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BOOK FIVE

LABOR RELATIONS
Title I
POLICY AND DEFINITION
Chapter I
POLICY
Overview/Key Questions:
Box 1
1. What are the policy objectives of our labor relations
law?
2. Employer-employee relationship must exist so that
labor relations law may apply within an enterprise. What
factors determine the existence of such relationship?
3. What are considered labor disputes? What are the
available remedies?
ART. 2 1 1 . DECLARATION OF POLICY
A.
It is the policy of the State:
(a) To promote and emphasize the primacy of free collective
bargaining and negotiations, including voluntary arbitration, mediation and
conciliation, as modes of settling labor or industrial disputes;
(b) To promote free trade unionism as an instrument for the
enhancement of democracy and the promotion of social justice and
development;
(c) To foster the free and voluntary organization of a strong and
united labor movement;
(d) To promote the enlightenment of workers concerning their
rights and obligations as union members and as employees;
(e) To provide an adequate administrative machinery for the
expeditious settlement of labor or industrial disputes;
(f) To ensure a stable but dynamic and just industrial peace; and
(g) To ensure the participation of workers in decision and policyn&aking processes affecting their rights, duties and welfare.
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LABOR RELATIONS

B.
To encourage a truly d e m o c r a t i c m e t h o d of regulating the
relations between the employers and employees by means of agreements
freely entered into through collective bargaining, no court or administrative
agency or official shall have the power to set or fix wages, rates of pay, hours
of work or other terms and conditions of employment, except as otherwise
provided under this Code.
COMMENTS AND CASES
1.

OVERVIEW AND VIEWPOINT


In the opening comments to the Preliminary Title in Volume I, it is said
that labor legislation is divided broadly into labor standards and labor relations.
"Labor Standards" refers to the minimum terms and conditions of employment
to which employees are legally entitled and with which employers must comply.
"Labor Relations" refers to the interactions between employer and employees
or their representatives and the mechanism by which the standards and other
terms and conditions of employment are negotiated, adjusted and enforced.
Thus defined, Books I to IV of the Code deal largely with standards and V to VII
with relations.
What is the "correct" sequence of studying the books? This is just a question
of instructional sequence which is not of great importance because the distinction
between labor standard and labor relation is in fact academic. T h e distinction
does not matter, for instance, when an employer and the employees negotiate a
labor contract, or when an employee files a complaint with a government agency.
Negotiating a contract and filing a complaint are aspects of labor relations but
their subjects oftentimes are labor standards. Similarly, the government body
that hears and decides labor disputes, in general, whether involving money
claims or anti-union acts, is called "labor relations" commission and not "labor
standards and relations" commission. Labor standards and labor relations actually
intertwine; they are not mutually exclusive.
What follows is a perspective of labor relations in the private sector.
T h e government labor relations policy is declared in Article 211 which is
a focused elaboration of the basic labor policy announced in Article 3 which,
in turn, echoes the constitutional mandates. T h e policy intends to attain social
justice through industrial peace and progress. T h e latter is significantly founded
on employee participation and collective interactions between employer and
employees. In Management parlance, the input is the parties' rights and duties,
the process is workers' organization and collective bargaining, and the output
is industrial peace and progress towards social justice as the end goal.
As in political democracy the crux of labor relations is the process and
substance of employee participation, that is, how rights and duties are exercised,
how agreements are reached, and how relationship is enhanced.
The process starts when workers organize themselves into a union or some
other form of association. They may or may not register their organization with
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ART. 211

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

voluntary basis. Subject to the minimum requirements of wage laws


and other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the process
of collective bargaining..." (SSS Employees Association vs. Court of Appeals, 175
SCRA 686 [1989].)
The inter-party character of labor relations is likewise the reason the legal
policy prefers voluntary instead of compulsory modes of dispute settlement. The
government steps in only when the parties themselves fail to reach an agreement,
or when one disregards the defined rights of the other, such as when the employer
busts the union or commits other form of "unfair labor practice" or when, for
instance, the union blockades the company gate.
Because labor relations are primarily "domestic," third parties, even the
Government, shy away from meddling, as much as it can be helped. This is
why an in-house problem-solving structure, called grievance machinery, is a
requirement in CBAs. If this machinery fails, the parties themselves are free to
select any third party, called voluntary arbitrator, to resolve their differences. The
company is a house where the employer and employees are the family members.
Although it is the government that sets the legal boundaries, the real parties-ininterest are the employer and employees. If the parties are observing the legal
boundaries, the government, if not invited in, is an intruder. This, finally, is the
reason a restraining order or injunction from government is frowned upon in
labor disputes; if such an order must issue at all, it will have to pass through a
strict procedural route.
But when the dispute, whether it be a lockout, a strike, a picket, or any
form of "concerted activities," violates the rights of others or is accompanied
by violence or other illegal acts in a word, when the legal boundaries are
transgressed then the injunctive power of the State may be invoked. In
fact, it need not be invoked when the Secretary of Labor, on his own volition,
decides to use the state's restraining power when the dispute puts national
interest at stake. In that situation, the Secretary or even the President may
either "assume jurisdiction" or "certify" the case to NLRC. Either action has
the effect of compulsory arbitration which maintains the status quo while the
government tries to resolve the dispute.
T h e laws, as a force that balances the parties' rights and obligations, are
admittedly necessary in the industrial setting. This is because, according to
the Civil Code in Article 1700, "the relations between capital and labor are
not merely contractual" and "they are so impressed with public interest that
labor contracts must yield to the common good." But, still, industrial or labor
relations are, in fine, human relations. It is not a lawyers' invention and need
not be a lawyers' game. T h e labor law prescriptions will "naturally" follow if the
parties would only adhere to the civil law precept of human relations which
succinctly states: "Every person must, in the exercise of his rights and in the
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performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."
1

2.

WORKERS' ORGANIZATION

A labor or trade union is a combination of workmen organized for


the ultimate purpose of securing through united action the most favorable
conditions as regards wages, hours of labor, conditions of employment, etc.,
for its members.
2

All combinations or associations, although concerned with labor matters,


are not necessarily labor unions as they are commonly conceived. Many
associations or groups of employees, or even combinations of only several persons,
may qualify as labor organizations yet fall short of constituting a labor union. In
the popular sense a labor union is understood to be a completely organized body
of dues-paying members, operating through elected officers and constituting
a militant, vital and functioning organ. It may be said that while every labor
union is a labor organization, not every labor organization is a labor union. The
difference is one of organization, composition and operation.
3

3.

WHY WORKERS ORGANIZE

The basic urge which leads workers to organize, the spark which gave
unions life and the power of growth under favorable conditions, is the human
drive toward self-advancement.
Self-help through economic action necessarily requires increasing the
bargaining power of employees; hence, one of the basic purposes of a labor
union is to eliminate competition among employees in the labor market. The
labor union seeks to exercise the power of a monopolist. T h e growth of the
large corporation diminished the bargaining power of the individual worker
to such an extent that talk of freedom of individual contract became an empty
slogan. Thus, the near-monopoly which the union obtains is often opposed by
the near-monopoly of the large corporation which is the only buyer of labor in
a local market.
Three other human desires should be noted among the forces that led
workers to organize. (1) One is the desire for j o b security. Skilled craftsmen
organized in order to secure control over available jobs so as to hold them against
the competition of unskilled immigrants. (2) Employees wished to substitute
what we should term "the rule of law" for the arbitrary and often capricious
exercise of power by the boss. Forty years ago, a foreman could discharge an
employee for any reason or no reason. Labor unions have subordinated this
absolute power to the rules set forth in collective agreements, and administration
'Article 19, Civil Code.
31 Am. Jur., Sec. 30, pp. 848-849.
I. Herbert Rothenberg, Rothenberg on Labor Relations [New York, 1949], p. 3.

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LABOR RELATIONS

ART. 211

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


the regulation of discipline is typical of what has occurred throughout life in
industrial establishments. (3) Finally, unions helped to give employees a sense
of participation in the business enterprises of which they are part a function
of labor unions which became important as organizations spread into mass
production industries.
The union is the recognized instrumentality and mouthpiece of the
laborers. Only through the union can the laborers exercise the right of collective
bargaining and enjoy other privileges. Without the union, laborers are impotent
to protect themselves against 'the reaction of conflicting economic changes' and
maintain and improve their lot.
However, it is unlawful for workmen to combine and to control the business
of the employer in matters not affecting the terms of their own hiring.
1

4. ILO CONVENTION NO. 87


We explained in Volume I (under the Preliminary Tide) that the Philippines
is a member of the International Labor Organization whose Conventions, when
ratified, become binding laws. One of these is ILO Convention No. 87.
Convention No. 87 of the International Labor Organization (effective July
4, 1950), provides in part:
Article 2 Workers and employers, without distinction whatsoever, shall
have the right to establish and, subject only to the rules of the organization
concerned, to j o i n organizations of their own choosing without previous
authorization.
Article 3 (1) Workers' and employers' organizations shall have the right
to draw up their constitutions and rules, to elect their representatives in full
freedom, to organize their administration and activities and to formulate their
programmes.
(2) T h e public authorities shall refrain from any interference which
would restrict this right or impede the lawful exercise thereof.
Article 8 (1) In exercising the rights provided for in this Convention,
workers and employers and their respective organizations, like other persons or
organized collectivities, shall respect the law of the land.
(2) T h e law of the land shall not be such as to impair, nor shall it be so
applied as to impair, the guarantees provided for in this Convention.

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

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POLICY

5.

ART. 211

WORKERS' PARTICIPATION IN POLICY-MAKING

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

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C h a p t e r II

DEFINITIONS
ART. 212. DEFINITIONS
(a) "Commission'' means the National Labor Relations Commission
or any of the divisions, as the case may be, as provided under this Code.
(b) "Bureau" means the Bureau of Labor Relations a n d / o r the Labor
Relations Divisions in the regional offices established under Presidential
Decree No. 1, in the Department of Labor.
(c) "Board" means the National Conciliation and Mediation Board
established under Executive O r d e r No. 126.
(d) "Council" means the Tripartite Voluntary Arbitration Advisory
Council established under Executive O r d e r No. 126, as amended.
(e) "Employer" includes any person acting in the interest of an
employer, directly or indirectly. T h e t e r m shall not include any labor
organization or any of its officers or agents except when acting as employer.
(f)
"Employee" includes any person in the employ of an employer.
The term shall not be limited to the employees of a particular employer,
unless this Code so explicitly states. It shall include any individual whose
work has ceased as a result of or in connection with any current labor dispute
or because of any unfair labor practice if he has not obtained any other
substantially equivalent and regular employment.
(g) "Labor organization" means any union or association of employees
which exists in whole or in part for the purpose of collective bargaining or
of dealing with employers concerning terms and conditions of employment.
(h) "Legitimate labor organization" means any labor organization
duly registered with the Department of Labor and Employment, and includes
any branch or local thereof.
(i)
"Company union" means any labor organization whose formation,
function or administration has been assisted by any act defined as unfair
labor practice by this Code.
(j)
"Bargaining representative" means a legitimate labor organization
or any officer or agent of such organization whether or not employed by the
employer.

16

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

DEFINITIONS

ART. 212

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


expressly defined by this Code.
(1)
"Labor dispute" includes any controversy or matter concerning
terms or conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing or arranging the terms
and conditions of employment, regardless of whether the disputants stand
in the proximate relation of employer and employee.
( m ) "Managerial employee" is one who is vested with powers or
prerogatives to lay down and execute management policies a n d / o r to hire,
transfer, suspend, lay off, recall, discharge, assign or discipline employees.
Supervisory employees a r e those who, in the interest of the employer,
effectively r e c o m m e n d such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use
of independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.
(n) "Voluntary Arbitration" means any person accredited by the Board
as such, or any person named or designated in the Collective Bargaining
Agreement by the parties to act as their Voluntary Arbitrator, or one chosen
with or without the assistance of the National Conciliation and Mediation
Board, pursuant to a selection procedure agreed upon in the Collective
Bargaining Agreement, or any official that may be authorized by the Secretary
of Labor and Employment to act as Voluntary Arbitration upon the written
request and agreement of the parties to a labor dispute.
(o) "Strike" means any temporary stoppage of work by the concerted
action of employees as a result of an industrial or labor dispute.
(p) "Lockout" means the temporary refusal of an employer to furnish
work as a result of an industrial or labor dispute.
(q)
"Internal union dispute" includes all disputes or grievances arising
from any violation of or disagreement over any provision of the constitution
and by-laws of a union, including any violation of the rights and conditions
of union membership provided for in this Code.
(r)
"Strike-breaker" means any person who obstructs, impedes,
or interferes with by force, violence, coercion, threats or intimidation any
peaceful picketing by employees during any labor controversy affecting
wages, hours or conditions of work or in the exercise of the right of selforganization or collective bargaining.
(s)
"Strike area" means the establishment, warehouses, depots,
plants or offices, including the sites or premises used as runaway shops, of
the employer struck against, as well as the immediate vicinity actually used
by picketing strikers in moving to and fro before all points of entrance to
and exit from said establishment.
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ART. 212

LABOR RELATIONS

COMMENTS AND CASES


The following comments and cases for this opening chapter of definitions
will deal only with "employee," "employer," and "labor disputes." The other
terms defined in the above article will be taken up in the chapters where they
belong.
1.

EMPLOYER-EMPLOYEE RELATIONSHIP ESSENTIAL


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

ART. 212

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

2.

WHO ARE EMPLOYEES


The term "employee":
(1)

shall include any employee

(2) and shall not be limited to the employee of any particular employer,
unless the Act explicitly states otherwise
(3)

and shall include any individual

(a) whose work has ceased as a consequence of, or in connection with,


any current labor dispute
(b) and who has not obtained any substantially equivalent and regular
employment.
2

This definition, like the definition of the term 'employer' by the use of the
term 'include,' is complementary. It embraces not only those who are usually and
ordinarily considered employees, but also those who have ceased as employees
as a consequence of a labor dispute. T h e term 'employee,' furthermore, is not
limited to those of a particular employer. The Court in the case Angat River
Irrigation System, et al. vs. Angat River Workers' Union (PLUM), et al, has defined
the term 'employer' as "one who employs the services of others; one for whom
employees work and who pays their wages or salaries." Correlatively, an employee
must be one who is engaged in the service of another; who performs services
for another; who works for salary or wages.
3

The definitions in D.O. No. 40-03 (March 15, 2003) which constitutes the
Implementing Rules of Book V of the Labor Code states:
"Employee" refers to any person working for an employer. It includes one
whose work has ceased in connection with any current labor dispute or because
'See related discussion in Book III, Volume I of this work.
'Article 212 [f]; Feati University vs. Bautista, 18 SCRA 1190, 1215.
Feati University vs. Bautista, L-21278, December 27, 1966, 18 SCRA 1191.
3

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LABOR RELATIONS

ART. 212

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

2.1

"One Whose Work Has Ceased..."

The definition in Article 212(f) further states that the term "employee"
includes any individual whose work has ceased as a result of, or in connection
with any unfair labor practice if he has not obtained any other substantially
equivalent and regular employment.
Gothenburg, commenting on a similar provision of the National Labor
Relations Act and citing many authoritative cases, maintains that the participation
of an employee in a strike does not remove him from the status of "employee."

Cessation of work due to strike or lockout, or to dismissal or suspensions


constituting unfair labor practices, does not in itself affect the "employee" status,
in the sense that the rights and benefits of the employee are protected as though
there had been no interruption of service, effective upon actual return to work.
Thus, a striker may not be deprived of a bonus merely because he had taken part
in a strike. Generally, upon reinstatement of one whose dismissal constituted an
unfair labor practice, he is entitled to backwages, seniority and other rights, in
order to make whole his loss as a result of the employer's unlawful act.
3

3.

LABOR ORGANIZATION AS EMPLOYER

Exceptionally, a labor organization may be deemed an "employer" when it is


acting as such in relation to persons rendering services under hire, particularly in
connection with its activities for profit or gain. An organization may be ostensibly
a labor union, but it may attain the status of an ordinary business concern in the
1

20

Associated Labor Union vs. Borromeo, 26 SCRA 88 [1968].


Rothenberg on Labor Relations, p. 338.
PAL vs. PALEA, 19 SCRA 483 [1987].

DEFINITIONS

ART. 212

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


a stevedoring and arrastre business under contracts with various shipping firms,
with an organizational structure, operational systems and facilities similar to those
of independent contractors engaged in the same line of business, is already a
business entity, hence, an "employer" of laborers under its hire.
1

The mere fact that the respondent is a labor union does not mean that
it cannot be considered an employer of the persons who work for it. Much less
should it be exempted from the very labor laws which it espouses as a labor
organization. In the case at bar, the Regional Director correctly found that the
petitioner was an employee of the respondent union as reflected in the latter's
individual payroll sheets and shown by the petitioner's membership with the
Social Security System (SSS) and the respondent union's share of remittances
in the petitioner's favor ... Bautista was selected and hired by the Union. He
was paid wages by the Union. ALU had the power to dismiss him as indeed it
dismissed him. And definitely, the Union tightly controlled the work of Bautista
as one of its organizers.
2

4.

LABOR DISPUTE

T h e mere fact that the disputants do not stand in the proximate or


reciprocal relation of employer and employee does not remove the dispute
from the category of labor dispute. T h e test of whether a labor controversy
comes within the definition of a labor dispute depends on whether it involves
or concerns terms, conditions of employment or representation. So a strike to
compel dismissal of an antagonistic supervisor; or a controversy over seniority
rights; or a dispute over an asserted duty to work on legal holidays, fall within
the category of labor disputes. Any bona fide controversy concerning wage, hours
or conditions of work or representation constitutes a labor dispute within the
meaning of the Act. To qualify for that status, the controversy must involve or
concern the terms and conditions of employment or pertain to the issue of
representation.
3

Even the question of employer-employee relationship can be considered


a "labor dispute."
San Miguel Corporation Employees Union-PTGWO, et al. vs. Hon. Jesus G. Bersamira,
as Presiding Judge of Branch 166 RTC, Pasig and San Miguel Corporation, G.R.
No. 87700, June 13, 1990
Facts: San Miguel Corporation (SMC) entered into contracts for merchandising
services with Lipercon and D'Rite which are independent contractors duly licensed
by the DOLE. It was agreed that the workers employed by the contractors would not
be deemed employees or agents of SMC.
'Allied Free Workers Union vs. Cia. Maritima, 19 SCRA 258, 271.
Bautista vs. Inciong, G.R. No. 52824, March 16, 1988.
3Rothenberg on Labor Relations, p. 344.

21

ART. 212

LABOR RELATIONS

Petitioner San Miguel Corporation Employees Union-PTGWO is the union


of the monthly paid rank-and-file employees. Their CBA provides that "temporary,
probationary or contractual employees and workers are excluded from the bargaining
unit and, therefore, outside the scope of this Agreement." Despite this provision, the
Union advised SMC that some Lipercon and D'Rite workers had joined the union
and should be treated as SMC employees. Not getting a favorable response from
SMC, the Union filed a notice of strike for unfair labor practice.
SMC filed a Complaint for Injunction and Damages before the Regional Trial
Court of Pasig to enjoin the Union from representing the employees of LIPERCON
and/or D'RITE for the purpose of collective bargaining. The Court issued an Order
enjoining the Union from committing the acts complained of.
The Union argued that the controversy involved a labor dispute pending with
the NCMB-DOLE, and was thus beyond the regular court's jurisdiction. On the
other hand, SMC denied the existence of any employer-employee relationship and,
consequently, of any labor dispute between the company and the Union.
Ruling: A labor dispute exists. While it is San Miguel's submission that no
employer-employee relationship exists between itself, on the one hand, and the
contractual workers of Lipercon and D'Rite, on the other, a labor dispute can
nevertheless exist "regardless of whether the disputants stand in the proximate
relationship of employer and employee" (Article 212[1], Labor Code), provided
the controversy concerns, among others, the terms and conditions of employment
or a "change" or "arrangement" thereof. Put differently, and as defined by law,
the existence of a labor dispute is not negatived by the fact that the plaintiffs and
defendants do not stand in the proximate relation of employer and employee.
That a labor dispute, as defined by law, does exist herein is evident. At bottom,
what the Union seeks is to regularize the status of the employees contracted by
Lipercon and D'Rite and, in effect, that they be absorbed into the working unit of
San Miguel. This matter definitely dwells on the working relationship between said
employees vis-a-vis San Miguel. Terms, tenure and conditions of the employment
and the arrangement of those terms are thus involved, bringing the matter within
the purview of a labor dispute.
As the case is indisputably linked with a labor dispute, jurisdiction belongs to
the labor tribunals.
5.

LABOR DISPUTES AND REMEDIES: A SUMMARY


5.1

Definition

"Labor Dispute" includes any controversy or matter concerning terms or


conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing or arranging the terms and conditions
of employment, regardless of whether the disputants stand in the proximate
relation of employer and employee.
1

1Article 212[1].
22

DEFINITIONS

5.2

ART. 212

Tests or Criteria of "Labor Dispute"

A.
Nature: Dispute arises from employer-employee relationship,
although disputants need not be proximately "employee" or "employer" of the
other.
B.
Subject matter: Dispute concerns (1) terms or conditions of employment; or (2) association or representation of persons in negotiating, fixing,
maintaining, or changing terms or conditions of employment.
5.3

Kinds of Labor Disputes

A.
Labor Standards Disputes: (as defined in D O L E Guidelines, 16
September 1987).
(1)

Compensation Examples: Underpayment of minimum wage;


stringent output quota; illegal pay deductions

(2)

Benefits Examples: nonpayment of holiday pay, overtime pay, or


other benefits

(3)

Working conditions Example: unrectified work hazards

B.

Labor Relations Disputes:

(1)

Organizational

Right Dispute/ULP

Examples: coercion, restraint or interference in unionization efforts;


reprisal or discrimination due to union activities; company unionism;
ULP strike or lockout; union members' complaint against union
officers
(2)

Representation Disputes
E x a m p l e s : U n c e r t a i n t y as to which is the majority union;
determination of appropriate collective bargaining unit; contest for
recognition by different sets of officers of same union;

(3)

Bargaining Disputes
Examples: Refusal to bargain ( U L P ) ; bargaining in bad faith;
bargaining deadlock; economic strike or lockout

(4)

Contract Administration or Personnel Policy Disputes


Examples: Noncompliance with CBA provision (ULP if gross
noncompliance with economic provisions); disregard of grievance
machinery; nonobservance or unwarranted use of union security
clause; illegal or unreasonable personnel management policies;
violation of no-strike/no-lockout agreement.

(5)

Employment Tenure Disputes


Examples: Nonregularization of employees; nonabsorption of
labor-only contracting staff; illegal termination; non-issuance of
employment contract.

23

ART. 212

LABOR RELATIONS

5.4 Remedies in Labor Disputes


A.
Grievance Procedure in-house adjustment of complaint, problem,
or dispute following the steps prescribed in CBA or company policy.
B.
Conciliation (literally means "to draw together") a process where a
disinterested third party meets with management and labor, at their request or
otherwise, during a labor dispute or in collective bargaining conferences, and,
by cooling tempers, aids in reaching an agreement.
C.
Mediation (literally means "to be in the middle") a third party studies
each side of the dispute then makes proposal for the disputants to consider.
But a mediator, like a conciliator, cannot render an award or render a decision;
they do not adjudicate. Conciliation and mediation, usually combined, are done
primarily by "Conciliators-Mediators" of the National Conciliation and Mediation
Board.
D.
Enforcement or compliance order an act of the Secretary of Labor
(through Regional Director or other representatives) in the exercise of his
visitorial or administrative authority to enforce labor laws, policies, plans, or
programs, or rules and regulations.
1

E.
Certification of bargaining representatives determination of which
contending unions shall represent employees in collective bargaining. This
is handled by "Med-Arbiters" of DOLE Regional Offices after certification or
consent elections.
F.
Arbitration the submission of a dispute to an impartial person for
determination on the basis of evidence and arguments of the parties. Arbitration,
unlike conciliation or mediation, is adjudication and the arbitrator's decision or
award is enforcible upon the disputants. A dispute pending in arbitration cannot
be a ground for strike or lockout; to do so will be a sabotage of the arbitration
process.
"Voluntary" if submission of the dispute is by agreement of the
parties and the arbitrators or panel of arbitrators is chosen by them. Voluntary
Arbitration is done, of course, by "voluntary arbitrators."
"Compulsory" if submission of the dispute is by directive of law. Unlike
a conciliator or a mediator, an arbitrator is a judge; he makes decisions and
awards that the parties must accept. Compulsory Arbitration is done primarily
by "Labor Arbiters" of the NLRC.
In voluntary arbitration (VA), the award is final and unappealable, except
through certiorari.
In compulsory arbitration (CA), the decision is appealable to NLRC, then
to the Court of Appeals, thru special civil action of certiorari.

1Article 128.
24

DEFINITIONS

ART. 212

G.
Assumption of jurisdiction an authority vested by law to the
Secretary of Labor or the President to decide a dispute causing or likely to
cause a strike or lockout in an industry indispensable to national interest.
1

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

Article 263.
'Article 236.
25

ART. 212

LABOR RELATIONS

L.
Review by court No law allows appeal from a decision of the
Secretary of Labor, or of the NLRC, or of a Voluntary Arbitrator. In these cases
the petition for certiorari, prohibition, or mandamus (Rule 65, Rules of Court)
may be lodged with the Supreme Court or the Court of Appeals. The grounds
for petition for certiorari and/or prohibition are abuse of discretion, or lack or
excess of jurisdiction.
M.
Compromise agreement in any stage of any of these settlement
processes, the labor dispute may be resolved by the parties through a compromise
agreement, provided that the agreement is freely entered into and is not contrary
to law, moral, or public policy. A compromise agreement is also subject to
approval of the authority before whom the case is pending. Even a labor standards
case can be settled through a compromise.
1

'Article 227.
26

Title II
NATIONAL LABOR RELATIONS COMMISSION
Chapter I
CREATION AND COMPOSITION
Overview/Key Questions:
Box 2
1. What is the NLRC?
2. Is the NLRC independent of the Department of Labor
and Employment?
3. How is the NLRC's adjudicatory power distributed?

ART. 2 1 3 . NATIONAL LABOR RELATIONS COMMISSION


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

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

ART. 213

LABOR RELATIONS

Commission shall exercise its adjudicatory and all other powers, functions,
and duties through its divisions. Of the eight ( 8 ) divisions, the first, second,
third, fourth, fifth and sixth divisions shall handle cases coming from the
National Capital Region and other parts of Luzon: and the seventh and eighth
divisions, cases from the Visayas and Mindanao, respectively; Provided, That
the Commission sitting en banc may, on temporary or emergency basis, allow
cases within the jurisdiction of any division to be heard and decided by any
other division whose docket allows the additional workload and such transfer
will not expose litigants to unnecessary additional expense. T h e divisions of
the Commission shall have exclusive appellate jurisdiction over cases within
their respective territorial jurisdiction. (As amended by R A . No. 7 7 0 0 [May
1, 1994] and R A . No. 9 3 4 7 , effective August 2 6 , 2 0 0 6 ) .
The concurrence of two ( 2 ) Commissioners of a division shall be
necessary for the pronouncement of a judgment or resolution. Whenever the
required membership in a division is not complete and the concurrence of two
(2) Commissioners to arrive at a judgment or resolution cannot be obtained,
the Chairman shall designate such number of additional Commissioners
from the other divisions as may be necessary.
The conclusions of a division on any case submitted to it for decision
shall be reached in consultation before the case is assigned to a member for
the writing of the opinion. It shall be mandatory for the division to meet for
purposes of the consultation ordained herein. A certification to this effect
signed by the Presiding Commissioner of the division shall be issued, and a
copy thereof attached to the record of the case and served upon the parties.
The Chairman shall be the Presiding Commissioner of the first division,
and the seven (7) other members from the public sector shall be the Presiding
Commissioners of the second, third, fourth, fifth, sixth, seventh and eighth
divisions, respectively. In case of the effective absence or incapacity of the
Chairman, the Presiding Commissioner of the second division shall be the
Acting Chairman.
The Chairman, aided by the Executive Clerk of the Commission, shall
have exclusive administrative supervision over the Commission and its
regional branches and all its personnel, including the L a b o r Arbiters.
T h e Commission, when sitting en banc, shall be assisted by the same
Executive Clerk, and, when acting thru its Divisions, by said Executive Clerk
for its first division and seven ( 7 ) other Deputy Executive Clerks for the
second, third, fourth, fifth, sixth, seventh, and eighth Divisions, respectively,
in the performance of such similar or equivalent functions and duties as are
discharged by the Clerk of Court and Deputy Clerks of Court of the Court
of Appeals.
28

CREATION AND COMPOSITION

ART. 214

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


Commission Attorneys in its Appellate and adjudicatory functions whose
terms shall be coterminous with the Commissioners with whom they are
assigned. T h e Commission Attorneys shall be members of the Philippine
B a r with at least one ( 1 ) year experience or exposure in the field of labormanagement relations. They shall receive annual salaries and shall be entitled
to the same allowances and benefits as those falling under Salary Grade
twenty-six (SG 2 6 ) . T h e r e shall be as many Commission Attorneys as may
be necessary for the effective and efficient operations of the Commission
but in no case m o r e than three ( 3 ) assigned to the Office of the Chairman
and each Commissioner.
No L a b o r Arbiter shall be assigned to p e r f o r m the functions of the
Commission Attorney n o r detailed to the office of any commissioner.
ART. 214. HEADQUARTERS, BRANCHES AND PROVINCIAL EXTENSION
UNITS.
T h e Commission and its first, second, third, fourth, fifth and sixth
divisions shall have their main offices in Metropolitan Manila, and the
seventh and eighth divisions in the cities of Cebu and Cagayan de O r o ,
respectively. T h e Commission shall establish as many regional branches as
there are regional offices of the Department of L a b o r and Employment,
sub-regional branches or provincial extension units. T h e r e shall be as many
labor arbiters as may be necessary for the effective and efficient operation
of the Commission. [As amended by R A . N o . 9 3 4 7 , effective August 26,
2006.]
COMMENTS AND CASES
1.

NLRC: NATURE AND ORGANIZATION

1.1 Creation and Autonomy


Before the advent of the Labor Code the labor court was the Court of
Industrial Relations. When martial law was declared in September 1972, PD No.
21 (October 14,1972) abolished the CIR and replaced it with an ad hoc National
Labor Relations Commission. This NLRC was short-lived as it gave way to the
NLRC which the Labor Code created in 1974.
The Code originally envisaged the National Labor Relations Commission
as an integral part of the Department of Labor and Employment. It said that
"There shall be a National Labor Relations Commission in the Department of
Labor and Employment, x x x" But Republic Act No. 6715 (March 21, 1989)
introduced a number of amendments, one of which declared that, "There
shall be a National Labor Relations Commission which shall be attached to the
Department of Labor and Employment for program coordination only..."
29

ARTS. 213-214

LABOR RELATIONS

1.2 Administrative Supervision Delegated to the DOLE Secretary


The limiting phrase "for program coordination only" in the first paragraph
of Article 213 did not hinder the issuance of Executive Order No. 204, dated May
5, 2005, by President Gloria Macapagal Arroyo. Premised on the presidential
power to "have control of all the executive departments, bureaus and offices"
under the constitution, the Executive Order delegated to the Secretary of Labor
"administrative supervision over the NLRC, its regional branches and all its
personnel." The Order cited two objectives: (1) to further improve the rate of
disposition of cases and (2) to enhance existing measures for the prevention of
graft and corruption in the NLRC.
In the exercise of the delegated authority the Secretary was tasked to:
"enhance existing measures within the agency, or initiate new ones,
to prevent graft and corruption, x x x" and including such measures as
management audit, performance evaluations and inspections to determine
compliance with policies, standards and guidelines;
"to investigate, on its own or upon complaint, matters involving
disciplinary action against any presidential appointees in the NLRC in
accordance with existing law and regulations."
The delegation of authority, the Executive Order stated, did not extend
to the power to review, reverse, revise, or modify decisions of the NLRC in the
exercise of its judicial functions.
After E.O. No. 204 was issued, a new Acting NLRC chairman was appointed.
But he did not last long in office because a new chairman was appointed as a new
law took effect. Republic Act No. 9347, without presidential signature, lapsed
into law on July 27, 2006 because of the constitutional provision that a bill "shall
become a law" if not vetoed by the President within 30 days from receipt. It was
published, according to NLRC, on August 11, 2006.
R.A. No. 9347 is incorporated in Articles 213 through 216 as here worded. It
reiterates that the NLRC is attached to DOLE "solely" (repeated in the word "only")
for program and policy coordination. It likewise elevates to the Court-of-Appeals
level the qualifications, pay, perquisites, and rank of the NLRC commissioners
whose number is increased from 15 to 24 in eight divisions instead of five.
1.3

Essential Character

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

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


30

CREATION AND COMPOSITION

1.4

ARTS. 213-214

Tripartite Composition

Another amendment by R.A. No. 6 7 1 5 is the restoration of tripartite


representation in the Commission. T h e same Article 213, as amended, provides
that the Chairman and fourteen, now twenty-three, members composing
the National Labor Relations Commission shall be chosen from the workers,
employers and the public sectors. However, once they assume office "the members
nominated by the workers and employers organization shall divest themselves
of any affiliation with or interest in the federation or association to which they
belong." Strengthening the tripartite representation, R.A. No. 9347 requires that
an appointee to a vacancy should be a nominee of the sector that nominated
the predecessor.
1.5

Allocation of Powers Between NLRC En Banc and Its Divisions

Still another amendment is in the allocation of powers and functions


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

'Union of Filipro Employees vs. NLRC, et al, G.R No. 91025, December 19,1990.
2Mina, et al vs. NLRC, G.R. Nos. 97251-52, July 14, 1995.
31

LABOR RELATIONS

ART. 215

assignments whenever the required concurrence is not met. The law does not
say that a commissioner from the first division cannot be temporarily assigned to
the second or third division to fill the gap or vice versa. The territorial divisions
do not confer exclusive jurisdiction to each division and are merely designed
for administrative efficiency.
1

1.6 The NLRC Rules of Procedure


In the exercise of its rule-making power, the NLRC revised its rules of
procedure issued in 2002. The new set of rules, officially tided "The 2005 Revised
Rules of Procedure of the National Labor Relations Commission" was published
in newspapers on December 23, 2005 and took effect on January 7, 2006. T h e
rules govern the proceedings before the labor arbiters, the NLRC divisions, and
the NLRC en banc, as well as the internal functions of the latter two. T h e Rules
of Court supplements the NLRC rules.
ART. 2 1 5 . APPOINTMENT AND QUALIFICATIONS
T h e Chairman and other Commissioners shall be members of the
Philippine B a r and must have been engaged in the practice of law in the
Philippines for at least fifteen ( 1 5 ) years with at least five (5) years experience
or exposure in the field of labor-management relations, and shall preferably
be residents of the region where they shall hold office. T h e L a b o r Arbiters
shall likewise be members of the Philippine B a r and must have been engaged
in the practice of law in the Philippines for at least ten ( 1 0 ) years, with at
least five (5) years experience or exposure in the field of labor-management
relations:
T h e Chairman, the o t h e r Commissioners and the L a b o r Arbiters
shall hold office during good behavior until they reach the age of sixty-five
( 6 5 ) years, unless sooner removed for cause as provided by law or b e c o m e
incapacitated to discharge the duties of their office: Provided, however, That
the President of the Republic of the Philippines may extend the services of
the Commissioners and L a b o r Arbiters up to the maximum age of seventy
( 7 0 ) years upon the recommendation of the Commission en banc.
T h e Chairman, the Division Presiding Commissioners and o t h e r
Commissioners shall all be appointed by the President. Appointment to
any vacancy in a specific division shall c o m e only from the nominees of the
sector which nominated the predecessor. T h e L a b o r Arbiters shall also be
appointed by the President upon recommendation of the Commission en
banc to a specific arbitration branch preferably in the region where they are
residents, and shall be subject to Civil Service Law, rules and regulations:
'Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos, 326
SCRA 441 [2000].
32

CREATION AND COMPOSITION

ART. 216

Provided, That the L a b o r Arbiters who are presently holding office in the
region where they are residents shall be deemed appointed thereat.
The Chairman of the Commission shall appoint the staff and employees
of the Commission and its regional branches as the needs of the service may
require, subject to the Civil Service Law, rules and regulations, and upgrade
their current salaries, benefits and other emoluments in accordance with law.
(As amended by R A . No. 9 3 4 7 , effective August 2 6 , 2 0 0 6 . )
COMMENTS
REQUIRING CONFIRMATION BY COMMISSION ON APPOINTMENTS,
UNCONSTITUTIONAL
T h e third paragraph of Article 215 states that the presidential appointment
of the NLRC commissioners is "subject to confirmation by the Commission
on Appointments." T h e requirement, ruled the Supreme Court, has no
constitutional basis. That portion of Article 215 is therefore null and void.
1

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


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

'See Calderon vs. Carale, et al., G.R. No. 91636, April 23, 1992.
33

Chapter II
POWERS AND DUTIES
[Part 1. Jurisdiction]
Overview/Key Questions:
Box 3
1. What is a RAB?
2. What cases fall within the jurisdiction of a Labor
Arbiter?
3. What are "corporate disputes"? Who has jurisdiction
over them?
4. Where is the venue of compulsory arbitration cases?

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION


(a)
Except as otherwise provided under this Code the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
1.
Unfair labor practice cases;
2.
Termination disputes;
3.
If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other terms
and conditions of employment;
4.
Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5.
Cases arising from any violation of Article 2 6 4 of this Code,
including questions involving the legality of strikes and lockouts;
6.
E x c e p t claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from employeremployee relations, including those of persons in domestic or household
'This rather long chapter of the Code is divided here into three parts to assist
study and discussion:
Part 1. Jurisdiction
Part 2. Powers
Part 3. Procedure
As amended by Sec. 9, R.A. 6715.
2

34

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

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


regardless of whether accompanied with a claim for reinstatement.
b) T h e Commission shall have exclusive appellate jurisdiction over
all cases decided by L a b o r Arbiters.
( c ) Cases arising from the interpretation of collective bargaining
agreements and those arising from the interpretation or enforcement of
company personnel policies shall be disposed of by the L a b o r Arbiter by
referring the same to the grievance machinery and voluntary arbitration as
may be provided in said agreements.
C O M M E N T S AND CASES
1.

ADDITIONAL CASES

To the six (6) kinds of cases mentioned in Article 217, the following should
be added:
1.
Money claims arising out of employer-employee relationship or by
virtue of any law or contract, involving Filipino workers for overseas deployment,
including claims for actual, moral, exemplary and other forms of damages, as
well as employment termination of OFWs;
2.
Wage distortion disputes in unorganized establishments not
voluntarily settled by the parties pursuant to Republic Act No. 6727, as reflected
in Article 124;
3.
E n f o r c e m e n t of c o m p r o m i s e agreements when there is noncompliance by any of the parties pursuant to Article 227 of the Labor Code, as
amended; and
4.
2.

Other cases as may be provided by law.

COMPULSORY ARBITRATION BY LABOR ARBITERS

In its broad sense, arbitration is the reference of a dispute to an impartial


third person, chosen by the parties or appointed by statutory authority to hear
and decide the case in controversy. When the consent of one of the parties is
enforced by statutory provisions, the proceeding is referred to as compulsory
arbitration. In labor cases, compulsory arbitration is the process of settlement
of labor disputes by a government agency which has the authority to investigate
and to make an award which is binding on all the parties.
1

2.1
NLRC Appellate Proceedings Not Part of Arbitration
A labor arbiter is the NLRC's representative in a RAB (regional arbitration
branch). The labor arbiters, numbering about 200, adjudicate cases in behalf of
the NLRC but their decisions are appealable to the NLRC itself sitting as any of
its eight divisions.
'Philippine Airlines, Inc. vs. National Labor Relations Commission, G.R. No.
55159, December 22, 1989.
35

LABOR RELATIONS

ART. 217

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

2.2

Nature of Proceedings

T h e NLRC Rules describe the proceedings before a Labor Arbiter as


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

2.3. Article 217 Yields to Articles 261 and 262


Article 217 enumerates the cases falling under "original and exclusive"
jurisdiction of labor arbiters. This gives the impression that none but a labor
arbiter can hear and decide the six categories of cases listed. But this is not really
so. Any or all of these cases can, by agreement of the parties, be presented to and
decided with finality by a voluntary arbitrator or panel of voluntary arbitrators. A
voluntary arbitrator, under Article 261, has "original and exclusive "jurisdiction
over disputes concerning CBA implementation or personnel policy enforcement.
In addition, under Article 262, the parties may submit to a voluntary
arbitrator (or panel) "all other disputes including unfair labor practices and
bargaining deadlocks."
In other words, a case under Article 217 may be lodged instead with a
voluntary arbitrator despite the seemingly "exclusive" jurisdiction of the labor
Philippine Airlines, Inc. vs. National Labor Relations Commission, G.R. No.
55159, December 22, 1989.
Ibid.
*Ibid.
Article 221.
Rule V, Sec. 2, NLRC Revised Rules of Procedure, 2005.
2

36

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

arbiter. This is because the law prefers, or gives primacy to, voluntary arbitration
(see Article 211) instead of compulsory arbitration. And this, in turn, is the
reason why the law (Article 261, last paragraph, and Article 2 1 7 [ c ] ) forbids a
compulsory arbitrator from entertaining a dispute properly belonging to the
jurisdiction of a voluntary arbitrator.
3.

LABOR ARBITER'S JURISDICTION, IN GENERAL

T h e cases a labor arbiter can hear and decide are employment-related.


Employment is the one element that runs through all the cases and disputes
enumerated in Article 217.
Hawaiian-Philippine Company vs. Gulmatico, et al., G.R. No. 106231, November
16, 1994
Facts: The union of sugar farm workers filed with the NLRC a complaint against
Hawaiian-Philippine Company for claims under Republic Act 809 (The Sugar Act of
1952).
Petitioner company contended that the complaint could not be categorized
under any of the cases within the jurisdiction of the Labor Arbiter under Article 217,
considering that no employer-employee relationship existed between the milling
company and the farmworkers represented by the union. It asserted that the centrals
have never had any privity with the plantation laborers, since they had their own
laborers to take care of. x x x
Ruling: We find for petitioner company.
The Solicitor General, in its adverse Comment, correctly agreed with
petitioner's contention that while the jurisdiction over controversies involving
agricultural workers has been transferred from the Court of Agrarian Relations to
the Labor Arbiters, the transferred jurisdiction, however, is not without limitations.
The dispute or controversy must still fall under one of the cases enumerated under
Article 217 of the Labor Code, which cases, as ruled in San Miguel Corp. vs. NLRC,
G.R No. 80774, May 31, 1988, arise out of or are in connection with an employeremployee relationship.
In the case at bar, it is clear that there is no employer-employee relationship
between petitioner milling company and respondent union and/or its memberworkers. Absent the jurisdictional requisite of an employer-employee relationship
between the company and the farm workers, the inevitable conclusion is that die
NLRC is without jurisdiction to hear and decide the case.
3.1 Supervisory Control, Crucial
Control over the performance of the work is the crucial indicator of
employment relationship, without which the labor arbiter has no jurisdiction
over the dispute.
One who was hired to render "professional services" as Refinery Senior
Process Design Engineer to work with the Process Design Consultant, was not
37

ART. 217

LABOR RELATIONS

hired as an employee. When the hiring was indefinitely suspended for financial
reasons, there was no "breach of contract of employment," and the NLRC had
no jurisdiction over the case. The letter-contract stating the complainant's "Scope
of Professional Services" did not show a power of control: it specified what would
need to be achieved but not how to go about it.
It is well settled in law and jurisprudence that where no employee-employer
relationship exists between the parties and no issue is involved which may be
resolved by reference to the Labor Code, other labor statutes, or any collective
bargaining agreement, it is the Regional Trial Court that has jurisdiction.
1

T h e question about existence of employer-employee relationship is


explained under Articles 82 and 106 to 109.
4.

VENUE
The NLRC Rules of Procedure provides:
Section 1. Venue. (a) All cases which Labor Arbiters have authority
to hear and decide may be filed in the Regional Arbitration Branch having
jurisdiction over the workplace of the complainant or petitioner.
For purposes of venue, workplace shall be understood as the place
or locality where the employee is regularly assigned at the time the cause
of action arose. It shall include the place where the employee is supposed
to report back after a temporary detail, assignment or travel. In the case of
field employees, as well as ambulant or itinerant workers, their workplace is
where they are regularly assigned or where they are supposed to regularly
receive their salaries and wages or work instructions from, and report the
results of their assignment to their employers.
(b) Where two or more Regional Arbitration B r a n c h e s have
jurisdiction over the workplace of the complainant or petitioner the Branch
that first acquired jurisdiction over the case shall exclude the others.
(c) When venue is not objected to before the filing of position
papers, such issue shall be deemed waived.
(d) T h e venue of an action may be changed or transferred to a
different Regional Arbitration Branch other than where the complaint
was filed by written agreement of the parties or when the Commission or
Labor Arbiter before whom the case is pending so orders, upon motion
by the proper party in meritorious cases.
(e) Cases involving overseas Filipino workers may be filed before the
Regional Arbitration Branch having jurisdiction over the place where the

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

38

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

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


is situated, at the option of the complainant. (See also: Philippine National
Bank vs. Cabansag, G.R No. 157010, June 21, 2005.)
4.1

Worker's Option

Suppose the workplace is in Cebu and the employer's place of business


is also in Cebu. But the laborers, who have complaints against their employer,
reside in Manila. Should they file their complaint in Cebu? or in Manila?
Dayag, et al. vs. Canizares, NLRC, and Young Construction, G.R. No. 124193,
March 6,1998
Instead of attending the initial hearings set by the labor arbiter, Young
[the employer] filed on July 6, 1993 a motion to transfer the case to the Regional
Arbitration Branch, Region VII of the NLRC. He claimed that the workplace where
petitioners were regularly assigned was in Cebu City and that, in consonance with
Section 1 (a) of Rule IV of the New Rules of Procedure of the NLRC, the case should
have been filed in Cebu city [and not in the National Capital Region].
In the case of Sulpicio Lines, Inc. vs. NLRC (254 SCRA 506 [1996]), the Supreme
Court held that the question of venue essentially pertains to the trial and relates
more to the convenience of the parties rather than upon the substance and merits of
the case. It underscored the fact that the permissive rules underlying provisions on
venue are intended to assure convenience for the plaintiff and his witnesses and to
promote the ends of justice. With more reason does the principle find applicability
in cases involving labor and management because of the doctrine well-entrenched
in our jurisdiction that the State shall afford full protection to labor.
The rationale for the rule is obvious. The worker, being the economicallydisadvantaged party whether as complainant/petitioner or as respondent,
as the case may be the nearest governmental machinery to settled the dispute
must be placed at his immediate disposal. The other party is not to be given
the choice of another competent agency sitting in another place as this will
unduly burden the worker. Even in cases where venue has been stipulated by
the parties, the Court has not hesitated to set aside the same if it would lead to
a situation so grossly inconvenient to one party as to virtually negate his claim.
(See Suplicio Lines, Inc. vs. NRC, 254 SCRA 506 [1996].)
Where is the workplace if the complainant works in a vessel plying the
Manila and Cotabato route?
Suplicio Lines, Inc. vs. NLRC, further held that:
"Section 1, Rule IV of the 1990 NLRC Rules [as well as the 2005
Rules] additionally provides that, Tor purposes of venue, workplace shall
be understood as the place or locality where the employee is regularly
assigned when the cause of action arose.' Since the private respondent's
regular place of assignment is the vessel MV Cotabato Princess which
plies the Manila-Estancia-Iloilo-Zamboanga-Cotabato route, we are of the
39

ART. 217

LABOR RELATIONS

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


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

4.2 Waiver
Section 1 (a), Rule IV of the New Rules of Procedure of the NLRC [and
also the 2005 Rules], speaks of the complainant/petitioner's workplace, evidently
showing that the rule is intended for the exclusive benefit of the worker. This
being the case, the worker may waive said benefit.
2

The 2005 NLRC Rules, in Sec. 1 ( c ) , Rule IV states: "When improper venue
is not objected to before the filing of position papers, such issue shall be deemed
waived."
5. LABOR ARBITER'S JURISDICTION: U.L.P. CASES
The first in the enumeration of cases cognizable by a labor arbiter is
unfair labor practice (ULP) cases. Questions about unfair labor practice how
and under what conditions it is committed, who are liable for it, and what its
consequences are are discussed under Article 247 and following articles. But
its essence, captured in Article 246, is any act intended or directed to weaken
or defeat the workers' right to self-organize or to engage in lawful concerted
activities. In short, unfair labor practice, when committed by an employer, carries
the effect of anti-unionism. Every such case is within the original jurisdiction
of a labor arbiter, unless the parties agree to submit it to voluntary arbitration,
pursuant to Article 262.
National Union of Bank Employees vs. Judge Alfredo Lazaro, et al, G.R. No. 56431,
January 19, 1988
Facts: The CBTC entered into a collective bargaining agreement with the Union
representing the rank-and-file employees. The agreement was to be effective until June
30, 1980, with automatic renewal clause until the parties execute a new agreement.
On May 30, 1980, the Union submitted to the bank management some proposals
for renegotiation of the CBA. But the next day the bank suspended negotiations
with the union because the bank had entered into a merger with the Bank of the
Philippine Islands, which assumed all assets and liabilities of CBTC. The Union filed
with the Court of First Instance a complaint for specific performance, damages and
preliminary injunction against the CBTC and the BPI. The Court dismissed the case
for lack of jurisdiction. Is the dismissal correct?
Philtranco Service Enterprises, Inc. vs. NLRC and Nieva, G.R. No. 124100,
April 1, 1998.
Ibid.
40

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

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

6. CBA VIOLATION AMOUNTING TO ULP


If the only question is the legality of the expulsion of an employee from
the union, undoubtedly, the question is one cognizable by the Bureau of
Labor Relations. But if the question extended to the dismissal of the employee
from employment or steps leading to it, as when the employer decides the
recommended dismissal, its acts would be subject to scrutiny. Particularly,
it will be asked whether it violates or not the existing collective bargaining
agreement. Certainly, violations of the collective bargaining agreement would
be unfair labor practice which falls under the jurisdiction of the Labor Arbiters
and the National Labor Relations Commission.
1

T h e preceding ruling is affected by changes made by R.A. 6715 in 1989.


Only gross violations of a collective bargaining agreement are considered unfair
labor practice, hence, within the jurisdiction of a labor arbiter. If not gross, the
violation is not ULP. This is explained in Article 261.
7.

