act states:
Sec.3.Coverage.ThisActshallapplytoallbusinessenterpriseswithorwithoutexistinganddulyrecognizedorcertifiedlabor
organizations,includinggovernmentownedandcontrolledcorporationsperformingproprietaryfunctions.Itshallcoverall
employeesandworkersincludingcasual,regular,supervisoryandmanagerialemployees.
The Secretary of Labor and Employment and the Secretary of Finance promulgated the Rules Implementing Republic
Act No. 6971[1] on June 4, 1991. Rule II of said implementing rules provides:
Section1.Coverage.TheseRulesshallapplyto:
(a)Allbusinessenterpriseswithorwithoutexistingdulyrecognizedorcertifiedlabororganizations,including
governmentownedandcontrolledcorporationsperformingproprietaryfunctions;
(b)Allemployeesandworkersincludingcasual,regular,rankandfile,supervisoryandmanagerialemployees.
On November 21, 1991, petitioner HDMF granted Productivity Incentive Bonus equivalent to one month salary
plus allowance to all its personnel pursuant to Republic Act No. 6971, and its Implementing Rules.[2]

The HDMF granted said bonus despite the advice on August 26, 1991 of Undersecretary Salvador Enriquez of the
Department of Budget and Management (DBM) to all government-owned and controlled corporations (GOCCs) and
government financial institutions (GFIs) with original charters performing proprietary functions to defer payment of the
productivity incentive bonus to their employees, pending the issuance of a definite ruling by the Office of the President
on the matter.[3]
On December 27, 1991, the Department of Labor and Employment and the Department of Finance issued the
Supplemental Rules Implementing Republic Act No. 6971, which provides, thus:
Section1.Paragraph(a)Section1,RuleIIoftheRulesImplementingRA6971,shallbeamendedtoreadasfollows:
Coverage.TheseRulesshallapplyto:
(a)Allbusinessenterpriseswithorwithoutexistingdulycertifiedlabororganizationsincludinggovernmentownedand
controlledcorporationsperformingproprietaryfunctionswhichareestablishedsolelyforbusinessorprofitorgainand
accordinglyexcludingthosecreated,maintainedoracquiredinpursuanceofapolicyofthestate,enunciatedintheconstitutionorby
law,andthosewhoseofficersandemployeesarecoveredbytheCivilService.(Emphasissupplied.)
On November 29, 1996, the grant of productivity incentive bonus to the HDMF personnel in the total amount of
P5,136,710.91 was disallowed in audit under Notice of Disallowance No. 96-006-101 (91).[4] The disallowance was based
on COA Decision No. 96-288, dated June 4, 1996, stating that Republic Act No. 6971 does not apply to governmentowned or controlled corporations or to government financial institutions with original charters performing
proprietary functions, such as the HDMF.[5]
In a letter-request dated May 28, 1997, HDMF, through its President and Chief Executive Officer, Zorayda Amelia C.
Alonzo, requested for the lifting of the disallowance.[6] Alonzo argued that Republic Act No. 6971 applies to the employees
of HDMF since the coverage of the said law includes government-owned and controlled corporations performing proprietary
functions, and the supplemental rules excluding it from coverage was issued after the HDMF had already granted the
productivity incentive bonus to its employees.
In its Decision No. 98-245[7] dated June 16, 1998, the Commission on Audit affirmed the audit disallowance. It
ruled, thus:
xxxxxxxxx
Appellant(petitionerherein)furtheraverredthatwhiletheSupplementalRulesImplementingR.A.No.6971issuedbytheDepartmentof
LaborandEmploymentandtheDepartmentofFinancedatedDecember27,1991,excludefromthecoverageofR.A.No.6971GOCCs
whoseofficersandemployeesarecoveredbytheCivilServiceLaw(liketheHDMF),paymentoftheincentivebonushavebeeneffected
priortotheissuanceofthesaidsupplementalrules.Simplystated,itisthepositionoftheappellantthatthesupplementalrulesshouldnot
begivenretroactiveeffect.
TheCommissionfindstheappellantsargumentsuntenable.ItmustbenotedthatthegrantoftheProductivityIncentiveBonuswasmade
onNovember21,1991orafterreceiptoftheadviceoftheDepartmentofBudgetandManagementUndersecretarydatedAugust26,1991
todeferpaymentofProductivityIncentiveBonustoallGOCCs/GFIswithoriginalchartersperformingproprietaryfunctions,pending
definiterulingoftheOfficeofthePresident.Despitethesaidnotice,managementproceededwiththepayment.
Likewise,theissueastowhetherornotGOCCs/GFIswithoriginalcharterswhichareperformingproprietaryfunctionsarecoveredby
R.A.No.6971hadbeenresolvedbytheSecretaryofJusticeinhisletterdatedNovember8,1995,statingthatGOCCswithoriginal
charter,beingcoveredbytheCivilServiceLaw,andnotbythelaborlaws,areclearlyoutsidetheambitofR.A.No.6971.
Verily,thegrantoftheincentivebonusiscontrarytotheSupplementalRulesImplementingR.A.No.6971issuedbytheDepartmentof
LaborandEmploymentandtheDepartmentofFinancedatedDecember27,1991,portionofwhichpertinentlyreadsasfollows:
Allbusinessenterprisesxxxestablishedsolelyforbusinessofprofitorgainandaccordingly,excludingthosecreated,maintainedor
acquiredinpursuanceofapolicyofthestate,enunciatedintheconstitutionorbylaw,andthosewhoseofficersandemployeesare
coveredbytheCivilService(underscoringsupplied).
Moreover,theissueraisedbytheappellantthatthesupplementalrulesexcludingGOCCs/GFIsfromthecoverageofR.A.No.6971
shouldnotbegivenretroactiveeffectisnottenablesincetheHDMFfromtheverybeginningisnotcoveredbytheaforesaidlaw.
Premisesconsidered,theauditdisallowanceisherebyaffirmed,andtherefundoftheamountofP5,136,710.91grantedasProductivity
IncentiveBonustoHDMFpersonnelbasedontheprovisionsofR.A.No.6971shallbeenforcedaccordingly.
HDMF filed a motion for reconsideration that was denied by the Commission on Audit in Resolution No. 2000-086
dated March 7, 2000. [8]
Hence, this petition.
Petitioner raises three issues:[9]
1. What is the applicable rule at the time of the grant of the Productivity Incentive Bonus?

2. Whether the Memorandum from the Department of Finance signed by Secretary Jesus P. Estanislao dated
January 16, 1992 constitutes appropriate authorization for the grant of Productivity Incentive Allowance
for 1991.
3. Whether the Supplemental Implementing Rules are valid? If so, whether it may be given retroactive
effect?
Petitioner contends that when it granted the productivity incentive bonus to its personnel on November 21, 1991, no
other rule but the Implementing Rules of Republic Act No. 6971 dated June 4, 1991 was in existence. Said Rule includes in
its coverage government-owned and controlled corporations performing proprietary functions, without any qualification. The
Supplementary Rules, which excluded petitioner from coverage, was issued only after it had already granted the productivity
incentive bonus to its personnel. Hence, the employees already acquired a vested right over the productivity incentive
bonus.
The contention is without merit.
Association of Dedicated Employees of the Philippine Tourism Authority (ADEPT) v. Commission on Audit,[10] held
that the legislature intended Republic Act No. 6971 to cover only government-owned and controlled corporations
incorporated under the general corporation law, thus:
PetitionercitesanentryinthejournaloftheHouseofRepresentativestobuttressitssubmissionthatPTAiswithinthecoverageofRA
6971,towit:
ChairmanVeloso:TheintentofincludinggovernmentownedandcontrolledcorporationswithinthecoverageoftheActisthe
recognitionoftheprinciplethatwhengovernmentgoesintobusiness,it(divests)itselfofitsimmunityfromsuitandgoesdowntothe
levelofordinaryprivateenterprisesandsubjectsitselftotheordinarylawsofthelandjustlikeordinaryprivateenterprises.Now,when
peopleworkthereforeingovernmentownedorcontrolledcorporations,itisasiftheyarealso,justlikeintheprivatesector,entitledtoall
thebenefitsofalllawsthatapplytoworkersintheprivatesector.Inmyview,evenincludingtherighttoorganize,bargainVELOSO
(BicameralConferencecommitteeonLaborandEmployment,pp.1516).