LABOR ARBITER'S JURISDICTION: TERMINATION DISPUTES

Termination disputes or illegal dismissal complaints fall within the


jurisdiction of a labor arbiter, as stated in Article 2 1 7 ( 2 ) . The usual bone of
'Articles 250 and 217, Labor Code. Manila Mandarin Employees Union vs.
National Labor Relations Commission, G.R. No. 76989, September 29, 1987.
41

ART. 217

LABOR RELATIONS

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


the cause and the manner of the employee's dismissal, which matters are covered
in Book VI of the Code.
But a question of overlapping jurisdiction has arisen because of Article
217, last sentence. It requires a labor arbiter to refer to the grievance machinery
and voluntary arbitration all cases arising from interpretation or enforcement of
collective bargaining agreement or company personnel policies. Is the dismissal
of an employee an enforcement of personnel policy and, therefore, should be
brought to a voluntary arbitrator instead of a labor arbiter? No, not necessarily,
thus ruled the Supreme Court in San Miguel Corp. vs. NLRC (G.R. No. 108001,
March 15, 1996).
Quoting a labor law textbook, the Court explained:
"Company personnel policies are guiding principles stated in broad,
long-range terms that express the philosophy or beliefs of an organization's
top authority regarding personnel matters. They deal with matters affecting
efficiency and well-being of employees and include, among others, the
procedure in the administration of wages, benefits, promotions, transfer
and other personnel movements which are usually not spelled out in the
collective agreement. T h e usual source of grievances, however, is the rules
and regulations governing disciplinary actions. Judging therefrom, the
questioned discharges due to alleged redundancy can hardly be considered
company personnel policies and, therefore, need not directly be subject
to the grievance machinery nor to voluntary arbitration."
The Court further said that the dismissal of the U.L.P case would have
been proper for voluntary arbitration had the parties explicitly so agreed. There
was no such express agreement in the San Miguel case:
We subjected the records of this case, particularly the CBA, to
meticulous scrutiny and we find no agreement between SMC and the
respondent union that would state in unequivocal language that petitioners
and the respondent union conform to the submission of termination
disputes and unfair labor practices to voluntary arbitration. Section 1,
Article V of the CBA, cited by the herein petitioners, certainly does not
provide so. Hence, consistent with the general rule under Article 217(a)
of the Labor Code, the Labor Arbiter properly has jurisdiction over the
complaint filed by the respondent union on February 2 5 , 1 9 9 1 , for illegal
dismissal and unfair labor practice.
Still on termination disputes, does a labor arbiter have jurisdiction over
an illegal dismissal complaint filed by a church minister? Is the principle of
separation of church and state applicable? T h e Court answers:
It does not matter that the employer here is a religious sect and
that it was organized not for profit because the Labor Code applies to all
establishments whether for profit or not. (Article 278, Labor Code.)
42

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

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


application in the case at bench. For the rationale of the principle is to
delineate or demarcate the boundaries between the two (2) institutions
(church and state) to avoid encroachments by one against the other.
T h e demarcation line calls on the two entities to "render unto Ceasar
the things that are Ceasar's and unto God the things that are God's."
This means that the State is prohibited from interfering in purely
ecclesiastical affairs, and the Church likewise is barred from meddling
in purely secular matter.
T h e case at bench is only one of dismissal of an employee in the
exercise by the employer-church of its management prerogatives and
therefore does not concern any ecclesiastical matter. While the case relates
to the church and its minister, it does N O T ipso facto give it a religious
significance, what is involved is only the relationship of the church as an
EMPLOYER and the minister as an employee which is purely SECULAR
in character and has no relation whatsoever to practice of faith, worship
or doctrines of the Seventh Day Adventist Church. T h e minister was not
excommunicated nor expelled from membership of the SDA church but
only dismissed from employment. Terminating one from his employment
is totally different from the ecclesiastical act of expelling a member from
the religious congregation. (Austria vs. NLRC & Cebu City Central Philippines
Union Mission Corporation of the Seventh Day Adventists, G.R No. 124382, August
16, 1999.)
7.1 Termination of Corporate Officer; Jurisdiction Over Intra-Corporate
Disputes Transferred From SEC to RTC
T h e dismissal of a corporate officer by a corporate board is a corporate
dispute that should be brought to the regular courts. The jurisdiction of the
Securities and Exchange Commission over such case has been transferred to
the courts by the Securities Regulation Code (R.A. No. 8799), passed on July
19, 2000. Its Section 5.2 states:
"5.2. T h e [Securities and Exchange] Commission's jurisdiction over
all cases enumerated under Section 5 of President Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the appropriate
Regional Trial Court: Provided, That the Supreme Court in the exercise
of its authority may designate the Regional Trial Court branches that
shall exercise jurisdiction over these cases. The Commission shall retain
jurisdiction over pending cases involving intra-corporate disputes submitted
for final resolution which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed as of 30 June
2000 until finally disposed."
43

LABOR RELATIONS

ART. 217

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


pertinently reads:
b)
Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members, or associates;
between any or all of them and the corporation, partnership or associates
of which they are stockholders, members or associates, respectively; and
between such corporation, partnership or association and the state insofar
as it concerns their individual franchise or right to exist as such entity;
(c)
Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations, partnerships or
associations."
M

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

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


as Executive Vice-President of the company for loss of trust and confidence.
44

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

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

7.2

Effect of Claim for Backwages, Benefits, or Damages

In a 1994 case involving Philippine Airlines' Executive Vice-PresidentChief Executive Officer, the Supreme Court reiterated the conclusion reached
in the preceding Dy and Fortune Cement cases. T h e position of PAL's EVP-CEO
is an elective corporate office. Where its occupant is not reelected by the Board
of Directors, the officer's complaint should be lodged with the SEC, [now
regular court] not the NLRC, even if the complainant/petitioner has claims for
backwages, employment benefits, and damages. Said the Court:
"The fact that petitioner sought payment of his backwages, other
benefits, as well as moral and exemplary damages and attorney's fees in
his complaint for illegal dismissal will not operate to prevent the SEC from
exercising its jurisdiction under PD 902-A. While the affirmative reliefs
and monetary claims sought by petitioner in his complaint may, at first
glance, mislead one into placing the case under the jurisdiction of the
Labor Arbiter, a closer examination reveals that they are actually part of
the perquisites of his elective position; hence, intimately linked with his
relations with the corporation, x x x"
T h e Court has likewise ruled in the case of Andaya vs. Abadia (228
SCRA 705 [1993]) that in intra-corporate matters, such as those affecting the
corporation, its directors, trustees, officers and shareholders, the issue of
consequential damages may just as well be resolved and adjudicated by the SEC.
Undoubtedly, it is still within the competence and expertise of the SEC to resolve
fortune Cement Corp. vs. NLRC, G.R. No. 79762, January 24, 1991.
45

LABOR RELATIONS

ART. 217

all matters arising from or closely connected with all intra-corporate disputes.
Such jurisdiction of the SEC [now the RTC] is not negated by the complainant's
claims for vacation and sick leaves, 13th-month pay, Christmas bonus, medical
expenses, car expenses, and other benefits, as well as for moral and exemplary
damages and attorney's fees.
2

7.3 Mainland vs. Movilla: T h e "Better Policy" in Determining SEC


Jurisdiction
Our examination of the dividing line between the NLRC and the SEC
jurisdictions is not yet over. Espino and Lozon cases hold that intracorporate
disputes belong to SEC [now the regular courts] despite claims for backwages,
employment benefits and damages. But still, we need to call attention to Mainland
Construction vs. Movilla (1995) where the Court upheld the jurisdiction of NLRC as
against that of the SEC. In that case the Court, through Mr. Justice Hermosisima,
sets forth the "better policy" in determining the SEC jurisdiction. Said the Court:
"... (T)hat the parties involved are the stockholders and the corporation does not
necessarily place the dispute within the ambit of the jurisdiction of SEC." Thus
NLRC's jurisdiction was recognized. And yet we will see later that this "better
policy" expressed in 1995 is not observed in the 1997 case of Tabang.
Mainland Construction Co., etc. vs. Movilla, et al., G.R. No. 118088, November
23, 1995
Facts: Movilla was hired as accountant by Mainland Construction in 1977 and as
an employee, was registered with the SSS, Medicare, and ECC. In 1987, the board of
directors elected Movilla as board member and Administrative Manager. Meantime,
DOLE had conducted a routine inspection on the corporation and found several
labor law violations. DOLE ordered the corporation to pay its thirteen employees,
including Movilla, the unpaid holiday pay, service incentive leave, etc.
The employer paid all the employees listed in the DOLE'S order, but not Movilla;
hence, he filed a complaint with the NLRC Regional Arbitration Branch XI, Davao
City.
On February 29, 1992, Movilla died and was substituted for by his heirs.
The Labor Arbiter rendered judgment on June 26, 1992, dismissing the
complaint on the ground of lack of jurisdiction. The decision said in part:
What Movilla is claiming against respondents are his alleged unpaid
salaries and separation pay as Administrative Manager of the corporation
for which position he was appointed by the Board of Directors. His claims
therefore, fall under the jurisdiction of the Securities and Exchange
Commission because this is not a simple labor problem, but a matter that
Espino vs. NLRC and Philippine Airlines, G.R. Nos. 109642-43, January 5,
1995.
2

1995.
46

Lozon vs. NLRC and Philippine Airlines, Inc., G.R. No. 107660, January 2,

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

comes within the area of corporate affairs and management, and is in fact a
corporate controversy in contemplation of the Corporation Code. (Fortune
Cement Corporation vs. NLRC, et al, G.R No. 79762, January 24, 1991.)
The heirs appealed to the NLRC which ruled that the issue was a labor dispute
between an employee and petitioner corporation and, thus, the NLRC had jurisdiction
over the case.
Is it the NLRC or the SEC [now the RTC] that has jurisdiction over the
controversy?
Ruling: T h e NLRC, replied the Supreme Court.
In order that the SEC can take cognizance of a case, the controversy must
pertain to any of the following relationships: a) between the corporation, partnership
or association and the public; b) between the corporation, partnership or association
and its stockholders, partners, members or officers; c) between the corporation,
partnership or association and the State as far as its franchise, permit or license
to operate is concerned; and d) among the stockholders, partners or associates
themselves. The fact that the parties involved in the controversy are all stockholders
or that the parties involved are the stockholders and the corporation does not necessarily
place the dispute -within the ambit of the jurisdiction of SEC. The better policy to be followed
in determining jurisdiction over a case should be to consider concurrent factors such
as the status or relationship of the parties or the nature of the question that is the
subject of their controversy. In the absence of any one of these factors, the SEC will
not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between
the corporation and its stockholders would involve such corporate matters as only the SEC can
resolve in the exercise of its adjudicatory or quasi-judicial powers. (Emphases supplied)
In the case at bench, the claim for unpaid wages and separation pay filed by
the complainant against petitioner corporation involves a labor dispute. It does
not involve an intra-corporate matter, even when it is between a stockholder and a
corporation. It relates to an employer-employee relationship which is distinct from
the corporate relationship of one with the other. Moreover, there was no showing
of any change in the duties being performed by complainant as an Administrative
Officer and as an Administrative Manager after his election by the Board of Directors.
What comes to the fore is whether there was a change in the nature of his functions
and not merely the nomenclature or tide given to this job.
Since Movilla's complaint involves a labor dispute, it is the NLRC, under Article
217 of the Labor Code of the Philippines, which has jurisdiction over the case.
7.4 Tabang vs. NLRC: SEC Jurisdiction Reaffirmed; Corporate Officer
and Intra-corporate Controversy Defined
The "better policy" enunciated in Mainland vs. Movilla (1995), however, did
not influence and was not mentioned at all in the 1997 decision in Tabang vs.
NLRC, penned by Mr. Justice Regalado. The Court ruled, again, that all kinds of
controversies between stockholders and corporations fall under SEC'sjurisdiction
[RTC, per R.A. No. 8799]. It also clarified the term "corporate officers."
47

LABOR RELATIONS

ART. 217

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


regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the corporation.
However, other offices are sometimes created by the charter or by-laws of a
corporation, or the board of directors may be empowered under the by-laws of
a corporation to create additional offices as may be necessary.
1

Under Section 25 of the Corporation Code, the president, secretary and


treasurer are specifically mentioned as officers of the corporation. The same
section also provides that the board of directors may elect "such other officers
as may be provided for in the by-laws."
Jurisprudence leads to this definition: a "corporate officer" is the president,
secretary, or treasurer of the corporation or any other officer whose office is
created by the board of directors as authorized or required by the corporate
charter or by-laws.
It has been held that an "office" is created by the charter of the corporation
and the officer is elected by the directors or stockholders. On the other hand, an
"employee" usually occupies no office and generally is employed not by action
of the directors or stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such employee. A further
distinction may thus be drawn between an officer and an employee of a private
corporation in that the latter is subordinate to the officers and under their
control and direction... It is clear that the two terms officers and agents are by
no means interchangeable...
2

An "intra-corporate controversy" is one which arises between a stockholder


and the corporation. There is no distinction, qualification, nor any exemption whatsoever.
The provision is broad and covers all kinds of controversies between stockholders and
corporations. (Tabang vs. NLRC, above) [Italics supplied CAA]
In Mainland, the complainant is a stockholder-employee while in Tabanghe
is a stockholder-corporate officer. Both in Mainland and Tabang the complaints
include claims for unpaid wages and 13th month pay. In Mainland the Court views
it as a labor dispute, hence under NLRC jurisdiction. But in Tabang the Court
calls it an intra-corporate controversy, hence under SEC [now RTC] jurisdiction;
then the Court concludes: "The provision is broad and covers all kinds of controversies
between stockholders and corporation. "
Nacpil vs. International Broadcasting Corp., G.R. No. 144767, March 21, 2002
Facts: Petitioner was Assistant General Manager for Finance/Administration
and Comptroller of respondent IBC. Alleging that he was forced to retire by the
'Tabang vs. NLRC, G.R. No. 121143, January 21, 1997.
PSBA vs. Leano, 127 SCRA 778 [1984], quoting Bruce v. Travelers Ins. Co.,
266 F2d 781, at pp. 784-785.
2

48

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

new IBC president, he filed with the NLRC a complaint for illegal dismissal and
non-payment of benefits. IBC assailed the jurisdiction of the Labor Arbiter, insisting
that the complainant was a corporate officer and that the dispute was for the SEC to
take cognizance of. Petitioner maintained that he was not a corporate officer but a
mere employee because he was appointed by the General Manager, not appointed
or elected by the Board.
Ruling: The Court has consistently held that there are two elements to be
considered in determining whether the SEC has jurisdiction over the controversy, to
wit: (1) the status or relationship of the parties; and (2) the nature of the question
that is the subject of their controversy.
Even assuming that the petitioner was in fact appointed by the General Manager,
such appointment was subsequently approved by the Board of Director of the IBC.
That the position of Comptroller is not expressly mentioned among the officers of
the IBC in the By-Laws is of no moment, because the IBC's Board of Directors is
empowered under Section 25 of the Corporation Code and under the corporation's
By-Laws to appoint such other officers as it may deem necessary.
1

The Court has held that in most cases the "by-laws may and usually do provide
for such other officers,'' and that where a corporate office is not specifically indicated
in the roster of corporate officers in the by-laws of a corporation, the board of director
may also be empowered under the by-laws to create additional officers as may be
necessary.
As petitioner's appointment as comptroller required the approval and formal
action of the IBC's Board of Directors to become valid, it is clear therefore that
petitioner is a corporate officer whose dismissal may be the subject of a controversy
cognizable by the SEC [now RTC] under Section 5(c) of P.D. 902-A which includes
controversies involving both election and appointment of corporate directors,
trustees, officers, and managers. Had petitioner been an ordinary employee, such
board action would not have been required.
After reviewing many court decisions, Villanueva (law dean and corporate
law practitioner) observes that the "business judgment doctrine" encompasses
the removal from office of a corporate officer at the discretion of the board of
directors. It appears therefore that corporate officers do not enjoy security of
tenure. Such latitude of discretion, he argues, runs counter to the guarantee of
security of tenure of "all workers" under the Constitution and the Labor Code.
He sees an open constitutional issue.
In the next case, the court treats the assistant vice-president as an employee,
sustains NLRC's jurisdiction, and upholds the right to security of tenure.
2

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

49

ART. 217
7.5

LABOR RELATIONS

When Bank Officer May be a Regular Employee

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

8.

LABOR ARBITER'S JURISDICTION: MONEY CLAIMS

A money claim arising from employer-employee relations, excepting S S S /


ECC/Medicare claims, is within the jurisdiction of a labor arbiter
1.
if the claim, regardless of amount, is accompanied with a claim for
reinstatement; or

'Prudential Bank and Trust Co. vs. Reyes, G.R. No. 141093, February 20, 2001.
50

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

2.
if the claim, w h e t h e r or not a c c o m p a n i e d with a claim for
reinstatement, exceeds five thousand pesos (P5,000) per claimant.
T h e claim under No. 1, above, is practically a termination dispute which
falls within the labor arbiter's jurisdiction, according to Article 217, except, as
already mentioned, if Article 261 or 262 is applicable.
Furthermore, the claims under either No. 1 or No. 2, above, are beyond
the jurisdiction of a D O L E regional director under Article 129 which removes
from the regional director's hands any claim for reinstatement or any money
claim exceeding five thousand pesos. Those claims should instead be filed with
the NLRC.
8.1

Only Money Claims Not Arising from CBA

May a money claim arising from implementation of the CBA be filed with
a labor arbiter?
T h e original and exclusive jurisdiction of the Labor Arbiter under
Article 2 1 7 ( c ) for m o n e y claims is limited only to those arising from
statutes or contracts other than a Collective Bargaining Agreement. T h e
Voluntary Arbitrator or Panel of Voluntary Arbitrators will have original and
exclusive jurisdiction over money claims "arising from the interpretation or
implementation of the Collective Bargaining Agreement, and those arising
from the interpretation or enforcement of company personnel policies,"
under Article 2 6 1 .
1

8.2

Money Claims Must Have Arisen From Employment

Money claims of workers which do not arise out of or in connection


with their employer-employee relationship fall within the general jurisdiction
of regular courts of justice. Hence, "money claims of workers" referred to in
paragraph 3 of Article 217 embraces money claims which arise out of or in
connection with the employer-employee relationship, or some aspect or incident
of such relationship.
2

If an employee is claiming a prize under an incentive program in his


company, where should he file his claim? In the Pepsi-Cola case decided in 1982,
the ruling says it should be filed with a labor arbiter, not with a regular court.
In the San Miguel case, decided in 1988, it says it should be filed with a regular
court, not with a labor arbiter. The difference lies in what law will be applied to resolve
the hey questions raised.

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

51

ART. 217

LABOR RELATIONS

Pepsi-cola Bottling Co. vs. Martinez, G.R. No. Lr58877, March 15, 1982
Facts: The complaint filed in the Court of First Instance (now Regional Trial
Court) of Davao averred that in the annual "Sumakwel" contest conducted by the
company in 1979, Tumala was declared winner of the "Lapu-Lapu Award" for his
performance as top salesman of the year. The award entitled him to a prize of a house
and lot, but petitioner company, despite demands, refused to deliver the prize.
It was also alleged that the Company, "in a manner oppressive to labor" ...
"arbitrarily and illegally" terminated the claimant's employment.
Tumala prayed that the company be ordered to deliver his prize of house and
lot or its cash equivalent, and to pay his back salaries and separation benefits, plus
damages. He did not ask for reinstatement. He argued that his action was a civil
controversy triable exclusively by the courts of general jurisdiction.
The company moved to dismiss the complaint on grounds of lack of jurisdiction
and cause of action.
Ruling: The claim for said prize unquestionably arose from an employeremployee relation and, therefore, falls within the coverage of Article 217 of the
Labor Code, as amended by PD 1691 which speaks of "all the claims arising from
employer-employee relations, unless expressly excluded by this Code."
Indeed, Tumala would not have qualified for the contest, much less won the
prize, if he was not an employee of the company at the time of the holding of the
contest. Besides, the cause advanced by petitioners to justify their refusal to deliver the
prize the alleged fraudulent manipulations committed by Tumala in connection
with his duties as salesman of the company involves an inquiry into his actuations
as an employee.
To hold that Tumala's claim for the prize should be passed upon by the
regular courts of justice, independently and separately from his claim for back
salaries, retirement benefits and damages, would be to sanction split jurisdiction.
San Miguel Corp. vs. NLRC, G.R. No. 80774, May 31, 1988
Facts: SMC sponsored an innovation program granting cash awards to
employees who would submit ideas and suggestions beneficial to the corporation.
Rustico submitted a proposal which, he alleged, was accepted and implemented
by SMC; hence, he demanded the cash award of P60,000. But SMC refused to pay,
prompting Rustico to file with the NLRC a complaint claiming entitlement to the
cash award.
The labor arbiter ruled that Rustico's money claim was not an incident of his
employment and that the money claim was not among those enumerated in Article
217 of the Labor Code. He dismissed the complaint.
On appeal, the NLRC reversed the labor arbiter and ordered SMC to pay
Rustico P60,000. Hence, this petition by the employer, alleging that the labor arbiter
and the NLRC had no jurisdiction over the subject matter of the case.
The Supreme Court set aside the decision of the NLRC and dismissed Rustico's
complaint, without prejudice to his right to file a suit before the proper court, if he
so desires.
52

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

Ruling: Money claims of workers which now fall within the original and exclusive
jurisdiction of the labor arbiter are those money claims which have some reasonable
causal connection with the employer-employee relationship.
In this case, SMC's Innovation Program is an employee incentive scheme
offered and open only to employees of SMC below the rank of manager. Without
the existing employer-employee relationship between the parties here, there would
have been no occasion to consider SMC's Innovation Program or the submission by
Rustico of his proposal concerning beer grande. Without that relationship, Rustico's
suit against SMC would never have arisen. The money claim of Rustico, therefore,
arose out of or in connection with his employment relationship with SMC.
However, the fact that Rustico's money claim arose out of or in connection
with his employment with SMC is not enough to bring such money claim within the
original and exclusive jurisdiction of labor arbiters.
Where the claim to the principal relief sought is to be resolved not by reference to the Labor
Code or other labor relations statute or a collective bargaining agreement but by the general civil
law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the labor
arbiter and the National Labor Relations Commission. (Italics supplied)
Here, SMC's innovation program was an invitation from SMC to its employees
to submit innovation proposals, and the SMC undertook to grant awards to employees
who accept such invitation and whose suggestions satisfied SMC's standards and
requirements of the Innovation Program, and which therefore could be translated
into substantial benefit to the corporation. Such undertaking, though unilateral in
origin, could nonetheless ripen into an enforceable contractual (facio ut des) obligation
on the part of SMC under certain circumstances.
Thus, whether or not an enforceable contract, albeit implied and
innonimate, had arisen between SMC and Rustico in this case, and if so, whether
or not it had been reached, are preeminently legal questions, questions not to be
resolved by referring to labor legislation and having nothing to do with wages or
their terms and conditions of employment, but rather by having recourse to our
law on contracts.
8.3 Money Claims of Coop Employees
The cooperative argues that the labor arbiter has no jurisdiction to take
cognizance of the complaint because the complainants failed to submit their
dispute to the grievance machinery as required by P.D. 175 (Strengthening
the Cooperative Movement) and because of the non-issuance of a Certificate
of Non-Resolution pursuant to Section 8 of R.A. 6939 or the Cooperative
Development Authority Law. The argument does not hold. The said provisions
apply to members, officers and directors of the cooperative involved in disputes
within a cooperative or between cooperatives. There is no evidence that private
respondents are members of the cooperative, and even if they are, the dispute is
about payment of wages, overtime pay, rest day and termination of employment.
53

ART. 217

LABOR RELATIONS

These disputes are within the original and exclusive jurisdiction of the Labor
Arbiter.
1

8.4 Jurisdiction Over Claims for Damages


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

8.5

Splitting of Actions Not Allowed

An employee who has been illegally dismissed so as to cause him moral


damages has a cause of action for reinstatement, backwages and damages.
When he institutes proceedings before the Labor Arbiter, he should make a
claim for all said relief. He cannot prosecute his claim piecemeal, separately
and contemporaneously, in a court of justice upon the same cause of action or
a part thereof. He cannot sue in two forums: one, before the Labor Arbiter for
reinstatement and recovery of backwages upon the theory that his dismissal was
Perpetual Help Credit Cooperative, Inc. vs. Faburada, et al., G.R. No. 121948,
October 8, 2001.
54

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

illegal; and two, before a court of justice for recovery of moral damages upon
the theory that his dismissal was injurious or tortious.
1

The judgment of the Labor Arbiter granting separation pay operated as


a bar to his subsequent action for the recovery of damages before the Court of
First Instance under the doctrine of res judicata.
2

The previous ruling in Quisaba vs. Sta. Ines-Melae Veneer and Plywood, Inc. drew
a distinction between the rights of the employer to dismiss an employee, which
was declared to be within the competence of labor agencies to pass upon and
the manner in which the right was exercised and the effects flowing therefrom,
declared to be a matter cognizable only by the regular courts because it is
intrinsically civil. It is this very distinction which the law has sought to eradicate
as being tenuous and as giving rise to split jurisdiction. The Court reiterates the
doctrine that the grant of jurisdiction to the Labor Arbiter by Article 217 of the Labor Code
is sufficiently comprehensive to include claims for moral and exemplary damages sought
to be recovered from an employer by an employee upon the theory of his illegal dismissal.
3

A contrary rule would result in the splitting of actions and the consequent
multiplication of suits. T h e damages suffered by the employee only form part of
the civil component of the injury arising from the unfair labor practice. Under
Article 247 of the Labor Code, the civil aspect of all cases which include claims
for damages and other affirmative relief shall be under the jurisdiction of labor
arbiters.
4

8.6

Employer's Complaint for Damages

An employer's claim for damages against an employee may be filed as


counterclaim in the illegal dismissal case filed by the employee. Such claim for
damages, arising from employment relationship, is outside the jurisdiction of
the regular court.
5

9.

LABOR ARBITER'S JURISDICTION: STRIKES AND LOCKOUTS

Questions relating to strikes or lockouts or any form of work stoppage


including incidents thereof under Article 264 fall within the labor arbiter's
jurisdiction. Whether the alleged reason for the strike is "strikeable," whether
the required strike procedure is followed, or whether the strikers committed
prohibited acts during a strike, are some of the issues a labor arbiter may be
called upon to decide.
1Primero vs. Intermediate Appellate Court, G.R. No. 72644, December 14,
1987.
2

Ibid.
Ibid.
Lim vs. National Labor Relations Commission, G.R. No. 79907, March 16,
1989; Sweet Lines vs. National Labor Relations Commission, G.R. No. 79975, March
16,1989.
Baez vs. Hon. Valdevilla, G.R. No. 128024, May 9, 2000.
4

55

ART. 217

LABOR RELATIONS

But the power to issue injunction is lodged with an NLRC division, not a
labor arbiter (see discussion under Article 218). Moreover, "national interest"
cases are handled differently. Article 263(g) empowers the DOLE Secretary
or the President of the Republic to assume jurisdiction or refer the case to the
NLRC if the labor dispute or impending strike or lockout involves an industry
indispensable to national interest.
Still another limit to the arbiter's jurisdiction is the jurisdiction of the
regular courts to hear and decide actions filed by third parties being affected by
a strike of people who are not their employees. Finally, if a crime is committed,
whether in relation to a strike or not, the prosecution of the crime has to be
done not before a labor arbiter but a regular court, because in such case the
laws to be administered are primarily the penal laws of the land.
10.

LABOR A R B I T E R ' S J U R I S D I C T I O N : OFW'S MONEY CLAIMS OR


DISMISSAL

Section 10 of R.A. 8042, approved on J u n e 7 , 1 9 9 5 , known as the Migrant


Workers and Overseas Filipinos Act of 1995, transfers from the POEA to Labor
Arbiters the original and exclusive jurisdiction to hear and decide claims arising
out of an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment, including claims for actual,
moral, exemplary and other forms of damages. (See related discussion in
Volume I of this work in the chapter on POEA jurisdiction.)
Philippine National Bank vs. Cabansag, G.R. No. 157010, June 21, 2005
Facts: While in Singapore as a tourist, Cabansag applied with the Philippine
National Bank, Singapore Branch and was hired as Branch Credit Officer. As required,
she obtained from the Singapore Government an "Employee Pass" for two years.
Her appointment paper stated she would undergo a three-month probation that
can be terminated upon one-day notice, or, after probation with one month notice,
or equivalent pay. The Philippine embassy in Singapore processed her employment
contract and the POEA issued an "Overseas Employment Certificate'' that she was a
bona fide contract worker in Singapore.
After about three months in office, she submitted her initial performance
report which favorably impressed the branch general manager. But just one month
later the same general manager, personally and through two other bank officers, told
Cabansag that as a "cost-cutting measure" she had to resign her position. Surprised
and perflexed, she asked for a 'Formal Advice,' but she received none. She refused
to resign. The manager explained that he needed a Chinese-speaking credit officer.
Still she refused to resign, hence, the manager dismissed her just about four months
from hiring.
When she filed an illegal dismissal complaint with the NLRC, the employer
contended that the employee was a "local hire," having been hired in Singapore and
therefore "Singapore laws, customs and practice" should govern instead of Philippine
laws.
56

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

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


of Manpower was merely a compliance with that country's immigration regulations.
This is a counterpart of the requirement for a work permit from DOLE before a nonFilipino can work in the Philippines. The pass or the permit does not imply a waiver
of the worker's national laws on labor. It does not mean that only the local laws (in
this case, Singapore laws) apply. Absent clear evidence to the contrary, the permit
simply means that its holder has a legal status as worker in the issuing country.
Moreover, the POEA certificate not only authorizes her working status; it also
entities her to all benefits and processes under Philippine statutes.
The bank is a Philippine corporation doing business through a branch in
Singapore, and Cabansag's appointment had to be approved by the PNB President
in Manila. This fact reinforces that she was a "migrant worker," making her subject to
Philippine laws on the jurisdiction of the NLRC and the labor arbiter. Section 3 [a]
of R A 8042 defines migrant workers as "a person who is to be engaged, is engaged or
has been engaged in a remunerated activity in a state in which he or she is a not legal
resident; to be used interchangeably with overseas Filipino worker." (Emphasis ours.)
Based on [Article 217, Labor Code and Section 10, R.A. No. 8042.], labor
arbiters clearly have original and exclusive jurisdiction over claims arising from
employer-employee relations, including terminations disputes involving all workers,
among whom are Overseas Filipino Workers (OFW). In any event, we recall the
following policy pronouncement of the court in Royal Crown International v. NLRC:
"x x x. Whether employed locally or overseas, all Filipino workers enjoy
the protective mantle of the Philippine labor and social legislation, contract
stipulations to die contrary notwithstanding.
This ruling is likewise rendered imperative by Article 17 of the Civil
Code which states that laws 'which have for their object public order, public
policy and good customs shall not be rendered ineffective by laws or judgments
promulgated, or by determination or conventions agreed upon in a foreign
country.'"
11.

LABOR ARBITER'S JURISDICTION: WAGE DISTORTION

A salary distortion case, referred to in Article 124, is resolved either through


the CBA mechanism or, in unorganized establishments, through the NCMB. If
the NCMB fails to resolve the dispute in ten days of conciliation conferences, it
shall be referred to the appropriate branch of the NLRC.
12.

LABOR ARBITER'S JURISDICTION: DISPUTES OVER COMPROMISE


SETTLEMENTS
Because labor law policy encourages voluntary resolution of disputes,
compromise settlements are ordinarily final and binding upon the parties. But
a compromise settlement may itself become the subject of a dispute. If there is
noncompliance with the compromise agreement or if there is prima facie evidence
that the settlement was obtained through fraud misrepresentation, or coercion,
57

ART. 217

LABOR RELATIONS

then, according to Article 227, the NLRC through the labor arbiter may assume
jurisdiction over such dispute.
13.

SUBMISSION TO JURISDICTION
A party cannot invoke the jurisdiction of a court to secure affirmative
relief against his opponent and, after obtaining or failing to obtain such relief,
repudiate or question that same jurisdiction. The question whether the court
had jurisdiction either over the subject matter of the action or over the parties
is barred from such conduct not because the judgment or order of the court is
valid and conclusive as an adjudication but for the reason that such a practice
cannot be tolerated obviously for reasons of public policy.
1

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

1Marquez vs. Secretary of Labor, G.R. No. 80685, March 16, 1989.
58

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

But another line of court decisions holds a different view: it is the law that
determines the jurisdiction of an adjudicating body and not the initiative or
acquiescence of the disputants. For instance, in La Naval Drug vs. C.A., G.R. No.
103200, August 31, 1994, the Court said: "Lack of jurisdiction over the subject
matter of the suit is yet another matter. Whenever it appears that the court has
no jurisdiction over the subject matter, the action shall be dismissed (Sec. 2, Rule
9, Rules of Court). This defense may be interposed at any time, during appeal or
even after final judgment. Such is understandable, as this kind of jurisdiction is
conferred by law and not within the courts, let alone the parties, to themselves
determine or conveniently set aside." T h e same ruling is laid down in Luzon vs.
NLRC, G.R. No. 107660, January 2, 1995. Accordingly, in the case Metromedia
Times Corp. vs. Pastorin, G.R. No. 154295, July 29, 2005, the court ruled that since
the Labor Arbiter assumed jurisdiction, when he should not over an issue which
is properly cognizable by the grievance machinery, petitioner is not estopped
from assailing the jurisdiction of the Labor Arbiter before the NLRC on appeal,
in line with... the general rule that estoppel does not confer jurisdiction.
14.

IMMUNITY OF FOREIGN GOVERNMENTS

In this jurisdiction, we recognize and adopt the generally accepted


principles of international law as part of the law of the land. Immunity of State
from suit is one of these universally recognized principles. In international law,
"immunity" is commonly understood as the exemption of the state and its organs
from the judicial jurisdiction of another state. This is anchored on the principle
of the sovereign equality of states under which one state cannot assert jurisdiction
over another in violation of the maxim par in parem non habet imperium (an equal
has no power over an equal).
1

As it stands now, the application of the doctrine of immunity from suit has
been restricted to sovereign or governmental activities (jure imperii). The mantle of
state immunity cannot be extended to commercial, private and proprietary acts
(jure gestionis).
2

14.1 Immunity of the UN and Its Specialized Agencies


Being a member of the United Nations and a party to the Convention on
the Privileges and Immunities of the Specialized Agencies of the United Nations,
the Philippine Government adheres to the doctrine of immunity granted to
the United Nations and its specialized agencies. Both treaties have the force
and effect of law. The United Nations Revolving Fund for Natural Resources
Exploration (UNRFNRE), which is a special fund and subsidiary organ of the
United Nations, enjoys diplomatic immunity and is beyond the jurisdiction of a
'JUSMAG^Philippines vs. NLRC and Sacramento, G.R. No. 108813, December
15,1994.
Ibid.
2

59

ART. 217

LABOR RELATIONS

labor arbiter. "Our courts can only assume jurisdiction over private respondent
if it expressly waived its immunity which is not so in the case at bench."
1

15.

EXECUTING MONEY CLAIMS AGAINST THE GOVERNMENT


Even when a government agency enters into a business contract with a
private entity, it is not the Labor Code but C.A. No. 327 that applies in pursuing
a money claim (against the Government) arising from such contract.
Department of Agriculture vs. The National Labor Relations Commission, et al., G.R.
No. 104269, November 11, 1993
Facts: The Department of Agriculture and Sultan Security Agency, a private
firm, entered into a contracts for security services.
Later, several guards of the Sultan Security Agency filed a complaint for
underpayment of wages, nonpayment of 13th-month pay, uniform allowances, night
shift differential pay, holiday pay and overtime pay, as well as for damages, against
die Department of Agriculture and Sultan Security Agency.
The Executive Labor Arbiter found both respondents jointly and severally liable
for the payment of the money claims. The petitioner (Department of Agriculture)
and Sultan Security Agency did not appeal the decision; thus, the decision became
final and executory.
The Labor Arbiter issued a writ of execution against the property of the two
respondents. The City Sheriff levied on execution the motor vehicles of the petitioner
Department of Agriculture.
Issues: In this petition for certiorari, the petitioner charges the NLRC with grave
abuse of discretion for refusing to quash the writ of execution. The petitioner faults
die NLRC for assuming jurisdiction over a money claim against the Department,
which, it claims, falls under the exclusive jurisdiction of the Commission on Audit.
More importantly, the petitioner asserts, the NLRC has disregarded the cardinal rule
on the nonsuability of the State.
The private respondents, on the other hand, argue that the petitioner has
impliedly waived its immunity from suit by concluding a service contract with Sultan
Security Agency.
Ruling: In this jurisdiction, the general law waiving the immunity of the State
from suit is found in Act No. 3083, when the Philippine government "consents and
submits to be sued upon any money claim involving liability arising from contract,
express or implied, which could serve as a basis of civil action between private parties."
Implied consent, on the other hand, is conceded when the State itself commences
litigation, thus opening itself to a counter-claim or when it enters into a contract. In
this situation, the government is deemed to have descended to die level of the other
contracting party and to have divested itself of its sovereign immunity.
This rule, relied upon by the NLRC and the private respondents, is not,
however, without qualification. Not all contracts entered into by the government
'Lasco vs. UNRFNRE, G.R. Nos. 109095-109107, February 23, 1995.
60

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

operate as a waiver of its nonsuability; distinction must still be made between one
which is executed in the exercise of sovereign function and another which is done
in its proprietary capacity.
In the instant case, the Department of Agriculture has not pretended to have
assumed a capacity apart from its being a governmental entity when it entered into
the questioned contract; nor that it could have, in fact, performed any act proprietary
in character.
But, be that as it may, the claims of private respondents, i.e., for underpayment
of wages, holiday pay, overtime pay and similar other items, arising from the Contract
for Security Services, clearly constitute money claims. Act No. 3083, aforecited, gives
the consent of the State to be "sued upon any money claim involving liability arising
from contract, express or implied x x x." Pursuant, however, to Commonwealth
Act No. 327, as amended by Presidential Decree No. 1445, the money claim should
first be brought to the Commission on Audit. Thus, in Carabao, Inc. vs. Agricultural
Productivity Commission, we ruled:
[ C l a i m a n t s have to prosecute their money claims against the
Government under Commonwealth Act 327, stating that Act 3083 stands now
merely as the general law waiving the State's immunity from suit, subject to
the general limitation expressed in Section 7 thereof that "no execution shall
issue upon any judgment rendered by any Court against the Government of
the (Philippines), and that the conditions provided in Commonwealth Act 327
for filing money claims against the Government must be strictly observed."
We fail to see any substantial conflict or inconsistency between the provisions
of CA 327 and the Labor Code with respect to money claims against the State. The
Labor Code, in relation to Act No. 3083, provides the legal basis for the State liability
but the prosecution, enforcement or satisfaction thereof must still be pursued in
accordance with the rules and procedures laid down in CA 327, as amended by PD
1445.
16.

LOCAL WATER DISTRICT


The question of the corporate personality of local water districts is not new.
The Court ruled in the case of Hagonoy Water District vs. NLRC, G.R. No. 81490,
August 31,1988, that they are quasi public corporations whose employees belong
to the civil service, hence, the dismissal of those employees shall be governed
by die civil service law, rules and regulations. The pertinent part of this Court's
decision reads as follows:
' T h e only question here is whether or not local water districts are
government owned or controlled corporations whose employees are
subject to the provisions of the Civil Service Law. The Labor Arbiter
asserted jurisdiction over the alleged illegal dismissal of private respondent
Villanueva by relying on Section 25 of Presidential Decree No. 198, known
as the 'Provincial Water Utilities Act of 1973' which went into effect on 25
May 1973, and which provides as follows:
61

ART. 217

LABOR RELATIONS

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


being engaged in a proprietary function, are hereby exempt from
the provisions of the Civil Service Law. Collective Bargaining shall
be available only to personnel below supervisory levels: Provided,
however, That the total of all salaries, wages, emoluments, benefits or
other compensation paid to all employees in any month shall not
exceed fifty percent (50%) of average net monthly revenue, said net
revenue representing income from water sales and sewerage service
charges, less pro rata share of debt service and expenses for fuel or
energy for pumping during the preceding fiscal year.'
The Labor Arbiter failed to take into account the provisions of
Presidential Decree No. 1479, which went into effect on 11 J u n e 1978. PD.
No. 1479 wiped away Section 25 of PD. 198 quoted above and Section 26 of
P.D. 198 was renumbered as Section 25 xxx. Thus, Section 25 of P.D. 198
exempting the employees of water districts from the application of the Civil
Service Law was removed from the statute books. (Tanjay Water District vs.
Gabaton, G.R No. 63742, April 17, 1989.)
Significantly, Article I X ( B ) , Section 2 ( 1 ) of the 1987 Constitution
provides that "(t)he civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the government, including governmentowned or controlled corporations with original charters." Inasmuch as P.D. No.
198 as amended, is the original charter of the petitioner, Tanjay Water
District, and respondent Tarlac Water District and all water districts in the
country, they come under the coverage of the civil service law, rules and
regulations. (Sec. 35, Article VIII and Sec. 37, Article IX of P.D. No. 807; Ibid.)
16.1 Exception: Where NLRC Jurisdiction is Invoked
The employees of Zamboanga Water District held a strike. The management
of the water district filed on March 17,1987 a complaint before the Labor Arbiter
to declare the strike illegal. Subsequently, the water district questioned in the
Supreme Court the labor arbiter's jurisdiction over the case. T h e Supreme Court
denied the petition, saying:
Petitioner never raised the issue of lack of jurisdiction before the
Executive Labor Arbiter, the NLRC or even this Court in G.R. Nos. 9521920. In fact, petitioner itself filed the complaint before the Executive Labor
Arbiter in NLRC Case No. RAB-IX-03-0090-87, sought affirmative relief
therefrom and even participated actively in the proceedings below. It is
only now in this case before us, after the NLRC ordered payment of back
wages, that petitioner raises the issue of lack of jurisdiction. Indeed, it is not
fair for a party who has voluntarily invoked the jurisdiction of a tribunal in
a particular matter to secure an affirmative relief therefrom, to afterwards
repudiate and deny that very same jurisdiction to escape a penalty. (Ocheda
62

POWERS AND DUTIES


(Part 1. Jurisdiction)

ART. 217

vs. Court of Appeals, 214 SCRA 629 [1992]; Royales vs. Intermediate Appellate
Court, 127 SCRA 470 [1984]; Tijam vs. Sibonghanoy, 23 SCRA 29 [1968];
Zamboanga City Water District vs. Buat, et al, G.R. No. 104389, May 27, 1994.)
17.

REPUBLIC ACT NO. 6715 RETROACTIVE?

Republic Act No. 6715, like its predecessors, Executive Order No. I l l
and Article 217, as amended, has retroactive application, because amendments
relative to the jurisdiction of Labor Arbiters partake of the nature of curative
statutes.
1

However, in Inciong vs. NLRC (May 21, 1990), the Court refused to apply
R.A. 6715 retroactively as regards immediate execution of an order to reinstate
an employee. Similarly, the Court did not give retroactive application to R.A.
6715 in the case of Lantion vs. NLRC and Araneta University on the question of
full backwages.
T h e Supreme Court has noted these apparently varying rulings and made
this explanation:
Our previous decisions on whether to give R.A. 6715 retroactive
application or not depended to a great extent on what amended provisions
were under consideration, as well as the factual circumstances to which
they were made to apply. In Briad, the underlying reason for applying
RA 6715 retroactively was the fact that prior to its amendment, Article
217 of the Labor Code, as amended by then Executive Order No. I l l ,
created a scenario where the Labor Arbiters and the Regional Directors
of the Department of Labor and Employment (DOLE) had overlapping
jurisdiction over money claims. This situation was viewed as a defect in the
law so that when RA 6715 was passed and delineated the jurisdiction of the
Labor Arbiters and Regional Directors, the Court deemed it a rectification
of such defect; hence, the conclusion that it was curative in nature and,
therefore, must be applied retroactively. (Silva, et al. vs. NLRC and Philtread,
G.R No. 110226, June 19, 1997.)
In the Silva case the court further explained that there was no statutory
defect that R.A. No. 6715 would cure. Not being curative in this instance, R.A.
No. 6715 need not be given retroactive effect.

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


November 9, 1989, En Banc, Sarmiento,/.
63

Chapter II
POWERS AND DUTIES (cont'd.)
[Part 2. POWERS]
Overview/Key Questions
Box 4
1. What are the powers of the NLRC?
2. Injunction is frowned upon in labor disputes. What
are the pre-conditions before an injunctive writ may
be issued?
ART. 2 1 8 . POWERS OF THE COMMISSION
The Commission shall have the power and authority:
(a) To promulgate rules and regulations governing the hearing and
disposition of cases before it and its regional branches, as well as those
pertaining to its internal functions and such rules and regulations as may
be necessary to c a r r y out the purposes of this Code;
(b) To administer oaths, summon the parties to a controversy, issue
subpoenas requiring the attendance and testimony of witnesses or the
production of such books, papers, contracts, records, statement of accounts,
agreements, and others as may be material to a just determination of the
matter under investigation, and to testify in any investigation or hearing
conducted in pursuance of this Code;
( c ) To conduct investigation for the determination of a question,
matter or controversy within its jurisdiction, p r o c e e d to hear and determine
the disputes in the absence of any party thereto who has been summoned or
served with notice to appear, conduct its proceedings or any part thereof in
public or in private, adjourn its hearings to any time and place, refer technical
matters or accounts to an e x p e r t and to accept his report as evidence after
hearing of the parties upon due notice, direct parties to be joined in or
excluded from the proceedings, correct, amend, or waive any error, defect
or irregularity whether in substance or in form, give all such direction as
it may deem necessary or expedient in the determination of the dispute
before it, and dismiss any matter or refrain from further hearing or from
determining the dispute or part thereof, where it is trivial or where further
proceedings by the Commission are not necessary or desirable; and
(d) To hold any person in contempt directly or indirectly and impose
appropriate penalties therefor in accordance with law.
64

POWERS AND DUTIES


(Part 2. Powers)

ART. 218

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


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

ART. 218

LABOR RELATIONS

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


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

66

POWERS AND DUTIES


(Part 2. Powers)

ART. 219

ART. 2 1 9 . OCULAR INSPECTION


T h e C h a i r m a n , any C o m m i s s i o n e r , L a b o r A r b i t e r o r their duly
authorized representative, may at any time during working hours, conduct
an ocular inspection on any establishment, building, ship or vessel, place or
premises, including any work, material, implement, machinery, appliance
or any object therein, and ask any employee, laborer, or any person as the
case may be for any information or data concerning any matter or question
relative to the object of the investigation.
C O M M E N T S AND CASES
1.

POWERS OF THE COMMISSION


1.1

Rule-Making Power

T h e Commission has the power to promulgate rules and regulations:


a)

governing the hearing and disposition of cases before it and its


regional branches;

b)

pertaining to its internal functions; and

c)

those that may be necessary to carry out the purposes of this Code.

T h e rules and regulations promulgated by the Commission have the force


and effect of law. It is an elementary rule in administrative law that administrative
regulations and policies enacted by administrative bodies, such as the Revised
Rules of the NLRC, to interpret the law which they are entrusted to enforce,
have the force of law, and are entitled to great respect.
1

It is likewise elementary that the rules and regulations must not be in


conflict with or contrary to the provisions of the Labor Code and other laws.
1.2

Power to Issue Compulsory Processes

T h e Commission has the power to:


a)

administer oaths;

b)

summon parties; and

c)

issue subpoenas ad testificandum and duces tecum.

1.3

Power to Investigate and Hear Disputes Within Its Jurisdiction

The Commission has the power to:


a)
conduct investigations for the determination of a question, matter
or controversy within its jurisdiction; and
b)
proceed to hear and determine the disputes in the manner laid
down under paragraph (c) of Article 218.

'Rizal Empire Insurance Group vs. NLRC, 150 SCRA 588, citing the case of
Espaol vs. PVA, 137 SCRA 314.
67

ARTS. 218-219

LABOR RELATIONS

1.4 Contempt Power


The commission has the power to hold any person in direct or indirect
contempt under Rule IX of the NLRC 2005 Rules of Procedure.
The procedures and penalties thereof are provided under paragraph (d)
of Article 218.
Contempt is defined as a disobedience to the Court by setting up an
opposition to its authority, justice and dignity. It signifies not only a willful
disregard or disobedience of the court's orders but such conduct as tends to
bring the authority of the court and the administration of law into disrepute
or in some manner to impede the due administration of justice. There is no
question that disobedience or resistance to a lawful writ, process, order, judgment
or command of a court or injunction granted by a court or judge constitutes
indirect contempt punishable under Rule 71 of the Rules of Court.
It is proper for a labor arbiter to cite guilty of indirect contempt an employer
who refuses to reinstate an illegally dismissed employee.
1

1.5

Power to Conduct Ocular Inspection

Under Article 219, the chairman, any commissioner, labor arbiter or their
duly authorized representatives may, at anytime during working hours:
a)
conduct an ocular inspection on any establishment, building, ship or
vessel, place or premises, including any work, material, implement, machinery,
appliance or any object therein; and
b)
ask any employee, laborer or any person, as the case may be, for any
information or data concerning any matter or question relative to the object of
the investigation.
The present writer believes that this inspection power is but an adjunct
to the adjudicatory function. It can be exercised only to assist or expedite
adjudication of a pending dispute. T h e power is not meant to duplicate the
visitatorial-enforcement authority under Article 128.
1.6

Adjudicatory Power: Original

Each of the NLRC divisions has original jurisdiction over petitions for
injunction or temporary restraining order under Article 2 1 8 ( e ) .
Also, it has original jurisdiction to hear and decide "National Interest"
cases certified to it by the Secretary of Labor under Article 263(g). T h e NLRC
thereby gains jurisdiction over all questions submitted or necessarily deemed
submitted so as to resolve the dispute, even over issues that otherwise fall within
the labor arbiter's exclusive jurisdiction.
'Industrial and Transport Equipment, Inc., et al. vs. NLRC, et al, G.R. No.
113592, January 15, 1998.
Ibid.
68

POWERS AND DUTIES


(Part 2. Powers)
1.7

ARTS. 218-219

Adjudicatory Power: Appellate

The NLRC (i.e., a division) has exclusive appellate jurisdiction over all cases
decided by labor arbiters and the D O L E regional director or hearing officers
under Article 129.
1

T h e NLRC has no appellate jurisdiction over decisions rendered by (1)


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

Article217[b].
69

ARTS. 218-219

LABOR RELATIONS

Therefore, the private respondent admitted the final and executory character of the
judgment.
As correctly contended by the Office of the Solicitor General, there is a complete
want of evidence that the indebtedness asserted by the [employer] against [employee]
Pondoc arose out of or was incurred in connection with the employer-employee
relationship between them. The Labor Arbiter did not then have jurisdiction over
the claim as under paragraph (a) of Article 217 of the Labor Code, Labor Arbiters
have exclusive and original jurisdiction only in the following cases: x x x On the other
hand, under paragraph (b) thereof, the NLRC has exclusive appellate jurisdiction
over all cases decided by the Labor Arbiters. This simply means that the NLRC does
not have original jurisdiction over the cases enumerated in paragraph (a) and that
if a claim does not fall within the exclusive original jurisdiction of the Labor Arbiter,
the NLRC cannot have appellate jurisdiction thereon.
2. POWER TO ISSUE INJUNCTION OR TEMPORARY RESTRAINING ORDER
Aside from the powers mentioned above, the NLRC has injunction power
or, simply, the power to command that an act be done or not done. It may enjoin
any actual or threatened commission of any or all prohibited or unlawful acts,
or require the performance of a particular act in any labor dispute which, if not
restrained or performed forthwith, may cause grave or irreparable damage to
any party or render ineffectual any decision in favor of such party. An injunction,
in short, may either require, forbid, or stop the doing of an act.
Article 218(e) explains the injunctive power of the Commission and the
prerequisites for its exercise. But it must first be stressed that injunctions or
restraining orders are frowned upon as a matter of labor relations policy. This
no-injunction rule is found in Article 254 which provides: "No temporary or
permanent injunction or restraining order in any case involving or growing out
of labor dispute shall be issued by any court or other entity, except as otherwise
provided in Articles 218 and 264 of this Code." This policy explains why Article
218(e) prescribes the particular procedure and requisites that must be carefully
observed before an injunctive writ may issue.
T h e action for injunction is distinct from the ancillary remedy of
preliminary injunction which cannot exist except only as part or an incident of
an independent action or proceeding. As a matter of course, in an action for
injunction, the auxiliary remedy of preliminary injunction, whether prohibitory
or mandatory, may issue. Under the present state of the law, the main action
of injunction seeks a judgment embodying a final injunction which is distinct
from, and should not be confused with the provisional remedy of preliminary
injunction, the sole object of which is to preserve the status quo until the merits
can be heard. A writ of preliminary injunction is generally based solely on initial
and incomplete evidence. T h e evidence submitted during the hearing on an
application for a writ of preliminary injunction is not conclusive or complete
70

POWERS AND DUTIES


(Part 2. Powers)

ARTS. 218-219

for only a "sampling" is needed to give the trial court an idea of the justification
for the preliminary injunction pending the decision of the case on the merits.
As such, the findings of fact and opinion of a court when issuing the writ of
preliminary injunction are interlocutory in nature and made even before the
trial on the merits is commenced or terminated. It does not necessarily proceed
that when a writ of preliminary injunction is issued, final injunction will follow.
1

T h e reasons for the petition for injunction must be specified, but it is not
necessary to allege in verbatim the requisites for the issuance of the temporary
restraining order a n d / o r writ of preliminary injunction under Article 218(e)
of the Labor Code. For instance, the bank has made sufficient allegations that
members of petitioner union were unlawfully preventing or obstructing the
free ingress to and egress from the respondent bank premises; and disrupting
operations, causing great and continuing damage to the bank in terms of lost
revenues. These were proven by the bank during the proceedings for the issuance
of a writ of preliminary injunction.
2

Where the trial court [now N L R C ] did not follow and observe the
procedure outlined and provided for in Section 9 ( d ) of Republic Act No.
875 [counterpart of present Article 2 1 8 ( e ) ] in issuing the preliminary writ of
prohibitory injunction, the said writ is illegal and void, although the court had
jurisdiction to issue it.
3

2.1

Injunction by Labor Arbiter

May a labor arbiter issue an injunction or a restraining order? Under


the Guidelines Governing Labor Relations (October 1987), this power was
reserved specifically to the Commission proper. T h e Rules of Procedure (1990)
of the NLRC, on the other hand, provided that the ancillary power of issuing
preliminary injunction or a restraining order "may be exercised by the Labor
Arbiters only as an incident to the cases pending before them in order to preserve
the rights of the parties during the pendency of the cases but excluding labor
disputes involving strike or lockout."
This power of the labor arbiter was recognized in the last sentence, Section
1, Rule XI of the NLRC Rules of 1990. But it must be noted that that statement no
longer appears in the 2002 and 2005 NLRC Rules. Indeed, NLRC Commissioner
[now CA Justice] Vicente S.E. Veloso HI has argued that Article 218 limits the
'Urbanes, Jr. vs. Court of Appeals, Social Security System, G.R. No. 117964,
March 28, 2001.
^The Hongkong and Shanghai Banking Corporation Employees Union vs.
National Labor Relations Commission and the Hongkong and Shanghai Banking
Corp., G.R. No. 113541, November 22, 2001.
Reyes vs. Tan, 52 Off. Gaz. 6187; Allied Free Workers' Union vs. Apostol, 54
Off. Gaz. 981; and Associated Watchmen and Security Union vs. United States Lines,
54 Off. Gaz. 7397.
3

71

ARTS. 218-219

LABOR RELATIONS

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


or any of its divisions. The labor arbiter is "excluded statutorily," hence no NLRC
Rules can grant him that power.
1

2.2 Requisites for Issuance of Restraining Order or Injunction


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

2.3
(TRO)

Conditions for Issuance Ex Parte of a Temporary Restraining Order

A temporary restraining order (valid only for 20 days) may be issued ex


parte under the following conditions:
a)
the complainant "shall also allege that, unless a temporary restraining
order shall be issued without notice, a substantial and irreparable injury to
complainant's property will be unavoidable";
b)
there is "testimony under oath, sufficient, if sustained, to justify the
Commission in issuing a temporary injunction upon hearing after notice";
c)
the "complainant shall first file an undertaking with adequate security
in an amount to be fixed by the Commission sufficient to recompense those
PMAP Labor Relations Update, Q3 and Q4, p. 2.
Ilaw at Buklod ng Manggagawa vs. NLRC, G.R. No. 91980, June 27, 1991.

72

POWERS AND DUTIES


(Part 2. Powers)

ARTS. 218-219

enjoined for any loss, expense or damage caused by the improvident or erroneous
issuance of such order or injunction, including all reasonable costs, together
with a reasonable attorney's fee, and expense of defense against the order or
against the granting of any injunctive relief sought in the same proceeding and
subsequently denied by the Commission"; and
d)
the "temporary restraining order shall be effective for no longer than
twenty (20) days and shall become void at the expiration of said twenty (20) days."

To be sure, the issuance of an ex parte temporary restraining order in a labor


dispute is not per se prohibited. Its issuance, however, should be characterized by
care and caution for the law requires that it be clearly justified by considerations
of extreme necessity, i.e., when the commission of unlawful acts is causing
substantial and irreparable injury to company properties and the company is,
for the moment, bereft of an adequate remedy at law.
2

An injury is considered irreparable if it is of such constant and frequent


recurrence that no fair and reasonable redress can be had therefor in a court of
law or where there is no standard by which their amount can be measured with
reasonable accuracy, that is, it is not susceptible of mathematical computation.
It is considered irreparable injury when it cannot be adequately compensated
in damages due to the nature of the injury itself or the nature of the right or
property injured or when there exists no certain pecuniary standard for the
measurement of damages.
3

"Property" includes not only tangible property but also the right to use
such property. Where the evidence showed mass picketing by strikers, obstruction
of entrances to plaintiffs plant, intimidation of and unlawful conduct toward
nonstrikers, and interference with automobiles hired by plaintiff to convey
nonstrikers, resulting in the closing of the plaintiffs plant, it was held that there
was injury to "property" within this provision.
4

"Public officers" means local law enforcing officers.


Injunction cannot issue against unlawful acts, unless the local authorities
whose duty is to keep the peace have first been resorted to and have either advised
that they could not or would not keep it, or advising that they could and would
have failed through inability or unwillingness to do so.
6

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

73

LABOR RELATIONS

ARTS. 218-219

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


proceed with the work.
In view of this requirement, the employer may not seek by injunction protection
from losses which the exercise of the powers of the police could not be calculated
to prevent.
The intent of this requirement is to take the executive function of law
enforcement out of the court and leave it to the appropriate executive officers, unless
they fail to function. The reason is that the preservation of order and the protection
of property are primarily police and executive, rather than judicial problems.
For this reason, these public officers should be served the notice of hearing
of the application for injunction.
1

2.4

No Adequate Remedy

In addition to the other requirements which the complainant must satisfy


in order to obtain injunctive relief under the Act, the complainant must show
that "he has no adequate remedy at law."
An adequate remedy at law has been defined as one "that affords relief with
reference to the matter in controversy, and which is appropriate to the particular
circumstances of the case."
5

It is well settled that the existence of a remedy at law does not necessarily
preclude injunctive relief. In order to have that effect, a remedy at law must,
in the first place, be plain and not doubtful or obscure. Secondly, it must be
complete.
6

It has been held that one who closes down his business in consequence of
labor difficulties may not thereafter successfully sue to enjoin a sit-down strike
called by the plaintiff's former employees for the purpose of preventing removal
of the machinery and liquidation of the plant, because an action of ejectment
will furnish an adequate legal remedy.
7

2.5

Cash Bond

Under the NLRC Rules of 2005, no temporary restraining order or writ of


preliminary injunction shall be issued except on the condition that petitioner
shall first file an undertaking to answer for the damages and post a cash bond in
the amount of Fifty Thousand Pesos (P50,000.00), or such higher amount as may
be determined by the Commission. T h e purpose of the bond is to recompense
'Cater Const. Co. vs. Nischwitz, 11 F 2 971.
^Wilson 8c Co. vs. Birl, 105 F 2d 948.
United Packing House Workers of America vs. Wilson Co., 80 F. Supp 563.
Heintz Mfg. Co. vs. Local No. 515 of United Automobile Workers, 20 F Supp.

116.
5

Mt. Vermon vs. Borman, 100 Ohio St. 2, 75,125 NE 116 [1919].
t e l l e r , Labor Disputes and Collective Bargaining, Vol. 1, p. 628.
Oswald vs. Leader, 20 F. Supp. 876 [DC ED Pa. 1937].
7

74

POWERS AND DUTIES


(Part 2. Powers)

ARTS. 218-219

those enjoined for any loss, expense or damage caused by the improvident
or erroneous issuance of such order or injunction, including all reasonable
costs, together with a reasonable attorney's fee, and expense of defense against
the order or against the granting of any injunctive relief sought in the same
proceeding and subsequently denied by the Commission.
2.6

Scope

As to the scope of an injunction issued under the Act, both the Act itself and
the cases restrict the operation of such injunctions not only to the specific acts
complained of in the pleadings and proven at trial as wrongful, but further, limits
the injunction to only those alleged and proven guilty of actual participation,
authorization or ratification of such acts.
1

The power of the NLRC to enjoin or restrain the commission of any or all
prohibited or unlawful acts as provided in Article 218 of the Labor Code, can
only be exercised in a labor dispute. In one case it was held that the company's
demand for payment of the [employees'] amortizations on their car loans, or, in
the alternative, the return of the cars to the company, is not a labor, but a civil
dispute. It involves debtor-creditor relations, rather than employee-employer
relations, x x x. T h e NLRC gravely abused its discretion and exceeded its
jurisdiction by issuing the writ of injunction to stop the company from enforcing
the civil obligation of the [employees] under the car loan agreements and from
protecting its interest in the cars which, by the terms of those agreements, belong
to it (the company) until their purchase price shall have been fully paid by the
employee. T h e terms of the car loan agreements are not an issue in the labor
case. The rights and obligations of the parties under those contracts may be
enforced by a separate civil action in the regular courts, not in the NLRC.
2

2.7

Reception of Evidence

The reception of evidence "for the application of a writ of injunction may


be delegated by the Commission to any of its Labor Arbiters who shall conduct
such hearings in such places as he may determine to be accessible to the parties
and their witnesses and shall submit thereafter his recommendation to the
Commission."
"Labor Arbiter" in the preceding sentence may now refer to "Commission
Attorney," a position created by R.A. No. 9347 (July 27, 2006) to assist the
Commission and its divisions in their appellate and adjudicatory functions. Note
further this provision in R.A. No. 9347: "No Labor Arbiter shall be assigned to
perform the functions of the Commission Attorney nor detailed to the office of
any Commissioner."

Rothenberg on Labor Relations, p. 213.


*Nestle Philippines, Inc. vs. NLRC, G.R. No. 85197, March 18, 1991.
75

ARTS. 218-219

LABOR RELATIONS

2.8 Twenty-day Life of TRO


A temporary restraining order ( T R O ) , if issued at all in a petition for
injunction, is valid only for twenty (20) days and becomes void ipso facto at the
end of that period.
The TRO takes effect upon its issuance and not upon receipt of the parties.
In computing the effectivity of a T R O , Saturday, Sunday, and holidays are
not excluded. The maximum period of 20 days includes Saturdays, Sundays, and
holidays.
1

2.9

Illustrative Case: Issuance of T R O

A petition for injunction and T R O may be filed with the NLRC where the
complaint filed with the labor arbiter against slowdown by petitioner's employees
has not yielded adequate relief.
Haw at Buklod Ng Mangggawa vs. NLRC and San Miguel Corporation, G.R. No.
91980, June 27, 1991
Facts: On December 8, 1989, claiming that its action in the Arbitration
Branch had as yet "yielded no relief," San Miguel Corporation (SMC) filed
another complaint against the Union and members thereof directly with the
National Labor Relations Commission, "to enjoin and restrain illegal slowdown
and for damages, with prayer for the issuance of a cease-and-desist and temporary
restraining orders." T h e NLRC's First Division directed SMC to present evidence
in support of the application before a commissioner. On December 19,1989, the
First Division promulgated a Resolution on the basis of "the allegations of the
petitioner (SMC) and the evidence adduced ex partem support of their petition."
The Resolution
1)
authorized the issuance of "a Temporary Restraining Order for a
period of twenty (20) days x x x upon x x x a cash or surety bond in the amount
of P50,000.00 x x x DIRECTING the respondents to CEASE and DESIST from
further committing the acts complained about particularly their not complying
with the work schedule."
The Union filed the petition which commenced the special civil action of
certiorari and prohibition. It asserted that the NLRC, as an essentially appellate
body, had no jurisdiction to act on the plea for injunction in the first instance.
Ruling: The Court finds that the respondent Commission has acted entirely
in accord with applicable provisions of the Labor Code.
T h e record reveals that the Commission exercised the power directly and
plainly granted to it by sub-paragraph ( e ) , Article 217 in relation to Article 254
'SC Administrative Circular 20-95, par. 3; Manotoc vs. Agcaoili, AM. No. RTJ98-1405, April 12, 2000.
Ibid.
76

POWERS AND DUTIES


(Part 2. Powers)

ARTS. 218-219

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

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


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

2.10 Injunction from NLRC Not the Proper Remedy Against Employee's
Dismissal
In the preceding case involving slowdown at San Miguel Corporation, the
employer petitioned for an injunction after it had commenced an action at the
arbiter's level, and the High Court held that it was proper for NLRC to entertain
and act on the petition for injunction. But in the PAL case given below involving
employee dismissal no case had yet been filed with the labor arbiter when the
petition for injunction was filed with the NLRC. T h e High Court invalidated
the injunction issued by NLRC. Petition for injunction is not the way to halt an
employee's dismissal.
Philippine Airlines, Inc. vs. NLRC, et al, G.R. No. 120567, March 20, 1998
Facts: PAL dismissed two flight stewards for their alleged involvement in
smuggling some 2.5 million Philippine pesos in Hongkong airport. The employees,
instead of filing an illegal dismissal complaint before a labor arbiter, directly petitioned
the NLRC for injunction, with prayer for a TRO, to prohibit Philippine Airlines
from effecting their dismissal and, after hearing, to reinstate them to their jobs, with
backwages and damages. The NLRC, citing its injunctive power under Article 218(e)
of the Labor Code, issued the injunction. PAL disputed the legality of the issuance,
contending that injunction or restraining order under Article 218(e) may be issued
by NLRC only if the case involves or arises from labor disputes. Debunked by NLRC,
PAL management took recourse to the High Court.
1

Abbot, et al. vs. National Labor Relations Commission, et al, G.R. No. 65173,
October 27, 1986.
77

ARTS. 218-219

LABOR RELATIONS

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

Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order
granting private respondents' petition for injunction and ordering the petitioner to
reinstate private respondents.

See Article 217.


78

Chapter II
POWERS AND DUTIES (cont'd.)
[Part 3. PROCEDURE]
Overview/Key Questions:
Box 5
1. Technical rules are not strictly followed in proceedings
before the NLRC and the Labor Arbiter. How is this
rule reconciled with the requirement of procedural
due process?
2. How are compulsory arbitration cases heard and
decided?
ART. 2 2 1 . TECHNICAL RULES NOT BINDING AND PRIOR RESORT TO
AMICABLE
SETTLEMENT
I n any p r o c e e d i n g b e f o r e the Commission o r any o f the L a b o r
Arbiters, the rules of evidence prevailing in courts of law or equity shall
not be controlling and it is the spirit and intention of this Code that the
Commission and its members and the L a b o r Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively
and without regard to technicalities of law or procedure, all in the interest of
due process. In any proceeding before the Commission or any Labor Arbiter,
the parties may be represented by legal counsel but it shall be the duty of
the Chairman, any Presiding Commissioner or commissioner or any Labor
Arbiter to exercise complete control of the proceedings at all stages.
Any provision of law to the contrary notwithstanding, the Labor Arbiter
shall exert all efforts towards the amicable settlement of a labor dispute
within his jurisdiction on or before the first hearing. The same rule shall
apply to the Commission in the exercise of its original jurisdiction.
COMMENTS AND CASES
1.

PROCEEDINGS BEFORE LABOR ARBITER OR THE COMMISSION;


TECHNICAL RULES NOT APPLICABLE
Administrative and quasi-judicial bodies, like the National Labor
Relations Commission, are not bound by the technical rules of procedure in
the adjudication of cases.
1

Ford Philippines Salaried Employees Association vs. National Labor Relations


Commission, G.R. No. 75347, December 11, 1987.
79

LABOR RELATIONS

ART. 221

Simplification of procedure, without regard to technicalities of law or


procedure and without sacrificing the fundamental requisites of due process,
is mandated to insure speedy administration of justice. The Supreme Court
construed Article 221 of the Labor Code so as to allow the National Labor
Relations Commission or a labor arbiter to decide a case on the basis of position
papers and other documents submitted without resorting to technical rules of
evidence as observed in the regular courts of justice.
1

Although the affiants have not been presented to affirm the contents of
their affidavits and be cross-examined, their affidavits may be given evidentiary
value. The argument that such affidavits were hearsay is not persuasive. Rules of
evidence are not strictly observed in proceedings before administrative bodies
like the NLRC.
2

1.1

Modicum of Admissibility; Substantial Evidence

It is true that administrative quasi-judicial bodies like the NLRC are not
bound by the technical rules of procedure in the adjudication of cases. However,
this procedural rule should not be construed as a license to disregard certain
fundamental evidentiary rules. While the rules of evidence prevailing in the
courts of law or equity are not controlling in proceedings before the NLRC, the
evidence presented before it must at least have a modicum of admissibility for it
to be given some probative value. For instance, the Statement of Profit and Losses
submitted by Crispa, Inc. to prove its alleged losses, without the accompanying
signature of a certified public accountant or audited by an independent auditor,
are nothing but self-serving documents which ought to be treated as a mere scrap
of paper devoid of any probative value. For sure, this is not the kind of sufficient
and convincing evidence necessary to discharge the burden of proof required
of petitioners to establish the alleged losses suffered by Crispa, Inc. in the years
immediately preceding 1990 that would justify the retrenchment of respondent
employees.
3

Not only must there be some evidence to support a finding or conclusion,


but evidence must be substantial. Substantial evidence is more than a mere
scintilla. It means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.
4

1.2

Cardinal Rights in Quasi-Judicial Proceedings

There are cardinal primary rights which must be respected in administrative


or quasi-judicial proceedings. Not the least among them are those which refer
1Robusta Agro Marine Products, Inc. vs. Gorombalem, G.R. No. 80500, July 5,
1989; Sevillana vs. I.T. Corp., et al, G.R. No. 99047, April 16, 2001.
Bantolino, et al vs. Coca-Cola Bottlers Phils., G.R. No. 153660, June 10, 2003.
Uichico, et al vs. NLRC, G.R. No. 121434,June 2, 1997.
Gelmart Industries [Phils.], Inc. vs. Leogardo, Jr., G.R. No. 70544, November
5, 1987.
2

80

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

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


does not impose the obligation to decide rightly, it does imply a necessity which
cannot be disregarded, namely, that of having something to support the decision.
A decision with absolutely nothing to support it is a nullity, at least, when directly
attacked.
1

It would be in keeping with the directive of Article 221 of the Labor Code
(which provides that the rules of evidence prevailing in courts of law or equity
shall not be controlling) for the Minister of Labor to take into account the
evidence sought to be presented by the employer regarding its financial reverses,
especially if the Bureau Director did not conduct a full-blown hearing, because
said evidence, when accorded its due weight, would indubitably show that the
employer had a just cause for terminating the employees' employment.
2

Where the complaint is for the recovery of unused vacation leave and
sick leave, it is palpable and prejudicial error to grant the employees complete
payment for all the vacation and sick leaves, without receiving evidence on and
determining the exact number of days thereof which may not have been used
or availed of by the employees and which would be the proper subject of any
claim on their part.
3

Ang may vs. OR, 69 Phil. 335, February 27, 1940


Facts: The Solicitor General in behalf of CIR filed a motion for reconsideration,
while respondent National Labor Union, Inc. prayed for a new trial and vacation of
the judgment of the majority of this Court. This concerns the laying off of employees
of Ang Tibay belonging to the NLU, Inc.
Issue: Whether there was due process observed in the CIR proceedings.
Held: The CIR is a special court whose functions are specifically stated in the
law of its creation. It is more of an administrative board than a part of the integrated
judicial system of the nation. It is not narrowly constrained by technical rules of
procedure. However, this does not mean that it can entirely ignore or disregard the
fundamental and essential requirements of due process in trials and investigations
of an administrative character.
There are cardinal primary rights which must be respected even in proceedings
of this character:
1)
right to a hearing;
2)
tribunal must consider the evidence presented;
3)
decision must be supported by something (evidence);
^ l m a r t Industries [Phils.], Inc. vs. Leogardo,Jr., G.R. No. 70544, November
5, 1989.
Columbia Development Corporation vs. Minister of Labor, G.R. No. 5769,
December 29, 1986.
Rural Bank of San Miguel [Bohol], Inc. vs. National Labor Relations
Commission, G.R. No. 82144, March 8, 1989.
2

81

ART. 221

LABOR RELATIONS

4)
supporting evidence must be substantial;
5)
decision must be rendered on the evidence presented or at least
contained in the record and disclosed to the parties affected;
6)
the body or CIR or any of its judges must act on his own independent
consideration of the law and facts, and not simply accept the views of the subordinate
in arriving at a decision; and
7)
decide in such manner that parties can know the various issues involved
and the reason for the decision.
1.3

Verification

A pleading is verified by an affidavit that the affiant has read the pleading
and that the allegations therein are true and correct of his knowledge and belief.
Verification is intended to assure that the allegations in the pleading have been
prepared in good faith or are true and correct, not mere speculations. Generally,
lack of verification is merely a format defect that is neither jurisdictional nor
fatal. The court may order the correction of the pleading or act on the unverified
pleading if the attending circumstances are such that strict compliance with the
rule may be dispensed with in order to serve the ends of justice.
T h e purpose of verification was served where the verification of the
petition was done by an Employment Specialist of petitioner Pfizer, Inc.,
[employer] who "coordinated and actually took part in the investigation" of
the administrative charges against respondent. As such, she was in a position to
verify the truthfulness and correctness of the allegations in the petition.
1

In another case, the petitioner claims that out of the sixty-five complainants
only twenty-one of them signed the verification. Hence, petitioner infers that
only the twenty-one signatories have the legal personality to prosecute the case.
As for the rest of the complainants, petitioner insists that the complaint was
dismissible.
T h e Supreme Court does not agree. T h e complainants therein were being
represented by their counsel of choice. In addition, in the verification attached to
the complaint, it is manifested that the twenty-one complainant-signatories were
not only signing in their own behalf but also in behalf of the other complainants.
Surely, the signing of the verification is a matter of procedure which did not in
any way diminish nor weaken the claim of the other complainants. No special
power of attorney was needed considering that no compromise agreement was
being entered into. Besides, petitioner did not offer any objection when each of
the complainants presented evidence pertaining to his or her monetary claim.
2

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

82

POWERS AND DUTIES


(Part 3. Procedure)
1.4

ART. 221

Party Respondent

In a complaint for underpayment of wages and other money claims filed


by employees of a single proprietorship business, the respondent should be the
business owner. This is not necessarily the person in whose name the business
is registered.
Mayan Hotel & Restaurant, et al vs. Adana, et al., G.R. No. 157634, May 16,
2005
Facts: Mayon Hotel & Restaurant is a single proprietor business registered in the
name of petitioner Pacita O. Po, whose mother, Josefa, manages the establishment. On
various dates of April and May 1997, the 16 employees of the hotel filed complaints
for underpayment of wages and other money claims against petitioners. The Labor
Arbiter awarded substantially all of the employees' money claims. The Labor Arbiter
also held that based on the evidence presented, Josefa Po Lam was the owner/
proprietor of Mayon Hotel 8c Restaurant even though the registered owner was Pacita,
the daughter. Was it correct to hold Josefa Po Lam liable as the owner of Mayon Hotel
& Restaurant, and the proper respondent in the case?
Petitioners insist that it was error for the Labor Arbiter and the CA to have
ruled that petitioner Josefa Po Lam is the owner of the Mayon Hotel & Restaurant.
They contend that petitioner Josefa Po Lam's participation was limited to merely (a)
being the overseer; (b) receiving the month-to-month and/or year-to-year financial
reports and (c) visitation of the premises.
Ruling: The claim that petitioner Josefa Po Lam is merely the overseer is not
borne out by the evidence.
First. Only Josefa Po Lam appeared in the proceedings with the Labor Arbiter.
It was only on appeal with the NLRC that Pacita Po signed the pleading. The apathy
shown by petitioner Pacita Po is contrary to human experience as one would think
that the owner of the establishment would naturally be concerned when ALL her
employees file complaints against her.
Second. The records belie Josefa Po Lam's claim that she is merely an overseer.
The findings of the Labor Arbiter were based on credible, component and substantial
evidence. We quote:
Mayon Hotel and Restaurant is a [business name] of an enterprise.
While Josefa Po Lam claims that it is her daughter, Pacita Po, who owns
the hotel and restaurant, Josefa failed to submit the document of sale. .
. [Respondents] testified that it was Josefa who exercises all the acts and
manifestation of ownership of the hotel and restaurant like transferring
employees. It is Josefa to whom the employees submits reports, draws money
for payment of payables and for marketing, attending (sic) to Labor Inspectors
during ocular inspections. Except for documents whereby Pacita Po appears
as the owner of Mayon Hotel and Restaurant, nothing in the record shows
any circumstance or manifestation that Pacita Po is the owner. The least that
can be said is that it is absurd for a person to purchase a hotel and restaurant
in the very heart of the City of Legazpi verbally. Assuming this to be true,
83

ART. 221

LABOR RELATIONS

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


the ownership of Pacita, Josefa should [have] submitted the lease contract
between the owner of the building where the Mayon Hotel and Restaurant
was located and Pacita Po to clearly establish ownership by the latter of said
enterprise. Josefa failed.
Petitioners' reliance on the rules of evidence, i.e., the certificate of registration
being the best proof of ownership, is misplaced. Notwithstanding the certificate of
registration, doubts were cast as to the true nature of petitioner Josefa Po Lam's
involvement in the enterprise, and the Labor Arbiter had the authority to resolve
this issue.
Article 221 of the Labor Code is clear: technical rules are not binding, and the
application of technical rules of procedure may be relaxed in labor cases to serve the
demand of substantial justice. But more significantly, we sustain the Labor Arbiter
and the CA because even when the case was on appeal with the NLRC, nothing was
submitted to negate the Labor Arbiter's finding that Pacita Po is not the real owner
of the subject hotel and restaurant. Indeed, no such evidence was submitted in the
proceedings with the CA nor with this court. Thus, we find that there is substantial
evidence to rule that petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel
& Restaurant.
1.5

Prohibited Pleadings and Motions

Emphasizing the avoidance of legal technicalities, the NLRC 2005 Rules


(in Rule III, Section 4) does not allow the following motions or pleadings:
a.
Motion to dismiss the complaint except on the ground of lack of
jurisdiction over the subject matter, improper venue, res judicata, prescription
and forum shopping;
b.

Motion for a Bill of Particulars;

c.

Motion for new trial;

d.
Arbiter;

Petition for r e l i e f from j u d g m e n t when filed with the L a b o r

e.

Petition for Certiorari, Mandamus, or Prohibition;

f.

Motion to declare respondent in default;

Motion for Reconsideration or appeal from any interlocutory order


g.
of the Labor Arbiter.
2.

MANDATORY CONCILIATION AND MEDIATION CONFERENCE;


COMPROMISE ENCOURAGED
Nature of Proceedings.

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


nature. Subject to the requirements of due process, the technicalities of law
and procedure and the rules obtaining in the courts of law shall not strictly
84

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

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

Mandatory Conciliation and Mediation Conference


a)
T h e mandatory conciliation and mediation conference shall be
called for the purpose of (1) amicably settling the case upon a fair compromise;
(2) determining the real parties in interest; (3) determining the necessity of
amending the complaint and including all causes of action; (4) defining and
simplifying the issues in the case; (5) entering into admissions or stipulation of
facts; and (6) threshing out all other preliminary matters. T h e Labor Arbiter
shall preside and take full control of the proceedings.
(b) Conciliation and mediation efforts shall be
Arbiter all throughout the proceedings. Should the
agreement as to the whole or any part of the dispute, the
to writing and signed by the parties and their respective
representative, if any, before the Labor Arbiter.

exerted by the Labor


parties arrive at any
same shall be reduced
counsel or authorized

(c) In any case, the compromise agreement shall be approved by the


Labor Arbiter, if after explaining to the parties, particularly to the complainants,
the terms, conditions and consequences thereof, he is satisfied that they
understand the agreement, that the same was entered into freely and voluntarily
by them, and that it is not contrary to law, morals, and public policy.
(d) A compromise agreement duly entered into in accordance with this
section shall be final and binding upon the parties and shall have the force and
effect of judgment rendered by the Labor Arbiter.
(e) T h e mandatory conciliation and mediation conference shall, except
for justifiable grounds, be terminated within thirty (30) calendar days from the
date of the first conference.
(f)
No motion for postponement shall be entertained except on
meritorious grounds.
2

Effect of failure of conciliation and mediation


Should the parties fail to agree upon an amicable settlement, either in
whole or in part, during the mandatory conciliation and mediation conference,
the Labor Arbiter shall terminate the conciliation and mediation stage and
proceed to pursue the other purposes of the said conference as enumerated in
the immediately preceding section. Thereafter, the Labor arbiter shall direct
the parties to simultaneously file their respective position papers on the issues
agreed upon by the parties and as reflected in the minutes of the proceedings.
3

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


Section 3, Ibid.
Section 4, Ibid.

85

LABOR RELATIONS

ART. 221
Non-appearance of parties

The non-appearance of the complainant or petitioner during the two (2)


settings for mandatory conciliation and mediation conference scheduled in the
summons, despite due notice thereof, shall be a ground for the dismissal of the
case without prejudice.
In case of non-appearance by the respondent during the first scheduled
conference, the second conference shall proceed as scheduled in the summons.
If the respondent still fails to appear at the second conference despite being
duly served with summons, the Labor Arbiter shall immediately terminate the
mandatory conciliation and mediation conference. The Labor Arbiter shall
thereafter allow the complainant or petitioner to file his verified position paper
and submit evidence in support of his cause of action, and thereupon render
his decision on the basis of the evidence on record.
1

Under these rules, it is incumbent upon the Labor Arbiter not only to
persuade the parties to settle amicably, but equally to ensure that the compromise
agreement entered into by them is a fair one and that the same was forged [i.e.,
agreed upon] freely, voluntarily and with a full understanding of the terms and
conditions as well as the consequences. T h e latter onus devolving upon the
Labor Arbiter gains significance when taken in conjunction with Article 222 of
the Labor Code of the Philippines, which allows non-lawyers to appear before
the labor tribunal in representation of their own selves.
3

It is true that a compromise agreement once approved by the court


has the effect of res judicata between the parties and should not be disturbed
except for vices of consent and forgery. However, the National Labor Relations
Commission may disregard technical rules of procedure in order to give life to
the constitutional mandate affording protection to labor and to conform to the
need of protecting the working class whose inferiority against the employer has
always been earmarked by disadvantage.
4

2.1

Binding Effect of Compromise Agreement

Generally, a judgment on a compromise agreement puts an end to a


litigation and is immediately executory. However, the Rules of Court requires
a special authority before an attorney can compromise the litigation of his
clients. The authority to compromise cannot lightly be presumed and should
be established by evidence. Section 9, Rule III of the NLRC Rules of Procedure
states: "Attorneys and other representatives of parties shall have authority to
'Section 5, Rule V, NLRC Revised Rules of Procedure, 2005.
Ibid.
Santiago vs. De Guzman, G.R. No. 84578, September 7, 1989.
Principe vs. Philippine-Singapore Transport Services, Inc., G.R. No. 80918,
August 26, 1989.
2

86

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

bind their clients in all matters of procedure, but they cannot, without a special
power of attorney or express consent, enter into a compromise agreement with
the opposing party in full or partial discharge of a client's claim."
Also not to be overlooked is Section 3 (c and d) of the NLRC 2005
Rules of Procedure quoted above. It requires the Labor Arbiter's approval of a
compromise agreement over a case pending before the Labor Arbiter.
General Rubber and Footwear Corporation vs. Drilon, G.R. No. 76988, January
31, 1989
Facts: In 1984, Wage Order No. 6 was issued increasing the statutory minimum
wage rate. General Rubber applied for exemption, but the Wage Council denied the
application. Some members of the Union declared a strike against General Rubber.
Three days later, General Rubber and Sto. Domingo, purporting to represent the
striking workers, entered into a return-to-work agreement, where the Union agreed
not to demand the differential pay arising from the wage order. Some 268 members of
the Union ratified the document, but some 100 members, who viewed the Council's
order as final, refused to ratify it. These minority members sought a writ of execution
of the Council's order.
The Ministry of Labor directed the issuance of a writ of execution and required
General Rubber to pay the minority members their claim for differential pay.
Issue: Is the waiver agreement binding upon all the members of the union,
even those who did not sign it?
Ruling: The minority members cannot be bound by the return-to-work
agreement. The waiver of the money claims is a personal right, i.e., a right that must
be personally exercised. For a waiver thereof to be legally effective, the individual
consent or ratification of the workers or employees involved must be shown. Neither
the officers nor the majority of the union had any authority to waive the accrued
rights pertaining to the dissenting minority members.
This does not mean that the accrued money claims can never be waived.
However, in the present case, the minority members never waived their claims to
accrued differential pay. Since Article 4 of the return-to-work agreement was not
enforceable against the nonconsenting union members, the order of the National
Wages Council must be regarded as having become final and executory insofar as the
nonconsenting union members were concerned. Enforcement by writ of execution
of that order was therefore proper.
2.2 Quitclaim and Waivers
Olacao, et al. vs. NLRC, et al, G.R. No. 81390, August 29, 1989
Facts: In 1977, the complainants (employees) filed a complaint for unpaid
wages and living allowances against their employer. One of the issues was whether the
documents each signed individually by complainants denominated as "Receipts and
Release" were legally binding. The documents showed that each of the complainants
received the specified amounts from respondents representing full and final payment
87

ART. 221

LABOR RELATIONS

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

88

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

2.2a Final and Executory Judgment Cannot be Negotiated


Although compromise agreements are encouraged, this general rule does
not apply to decisions that have become final and executory. In a labor case the
employer, after receiving an unfavorable decision, managed to secure a "release
and quitclaim" from the complainants but this "release" became itself a subject of
litigation between them, thereby dragging the main dispute for 18 years. Ruling
on the appeal by the employer, the Supreme Court, sounding exasperated,
declared:
In the present case, the judgment of the Court of Industrial Relations
had long become final and executory. A final and executory judgment can
no longer be altered. As we held in a recent case, "(t) he judgment may
no longer be modified in any respect, even if the modification is meant
to correct what is perceived to be an erroneous conclusion of fact or law,
and regardless of whether the modification is attempted to be made by the
court rendering it or by the highest court of the land." Moreover, a final
and executory judgment cannot be negotiated, hence, any act to subvert
it is contemptuous. T h e NLRC was correct in setting aside the order of the
Labor Arbiter dated 31 October 1984, as the same was void. It rendered
the very decision of this Court meaningless, and showed disrespect for
the administration of justice. This should not be sanctioned. (Alba Patio
de Makati vs. NLRC, G.R No. 85393, September 5, 1991, quoting Philippine
Apparel Workers Union vs. NLRC, 125 SCRA 393 [1983].)
Note: See also Veloso vs. DOLE, cited under Article 227 and the recent
definitive summation in Magbanua vs. Dy.
3.

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

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

LABOR RELATIONS

ART. 221

3.1 Motu Propio Dismissal of Complaint Based on Prescription


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

3.2 Res Judicata as Reason to Dismiss Complaint


Delfin, et al. vs. Inciong, et al., G.R. No. 50661, December 10, 1990
Rulings: (1) Requisites for prior judgment to constitute a bar to a subsequent case.
For a prior judgment to constitute a bar to a subsequent case, the following requisites
must concur: (a) it must be a final judgment or order; (b) the court rendering the
same must have jurisdiction over the subject matter and over the parties; (c) it must
be a judgment or order on the merits; and (d) there must be between the two cases
identity of parties, subject matter, and cause of action.
2

(2) First three requisites. There is no question that the first three requisites
are present in this case. First, the decision in the first complaint had already become
final and executory. The motion for reconsideration filed by the union in that case
was denied by the Court of Industrial Relations (CIR) and no petition questioning
the denial was brought to this court. The fact of its finality was admitted by the
petitioners in their second complaint. Second, the CIR which rendered the decision
had jurisdiction over the subject matter and over the parties. Third, the judgment
rendered therein was a judgment on the merits of the case after the parties presented
their evidence, oral and documentary.
(3) Fourth requisite. There is, between the first and the second complaints,
identity of causes of action, subject matter and parties.
There is an identity of cause of action in the two cases, that is, the unfair labor
practices committed by Atlantic [the previous corporation] against its employees
during its existence. The obligations of Atlantic arising from the acts of unfair labor
practices committed against its employees during the former's existence were already
settled in the first case. It is clear that whatever cause of action individual petitioners
'Pepsi Cola Bottling Company vs. Guanzon, et al, G.R. No. 81162, April 19,
1989.
2

90

Ibabao vs. IAC, G.R. No. 74848, May 20, 1987, 150 SCRA 76.

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

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

3.3

No Dismissal of Complaint Despite Death

Petitioner claims that the present labor cases do not survive, considering
that on January 13,1979 the proprietor of the company died intestate. It is alleged
that as a result of his death, the labor case was automatically extinguished. The
Court does not agree.
T h e present case was not extinguished because of the death of the
proprietor. T h e case is one for reinstatement of the dismissed employees from
their work. It was not a money claim, not to say it involved purely employeremployee relationship, which falls under the exclusive authority of the labor
officials to hear and resolve. While it combined a claim for backwages and the
like, the entitlement of individual employees thereto solely depended on their
right to reinstatement. T h e proprietor died long before the application for
clearance to terminate was filed. This case falls under the jurisdiction of the
Ministry of Labor [read NLRC] and not the civil courts.
2

3.4 Revival or Refiling of Dismissed Case


A dismissed case is not necessarily dead.
A party may file a motion to revive or re-open a case dismissed without
prejudice, within ten (10) calendar days from receipt of notice of the order
dismissing the same; otherwise, his only remedy shall be to refile the case in the

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


Camara Shoes vs. Kapisanan ng mga Manggagawa sa Camara Shoes, G.R.
632084)9, May 5, 1989.
2

91

LABOR RELATIONS

ART. 221
1

arbitration branch of origin. A complaint dismissed "without prejudice" simply


means a tentative or temporary dismissal the complaint may be revived through
an appropriate motion.
4.

SUBMISSION OF POSITION PAPERS AND REPLY


4.1

Determination of Necessity of Hearing or Clarificatory Conference

Immediately after the submission by the parties of their position paper


or reply, as the case may be, the Labor Arbiter shall, motu proprio, determine
whether there is a need for a hearing or clarificatory conference. At this stage,
he may, at his discretion and for the purpose of making such determination,
ask clarificatory questions to further elicit facts or information, including but
not limited to the subpoena of relevant documentary evidence, if any, from any
party or witness.
2

4.2

Role of the Labor Arbiter in Hearing and Clarificatory Conference

a)
The Labor Arbiter shall take full control and personally conduct the
hearing or clarificatory conference. Unless otherwise provided by law, the Labor
Arbiter shall determine the order of presentation of evidence by the parties,
subject to the requirements of due process. He shall examine the parties and
their witnesses with respect to the matters at issue; and ask questions only for
the purpose of clarifying points of law or fact involved in the case. He shall limit
the presentation of evidence to matters relevant to the issue before him and
necessary for a just and speedy disposition of the case.
3

b)
In the cross-examination of witnesses, only relevant, pertinent and
material questions necessary to enlighten the Labor Arbiter shall be allowed.
4

c)
T h e Labor Arbiter shall make a written summary of the proceedings,
including the substance of the evidence presented, in consultation with the
parties. T h e written summary shall be signed by the parties and shall form part
of the records.
5

4.3 N o n - a p p e a r a n c e o f P a r t i e s ; P o s t p o n e m e n t o f H e a r i n g and
Clarificatory Conferences
a)
Non-appearance at a hearing or clarificatory conference by the
complainant or petitioner, who was duly notified thereof, may be sufficient cause
to dismiss the case without prejudice. Subject to Section 16 of this Rule, where
proper justification is shown by proper motion to warrant the re-opening of the
case, the Labor Arbiter shall call another hearing or clarificatory conference
and continue the proceedings until the case is finally decided. T h e dismissal
'Sec. 16, Rule V, NLRC Revised Rules of Procedure, 2005.
Sec. 8, Rule V, Ibid.
Sec. 9, Rule V, Ibid.
'Ibid.
Ibid.
2

92

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

of the case for the second time due to the unjustified non-appearance of the
complainant or petitioner, who was duly notified of the clarificatory hearing,
shall be with prejudice.
b)
In case the respondent fails to appear during the hearing or
clarificatory conference despite due notice thereof, the complainant shall be
allowed to present evidence ex-parte, without prejudice to cross-examination at
the next hearing or conference. Two (2) successive non-appearances by the
respondent during his scheduled presentation of evidence or opportunity to
cross-examine witnesses, despite due notice thereof, shall be construed as a
waiver on his part to present evidence or conduct cross-examination.
c)
T h e parties and their counsels appearing before the Labor Arbiter
shall be prepared for continuous hearing or clarificatory conference. No
postponement or continuance shall be allowed by the Labor Arbiter, except
upon meritorious grounds and subject always to the requirement of expeditious
disposition of cases. In any case, the hearing or clarificatory conference shall be
terminated within ninety (90) calendar days from the date of the initial hearing
or conference.
d)
Paragraph (c) of this Section notwithstanding, in cases involving
overseas Filipino workers, the aggregate period for conducting the mandatory
conciliation and mediation conference, including hearing on the merits or
clarificatory conference, shall not exceed sixty (60) days, which shall be reckoned
from the date of acquisition of jurisdiction by the Labor Arbiter over the person
of the respondents.
1

5.

SUBMISSION OF THE CASE FOR DECISION

Upon the submission by the parties of their position papers or replies, or


the lapse of the period to submit the same, the case shall be deemed submitted
for decision unless the Labor Arbiter calls for a hearing or clarificatory
conference in accordance with Section 8 of this Rule, in which case, notice of
hearing or clarificatory conference shall be immediately sent to the parties.
Upon termination of the said hearing or conference, the case shall be deemed
submitted for decision.
2

5.1 Position Papers as Basis of Decision


In the determination of whether or not the quantum of proof was satisfied
by a party contending for a particular proposition, the procedure by which issues
are resolved based only on position papers, affidavits or documentary evidence,
if agreed upon by the parties, may be availed of by the arbiter. It is not violative
of the due process clause. T h e affidavits in such case may take the place of their
direct testimony. The Labor Arbiter may choose, if he deems it necessary, to set the
'Sec. 10, Rule V, NLRC Revised Rules of Procedure, 2005.
Sec. 11, Ibid.

93

LABOR RELATIONS

ART. 221

case for hearing on the merits where witnesses may be presented and examined
by the parties. In both instances, the burden of proving that the termination was
for valid or authorized cause rests on the employer.
If the employer filed no position paper despite adequate notice and in no
way justified the employee's dismissal, the labor arbiter is justified in deciding
the case based on the position papers on record.
1

5.2

Lack of Verification, Not Fatal

The lack of verification of the position paper-affidavit is a formal, rather


than a substantial, defect. It is not fatal. It could be easily corrected by requiring
an oath.
The lack of verification or oath in the appeal (the employee prosecuted
his appeal by himself) is not fatal. A pleading which is required by the Rules of
Court to be verified may be given due course even without a certification if the
circumstances warrant the suspension of the rules in the interest of justice.
3

5.3

Due Process: Opportunity To Be Heard

The Labor Arbiter should use every and all reasonable means to ascertain
the facts in the case, speedily and objectively and without regard to technicalities
of law or procedure, all in the interest of due process and for purposes of accuracy
and correctness in adjudicating the monetary awards.
5

Procedural due process means that a party to a case must be given sufficient
opportunity to be heard. Its very essence is to allow all parties opportunity to
present evidence.
6

There is denial of due process when a party is not accorded an opportunity


to be heard in the case filed against him. However, what the law prohibits is the
absolute lack of opportunity to be heard. There is no denial of due process where
the employer was duly represented by counsel and given sufficient opportunity
to be heard and present his evidence, nor where the employer's failure to be
heard was due to the various postponements granted to it or to his repeated
failure to appear during the hearings.
7

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


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

94

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

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


essential to due process, the requirements of which are satisfied where parties
are afforded fair and reasonable opportunity to explain their side of the
controversy at hand.
1

Thus, petitioners due process argument must fail where the records
show that in response to respondent's complaint and before the Labor Arbiter
rendered his decision, petitioners submitted a position paper, complete with
annexes where they set out and argued the factual as well as the legal basis of
their position. They do not claim that their submissions there were ignored or
disregarded altogether by the Labor Arbiter. Moreover, they were given additional
opportunity to argue their case on appeal before the National Labor Relations
Commission, in a memorandum and motion for reconsideration which pleadings
were likewise considered by that labor agency in the course of resolving the case.
2

Similarly, a party before the labor arbiter cannot claim denial of due process
where it had a chance to present its side during a period of more than two-anda-half months and despite repeated extensions of the time given to enable him
to present his position, failed to meet even the final deadline.
3

A plea of denial of procedural due process does not lie where a defect
consisting of an absence of notice of hearing was thereafter cured by the
alleged aggrieved party having had the opportunity to be heard on a motion for
reconsideration .
4

5.4

Inhibition

A Labor Arbiter may voluntarily inhibit himself from the resolution of a


case and shall so state in writing the legal justifications thereof. Upon motion
of a party, either on the ground of relationship within the fourth civil degree
of consanguinity or affinity with the adverse party or counsel, or on question
of impartiality, the Labor Arbiter may inhibit himself from further hearing
and deciding the case. Such motion shall be resolved within five (5) days from
the filing thereof. An order denying or granting a motion for inhibition is
inappealable.
5

5.5

Due Process Includes Impartiality of the Appeal Body

May an NLRC Commissioner review on appeal his own decision as a labor


arbiter? T h e Supreme Court answers this question in a 1997 case against PAL.
Llora Motors, Inc. vs. Franklin Drilon, G.R. No. 82895, November 7, 1989.
Ibid.
Almoite vs. Pacific Architects and Engineers, Inc., et al., G.R. No. 73680, July
10,1986.
Magnolia Poultry Employees Union vs. Sanchez, G.R. Nos. 76227-28, November
5,1986.
Sec. 12, Rule V, NLRC Revised Rules of Procedure, 2005.
3

95

ART. 221

LABOR RELATIONS

In the case of Ang Tibay vs. Court of Industrial Relations, [see above]
we laid down the requisites of procedural due process in administrative
proceedings x x x.
In addition, administrative due process includes (a) the right to
notice, be it actual or constructive, of the institution of the proceedings
that may affect a person's legal right; (b) reasonable opportunity to
appear and defend his rights and to introduce witnesses and relevant
evidence in his favor; (c) a tribunal so constituted as to give him
reasonable assurance of honesty and impartiality, and one of competent
jurisdiction; and (d) a finding or decision by that tribunal supported by
substantial evidence presented at the hearing or at least ascertained in
the records or disclosed to the parties. It is self-evident from the ruling
case law that the officer who reviews a case on appeal should not be the
same person whose decision is the subject of review. Thus, we have ruled
that "the reviewing officer must perforce be other than the officer whose
decision is under review."
In the case at bar, we hold that petitioner was denied due process
when Commissioner Aquino participated, as presiding commissioner of
the Second Division of the NLRC, in reviewing private respondent PAL's
appeal. He was reviewing his own decision as a former labor arbiter...
Prescinding from this premise, the May 19, 1995 resolution of the
respondent NLRC is void for the Division that handed it down was not
composed of three impartial commissioners. (Singson vs. NLRC and PAL,
G.R No. 122389, June 19, 1997.)
6.

SUSPENSION OF PROCEEDINGS
Rubberworld (Phil) Inc. vs. NLRC, et al., G.R. No. 126773, April 14,1999
When a corporation, unable to pay its debts and liabilities, petitions the
SEC for a declaration of suspension of payments, the SEC may appoint a receiver
or a management committee tasked with the rehabilitation of the corporation.
Consequent to such appointment, according to PD 902-A, "all actions for claims
against such corporation x x x pending before any court, tribunal, board or body
shall be suspended accordingly."
Such suspension of proceedings applies even to complaints for illegal dismissal,
unfair labor practice, damages and payment of separation pay, retirement benefits,
13th month pay and service incentive leave which employees have filed with and were
awaiting resolution by a labor arbiter. To allow labor cases to proceed would clearly
defeat the purpose of the automatic stay and severely encumber the management
committee's time and resources. "The said committee would need to defend itself
against these suits, to the detriment of its primary and urgent duty to work towards
rehabilitating the corporation and making it viable again. To rule otherwise would
open the floodgates to other similarly situated claimants and forestall if not defeat the
rescue efforts. Besides, even if the NLRC awards the claims of private respondents,
96

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

as it did, its ruling could not be enforced as long as the petitioner is under the
management committee."
In Chua vs. National Labor Relations Commission, we [the Supreme Court]
ruled that labor claims cannot proceed independently of a bankruptcy liquidation
proceeding, since these claims "would spawn needless controversy, delays, and
confusion." With more reason, allowing labor claims to continue in spite of a SEC
suspension order in a rehabilitation case would merely lead to such results.
The purpose of rehabilitation proceedings is precisely to enable the company
to gain a new lease on life and thereby allow creditors to be paid their claims from its
earnings. In insolvency proceedings, on the other hand, the company stops operating,
and the claims of creditors are satisfied from the assets of the insolvent corporation.
The present case involves the rehabilitation, not the liquidation, of petitionercorporation. Hence, the preference of credit granted to workers or employees under
Article 110 of the Labor Code is not applicable.
Accordingly, in another case where the employer company likewise
petitioned the SEC for a declaration of suspension of payments, the Supreme
Court ruled: "The labor arbiter, the NLRC as well as the CA should not have
proceeded to resolve [the employee's] complaint for illegal dismissal and should
instead have directed [the employee] to lodge her claim before the then dulyappointed receiver..."
1

7.

FILING AND SERVICE OF PLEADINGS AND DECISIONS

All pleadings in connection with the case shall be filed with the appropriate
docketing unit of the Regional Arbitration Branch of the Commission, as the
case maybe.
2

T h e party filing the pleading shall serve the opposing parties with a copy
thereof and its supporting documents in the manner provided in these Rules
with proof of service thereof.
3

7.1 Service of Notice and Resolutions


a)
Notices or summons and copies of orders, shall be served on the
parties to the case personally by the Bailiff or duly authorized public officer
within three (3) days from receipt thereof or by registered mail; Provided that in
special circumstances, service of summons may be effected in accordance with
the pertinent provisions of the Rules of Court; Provided further, that in cases of
decisions and final awards, copies thereof shall be served on both parties and
their counsel or representative by registered mail; Provided further that in cases
where a party to a case or his counsel on record personally seeks service of the
'Clarion Printing House. Inc., et al. vs. NLRC, G.R. No. 148372, June 27, 2005.
Sec. 5, Rule III, NLRC Revised Rules of Procedure, 2005.
Ibid.