Afteracarefulstudy,theCourtisoftheview,andsoholds,thatcontrarytopetitionersinterpretation,thegovernmentownedand
controlledcorporationsMr.ChairmanVelosohadinmindweregovernmentownedandcontrolledcorporationsincorporatedunder
thegeneralcorporationlaw.Thisissobecauseonlyworkersinprivatecorporationsandgovernmentownedandcontrolled
corporations,incorporatedunderthegeneralcorporationlaw,havetherighttobargain(collectively).Thoseingovernmentcorporations
withspecialcharter,whicharesubjecttoCivilServiceLaws,havenorighttobargain(collectively),exceptwherethetermsand
conditionsofemploymentarenotfixedbylaw.Theirrightsanddutiesarenotcomparablewiththoseintheprivatesector.(Emphasis
supplied.)
xxxxxxxxx
Thelegislativeintenttoplaceonlygovernmentownedandcontrolledcorporationsperformingproprietaryfunctionsunderthecoverage
ofRA6971isgleanablefromtheotherprovisionsofthelaw.Forinstance,section2ofsaidlawenvisionsindustrialpeaceand
harmonyandtoprovidecorrespondingincentivestobothlaborandcapital;section4referstorepresentativesoflaborand
management,section5mentionsofcollectivebargainingagent(s)ofthebargainingunit(s);section6relatestoexistingcollective
bargainingagreements,andlaborandmanagement;section7speaksofstrikeorlockout;andsection9purportstoseekthe
assistanceoftheNationalConciliationandMediationBoardoftheDepartmentofLaborandEmploymentandincludethename(s)of
thevoluntaryarbitratororpanelofvoluntaryarbitrators.Alltheaforecitedprovisionsoflawapplyonlytoprivatecorporationsand
governmentownedandcontrolledcorporationsorganizedunderthegeneralcorporationlaw.Onlytheyhavecollectivebargaining
agents,collectivebargainingunits,collectivebargainingagreements,andtherighttostrikeorlockout.(Emphasissupplied.)
Torepeat,employeesofgovernmentcorporationscreatedbyspecialchartershaveneithertherighttostrikenortherighttobargain
collectively,asdefinedintheLaborCode.ThecaseofSocialSecuritySystemEmployeesAssociationindicatesthefollowingremedyof
governmentworkersnotallowedtostrikeorbargaincollectively,towit:
Governmentemployeesmay,therefore,throughtheirunionsorassociations,eitherpetitiontheCongressforthebettermentoftheterms
andconditionsofemploymentwhicharewithintheambitoflegislationornegotiatewiththeappropriategovernmentagenciesforthe
improvementofthosewhicharenotfixedbylaw.Iftherebeanyunresolvedgrievances,thedisputemaybereferredtothePublicSector
LaborManagementCouncilforappropriateaction.Butemployeesinthecivilservicemaynotresorttostrikes,walkoutsandother
temporaryworkstoppages,likeworkersintheprivatesector,topressuretheGovernmenttoaccedetotheirdemands.(supra,footnote
14,p.698;italicsours)
Itisaruleinstatutoryconstructionthateverypartofthestatutemustbeinterpretedwithreferencetothecontext,i.e.,thateverypartof
thestatutemustbeconsideredtogetherwiththeotherparts,andkeptsubservienttothegeneralintentofthewholeenactment.The
provisionsofRA6971,takentogether,revealthelegislativeintenttoincludeonlygovernmentownedandcontrolledcorporations
performingproprietaryfunctionswithinitscoverage.