97

LABOR RELATIONS

ART. 221

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

7.2.

Proof and Completeness of Service

The return is prima facie proof of facts indicated therein. Service by


registered mail is complete upon receipt by the addressee or his agent; but if the
addressee fails to claim his mail from the post office within five (5) days from the
date of first notice of the postmaster, service shall take effect after such time.
4

Section 4, Rule 13 of the Rules of Court, which is suppletory to the Rules


of the National Labor Relations Commission, provides: Service of the papers
may be made by delivering personally a copy to the party or his attorney, or by
leaving it in his office with his clerk or with a person having charge thereof. If
no person is found in his office, or his office is not known, then by leaving the
copy, between the hours of eight in the morning and six in the evening, at the
party's or attorney's residence, if known, with a person of sufficient discretion
to receive the same.
5

Under the foregoing rule, service of papers should be delivered personally


to the party or attorney or by leaving it at his office with his clerk or with a person
having charge thereof. The service of the court's order upon any person other
than the party's counsel is not legally effective.
Service of summons to a bookkeeper at the respondent's office is sufficient
compliance with the procedural requirement of proper notice. T h e j o b of a
'Sec. 6, Rule III, NLRC Revised Rules of Procedure, 2005.
Ibid.
Ibid.
Sec. 7, Rule III, Ibid.
Adamson Ozanam Educational Institution, Inc. vs. Adamson University Faculty,
etc., G.R No. 86819, November 9, 1989.
2

98

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

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


the corporation's "business accounts" and "essential facts about the transactions
of a business or enterprise" safeguards the corporation from possible fraud
being committed adverse to its own corporate interest... [T]here was substantial
compliance with the rule on service of summons.
1

Decisions emanating from administrative tribunals or officials like the


Minister of Labor should be served in accordance with law. In the absence
of specific provisions in the applicable laws like the Labor Code and its
implementing rules on the service of decisions or orders, the provisions of the
Rules of Court shall be applied in a suppletory character. Accordingly, when a
party is represented by counsel, notices should be made upon the counsel of
record at his given address, to which notices of all kinds emanating from the
court should be sent.
2

T h e Union insists that the procedure of serving a copy of the decision not
by official process servers but by authorized union officials to the employer is
not unusual in the Labor Ministry. This argument is untenable. In the absence
of any showing that such practice is sanctioned by the implementing rules of
the Ministry of Labor or by the Rules of Court, the party who takes advantage
of such irregular practice does so at its own risk and cannot be later heard to
complain.
3

Where the copy of the decision is served on a person who is neither a clerk
or one in charge of the attorney's office, such service is invalid and the decision
does not therefore become executory. T h e security guard of the building where
the attorney is holding office is neither the office clerk nor a person in charge
thereof as contemplated in the rules. T h e service of the decision at the ground
floor of a party's building when the office is at the 9th floor is not a valid service.
4

8.

RESOLUTION OF DOUBT IN LAW OR EVIDENCE


It is now a familiar rule that doubt as to the interpretation of labor laws
and regulations has to be resolved in favor of labor. This precept is etched in
the Labor Code (Art. 4) and, in similar tenor, the Civil Code (Art. 1702).
But this precept is not limited to interpretation of legal provisions. It
extends likewise to doubts about the evidence of the disputants. This ruling is
rendered by the Supreme Court in Prangan vs. NLRC, G.R No. 126529, April 15,
1998 and is labelled a "well-settled doctrine" in Nicario vs. NLRC.
'Pabon, et al. vs. NLRC and Senior Marketing Corp., G.R. No. 120457,
September 24, 1998.
UERM Employees Union-FFW vs. Ministry of Labor, G.R. No. 75838, August
31, 1989.
See Ibid.
Adamson Ozanam Educational Institution, Inc. vs. Adamson University Faculty,
etc., G.R. No. 86819, November 9, 1989.
2

99

ART. 221

LABOR RELATIONS

Nicario vs. NLRC, Mancao Supermarket, Inc., et al., G.R. No. 125340, September
17, 1998
Facts: In her claim for payment of overtime pay, petitioner [complainant
employee] alleged that during her period of employment, she worked twelve (12)
hours a day from 7:30 a.m. to 7:30 p.m., thus rendering overtime work for four hours
each day. The labor arbiter awarded overtime pay to petitioner by taking judicial
notice of the fact that all Mancao [the employer] establishments open at 8:00 a.m.
and close at 8:00 p.m.. Upon appeal, this particular finding was affirmed by the
Commission. However, when the employer filed a motion for reconsideration, the
NLRC modified its earlier ruling and deleted the award for overtime pay. The NLRC
instead gave credence to the daily time records (DTRs) presented by respondent
corporation showing that petitioner, throughout her employment from 1986 to 1989,
worked for only eight hours a day from 9:00 a.m. to 12:00 p.m. and 2:00 p.m. to 7:00
p.m. and did not render work on her rest days.
Rulings: The NLRC's reliance on the daily time records submitted by the
employer is misplaced. As aptly stated by the Solicitor General, the time records
presented by the company are unreliable based on the following observations:
"a) the originals thereof were not presented in evidence; petitioner's
allegation of forgery should have prompted respondent to submit the
same for inspection; evidence willfully suppressed would be adverse if
produced [Sec. 3(e), Rule 131, Rules of Court].
xxxxxxxxx
e)

they would make it appear that petitioner has a two-hour rest period
from 12:00 to 2:00 p.m.; this is highly unusual for a store establishment
because employees should attend to customers almost every minute, as
well as contrary to the judicial notice that no noon break is observed.

f)

petitioner never reported earlier or later than 9:00 a.m., likewise, she
never went home earlier or later than 8:00 p.m.; all entries are suspiciously
consistent."

While private respondent company submitted the daily time records of the
petitioner to show that she rendered work for only eight (8) hours a day, it did not
refute nor seek to disprove the judicial notice taken by the labor arbiter that Mancao
establishments, including the establishment where petitioner worked, is open twelve
hours a day, opening at 8:00 a.m. and closing at 8:00 p.m.
This Court, in previously evaluating the evidentiary value of daily time records,
especially those which show uniform entries with regard to the hours of work rendered
by an employee, has ruled that "such unvarying recording of a daily time record is
improbable and contrary to human experience. It is impossible for an employee
to arrive at the workplace and leave at exactly the same time, day in day out. The
uniformity and regularity of the entries are 'badges of untruthfulness and as such
indices of dubiety." The observations made by the Solicitor General regarding the
unreliability of the daily time records would therefore seem more convincing. On
100

POWERS AND DUTIES


(Part 3. Procedure)

ART. 221

the other hand, respondent company failed to present substantial evidence, other
than the disputed DTRs, to prove that petitioner indeed worked for only eight hours
a day.
It is a well-settled doctrine that if doubts exist between the evidence presented
by the employer and the employee, the scales of justice must be tilted in favor of the
latter. It is a time-honored rule that in controversies between a laborer and his master,
doubts reasonably arising from the evidence, or in the interpretation of agreements and
writing should be resolved in the former's favor.
9.

DECISION OF LABOR ARBITER

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

9.1

Contents of Decisions

The decisions and orders of the Labor Arbiter shall be clear and concise and
shall include a brief statement of the: a) facts of the case; b) issues involved; c)
applicable laws or rules; d) conclusions and the reasons therefor; and e) specific
remedy or relief granted. In cases involving monetary awards, the decisions or
orders of the Labor Arbiter shall contain the amount awarded.
2

In case the decision of the Labor Arbiter includes an order of reinstatement,


it shall likewise contain: a) a statement that the reinstatement aspect is
immediately executory; and b) a directive for the employer to submit a report
of compliance within ten (10) calendar days from receipt of the said decision.
3

9.2 No Motions for Reconsideration and Petitions for Relief from


Judgment
No motions for reconsideration or petitions for relief from judgment or
any decision, resolution or order of a Labor Arbiter shall be allowed. However,
when one such motion for reconsideration is filed, it shall be treated as an appeal
provided that it complies with the requirements for perfecting an appeal. In the
case of a petition for relief from judgment, the Labor Arbiter shall elevate the
case to the Commission for disposition.
4

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


Sec. 14, Rule V, Ibid.
Ibid.
Sec. 15, Rule V, Ibid.

101

ART. 222

LABOR RELATIONS

N O T AUTOMATICALLY IN FAVOR OF LABOR


The law in protecting the rights of the laborer authorizes
neither oppression nor self-destruction of the employer. More
importantly, while the Constitution is committed to the policy of
social justice and the protection of the working class, it should
not be supposed that every labor dispute will automatically be
decided in favor of labor.
SUPREME COURT
Makati Haberdashery, Inc. vs. National Labor
Relations Commission, G.R. Nos. 83380-81, Nov. 15, 1989
Manila Electric Company vs. National
Labor Relations Commission, G.R. No. 78763, July 12,1989

ART. 222. APPEARANCES AND FEES


(a) Non-lawyers may appear before the Commission or any L a b o r
Arbiter only:
1.
If they represent themselves; or
2.
If they represent their organization or members thereof.
b)
No attorney's fees, negotiation fees or similar charges of any
kind arising from any collective bargaining negotiations or conclusion of
the collective agreement shall be imposed on any individual m e m b e r of the
contracting union: Provided, however, That attorney's fees may be charged
against union funds in an amount to be agreed upon by the parties. Any
contract, agreement or arrangement of any sort to the contrary shall be null
and void.
C O M M E N T S AND CASES
1.

APPEARANCE OF NON-LAWYERS

Under the NLRC Rules of 2 0 0 5 a nonlawyer may appear before the


Commission or Labor Arbiter only if:

102

(1)

he represents himself as party to the case;

(2)

he represents a legitimate labor organization, as defined under Article


212 and 242 of the Labor Code, as amended, which is a party to the
case: Provided, that he presents: (i) a certification from the Bureau
of Labor Relations (BLR) or Regional Office of the Department
of Labor and Employment attesting that the organization he
represents is duly registered and listed in the roster of legitimate
labor organizations; (ii) a verified certification issued by the secretary

POWERS AND DUTIES


(Part 3. Procedure)

ART. 222

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


he is authorized to represent the said organization in the said case;
and (iii) a copy of the resolution of the board of directors of the said
organization granting him such authority;
(3)

he represents a member or members of a legitimate labor organization


that is existing within the employer's establishment, who are parties to
the case. Provided, that he presents: (i) a verified certification attesting
that he is authorized by such member or members to represent them
in the case; and (ii) a verified certification issued by the secretary
and attested to by the president of the said organization stating
that the person or persons he is representing are members of their
organization which is existing in the employer's establishment;

(4)

he is a duly-accredited member of any legal aid office recognized


by the Department of Justice or Integrated Bar of the Philippines:
Provided, that he (i) presents proof of his accreditation; and (ii)
represents a party to the case;

(5)

he is the owner or president of a corporation or establishment


which is a party to the case: Provided, that he presents: (i) a verified
certification attesting that he is authorized to represent said
corporation or establishment; and (ii) a copy of the resolution of the
board of directors of said corporation, or other similar resolution
or instrument issued by said establishment, granting him such
authority.

T h e appearance of labor federations and local unions as counsel in labor


proceedings has been given legal sanction and we need only cite Article 222
of the Labor Code which allows nonlawyers to represent their organization or
members thereof.
1

2.

CHANGE OF LAWYER
The counsel who acted as such until a labor case reached its final conclusion
should be considered as the union's counsel in the execution of the decision.
There can be no valid substitution of counsel until the prescribed procedure is
followed. As underlined in the case of Aban vs. Enage, L-30666, promulgated on
February 25,1983, "no substitution of attorney will be allowed unless the following
requisites concur: (1) there must be filed a written application for substitution;
(2) there must be filed the written consent of the client to the substitution;
(3) there must be filed the written consent of the attorney to be substituted, if
such consent can be obtained; and (4) in case such written consent cannot be
procured, there must be filed with the application for substitution, proof of the
'Radio Communication of the Phils., Inc. vs. The Secretary of Labor and
Employment, 169 SCRA 38 [1989].
103

LABOR RELATIONS

ART. 222

service of notice of such motion in the manner required by the rules, on the
attorney to be substituted."
We are aware of the time-honored principle that administrative and quasijudicial bodies like the National Labor Relations Commission are not bound by
the technical rules of procedure in the adjudication of cases. However, the rule
on substitution of counsel or employment of additional counsel is still observed
in labor cases. Thus, there can be no valid substitution of counsel until the
prescribed procedure is followed.
U n d e r the NLRC Rules any c h a n g e or withdrawal of counsel or
representative shall be made in accordance with the Rules of Court.
1

3.

AUTHORITY TO BIND PARTY

Attorneys and other representatives of parties shall have authority to bind


their clients in all matters of procedure; but they cannot, without a special power
of attorney or express consent, enter into a compromise agreement with the
opposing party in full or partial discharge of a client's claim.
4

Kanlaon Construction Enterprises Co., Inc. vs. NLRC, et al., G.R. No. 126625,
September 18, 1997
Facts: The laborers of a construction company filed claims for wages and 13th
month pay. Made respondents were the company itself and the two engineers who
were the managers of the projects where the claimants worked. The engineers, both
nonlawyers, admitted the company's liability to the claimants and agreed to pay
the money claims. They also waived the company's right to file its position paper.
When the arbiter directed the company to pay the claims, the company refused to
do so and declared that the engineers had no authority to represent and bind the
corporation.
Ruling: The two Engineers were not lawyers, nor duly accredited members
of a legal aid office. Their appearance before the labor arbiters in their capacity as
parties to the cases was authorized under the first exception to the rule. However,
their appearance on behalf of the company required written proof of authorization.
This they did not have. It was incumbent upon the labor arbiters to ascertain this
authority especially since both engineers were named co-respondents.
Petitioner's liability arose from Engineer Estacio's alleged promise to pay. A
promise to pay amounts to an offer to compromise and requires a special power
of attorney or the express consent of petitioner. The authority to compromise
cannot be lightly presumed and should be duly established by evidence.

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


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

104

POWERS AND DUTIES


(Part 3. Procedure)

ART. 222

Absent this authority, whatever statements and declarations Engineer Estacio


made before the labor arbiters could not bind the petitioner company.
4.

ATTORNEY'S FEE

Article 222 of the Labor Code prohibits the payment of attorney's fees only
when it is effected through forced contributions from the workers from their own
funds as distinguished from the union funds. T h e purpose of the provision is to
prevent imposition on the workers of the duty to individually contribute their
respective shares in the fee to be paid the attorney for his services on behalf of
the union in its negotiations with the management. T h e obligation to pay the
attorney's fees belongs to the union and cannot be shunted to the workers as
their direct responsibility.
1

Neither the lawyer nor the union itself may require the individual workers
to assume the obligation to pay the attorney's fees from their own pockets. So
categorical is this intent that the law also makes it clear that any agreement to
the contrary shall be null and void ab initio.
2

4.1

Negotiation Fee

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

'Bank of the Philippine Islands Employees' Union vs. National Labor Relations
Commission, et al., G.R. Nos. 69746-47 [and two companion cases], March 31, 1989.
Ibid.
105

ART. 222

LABOR RELATIONS

that ensued arising from the nonimplementation of P.D. 451, the school would not
grant the benefits thereunder."
Ruling: There is merit in the School's argument. The whole ninety percent
(90%) economic package awarded by the NLRC cannot be the basis for computing
the negotiation fees. The law has already provided for the minimum percentage of
tuition fee increases to be allotted for teachers and other school personnel. This is
mandatory and cannot be diminished although it may be increased by collective
bargaining. It follows that only the amount beyond that mandated by law should be
subject to negotiation fees and attorney's fees for the simple reason that it is only
this which the employees had to bargain for. The sixty percent (60%) which the law
grants is not a negotiable issue and not obtained by negotiation.
4.2

For Services Rendered by Union Officers

Article 222(b) prohibits the imposition on any individual union member


of attorney's fees, negotiation fees and similar charges arising from negotiation
of a bargaining agreement. T h e collection of the special assessment partly for
the payment of services rendered by union officers, consultants and others may
not be in the category of "attorney's fees or negotiation fees." But there is no
question that it is an exaction which falls within the category of a "similar charge,"
and therefore, within the coverage of the prohibition in the aforementioned
article.
1

This matter of imposition of attorney's fee and negotiation fee should be


correlated with Article 241 (n and o ) , Article 2 3 9 ( h ) , and Article 2 4 9 ( e ) .
4.3

Attorney's Fee Collectible Only from Union Funds

Article 2 2 2 ( b ) allows attorney's fees to be charged against "union funds."


The economic benefits granted by a newly concluded CBA do not constitute
"union funds" when the employees have not received them yet.
In a case where the CBA granted a P42 million economic package to the
union members from which will be deducted P4.2 million to pay attorney's
fees, negotiation fees, and similar charges arising from the CBA, the deduction,
according to the Supreme Court, violates Article 2 2 2 ( b ) . T h e Court finds that
"the P42 million economic benefits package granted by the employer through
the CBA did not constitute union funds from where the P4.2 million could have
been validly deducted as attorney's fees. T h e P42 million was not intended for
the union but for the members of the bargaining unit represented by the union,
whether member or members of the union... T h e deduction of the P4.2 million,
as alleged attorney's/agency fees, from the P42 million economic package
effectively decreased the share from said package accruing to each member of
the collective bargaining unit." T h e Court further said that the union's argument
1Palacol vs. Ferrer-Calleja, 182 SCRA 710 [1990].
106

POWERS AND DUTIES


(Part 3. Procedure)

ART. 222

that the P4.2 Million became union fund after its deduction from the P42 million
package is "absurd." T h e union's reasoning is flawed since the attorney's fee may
only be paid from the "union funds" according to Article 2 2 2 ( b ) ; yet the amount
to be used in paying such fee does not become union funds until it is actually
deducted as attorney's fees from the benefits awarded to the employees. It is just
a roundabout argument.
1

For the reason explained above, the authorization to deduct, signed by


the members upon instruction of the union officers, was invalid. For another
reason, see comments under Article 241 (n and o ) .

'Marino, et al. vs. Gamilla, et al., G.R. No. 149763, July 7, 2009.
107

Chapter III
APPEAL
Overview/Key Questions:
Box 6
1. A labor arbiter's decision is appealable to the NLRC
and up to the CA/SC. On what grounds? When?
2. At each level of appeal what are the prerequisites? Is a
motion for reconsideration a prerequisite?
3. What are the limits to NLRC's appellate jurisdiction?
4. How is a final decision of the Labor Arbiter (or the
NLRC, etc.) executed?
5. May a regional trial court issue an injunction against
an NLRC decision?
ART. 2 2 3 . APPEAL
Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten ( 1 0 )
calendar days from receipt of such decisions, awards, or orders. Such appeal
may be entertained only on any of the following grounds:
(a)
If there is prima fade evidence of abuse of discretion on the part
of the Labor Arbiter;
(b)
If the decision, order or award was secured through fraud or
coercion, including graft and corruption;
(c)
If made purely on questions of law; and
(d)
If serious e r r o r s in the findings of facts are raised which would
cause grave or irreparable damage or injury to the appellant.
In case of a judgment involving a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the Commission
in the amount equivalent to the monetary award in the judgment appealed
from.
In any event, the decision of the L a b o r Arbiter reinstating a dismissed
or separated employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. T h e employee shall either
be admitted back to work under the same terms and conditions prevailing
prior to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. T h e posting of a bond by the employer shall not
stay the execution for reinstatement provided herein.
108

APPEAL

ART. 223

To discourage frivolous or dilatory appeals, the Commission or the


L a b o r Arbiter shall impose reasonable penalty, including fines or censures,
upon the erring parties.
In all cases, the appellant shall furnish a copy of the memorandum
of appeal to the other party who shall file an answer not later than ten ( 1 0 )
calendar days from receipt thereof.
T h e Commission shall decide all cases within twenty ( 2 0 ) calendar days
from receipt of the answer of the appellee. T h e decision of the Commission
shall be final and e x e c u t o r y after ten ( 1 0 ) calendar days from receipt thereof
by the parties.
Any law enforcement agency may be deputized by the Secretary of
Labor and Employment or the Commission in the enforcement of decisions,
awards, or orders.
C O M M E N T S AND CASES
1. NO MOTION FOR RECONSIDERATION OF LABOR ARBITER'S DECISION
If any of the grounds mentioned in this Article exists, the losing party
may appeal the Labor Arbiter's decision to the NLRC within ten (10) days from
receipt of the decision. No motion for reconsideration need be filed; in fact,
the NLRC Rules of 2005 does not allow a motion for reconsideration of a labor
arbiter's decision. Rule V (Proceedings Before Labor Arbiters) states in part:
Sec. 15 Motions for Reconsideration and Petition for Relief from Judgment.
No motions for reconsideration or petitions for relief from judgment of any
decision, resolution or order of a Labor Arbiter shall be allowed. However,
when one such motion for reconsideration is filed, it shall be treated as an
appeal, provided, that it complies with the requirements for perfecting an
appeal. In the case of petition for relief from judgment, the Labor Arbiter
shall elevate the case to the Commission for disposition.
In stark contrast is the rule for appealing an NLRC decision. It may be
elevated to the Court of Appeals but a motion for reconsideration should first
be filed.
1.1 Final Decisions Cannot Be Amended
If not appealed on time, the Labor Arbiter's decision becomes final and
cannot be amended.
In Asuncion vs. NLRC (G.R. No. 109311, J u n e 17, 1997), the Court ruled
that perfection of an appeal within the statutory or reglementary period is not
only mandatory but also jurisdictional and failure to do so renders the questioned
decision final and executory, thus depriving the appellate court of jurisdiction
to alter the final judgment, much less to entertain the appeal. In the case of
Aboitiz Shipping Employees Association vs. Trajano (G.R. No. 112955, September 1,
1997), the Court pointed out that except for correction of clerical errors, or the
109

LABOR RELATIONS

ART. 223

making of nunc pro tunc entries which cause no prejudice to any party, or where
the judgment is void, after the judgment has become final and executory, the same can
neither be amended nor altered even if the purpose is to correct a perceived conclusion of
fact or of law. This is true regardless of whether the modification is to be made by
the magistrate that rendered the judgment, or by the appellate magistrate that
reviewed the same. Indeed, all litigations must come to an end however unjust the
result of error may appear, otherwise, litigation would even be more intolerable
than the wrong or injustice it is designed to correct. (Italics supplied)
1

A decision that has become final and executory cannot be amended so


as to indicate in the writ of execution that the liability of the losing parties
is "solidary" where this kind of liability is not stated in the decision or in the
dispositive portion.
2

2.

PERIOD TO APPEAL FROM LABOR ARBITER


2.1

Ten Calendar Days

Under Article 223 of the Labor Code, decisions, awards or orders of a labor
arbiter cannot be declared final and executory upon the mere issuance thereof.
A period of ten (10) days from receipt of any order is granted to either or to
both parties involved to appeal to the National Labor Relations Commission.
What does the "10 days" refer to? T h e Supreme Court says in the Vir-Jen
case:
After mature and careful deliberation, We have arrived at the
conclusion that the shortened period of ten (10) days fixed by Art. 223
contemplates calendar days and not working days. We are persuaded to
this conclusion, if only because We believe that it is precisely in the interest
of labor that the law has commanded that labor cases be promptly, if not
peremptorily, disposed of. (Vir-jen Shipping and Marine Services, Inc. vs. NLRC,
R. Bisula, et al, G.R Nos. 58011-12, July 20, 1982.)
Since the 10-day period provided in Article 223 of the Labor Code refers to
ten calendar days and not to ten working days, this means that Saturdays, Sundays
and Legal Holidays are not to be excluded, but included, in counting the 10-day
period. This is in line with the objective of the law for speedy disposition of labor
cases with the end in view of protecting the interests of the working men.
3

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

110

APPEAL

2.2

ART. 223

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

T h e ruling in Vir-Jen cannot be applied to a case where the appeal to the


NLRC was filed prior to the promulgation of the Supreme Court's decision in
the Vir-Jen case on July 20, 1982.
1

2.3

Under the 2005 NLRC Rules of Procedure

(At this point, we shall examine in greater detail the appeal procedure from
the Labor Arbiter and the Regional Director [under Article 129] to the NLRC.
Later, we shall move on from the NLRC to the Court of Appeals and, finally, to
the Supreme Court.)
T h e 2005 Revised Rules of the NLRC reads:
Decisions, resolutions or orders of the Labor Arbiter shall be final
and executory unless appealed to the Commission by any or both parties
within ten (10) calendar days from receipt thereof; and in case of decisions,
resolutions or orders of the Regional Director of the Department of Labor
and Employment pursuant to Article 129 of the Labor Code, within five
(5) calendar days from receipt thereof. If the 10th or 5th day, as the case
may be, falls on a Saturday, Sunday or holiday, the last day to perfect the
appeal shall be the first working day following such Saturday, Sunday or
holiday. (Sec. 1, Rule VI.)
2.4

Date of Receipt by Mail

T h e rule is that service by registered mail is complete either upon actual


receipt by the addressee or at the end of five (5) days, if he does not claim it
within five (5) days from the first notice of the postmaster. The purpose is to
place the date of receipt of pleadings, judgments and processes beyond the
power of the party being served to determine at his pleasure.
2

2.5

Failure to Give Copy of Appeal to Adverse Party Within Ten Days

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

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

Ill

LABOR RELATIONS

ART. 223

does not justify dismissal of the appeal. The dismissal of an employee's appeal
on a purely technical ground is inconsistent with the constitutional mandate on
protection to labor.
1

2.6 No Extension of Period


No motion or request for extension of the period within which to perfect
an appeal shall be allowed.
2

2.7. Periods Generally Mandatory


Rules of procedure and practice of the Ministry of Labor provide periods
within which to do certain acts such as to file a motion for reconsideration. Such
periods are imposed to prevent needless delays and to ensure the orderly and
speedy discharge of judicial business. Strict compliance with such rule is both
mandatory and imperative. Only strong consideration of equity will lead the
Supreme Court to allow an exception to the procedural rule in the interest of
substantial justice.
3

It is precisely in the interest of labor that the law has commanded that labor
cases be promptly if not peremptorily disposed of. Long periods for any acts to be
done by the contending parties can be taken advantage of more by management
than by labor. Most labor claims are decided in their favor and management
is generally the appellant. Delay in most instances gives the employers more
opportunity not only to prepare even ingenious defenses, what with well-paid
talented lawyers they can afford, but even to wear out the efforts and meager
resources of the workers, to the point that not infrequently the latter either gives
up or compromises for less than what is due.
4

3. GROUNDS OF APPEAL
The appeal may be entertained only on any of the following grounds:
a)
If there is prima facie evidence of abuse of discretion on the part of
the Labor Arbiter or Regional Director;
b)
If the decision, resolution or order was secured through fraud or
coercion, including graft and corruption;
c)

If made purely on questions of law; a n d / o r

d)
If serious errors in the findings of facts are raised which, if not
corrected, would cause grave or irreparable damage or injury to the appellant.

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

1989.
5

112

Sec. 2, Rule VI, NLRC Revised Rules of Procedure, 2005.

APPEAL

4.

ART. 223

WHERE TO FILE APPEAL

T h e appeal shall be filed with the Regional Arbitration Branch or Regional


Office where the case was heard and decided.
1

5.

REQUISITES FOR PERFECTION OF APPEAL


a)

T h e appeal shall be:


1)

filed within the reglementary period provided in Section 1 of


this Rule;

2)

verified by the appellant himself in accordance with Section 4,


Rule 7 of the Rules of Court, as amended;

3)

in the form of a memorandum of appeal which shall state the


grounds relied upon and the arguments in support thereof, the
relief prayed for, and with a statement of the date the appellant
received the appealed decision, resolution or order;

4)

in three (3) legibly typewritten or printed copies; and

5)

accompanied by i) proof of payment of the required appeal


fee; ii) posting of a cash or surety bond as provided in Section
6 of this Rule; iii) a certificate of non-forum shopping; and iv)
proof of service upon the other parties.

b)
A m e r e n o t i c e of appeal without complying with the o t h e r
requisites aforestated shall not stop the running of the period for perfecting
an appeal.
c)
T h e appellee may file with the Regional Arbitration Branch or
Regional Office where the appeal was filed, his answer or reply to appellant's
memorandum of appeal, not later than ten (10) calendar days from receipt
thereof. Failure on the part of the appellee who was properly furnished with
a copy of the appeal to file his answer or reply within the said period may be
construed as a waiver on his part to file the same.
d)
Subject to the provisions of Article 218 of the Labor Code, once the
appeal is perfected in accordance with these Rules, the Commission shall limit
itself to reviewing and deciding only the specific issues that were elevated on
appeal.
2

6.

FRIVOLOUS APPEAL
In a 1988 decision the Court noted that Section 5, Rule IX [later Section 11,
Rule VI] of the NLRC Rules of Procedure] empowers not only the Commission
but also the Labor Arbiter to impose reasonable penalties, including fines and
censures, upon a party for filing a frivolous appeal. "This implies that even when
appeal is still with the Labor Arbiter, and not yet transmitted to the Commission,
!

Sec. 3, Rule VI, NLRC Revised Rules of Procedure, 2005.


Sec. 4, Rule VI, Ibid.
113

LABOR RELATIONS

ART. 223

the former may already find it frivolous and, there and then, terminate the
appeal.
6.1 Unverified Letter Not Proper Appeal
Garcia vs. NLRC, et al, G.R. No. 110494, November 18, 1996
After receiving a copy of the decision, private respondent [employer] through
its president, wrote the labor arbiter (who rendered the decision) a letter expressing
dismay over the judgment. No appeal was taken therefrom within ten (10) days from
September 10, 1992, the date private respondent received a copy of such judgment.
Neither was a cash or surety bond posted by the private respondent.
Even assuming for the sake of argument that the letter is a valid notice of
appeal, the lack of a cash or surety bond is fatal to the appeal. The judgment in
question involves a monetary award, and in cases where the judgment involves a
monetary award, the second paragraph of Article 223 of the Labor Code, as amended
by R.A. 6715, provides that the appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the NLRC in the amount equivalent to the monetary award in the
judgment appealed from. [The letter was not under oath and it did not appear that
a copy thereof was sent to the employee petitioner.]
Clearly, respondent NLRC acted with grave abuse of discretion and in excess
of jurisdiction in treating the letter of private respondent's president as an appeal
from the judgment of the labor arbiter, x x x Perfection of an appeal in the manner
and within the period prescribed by law is not only mandatory but also jurisdictional.
Failure to conform with the rules regarding appeal will certainly render the judgment
final and executory, hence, unappealable.
7.

PAYMENT OF APPEAL FEES

The appellant shall pay an appeal fee of One Hundred Fifty Pesos (PI50.00)
to the Regional Arbitration Branch or Regional Office of origin, and the official
receipt of such payment shall form part of the records of the case.
2

The failure to pay the appeal docketing fee confers a directory and not
a mandatory power to dismiss an appeal, and such power must be exercised
with a sound discretion and with a great deal of circumspection considering all
attendant circumstances. It is true that in Acda vs. Minister of Labor, 136 SCRA
669, the Supreme Court said that the payment of the appeal fee is by no means a
mere technicality but is an essential requirement in the perfection of an appeal.
However, where the fee had been paid belatedly, the broader interest of justice
and the desired objective in deciding the case on the merits demand that the
appeal be given due course. '
9

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


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

114

APPEAL

ART. 223

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


failure to pay the nominal docketing fee of P25 within the reglementary period
should be treated with understanding and compassion.
1

8.

APPEAL BOND; FILING ON TIME; EXCEPTIONS

In case the decision of the Labor Arbiter or the Regional Director involves
a monetary award, an appeal by the employer may be perfected only upon the
posting of a bond, which shall either be in the form of cash deposit or surety
bond equivalent in amount to the monetary award, exclusive of damages and
attorney's fees.
2

In case of surety bond, the same shall be issued by a reputable bonding


company duly accredited by the Commission or the Supreme Court, and shall
be accompanied by original or certified true copies of the following:
a)

a j o i n t declaration under oath by the employer, his counsel, and the


bonding company, attesting that the bond posted is genuine, and
shall be in effect until final disposition of the case.

b)

an indemnity a g r e e m e n t between the employer-appellant and


bonding company;

c)

proof of security deposit or collateral securing the bond: provided,


that a check shall not be considered as an acceptable security;

d)

a certificate of authority from the Insurance Commission;

e)

certificate of registration from the Securities and E x c h a n g e


Commission;

f)

certificate of authority to transact surety business from the Office of


the President;

g)

certificate of accreditation and authority from the Supreme Court;


and

h)

notarized board resolution or secretary's certificate from the bonding


company showing its authorized signatories and their specimen
signatures.
A cash or surety bond shall be valid and effective from the date of deposit
or posting, until the case is finally decided, resolved or terminated, or the
award satisfied. This condition shall be deemed incorporated in the terms and
conditions of the surety bond, and shall be binding on the appellants and the
bonding company.
The appellant shall furnish the appellee with a certified true copy of the said
surety bond with all the above-mentioned supporting documents. The appellee
3

^ . W . Tan Mfg. vs. National Labor Relations Commission, G.R. No. 79596,
February 10, 1989.
Sec. 6, Rule VI, NLRC Revised Rules of Procedure, 2005.
Ibid.
2

115

LABOR RELATIONS

ART. 223

shall verify the regularity and genuineness thereof and immediately report any
irregularity to the Commission.
Upon verification by the Commission that the bond is irregular or not
genuine, the Commission shall cause the immediate dismissal of the appeal,
and censure or cite in contempt the responsible parties and their counsels, or
subject them to reasonable fine or penalty.
No motion to reduce bond shall be entertained except on meritorious
grounds, and only upon the posting of a bond in a reasonable amount in relation
to the monetary award.
The mere filing of a motion to reduce bond without complying with the
requisites in the preceding paragraphs shall not stop the running of the period
to perfect an appeal.
The bond is sine qua non to the perfection of appeal from the labor arbiter's
monetary award.
Indisputable is the legal doctrine that the appeal of a decision involving
a monetary award in labor cases may be perfected "only upon the posting of a
cash or surety bond." The lawmakers intended the posting of the bond to be an
indispensable requirement to perfect an employer's appeal.
1

The preceding Rosewood ruling, penned by Justice (later Chief Justice)


Panganiban, recalls that in Quiambao vs. National Labor Relations Commission
(254 SCRA 211, 216-217, March 4, 1 9 9 6 ) , the Court ruled that a relaxation of
the appeal bond requirement could be justified by substantial compliance with
the rule. Quiambao, in turn, had cited the cases of Rada vs. NLRC, 205 SCRA 69,
76-77, January 9, 1992, in which the bond was paid belatedly because the labor
arbiter's Decision did not state the amount awarded as backwages and overtime
pay; Blancaflor vs. NLRC, 218 SCRA 366, 371, February 2, 1993, in which the
failure to give a bond was in part due to the failure of the labor arbiter to state
the exact amount of backwages and separation pay due; and Your Bus Line vs.
NLRC, 190 SCRA 160, September 28, 1990, in which the failure to file a bond
was excused because petitioner was misled by the notice of the Decision which,
while stating the requirement for perfecting an appeal, did not mention that a
bond must be filed.
Back to the Rosewood case, the Court noted that the petitioner had filed,
together with its memorandum on appeal and notice of appeal, a motion to
reduce the appeal bond accompanied by a surety bond for fifty thousand pesos.
'Sec. 6, Rule VI, NLRC Revised Rules of Procedure, 2005.
Ibid.
Ibid.
"Ibid.
Catubay, et al. vs. NLRC, Ngo and Fishwealth, G.R. No. 119289, April 12,2000.
"Rosewood Processing, Inc. vs. NLRC, et al, G.R. Nos. 116476-84, May 21,1998.
2

116

APPEAL

ART. 223

But the judgment being appealed was for P789,154.39, so the Solicitor General
argued that it was defective as it was not "equivalent to the monetary award in
the judgment appealed from." T h e Court retorted:
We hold that petitioner's motion to reduce the bond is a substantial
compliance with the Labor Code. This holding is consistent with the norm
that letter-perfect rules must yield to the broader interest of substantial
justice, x x x A judicious reading of the memorandum of appeal would
have made it evident to Respondent Commission that the recourse was
meritorious.
It must be noted, however, that more recent Supreme Court decisions
require strict observance of the reglementary period.
Sameer Overseas Placement Agency Inc. vs. Levantino, et al, G.R. No. 153942,
June 29, 2005
Facts: The employee complained of illegal dismissal, underpayment of wages
and illegal deduction against the recruitment agency as representative of the principal
employer. The labor arbiter upheld the employee's dismissal but granted a monetary
award. Sameer, the agency, appealed to the NLRC but the appeal was dismissed for
lack of appeal bond. This is the point in dispute.
Having received a copy of the Labor Arbiter's decision on 17 October 1997,
Sameer had until 28 October 1997 to perfect the appeal, 27 October falling
on a Sunday. It filed its notice of appeal and a memorandum of appeal on 27
October 1997, along with a motion for extension of time to file a surety-appeal
bond, alleging that it was still arranging for the issuance of such with the bonding
company. It was only on 3 November 1997 that it filed the appeal bond. Thus,
the NLRC First Division, in an Order dated 16 June 1998, dismissed the appeal
for failure to perfect it within the ten (10)-day reglementary period. The Court
of Appeals Sixteenth Division affirmed the dismissal by the NLRC; hence, the
present petition.
Sameer argues that since it subsequently submitted die appeal bond, the filing
of the bond should retroact to die date of the filing of the motion for reduction, which
had been filed within the reglementary period to perfect the appeal. It characterizes
the appeal bond requirement as procedural, and urges that the case be decided on
the merits.
Ruling: Contrary to Sameer's suggestion, the appeal bond requirement is
not merely procedural but jurisdictional, for without it, the NLRC does not acquire
jurisdiction over the appeal. Applying the express provisions of the law, the NLRC did
not acquire jurisdiction over Sameer's appeal within the ten (10)-day reglementary
period to perfect die appeal, for the appeal bond was filed six (6) days after the lapse
of the reglementary period.
The Labor Code [Article 223] is explicit in providing that the appeal from a
decision of the Labor Arbiter must be perfected within ten (10) days, and that such
appeal is perfected only upon die posting of a cash or surety bond.
117

ART. 223

LABOR RELATIONS

Even the NLRC Rules of Procedure plainly expects that the employer submit
the entire cash or surety bond within the reglementary period, even if there may be
cause for its subsequent reduction, to wit:
The Commission may, in justifiable cases and upon Motion of the
Appellant, reduce the amount of the bond. The filing of the motion to reduce
bond shall not stop the running of the period to perfect appeal. (Emphasis
supplied.)
8.1

Motion to Reduce Bond under NLRC Rules

A motion to reduce the amount of the bond may be entertained, but,


meantime, a bond in reasonable amount must be filed anyway. T h e NLRC Rules
of 2005 states:
"No motion to reduce b o n d shall be e n t e r t a i n e d e x c e p t on
meritorious grounds and only upon the posting of a bond in a reasonable
amount in relation to the monetary award.
"The mere filing of the motion to reduce bond without complying
with the requisites in the preceding paragraph shall not stop the running
of the period to perfect an appeal."
8.2

No Bond, No Appeal Perfected

In one of the three "appeal bond decisions" that Mr. Justice Tinga penned
in J u n e 2005 he explained the meaning of the rule under Article 223.
Borja Estate, et al vs. Spouses R. Ballad and R. Ballad, G.R. No. 152550, June
8, 2005
The intention of the lawmakers to make the bond an indispensable requisite
for the perfection of an appeal by the employer is underscored by the provision that
an appeal may be perfected "only upon the posting of a cash or surety bond." The
word "only" makes it perfectly clear that the L A W M A K E R S intended the posting
of a cash or surety bond by the employer to be the exclusive means by which an
employer's appeal may be considered completed. The law however does not require
its outright payment, but only the posting of a bond to ensure that the award will be
eventually paid should the appeal fail. What petitioners have to pay is a moderate
and reasonable sum for the premium of such bond.
The word "may" [in the phrase "may be perfected"], on the other hand, refers
to the perfection of an appeal as optional on the part of the defeated party, but not
to the posting of an appeal bond, if he desires to appeal.
Evidently, the posting of a cash or surety bond is mandatory. And the perfection
of an appeal in the manner and within the period prescribed by law is not only
mandatory but jurisdictional.
As there was no appeal bond filed together with the Appeal Memorandum
within the ten (10)-day period provided by law for the perfection of appeal, it
follows that no appeal from the decision of the Labor Arbiter had been perfected.
118

APPEAL

ART. 223

Accordingly, the Decision of the Labor Arbiter became final and executory upon
the expiration of the reglementary period.
8.2a Relaxing the Ten-day Period
In the same Borja Estate case, Mr. Justice Tinga summarizes the situations
where the Court allowed tardy appeals. We quote:
While it is true that this Court has relaxed the application of the rules on
appeal in labor cases, it has only done so where the failure to comply with the
requirements for perfection of appeal was justified or where there was substantial
compliance with the rules. Hence, the Supreme Court has allowed tardy appeals
injudicious cases, e.g.,
where the presence of any justifying circumstance recognized by law, such
as fraud, accident, mistake or excusable negligence, properly vested the
judge with discretion to approve or admit an appeal filed out of time;
where on equitable grounds, a belated appeal was allowed as the questioned
decision was served directly upon petitioner instead of her counsel of
record who at the time was already dead;
where the counsel relied on the footnote of the notice of the decision of
the labor arbiter that the aggrieved party may appeal. . . within ten (10)
working days;
in order to prevent a miscarriage of justice or unjust enrichment such as
where the tardy appeal is from a decision granting separation pay which
was already granted in an earlier final decision;
or where there are special circumstances in the case combined with its
legal merits or the amount and the issue involved.
8.3 No Distinction Between "Filing" and "Perfection" of Appeal; Star
Angel Decision, Not "Venerable"
In still another of the three "appeal bond decisions" that Mr. Justice Tinga
penned for the Court in J u n e 2005, the good Justice confronted and rectified the
confusion caused by the Star Angel ruling that the appeal must be filed within ten
(10) days but may be perfected after that period. That, the Court now says, was just
an obiter dictum. The Court declares: The Star Angel decision is not "venerable."
In other words, practicing lawyers are advised to forget, rather than invoke, Star
Angel
Computer Innovations Center, et al vs. NLRC, G.R. No. 152410, June 29, 2005
Petitioners invoke the holding in Star Angel Handicraft v. NLRC, G.R. No. 108914,
September 20,1994 that there is a distinction between the filing of an appeal within
the reglementary period and its perfection, and that the appeal may be perfected
after the said reglementary period. Indeed, Star Angel held that the filing of a motion
for reduction of an appeal bond necessarily stays the reglementary period for
119

LABOR RELATIONS

ART. 223

appeal. However in this case, the motion for reduction of appeal bond, which was
incorporated in the appeal memorandum, was filed only on the tenth or final day
of the reglementary period. Under such circumstance, the motion for reduction of
appeal bond can no longer be deemed to have stayed the appeal, and the petitioner
faces the risk, as had happened in this case, of summary dismissal of the appeal for
non-perfection.
Moreover, the reference in Star Angel as to the distinction between the period
to file the appeal and to perfect the appeal has been pointedly made only once by
this Court in Gensoli v. NLRC; thus, it has not acquired the sheen of venerability
reserved for repeatedly-cited cases. The distinction, if any, is not particularly evident
or material in the Labor Code; hence, the reluctance of the Court to adopt such
doctrine. Moreover, the present provision in the NLRC Rules of Procedure, that "the
filing of a motion to reduce bond shall not stop the running of the period to perfect
appeal" flatly contradicts the notion expressed in Star Angel that there is a distinction
between filing an appeal and perfecting an appeal.
8.4

Amount of Appeal Bond Excludes Damages

An appeal is deemed perfected upon the posting of the bond equivalent


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

8.5

Is Property Bond Acceptable?

In one case the labor arbiter awarded more than P I 7 million to the
numerous complainant employees. Appealing to the NLRC, the employer hospital
posted as appeal bond a real estate bond consisting of land and improvements worth
more than P I 0 0 million. T h e employer manifested that it was not in a financial
position to post a cash bond or to pay an annual premium of P700,000.00 for a
surety bond. But the NLRC rejected the property bond and dismissed the appeal,
pointing out that the bond should either be "cash" or "surety" as specified in
Article 223 (second paragraph). T h e seasoned counsel petitioned the Supreme
Court for a certiorari, insisting that NLRC gravely abused its discretion.
The Court granted the petition by ruling that although the posting of a
bond is jurisdictional, the requirement should be given a liberal interpretation.
"We reiterate this policy," Mr. Justice Puno said for the Court, "which stresses
the importance of deciding cases on the basis of their substantive merit and not
on strict technical rules. In the case at bar, the judgment involved is more than
P I 7 million and its precipitate execution can adversely affect the existence of
petitioner medical center. Likewise, the issues involved are not insignificant and
Fernandez, et al. vs. NLRC, et al, G.R. No. 105892, January 28, 1998.
120

APPEAL

ART. 223

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

8.6

Bond Accepted Conditionally

If the bond filed by the [appellant] petitioner is accepted by the NLRC


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

8.7

Supersedeas Bond

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

9.

RECORDS AND TRANSMITTAL

T h e records of a case shall have a corresponding index of its contents


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

T h e records shall be chronologically arranged and paged prominently.

'UERM-Memorial Medical Center vs. NLRC, et al, G.R. No. 110419, March 3,
1997.
2

Metro Transit vs. Piglas NFWU-KMU, et al, G.R. No. 175460, April 14, 2008.
Pan American Employees Association, etc. vs. National Labor Relations
Commission, et al, G.R. No. 74273, October 12, 1986.
Sec. 7, Rule VI, NLRC Revised Rules of Procedure, 2005.
Ibid.
3

121

LABOR RELATIONS

ART. 223

Within forty-eight (48) hours after the filing of the appeal, the records
of the case shall be transmitted by the Regional Arbitration Branch or office of
origin to the Commission.
1

10.

EFFECT OF APPEAL OF ARBITER'S DECISION


Without prejudice to immediate reinstatement pending appeal under
Section 6 of Rule X I , once an appeal is filed, the Labor Arbiter loses jurisdiction
over the case. All pleadings and motions pertaining to the appealed case shall
thereafter be addressed to and filed with the Commission.
2

10.1 Execution or Reinstatement Pending Appeal


In case the decision includes an order of reinstatement, and the employer
disobeys the directive under the second paragraph of Section 14 of Rule V or
refuses to reinstate the dismissed employee, the Labor Arbiter shall immediately
issue writ of execution, even pending appeal, directing the employer to
immediately reinstate the dismissed employee either physically or in the payroll,
and to pay the accrued salaries as a consequence of such reinstatement at the
rate specified in the decision.
3

The Sheriff shall serve the writ of execution upon the employer or any
other person required by law to obey the same. If he disobeys the writ, such
employer or person may be cited for contempt in accordance with Rule I X .
4

10.2 Effect of Perfection of Appeal on Execution


T h e perfection of an appeal shall stay the execution of the decision of the
Labor Arbiter on appeal, except execution for reinstatement pending appeal.
5

(Automatic execution of reinstatement and the rationale of payroll


reinstatement are discussed in Book VI in this volume.)
11.

FRIVOLOUS OR DILATORY APPEALS

No appeal from an interlocutory order shall be entertained. To discourage


frivolous or dilatory appeals, including those taken from interlocutory orders,
the Commission may censure or cite in contempt the erring parties and their
counsels, or subject them to reasonable fine or penalty.
6

12.

APPEALS FROM DECISION OF OTHER AGENCIES

The Rules provided herein governing appeals from the decisions or orders
of Labor Arbiters shall apply to appeals to the Commission from decisions or
Sec.
Sec.
Sec.
Ibid.
Sec.
Sec.

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


9, Rule VI, Ibid.
6, Rule XI, Ibid.

122

9, Rule XI.
10, Rule VI, Ibid.

APPEAL

ART. 223

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


to law.
1

13.

PROCEEDINGS BEFORE THE COMMISSION

[Note: As this edition went to press the "2005 Revised Rules of the
which the following paragraphs were taken, have not yet been changed
R.A. No. 9347 which lapsed into law on July 27, 2006. This law, among
increased the NLRC divisions from five to eight, with three commissioners

NLRC, " from


to conform to
other changes,
each division.]

Commission En Banc The Commission shall sit en banc only for purposes
of promulgating rules and regulations governing the hearing and disposition
of cases before its Divisions and Regional Arbitration Branches, and for the
formulation of policies affecting its administration and operations. It may, on
temporary or emergency basis, allow cases within the jurisdiction of any Division
to be heard by any other Division whose docket allows the additional workload
and such transfer will not expose litigants to unnecessary additional expense.
2

Divisions. Unless otherwise provided by law, the Commission shall


exercise its adjudicatory and all other powers, functions and duties through its
five (5) [now eight] Divisions. Each Division shall consist of one member from
the public sector who shall act as the Presiding Commissioner and one member
each from the workers and employers sectors, respectively.
3

T h e presence of at least two (2) Commissioners of a Division shall constitute


a quorum. T h e concurrence of two (2) Commissioners of a Division shall be
necessary for the pronouncement of a judgment or resolution.
4

Whenever the required membership in a Division is not complete and the


concurrence of two (2) Commissioners to arrive at a judgment or resolution
cannot be obtained, the Chairman shall designate such number of additional
Commissioners from the other Divisions as may be necessary from the same
sector.
Role of Chairman in the Division. The Chairman of the Commission
may convene and preside over the session of any Division to consider any
case pending before it and participate in its deliberations, if in his judgment,
his presence therein will best serve the interests of labor justice. He shall not
however, participate in the voting by the Division, except when he is acting as
Presiding, Commissioner of the Division in the absence of the regular Presiding
Commissioner.
5

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


Sec. 2, Rule VII, Ibid.
*Ibid.
Sec. 4, Rule VII, Ibid.
Ibid.
Ibid.

123

LABOR RELATIONS

ART. 223

13.1 Issues on Appeal


Under Section 4 ( c ) Rule VI of the NLRC Rules of Procedure, the
Commission shall, in cases of perfected appeals, limit itself to reviewing those
issues which are raised on appeal. Those which are not raised on appeal shall be
final and executory. The issues raised on appeal, however, shall be opened for
review and any action taken thereon by the Commission are within the parameters
of its jurisdiction.
1

13.2 Technical Rules Not Binding


The rules of procedure and evidence prevailing in courts of law and equity
shall not be controlling and the Commission shall use every and all reasonable
means to ascertain the facts in each case speedily and objectively, without regard
to technicalities of law or procedure, all in the interest of due process.
2

In any proceeding before the Commission, the parties may be represented


by legal counsel but it shall be the duty of the Chairman, any Presiding
Commissioner or Commissioner to exercise complete control of the proceedings
at all stages.
3

13.2a Evidence Submitted on Appeal to NLRC


The settled rule is that the NLRC is not precluded from receiving evidence
on appeal as technical rules of evidence are not binding in labor cases. In fact,
labor officials are mandated by the Labor Code to use every and all reasonable
means to ascertain the facts in each case speedily and objectively, without regard
to technicalities of law or procedure, all in the interest of due process.
4

T h e rules of evidence prevailing in courts of law or equity are not


controlling in proceedings before the Commission. T h e submission of additional
evidence in support of the employee's appeal does not prejudice the employer
since the latter could submit counter-evidence.
5

Philippine Telegraph And Telephone Corporation vs. National Labor Relations


Commission, et al., G.R. No. 80600, March 21, 1990
On appeal to respondent Commission, petitioner [employer] submitted
uncontradicted evidence showing payment to [the employee] of his holiday pay and
rest day pay, and die employee's nonentitlement to incentive leave pay due to his
enjoyment of vacation leave privileges, consistent with Article 95 of the Labor Code.
Such evidence was, however, rejected by respondent Commission on the ground that
'Roche Philippines vs. National Labor Relations Commission, G.R. No. 83335,
October 5, 1989.
Sec. 10, Rule VII, NLRC Revised Rules of Procedure, 2005.
Ibid.
Clarion Printing House, Inc., et al vs. NLRC, G.R. No. 148372, June 27, 2005.
Precision Electronics Corporation vs. National Labor Relations Commission,
G.R. No. 86657, October 23, 1989.
2

124

APPEAL

ART. 223

it was not presented at the first opportunity, presumably when the case was pending
with the labor arbiter.
The belated presentation of the evidence notwithstanding, respondent
Commission should have considered them just the same. As correctly pointed out by
the Solicitor-General who has impartially taken a contrary view vis-a-vis that portion
of said decision of respondent commission which he is supposed to defend, technical
rules of evidence are not binding in labor cases. Labor officials should use every
reasonable means to ascertain the facts in each case speedily and objectively, without
regard to technicalities of law or procedure, all in the interest of due process.
Thus, even if the evidence was not submitted to the labor arbiter, the fact that
it was duly introduced on appeal to respondent Commission is enough basis for the
latter to have been more judicious in admitting the same, instead of falling back on
the mere technicality that said evidence can no longer be considered on appeal.
Certainly, the first course of action would be more consistent with equity and the
basic notions of fairness.
13.3 Conciliation/Mediation
Even when the case is elevated on appeal to the NLRC, the Commission
(i.e., the division handling the case) shall exert all efforts towards the amicable
settlement of a labor dispute. T h e settlement of cases on appeal, to be valid and
binding between the parties, shall be made before the Commissioner or his
authorized representative.
1

13.4 Consultation
T h e conclusions of a Division on any case or matter submitted to it for
decision shall be reached in consultation before the case is assigned to a member
for the writing of the opinion. It shall be mandatory for the Division to meet for
the purpose of the consultation ordained herein.
2

A certification to this effect signed by the Presiding Commissioner of the


Division shall be issued and a copy thereof attached to the record of the case
and served upon the parties.
3

13.5 Dissenting Opinion


Should any member of a Division indicate his intention to write a dissenting
opinion, he may file the same within the period prescribed for deciding or
resolving the appeal; otherwise, such written dissenting opinion shall not be
considered part of the records of the case.
4

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


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

125

ART. 223

LABOR RELATIONS

13.6 Inhibition
No motion to inhibit the entire Division of the Commission shall be entertained. However, any Commissioner may inhibit himself from the consideration
and resolution of any case or matter before the Division and shall so state in writing the legal or justifiable grounds therefor. In the event that a member inhibits
himself, the case shall be raffled by the Executive Clerk or Deputy Executive Clerk
to either of the two (2) remaining Commissioners. In case two (2) Commissioners in a Division inhibit themselves in a case or matter before it, the Chairman
shall, as far as practicable, appoint two (2) Commissioners from other Divisions
representing the sector of the Commissioners who inhibited themselves.
1

14.

FORM OF DECISION, RESOLUTION AND ORDER

The decision, resolution and order of the Commission shall state clearly
and distinctly the findings of facts, issues, and conclusions of law on which it is
based, and the relief granted, if any. If the decision, resolution or order involves
monetary awards, the same shall contain the specific amount awarded as of the
date the decision is rendered.
2

Under Article 223, the Commission shall decide all cases within twenty
calendar days from receipt of the answer of the appellee.
The decision of the Commission shall be final and executory after ten
calendar days from receipt thereof by the parties.
Any enforcement agency may be deputized by the Secretary of Labor or
the Commission in the enforcement of decision, awards or orders.
14.1 Reasoned Reversal
While it is within respondent Commission's competence, as an appellate
agency reviewing decisions of Labor Arbiters, to disagree with and set aside
the latter's findings, it stands to reason that it should state an acceptable cause
therefor. It would otherwise be a whimsical, capricious, oppressive, illogical,
unreasonable exercise of quasi-judicial prerogative, subject to invalidation by
the extraordinary writ of certiorari}
But that, regrettably, is precisely what respondent Commission appears to
have done. It overturned the Labor Arbiter's factual determination regarding
LIPERCON's being a legitimate independent contractor without stating the
reason therefor, without any explanation whatever as to why the Arbiter's
evidentiary premises were not worthy of credit, or why the inferences drawn
therefrom were unacceptable, as a matter of law or logic.
4

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


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

1998.
4

Ibid.

126

APPEAL

ART. 223

14.2 Extended Meaning of "Appeal" under Article 223; NLRC May Issue
Writ of Certiorari
Triad Security & Allied Services, Inc. et al. vs. Ortega, et al, G.R. No. 160871,
February 6, 2006
It is a basic tenet of procedural rules that for a special civil action for a petition
for certiorari to prosper, the following requisites must concur: (1) the writ is directed
against a tribunal, a board or an officer exercising judicial or quasi-judicial functions;
(2) such tribunal, board or officer has acted without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is
no appeal or any plain, speedy and adequate remedy in the ordinary course of law.
In this case, petitioners insist that the NLRC is bereft of authority to rule on a
matter involving grave abuse of discretion that may be committed by a labor arbiter.
Such conclusion, however, proceeds from a limited understanding of the appellate
jurisdiction of the NLRC under Article 223 of the Labor Code which states:
Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. Such appeal
may be entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part
of the Labor Arbiter.
In the case of Air Services Cooperative v. Court of Appeals, we had the occasion to
explain the scope of said Article of the Labor Code to mean
x x x Also, while the title of Article 223 seems to provide only for
the remedy of appeal as that term is understood in procedural law and as
distinguished from the office of certiorari, nonetheless, a closer reading thereof
reveals that it is not as limited as understood by the petitioners x x x .
xxx
Abuse of discretion is admittedly within the ambit of certiorari and its
grant thereof to the NLRC indicates the lawmakers' intention to broaden the
meaning of appeal as that term is used in the Code x x x .
Likewise, in the same case, this Court quoted with approval the following
observation of the Court of Appeals:
We do not see how appeal would have been inadequate or ineffectual
under the premises. On the other hand, being the administrative agency
especially tasked with the review of labor cases, [the NLRC] is in a far
better position to determine whether petitioners' grounds for certiorari are
meritorious. Neither is there any cause for worry that appeal to the Commission
would not be speedy as the Labor Code provides that the Commission shall
decide cases before it, within twenty (20) calendar days from receipt of the
Answer of Appellee x x x .
Given the foregoing, we hold that the Court of Appeals correctly dismissed
the petition for certiorari brought before it.
127

LABOR

ART. 223

RELATIONS

15.

FINALITY OF DECISION OF THE COMMISSION AND ENTRY OF


JUDGMENT
a)
Finality of the Decisions, Resolutions or Orders of the Commission.
- Except as provided in Section 9 of Rule X, the decisions, resolution or orders
of the Commission shall become final and executory after ten (10) calendar
days from receipt thereof by the parties.
b)
Entry of Judgment. - Upon the expiration of the ten (10) calendar
day period provided in paragraph (a) of this Section, the decision, resolution,
or order shall be entered in a book of entries of judgment.
1

The Executive Clerk or Deputy Executive Clerk shall consider the decision,
resolution or order as final and executory after sixty (60) calendar days from
date of mailing in the absence of return cards, certifications from the post office,
or other proof of service to parties.
3

16. MOTIONS FOR RECONSIDERATION


Motion for reconsideration of any decision, resolution or order of the
Commission shall not be entertained except when based on palpable or patent
errors; provided that the motion is under oath and filed within ten (10) calendar
days from receipt of decision, resolution or order, with proof of service that a
copy of the same has been furnished, within the reglementary period, the adverse
party, and provided further, that only one such motion from the same party shall
be entertained.
Should a motion for reconsideration be entertained pursuant to this
Section, the resolution shall be executory after ten (10) calendar days from
receipt thereof.
4

The NLRC Rules does not allow a second motion for reconsideration. T h e
NLRC abuses its discretion when it violates its own rules by entertaining such a
motion.
5

A supplemental motion for Reconsideration filed outside of the 10-day


appeal period cannot be entertained.
6

16.1 Party Who Failed to Appeal on Time From Decision of Labor Arbiter
May Still File Motion for Reconsideration of NLRC Decision
Sadol vs. Filipinos Kao, Inc., et al., G.R. No. 87530, June 13, 1990
Facts: Petitioner was recruited as a laborer by owners of Vega & Co., a private
recruitment agency, with assignment at respondent Pilipinas Kao, Inc. (PKI). On April
Sec. 14, Rule VII, NLRC Revised Rules of Procedure, 2005.
Ibid.
Ibid.
Sec. 15, Rule VII,/ta*.
Jardin vs. NLRC and Goodman Taxi, G.R. No. 119268, February 23, 2000.
Favila vs. NLRC, G.R. No. 126768, June 16, 1999.

128

APPEAL

ART. 223

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


and backwages. The labor arbiter rendered a decision ordering private respondents
to pay petitioner separation pay at one month for every year of service. Petitioner
appealed to die NLRC. Respondents also appealed but its appeal was filed out of
time.
The NLRC modified the appealed decision in that respondent PKI was ordered
to reinstate petitioner with full backwages and other accrued benefits and in case
reinstatement is impossible, payment of full backwages and separation pay. The
appeal of respondent PKI was dismissed for having been filed out of time.
Respondent PKI received a copy of the decision of the NLRC on September
13, 1988. A motion for reconsideration dated September 22, 1988 was filed by said
respondent. Petitioner opposed the motion.
On September 30,1988 the NLRC set aside its decision and dismissed the case
for lack of merit.
Hence, the herein petition for certiorari.
Ruling: Party who failed to appeal from a decision of the Labor Arbiter to the NLRC
can still participate in a separate appeal timely filed by the adverse party by a motion for
reconsideration of the decision of the NLRC on appeal. There is no question that private
respondents failed to file a timely appeal from the decision of the labor arbiter while
the petitioner was able to interpose his appeal within the reglementary period. It
is also an accepted postulate that issues not raised in the lower court or die labor
arbiter may not be raised for the first time on appeal.
Note is taken of the fact that even the Solicitor General refused to represent
the NLRC in this proceeding as it shares the view of petitioner that the decision of
the labor arbiter having become final by the failure of respondent PKI to appeal on
time, the NLRC may no longer amend, modify, much less set aside the same.
The posture is correct insofar as respondent PKI is concerned. However, as
petitioner had filed a timely appeal, the NLRC had jurisdiction to give due course to
his appeal and render the decision of August 28,1988, a copy of which was furnished
respondents. Having lost the right to appeal, can respondent PKI file a motion for
reconsideration of said decision? The Court resolves the question in the affirmative.
The rules of technicality must yield to the broader interest of justice. It is only by giving
due course to the motion for reconsideration that was timely filed that the NLRC may
be able to equitably evaluate the conflicting versions of facts presented by the parties.
17.

CERTIFIED CASES
The proceedings before the Commission on cases certified to it under
Article 263(g) are explained under that article.
18.

APPEAL FROM THE NATIONAL LABOR RELATIONS COMMISSION


18.1 Review by Certiorari by the Court of Appeals; The St. Martin case
On September 16,1998 the Supreme Court promulgated its epoch-making
ruling in St. Martin Funeral Homes vs. NLRC and B. Aricayos, G.R. No. 130866.
129

ART. 223

LABOR RELATIONS

From the labor arbiter to the NLRC this illegal dismissal case reached the Highest
Court on the question of whether the complainant/respondent was or was not
an employee of the petitioner. The Court did not answer the question and ended
up referring it to the Court of Appeals. There lies the significance of this en banc
decision.
After quickly reviewing the NLRC's creation, the Court noted that present
laws provide no appeals from NLRC decisions. The Court painstakingly examined
the definitions of jurisdiction of the Court of Appeals under BP Big. 129 (Judiciary
Reorganization Act of 1980) in relation to the amendments made by R.A. No.
7902 (March 18, 1995). The Supreme Court noted "a somewhat perplexing
impasse" some kind of a neither here nor there. The SC review of NLRC
decisions has always been through petition for certiorari under Rule 65 which is
limited to resolution of jurisdictional issues and grave abuse of discretion. And
yet, BP Big. 129, which defined the exclusive appelate jurisdiction of the CA,
excepted the cases falling under the appellate jurisdiction of the SC "in accordance
with the Labor Code." In other words, BP Big. 129 says that the CA shall not
entertain appeals that belong to the SC "in accordance with the Labor Code."
But the Labor Code itself does not provide for appeal to the Supreme Court.
Such "procedural gaffe," said the Court graciously, could not have been intended
by Congress.
R.A. No. 7902 transposed and did not delete the exception of "appellate
jurisdiction of the Supreme Court in accordance with the Labor Code." But the
Court is persuaded that "there may have been oversight in the course of the
deliberations [on R.A. No. 7902] or an imprecision in the terminology used
therein." Thus, the Court deduced that "Congress did intend to provide for judicial
review of the adjudications of the NLRC in labor cases by the Supreme Court, but there
was an inaccuracy in the term used for the intended mode of review"
Delving into the legislative deliberations, the Court pointed out that the
purpose of R.A. No. 7902 in amending BP Big. 129 was "to ease the workload
of the Supreme Court by the transfer of some of its burden of review of factual
issues to the Court of Appeals."
Pursuing this objective, the Court then made this epochal pronouncement:
T h e Court is, therefore, of the considered opinion that ever since
appeals from the NLRC to the Supreme Court were eliminated, the
legislative intendment was that the special civil action of certiorari was and
still is the proper vehicle for judicial review of decisions of the NLRC. T h e
use of the word "appeal" in relation thereto and in the instances we have
noted could have been a lapsus plumae because appeals by certiorari and the
original action for certiorari are both modes of judicial review addressed to
the appellate courts. T h e important distinction between them, however,
and with which the Court is particularly concerned here, is that the special
Civil action of certiorari is within the concurrent original jurisdiction of this
130

APPEAL

ART. 223

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


that appeals by certiorari to the Supreme Court are allowed would not
subserve, but would subvert, the intention of Congress as expressed in the
sponsorship speech on Senate Bill No. 1495.
Therefore, all references in the amended Section 9 of B.P. No. 129
to supposed appeals from the NLRC to the Supreme Court are interpreted
and hereby declared to mean and refer to petitions for certiorari under Rule
65. Consequently, all such petitions should henceforth be initially filed in
the Court of Appeals in strict observance of the doctrine on the hierarchy
of courts as the appropriate forum for the relief desired.
In a nutshell, the St. Martin precedent states: (1) the way to review NLRC
decisions is through the special civil action of certiorari under Rule 65; (2) the
jurisdiction over such action belongs to both the Supreme Court and the Court
of Appeals; but (3) in line with the doctrine on hierarchy of courts, the petition
should be initially presented to the lower of the two courts, that is, the Court of
Appeals.
18.2 When and Where to File Petition
Under the 1997 Rules of Civil Procedure, effective July 1, 1997, the
petition for certiorari may be filed not later than sixty (60) days from notice of
the judgment, order, or resolution sought to be assailed in the Supreme Court
x x x. It may also be filed in the Court of Appeals whether or not the same is
in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its
jurisdiction.
1

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

Sec. 4, Rule 65, Rules of Court.


Universal Robina Corp., et al. vs. CA, et al., G.R. No. 144978, January 15, 2002.
131

ART. 223

LABOR RELATIONS

18.2a One Day Late


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

18.2b Certified True Copy of NLRC Decision


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

18.3 Effect on NLRC's Decision


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

18.4 Appeal to Labor Secretary Abolished


T h e Labor Code formerly granted, under Article 223, an aggrieved party
the remedy of appeal from a decision of the NLRC to the Secretary of Labor.
Presidential Decree No. 1391, however, amended Article 223 and abolished
appeals to the Secretary of Labor.
18.5 Grounds for Certiorari
A party may seasonably avail itself of the special civil action for certiorari,
where the tribunal, board or officer exercising judicial functions has acted without
or in excess of its jurisdiction, or with grave abuse of discretion, and praying
that judgment be rendered annulling or modifying the proceedings, as the law
requires, of such tribunal, board or officer.
4

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

132

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


administrative agencies, the Supreme Court [or Court of Appeals] using the
power of judicial review, has taken cognizance of petitions questioning the
decisions where want of jurisdiction, grave abuse of discretion, violation of due
process, denial of substantial justice, or erroneous interpretation of the law were
brought to its attention.
1

No law provides for an appeal from decisions of the National Labor


Relations Commission. Hence, there can be no review and reversal on appeal
by higher authority of its factual or legal conclusions. When, however, it decides
a case without or in excess of its jurisdiction, or with grave abuse of discretion,
the party thereby adversely affected may obtain a review and nullification of that
decision by the Supreme Court [or Court of Appeals] through the extraordinary
writ of certiorari. If it appears, for example, that the Commission had indeed acted
without jurisdiction and with grave abuse of discretion in taking cognizance
of a belated appeal sought to be taken from a decision of a labor arbiter and
thereafter reversing it, the writ of certiorari will issue to undo those acts, and do
justice to the aggrieved party. Note: See above the St. Martin case.
2

18.6 "Grave Abuse of Discretion"


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

18.7 Sole Office of Certiorari


T h e appellate court's jurisdiction to review a decision of the NLRC in
a petition for certiorari is confined to issues of jurisdiction or grave abuse of
discretion. An extraordinary remedy, a petition for certiorari is available only and
Mantrade/FMMC Division Employees and Workers Union vs. Bacungan, G.R.
No. 48437, September 30, 1986.
John Clement Consultants, Inc. vs. National Labor Relations Commission,
G.R. No. 72096, January 29, 1988.
Solvic Industrial Corp., et al vs. NLRC and Lauz, G.R. No. 125548, September
25,1998, citing Taada vs. Angara, G.R. No. 118295, May 2,1997, per Panganiban,/.
See also Zarate vs. Olegario, G.R. No. 90655, October 7,1996; San Sebastian College
vs. Court of Appeals, 197 SCRA 138, May 15,1991; Bustamante vs. Commissioner on
Audit, 216 SCRA 134, November 27, 1992.
2

133

ART. 223

LABOR RELATIONS

restrictively in truly exceptional cases. The sole office of the writ of certiorari is
the correction of errors of jurisdiction including the commission of grave abuse
of discretion amounting to lack or excess of jurisdiction. It does not include
correction of the NLRC's evaluation of the evidence or of its factual findings.
Such findings are generally accorded not only respect but also finality. A party
assailing such findings bears the burden of showing that the tribunal acted
capriciously and whimsically or in total disregard of evidence material to the
controversy, in order that the extraordinary writ of certiorari will lie.
1

18.8 Not a Slave to Technical Rules


Reyes vs. NLRC, Coca-Cola Bottlers Phils., G.R. No. 180551, February 10,2009
Facts: The dismissed employee was ordered reinstated by the Labor Arbiter,
but the NLRC reversed this decision. Raising his appeal to the Court of Appeals, the
employee, unfortunately, failed to explain to the court why he did not personally
serve a copy of his petition to the adverse party (his employer), as required by Section
11, Rule 13 of the Revised Rules of Court. Thus, the Court of Appeals dismissed his
petition. The employee did not file a motion for reconsideration of the CA decision.
Despite this and the earlier failure to furnish the employer personally a copy of
the petition, the Supreme Court entertained and granted the employee's petition,
through the pen of Justice Chico-Nazario.
Ruling: In numerous cases, the Court has allowed liberal construction of Section
11, Rule 13 of the Revised Rules of Court when doing so would be in the service of
the demands of substantial justice and in the exercise of the equity jurisdiction of this
Court. In one such case, Fulgencio v. National Labor Relations Commission, this Court
provided the following justification for its non-insistence on a written explanation
as required by Section 11, Rule 13 of the Revised Rules of Court:
The rules of procedure are merely tools designed to facilitate the
attainment of justice. They were conceived and promulgated to effectively aid
the court in the dispensation of justice. Courts are not slaves to or robots of
technical rules, shorn of judicial discretion. In rendering justice, courts have
always been, as they ought to be, conscientiously guided by the norm that
on the balance, technicalities take a backseat against substantive rights, and
not the other way around. Thus, if the application of the Rules would tend to
frustrate rather than promote justice, it is always within our power to suspend
the rules, or except a particular case from its operation.
The basic general rule is that the negligence of counsel binds the client.
Hence, if counsel commits a mistake in the course of litigation, thereby resulting
in his losing the case, his client must perforce suffer the consequences of the
mistake. The reason for the rule is to avoid the possibility that every losing
party would raise the issue of negligence of his or her counsel to escape an
adverse decision of the court, to the detriment of our justice system, as no party
would ever accept a losing verdict. This general rule, however, pertains only
'Odango vs. NLRC, et al, G.R. No. 147420, June 10, 2004.
134

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ART. 223

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


that is so gross, palpable, pervasive, reckless and inexcusable, then it does not
bind die client since, in such a case, the client is effectively deprived of his or
her day in court.
The circumstances of this case qualify it under the exception, rather than the
general rule. The negligence of petitioner's former counsel may be considered gross
since it invariably resulted to the foreclosure of remedies otherwise readily available
to the petitioner. Not only was petitioner deprived of the opportunity to bring his case
before the Court of Appeals with the outright dismissal of his Petition on a technicality,
but he was also robbed of the chance to seek reconsideration of the dismissal of his
petition. What further impel this Court to heed the call for substantial justice are
the pressing merits of this case which, if left overshadowed by technicalities, could
result in flagrant violations of the provisions of the Labor Code and of the categorical
mandate of the Constitution affording protection to labor.
Higher interest of justice and equity demand that petitioner should not be
denied his day in court and made him to suffer for his counsel's indiscretions. To
cling to the general rule in this case would only condone, rather than rectify, a serious
injustice to a partywhose only fault was to repose his faith and trust in his previous
counsel and close our eyes to the glaring grave abuse of discretion committed by
the NLRC.
18.9 Appeal from OSEC to CA; St Martin Ruling Applies
Like NLRC decisions, rulings issued by the Office of the Secretary (OSEC)
of DOLE may be appealed to the Court of Appeals, not the Supreme Court,
pursuant to the ruling in St. Martin Funeral Homes vs. NLRC.
1

T h e instances of possible appeal to the CA from the DOLE Secretary are


the following:
1. Under the rules governing local employment, dated J u n e 5, 1997,
regarding the regional director's decisions on complaints of
employment agencies.
2. Under Article 128 and Sec. 2 in relation to Sec. 3a and Sec. 4, Rule X,
Book III, Implementing Rules regarding compliance order in labor
standards cases; under Sec. 1, Rule IV of the Rules on Disposition
of labor standard cases dated September 16, 1987; execution, on
occupational health and safety cases.
3. Under Article 236: denial of application for registration by BLR of
registration of federation, national or industry union, or trade union
center.

Cited in National Federation of Labor vs. Laguesma, G.R. No. 123426, March
10, 1999.
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ART. 223

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


Office.
5. Under Article 2 5 9 : order of a med-arbiter on a petition for
certification election or as to the results of a certificate election.
6. Under Book V of the Implementing Rules: decision of the B L R
regarding administration of union funds;
7. Under Article 263: decisions in cases of assumption of jurisdiction.

18.10 Exhaustion of Administrative Remedies; Motion for Reconsideration


Required
The remedy of an aggrieved party in a decision or resolution of the Secretary
of the DOLE is to timely file a motion for reconsideration as a precondition for
any further or subsequent remedy, and then seasonably file a special civil action
for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
Petitioner's failure to file its motion for reconsideration seasonably is fatal
to its cause and in effect, renders final and executory the Resolution of the
Secretary of the DOLE.
2

A petition for certiorari should be preceded by exhaustion of administrative


remedies.
When an administrative remedy is provided by law, relief must be sought
by first exhausting that remedy before seeking judicial intervention. Failure to
do so is fatal.
3

18.10a Exceptions
NLRC rules require the filing of a motion for reconsideration before
the parties may pursue any further or subsequent remedy. How absolute is this
rule? In some cases elevated to it, the Supreme Court upheld the rule; in some
other cases, it did not. In Sunshine Transportation, Inc. vs. NLRC and R. Santos,
G.R. No. 116025, February 22, 1996, the NLRC affirmed the labor arbiter's
dismissal of the employee's complaint against his employer. T h e employee
forthwith elevated the case to the Supreme Court, charging the NLRC with
grave abuse of discretion. T h e Court dismissed the petition for certiorari, saying
that "in the light of the doctrine of exhaustion of administrative remedies, a
National Federation of Labor vs. Laguesma, G.R. No. 123426, March 10,1999.
See University of Immaculate Conception vs. Secretary of Labor, G.R. No.
143557, June 25, 2004; SMC Quarry 2 Workers Union - February Six Movement
Local Chapter No. 1564 vs. Titan Megabags Industrial Corporation, G.R. No. 150761,
May 19,2004; Also: Manila Pearl Corp. vs. Manila Pearl Independent Workers Union,
G.R. No. 142960, April 15, 2005.
National Labor Union vs. Secretary of Labor, G.R. No. 41459, December 18,
1987.
2

136

APPEAL

ART. 223

motion for reconsideration must first be filed before the special civil action
for certiorari may be availed of."
Five months later, in another case of employee dismissal, the Supreme Court
entertained the petition although it noted that the petitioners had not filed with
die NLRC a motion for reconsideration. It clarified that the rule requiring a
motion for reconsideration before filing a petition for certiorari "admits of certain
exceptions, among which is the finding that under the circumstances of the case,
a motion for reconsideration would be useless." It explained: "In this case, the
NLRC had reversed the decision of the Labor Arbiter and no new issues were
raised in this appeal. We find it quite impossible for the NLRC to reverse itself
under the foregoing facts and so, a motion for reconsideration will be deemed
useless. Hence, by reason of justice and equity, we resolve to settle the issues on
the merits in order to avoid further delay."
1

Before 1996 ended the Court had occasion to summarize the exceptions
to the rule requiring a motion for reconsideration or the exhaustion of
administrative remedies. In Fe Alindao vs. Joson, et al, G.R. No. 114132, November
14, 1996, the Supreme Court summed up:
It has been held that the requirement of a motion for reconsideration
may be dispensed with in the following instances: (1) when the issue raised
is one or purely of law; (2) where public interest is involved; (3) in cases
of urgency; and (4) where special circumstances warrant immediate or
more direct action. On the other hand, among the accepted exceptions
to the rule on exhaustion of administrative remedies are: (1) where the
question in dispute is purely a legal one; and (2) where the controverted
act is patently illegal or was performed without jurisdiction or in excess of
jurisdiction."
T h e remedy of appeal from the Secretary of Labor to the Office of the
President is not a mandatory requirement before resort to courts can be had,
but an optional relief provided by law to parties seeking expeditious disposition
of their labor disputes. Failure to avail of such relief shall not in any way serve
as an impediment to judicial intervention. And where the issue is lack of power
or arbitrary or improvident exercise thereof, decisions of the Secretary of Labor
may be questioned in a certiorari proceeding without prior appeal to the President.
Since the instant petition raises the same issue of grave abuse of discretion of the
Secretary of Labor amounting to lack of or in excess of jurisdiction in deciding
the controversy, this Court can properly take cognizance of and resolve the issues
raised herein.
2

'Midas Touch Food Corp. vs. NLRC and Iris Fe Isaac, G.R. No. 111639, July 29,
1996.
^Tropical Hut Employee's Union-CGQ, et al. vs. Tropical Hut Food Market,
Inc., et al, G.R. Nos. L43495-99, January 20, 1990.
137

ART. 223

LABOR RELATIONS

Another established exception to the rule on exhaustion of administrative


remedies is one where the issue involved is a question of law. Such "question-oflaw" exception includes a situation where petitioner is invoking the applicability
of a Supreme Court ruling to the case at hand. Whether or not a precedent
applies to a subsequent case is a question of law because Supreme Court rulings
form part of the country's legal system.
Nonetheless, it is obvious that the High Court does not relish skipping the
filing of a motion for reconsideration. Certiorari is not a shield from the adverse
consequences of an omission to file the required motion for reconsideration.
The petitioners may not arrogate to themselves the determination of whether
a motion for reconsideration is necessary or not. To dispense with a motion for
reconsideration, there must be a concrete, compelling and valid reason for the
failure to comply with the requirement.
1

Despite the jurisprudence insisting on exhaustion of administrative


remedies, the DOLE department order amending the rules implementing Book
V of the Code states in part: ' T h e decision of the Secretary shall become final
and executory after ten (10) days from receipt thereof by the parties. No motion
for reconsideration of the decision shall be entertained. "
5

19.

CERTIFICATE OF NON-FORUM SHOPPING

Administrative remedies must be exhausted, but forum shopping cannot


be resorted to. Forum shopping is the act or attempt to present the same dispute
to different adjudicators in the hope of securing a favorable ruling. It is scouting
around for a most sympathetic ear. It is not allowed because it mocks the basic
tenet that one dispute ought to be litigated only once in only one forum.
In one case, for instance, the petition had to be dismissed because of forum
shopping. In failing to state the pendency of a civil case or even the action before
the CA, the petitioners were engaged in a deliberate act of forum shopping. T h e
issues and causes of action involved in both actions revolve around the legality of
their dismissal. From the very same act of termination, petitioners seek damages
either from herein respondent which they claim unlawfully fired them, or failing
that, from respondent's officers whom they claim terminated them without the
sanction of the company. Both claims are contradictory, which underscores their
attempt to canvass for a friendly forum, namely, that if their claim is defeated in
the regular court, then they would attempt to prevail in the labor tribunal, or
vice versa.
'Cambronero, et al vs. NLRC, G.R. Nos. 93787-93, December 19, 1990
Resolution.
Ibid.
Article 8, Civil Code.
Metro Transit Organization vs. CA, et al, G.R. No. 142133, November 19,2002.
Sec. 21, Rule VIII, D.O. No. 40-03.
3

4
5

138

APPEAL

ART. 223

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


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

19.1 Certification of Nonforum Shopping Must be Made by Petitioner


Santos, et al vs. CA, Pepsi Cola Products, et al, G.R. No. 141947, July 5, 2001
It is true that insofar as verification is concerned, we have held that there is
substantial compliance if the same is executed by an attorney, it being presumed
that facts alleged by him are true to his knowledge and belief. However, the same
does not apply as regards the requirement of a certification against forum shopping.
Section 3, Rule 46, of the 1997 Rules of Civil Procedure explicitly requires
x x x x The petitioner shall also submit together with the petition a sworn
certification that he has not theretofore commenced any other action involving
the same issues in the Supreme Court, the Court of Appeals or different divisions
thereof, or any other tribunal or agency; if there is such other action or proceeding,
he must state the status of the same; and if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the Supreme Court, the
Court of Appeals, or different divisions thereof, or any other tribunal or agency, he
undertakes to promptly inform the aforesaid courts and other tribunal or agency
thereof within five (5) days therefrom x x x x
It is clear from the above-quoted provision that the certification must be made
by petitioner himself and not by counsel since it is petitioner who is in the best position to
know whether he has previously commenced any similar action involving the same
issues in any other tribunal or agency.
Petitioners argue that while it may be true that they are in the best position
to know whether they have commenced an action or not, this information may
^anuto, Jr. and De la Corte vs. National Labor Relations Commission and
Colgate Palmolive Philippines, Inc., G.R. No. 110914, June 28, 2001.
139

LABOR RELATIONS

ART. 223

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


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

20.

DISPOSITION BY THE COURT OF APPEALS

The Supreme Court [or the Court of Appeals, per St. Martin case, discussed
above] is clothed with ample authority to review matters, even if they are not
assigned as errors in the appeal, if it finds that its consideration is necessary in
arriving at a just decision of the case.
1

20.1 Remand
Where the appraisal of the NLRC and the Labor Arbiter lacks precision,
giving rise to an ambiguity that lends plausibility to a petition for certiorari, and
there are matters regarding the quitclaim that still need to be clarified, equity calls
for a remand of the case to the NLRC for an ascertainment of greater detail of
the circumstances surrounding the execution of the quitclaim. It would be unfair
if the Supreme Court [or Court of Appeals] would disregard the quitclaim and
thus enable respondents to unjustly benefit if indeed they signed the quitclaim.
2

20.2 Dismissal of Appeal


Even if the appeal filed by respondents in the National Labor Relations
Commission is still pending, if the Supreme Court [or Court of Appeals] in a
petition for certiorari finds the facts on record substantially sufficient for it to rule
that the appeal was filed late and is patently dilatory and would serve no other
purpose except to delay and frustrate justice, it may be constrained under the
circumstances to order the National Labor Relations Commission to dismiss the
appeal of respondents.
3

Lim vs. National Labor Relations Commission, G.R. No. 79907; Sweet Lines
vs. National Labor Relations Commission, G.R. No. 79975, March 16, 1989.
industrial Timber Corporation vs. National Labor Relations Commission, G.R.
No. 83616, January 20, 1989.
Bongay vs. Martinez, G.R. No. 77188, March 14, 1988.
3

140

APPEAL

ART. 223

20.S Findings of Facts Generally Final


As a general rule, the findings of administrative agencies are accorded
not only respect but even finality. This is especially true with respect to the
Department of Labor, which performs not only a statutory function but carries
out a constitutional mandate as well. T h e Supreme Court's [Court of Appeals']
jurisdiction, as a rule, is confined to cases of grave abuse of discretion. But for
certiorari to lie, there must be such arbitrary and whimsical exercise of power, or
that discretion was exercised despotically.
1

T h e doctrine that the findings of facts of the National Labor Relations


Commission are binding on the Supreme Court [or Court of Appeals], if
supported by substantial evidence, is well established. However, in the same way
that the findings of facts unsupported by substantial and credible evidence do not
bind the Supreme Court [or Court of Appeals], neither will it uphold erroneous
conclusions of the National Labor Relations Commission when it finds that the
latter committed grave abuse of discretion in reversing the decision of the labor
arbiter, especially if the findings of NLRC based on practically the same facts
established in the hearings before the arbiter are speculative and conjectural.
2

Judicial review by the Supreme Court on labor cases do not go so far as


to evaluate the sufficiency of the evidence upon which the Deputy Minister and
the Regional Director based their determinations but are limited to issues of
jurisdiction or grave abuse of discretion.
3

The issue of existence of an employer-employee relationship between the


parties is a question of fact, and the finding of the Labor Arbiter on this point
is entitled not only to respect but also the stamp of finality.
4

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

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

141

LABOR RELATIONS

ART. 223

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

20.5 Examples: Some Findings of Facts Reversed


It is wrong and clearly in grave abuse of discretion for the National Labor
Relations Commission to fail or refuse to take into account the fact - clearly
shown by the record and to which its attention had already been drawn - that the
appeal taken by the employee from the decision of the labor arbiter, dismissing
his complaint, was late, because it was perfected 12 days after service on him of
notice of the decision. T h e reglementary period for appeal fixed by the Labor
Code is ten days.
2

In another case, the labor arbiter found the dismissal of the employee
justified, hence, the company discontinued the payment of the employee's
salary. The employee objected on the ground that the discontinuance violated an
earlier agreement that the employee would be kept in the payroll until the case
was finally resolved by arbitration. On appeal the NLRC affirmed the arbiter's
decision, but at the same time ordered the company to continue paying the
employee's salary since the arbitration case was not yet over.
'Nicario vs. NLRC, Mancao Supermarket, Inc., et al., G.R. No. 125340,
September 17, 1998.
MAI Philippines, Inc. vs. National Labor Relations Commission, et al, G.R.
No. 73662, June 18, 1987.
2

142

APPEAL

ART. 223

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


The Court explained that the clause "pending final resolution of the case by
arbitration" should be limited only to the proceedings before the labor arbiter.
When the arbiter rendered his decision the case was considered finally resolved
by arbitration. T h e NLRC order was inconsistent with its affirmance of the labor
arbiter's decision upholding the validity of the employee's dismissal.
1

Similarly, it is grave abuse of discretion on the part of the National Labor


Relations Commission not to give weight to the claim that the petitioner is
an Adecor employee, in glossing over the fact that it is fully corroborated by
indubitable documents.
2

21.

FROM CA TO SC: ONLY QUESTION OF LAW, RULE 45

To appeal to the Supreme Court a judgment, final order or resolution of


the Court of Appeals, the proper remedy is a petition for review under Rule 45 of
the Rules of Court. Such petition for review on certiorari can raise only questions
of law. It must be filed within fifteen (15) days from notice of the judgment or
final order or resolution appealed from, or of the denial of the petitioner's
motion for new trial or reconsideration.
Where the appealing party failed to file the petition under Rule 45 within
the said fifteen (15) days, the petition for certiorari, in the nature of special civil
action, is not available. T h e special civil action of certiorari under Rule 65 cannot
be used as a substitute for an appeal under Rule 45 that the petitioner already
lost.
Emphatically, the Court said:
"This Court has often enough reminded members of the bench and bar
that a special civil action for certiorari under Rule 65 lies only when there is no
appeal nor plain, speedy and adequate remedy in the ordinary course of law.
Certiorari is not allowed when a party to a case fails to appeal a judgment or final
order despite the availability of that remedy. The remedies of appeal and certiorari
are mutually exclusive and not alternative or successive.
With the promulgation of the St. Martin ruling, most of the appealed labor
cases end up at the Court of Appeals because the highest Court entertains only
questions of law.
For instance, in the Metro Transit case, the dismissed employee was ordered
reinstated by the Labor Arbiter, which decision was upheld both by the NLRC
and the Court of Appeals. The employer brought the case to the Supreme Court
3

Philippine Airlines, Inc. vs. NLRC, G.R. No. 55159, December 22, 1989.
Jose vs. National Labor Relations Commission, G.R. No. 72588, October 15,

1986.
'People of die Phil. vs. The Honorable Sandiganbayan, G.R. No. 156394, January
21,2005.
143

LABOR RELATIONS

ART. 223

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


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

Faster Disposition of Appealed Cases


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

Justice Artemio V. Panganiban


"An Introduction to the Supreme Court"
The Lawyers Review
October 31,1998, p. 74
'St. Martin Funeral Homes vs. NLRC, G.R. No. 130866, September 16,1998,
per J. Regalado.
According to the hierarchy of courts, when two or more of them have
concurrent jurisdiction, the lower court shall have initial cognizance of the suit.
RA 8246, signed into law on December 21, 1996, created additional CA
Divisions, thereby increasing the number of CA justices to 69.
(Note: The footnotes, renumbered here, are in the original. CAA)
2

144

APPEAL

ART. 224

The Supreme Court, quoting Sec. 1, Rule 45, stressed that in a petition
for review on certiorari only questions of law may be raised. The court cannot
reexamine the probative value of the evidence, unless the appreciation of the
evidence is glaringly erroneous. T h e petitioner having failed to do this, the
petition on certiorari had to be dismissed. T h e Court (through Mr. Justice Carpio)
went on: ' T h e findings of the Labor Arbiter, when affirmed by the NLRC and
the Court of Appeals, are binding on this Court unless patently erroneous. In
the instant case, we find no patent error. It is not the function of this Court to
analyze or weigh all over again the evidence already considered in the proceeding
below. T h e jurisdiction of this Court is limited only to reviewing errors of law
that may have been committed by the lower courts.
ART. 2 2 4 . EXECUTION OF DECISIONS, ORDERS, OR AWARDS
T h e Secretary of L a b o r and Employment or any Regional Director, the
Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may,
motu proprio or on motion of any interested party, issue a writ of execution on
a judgment within five ( 5 ) years from the date it becomes final and executory,
requiring a sheriff or a duly deputized officer to execute or enforce final
decisions, orders or awards of the Secretary of L a b o r and Employment or
regional director, the Commission, the L a b o r Arbiter or med-arbiter, or
voluntary arbitrators. In any case, it shall be the duty of the responsible officer
to separately furnish immediately the counsels of record and the parties
with copies of said decisions, orders or awards. Failure to comply with the
duty prescribed herein shall subject such responsible officer to appropriate
administrative sanctions.
(b)
T h e Secretary of Labor and Employment, and the Chairman of
the Commission may designate special sheriffs and take any measure under
existing laws to ensure compliance with their decisions, orders or awards and
those of Labor Arbiters and voluntary arbitrators, including the imposition
of administrative fines which shall not be less than P 5 0 0 . 0 0 nor more than
P10,000.00.
COMMENTS AND CASES
1.

EXECUTION
A writ of "Execution" is an order to carry out, to implement, a final
judgment.
Under Article 224, a writ of execution may be issued by the following
officials for the final decisions, orders or awards promulgated by them:
a)
Secretary of Labor and Employment;
'Metro Transit Orgn., Inc., et. al. vs. The Court of Appeals, et al., G.R. No.
142133, November 19, 2002.
145

ART. 224

LABOR RELATIONS

b)

DOLE Regional Director;

c)
d)
e)

NLRC;
Labor Arbiter;
Med-Arbiter;

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

1.1

Both Party and Counsel Should Be Notified

T h e present article, specifically pertaining to execution of judgment,


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

1.2

Article 224 is Execution, Not Appeal, Procedure

Article 224 of the Labor Code is about execution; it does not govern the
procedure for filing a petition for certiorari with the Court of Appeals from the
decision of the NLRC but rather, it refers to the execution of "final decisions,
orders or awards" and requires the sheriff or a duly deputized officer to furnish
both the parties and their counsel with copies of the decision or award for that
purpose. T h e period or manner of "appeal" from the NLRC to the Court of
Appeals is governed by Rule 65 [not this Article 224] pursuant to the ruling in
the case of St. Martin Funeral Homes vs. NLRC.
2.

EXECUTION UPON FINALITY OF DECISION OR ORDER

a)
A writ of execution may be issued moto proprio or on motion, upon a
decision that finally disposes of the action or proceedings after the parties and
their counsels or authorized representatives are furnished with copies of the
decision or order in accordance with these Rules, but only after the expiration
'Sec. 1, Rule XXIV, D.O. No. 40-03.
PNOC Dockyard and Engineering Corp. vs. NLRC, et al, G.R. No. 118223,
June 26, 1998.
2

146

APPEAL

ART. 224

of the period to appeal if no appeal has been filed, as shown by the certificate
of finality. If an appeal has been filed, a writ of execution may be issued when
there is an entry of judgment as provided for in Section 14 of Rule VII.
b) No motion for execution shall be entertained nor a writ of execution
be issued unless the Labor Arbiter or the Commission is in possession of the
records of the case which shall include an entry of judgment if the case was
appealed; except that, as provided for in Section 14 of Rule V and Section 6 of
this Rule, and in those cases where partial execution is allowed by law, the Labor
Arbiter shall retain duplicate original copies of the decision to be implemented
and proof of services thereof for the purpose of immediate enforcement.
1

Pre-execution Conference. Within two (2) working days from receipt


of a motion for the issuance of a writ of execution, and subject to Section 1,
paragraph (b) of this Rule, the Labor Arbiter shall schedule a pre-execution
conference or hearing to thresh out matters relevant to execution, including
the computation of the award.
2

Form and Contents of a Writ of Execution. The writ of execution must be


issued in the name of the Republic of the Philippines signed by the Commission
or Labor Arbiter requiring the Sheriff to execute the decision, order, or award
of the Commission or Labor Arbiter, and must contain the dispositive portion
thereof, the amount, if any, to be demanded, and all lawful fees to be collected
from the losing party or any other person required by law to obey the same.
3

Computation During Execution. Where further computation of the


award in the decision, resolution or order is necessary during the course of
the execution proceedings, no writ of execution shall be issued until after the
computation has been approved by the Labor Arbiter in an order issued after
the parties have been duly notified and heard on the matter.
4

Execution of Monetary Judgment.


a)
Immediate payment on demand. T h e Sheriff shall enforce a
monetary judgment by demanding the immediate payment of the full amount
stated in the writ of execution and all lawful fees from the losing party or any
other person required by law to obey the same.
b)
In the event of failure or refusal of the losing party to pay the
judgment award, the Sheriff shall immediately proceed against the cash deposit
or surety bond posted by the losing party, if any;
c)
If the bonding company refuses to comply with the writ of execution,
then its president and officers or authorized representatives shall be cited for
^ e c . 1, Rule XI, NLRC Revised Rules of Procedure, 2005.
Sec. 2, Ibid.
Sec. 3, Ibid.
Sec. 4, Ibid.

147

LABOR RELATIONS

ART. 224

contempt, and the bonding company shall be barred from transacting business
with the Commission;
d)
Should the cash deposit or surety bond be insufficient, or in case
the surety bond cannot be proceeded against for any reason, the Sheriff shall,
within five (5) days from demand, execute the monetary judgment by levying on
the property, personal and real, of the losing party not exempt from execution,
sufficient to cover the judgment award, which may be disposed of for value at a
public auction to the highest bidder.
e)
Proceeds of execution shall be deposited with the Cashier of the
concerned Division or Regional Arbitration Branch, or with an authorized
depositary bank. Where payment is made in the form of a check, the same shall
be payable to the Commission.
1

Enforcement of Writ of Execution. In executing a decision, resolution


or order, the Sheriff, or other authorized officer acting as Sheriff of the
Commission, shall be guided strictly by these Rules, and by the Manual on
Execution of Judgment, which shall form part of these Rules. In the absence
of applicable rules, the Rules of Court, as amended, shall be applied in a
suppletory manner.
2

[Execution of an order to reinstate an illegally dismissed employee is taken up in the


comments under Article 282]
Execution by Motion or by Independent Action. A decision or order may
be executed on motion within five (5) years from the date it becomes final and
executory. After the lapse of such period, the judgment shall become dormant,
and may only be enforced by an independent action within a period of ten (10)
years from date of its finality.
3

Effect of Petition for Certiorari on Execution. A petition for certiorari


with the Court of Appeals or the Supreme Court shall not stay the execution of
the assailed decision unless a restraining order is issued by said courts.
Resolution of Motion to Quash. T h e mere filing of a motion to quash
shall not stay execution proceedings. A motion to quash shall be resolved by the
Labor Arbiter within ten (10) working days from submission of said motion for
resolution.
3.

APPEAL ON THE EXECUTION OF DECISION; SUPERVENING EVENTS

Generally, once a judgment becomes final and executory, it can no longer


be disturbed, altered or modified. T h e principle, however, admits of exceptions
as in cases where, because of supervening events, it becomes imperative, in the
higher interest of justice, to direct its modification in order to harmonize the
Sec. 5, Rule XI, NLRC Revised Rules of Procedure, 2005.
Sec. 7, Ibid.
'Sec. 8, Ibid.