Petitioner is a government-owned and controlled corporation performing proprietary functions with original
charter or created by special law, specifically Presidential Decree (PD) No. 1752,[11] amending PD No. 1530. As such,
petitioner HDMF is covered by the Civil Service pursuant to Article IX, Section 2(1)[12] of the 1987 Constitution, and,
therefore, excluded from the coverage of Republic Act No. 6971.
Since Republic Act No. 6971 intended to cover only government-owned and controlled corporations
incorporated under the general corporation law, the power of administrative officials to promulgate rules in the

implementation of the statute is necessarily limited to what is intended and provided for in the legislative
enactment.[13] Hence, the Supplemental Rules clarified that government-owned and controlled corporations
performing proprietary functions which are created, maintained or acquired in pursuance of a policy of the state,
enunciated in the constitution or by law, and those whose officers and employees are covered by the Civil Service
are excluded from the coverage of Republic Act No. 6971.
Therefore, even if petitioner HDMF granted the Productivity Incentive Bonus before the Supplemental Rules
were issued clarifying that petitioner was excluded from the coverage of Republic Act No. 6971, the employees of
HDMF did not acquire a vested right over said bonus because they were not entitled to it under Republic Act No.
6971.
Moreover, the DBM advised petitioner herein, HDMF, on August 26, 1991, to defer payment of the productivity
incentive bonus to their employees, pending the issuance of a definite ruling by the Office of the President on the matter.
Despite said advice, the Board of Trustees of HDMF opted to grant the said bonus on a voluntary basis as stated in its
Resolution No. 91-549, Series of 1991.[14] It expressed its concern over the welfare of the officers and employees of the
Fund rather than adhering to the stringent technicality of the law. The Board, therefore, was aware that possibly HDMF
may not be covered by Republic Act No. 6971. It should have exercised prudence by awaiting the definite ruling on
the coverage to prevent legal problems.
Regarding the validity of the Supplemental Rules Implementing Republic Act No. 6971, ADEPT v. Commission
on Audit held that said rules issued by the Secretary of Labor and Employment and the Secretary of Finance were in
accord with the intendment and provisions of Republic Act No. 6971.[15]
Petitioner further claims that it is covered by a memorandum,[16] dated January 16, 1992, which was allegedly
issued by Secretary Jesus P. Estanislao, Department of Finance, stating that [a]s authorized by the President, the GFIs are
to pay the traditional PIA at the year-end 1991, following the standard formulas that have been observed by the GFIs over the
years. Petitioner raises as an issue whether or not said memorandum constitutes appropriate authorization for its grant of
productivity incentive allowance for 1991.
Parenthetically, the decision of the Commission on Audit subject of the petition herein, never discussed the aforesaid
memorandum. The same, in any case, cannot prevail over the law.
Petitioner finally asserts that its payment of the productivity incentive bonus to its personnel and the latters
acceptance of the same was in good faith and cites ADEPT v. Commission on Audit as precedent against a refund of said
bonus.
In ADEPT v. Commission on Audit, docketed as G.R. No. 119597, the Court sustained the decision of the Commission
on Audit affirming the disallowance by the Corporate Auditor of the productivity incentive bonus granted to ADEPT (an
association of employees of the Philippine Tourism Authority) for calendar year 1992 pursuant to Republic Act No. 6971.
ADEPT v. Commission on Audit was consolidated with four other cases, which did not involve the application of Republic Act
No. 6971. It was in the other cases, docketed as G.R. Nos. 109406, 110642, 111494 and 112056, that the Court enjoined
further deductions from the salaries and allowances of petitioners therein.
In view of the foregoing, the respondent Commission on Audit did not commit grave abuse of discretion amounting to
lack of jurisdiction in affirming the audit disallowance.
WHEREFORE, the petition is DISMISSED. Respondent Commission on Audits Resolution No. 2000-086, dated
March 7, 2000, which affirmed COA Decision No. 98-245, dated June 16, 1998, is hereby AFFIRMED.
Costs de oficio.
SO ORDERED.