148

APPEAL

ART. 224

disposition with the prevailing circumstances or whenever it is necessary to


accomplish the aims of justice.
1

Although the decision of the L a b o r Arbiter has b e c o m e final, the


correctness of the execution of the decision may be appealed to and reviewed
by the NLRC.
Abbott vs. National Labor Relations Commission, 145 SCRA 206, October 27,
1986
A judgment becomes final and executory by operation of law, not by judicial
declaration. Accordingly, finality of judgment becomes a fact upon the lapse of the
reglementary period of appeal if no appeal is perfected. In such a situation, the
prevailing party is entitled as a matter of right to a writ of execution, and issuance
thereof is a ministerial duty, compellable by mandamus.
In the instant case, however, what is sought to be reviewed is not the decision
itself but the manner of its execution. There is a big difference. While it is true that
the decision itself has become final and executory and so can no longer be challenged,
there is no question either that it must be enforced in accordance with its terms and
conditions. Any deviation therefrom can be the subject of a proper appeal.
The fact alone that the labor arbiter, in recomputing the award in the
original decision, raised it from the amount of P98,883.80 to the astonishing sum of
PI ,372,451.55 is justification enough for the respondent NLRC to issue the challenged
temporary restraining order. In the meantime anyway, the petitioners are protected
by the supersedeas bond put up by the respondent in the amount of the recomputed
award.
We hold therefore that the NLRC has the authority to look into the correctness
of the execution of the decision in this case and to consider die supervening events
that may affect such execution, like the possible off-set of the petitioners' advances
or debts against their total claim, their discontinuance from employment by
abandonment or resignation, and other relevant developments.
Pacific Mills, Inc. vs. National Labor Relations Commission, et al., G.R. No. 88864,
January 17, 1990
Facts: The case of Pacific Mills, Inc. vs. National Labor Relations Commission, et
al., G.R. No. 79535, was dismissed by the Supreme Court on August 3, 1988. The
entry of judgment having been effected, the NLRC in the process of execution of
the decision of the labor arbiter made a computation of the award to the private
respondents in the amount of P680,037.30 on April 28, 1989. On May 5, 1989 the
NLRC issued a partial writ of execution for P655,527.30.
On May 9, 1989 petitioner [employer] filed a motion to stay execution/
reconsideration citing supervening events that affect the computation of the award
as follows:
^alindez, et al. vs. Rural Bank of Llanera, Inc., et al, G.R. No. 84975; Rural
Bank of Llanera, Inc. vs. Department of Labor, etc., et al, July 5, 1989.
149

ART. 224

LABOR RELATIONS

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

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


INJUNCTION AGAINST NLRC

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

'Nova vs. Judge Sancho Dames II, Regional Trial Court, Branch 38, Daet,
Camarines Norte, AM. No. RTJ-00-1574, March 28, 2001.
150

APPEAL

ART. 224

Precedents abound confirming the rule that said courts have no jurisdiction
to act on labor cases or various incidents arising therefrom, including the
execution of decisions, awards or order. Jurisdiction to try and adjudicate such
cases pertains exclusively to the proper labor official concerned under the
Department of Labor and Employment. To hold otherwise is to sanction split
jurisdiction which is obnoxious to the orderly administration of justice.
1

Petitioner failed to realize that by filing its third-party claim with the deputy
sheriff, it submitted itself to the jurisdiction of the Commission acting through
the Labor Arbiter. It failed to perceive the fact that what it is really controverting
is the decision of the Labor Arbiter and not that of the deputy sheriff in executing
said order issued as a consequence of the decision rendered.
2

Jurisdiction once acquired is not lost upon the instance of the parties
but continues until the case is terminated. Whatever irregularities attended
the issuance and execution of the alias writ of execution should be referred to
the same administrative tribunal which rendered the decision. This is because
any court which issued a writ of execution has the inherent power, for the
advancement of justice, to correct errors of its ministerial officers and to control
its own processes.
3

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


Remedies of Third Party Claimant; the Yupangco Case
In a long line of cases, the Court has ruled that the power of the Court, or
the NLRC, for that matter, to execute its judgment extends only to properties
unquestionably belonging to the judgment debtor. Therefore, if the property
under levy does not belong to the judgment debtor in the NLRC case, it could not
be validly levied upon by the sheriff for the satisfaction of the judgment therein.
Even upon a mere prima facie showing of ownership by the third-party claimant, if
the third-party claim does not involve nor grows out of, a labor dispute, a separate
action for injunctive relief against such levy may be maintained in court.
4

Under the Revised Rules of the NLRC (Section 4, Rule I X ) [Sec. 7, Rule
VIII of the NLRC Rules, 2 0 0 2 ] , the sheriff of the Commission, or other officer
acting as such, must "... be guided strictly by the Sheriffs Manual which shall
^eltaventures Resources vs. Hon. Fernando Cabato, G.R. No. 118216, March
9, 2000.
Ibid.
Ibid.
Santos vs. Bayhon, 199 SCRA 525; Special Servicing Co. vs. Centro La Paz,
121 SCRA 748; New Owners/Management of TML Garments, Inc. vs. Zaragosa, 170
SCRA 563.
Penalosa vs. Villanueva, 177 SCRA 77, citing the case of National Mines and
Allied Workers' Union vs. Vera, 133 SCRA 259. Co Tuan, Samuel Ang, et al vs. NLRC
and CLUP, G.R. No. 117232, April 22, 1998.
4

151

LABOR RELATIONS

ART. 224

form part of these Rules"; and under Sec. 2, Rule VI of the said Manual, when
a third party claims the property subject of the execution and files an affidavit
thereto, the Labor Arbiter shall "... conduct a hearing x x x and resolve the
validity of the claim..."
Indeed, there appears to be an inconsistency between the said rule and the
decided cases. However, such Rule prescribes only the procedure to be followed
by the sheriff (or the arbiter or officer of the Commission) if the levied property
is claimed by any person other than the losing party or his agent. It applies only
to the sheriff and such other officers; and only when the third-party claimant
chooses to file his claim with the Labor Arbiter or the NLRC. It does not limit
the procedure to be followed by the third-party claimant himself.
1

Yupangco Cotton Mills, Inc. vs. Court of Appeals et al., G.R. No. 126322, January
16, 2002
A third-party whose property has been levied upon by a sheriff to enforce a
decision against a judgment debtor is afforded with several alternative remedies
to protect its interests. The third party may avail himself of alternative remedies
cumulatively, and one will not preclude the third party from availing himself of the
other alternative remedies in the event he failed in the remedy first availed of.
Thus, a third party may avail himself of the following alternative remedies:
a)
File a third-party claim with the sheriff or the Labor Arbiter, and
b)
If the third-party claim is denied, the third party may appeal the
denial to the NLRC.
Even if a third party claim was denied, a third party may still file a proper action
with a competent court to recover ownership of the property illegally seized by the
sheriff. This finds support in Section 17 (now 16), Rule 39, Revised Rules of Court,
to wit:
"SEC. 17 (now 16), Proceedings where property claimed by third person.
If property levied on is claimed by any person other than the judgment
debtor or his agent, and such person makes an affidavit of his title thereto or
right to the possession thereof, stating the grounds of such right or tide, and
serve the same upon the officer making the levy, and a copy thereof upon the
judgment creditor, the officer shall not be bound to keep the property, unless
such judgment creditor or his agent, on demand of the officer, indemnify the
officer against such claim by a bond in a sum not greater than the value of the
property levied on. In case of disagreement as to such value, the same shall be
determined by the court issuing the writ of execution.
"The officer is not liable for damages, for the taking or keeping of the
property, to any third-party claimant unless a claim is made by the latter and
^efialosa vs. Villanueva, 177 SCRA 77, citing the case of National Mines and
Allied Workers' Union vs. Vera, 133 SCRA 259. Co Tuan, Samuel Ang, et al vs. NLRC
and CLUP, G.R. No. 117232, April 22, 1998.
Ibid.
152

APPEAL

ART. 224

unless an action for damages is brought by him against die officer within one
hundred twenty (120) days from die date of the filing of the bond. But nothing
herein contained shall prevent such claimant or any third person from vindicating his
claim to the property by any proper action.
"When the party in whose favor the writ of execution runs, is the Republic
of the Philippines, or any officer duly representing it, the filing of such bond
shall not be required, and in case the sheriff or levying officer is sued for
damages as a result of the levy, he shall be represented by the Solicitor General
and if held liable therefore, the actual damages adjudged by the court shall be
paid by die National Treasurer out of such funds as may be appropriated for
the purpose." (Italics ours)
In Sy vs. Discaya, we ruled that:
"The right of a third-party claimant to file an independent action to
vindicate his claim of ownership over the properties seized is reserved by
Section 17 (now 16), Rule 39 of the Rules of Court, x x x :
"xxx
xxx
xxx
"As held in the case of Ong vs. Tating et al, construing the aforecited
rule, a third person whose property was seized by a sheriff to answer for the
obligation of a judgment debtor may invoke the supervisory power of the court
which authorized such execution. Upon due application by the third person and
after summary hearing, the court may command that the property be released
from the mistaken levy and restored to the rightful owner or possessor. What
said court do in these instances, however, is limited to a determination of whether the
sheriff has acted rightly or wrongly in the performance of his duties in the execution of
judgment, more specifically, if he has indeed taken hold of property not belonging to the
judgment debtor. The court does not and cannot pass upon the question of title
to the property, with any character of finality. It can treat of the matter only
insofar as may be necessary to decide if the sheriff has acted correctly or not.
It can require the sheriff to restore the property to the claimant's possession if
warranted by the evidence. However, if the claimant's proof do not persuade
die court of the validity of his title or right of possession thereto, the claim will
be denied.
"Independent of the above-stated recourse, a third-party claimant may
also avail of the remedy known as 'terceria,* provided in Section 17 (now 16),
Rule 39, by serving on the officer making the levy an affidavit of his tide and
a copy thereof upon the judgment creditor. The officer shall not be bound to
keep the property, unless such judgment creditor or his agent, on demand of
the officer, indemnifies die officer against such claim by a bond in a sum not
greater than the value of die property levied on. An action for damages may
be brought against die sheriff within one hundred twenty (120) days from the
filing of the bond.
"The aforesaid remedies are nevertheless without prejudice to 'any proper action'
that a third party claimant may deem suitable to vindicate his claim to the property. Such
153

ART. 224

LABOR RELATIONS

a 'proper action' is, obviously, entirely distinct from that explicitly prescribed in
Section 17 of Rule 39, which is an action for damages brought by a third-party
claimant against the officer within one hundred twenty (120) days from the
date of the filing of the bond for the taking or keeping of the property subject
of the 'terceria.'
"Quite obviously, too, this 'proper action' would have for its object the recovery of
ownership or possession of the property seized by the sheriff as well as damages resulting
from the allegedly wrongful seizure and detention thereof despite the third-party claim; and
it may be brought against the sheriff and such other parties as may be alleged
to have colluded with him in the supposedly wrongful execution proceedings,
such as the judgment creditor himself. Such 'proper action, 'as above pointed out,
is and should be an entirely separate and distinct action from that in which execution
has issued, if instituted by a stranger to the latter suit.
'The remedies above mentioned are cumulative and may be resorted to
by a third-party claimant independent of or separately from and without need
of availing of the others. If a third-party claimant opted to file a proper action to
vindicate his claim of ownership, he must institute an action, distinct and separate from
that in which the judgment is being enforced, with the court of competent jurisdiction
even before or without need of filing a claim in the court which issued the writ, the latter
not being a condition sine qua non for the former. In such proper action, the validity
and sufficiency of the title of the third-party claimant will be resolved and a
writ of preliminary injunction against the sheriff may be issued." (Emphasis
and italics ours.)
In light of the above, the filing of a third-party claim with the Labor Arbiter
and the NLRC did not preclude the petitioner from filing a subsequent action for
recovery of property and damages with the Regional Trial Court. And, the institution
of such complaint will not make petitioner guilty of forum shopping.
4.2

RTC Injunction against Labor Arbiter or NLRC, When Allowed

In the same Yupangco case, the Court ruled that the regional trial court
where the reinvindicatory action is filed can issue an injunction or temporary
restraining order against the execution ordered by a labor arbiter or the NLRC.
Yupangco Cotton Mills, Inc. vs. Court of Appeals, et al, G.R. No. 126322, January
16, 2002
In Santos vs. Baylon, wherein Labor Arbiter Ceferina Diosana rendered a
decision in NLRC NCR Case No. 1-313-85 in favor of Kamapi, the NLRC affirmed
the decision. Thereafter, Kamapi obtained a writ of execution against the properties
of Poly-Plastic Products or Anthony Ching. However, respondent Priscilla Carrera
filed a third-party claim alleging that Anthony Ching had sold the property to her.
Nevertheless, upon posting by the judgment creditor of an indemnity bond, die NLRC
Sheriff proceeded with the public auction sale. Consequently, respondent Carrera
filed with Regional Trial Court, Manila an action to recover the levied property
and obtained a temporary restraining order against Labor Arbiter Diosana and the
154

APPEAL

ART. 224

NLRC Sheriff from issuing a certificate of sale over the levied property. Eventually,
Labor Arbiter Santos issued an order allowing the execution to proceed against the
property of Poly-Plastic Products. Also, Labor Arbiter Santos and the NLRC Sheriff
filed a motion to dismiss the civil case instituted by respondent Carrera on the
ground that the Regional Trial Court did not have jurisdiction over the labor case.
The trial court issued an order enjoining the enforcement of the writ of execution
over the properties claimed by respondent Carrera pending the determination of the
validity of the sale made in her favor by the judgment debtor Poly-Plastic Products
and Anthony Ching.
In dismissing the petition for certiorari filed by Labor Arbiter Santos, we ruled
that:
x x x . The power of the NLRC to execute its judgments extends only to
properties unquestionably belonging to the judgment debtor (Special Servicing
Corp. vs. Centra La Paz, 121 SCRA 748.)
"The general rule that no court has the power to interfere by injunction
with the judgments or decrees of another court with concurrent or coordinate
jurisdiction possessing equal power to grant injunctive relief, applies only when
no third-party claimant is involved (Traders Royal Bank vs. Intermediate Appellate
Court, 133 SCRA 141 [1984]). When a third-party, or a stranger to the action, asserts
a claim over the property levied upon, the claimant may vindicate his claim by an
independent action in the proper civil court which may stop the execution of the judgment
on property not belonging to the judgment debtor. " (Italics ours)
In Consolidated Bank and Trust Corp. vs. Court of Appeals, 193 SCRA 158 [1991],
we ruled that:
"The well-settled doctrine is that a 'proper levy' is indispensable to a valid
sale on execution. A sale unless preceded by a valid levy is void. Therefore,
since there was no sufficient levy on the execution in question, the private
respondent did not take any title to the properties sold thereunder x x x .
"A person other than the judgment debtor who claims ownership or right over the
levied properties is not precluded, however, from taking other legal remedies. " (Italics
ours)
Jurisprudence is likewise replete with rulings that since the third-party claimant
is not one of the parties to the action, he could not, strictly speaking, appeal from the
order denying his claim, but should file a separate reinvindicatory action against the
execution creditor or the purchaser of the property after the sale at public auction,
or a complaint for damages against the bond filed by the judgment creditor in favor
of the sheriff.
And in Lorenzana vs. Cayetano, we ruled that:
'The rights of a third-party claimant should not be decided in the action
where the third-party claim has been presented, but in a separate action to
be instituted by the third person. The appeal that should be interposed if the
term 'appeal' may properly be employed, is a separate reinvindicatory action
against the execution creditor or the purchaser of the property after die sale
155

ART. 224

LABOR RELATIONS

against the execution creditor or the purchaser of the property after the sale
at public auction, or complaint for damages to be charged against the bond
filed by the judgment creditor in favor of the sheriff. Such reinvindicatory action
is reserved to the third-party claimant."
A separate civil action for recovery of ownership of the property would
not constitute interference with the powers or processes of the Arbiter and the
NLRC which rendered the judgment to enforce and execute upon the levied
properties. The property levied upon being that of a stranger is not subject to
levy. Thus, a separate action for recovery, upon a claim and prima facie showing
of ownership by the petitioner, cannot be considered as interference.
4.3 Third Party Claim
The NLRC Rules of Procedure, revised in 2005, reads: "A third party claim
shall be filed within five (5) days from the last day of posting or publication of
the notice of execution sale; otherwise the claim shall be forever barred. T h e
third party claimant shall execute an affidavit stating his title to the property
or right to possession thereof with supporting evidence, and shall file the same
with the Sheriff and the Commission or Labor Arbiter who issued the writ of
execution. Upon receipt of the third party claim, all proceedings, with respect
to the execution of the property subject of such claim, shall automatically be
suspended. The Labor Arbiter who issued the writ may require the third party
claimant to adduce additional evidence in support of his third party claim and to
post a cash or surety bond equivalent to the amount of his claim, as provided for
in Section 6 of Rule VI, without prejudice to the posting by the prevailing party
of a supersedeas bond in an amount equivalent to that posted by the third party
claimant. T h e Labor Arbiter shall resolve the propriety of such third party claim
within ten (10) working days from submission of said claim for resolution."
1

4.4 Simulated Sale, Void Ab Initio


Tanongon vs. Samson, et al, G.R. No. 140889, May 9, 2002
Facts: Four employees won in their illegal dismissal case against their employer.
In due time the Labor Arbiter issued a writ of execution. When the sheriff levied
upon a tanker purportedly belonging to the employer, petitioner Tanongon filed a
third-party claim, alleging that he was the owner of the tanker because it had been
sold to her.
Can the execution proceed?
Ruling: The CA correctly ruled that the act of [employer] Olizon was a "cavalier
attempt to evade payment of the judgment debt." She obviously got word of die
issuance of the Writ and disposed of the tanker to prevent its sale on execution.
Despite knowledge of these antecedents, petitioner bought the tanker barely ten days
before it was levied upon on August 8,1997. It is not only the proximity in time that
Sec. 12, Rule XI, NLRC Revised Rules of Procedure, 2005.
156

APPEAL

ART. 225

supports this finding. It is also more than coincidental that the purchase price for the
tanker was PI, 100,000.00, while Olizon's judgment debt to respondents amounted
to PI,192,422.55. Under Article 1387 of the Civil Code, alienations by onerous title
are presumed to be fraudulent when done by persons against whom some judgment
has been rendered or some writ of attachment issued in any instance.
The appellate court ruled further that the disputed contract was not merely
rescissible; it was simulated or fictitious and, thus, void ab initio. We agree with the
Court of Appeals.
A third-party claim on a levied property does not automatically prevent
execution. When a third-party claim is filed, the sheriff is not bound to proceed with
the levy of the property unless the judgment creditor posts an indemnity bond. Where
the bond is filed, the remedy of the third-party claimant is to file an independent
reinvindicatory action against the judgment creditor or the purchaser of the property at
public auction. The NLRC should not have automatically lifted the levy and restrained
execution, just because a third-party claim had been filed.
Further, judicial rescission is not necessary in the case at bar. Petitioner's
claim of ownership over the disputed tanker is not supported by the evidence on
record. The Maritime Industry Authority (Marina) administrator wrote the parties
in two separate letters, which said that the registration of the disputed vessel under
petitioner's name had not been effected, and that the Certificates of Ownership and
Vessel Registry covering the motor tanker M/T Petron 7-CI had not been released.
Insofar as third persons like herein respondents were concerned, the ownership of
the disputed vessel remained with Olizon and CAYCO; thus, the CA correctly held
that the NLRC could proceed with the levy and the sale on execution.
ART. 2 2 5 . CONTEMPT POWERS OF THE SECRETARY OF LABOR
In the e x e r c i s e of his powers u n d e r this C o d e , the S e c r e t a r y of
Labor may hold any person in direct or indirect contempt and impose the
appropriate penalties therefor.

157

Title III
BUREAU OF LABOR RELATIONS'
Overview/Key Questions:
Box 7
1. What kinds of cases fall within BLR's jurisdiction?
2. May labor standards violations be settled by compromise?
How is this done?
3. May such compromise be valid if the agreement sets
terms lower than the statutory standards?
4. Where, when, and how is a CBA registered?
ART. 2 2 6 . BUREAU OF LABOR RELATIONS
T h e Bureau of L a b o r Relations and the L a b o r Relations Divisions
in the regional offices of the Department of L a b o r shall have original and
exclusive authority to act, at their own initiative or upon request of either
or both parties, on all inter-union and intra-union conflicts, and all disputes,
grievances or problems arising from or affecting labor-management relations
in all workplaces whether agricultural or nonagricultural, e x c e p t those
arising from the implementation or interpretation of collective bargaining
agreements which shall be the subject of grievance p r o c e d u r e a n d / o r
voluntary arbitration.
T h e Bureau shall have fifteen ( 1 5 ) working days to act on labor cases
before it, subject to extension by agreement of the parties.
C O M M E N T S AND CASES
1. BLR JURISDICTION AND FUNCTIONS
Legislative changes have so overtaken Article 226 that its present wording
has become partly obsolete. T h e Bureau of Labor Relations ( B L R ) no longer
handles "all" labor-management disputes; rather, its functions and jurisdiction
are largely confined to union matters, collective bargaining registry, and
labor education. Such is the effect of Executive Order No. 251 of 1987 which
transferred to the then newly-created National Conciliation and Mediation
Board (NCMB) the mediation, conciliation, and arbitration functions of BLR.
*See Executive Order No. 251 creating a National Conciliation and Mediation
Board which absorbed the conciliation, mediation and voluntary arbitration functions
of BLR, and Executive Order No. 126.

158

BUREAU OF LABOR RELATIONS

ART. 226

With similar effect, R.A. No. 6 7 1 5 , effective March 21, 1989, expanded and
enhanced the NLRC (including its labor arbiters) to make it the country's only
labor court, primarily responsible for settling labor-management disputes, as
already seen in the preceding chapter. T h e current functions and authority of
die BLR are those stated in Executive Order No. 292 or the 1987 Administrative
Code, as follows:
"Section 16. Bureau of Labor Relations. T h e Bureau of Labor
Relations shall set policies, standards, and procedures on the registration
and supervision of legitimate labor union activities including denial,
cancellation and revocation of labor union permits. It shall also set policies,
standards, and procedures relating to collective bargaining agreements,
and the examination of financial records of accounts of labor organizations
to determine compliance with relevant laws. T h e Bureau shall also
provide proper orientation to workers on their schemes and projects for
improvement of the standards of living of workers and their families.''
2.

ENTER-UNION AND INTRA-UNION DISPUTES; D.O. NO. 40-03


T h e B L R handles inter-and intra-union disputes.

"Inter-Union Dispute" refers to any conflict between and among legitimate


labor unions involving representation questions for purposes of collective
bargaining or to any other conflict or dispute between legitimate labor unions.
"Intra-Union Dispute" refers to any conflict between and among union
members, including grievances arising from any violation of the rights and
conditions of membership, violation of or disagreement over any provision
of the union's constitution and by-laws, or disputes arising from chartering or
affiliation of union.
Under Rule XI of D.O. No. 40-03 the long list of inter/intra-union disputes
include cancellation of union registration, audit of union funds, violation of
union members' rights and other disputes between unions or between a union
and its members. A complaint involving intra/inter-union dispute may be filed
by a legitimate labor organization (LLO) or its members. Where the issue,
however, involves the entire membership, the complaint shall be supported by
at least 3 0 % of the membership.
But D.O. No. 40-03 in the same Rule XI recognizes a second category called
"other related labor relations disputes" and these include any conflict between
a labor union and the employer or any individual, entity or group that is not a
labor organization or workers' association; such dispute include cancellation
of registration of a labor organization and interpleader. This category of labor
relations disputes, as the name suggests, is "related" to inter/intra union disputes
to differentiate it from other labor-management disputes, such as those under
Articles 128,129,217,261, or 263(g), which disputes are not handled by the BLR.
In inter/intra-union dispute the complaint may be filed by a union or union
159

ART. 226

LABOR RELATIONS

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


party-in-interest who is not necessarily a union or union member.
Whether the dispute be of the first or the second category, the complaint
or petition, if it involves an independent union (explained under Article 234), a
chartered local, or a workers' association, shall be filed with the DOLE Regional
Office where the labor organization is registered. But if the complaint involves
a federation or an industry/national union, it shall be filed with the B L R itself.
The procedures governing the hearing, decision, appeal and execution of
"inter/intra-union" cases and "related labor relations" cases are detailed in Rule
XI of D.O. No. 40-03. These serve as standard or common procedures because
they apply as well to other, but related, disputes under D.O. No. 40-03, such as
those on election of union officers, examination of union funds, and cancellation
of registration.
2.1

D.O. No. 40-03

At this point we make further introductory notes to D.O. No. 40-03.


It replaced D.O. No. 9, series of 1997 and took effect on March 1 5 , 2 0 0 3 .
It covers the entire subject of labor relations, except NLRC, and comprises
the entire Implementing Rules for B o o k V of the Labor Code. Aside from
supplying details of implementation, it also introduces new concepts such
as union merger or consolidation and multi-employer bargaining. Without
saying so, the Order appears to aim at the following specific objectives:
1.
to simplify the formation and registration of unions, especially
chartered locals
2.

to simplify and expedite the holding of certification elections

3.
to promote responsible unionism, particularly in administration of
union funds
4.

to authorize union merger, consolidation, and change of name

5.

to authorize deregistration of collective bargaining agreements

(For clear discussion, D.O. No. 40-03 will frequently be cited here although
it is reproduced entirely as part of the Implementing Rules in Part Two of this
volume.)
2.2

Effect of Pendency

Returning to the matter of inter/intra-union disputes, we note the provision


of D.O. No. 40-03 on status quo. It states:
Section 3. Effects of the filing/pendency of inter/intra-union and other related
labor relations disputes. T h e rights, relationships and obligations of the
parties litigants against each other and other parties-in-interest prior to the
institution of the petition shall continue to remain during the pendency of
the petition and until the date of finality of the decision rendered therein.
160

BUREAU OF LABOR RELATIONS

ART. 226

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


against each other and other parties-in-interest shall be governed by the
decision so ordered.
T h e filing or pendency of any inter/intra-union dispute and other
related labor relations dispute is not a prejudicial question to any petition
for certification election and shall not be a ground for the dismissal of
a petition for certification election or suspension of proceedings for
certification election.
2.3

Appeal

Also noteworthy are the provisions on appeal.


Section 16. Appeal. T h e decision of the Med-Arbiter and Regional
Director may be appealed to the Bureau by any of the parties within ten (10)
days from receipt thereof, copy furnished the opposing party. The decision
of the Bureau Director in the exercise of his/her original jurisdiction may
be appealed to the Office of the Secretary by any party within the same
period, copy furnished the opposing party.
T h e appeal shall be verified under oath and shall consist of a
memorandum of appeal specifically stating the grounds relied upon by
the appellant, with supporting arguments and evidence.
Section 17. Where to file appeal. T h e memorandum of appeal
shall be filed in the Regional Office or Bureau where the complaint or
petition originated. Within twenty-four (24) hours from receipt of the
memorandum of appeal, the Bureau or Regional Director shall cause
the transmittal thereof together with the entire records of the case to the
Office of the Secretary or the Bureau, as the case may be.
Section 18. Finality of Decision. Where no appeal is filed within the
ten-day period, the Bureau and Regional Director or Med-Arbiter, as the
case may be, shall enter the finality of the decision in the records of the
case and cause the immediate implementation thereof.
Section 19. Period to reply. A reply to the appeal may be filed by any
party to the complaint or petition within ten (10) days from receipt of the
memorandum of appeal. T h e reply shall be filed directly with the Bureau
or the Office of the Secretary, as the case may be.
Section 20. Decision of the Bureau/Office of the Secretary. The Bureau
Director or the Secretary, as the case may be, shall have twenty (20) days
from receipt of the entire records of the case within which to decide
the appeal. The filing of the memorandum of appeal from the decision
of the Med-Arbiter or Regional Director and Bureau Director stays the
implementation of the assailed decision.
The Bureau or Office of the Secretary may call the parties to a
clarificatory hearing in aid of its appellate jurisdiction.
161

ART. 226

LABOR RELATIONS

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


decision of the Bureau or the Office of the Secretary shall become final
and executory after ten (10) days from receipt thereof by the parties, unless
a motion for its reconsideration is filed by any party therein within the
same period. Only one (1) motion for reconsideration of the decision of
the Bureau or the Office of the Secretary in the exercise of their appellate
jurisdiction shall be allowed.
Section 22. Execution of decision. The decision of the Med-Arbiter
and Regional Director shall automatically be stayed pending appeal with
the Bureau. The decision of the Bureau in the exercise of its appellate
jurisdiction shall be immediately executory upon issuance of entry of final
judgment.
The decision of the Bureau in the exercise of its original jurisdiction
shall automatically be stayed pending appeal with the Office of the
Secretary. The decision of the Office of the Secretary shall be immediately
executory upon issuance of entry of final judgment.
3.

EXTENT OF BLR AUTHORITY

The BLR's authority has been described as broad and expansive. It was
ruled in a case that it may hold a referendum election among the members of a
union for the purpose of determining whether or not they desire to be affiliated
with a federation. "In the interest of industrial peace and for the promotion of
the salutary constitutional objective of social justice and protection to labor,
the competence of the governmental agencies entrusted with supervision over
disputes involving employers and employees as well as "inter-union and intraunion conflicts," is broad and expansive. Such broad authority over union
conflicts includes holding a referendum.
1

But the BLR has no authority to order a referendum among union members
to decide whether to expel or suspend union officers.
"If herein union officers (also petitioners) were guilty of the alleged acts
imputed against them, said public respondent [BLR] pursuant to Article 242
of the New Labor Code and in the light of our ruling in Duyag vs. Inciong, 98
SCRA 522, should have meted out the appropriate penalty on them, i.e., to expel
them from the Union, as prayed for, and not call for a referendum to decide the
issue."
2

Neither does the B L R have authority to forward a case to the Trade


Union Congress of the Philippines for arbitration and decision. Certification
election is the fairest and most effective way of determining which labor
'Litex Employees Association vs. Eduvala, 79 SCRA 88 [1977].
Kapisanan ng Manggagawang Pinagyakap [KMP] vs. Trajano, 134 SCRA 236
[1985].
2

162

BUREAU OF LABOR RELATIONS

ART. 227

organization can truly represent the working force. In the case at bar,
instead of ordering an election, respondent Director dismissed the appeal
of PLUM based on the decision of the TUCP, which the Court considers an
impairment of the freedom of the workers to voice out their choice of the
union to represent them.
"If there is any doubt as to the required number having been met, there
would be no better way than the holding of a certification election to ascertain
which union really commands the allegiance of the rank-and-file employees. If
the desired goal is for the execution of a collective bargaining contract to protect
the workers, then certification election is the most appropriate means to attain
said end."
1

4.

KATARUNGANG PAMBARANGAY, NOT APPLICABLE TO LABOR


DISPUTES

Presidential Decree No. 1508 applies only to courts of justice and not to
labor relations commissions or labor arbitrators' offices.
Article 226 of the Labor Code grants original and exclusive jurisdiction
over the conciliation and mediation of disputes, grievances or problems in the
regional offices of the Department of Labor and Employment. It is the said
Bureau and its divisions and not the Barangay Lupong Tagapayapa which are
vested by law with original and exclusive authority to conduct conciliation and
mediation proceedings on labor controversies before their endorsement to the
appropriate labor arbiter for adjudication. Note: Conciliation-mediation is now
done by NCMB, not BLR.
2

Requiring conciliation of labor disputes before the barangay courts


would defeat the very salutary purposes of the law. Instead of simplifying
labor proceedings designed at expeditious settlement of or referral to the
proper court or office to decide it finally, barangay conciliation would only
duplicate the conciliation proceedings and unduly delay the disposition of
the labor case. T h e suggested procedure would destroy the salutary purposes
of Presidential Decree 1508 and of the Labor Code of the Philippines. Labor
would then be given another unnecessary obstacle to hurdle. It does violence
to the constitutionally mandated policy of the State to afford full protection
to labor.
3

ART. 227. COMPROMISE AGREEMENTS


Any compromise settlement, including those involving labor standard
laws, voluntarily agreed upon by the parties with the assistance of the Bureau
or the regional office of the Department of Labor, shall be final and binding
'Plum Fed. of Industrial and Agrarian Workers vs. Noriel, 119 SCRA 299 [1982].
Montoya vs. Escayo, G.R. Nos. 82211-12, March 21, 1989.
Ibid.

163

ART- 227

LABOR RELATIONS

upon the parties. The National Labor Relations Commission or any court
shall not assume jurisdiction over issues involved therein except in case of
noncompliance thereof or if there is prima fade evidence that the settlement
was obtained through fraud, misrepresentation, or coercion.
COMMENTS AND CASES
1.

COMPROMISE AGREEMENTS
A fundamental policy of Philippine labor laws is to allow the parties to find
solutions to their own disputes. The Constitution, it may be recalled, commands
the State to promote the preferential use of voluntary modes in settling disputes
since the maintenance of industrial peace is a joint responsibility of workers and
employers. This is why the Constitution and the Code guarantee the right of
the parties to free bargaining and negotiations.
1

But between a j o b provider and a j o b seeker the playing field is starkly


uneven; thus, it is necessary for the law to provide workers the solidity of their own
organization and recourse to concerted action, if needed. Additional safeguard
is provided by DOLE's impartial and expert assistance.
T h e assistance of the B L R or the regional office of the D O L E in the
execution of a compromise settlement is generally a basic requirement; without it,
there can be no valid compromise settlement. Under Article 227, any compromise
settlement, even on labor standard matters, agreed to by the parties with the
assistance of the BLR or the regional office of the Department of Labor, is allowed.
The resulting agreement, if freely authored by them and not unconscionable or
otherwise unlawful, is legally binding. T h e NLRC or any court shall not assume
jurisdiction over issues involved therein, except:
a)

in case of noncompliance with the compromise agreement, or

b)
if there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.
Along the same line, the Court reiterated in 2005:
There are legitimate waivers that represent a voluntary and reasonable
settlement of a worker's claim which should be respected by the courts as
the law between the parties. Indeed, not all quitclaims are per se invalid or
against public policy, except (1) where there is clear proof that the waiver
was wangled from an unsuspecting or gullible person, or (2) where the
terms of settlement are unconscionable on their faces; in these cases, the
law will step in to annul the questionable transactions. Such quitclaims are
regarded as ineffective to bar the workers from claiming the full measure
of their legal rights. (Mindoro Lumber and Hardware vs. Baay, et al., G.R No.
158753, June 8, 2005.)
Article XIII, Sec. 3.
164

BUREAU OF LABOR RELATIONS

2.

ART. 227

FORMAL REQUIREMENTS OF COMPROMISE AGREEMENT


Union of Filipino Workers (UFW) vs. NLRC, et al, G.R. No. 90519, March 23,
1992

Compromise agreements involving labor standards cases must be reduced to


writing and signed in the presence of the Regional Director or his duly authorized
representative. Section 8, Rule II of the Rules on the Disposition of Labor Standards
Cases in the Regional Offices provides:
1

Section 8. Compromise Agreement. Should the parties arrive at an


agreement as to the whole or part of the dispute, said agreement shall be
reduced [in] writing and signed by the parties in the presence of the regional
director or his duly authorized representative.
The questioned "Acknowledgment Receipt and Undertaking" did not comply
with this requisite. It was not, therefore, duly executed.
Furthermore, Article 1878 of the Civil Code provides that a Special Power of
Attorney is required before an agent [including a legal counsel] can be authorized
to enter into a compromise. It reads:
Art. 1878. Special powers of attorney are necessary in the following cases:
xxx
(3) To compromise, to submit questions to arbitration, to renounce
the right to appeal from a judgment, to waive objections to the venue of an
action or to abandon a prescription already acquired.
3.

VALID COMPROMISE AND QUITCLAIM


Veloso and Liguaton vs. Department of Labor and Employment, Noahs Ark Sugar
Carriers, and Go, G.R. No. 87297, August 5, 1991
Facts: The complaint against the employer for unfair labor practices,
underpayment, and nonpayment of overtime, holiday, and other benefits was decided
in favor of the complainants.
The employer filed a motion for reconsideration and recomputation of the
amount awarded. While the motion was pending, Veloso (one of the complainants),
through his wife Connie, signed a Quitclaim and Release in consideration of
P25,000.00. His counsel manifested a "Satisfaction of Judgment." Petitioner Liguaton
filed also a motion to dismiss based on a Release and Quitclaim dated July 19, 1988,
in consideration of the sum of P20,000.00 which he acknowledged to have received
also from his employer.
But these releases were later impugned by the petitioners. They alleged that
they were constrained to sign the documents because of "extreme necessity."
They have come to the Supreme Court on certiorari to ask that the quitclaims
they signed be annulled.
'Atilano vs. De la Cruz, G.R. No. 82488, February 28, 1990.
165

ART. 227

LABOR RELATIONS

Their petition is based primarily on Pampanga Sugar Development Co., Inc. vs.
Court of Industrial Relations (114 SCRA 725) where it was held:
x x x while rights may be waived, the same must not be contrary to law,
public order, public policy, morals or good customs or prejudicial to a third
person with a right recognized by law. (Article 6, New Civil Code) x x x .
x x x The above-quoted provision renders the quitclaim agreements
void ab initio in their entirety since they obligated the workers concerned to
forego their benefits, while at the same time, exempted the [employer] from
any liability that it may choose to reject. This runs counter to Art. 22 of the
new Civil Code which provides that no one shall be unjustly enriched at the
expense of another.
Ruling: The law looks with disfavor upon quitclaims and releases by employees
who are inveigled or pressured into signing them by unscrupulous employers seeking
to evade their legal responsibilities. On the other hand, there are legitimate waivers
that represent a voluntary settlement of a laborer's claims that should be respected
by the courts as the law between the parties.
In the case at bar, the petitioners claim that they were forced to sign their
respective releases in favor of their employer, the herein private respondent, by
reason of their dire necessity. The latter, for its part, insists that the petitioner entered
into the compromise agreement freely and with open eyes and should not now be
permitted to reject their solemn commitments.
The Court has deliberated on the issues and the arguments of the parties and
finds that the petition must fail. The exception and not the rule shall be applied in
this case.
The case cited is not apropos because the quitclaims therein invoked were
secured by the employer after it had already lost in the lower court and were
subsequently rejected by this Court when the employer invoked it in a petition for
certiorari. By contrast, the quitclaims in the case before us were signed by the petitioners
while the motion for reconsideration was still pending in the DOLE, which finally
denied it on March 7,1989. Furthermore, the quitclaims in the cited case were entered
into without leave of the lower court whereas in the case at bar, the quitclaims were
made with the knowledge and approval of the DOLE, which declared in its order of
December 16, 1988, that "the compromise agreement/settlements dated April 15,
1988 and July 19, 1988 are hereby approved."
"Dire necessity" is not an acceptable ground for annulling the releases, especially since
it has not been shown that the employees had been forced to execute them. It has not even been
proven that the considerations for the quitclaims were unconscionably low and that the petitioners
had been tricked into accepting them. While it is true that the writ of execution dated
November 24, 1987, called for the collection of the amount of P46,267.92 each for
the petitioners, that amount was still subject to recomputation and modification as
the private respondent's motion for reconsideration was still pending before the
DOLE. The fact that the petitioners accepted the lower amounts would suggest
that the original award was exorbitant and they were apprehensive that it would be
adjusted and reduced. In any event, no deception has been established on the part of the
166

BUREAU OF LABOR RELATIONS

ART. 227

private respondent that would justify the annulment of the petitioners' quitclaims. [Italics
supplied]
The applicable law is Article 227 of the Labor Code.
The petitioners cannot renege on their agreement simply because they may now
feel they made a mistake in not awaiting the resolution of the private respondent's
motion for reconsideration and recomputation. The possibility that the original
award might have been affirmed does not justify the invalidation of the perfectly
valid compromise agreements they had entered into in good faith and with full
voluntariness. In General Rubber and Footwear Corp. vs. Drilon (169 SCRA 808), We "made
clear that the Court is not saying that accrued money claims can never be effectively
waived by workers and employees." As we later declared in Periquet vs. NLRC (186
SCRA 724 [1990]):
Not all waivers and quitclaims are invalid as against public policy. If the agreement
was voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms
of settlement are unquestionable on its face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making the waiver did so voluntarily, with
fall understanding of what he was doing, and the consideration for quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking. As in this
case. [Italics supplied]
4.

COMPROMISE SHOULD BE DULY AUTHORIZED


Jag & Haggar Jeans and Sportswear Corp. vs. NLRC, Lakas Manggagawa sa Jag,
et al., G.R. No. 105710, February 23,1995
The main issue to be resolved is whether or not the compromise agreement
entered into by petitioner and the Union (which constitute the majority) is binding
upon the other complainants (who constitute the minority).
Petitioner [employer] contends that the Compromise Agreement was deemed
ratified by the union members considering that 102 out of the 114 affected employees
already availed of and received the benefits under the said agreement and that private
respondents [employees] were represented in all stages of the proceedings without
them questioning the authority of their union officers and their counsel. Petitioner
cites the case of Betting Ushers Union (PLUM) vs.Jai-alai (101 Phil. 822 [1957]) wherein
we ruled that the "will of the majority should prevail over the minority" and which
ruling was reiterated in Dionela vs. Court of Industrial Relations Commission (190 SCRA
558 [1990].)
On the other hand, the complaining employees allege that for a compromise
agreement to be binding upon them, a special power of attorney or their express
consent was necessary for what was being waived or surrendered under the agreement
was their right to an employment.
The authority of attorneys to bind their clients is governed by Section 7, Rule
HI of the New Rules of Procedure of the National Labor Relations Commission,
which provides:
167

LABOR RELATIONS

ART. 227

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


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

We have ruled that " x x x when it comes to individual benefits accruing to


members of a union from a favorable final judgment of any court, the members
themselves become the real parties in interest and it is for them, rather than for the
union, to accept or reject individually the fruits of litigation."
2

The authority to compromise cannot lightly be presumed and should be


duly established by evidence.
3

In another case, the Court pointed out that respondent Prado executed
the compromise agreement not only on his own b e h a l f but on b e h a l f of
'General Rubber and Footwear Corporation vs. Drilon, 169 SCRA 808 [1989].
Esso Philippines, Inc. vs. Malayang Manggagawa sa Esso [MME], 75 SCRA 73
[1977].
General Rubber and Footwear Corporation vs. Drilon, supra; Kaisahan ng mga
Manggagawa sa La Campana vs. Sarmiento, 133 SCRA 220 [1984].
2

168

BUREAU OF LABOR RELATIONS

ART. 227

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


was duly authorized by respondent Tuscano to waive a part of the award given
her.
Under Article 1878 of the Civil Code of the Philippines, a special power
of attorney is necessary;
xxx

xxx

xxx

To effect novations which put an end to obligations already in


existence at the time the agency was constituted;
(3) T o compromise, x x x ;
(4) To waive any obligation gratuitously;
xxx
xxx
xxx
(2)

(15) Any other act of strict dominion.


Hence, being violative of existing law and jurisprudence, such settlement
cannot be given force and effect.
1

5.

RULINGS ON COMPROMISE SETTLEMENTS SUMMARIZED


Labor, et al. vs. NLRC and Gold City Commercial Complex, Inc., and Uy, G.R. No.
110388, September 14, 1995
Even if the petitioners [employees] did enter into a compromise settlement
with Gold City, such agreement would be valid and binding only if, per Veloso vs.
DOLE (200 SCRA 201 [ 1991 ] ) , quoting Periquet vs. National Labor Relations Commission
(186 SCRA 724 [1990]) the agreement was voluntarily entered into and represents
a reasonable settlement of the claims. In this case, as in Fuentes vs. NLRC (167 SCRA
767 [1988]), the amounts purportedly received by the petitioners were unreasonably
lower than what they were legally entitled to.
Furthermore, like in Pampanga Sugar Development Co. vs. CIR (114 SCRA 725
[1982]), the "compromise settlements" with the petitioners were not executed with
the assistance of the Bureau of Labor Relations or the Regional Office of the DOLE
pursuant to Article 227 of the Labor Code. The records do not disclose that the
assistance of such office was ever solicited. What Gold City did was merely to file with
the Regional Office of the DOLE in Davao City the vouchers purporting to show
payments of the alleged considerations of the "compromise settlements." Such filing
can by no stretch of the imagination be considered as the requisite assistance in the
execution of compromise settlements.
Even when a compromise agreement is approved by a labor arbiter, the
judgment cannot have the effect of res judicata upon persons who are not parties
to the compromise agreement. Res judicata, to apply, requires identity [i.e.,
sameness] of the parties. A judgment upon a compromise agreement has the
Loyola Security and Detective Agency vs. NLRC and Victor Prado and Matilde
Tuscano, G.R. No. 113287, May 9, 1995.
169

LABOR RELATIONS

ART. 227

force and effect of any other judgment, but is conclusive only upon the parties
thereto and their privies.
1

6.

WHEN TO EFFECT COMPROMISE: FINAL DECISION, NEGOTIABLE?

A compromise agreement may be effected at any stage of the proceedings


and even when there is already a final executory judgment. On this particular
point there was lingering doubt, but the doubt disappeared with the decision
in Magbanua vs. Uy> below.
The settlement of cases in court is authorized and even encouraged by
express provision of law. The law does not limit compromises to cases about to
be filed or cases already pending in courts. That a compromise may be effected
even after final judgment is impliedly authorized by Article 2040 (Civil Code).
2

There appears to be no limitation on the right to compromise, such as


the one claimed by petitioners to exist that there was already a final executory
judgment in favor of the petitioners. We can see no reason for limiting the right of
compromise to pending cases, excluding therefrom those already in the process
of execution.
3

In a 1991 decision, however, the Court rendered a contrary pronouncement.


After the court's decision ordering the reinstatement and payment of backwages
had become final and executory, the employees executed a release and quitclaim
in favor of the employer after receiving as backwages an amount much lesser
than the award. T h e Court voided the document even if it was approved by the
labor arbiter. Calling the approval "lamentable," the Court stressed that final
and executory judgment cannot be altered and neither can it be "negotiated."
Such act is contemptuous and if upheld, would render the very decision of the
Court meaningless. It manifested a willful disregard of the authority of the Court
as the final arbiter of cases brought to it.
4

6.1

T h e definitive Ruling: Magbanua vs. Uy

T h e Court faces squarely the question of compromise agreement over a


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

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

170

BUREAU OF LABOR RELATIONS

ART. 227

Magbanua, et al. vs. Uy, G.R. No. 161003, May 6, 2005 Facts: In September 1996 the Supreme Court affirmed an NLRC decision
awarding wage differentials, amounting to PI.4 million to eight complainant workers.
The decision having become final and executory, the employees on February 3,
1997 asked for a Writ of Execution of the decision. Before the Writ could be issued,
however, the parties apparently reached a compromise. Accordingly, both employer
and employees on May 19 filed a Manifestation, requesting that the case be terminated
"because the award had been complied with to the satisfaction of the complainants."
Attached to the Manifestation was a Joint Affidavit of the employer and the employees
affirming that each of the latter had received P40,000 from the employer.
Despite this signed affidavit, however, the employees on June 3 filed a Motion
for Issuance of a Writ of Execution of the September 1996 decision. Naturally, the
employer opposed the Motion. But the employees countered that they had received
only partial payment of the judgment award. Later in October 1997 six (6) of the
eight (8) complainants again filed a manifestation that they had received a total of
P320,000 from their employer for which reason they were requesting that their case
be considered closed.
On February 27, 1998 the Labor Arbiter, recognizing the compromise
agreement, denied the request for a writ of execution; instead he declared that the
cases were considered closed. But the employees did no* stop. They went up to the
NLRC which, in turn, sided with the employees, saying that a final and executory
judgment could no longer be altered and that quitclaims and releases are normally
frowned upon as contrary to public policy.
At the next level, the Court of Appeals reversed the NLRC. The CA
held that compromise agreements may be entered into even after a final
judgment. Thus, the employees' release of their employer's liability because
of the compromise agreement between them, was valid. This ruling, the
Supreme Court now says with finality, is correct, assuming that the agreement was
made knowingly and freely.
Ruling: Rights may be waived through a compromise agreement,
notwithstanding a final judgment that has already settled the rights of the contracting
parties. To be binding, the compromise must be shown to have been voluntarily, freely
and intelligently executed by the parties, who had full knowledge of the judgment.
Furthermore, it must not be contrary to law, morals, good customs and public policy.
A compromise agreement is a contract whereby the parties make reciprocal
concessions in order to resolve their differences and thus avoid or put an end
to a lawsuit. They adjust their difficulties in the manner they have agreed upon,
disregarding the possible gain in litigation and keeping in mind that such gain is
balanced by the danger of losing. Verily, the compromise may be either extrajudicial
(to prevent litigation) or judicial (to end a litigation).
There is no justification to disallow a compromise agreement, solely because
it was entered into after final judgment. The validity of the agreement is determined
by compliance with the requisites and principles of contracts, not by when it was
entered into. As provided by the law on contracts, a valid compromise must have
171

ART. 227

LABOR RELATIONS

the following elements: (1) the consent of the parties to the compromise, (2) an
object certain that is the subject matter of the compromise, and (3) the cause of the
obligation that is established.
The issue involving the validity of a compromise agreement notwithstanding
a final judgment is not novel. Jesalva v. Bautista upheld a compromise agreement
that covered cases pending trial, on appeal, and with final judgment. The Court
noted that Article 2040 [Civil Code] impliedly allowed such agreements; there was
no limitation as to when these should be entered into.
In the present factual milieu, compliance with the elements of a valid contract
is not in issue. Petitioners [complainant workers] do not challenge the factual finding
that they entered into a compromise agreement with [their employer]. There are
no allegations of vitiated consent. Neither was there any proof that the agreement
was defective or could be characterized as rescissible, voidable, unenforceable, or
void. Instead, petitioners base their argument on the sole fact that the agreement
was executed despite a final judgment, which the Court had previously ruled to be
allowed by law.
6.2

Absence of Counsel Remedied

The labor arbiter's absence when the waivers were executed was remedied
upon compliance with the above procedure. T h e Court observes that the arbiter
made searching questions during the pre-execution conference to ascertain
whether petitioners had voluntarily and freely executed the waivers. Likewise,
there was evidence that they made an intelligent choice, considering that the
contents of the written waivers had been explained to them. T h e labor arbiter's
absence when those waivers were executed does not, therefore, invalidate them.
1

Even if contracted without the assistance of labor officials, compromise


agreements between workers and their employers remain valid and are still
considered desirable means of settling disputes.
2

6.3

Reiteration

Magbanua and other decisions are reiterated in later cases, such as Cosmos
of 2008:
The parties may execute a compromise agreement even after the finality
of this decision. They are not precluded from doing so. In a catena of cases,
the Court has consistently ruled that even final and executory judgments
may be compromised. In Northern Lines, Inc. v. Court of Tax Appeals, the Court
recognized the right to compromise final and executory judgments, as long
as such right was exercised by the proper party litigants.
In Gatchalian v. Arlegui, the Court upheld the right to compromise
prior to the execution of a final judgment. The Court held that the final
'Magbanua vs. Uy, G.R. No. 161003, May 6, 2005.
Eurotech Hair Systems, Inc, et al. vs. Go, G.R. No. 160913, August 31,2006.

172

BUREAU OF LABOR RELATIONS

ARTS. 228-229

judgment had been novated and superseded by a compromise agreement.


Palanca v. Court of Industrial Relations also sustained a compromise agreement,
notwithstanding a final judgment in which only the amount of backwages was
left to be determined. The Court found no evidence of fraud or of any showing
that the agreement was contrary to law, morals, good customs, public order,
or public policy. (Cosmos Bottling Corp. vs. Nagrama, G.R No. 164403, March 4,
2008. See also: J-Phil Marine, Inc. vs. NLRC, G.R No. 175366, August 11, 2008.)
7.

OPTIONS WHEN COMPROMISE AGREEMENT IS VIOLATED

Under Article 2041 of the Civil Code, should a party fail or refuse to
comply with the terms of a compromise or amicable settlement, the other party
could either: (1) enforce the compromise by a writ of execution, or (2) regard
it as rescinded and so insist upon his original demand. Applying this law in a
case where the company failed to live up to the terms of an amicable settlement,
the court held that the complainant employees were within their right when
they insisted, after the company's noncompliance, that they be reinstated to
their j o b s , as they had originally demanded. T h e NLRC, the Court ruled, did
not abuse its discretion, when it accordingly ordered the reinstatement with
backwages.
1

I had learnt the true practice of law. I had learnt to find out the
better side of human nature and to enter men's hearts. I realized
that the true function of a lawyer was to unite parties riven asunder.
T h e lesson was so indelibly burnt into me that a large part of my
time during the twenty years of my practice as a lawyer was occupied
in bringing about compromises of hundreds of cases. I lost nothing
thereby - not even money, certainly not my soul.
M.K. Gandhi
ART. 2 2 8 . INDORSEMENT OF CASES TO LABOR ARBITERS (Repealed
by Batas Pambansa Big. 230)
ART. 2 2 9 . ISSUANCE OF SUBPOENAS
T h e Bureau shall have the power to require the appearance of any
person or the production of any paper, document or matter relevant to a
labor dispute under its jurisdiction either at the request of any interested
party or at its own initiative.

'Morales, et al. vs. NLRC and San Miguel Corp., G.R. No. 100133, February 6,
1995.
173

ARTS. 230-231

LABOR RELATIONS

ART. 230. APPOINTMENT OF BUREAU PERSONNEL


The Secretary of Labor and Employment may appoint, in addition to
the present personnel of the Bureau and the Industrial Relations Divisions,
such number of examiners and other assistants as may be necessary to carry
out the purpose of this Code.
ART. 2 3 1 . REGISTRY OF UNIONS AND FILE OF COLLECTIVE
AGREEMENTS
The Bureau shall keep a registry of legitimate labor organizations. The
Bureau shall also maintain a file of all collective bargaining agreements and
other related agreements and records of settlement of labor disputes, and
copies of orders, and decisions of voluntary arbitrators. T h e file shall be
open and accessible to interested parties under conditions prescribed by the
Secretary of Labor and Employment, provided that no specific information
submitted in confidence shall be disclosed unless authorized by the Secretary,
or when it is at issue in any judicial litigation or when public interest or
national security so requires.
Within thirty ( 3 0 ) days from the execution of a Collective Bargaining
Agreement, the parties shall submit copies of the same directly to the Bureau
or the Regional Offices of the Department of L a b o r and Employment
for registration accompanied with verified proofs of its posting in two
conspicuous places in the place of work and ratification by the majority
of all the workers in the bargaining unit. T h e Bureau or Regional Offices
shall act upon the application for registration of such Collective Bargaining
Agreement within five ( 5 ) calendar days from receipt thereof. T h e Regional
Offices shall furnish the Bureau with a copy of the Collective Bargaining
Agreement within five (5) days from its submission.
T h e Bureau or Regional Office shall assess the employer for every
Collective Bargaining Agreement a registration fee of not less than one
thousand pesos ( P I , 0 0 0 . 0 0 ) or in any other amount as may be deemed
appropriate and necessary by the Secretary of L a b o r and Employment
for the effective and efficient administration of the Voluntary Arbitration
Program. Any amount collected under this provision shall a c c r u e to the
Special Voluntary Arbitration Fund.
T h e Bureau shall also maintain a file, and shall undertake or assist in
the publication, of all final decisions, orders and awards of the Secretary of
Labor and Employment, Regional Directors and the Commission.
C O M M E N T S AND CASES
REGISTRY OF UNIONS AND CBAs
T h e Bureau shall keep a registry of legitimate labor organizations. "Labor
organization" and "legitimate labor organization" are defined in Article 212.
174

BUREAU OF LABOR RELATIONS

ART. 232

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


next Title.
T h e B u r e a u shall also maintain a file of all Collective Bargaining
Agreements (CBAs) and other related agreements.
T h e parties shall submit, within 30 days from execution, copies of their
CBA directly to the B L R or the Regional Offices of the DOLE for registration.
The registration of the CBA, however, is not a requisite for its validity.
T h e certification of the collective bargaining agreement by the Bureau
of Labor Relations is not required to put a stamp of validity to such contract.
Once it is duly entered into and signed by the parties, a collective bargaining
agreement becomes effective as between the parties regardless of whether or
not the same has been certified by the BLR.
1

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

'Liberty Flour Mills Employees vs. Liberty Flour Mills, Inc., 180 SCRA 668,
December 29, 1989.
175

ART. 233

LABOR RELATIONS

ART. 233. PRIVILEGED COMMUNICATION


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

176

Title IV
LABOR ORGANIZATION
Chapter I
REGISTRATION AND CANCELLATION
Overview/Key Questions:
Box 8
1. W h a t are the r e q u i r e m e n t s for o r g a n i z i n g and
registering a union?
2. What is a collective bargaining unit? How does it differ
from a union?
3. What is union affiliation and what are its implications?
May an affiliate disaffiliate?
4. How do unions merge or consolidate?
5. On what grounds and upon whose petition may a
union's registration be cancelled?
ART. 2 3 4 . REQUIREMENTS OF REGISTRATION
A federation, national union or industry or trade union center or an
independent union shall acquire legal personality and shall be entitled to the
rights and privileges granted by law to legitimate labor organizations upon
issuance of the certificate of registration based on the following requirements:
(a) Fifty pesos ( P 5 0 . 0 0 ) registration fee;
(b) T h e names of its officers, their addresses, the principal address
of the labor organization, the minutes of the organizational meetings and
the list of the workers who participated in such meetings;
( c ) In case the applicant is an independent union, the names of all
its members comprising at least twenty percent (20%) of all the employees
in the bargaining unit where it seeks to operate;
(d) If the applicant union has been in existence for one or more
years, copies of its annual financial reports; and
(e) Four (4) copies of the constitution and by-laws of the applicant
union, minutes of its adoption or ratification and the list of the members
who participated in it. (As amended by RA. No. 9481, effective June 14, 2007.)

177

ARTS. 234-A-237

LABOR RELATIONS

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


A duly registered federation or national union may directly create a local
chapter by issuing a charter certificate indicating the establishment of the
local chapter. The chapter shall acquire legal personality only for purposes
of filing a petition for certification election from the date it was issued a
charter certificate.
The chapter shall be entitled to all other rights and privileges of a
legitimate labor organization only upon the submission of the following
documents in addition to its charter certificate:
(a) The names of the chapter's officers, their addresses, and the
principal office of the chapter; and
(b) The chapter's constitution and by-laws: Provided, That where the
chapter's constitution and by-laws are the same as that of the federation or
the national union, this fact shall be indicated accordingly.
The additional supporting requirements shall be certified under oath by
the secretary or treasurer of the chapter and attested by its president. (This
article is inserted as an amendment by RA. No. 9481 effective June 14, 2007.)
ART. 2 3 5 . ACTION ON APPLICATION
The Bureau shall act on all applications for registration within thirty
( 3 0 ) days from filing.
All requisite documents and papers shall be certified under oath by
the secretary or the treasurer of the organization, as the case may be, and
attested to by its president.
ART. 2 3 6 . DENIAL OF REGISTRATION; APPEAL
T h e decision of the L a b o r Relations Division in the regional office
denying registration may be appealed by the applicant union to the Bureau
within ten ( 1 0 ) days from receipt of notice thereof.
ART. 2 3 7 . ADDITIONAL REQUIREMENTS FOR FEDERATIONS OR
NATIONAL UNIONS
Subject to Article 2 3 8 , if the applicant for registration is a federation
or a national union, it shall, in addition to the requirements of the preceding
Articles, submit the following:
(a)
P r o o f of the affiliation of at least ten ( 1 0 ) locals or chapters,
each of which must be a duly recognized collective bargaining agent in the
establishment or industry in which it operates, supporting the registration
of such applicant federation or national union; and
(b)
T h e n a m e s and addresses of the companies where the locals
or chapters o p e r a t e and the list of all the m e m b e r s in each c o m p a n y
involved.
178

REGISTRATION AND CANCELLATION

ARTS. 234-237

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


registration of federation or national unions. No federation or national
union shall be registered to engage in any organizational activity in more
than o n e industry in any area or region, and no federation or national union
shall be registered to engage in any organizational activity in m o r e than o n e
industry all over the country.
T h e federation or national union which meets the requirements and
conditions herein prescribed may organize and affiliate locals and chapters
without registering such locals or chapters with the Bureau.
Locals or chapters shall have the same rights and privileges as if they
were registered in the Bureau, provided that such federation or national
union organizes such locals or chapters within its assigned organizational
field of activity as may be prescribed by the Secretary of Labor.
T h e B u r e a u shall see to it that federations and national unions shall
only organize locals and chapters within a specific industry or region.)
C O M M E N T S AND CASES
1.

LABOR ORGANIZATION; TWO BROAD PURPOSES

T h e workers' right to self-organization is guaranteed under Article XIII


of the 1987 Constitution, and such right, according to Article 246 of the Labor
Code, shall not be abridged. T h e right includes the right to form, join or assist
labor organization "for the purpose of collective bargaining." D.O. No. 40-03
carries these definitions:
"Labor Organization" refers to any union or association of employees in
the private sector which exists in whole or in part for the purpose of collective
bargaining, mutual aid, interest, cooperation, protection, or other lawful purposes.
"Legitimate Labor Organization" refers to any labor organization in the
private sector registered or reported with the Department in accordance with
Rule III and IV of these Rules.
"Union" refers to any labor organization in the private sector organized
for collective bargaining and for other legitimate purposes.
We should note that not every union is "legitimate"; only those properly
registered are considered L L O . But non-registration does not mean it is
"illegitimate"; it simply is unregistered and has no legal personality. It exists
legally but does not possess the rights of an LLO.
"Exclusive Bargaining Representative" refers to a legitimate labor union
duly recognized or certified as the sole and exclusive bargaining representative
or agent of all the employees in a bargaining unit.
"Workers' Association" refers to an association of workers organized for the
mutual aid and protection of its members or for any legitimate purpose other
than collective bargaining.
179

ARTS. 234-237

LABOR RELATIONS

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


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

180

The Developing Labor Law, 2001 Cumulative Supplement, [BNA, Inc. 2001], p.

REGISTRATION AND CANCELLATION

ARTS. 234-237

Similarly, the employees' benefits and policy review committees, the safety
committee and "brainstorming" groups were held "dealing with" the employer
and may be considered as labor organizations whose ideas the management may
or may not adopt. T h e Board has reaffirmed the principle that there must be a
pattern or practice in which a group of employees makes proposals, overtime,
to management, and management responds to such proposals.
1

Along this line, the labor-management council envisioned in Article 255


(second paragraph) of this Code carries the character of a labor organization.
Because such groups or committees are regarded as labor organizations, the
protection under Articles 246, 247 and 248 covers them, although they cannot,
as such, demand collective bargaining under Article 250 or stage a strike under
Article 263.
1.2

Labor Organization Not Necessarily a Union

Instead of organizing a labor union, or side by side with an existing union,


workers may opt to form something shorn of the rigidity and formality of a labor
union: something they may call a labor-management committee. It may be a
works council or a body of any other name as a medium of employee-employer
interaction in the establishment through which problems or disputes, or potential
disputes, may be resolved by consensus, compromise or other constructive
voluntary mode.
Indeed, the richer the modes of labor-management interactions, the better.
This inclination is indicated by the broad definition and statement of purposes of
"labor organization" in Articles 212 and 246. It is likewise evident in Article 255,
second paragraph, which authorizes the creation of labor-management council,
and in Article 277(g) and (h) which advocate labor-management cooperation
programs as well as labor-management committees. Department Order No. 40,
series of 2003 (which implements this Book V of the Labor Code) allows the
formation of Workers' Association "for the mutual aid and protection of its
members or for any legitimate purpose other than collective bargaining."
2.

CLASSIFICATION OF LABOR ORGANIZATIONS

2.1 At the National Level


"National Union/Federation means any labor organization with at least ten
locals/chapters or affiliates each of which must be a duly certified or recognized
collective bargaining agent. Example: Federation of Free Workers (FFW). D.O.
No. 40-03 defines "national union" or "federation" as a group of labor unions in
a private establishment organized for collective bargaining or for dealing with
employers concerning terms and conditions of employment for their member
91

'See The Developing Labor Law, 2001 Cumulative Supplement, [BNA, Inc.,
2001], pp. 74-75.
implementing Rules: Book V, Rule I, Sec. 1.
181

ARTS. 234-237

LABOR RELATIONS

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


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

2.2

At the Enterprise Level

A labor union at the enterprise level is either "independent" if created


by independent registration or a "chapter" if created through chartering.
Independent registration is obtained by the union organizers in an enterprise
through their own action instead of through issuance of a charter by a federation
or national union. An independent union has a legal personality of its own not
derived from that of a federation. Thus, D.O. No. 40-03 defines an "independent
union" as "a labor organization operating at the enterprise level that acquired
legal personality through independent registration under Article 234 of the Labor
'Rothenberg on Labor Relations, pp. 41-42.
182

REGISTRATION AND CANCELLATION

ARTS. 234-237

Code and Rule III, Section 2-A of these Rules." But an independent union may
affiliate with a federation or national union, in which case it may also be called
an affiliate.
Chartering, on the other hand, takes place when a duly registered federation
or national union issues a charter to a union in an enterprise and registers the
creation of the chapter with the Regional Office where the applicant operates.
The union recipient of the charter is called a chapter or local or chartered local.
Its legal personality is derived from the federation/national union but it may
subsequently register itself independently.
2.3

Recent Changes by R A . No. 9481

Article 234-A, which explicitly authorizes the creation of enterprise-level


unions, is one of the many changes R.A. No. 9481 introduced. This law, passed
on February 20, 2007 as a consolidation of H.B. No. 1351 and SB No. 2466,
lapsed into law without presidential signature on May 25, 2007. Published on
May 30, 2007 it took effect on J u n e 14, 2007. Titled "An Act Strengthening
the Workers' Constitutional Right to Self-organization" it amended six articles
(namely, 234, 2 3 8 , 239, 2 4 5 , 256, and 2 5 7 ) and added new ones after each of
those six Articles.
T h e changes this law makes are summarized as follows:
1.

No required number.
T h e 20 percent registration requirement applies only to an
independent union. This makes a local chapter registerable even
if it its initial membership is less than 20 percent of the bargaining
unit. Hence, a company can be quickly unionized by a very small
number of employees.
1

2.

Tentative Legal Personality.


A local chapter is created once a federation (same as a national
union) issues a charter certificate. Once issued a charter, the chapter
acquires legal personality to file a petition for CE. All other union
rights will be acquired by submitting the following in addition to the
charter certificate.
a)
the names and addresses of the officers and members of
the union.
b)
the chapter's constitution and by-laws which can be the
same as that of the federation.
These documents must be certified under oath by the Secretary
or Treasurer and attested by the president.
2

l
2

See Article 234 as amended.


See Article 234-A.
183

LABOR RELATIONS

ARTS. 234-237
3.

Specified Grounds of Cancellation.


The BLR may cancel a union registration based only on
grounds enumerated in Article 239 as amended.
PCE Proceeds Despite Petition to Cancel Union Registration.
1

4.

A petition to cancel union registration does not prevent the


filing or the hearing of a petition for a CE.
2

5.

Only Three Grounds to Cancel.


The grounds to cancel a union's registration are reduced from
ten to three namely: any falsehood about the CBL, or about the
election of officers, and voluntary dissolution.
3

6.

Cancellation by Action of the Members.


At least two-thirds of the membership may vote to dissolve their
organization, but this action requires a subsequent "application to
cancel" to be submitted by the board of the organization, attested
by the president.
4

7.

Reportorial Requirements:
Every legitimate labor organization has to submit to B L R four
documents:

'

a)

adoption or amendments to constitution and by-laws


(CBL);

b)

election of officers, with list of voters to be submitted in


30 days;

c)

annual financial reports within 30 days from close of


fiscal year;
annual list of members.

d)

Non-submission of these reportorial requirements is no longer


a ground to cancel registration, but erring officer may be punished
even by expulsion.
5

8.

Affiliation with Same Federation.


Supervisors' union and rank and file union in same company
may affiliate with same federation. This amendment renders obsolete
the prohibition laid down previously in a Supreme Court decision.
6

'See Article 238 as amended.


See Article 238-A.
See Article 239 as amended.
See Article 239-A.
See Article 242-A.
See Article 245 as amended.

184

REGISTRATION AND CANCELLATION

9.

ARTS. 234-237

Commingling.
Commingling of supervisors and rank and file in one union is
not a ground to cancel union registration. T h e excludible member
is "automatically deemed removed" from the list.
1

10.

nondisclosure

of Identity.

In an organized (unionized) enterprise the federation who files


a Petition for Certification Election (PCE) on behalf of a chapter
cannot be required to identify the chapter's officers and members.
T h e PCE does not have to be filed by the local officers.
2

11.

Non-Disclosure even in Unionized Company.


T h e non-disclosure rule (in the preceding number) applies
also to a federation that files a PCE on behalf of its chapter in an
enterprise without yet a union as bargaining agent.
3

12.

Employer, a Bystander.
In a PCE the employer is a bystander and has no right to oppose
the petition. His participation is limited to being informed about the
petition and to being required to submit the list of employees if a
CE will be held.
4

T h e Implementing Rules and Regulations (IRR) of R.A. No. 9481 were


issued as D.O. No. 40-F-03 on 30 October 2008 and are incorporated in the IRR
of Book V in this volume.
3.

REGISTRATION RATIONALE

A labor organization may be registered or not. If registered with DOLE, it is


considered "legitimate labor organization" ("LLO"). But the reverse is not true,
that is, a labor organization is not "illegitimate" just because it is unregistered. It
is still a lawful organization and can deal with the employer, but it has no legal
personality to demand collective bargaining with the employer. It cannot petition
for a certification election and cannot hold a legal strike.
It is the fact of being registered with the Department of Labor and
Employment that makes a labor organization legitimate in the sense that it
is clothed with legal personality to claim the representational and bargaining
rights enumerated in Article 242 and Article 255 or to strike and picket under
Article 263.
The Supreme Court has upheld the legality of the requirement to register
labor unions. It said:
'See Article 245-A.
See Article 265 as amended.
See Article 257 as amended.
See Article 258-A as amended.

185

ARTS. 234-237

LABOR RELATIONS

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


of assembly or association which may be exercised with or without said
registration. The latter is merely a condition sine qua non for the acquisition
of legal personality by labor organizations, associations or unions and the
possession of the rights and privileges granted by law to legitimate labor
organizations. T h e Constitution does not guarantee these rights and
privileges, much less said personality, which are mere statutory creations,
for the possession and exercise of which registration is required to protect
both labor and the public against abuses, fraud, or impostors who pose as
organizers, although not truly accredited agents of the union they purport
to represent. Such requirement is a valid exercise of the police power,
because the activities in which labor organizations, associations and unions
of workers are engaged affect public interest, which should be protected,
x x x (PAFLU vs. Sec. of Labor, L-2222, February 27, 1969.)
3.1

Effect of Registration Under the Corporation Law

A labor organization may be organized under the Corporation Law as a


nonstock corporation and issued a certificate of incorporation by the Securities
and Exchange Commission. But such incorporation has only the effect of giving
to it juridical personality before regular courts of justice. Such incorporation
does not grant the rights and privileges of a legitimate labor organization.
1

4.

WHERE TO REGISTER

Applications for registration of independent labor unions, chartered locals,


and workers' associations shall be filed with and acted upon by the Regional
Office where the applicant principally operates.
Applications for registration of federations, national unions or workers'
associations operating in more than one region shall be filed with the Bureau
or the Regional Offices, but shall be processed and acted upon by the Bureau
which has national jurisdiction unlike a regional office.
5.

REGISTRATION REQUIREMENTS

Rule III of the Rules Implementing Book V (under D.O. No. 40-03) specifies
the registration requirements.
5.1

Federation or National Union

T h e application for registration of federations and national unions shall


be accompanied by the following documents:
1)

a statement indicating the name of the applicant labor union,


its principal address, the name of its officers and their respective
addresses;

'See Phil. Land-Sea-Air Labor Union [PLASLU], Inc. vs. CIR, 93 Phil. 747
[1953]; see also: Cebu Seamen's Association vs. Ferrer-Calleja, 212 SCRA 50 [1992].
186

REGISTRATION AND CANCELLATION

ARTS. 234-237

2)

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


employees who participated in the said meeting(s);

3)

the annual financial reports if the applicant union has been in


existence for one or more years, unless it has not collected any
amount from the members, in which case a statement to this effect
shall be included in the application;

4)

the applicant union's constitution and by-laws, minutes of


its adoption or ratification, and the list of the members who
participated in it. T h e list of ratifying members shall be dispensed
with where the constitution and by-laws was ratified or adopted
during the organization meeting (s). In such a case, the factual
circumstances of the ratification shall be recorded in the minutes
of the organizational meeting(s);

5)

the resolution of affiliation of at least ten (10) legitimate labor


organizations, whether independent unions or chartered locals,
each of which must be a duly certified or recognized bargaining
agent in the establishment where it seeks to operate; and

6)

the name and addresses of the companies where the affiliates


operate and the list of all the members in each company involved.

Labor organizations operating within an identified industry may also apply


for registration as a federation or national union within the specified industry
by submitting to the Bureau the same set of documents.
5.2

Independent Labor Union

T h e application for registration of an independent labor union shall be


accompanied by the following documents:
(1)

the name of the applicant labor union, its principal address, the
name of its officers and their respective addresses, approximate
number of employees in the bargaining unit where it seeks to
operate, with a statement that it is not reported as a chartered local
of any federation or national union;

(2)

the minutes of the organizational meetings(s) and the list of


employees who participated in the said meeting(s);
the name of all its members comprising at least 20% of the
employees in the bargaining unit;
the annual financial reports if the applicant has been in existence
for one or more years, unless it has not collected any amount from
the members, in which case a statement to this effect shall be
included in the application;
the applicant's constitution and by-laws, minutes of its adoption
or ratification, and the list of the members who participated in

(3)
(4)

(5)

187

ARTS. 234-237

LABOR RELATIONS

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


the constitution and by-laws was ratified or adopted during the
organizational meeting. In such a case, the factual circumstances of
the ratification shall be recorded in the minutes of the organizational
meeting(s).
5.3 Workers' Association
T h e application for registration of a workers' association shall be
accompanied by the following documents:
1)
the name of the applicant association, its principal address, the
name of its officers and their respective addresses;
2)
the minutes of the organizational meeting(s) and the list of
members who participated therein;
3)
the financial reports of the applicant association if it has been in
existence for one or more years, unless it has not collected any
amount from the members, in which case a statement to this effect
shall be included in the application;
4)

the applicant's constitution and by-laws to which must be attached the


names of ratifying members, the minutes of adoption or ratification
of the constitution and by-laws and the date when ratification was
made, unless ratification was done in the organizational meeting(s),
in which case such fact shall be reflected in the minutes of the
organizational meeting(s).

The application for registration of a workers' association operating in more


than one region shall be accompanied, in addition to the above requirements,
by a resolution of membership of each member association, duly approved by
its board of directors.
5.4

Chartered Local

As mentioned, a union at the enterprise level may be created either through


(1) independent registration or (2) chartering.
A union created through chartering is called a local, a chapter, or a
chartered local in the employer enterprise where the union officers and members
are employees.
5.4a Chartered Local has to be Registered; Requirements
A chartered local has to be registered, not just reported. T h e original
provision in D.O. No. 40-03 has been changed (or corrected) by D.O. No. 40B-03. Dated 16 February 2004, D.O. No. 40-B-03 redefines a "chartered local"
as a labor organization in the private sector operating at the enterprise level
that acquired legal personality through registration with the Regional Office in
accordance with Rule III, Section 2-E of these Rules. (The previous definition
read: "chartered local" refers to a labor organization in the private sector
188

REGISTRATION AND CANCELLATION

ARTS. 234-237

operating at the enterprise level that acquired legal personality, through the
issuance of a charter certificate by a duly registered federation or national union,
and reported to the Regional Office in accordance with Rule III, Section 2-E of
these Rules.)
Accordingly, Section 2-E, Rule HI has been amended and expanded
to require a duly registered federation or national union, directly creating a
chartered local, to submit to the Regional Office two (2) copies of the following:
(a)

a charter certificate issued by the federation or national union


indicating the creation or establishment of the local/charter.

(b)

the names of the local chapter's officers, their addresses, and the
principal office of the local/chapter; and

(c)

the local/chapter's constitution and by-laws, provided that where


the local/chapter's constitution and by laws is the same as that
of the federation or national union, this fact shall be indicated
accordingly.

All the foregoing supporting requirements shall be certified under oath by


the Secretary or the Treasurer of the local/chapter and attested by its President.
5.4b Legal Personality only to File a P C E
T h e present Article 234-A, inserted by R.A. No. 9 4 8 1 , has a definitive
statement: a chapter acquires legal personality on "the date it was issued a charter
certificate" by its mother federation or national union. T h e acquisition of legal
personality seems to happen automatically, but "only for purposes of filing a
petition for a certification election."
5.4c Submission of Confirming Documents
T h e acquired personality, moreover, is tentative because it needs to be
confirmed by submission of additional documents, otherwise the chapter does
not become entitled to all other rights and privileges of an LLO. T h e article
does not fix a time limit for submitting those additional documents because,
presumably, a chapter that wants to become a bargaining agent will waste no
time to permanently legitimize its status.
In any case the Med Arbiter may dismiss the petition for certification
election if the union is not listed in DOLE'S registry of legitimate unions or if it
fails to attach to its petition a duly issued charter certificate.
1

5.4d A Trade Union Center Cannot Create a Chapter


Even before R.A. No. 9481 became publicly known the question was already
raised before the Supreme Court whether a trade union center could create
a local chapter. The Court said no, and the ruling conforms with new Article
'Sec. 14, Rule VIII, D.O. No. 40-F-03.
189

ARTS. 234-237

LABOR RELATIONS

234-A under which only duly registered federations or national unions may create
chapters.
1

5.4e When does a Chapter Become an LLO?


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

5.4f Recognition by B L R not a Ministerial Duty


The shift from date of submission of documents to date of issuance of certificate
of registration is in line with the court's ruling in 1997 that registering a union is
not a ministerial function.
Progressive Development Corp.-Pizza Hut vs. Laguesma, et al, G.R. No. 115077,
April 18, 1997
Facts: The union, Nagkakaisang Lakas ng Manggagawa (NLM)- Katipunan,
filed a petition for certification election with the Department of Labor in behalf of
the rank- and-file employees of the Progressive Development Corporation (Pizza
Hut).
Petitioner employer filed a Motion to Dismiss the petition, alleging fraud,
falsification and misrepresentation in the respondent Union's registration, making
it void and invalid. The motion specifically alleged that: a) respondent Union's
registration was tainted with false, forged, double or multiple signatures of those who
allegedly took part in the ratification of the respondent Union's constitution and
'See San Miguel Corp. Employees Union, et al. vs. San Miguel Packaging
Products Employees Union, etc., G.R. No. 171153, September 12, 2007.
Section 8, Rule IV.
2

190

REGISTRATION AND CANCELLATION

ARTS. 234-237

by-laws and in the election of its officers; x x x thus, there were serious falsities in the
dates of the issuance of the charter certification and the organization meeting of the
alleged chapter. Citing other instances of misrepresentation and fraud, petitioner
employer filed a Supplement to its Motion to Dismiss, claiming that: x x x voting was
not conducted by secret ballot in violation of Article 241, section (c) of the Labor
Code; and that the constitution and by-laws submitted in support of its petition were
not properly acknowledged and notarized.
Petitioner also filed a petition seeking the cancellation of the Union's
registration on the grounds of fraud and falsification. Petitioner also filed with the
Med-Arbiter a motion requesting suspension of proceedings in the certification
election case until after the prejudicial question of the Union's legal personality is
determined in the proceedings for cancellation of registration.
However, the Med-Arbiter directed the holding of a certification election among
petitioner's rank-and-file employees. An appeal to the office of the Secretary of Labor
was denied, as well as a motion for reconsideration. In the DOLE Resolution dated
December 29, 1993, the suggestion is made that once a labor organization has filed
the necessary documents and papers and the same have been certified under oath
and attested to, said organization necessarily becomes clothed with the character of
a legitimate labor organization. In other words, recognition by the Bureau of Labor
Relations becomes merely a ministerial function.
Ruling: We do not agree.
In the first place, the public respondent's views as expressed in his Resolution
miss the entire point behind the nature and purpose of proceedings leading to the
recognition of unions as legitimate labor organizations under Article 234 of the Labor
Code.
A more than cursory reading of the aforecited provisions clearly indicates that
the requirements embodied therein are intended as preventive measures against the
commission of fraud. After a labor organization had filed the necessary papers and
documents for registration, it becomes mandatory for the Bureau of Labor Relations
to check if the requirements under Article 234 have been sedulously complied with.
If its application for registration is vitiated by falsification and serious irregularities,
especially those appearing on the face of the application and the supporting
documents, a labor organization should be denied recognition as a legitimate labor
organization. And if a certificate of recognition has been issued, the propriety of the
labor organization's registration could be assailed directly through cancellation of
registration proceedings in accordance with Articles 238 and 239 of the Labor Code,
or indirectly, by challenging its petition for the issuance of an order for certification
election. [Collateral Attack is no longer allowed; see below. CAA]
Furthermore, the Labor Code itself grants the Bureau of Labor Relations a
period of thirty (30) days within which to review all applications for registration under
Article 235.
The thirty-day period in the aforecited provision ensures that any action taken
by the Bureau of Labor Relations is made in consonance with the mandate of the
Labor Code, which, it bears emphasis, specifically requires that the basis for the
191

LABOR RELATIONS

ARTS. 234-237

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


for recognition under Article 234. x x x Obviously, recognition of a labor union or
labor organization is not merely a ministerial function.
Note: Subsequent to the Progressive Development ruling, R.A. No. 9481, Article
258-A, no longer allows an employer to oppose a petition for CE.
5.4g Requirements Relaxed
The creation of a local does not need subscription by a minimum number
of members. The 20 percent initial membership mentioned in Article 2 3 4 ( c ) is
required to register an independent union but not a local. This makes it easier
to create a chapter than an independent union, thus expediting the growth of
federations or national unions. Such effect accords with the objective, stated in
Article 211, to foster a strong and unified labor movement.
In 1992 the Supreme Court, applying the Implementing Rules at that time,
declared that submission of books of account was required for a local union to
be properly registered, otherwise the local could not be considered a legitimate
labor organization.
1

But the 1997 Implementing Rules (D.O. No. 9) deleted the book-ofaccounts requirement. Expectedly, the Supreme Court held in 1999 that since
the Department Order no longer required the presentation of books of account,
a union could be registered without having to submit such books.
2

T h e current Implementing Rules (D.O. No. 40, issued in 2003) does not
revive the books-of-account requirement in registration.
5.5 Union's Legitimacy not Subject to Collateral Attack
After stating that the union acquires legal personality on the date its
registration certificate is issued, Section 8, Rule IV of D.O. 40-03 further states:
"Such legal personality may be questioned only through an independent petition
for cancellation of union registration in accordance with Rule XIV of these Rules,
and not by way of collateral attack in [the] petition for certification election
proceedings under Rule VIII."
This issue is taken-up in the topic certification election under Articles
256-259.
6.

COLLECTIVE BARGAINING UNIT (CBU)

One of the requirements to register an independent union is that the


applicant should have a membership of at least 20 percent of the employees "in
the bargaining unit where it seeks to operate."
'Progressive Development Corporation vs. The Honorable Secretary of Labor,
G.R. No. 96425, February 4,1992; Protection Technology, Inc. vs. Secretary etc., G.R.
No. 117211, March 1, 1995.
Pagpalain Haulers, Inc. vs. Trajano, G.R. No. 133215, July 15, 1999.
2

192

REGISTRATION AND CANCELLATION

ARTS. 234-237

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


within a given employer unit, comprised of all or less than all of the entire body
of employees in the employer unit or any specific occupational or geographical
grouping within such employer unit.
1

T h e "bargaining unit" is always a group of employees. It may be all the


supervisors or all the rank-and-file in the company, but the law does not allow
supervisors and rank-and-file to belong to the same bargaining unit. Or the
unit may be an identifiable smaller group of supervisors or smaller group of
rank-and-file workers. In a manufacturing firm, for instance, the unit may be
all the rank-and-file factory personnel or all the rank-and-file sales force. In a
school, one CBU may include only the teachers, and another CBU only the nonteaching staff. In every case the composition of the unit must be "appropriate,"
meaning the members share common concerns or common interests. This will
be explained further under Article 255.
T h e unit may be as numerous as thousands of employees or as few as less
than a hundred. T h e law fixes no minimum or maximum number. Whatever the
number, twenty percent thereof should be members of the independent union
applying for registration.
Obviously, therefore, the CBU is different from and bigger than a union.
Union members come from the CBU and there can be several rival unions
within a CBU. While officers lead and represent a union, a union represents a
CBU. T h e representative is the union; the group represented is the CBU. The
representative union, once determined, will represent even the members of other
unions as long as they are part of the CBU. This is why the representative union
(also called bargaining agent or majority union) is called "exclusive bargaining
representative" ( E B R ) .
T h e union selection process is taken up under Article 255.
7.

CONSTITUTION, BY-LAWS, AND REGULATIONS

Another registration requirement is the submission of the constitution


and by-laws (CBL) of the applicant union.
Like other voluntary associations, labor unions have the right to adopt
constitutions, rules, and by-laws within the scope of the lawful purposes of the
union and bind their members thereby, provided they are reasonable, uniform,
and not discriminatory, and provided they are not contrary to public policy or
the law of the land.
The articles of agreement of a labor union, whether called a constitution,
charter, by-laws, or any other name, constitutes a contract between the members
which the courts will enforce, if not immoral or contrary to public policy or the
2

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


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

193

ARTS. 234-237

LABOR RELATIONS

law of the land. A rule of a labor union which violates the statute is, of course,
illegal.
A union's constitution and by-laws govern the relationship between and
among its members. As in the interpretation of contracts, if the terms are clear
and leave no doubt as to the intention of the parties, the literal meaning of the
stipulation shall control.
1

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

194

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

REGISTRATION

AND

CANCELLATION

ARTS. 234-237

SOME REASONS FOR JOINING A UNION


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

195

ARTS. 234-237

LABOR RELATIONS

7.1 Limitation to By-laws


A statute providing that labor unions may devise and adopt ways and
means to make their rules, regulations, by-laws, and resolutions effective does
not sanction rules, regulations, by-laws or resolutions to commit wrong, nor does
it authorize interference with the constitutional rights of others.
1

Under Article 234(e) it is implied that the members are the ones to adopt
or ratify the union's constitution and by laws. It being a governing law of the
union, the CBL should be democratically ratified.
7.2

Amendments

A union's constitution and by-laws may be amended, modified and


extended by the duly constituted union authorities under the laws of the state.
In the absence of other requirements, and subject to vested rights, a union
constitution may be made, changed, unmade, or superseded by a majority vote
of the members or its constituent body.
2

Under Article 241 (d), major policy questions are to be deliberated upon
and decided by secret ballot by the members.
8.

PROVISIONS COMMON TO THE REGISTRATION OF LABOR


ORGANIZATIONS AND WORKERS' ASSOCIATION
8.1

Attestation, Fee, Copies of Documents

The application for registration of labor unions and workers' associations,


notice for change of name, merger, consolidation and affiliation including all
the accompanying documents, shall be certified under oath by its Secretary or
Treasurer, as the case may be, and attested to by its President.
A labor union and worker's association shall be issued a certificate of
registration upon payment of the prescribed registration fee.
One (1) original copy and two (2) duplicate copies of all documents
accompanying the application or notice shall be submitted to the Regional Office
or the Bureau.
8.2

Action on the Application/Notices

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

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


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

196

ARTS. 234-237

REGISTRATION AND CANCELLATION

8.3

Denial of Application/Return of Notice

Where the documents supporting the application for registration/notice


of change of name, affiliation, merger and consolidation are incomplete or do
not contain the required certification and attestation, the Regional Office or
the Bureau shall, within five (5) days from receipt of the application/notice,
notify the applicant/labor organization concerned in writing of the necessary
requirements and complete the same within thirty (30) days from receipt of
notice. Where the applicant/labor organization concerned fails to complete the
requirements within the time prescribed, the application for registration shall be
denied, or the notice of change of name, affiliation, merger and consolidation
returned, without prejudice to filing a new application or notice.
T h e order of the Regional Office or the Bureau denying the application
for registration/returning the notice of change of name, affiliation, merger or
consolidation shall be in writing, stating in clear terms the reasons for the denial
or return.
8.4

Appeal

T h e denial by the regional office may be appealed to the Bureau and then
to the Court of Appeals. But if the denial originated at the Bureau itself, the
appeal is to the Secretary of Labor. T h e appeal should be filed within ten (10)
days from receipt of such notice, on the ground of grave abuse of discretion or
violation of [the] Rules.
T h e memorandum of appeal shall be filed with the Regional Office or the
Bureau that issued the denial/return of notice. T h e memorandum of appeal
together with the complete records of the application registration/notice of
change of name, affiliation, merger or consolidation, shall be transmitted by the
Regional Office to the Bureau, or by the Bureau to the Office of the Secretary,
within twenty-four (24) hours from receipt of the memorandum of appeal.
T h e Bureau or the Office of the Secretary shall decide the appeal within
twenty (20) days from receipt of the records of the case.
1

9.

AFFILIATION
An affiliate is an independently registered union that enters into an
agreement of affiliation with a federation or a national union. It also refers to
a chartered local which applies for and is granted an independent registration
but does not disaffiliate from its mother federation or national union.
A union, either an independent or a local, affiliates with a federation or
national union for a number of reasons. The most common ones are to secure
support or assistance particularly during the formative stage of unionization;
or to utilize expertise in preparing and pursuing bargaining proposals; or to
'Sections 6 and 7, Rule IV, D.O. No. 40-03.
197

LABOR RELATIONS

ARTS. 234-237

marshal mind and manpower in the course of a group action such as a strike.
Whatever the reason, both the federation and the affiliate expect the affiliation
to be beneficial. The mother union shares in union dues collection as it extends
its helping hand, while the daughter draws support and guidance from the
mother's wealth of experience or legal advice.
A federation or national union ceases as such when it loses its locals.
According to Articles 237 and 238 a federation or national union, to be
registerable or to remain registered, should have as affiliates no less than ten
locals or chapters, each of which is a duly recognized bargaining agent in the
establishment where it operates.
The relationship between a local or chapter and the labor federation or
national union is generally understood to be that of agency, where the local is
the principal and the federation the agent.
1

Affiliation by a duly registered local union with a national union or


federation does not make the local union lose its legal personality. Despite
affiliation, the local union remains the basic unit free to serve the common
interest of all its members.
2

9.1

Report of Affiliation; Requirements

An independently registered union affiliating with a federation or national


union is required to report such affiliation. T h e report shall be filed with the
Regional Office that issued its certificate of registration.
3

The report of affiliation shall be accompanied by the following documents:


(a)

resolution of the labor union's board of directors approving the


affiliation;

(b)

minutes of the general membership meeting approving the


affiliation;

(c)

the total number of members comprising the labor union and the
names of members who approved the affiliation;

(d)

the certificate of affiliation issued by the federation in favor of the


independently registered labor union; and

(e)

written notice to the employer concerned if the affiliating union is


the incumbent bargaining agent.

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


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

198

REGISTRATION AND CANCELLATION

10.

ARTS. 234-237

DISAFFILIATION

The right of a local union to disaffiliate from its mother union is wellsettled. It has been repeatedly held that a local union, being a separate and
voluntary association, is free to serve the interest of all its members including
the freedom to disaffiliate when circumstances warrant. This right is consistent
with the constitutional guarantee of freedom of association.
1

T h e sole essence of affiliation is to increase, by collective action, the


common bargaining power of local unions for the effective enhancement and
protection of their interests. Admittedly, there are times when without succor
and support local unions may find it hard, unaided by other support groups,
to secure justice for themselves. Yet the local unions remain the basic units of
association, free to serve their own interests subject to the restraints imposed by the
constitution and by-laws of the national federation, and free also to renounce the
affiliation upon the terms laid down in the agreement which brought such affiliation
into existence. In other words, to disaffiliate is a right, but to observe the terms
of affiliation is an obligation.
2

T h e Court noted, in the Skylanders case, that the local union was not expressly forbidden to disaffiliate from the federation nor were there any conditions
imposed for a valid breakaway. Significantly, the Court ruled that the pendency
of an election protest involving both the mother federation and the local union
did not constitute a bar to a valid disaffiliation. Neither was it disputed that 111
signatories out of the 120 members of the local union (or 9 2 . 5 % ) supported the
disaffiliation and had in fact disauthorized the federation from instituting any
complaint in their behalf. Thus, it was entirely reasonable for PSI [the employer]
to enter into a collective bargaining agreement with PSEA-NCW. As PSEA [the
local union] had validly disaffiated, it could validly affiliate with NCW [another
Federation] and enter into a collective bargaining agreement in behalf of its
members.
Neither is the disaffiliation from the federation, alleged as an act of disloyalty, a sufficient ground for dismissal from employment. A local union which
has affiliated itself with a federation is free to sever such affiliation or declare
its autonomy from the federation to which it belongs when the circumstances
so warrant, in accordance with the constitutional guarantee of freedom of association. It may sever its affiliation at any time and such disaffiliation cannot be
considered disloyalty in the absence of specific provisions in the federation's constitution prohibiting disaffiliation or the declaration of autonomy of a local union.
There is no provision in the federation's constitution, which prohibits disaffiliation or declaration of autonomy. There cannot be any valid dismissal because
!

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

199

LABOR RELATIONS

ARTS. 234-237

Article II, Section 4 of the union security clause in the CBA limits the dismissal
to only three grounds, to wit: failure to maintain membership in the union (1)
for non-payment of union dues; (2) for resignation; and (3) for violation of the
union's Constitution and By-laws.
1

Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc., G.R. No. L-33987,
September 4, 1975
Facts: In their CBA the company recognized the local union, represented
by PAFLU, as the sole bargaining agent. While the CBA was still in force, 32 out
of 36 members of the union disaffiliated from PAFLU, the mother federation.
PAFLU, alleging the disaffiliation to be contrary to the union security clause,
requested the company to terminate the employment of the employees, which
the company did, and at the same time expelled them from membership in the
mother federation.
Ruling: The resolution of this case hinged on the status of the contract
between the local union and PAFLU, the mother federation. In the CBA, it appeared
that PAFLU had been recognized as the sole bargaining agent for all the employees
of the company except the supervisors and security guards. PAFLU, acting for and
in behalf of its affiliate, had the status of an agent while the local union remained
the basic unit of the association, free to secure the common interest of all its
members including the freedom to disaffiliate when the circumstances warrant.
This was clearly stated in its constitution and by-laws which provided that the local
union should remain an affiliate as long as 10 or more of the members evidence
their desire to continue the affiliation. As only 4 did not sign the resolution for
disaffiliation, the intent to disaffiliate was manifest. Hence, the dismissal from
employment was not justified.
As to the liability of the company, it was limited only to reinstatement of the
employees, the dismissal having been made at the instance of the national union.
The latter was liable for backwages x x x .
Tropical Hut Employees Union-CGW, et al. vs. Tropical Hut Food Market, Inc., et
al., G.R. Nos. L-43495-99, January 20, 1990
When the local union withdrew from the old federation to join a new federation,
it was merely exercising its primary right to self-organization for the effective
enhancement and protection of common interests. In the absence of enforceable provisions
in the federation s constitution preventing disaffiliation of a local union, a local may sever its
relationship with its parent.
2

There is nothing in the constitution of the NATU or in the constitution of


the THEU-NATU that the THEU was expressly forbidden to disaffiliate from the
*Malayang Samahan ng mga Manggagawa sa M. Greenfield (MSMG-UWP), et
al vs. Hon. Cresencio J. Ramos, et al, G.R. No. 113907, February 28, 2000.
See People's Industrial and Commercial Employees and Workers Organization
[FFW] vs. People's Industrial and Commercial Corporation, G.R. No. 37687, March,
15, 1982.
2

200

ARTS. 234-237

REGISTRATION AND CANCELLATION

federation. The alleged noncompliance of the local union with the provision in
the NATU constitution requiring the service of three months notice of intention to
withdraw did not produce die effect of nullifying the disaffiliation for the following
grounds: firstly, NATU was not even a legitimate labor organization, it appearing that
it was not registered at that time with the Department of Labor, and therefore did not
possess and acquire, in the first place, the legal personality to enforce its constitution
and laws, much less the right and privilege under the Labor Code to organize and
affiliate chapters or locals within its group, and secondly, the act of noncompliance
with the procedure on withdrawal is premised on purely technical grounds which
cannot rise above the fundamental right of self-organization.
10.1

Local Union Is the Principal; Federation, the Agent

T h e r e is no merit in the contention of the respondents that the act


of disaffiliation violated the union security clause of the CBA and that their
dismissal as a consequence thereof is valid. A perusal of the collective bargaining
agreements shows that the THEU-NATU, and not the NATU federation, was
recognized as the sole and exclusive collective bargaining agent for all its
workers and employees in all matters concerning wages, hours of work and
other terms and conditions of employment. Although NATU was designated as
the sole bargaining agent in the check-off authorization form attached to the
CBA, this simply means it was acting only for and in behalf of its affiliate. The
NATU possessed the status of an agent while the local union remained the basic
principal union which entered into contract with the respondent company. When
the T H E U disaffiliated from its mother federation, the former did not lose its
legal personality as the bargaining union under the CBA.
Disaffiliation of employees from their mother union and their formation
into a new union do not terminate their status as employees of the corporation,
as the employees and members of the local union did not form a new union but
merely exercised their right to register their local union. A local union when
circumstances so warranted is free to disaffiliate from its mother union.
1

10.2

When to Disaffiliate

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

Elisco-Elirol Labor Union [NAFLU] vs. Noriel, G.R. No. L-41955, December
29, 1977.
2Tanduay Distillery Labor Union vs. National Labor Relations Commission, et
al, 149 SCRA 470 [1987].
201

ARTS. 234-237

LABOR RELATIONS

The "freedom period" refers to the last 60 days of the fifth and last year of
a CBA.
But even before the onset of the freedom period (and despite the closedshop provision in the CBA between the mother union and management)
disaffiliation may still be carried out, but such disaffiliation must be effected by
a majority of the members in the bargaining unit.
This ruling, this writer believes, is true only if the contract of affiliation
does not specify the period for possible disaffiliation. If it does, the stipulation
must be observed.
1

10.3 Disaffiliation must be by Majority Decision


Article 241(d) applies to disaffiliation, thus, it has to be decided by the
entire membership through secret balloting.
Where it was shown that only eleven members out of around 2,000 members
decided to disaffiliate, it was ruled that the disaffiliation was not justified.
3

A member or any number of members may disaffiliate from their union


during the "freedom period." But disaffiliating the union itself from its mother
union must be supported by the majority of the members. If done by a minority,
even during the freedom period, the act may constitute disloyalty. T h e minority
members breaking away at the wrong time may be expelled from the union and,
because of union security clause, may be removed from their employment.
Villar, et al. vs. Inciong, etc., G.R. Nos. L50283-84, April 20, 1983
Petitioners [the disaffiliating union members] insist that their disaffiliation from
PAFLU and filing a petition for certification election are not acts of disloyalty but an
exercise of their right to self-organization. They contend that these acts were done
within the 60-day freedom period when questions of representation may freely be
raised. Under the peculiar facts of the case, We find petitioners' insistence untenable.
In the first place, had petitioners merely disaffiliated from the Amigo Employees
Union-PAFLU, there could be no legal objections thereto for it was their right to do so.
But what petitioners did by the very clear terms of their "Sama-Samang Kapasiyahan"
was to disaffiliate the Amigo Employees Union-PAFLU from PAFLU, an act which they
could not have done with any effective consequence because they constituted the
minority in the Amigo Employees Union-PAFLU.
Extant from the records is the fact that petitioners numbering ten (10), were
among the ninety-six (96) who signed the "Sama-Samang Kapasiyahan" whereas
1

Article 256.
Associated Workers Union-PTGWO vs. NLRC, Metro Post Service, Inc., et
al., G.R. Nos. 87266-69, July 30, 1990; Alliance of Nationalist and Genuine Labor
Organization [ANGLO-KMU] vs. Samahan ng mga Manggagawang Nagkakaisa sa
Manila Bay Spinning Mills at J.P. Coats, et al., G.R. No. 118562, July 5, 1996.
^Associated Workers Union-PTGWO vs. NLRC, G.R. Nos. 87266-69, July 30,
1990.
2

202

REGISTRATION AND CANCELLATION

ARTS. 234-237

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

10.4 Disaffiliation: Effect on Legal Status


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

10.5 Disaffiliation: Effect on Union Dues


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

A contract between an employer and the parent organization as bargaining


agent for the employees is terminated by the disaffiliation of the local of which
'Villar vs. Inciong, 121 SCRA 444, April 20, 1983.
Phil. Federation of Petroleum Workers vs. Court of Industrial Relations, 37
SCRA 711.
2

203

LABOR RELATIONS

ARTS. 234-237

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


wrong in continuing the check-off in favor of respondent federation since they
were duly notified of the disaffiliation and of members having already rescinded
their check-off authorization.
A local union which has validly withdrawn from its affiliation with the parent
association and which continues to represent the employees of an employer is
entitled to the check-off dues under a collective bargaining contract.
1

10.6 Disaffiliation; Effect on Existing CBA; the "Substitutionary" Doctrine


The CBA continues to bind the members of the new or disaffiliated and
independent union up to the CBA's expiration date.
3

The "substitutionary doctrine" provides that the employees cannot revoke


the validly executed collective bargaining contract with their employer by the
simple expedient of changing their bargaining agent. T h e new agent must respect
the contract. The employees, thru their new bargaining agent, cannot renege
on the collective bargaining contract, except to negotiate with management for
the shortening hereof.
This matter is taken up further in commentaries under Article 260.
11.

REVOCATION OF CHARTER

A federation, national union or worker's association may revoke the charter


issued to a local/chapter or branch by serving on the latter a verified notice of
revocation, copy furnished the Bureau, on the ground of disloyalty or such other
grounds as may be specified in the constitution and by-laws of the federation,
national union or workers' association. T h e revocation shall divest the local/
chapter of its legal personality upon receipt of the notice by the Bureau, unless
in the meantime the local/chapter has acquired independent registration in
accordance with these Rules.
4

11.1 Effect of Cancellation of Registration of Federation or National


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

Volkschel Labor Union vs. BLR, et al, G.R. No. L45824, June 19, 1985.
Ibid.
'Associated Workers Union-PTGWO vs. NLRC, G.R. Nos. 87266-69, July 30,
1990.
implementing Rules: Book V, Rule VIII, Sec. 5.
implementing Rules: Book V, Rule VIII, Sec. 6.
204

REGISTRATION AND CANCELLATION

12.

ARTS. 234-237

MERGER OR CONSOLIDATION

Together with multi-employer bargaining (see annotations under Article


250-251), union merger and consolidation is a new concept (in the Philippines)
introduced by D.O. No. 40-03.
"Merger" of labor organizations is the process where a labor organization
absorbs another, resulting in the cessation of the absorbed labor organization's
existence and the continued existence of the absorbing labor organization; that
is, if Union A absorbs Union B, Union A remains and union B disappears, or it
can be B absorbing A. Another name for merger is "absorption."
"Consolidation" of unions refers to the creation or formation of a new
union arising from the unification of two or more unions; that is, if union A and
union B consolidate themselves, both of them disappear and Union C is born.
Another name for consolidation is "amalgamation."
One effect of merger is to transfer to the absorbing organization all the
rights, interest and obligations of the absorbed organization. In consolidation the
newly created labor organization acquires all the rights interest and obligations
of the consolidating labor organizations.
1

Consolidation (amalgamation) usually occurs between two unions that


are approximately the same size, whereas merger (absorption) often involves a
larger union merging with a smaller union.
2

Why do unions merge? They merge for reasons similar to those behind
corporate mergers. First, a small union may merge with a larger union in order
to gain access to greater resources and expertise. By merging, a union may have
more personnel and money for organizing and may be able to offer its members
a wider range of services. Second, unions that have traditionally competed with
each other for members may merge in order to eliminate interorganizational
conflicts; resources that had been used to compete with a rival union could be
used for more constructive purposes once the rivals have merged. Third, unions
whose members' skills have been outmoded by technological and economic
changes may merge with a stronger union in order to maintain j o b security and
institutional survival.
Most union mergers benefit their respective memberships. However,
some mergers appear to be poorly conceived because they involve unions
whose jurisdictions, occupational and industry groupings served, and mode
of operations, are radically different. Union officials who desire to increase
their membership numbers, financial base, and personal power in the labor
3

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


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

205

LABOR RELATIONS

ARTS. 234-237

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

Indeed union merger/consolidation is a new device fraught with questions


which, understandably, have no precast answers.
12.1 Notice of Merger/Consolidation of Labor Organizations; Where to
File
Notice of merger or consolidation of independent labor unions, chartered
locals and workers' associations shall be filed with and recorded by the Regional
Office that issued the certificate of registration/certificate of creation of
chartered local of either the merging or consolidating labor organization. Notice
of merger or consolidation of federations or national unions shall be filed with
and recorded by the Bureau.
2

12.2 Requirements of Notice of Merger/Consolidation


T h e notice of merger/consolidation of labor organizations shall be
accompanied by the following documents:
Terry L. Leap, Collective Bargaining and Labor Relations, [Prentice-Hall: 1995], p.
204.
2

206

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

REGISTRATION AND CANCELLATION

ARTS. 238-238-A

(a)

the minutes of merger/consolidation convention or general


membership meeting(s) of all the merging/consolidating labor
organizations, with the list of their respective members who
approved the same; and

(b)

the amended constitution and by-laws and minutes of its ratification, unless ratification transpired in the merger/consolidation
convention, which fact shall be indicated accordingly.

12.3 Certificate of Registration


T h e certificate of registration issued to merged labor organizations shall
bear the registration number of one of the merging labor organizations as agreed
upon by the parties.
The certificate of registration shall indicate the following: (a) the new name
of the merged/consolidated labor organization; (b) the fact that it is a merger/
consolidation of two or more labor organizations; (c) the name of the labor
organizations that were merged or consolidated; (d) its office or business address;
and (e) the date when each of the merging/consolidating labor organizations
acquired legitimate personality as stated in their respective original certificate
of registration.
13.

CHANGE OF NAME

T h e notice for change of name of a registered labor organization shall


be filed with the Bureau or the Regional Office where the concerned labor
organization's certificate of registration or certificate of creation of a chartered
local was issued. T h e notice for change of name of a labor organization shall be
accompanied by the proof of approval or ratification of change of name; and
the amended constitution and by-laws.
13.1 Effect of Change of Name
T h e change of name of a labor organization shall not affect its legal personality. All the rights and obligations of a labor organization under its old name
shall continue to be exercised by the labor organization under its new name.
ART. 2 3 8 . CANCELLATION OF REGISTRATION
T h e certificate of registration of any legitimate labor organization,
whether national or local, shall be cancelled by the Bureau, after due hearing, only on the grounds specified in Article 239 hereof. (As amended by RA.
No. 9481.)
ART. 238-A. EFFECT OF PETITION FOR CANCELLATION OF
REGISTRATION
A petition for cancellation of union registration shall not suspend
the proceedings on certification election nor shall it prevent the filing of a
petition for certification election.
207

LABOR RELATIONS

ART. 239

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


union to seek just and equitable remedies in the appropriate courts. (This
new article is an amendment inserted by RA. No. 9481, effective June 14, 2007.)
1

ART. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION


The following may constitute grounds for cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with
the adoption or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification, and the list of members who took part
in the ratification;
(b) Misrepresentation, false statements or fraud in connection with
the election of officers, minutes of the election of officers, and the list of
voters;

Before the amendments by RA. No. 9481, Article 239 read as follows:
ART. 239. Grounds for cancellation of union registration
The following shall constitute grounds for cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with the
adoption or ratification of the constitution and by-laws or amendments thereto, the
minutes of ratification, and the list of members who took part in the ratification;
(b) Failure to submit the documents mentioned in the preceding paragraph
within thirty (30) days from adoption or ratification of the constitution and by-laws
or amendments thereto;
(c) Misrepresentation, false statements or fraud in connection with the
election of officers, minutes of the election of officers, the list of voters, or failure
to submit these documents together with the list of the newly-elected/appointed
officers and their postal addresses within thirty (30) days from election;
(d) Failure to submit the annual financial report to the Bureau within thirty
(30) days after the closing of every fiscal year and misrepresentation, false entries or
fraud in the preparation of the financial report itself;
(e) Acting as a labor contractor or engaging in the "cabo" system, or otherwise
engaging in any activity prohibited by law;
(f)
Entering into collective bargaining agreements which provide terms and
conditions of employment below minimum standards established by law;
(g)
Asking for or accepting attorney's fees or negotiation fees from
employers;
(h) Other than for mandatory activities under this Code, checking off special
assessments or any other fees without duly signed individual written authorizations
of the members;
(i)
Failure to submit list of individual members to die Bureau once a year
or whenever required by the Bureau; and
(j)
Failure to comply with requirements under Articles 237 and 238.
208

REGISTRATION AND CANCELLATION

ART. 239-A

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


9481, effective June 14, 2007.)
ART. 239-A. VOLUNTARY CANCELLATION OF REGISTRATION
T h e registration of a legitimate labor organization may be cancelled
by the organization itself, Provided, That at least two-thirds of its general
membership votes in a meeting duly called for that purpose to dissolve the
organization; Provided, further, That an application to cancel registration is
thereafter submitted by the board of the organization, attested to by the
president thereof. (As inserted by R.A. No. 9481, effective June 14, 2007.)
C O M M E N T S AND CASES
1.

CANCELLATION OF REGISTRATION; GROUNDS

While registration is the act that converts a labor organization to a legitimate labor organization, cancellation is the government's act that divests
the organization of that status. It thereby reverts to its character prior to the
registration. Although it does not cease to exist or b e c o m e an unlawful organization, its juridical personality as well as its statutory rights and privileges is
suspended. It therefore loses entitlement to the rights enumerated in Article
242 of the Labor Code. It cannot demand recognition by or bargaining with
the employer, cannot file a petition for certification election, and cannot
strike.
Through R.A. No. 9 4 8 1 , the ten grounds mentioned in the unamended
Article 239 have been reduced to three, and one of them is new. Two pertain
to misrepresentation about the union constitution or by-laws or about election
of officers. T h e third mode is by the desire of the union members themselves.
Regarding this third ground, four requisites must be met. First, the members'
desire to dissolve or cancel the registration of their union should have been voted
upon through secret balloting, applying the rule in Article 241 (d). Second, the
balloting should take place in a meeting duly called for the purpose of deciding
whether or not to dissolve the union. Third, the vote to dissolve should represent
two-thirds affirmative vote of the general membership, not just of the quorum.
Neither the law nor the rules require justification of the members' decision.
And fourth, the members' resolution should be followed by an application
for cancellation passed and submitted by the union's governing board, which
application must be attested to by the president.
The fourth requisite itself raises some questions. Can the decision of the
general membership be defeated by lack of action by the board? Is there no time
limit for the board to submit the application to cancel the registration?
1.1. Invalid Grounds
Having held an illegal strike is not reason to cancel a union's registration.
Holding an illegal strike has adverse consequences to the strikers particularly
209

ARTS. 238-239-A

LABOR RELATIONS

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

1.2. "Cabo" and other Grounds Deleted


Engaging in the "cabo" system was a cause for cancellation of a union's
registration under Article 239 prior to its deletion by R.A. No. 9481. "Cabo" refers
to a person or group of persons or to a labor group which, in the guise of a labor
organization, supplies workers to an employer, with or without any monetary or
other consideration whether in the capacity of an agent of the employer or as
an ostensible independent contractor.
3

Engaging in cabo as a cause of cancellation of union registration was also


included in Rule XIV of D.O. No. 40-03, the rules implementing Book V of the
Code. But because of R.A. No. 9481, many provisions of D.O. No. 40-03 had
to be amended or deleted, and one of them is Rule XIV, Section 3 which lists
"engaging in cabo" as a cause of union cancellation.
Also deleted is "sweetheart contract" or a CBA which provides for terms
and conditions of employment below minimum standards established by law.
Also jettisoned by Article 239 as amended is "asking for or accepting
attorney's fees or negotiation fees from the employer." But, this cause of union
cancellation still exists because the Labor Code itself in Article 249 prohibits it
as a ULP act. R.A. No. 9481 has spared Article 249.
What about violation of Article 241, the rights of members? This Article
(last paragraph) used to provide one of the causes of cancellation of union
registration, if 30 percent of the members support the petition.
Failure to submit annual documentary reports is taken-up under Article
242-A.
1.3

Administrative Cancellation; the "reportorial requirements '

Every legitimate labor union and worker association has the duty to
submit to the Regional Office or the Bureau, two copies of each of the following
documents:

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


[1968].
Philippine Land Air-Sea Labor Union [PLASLU], Inc. vs. Court of Industrial
Relations, 93 Phil. 47 [1953].
implementing Rules, Book V, Rule I, Section 1.
210

REGISTRATION AND CANCELLATION

ARTS. 238-239-A

(a)

any amendment to its constitution and by-laws and the minutes of


adoption or ratification of such amendments, within thirty (30) days
from its adoption or ratification;

(b)

annual financial reports within thirty (30) days after the close of
each fiscal year or calendar year;

(c)

updated list of newly-elected officers, together with the appointive


officers or agents who are entrusted with the handling of funds,
within thirty (30) days after each regular or special election of
officers or from the occurrence of any change in the officers or
agents of the labor organization or workers association;

(d)

updated list of individual members of chartered locals, independent


unions and workers' associations within thirty (30) days after the
close of each fiscal year; and

(e)

updated list of its chartered locals and affiliates or member


organization, collective bargaining agreements executed and their
effectivity period, in the case of federations or national unions,
within thirty (30) days after the close of each fiscal year, as well
as the updated list of their authorized representatives, agents or
signatories in the different regions of the country.

T h e fiscal year of a labor organization shall coincide with the calendar


year, unless a different period is prescribed in the constitution and by-laws.
1

Failure of the labor organization to submit the reports mentioned above


for five (5) consecutive years authorizes the Bureau to institute cancellation
proceedings upon its own initiative or upon complaint by any party-in-interest.
2

2.

WHO FILES PETITION FOR CANCELLATION

D.O. No. 40-03 (Rule XIV, Section 2) states: "Any party-in-interest may
commence a petition for cancellation of a union's registration, except in actions
involving violations of Article 241, which can only be commenced by members
of the labor organization concerned." (Note: T h e exception portion of this
statement has no more basis because violation of Article 241 is not one of the
only three grounds specified in Articles 238 and 239 of R.A. No. 9481. In fact,
this ground has been deleted from D.O. No. 40-03 itself by D.O. No. 40-F-03.)
The employer is a "party-in-interest," and jurisprudence reveals cases of
cancellation of union registration based on petitions filed by the employer.
An example is Progressive Development Corporation vs. Secretary of Labor (G.R. No.
96425, February 4 , 1 9 9 2 ) where the employer sought and won the cancellation
of the union's registration on the ground that it failed to submit the required
documents, such as books of accounts and the union by-laws, when it applied
!
2

Rule 5, D.O. No. 40-03.


Rule XIV, D.O. No. 40-03.
211

ART. 240

LABOR RELATIONS

for registration. Another example is the case of Toyota Motor Philippine Corp. vs.
Toyota Motor Philippine Labor Union, G.R. No. 121084, February 19,1997 where the
employer questioned the inclusion of some supervisors in the rank-and-file union.
The petition filed by the employer led to the divestment of legal personality of
the union because its mixed membership makes it not a labor organization at
all. (Note: See Article 245-A.)
The petition to cancel shall be under oath and shall state clearly and
concisely the facts and grounds relied upon, accompanied by proof of service
to the respondent. But such petition, as already explained, should be a separate
action; it cannot be entertained in the petition for certification election filed by
the union.
3.

WHERE TO FILE PETITION

Subject to the requirements of notice and due process, the registration of


any legitimate independent labor union, chartered local and workers' association
may be cancelled by the Regional Director, or in the case of federations, national
or industry unions and trade union centers, by the Bureau Director, upon the
filing of an independent complaint or petition for cancellation.
1

Cancellation orders issued by the Regional Director are appealable to the


BLR. The latter's decision is final and executory, hence, not appealable to the
DOLE Secretary but it may be elevated to the Court of Appeals by certiorari. B L R
decisions on cancellation cases that originated at the B L R itself may be appealed
to the Secretary and, again, by certiorari to the CA.
2

4.

PROCEDURE

The rules of procedure in cancellation cases are those applicable to inter/


intra-union disputes in general which are already discussed under Article 226.
Additionally, however, certain procedural requirements apply particularly to
"delisting" due to failure to comply with "reportorial requirements." These
additional requirements, related to new Article 242-A, such as publication of
notices in newspapers, are detailed in Rule XV of D.O. No. 40-03 as amended
by D.O. No. 40-F-03.
ART. 2 4 0 . EQUITY OF THE INCUMBENT
All existing federations and national unions which meet the qualifications
of a legitimate labor organization and none of the grounds for cancellation
shall continue to maintain their existing affiliates regardless of the nature
of the industry and the location of the affiliates.
^ e c . 1, Rule XIV, D.O. No. 40-03.
Abbott Laboratories Phil. vs. Abbott Laboratories Employees Union, etc., G.R.
No. 131374, January 26, 2000; also: Section 16, Rule XI, D.O. No. 40-03; Section 15
as renumbered by D.O. No.40-F-03.
2

212

Chapter II
RIGHTS AND CONDITIONS OF MEMBERSHIP
Overview/Key Questions
Box 9
1. What are the rights of union members?
2. When, how, and by whom are union officers elected?
How may they be impeached or removed?
3. May a union m e m b e r seek the cancellation of his
union's registration?
4. What is check-off? When may it properly be done?
bill of rights of union members

ART. 2 4 1 . RIGHTS AND CONDITIONS OF MEMBERSHIP IN A LABOR


ORGANIZATION
T h e following are the rights and conditions of membership in a labor
organization:
( a ) No arbitrary or excessive initiation fees shall be required of the
members of a legitimate labor organization nor shall arbitrary, excessive or
oppressive fine and forfeiture be imposed;
(b) T h e members shall be entitled to full and detailed reports from
their officers and representatives of all financial transactions as provided
for in the constitution and by-laws of the organization;
( c ) T h e m e m b e r s shall directly elect their officers, including those
of the national union or federation, trade center or any similar aggrupation to which their union is affiliated, by secret ballot at intervals of five
( 5 ) years. No qualification requirements for candidacy to any position
shall be imposed other than membership in good standing in subject labor
organization. T h e secretary or any other responsible union officer shall
furnish the Secretary of L a b o r and Employment with a list of the newlyelected officers, together with the appointive officers or agents who are
entrusted with the handling of funds within thirty ( 3 0 ) calendar days after
the election of officers or from the o c c u r r e n c e of any change in the list of
officers of the labor organization;
(d) T h e m e m b e r s shall d e t e r m i n e by s e c r e t ballot, after due
deliberation, any question of major policy affecting the entire membership
of the organization, unless the nature of the organization or force majeure
1

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


213

ART. 241

LABOR RELATIONS

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

(k)
T h e officers of any labor organization shall not be paid any
compensation other than the salaries and expenses due to their positions
as specifically provided for in its constitution and by-laws, or in a written
'As amended by Sec. 16, R.A. 6715.
Ibid

214

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

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


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

ART. 241

LABOR RELATIONS

For this purpose, registered labor organizations may assess reasonable


dues to finance labor relations seminars and other labor education activities.
Any violation of the above rights and conditions of membership shall
be a ground for cancellation of union registration or expulsion of officer
from office, whichever is appropriate. At least thirty percent (30%) of all
the members of union or any member or members specially concerned may
report such violation to the Bureau. The Bureau shall have the power to hear
and decide any reported violation to mete the appropriate penalty.
COMMENTS AND CASES
1.

DEMOCRATIZATION OF UNIONS

A fundamental paradox in democratically governed market economies is


the presence of democracy in the political sphere but its absence in the economic
setting. The people as voters elect the government leaders and, particularly
through their legislative representatives, indirectly control the making of laws.
But in the world of work it is totally different. T h e governing philosophy is
ownership of private property, not popular sovereignty, and the traditional norm
is superior-subordinate relationship, not egalitarianism. T h e workers, generally,
do not and cannot select their superiors, and neither do they decide policy
questions or control the making of rules.
This paradox, this inherent contradiction between political and economic
relations, germinates the seed of unionism. Workers, awakened to their political
power, aspire also for power in their workplace. Realizing that there is strength in
unity, they unionize to match somehow the power of their corporate superiors.
But, as unionism's aim is to install industrial democracy, the unions
themselves must be democratic. This is a rationale behind Article 241.
To democratize the unions, Article 241 requires that the union officers be
elected directly by the members through secret ballot and that the major policy
decisions, as a rule, be made by the union members, again, by secret ballot. As in
a republic where sovereignty resides in the people, the members of the union are
the keepers and dispensers of authority. T h e governing power is the members,
not the officers.
2.

NATURE OF RELATIONSHIP BETWEEN UNION AND ITS MEMBERS

The union has been evolved as an organization of collective strength for the
protection of labor against the unjust exactions of capital, but equally important
is the requirement of fair dealing between the union and its members, which is
fiduciary in nature, and arises out of two factors: one is the degree of dependence
of the individual employee on the union organization; and the other, a corollary
of the first, is the comprehensive power vested in the union with respect to the
individual. T h e union may be considered but the agent of its members for the
purpose of securing for them fair and just wages and good working conditions.
216

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

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

2.1
Duty of Court to Protect Laborers from Unjust Exploitation by
Oppressive Employers and Union Leaders
Just as this Court has stricken down unjust exploitation of laborers by
oppressive employers, so will it strike down their unfair treatment by their own
unworthy leaders. Fair dealing is equally demanded of unions as well as of
employers in their dealings with employees. Where the union leadership as in
the case at bar was recreant in its duty towards the union members, the courts
must be vigilant to protect the individual interests of the union members.
2

T h e union officers cannot refuse to grant a benefit or assistance to which a


union member is entitled under the union constitution and by-laws. In this case
the union by-laws clearly shows that any member who is suspended or terminated
from employment without reasonable cause is entitled to financial assistance from
the union and its members. When the union officers refuse to grant such financial
assistance, it is not abuse of discretion for a labor arbiter, upon complaint of the
aggrieved member, to order such grant. T h e union constitution is a covenant
between the union and its members and among the members.
3

3.

RIGHTS OF UNION MEMBERS

T h e rights and conditions of membership laid down in Article 241 may be


summarized as follows:
(1) Political right the member's right to vote and be voted for, subject
to lawful provisions on qualifications and disqualifications.
(2) Deliberative and decision-making right the member's right to
participate in deliberations on major policy questions and decide them by secret
ballot.
(3) Rights over money matters the member's right against excessive fees;
the right against unauthorized collection of contributions or unauthorized
disbursements; the right to require adequate records of income and expenses and
the right of access to financial records; the right to vote on officers' compensation;
the right to vote on proposed special assessments and be deducted a special
assessment only with the member's written authorization.
(4) Right to information the member's right to be informed about the
organization's constitution and by-laws and the collective bargaining agreement
and about labor laws.

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

217

ART. 241

LABOR RELATIONS

Although not so denominated, Article 241 of the Labor Code carries the
character of a bill of rights of union members. At the same time, the union
members, as employees, retain the right to directly present grievances to the
employer at any time. This right is protected in Article 255, last sentence.
3.1 Eligibility for Membership
When, how, and under what conditions does an employee become a union
member? The answer depends on the union's constitution and by-laws inasmuch
as Article 249 gives a labor organization the right to prescribe its own rules for
acquisition or retention of membership. Nonetheless, under Article 277 an
employee is already qualified for union membership starting on his first day of
service.
An employee's membership in a union, however, does not necessarily
mean coverage by the collective bargaining agreement (CBA), if one exists. T h e
CBA defines its coverage as agreed by the parties. It may state that it covers only
regular employees, thus excluding probationary employees, and even among
regular employees, it may exclude certain positions or jobholders. Qualifying
for union membership therefore does not necessarily mean inclusion in the
coverage of the CBA. T h e reverse is equally true: membership in the CBU does
not automatically mean membership in the union. Members of certain religious
sects, for instance, do not join unions although they are members of a bargaining
unit. CBU members vote to select a bargaining union or to ratify a CBA. But only
union members can vote to elect union officers, to strike or not to strike, or to
decide major policy issues in the union.
To sum up: Inclusion in the CBU depends on the determination of its
appropriateness under Article 234 and Article 255. Inclusion or membership
in a union depends on the union's constitution and by laws, without prejudice
to Article 2 7 7 ( c ) . Inclusion or coverage in the CBA depends on the stipulations
in the CBA itself.
4.

ELECTION OF UNION OFFICERS

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

Rule XII, Section 1.


218

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

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

219

ART. 241

LABOR RELATIONS

The ratification of the new CBA executed between the petitioners and the
University of Santo Tomas management did not validate the void October 4, 1996
election. Ratified were the terms of the new CBA, not the issue of union leadershipa
matter that should be decided only by union members in die proper forum at the
proper time and after observance of proper procedure.
4.1 Eligibility of Voters
Only members of the union can take part in the election of union officers.
Under U.S. Federal law, in any election required to be held by secret ballot,
every member in good standing must have the right to vote for or otherwise
support the candidate or candidates of his choice without being subject to penalty,
discipline or improper interference or reprisal of any kind by the union or any
member thereof. Every member in good standing is entitled to one vote.
1

A member in good standing is any person who has fulfilled the requirements
for membership in the union and who has neither voluntarily withdrawn from
membership nor been expelled or suspended from membership after appropriate
proceedings consistent with the lawful provisions of the union's constitution and
by-laws.
3

A labor organization may prescribe reasonable rules and regulations with


respect to voting eligibility. Thus, it may, in appropriate circumstances, defer
eligibility to vote by requiring a reasonable period of prior membership, such
as six months or a year. While the right to vote may thus be deferred within
reasonable limits, a union may not create special classes of nonvoting members.

A labor organization may condition the exercise of the right to vote on


the payment of dues, since paying dues is a basic obligation of membership.
However, this rule is subject to two qualifications in that (a) any rule denying
dues-delinquent members the right to vote must be applied uniformly; and (b)
members must be afforded a reasonable opportunity to pay dues, including a
grace period during which dues may be paid without any loss of rights.
5

In a Philippine case it was held that the question of eligibility to vote may
be determined through the use of the applicable payroll period and employee's
status during the applicable period the payroll of the month next preceding
the labor dispute in case of regular employees and the payroll period at or near
the peak of operations in case of employees in seasonal industries.
7

'Article 241 [c], Labor Code.


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

220

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART, 241

T h e Court has also held that if none of the contending unions insisted on
the use of the payroll period-list as voting list, the act of the nonunion employees
of joining the election by casting their votes is a clear manifestation of their
intention to j o i n a union. They must therefore be considered ipso facto union
members. Said employees having exercised their right to unionism, by joining
one of the unions, their decision is paramount.
1

Submission of the employees' name with the Bureau of Labor Relations


as qualified members of the union is not a condition sine qua non to enable said
members to vote in the election of the union's officers.
2

Voting and voters in a certification election are discussed in the chapter


on employee representation in collective bargaining.
4.2

Union Officer Must Be an Employee

T h e Implementing Rules used to contain this provision: "No person


who is not an employee or worker of the company or establishment where
an independently registered union, affiliate, local or chapter of a labor
federation or n a t i o n a l u n i o n o p e r a t e s shall h e n c e f o r t h be e l e c t e d or
appointed as an officer of such union, affiliate, local or chapter." In short,
one should be employed in the company to qualify as officer of a union in that
company. Although subsequent department orders deleted this provision, the
membership qualification remains because it is required in the Code itself, in
Article 2 4 1 ( c ) , second sentence.
3

4.3

Disqualification of Union Officers

No person who has been convicted of a crime involving moral turpitude


shall be eligible for election as a union officer or for appointment to any position
in the union. (Article 241, paragraph [f].) A crime involving moral turpitude is
one characterized by "an act of baseness, vileness or depravity in the private or
social duties which a man owes his fellowmen, or to society in general, contrary
to accepted and customary rule of right and duty between man and man, or
conduct contrary to justice, honesty, modesty, or good morals."
4

Article 241 (e) provides that "no labor organization shall knowingly admit as
member or continue in membership any individual who belongs to a subversive
organization or who is engaged directly or indirectly in any subversive activity."
This membership disqualification applies with equal force to candidates in
union elections; in other words, one who cannot even be a member cannot be
a candidate for an office.

'Tancinco vs. Pura Ferrer-Calleja, G.R. No. 78131, January 20, 1988.
Ibid.
'Implementing Rules, Book V, Rule II, Sec. 3[f].
*Tak vs. Republic, 106 Phil. 730.
221

ART. 241

LABOR RELATIONS

4.4 Union Election Protest: Proclamation of Winners


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

RIGHTS OF UNION MEMBERS


The vast majority of union officials endeavor honestly to safeguard
the rights and forward the interests of their members and to discharge
the duties of their office. Yet the reputation of the vast majority and of the
labor movement are imperiled by the dishonest, corrupt and unethical
practices of the few who betray their trust.
Union members who fail to exercise and practice their responsibilities as union citizens likewise bear a high degree of accountability for
abridgement of their rights.
Most of the time but not all of it, by any means they do enjoy
their rights as members of democratic unions. Most of the time but,
unfortunately, not enough of the time they do exercise and practice
their responsibilities as union members.... What are the rights of a union
member vis-a-vis his union? I assume everyone interested in the subject
has his own list. This is mine:
1.

The right to a democratic union.

2. T h e right to due process of law in union disciplinary


proceedings.
3.

The right to a clean, honest union.

4.

The right to an effective union.

5. The right to a union free from discrimination because of race,


creed or color.
6. The right to a responsible union responsible not only to its
members and employees, but to the community and to the nation as
well.
Arthur J. Goldberg, "Rights and Responsibilities of Union Members, "in
E. Wight Bakke (ed.) Union, Management and the Public (Harcourt,
New York, 1967), p. 180.
T h e remedy against erring union officers is not referendum but union
expulsion. If the union officers were guilty of the alleged acts imputed against
222

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

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


the New Labor Code and in the light of Our ruling in Duyag vs. Inciong (98 SCRA
5 2 2 ) , should have meted out the appropriate penalty on them, i.e., to expel
them from the Union, as prayed for, and not call for a referendum to decide
the issue. By and large, the holding of the referendum in question has become
moot and academic. This is in line with Our ruling in Pascua vs. Provincial Board
of Nueva Ecija (106 Phil. 4 7 1 ) , which We quote: "The Court should never remove
a public officer for acts done prior to his present term of office. To do otherwise
would be to deprive the people of their right to elect their officers. When the
people have elected a man to office, it must be assumed that they did this with
knowledge of his life and character, and that they disregarded or forgave his faults
or misconduct, if he had been guilty of any. It is not for the court, by reason of
such faults or misconduct, to practically overrule the will of the people."
1

It is the better part of conventional or pragmatic solutions, absent


overriding considerations to the contrary, to respect the will of the majority of
the workers who voted in the elections. Although decreed under a different
setting, it is apropos to recall the ruling that where the people have elected a
man to office, it must be assumed that they did this with knowledge of his life
and character and that they disregarded or forgave his faults or misconduct if
he had been guilty of any.
2

Moreover, even if the disqualification could be justified, the candidates of


petitioner cannot be declared as the winners in the disputed election. The mere
fact that they obtained the second highest number of votes does not mean that
they will thereby be considered as the elected officers if the true winners are
disqualified.
3

6.

DUE PROCESS IN IMPEACHMENT


Litton Mills Employees Association-kapatiran vs. Ferrer-CaUeja, L-78061, November
24, 1988
As to the impeachment of a union officer, Section 2, Article XV of the petitionerunion's constitution and by-laws provides the procedures to be followed, to wit: (1)
Impeachment should be initiated by petition signed by at least 30% of all bona fide
members of the union, and addressed to the Chairman of the Executive Board; (b) A
general membership meeting shall be convened by the Board Chairman to consider
the impeachment of an officer; (c) Before any impeachment vote is finally taken,
the union officer against whom impeachment charges have been filed shall be given
ample opportunity to defend himself; and (d) A majority of all the members of the
union shall be required to impeach or recall union officers.
'Kapisanan ng Manggagawang Pinagyakap [KMP] vs. Trajano, 134 SCRA 236
[1985].
Manalad vs. Trajano, G.R. Nos. 72772-73, June 28, 1989.
Ibid.
2

223

LABOR RELATIONS

ART- 241

It clearly appears that the above cited procedure was not followed by the petitioners when they impeached Umali. To be sure, there was difficulty on the part of the
petitioners in complying with the required procedure for impeachment considering
mat the petition to impeach had to be addressed to the Chairman of the Executive
Board of the Union, and that the majority membership which would decide on the
impeachment had to be convened only upon call of the Chairman of the Executive
Board who, in the case at bar, happened to be respondent Umali himself.
Nevertheless, despite the practical difficulties in complying with the said
procedure, petitioners should have shown substantial compliance with said
impeachment procedure, by giving Umali ample opportunity to defend himself, as
contrasted to an outright impeachment, right after he failed to appear before die
first and only investigation scheduled on August 25, 1986 in the Litton Canteen.
7.

EXPULSION OF MEMBER

Just as an officer is entitled to due process, so does a member. In a case,


the Court explicitly ruled that a member of a labor union may be expelled only
for a valid cause and by following the procedure outlined in the constitution
and by-laws of the union.
1

Ferrer, et al vs. NLRC, G.R. No. 100898, July 5,1993


Facts: In May 1989, petitioner Ferrer and companions filed with the Department
of Labor a complaint seeking the expulsion from SAMAHAN of its officers headed
by president Capitle allegedly because the officers failed to attend to the economic
demands of the workers. Subsequently, Ferrer and companions elected a new set of
officers, an election which was objected to by FFW, the federation. Nonetheless, the
Ferrer group of officers tried to dissuade the OFC [employer] from remitting union
dues to the officers led by Capitle.
As a result, the union officials headed by Capitle expelled Ferrer, et al, from
the union and demanded from the company the termination of their employment.
At the time they were dismissed, they had been regular OFC employees for about
ten years.
Ferrer and his four companions turned to the Federation of Democratic Labor
Unions (FEDLU) and requested that they be represented ("katawanin") by said
federation before the DOLE in the complaint which they intended to file against
the union (SAMAHAN), the FFW, and the company.
On various dates, Ferrer and companions wrote the Company to profess
innocence of the "disloyalty" and other charges levelled against them by the
SAMAHAN and the FFW and to plead that they be reinstated. Eliciting no response,
they, through the FEDLU, filed a complaint for illegal dismissal and unfair labor
practice before the NLRC against OFC, the FFW, and the SAMAHAN officers headed
by Capitle.
'Kapisanan ng mga Manggagawa sa Manila Railroad Co., et al vs. Bugay and
CIR, 101 Phil. Reports 18.
224

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

Ruling: In the first place, the union has a specific provision for the permanent or
temporary "expulsion" of its erring members in its constitution and by-laws ("saligang
batas at alituntunin"). Under die heading membership and removal ("pag-aanib at
pagtitiwalag"), it states:
SEC. 4. Ang sinumang kasapi ay maaring itwalag (sic) ng Samahan pangsamantala o
tuluyan sa pamamgitan (sic) ng tatlo't ikaapat (3/4) na bahagi ng dami ng bilang ng Pamunuang Tagapapaganap. Pagkaraan lamang sa pandinig sa kanyang kaso. Batay sa sumusunod:
(a) Sinumang gumawa ng mga bagay bagay na labag at lihis sa patakaran ng
Samahan.
(b) Sinumang gumawa ng mga bagay na maaring ikabuwag ng Samahan.
(c) Hindi paghuhulog ng butaw sa loob ng tatlong buwan na walang sakit
o Doctor's Certificate.
(d) Hindi pagbibigay ng abuloy na itinatadhana ng Samahan.
(e)
Sinumang kasapi na natanggal sa kapisanan at gustong sumapi uli ay
magpapanibago ng bilang, mula sa taon ng kanyang pagsapi uli sa Samahan.
No hearing ("pandinig") was ever conducted by the SAMAHAN to look into
petitioners' explanation of their moves to oust the union leadership under Capitle,
or their subsequent affiliation with FEDLU. While it is true that petitioners' actions
might have precipitated divisiveness and, later, showed disloyalty to the union, still,
the SAMAHAN should have observed its own constitution and by-laws by giving
petitioners an opportunity to air their side and explain their moves. If, after an
investigation the petitioners were found to have violated union rules, then and only
then should they be subjected to proper disciplinary measures.
What aggravated the situation in this case is the fact that OFC [the employer]
itself took for granted that die SAMAHAN had actually conducted an inquiry and
considered the CBA provision for the closed shop as self-operating that, upon receipt
of a notice that some members of the SAMAHAN had failed to maintain their
membership in good standing in accordance with the CBA, it summarily dismissed
petitioners. To make matters worse, the labor arbiter and the NLRC shared die
same view in holding that "(t)he matter or question, therefore, of determining why
and how did complainants fail to retain membership in good standing is not for die
company to inquire via formal investigation."
Petitioners' alleged act of sowing disunity among the members of the
SAMAHAN could have been ventilated and threshed out through a grievance
procedure within the union itself. But resort to such procedure was not pursued.
What actually happened in this case was that some members, including petitioners,
dried to unseat the SAMAHAN leadership headed by Capitle due to the latter's
alleged inattention to petitioners' demands for the implementation of the P25-wage
increase which took effect on July 1,1989. The intraunion controversy was such that
petitioners even requested the FFW to intervene to facilitate die enforcement of the
said wage increase.
Petitioners sought the help of the FEDLU only after they had learned of
the termination of their employment upon the recommendation of Capitle. Their
225

ART. 241

LABOR RELATIONS

alleged application with federations other than the FFW can hardly be considered
as disloyalty to the SAMAHAN, nor may the filing of such applications denote that
petitioners failed to maintain in good standing their membership in the SAMAHAN.
The SAMAHAN is a different entity from FFW, the federation to which it belonged.
Neither may it be inferred that petitioners sought disaffiliation from the FFW, for
petitioners had not formed a union distinct from that of the SAMAHAN.
Hence, while petitioner's act of holding a special election to oust Capitle, et
al. may be considered as an act of sowing disunity among the SAMAHAN members,
and, perhaps, disloyalty to the union officials, which could have been dealt with by
the union as a disciplinary matter, it certainly cannot be considered as constituting
disloyalty to the union.
Expulsion of a member for arbitrary or impetuous reason may amount
to unfair labor practice by the union. This matter is taken up in the chapter on
ULP, particularly Article 249.
8.

RELIEF WITHIN THE UNION

Generally, redress must first be sought within the union itself in accordance
with its constitution and by-laws.
1

In o n e case the union vice-president filed a c o m p l a i n t of illegal


disbursement of funds against the president and treasurer of two unions. T h e
complaint, instead of being presented to the national convention as required
by the union by-laws, was filed directly with DOLE. T h e action was premature,
ruled the Court, with this explanation:
When the Constitution and by-laws of both unions dictated the
remedy for intra-union dispute, this should be resorted to not only
to give the grievance machinery or appeals' body of the union the
opportunity to decide the matter by itself, but also to prevent unnecessary
and premature resort to administrative or judicial bodies. Thus, a party
with an administrative remedy must not merely initiate the prescribed
administrative procedure to obtain relief, but also pursue it to its
appropriate conclusion before seeking judicial intervention. This rule
clearly applies to the instant case. T h e underlying principle of the rule
on exhaustion of administrative remedies rests on the presumption that
when the administrative body, or grievance machinery, as in this case,
is afforded a chance to pass upon the matter, it will decide the same
correctly. Petitioner's premature invocation of public respondent's
intervention is fatal to his cause of action. (Diamonon vs. Department of
Labor etc., et al., G.R No. 108951, March 7, 2000.)
If intra-union remedies have failed to correct any violations of
the internal labor organization procedures, a case can be filed with the
*Kapisanan ng mga Manggagawa sa MRR vs. Hernandez, 20 SCRA 109.
226

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

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


of this nature.
8.1

Exceptions

In an earlier case, however, the Court had ruled that where exhaustion of
remedies within the union itself would practically amount to a denial of justice,
it would not be insisted upon, as a condition to the right to invoke the aid of
a court. In Kapisanan ng mga Manggagawa sa MRR vs. Hernandez, 20 SCRA 109,
decided in 1967, the Court held:
"In the case at bar, noteworthy is the fact that the complaint was filed
against the union and its incumbent officers, some of whom were members
of the board of directors. T h e constitution and by-laws of the union provide
that charges for any violations thereof shall be filed before the said board.
But as explained by the lower court, if the complainants had done so the
board of directors would in effect be acting as respondent investigator and
judge at the same time. To follow the procedure indicated would be a farce
under the circumstances, where exhaustion of remedies within the union
itself would practically amount to a denial of justice or would be illusory
or vain, it will not be insisted upon, particularly where property rights of
the members are involved, as a condition to the right to invoke the aid of
a court."
Similarly, in another case, the Court said:
"One of the instances when the rule of exhaustion of administrative
remedies may be disregarded is when there is a violation of due process.
In this case, the respondents [union members] have chronicled from the
very beginning that they were indefinitely suspended without the benefit
of a formal charge sufficient in form and substance. Therefore, the rule
on exhaustion of administrative remedies cannot squarely apply to them."
(Verceles, et al. vs. Bureau of Labor Relations, G.R No. 152322, February 15,
2005.)
9.

CONSEQUENCE OF VIOLATION OF RIGHTS


If the conditions of membership, or the rights of the members, are violated,
the violation may result in the cancellation of the union registration or the
expulsion of the culpable officers. Such consequence is categorically stated in
the last paragraph of the present article.
Under D.O. No. 40-03 (Rule XIII, Sec. 4) any complaint or petition with
allegations of mishandling, misappropriation or non-accounting of funds in
violation of Article 241 shall be treated as an intra-union dispute. It shall be
heard and resolved by the Med-Arbiter pursuant to the provisions of Rule XI
(regarding inter/intra-union disputes).
227

LABOR RELATIONS

ART. 241

9.1 Exception: When 30% Not Required


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

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


195 [1964].
228

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

(Note: In view of Articles 238 and 239 [as amended] that limit to only
three the grounds for cancellation of union registration, and violation of Article
241 is not one of the three, the thirty percent requirement is now of doubtful
relevance to the particular issue of union cancellation.)
10.

VISITORIAL POWER

Article 2 7 4 authorizes the Secretary of Labor and Employment or his duly


authorized representative to inquire into the financial activities of any labor
organization on the basis of a complaint under oath, supported by 20 percent
of the membership in order to determine compliance or noncompliance with
the laws and to aid in the prosecution of any violation thereof.
11.

CHECK-OFFS AND ASSESSMENTS

A check-off is a method of deducting from an employee's pay at prescribed


period, the amounts due the union for fees, fines, or assessments. T h e right of
a union to collect union dues is recognized under Article 2 7 7 ( a ) .
Under Article 113, one of the lawful deductions from employee's wage is
"for union dues, in cases where the right of the worker or his union to check-off
has been recognized by the employer or authorized in writing by the individual
worker concerned." But the amount of union dues should be reasonable; Article
241 prohibits the imposition of excessive or arbitrary fees. And while payment of
union dues may be a basis of acquisition or retention of membership as authorized
under Article 2 4 9 ( a ) , it must be recalled that under Article 241 (d) "any question
of major policy affecting the entire membership" has to be determined by the
members themselves by secret ballot. T h e amount and collection of union dues
are questions that affect the entire membership, hence, they have to be approved
by the members themselves.
11.1 Assessments, like Dues, may also be Checked Off
Dues are defined as payments to meet the union's general and current
obligations. T h e payment must be regular, periodic, and uniform. Payments used
for a special purpose, especially if required only for a limited time, are regarded
as assessment.
1

Under Article 241 "other than for mandatory activities under the Code, no
special assessment, attorney's fees, negotiation fees or any other extraordinary
fees may be checked off from any amount due an employee without individual
written authorization duly signed by the employee. The authorization should
specifically state the amount, purpose and beneficiary of the deduction."
Attorney's fees may not be deducted or checked off from any amount due
to an employee without his written consent, except for mandatory activities under
the Code.
2

'Bruce S. Feldacker, Labor Guide to Labor Law, Prentice Hall, 2000, p. 434.
2 Vengco vs. Trajano, G.R. No. 74453, May 5, 1989.
229

ART. 241

LABOR RELATIONS

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


the law. An amicable settlement entered into by the management and the union
is not a mandatory activity under the Code. Moreover, the law explicitly requires
the individual written authorization of each employee concerned, to make the
deduction of attorney's fees valid.
Deductions for union service fee are authorized by law and do not require
individual check-off authorizations.
However, the benefits awarded to the employees formed part of the
collective bargaining negotiations although placed under compulsory arbitration.
Notwithstanding its "compulsory" nature, "compulsory arbitration" is not the
"mandatory activity" under the Code which dispenses with individual written
authorizations for check-offs. It is a judicial process of settling disputes laid
down by law. Besides, Article 222(b) does not except a CBA later placed under
compulsory arbitration, from the ambit of its prohibition. In other words,
individual written authorizations are needed to deduct from members' salary
the attorney's fee for concluding a collective bargaining agreement through
compulsory arbitration.
1

Special Assessment may be checked off, but Article 241 should be carefully
complied with.
Palacol, et al. vs. Pura Ferrer-CaUeja, et al., G.R. No. 85333, February 26,1990
Facts: The union president submitted to the company die ratification by the
union members of the newly concluded CBA. He also submitted an authorization
for the company to deduct union dues of P10.00 every pay day and, in addition, 10%
as special assessment, from the CBA lump sum pay granted to the union members.
Originally, 672 members authorized the 10% special assessment, while 173
opposed it. Subsequently, however, a total of528 members submitted documents to the
company stating that although they had ratified the new CBA, they were withdrawing
or disauthorizing the deduction of any amount from their CBA lump sum.
They assailed the 10% special assessment as a violation of Article 241 (o) in
relation to Article 222(b) of the Labor Code. As authority for their contention, they
cited Galvadores vs. Trajano (144 SCRA 138).
Rulings: (1) Requirements. The failure of the Union to comply strictly with
the requirements set out by the law invalidates the questioned special assessment.
Substantial compliance is not enough in view of die fact that die special assessment
will diminish the compensation of the union members. Their express consent is
required, and this consent must be obtained in accordance with the steps outlined
by law, which must be followed to the letter. No shortcuts allowed.
Vengco vs. Trajano, G.R. No. 74453, May 5, 1989.
Radio Communications of the Philippines, Inc. vs. Secretary of Labor, G.R.
No. 77959, January 9, 1989.
Galvadores, et al. vs. Trajano, G.R. No. 70067, September 15, 1986.
2

230

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

The applicable provisions are clear. The Union itself admits that both
paragraphs (n) and (o) of Article 241 apply. Paragraph (n) refers to "levy" while
paragraph (o) refers to "check-off of a special assessment. Both provisions must
be complied with. Under paragraph (n), the Union must submit to the Company a
written resolution of a majority of all the members at a general membership meeting
duly called for the purpose. In addition, the secretary of the organization must record
the minutes of the meeting which, in turn, must include, among others, the list of
all the members present as well as the votes cast.
The Union obviously failed to comply with the requirements of paragraph (n).
It held local membership meetings on separate occasions, on different dates and at
various venues, contrary to the express requirement that there must be a general
membership meeting. The contention of the Union that "the local membership
meetings are precisely the very general meetings required by law" is untenable because
the law would not have specified a general membership meeting had the legislative
intent been to allow local meetings in lieu of the latter.
It submitted only minutes of the local membership meetings when what is
required is a written resolution adopted at the general meeting. Worse still, the
minutes of three of those local meetings held were recorded by a union director and
not by the union secretary. The minutes submitted to the Company contained no list
of the members present and no record of the votes cast. Since it is quite evident that
the Union did not comply with the law at every turn, the only conclusion that may
be made therefrom is that there was no valid levy of the special assessment pursuant
to paragraph (n) of Article 241 of the Labor Code.
(2) Effects of withdrawal of authorizations. Paragraph (o), on the other hand,
requires an individual written authorization duly signed by every employee in order
that a special assessment may be validly checked off. Even assuming that the special
assessment was validly levied pursuant to paragraph (n), and granting that individual
written authorizations were obtained by the Union, nevertheless there can be no valid
check-off considering that the majority of the union members had already withdrawn
their individual authorizations. The withdrawal of the authorization is equivalent to
no authorization at all.
(3) Forms of disauthorizations. The Union points out, however, that said
disauthorizations are not valid for being collective in form. The contention deserves
no merit for die simple reason that the documents containing the disauthorizations
have the signatures of the union members. The Court finds these retractions to be
valid. There is nothing in die law which requires that the disauthorizations must be
in individual form.
(4) Purpose of the special assessment. Of the stated purposes of the special
assessment, as embodied in die board resolution of the Union, only the collection
of a special fund for labor and education research is mandated. The two other
purposes, namely, the purchase of vehicles and other items for the benefits of the
union officers and die general membership, and the payment of services rendered
by union officers, consultants and others, should be supported by the regular union
dues, there being no showing that the latter are not sufficient to cover the same.
231

LABOR RELATIONS

ART. 241

(5) Article 222(b) of the Labor Code, "similar charge. "The last stated purpose
is contended by petitioners to fall under the coverage of Article 222(b) of the Labor
Code. The contention is impressed with merit. Article 222(b) prohibits attorney's
fees, negotiation fees and similar charges arising out of the conclusion of a collective
bargaining agreement from being imposed on any individual union member. The
collection of die special assessment partly for the payment services rendered by
union officers, consultants and others may not be in the category of "attorney's
fees or negotiation fees." But there is no question that it is an exaction which falls
within the category of a "similar charge," and, therefore, within the coverage of the
prohibition in the aforementioned article.
(6)
Unlimited discretion of union president, disallowed. There is an additional
proviso giving the Union President unlimited discretion to allocate the proceeds of
the special assessment. Such a provision may open the door to abuse by the officers
of the union considering that the total amount of the special assessment is quite
considerable PI,027,694.33 collected from those union members who originally
authorized the deduction, and PI,267,863.39 from those who did not authorize the
same, or subsequently retracted their authorizations.
The Court, therefore, strikes down the questioned special assessment for being
a violation of Article 241, paragraphs (n) and (o), and Article 222(b) of the Labor
Code.
11.2 Three Requisites to Collect Special Assessment
Article 241 speaks of three requisites that must be complied with in order
that the special assessment for Union's incidental expenses, attorney's fees and
representation expenses, may be valid, namely: 1) authorization by a written
resolution of the majority of all the members at the general membership
meeting duly called for the purpose; (2) secretary's record of the minutes of
the meeting; and (3) individual written authorization for check-off duly signed
by the employee concerned.
1

11.2a Article 241 (n and o): Authorization Should Proceed from Free Consent
In another case, the union officers who negotiated the CBA, which grants
P42 million economic benefits package, required the union members to sign a
document embodying (1) the ratification of the CBA and (2) an authorization
for the deduction or check-off of P4.2 million (from the P42 million package)
as payment for attorney's fees.
Such authorization is invalid as it does not conform with Article 241 ( n ) .
T h e authorization, embodied in the ratification of the employer-union memo
of agreement, is a vitiated authorization because it could be assumed that the
union members felt it difficult to turn down the substantial and lucrative award
1

ABS-CBN Supervisors Employees Union Members vs. ABS-CBN Corp., et al.,


G.R. No. 106518, March 11,1999.
232

RIGHTS AND CONDITIONS OF MEMBERSHIP

ART. 241

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

11.3 Check-off of Agency Fee


Another allowable deduction from employee's wage is agency fee. This is
an amount, equivalent to union dues, which a nonunion member pays to the
union because he benefits from the CBA negotiated by the union. In negotiating
the CBA the union served as the employees' agent. Check-off of agency fee is
allowed under Article 2 4 8 ( e ) .
11.4 Illegal Check-off Ground for Cancellation
Violation of the law on check-off of special assessments was one of the
grounds for cancellation of union registration, as stated in Article 239(h) before
the article was amended by R.A. No. 9 4 8 1 .
On the part of the employer, illegal check-off may give rise to a charge of
illegal deduction, in violation of Article 113.
11.5 Employer's Liability in Check-off Arrangement
No provision of law makes the employer directly liable for the payment to
the labor organization of union dues and assessments that the former fails to
deduct from its employees' salaries and wages pursuant to a check-off stipulation.
The employer's failure to make the requisite deductions may constitute a violation
of a contractual commitment for which it may incur liability for unfair labor
practice. But the employer does not, by that omission, incur liability to the union
for the aggregate of dues or assessments uncollected from the union members,
or agency fees for non-union employees.
2

Check-offs in truth impose an extra burden on the employer in the form


of additional administrative and bookkeeping costs. It is a burden assumed
by management at the instance of the union and for its benefit, in order to
facilitate the collection of dues necessary for the latter's life and sustenance.
But the obligation to pay union dues and agency fees obviously devolves not
upon the employer, but the individual employee. It is a personal obligation
not demandable from the employer upon default or refusal of the employee to
consent to a check-off. T h e only obligation of the employer under a check-off
is to effect the deductions and remit the collections to the union.
3

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

1996.
Ibid.
233

ART. 241

LABOR RELATIONS

11.6 Jurisdiction Over Check-off Disputes


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

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


November 11, 1988.
234

Chapter III
RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS
Overview/Key Questions
Box 10
1. What are the rights of a legitimate labor organization?
2. May a union, as representative, settle by compromise
its members' money claims?

ART. 2 4 2 . RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS


A legitimate labor organization shall have the right:
(a) To act as the representative of its members for the purpose of
collective bargaining;
(b) To be certified as the exclusive representative of all the employees
in an appropriate collective bargaining unit for purposes of collective
bargaining;
(c) To be furnished by the employer, upon written request, with the
annual audited financial statements, including the balance sheet and the
profit and loss statement, within thirty ( 3 0 ) calendar days from the date
of receipt of the request, after the union has been duly recognized by the
employer or certified as the sole and exclusive bargaining representatives
of the employees in the bargaining unit, or within sixty (60) calendar days
before the expiration of the existing collective bargaining agreement, or
during the collective bargaining negotiation;
(d) To own property, real or personal, for the use and benefit of the
labor organization and its members;
(e) To sue and be sued in its registered name; and
(f) To u n d e r t a k e all o t h e r activities designed to benefit the
organization and its members, including cooperative, housing welfare and
other projects not contrary to law.
Notwithstanding any provision of a general or special law to the
contrary, the income and the properties of legitimate labor organizations,
including grants, endowments, gifts, donations and contributions they may
receive from fraternal and similar organizations, local or foreign, which are
actually, directly and exclusively used for their lawful purposes, shall be free
As amended by Sec. 17, R.A. 6715.
235

LABOR RELATIONS

ART. 242

from taxes, duties and other assessments. The exemptions provided herein
may be withdrawn only by a special law expressly repealing this provision.
COMMENTS AND CASES
1.

NOT ANY L.L.O.


The first three rights mentioned in this article do not pertain to just
about any union but only to the union that has been selected as the bargaining
representative of the employees in the bargaining unit. This article must be read
in relation to Article 255.
The union whose demand for collective bargaining was rebuffed by the
employer, because the union was not the certified bargaining agent, has no
right to stage a strike. T h e strike is illegal. Such illegality is reason enough for
the NLRC to declare that the union officers have lost their employment status.
1

2.

RIGHT OF UNION TO REPRESENT ITS MEMBERS

It is the function of a labor union to represent its members against the


employer's unfair labor practices. It can file an action in their behalf without
the cumbersome procedure of joining each and every member as a separate
party.
2

A labor union has the requisite personality to sue on behalf of its members
for their individual money claims. It would be an unwarranted impairment of
the right to self-organization if such collective entities would be barred from
instituting action in their representative capacity.
3

Even if it is not clear from the record that the union is a registered
organization, but considering that it filed a petition for certification election
and such petition was granted on appeal by the Labor Undersecretary, such
a union has the requisite personality to sue in its own name to challenge the
ULP acts committed by the employer. Such union may institute the action in its
representative capacity.
4

T h e union and its attorney should be allowed to participate in making


compromise settlements with employees who are union members. In one
case, the company was adjudged to have acted with evident bad faith and
malice when it secured the 53 quitclaim agreements individually with the
complainant workers without the intervention of court and without involving
the union. This subterfuge is tantamount to a sabotage of the interest of the
association. Needless to say, the means employed by the employer in dealing
1

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

236

RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS

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

2.1

Members Doubting Their Union

T h e authority of a union under Article 242 to act as representative of


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

3.

COMPROMISE BINDING UPON MINORITY MEMBERS OF UNION;


EXCEPTION

A compromise agreement between the Union and the Company, pursuant


to which the complaint in an unfair labor practice case had been withdrawn and
dismissed, is binding upon the minority members of the union. T h e action taken
by said minority members in disauthorizing the counsel of record and filing
another unfair labor practice case against the company is contrary to the policy of
the Magna Carta of Labor, which promotes the settlement of differences between
management and labor by mutual agreement. If said action were tolerated, no
employer would ever enter into any compromise agreement, for the minority
members of the union will always dishonor the terms of the agreement and
demand their better terms.
3

T h e court, however, reached a different conclusion in a case where 257


out of 262 complainants agreed to drop their criminal and ULP complaints
against their employer as well as their claim for reinstatement in exchange of
separation pay. T h e union, said the court, had no authority to compromise
the individual claims of members who did not consent to such settlement. Not
having authorized their union to enter into such compromise, those members
'Pampanga Sugar Development Co. Inc. vs. CIR, 114 SCRA 725 [1982].
Acedera, et al. vs. International Container Terminal Services, Inc., et al., G.R.
No. 146073, January 13, 2003.
See Dionela vs. Court of Industrial Relations, 8 SCRA 832 [1963].
2

237

LABOR RELATIONS

ART. 242

are not bound by the terms of the settlement; hence, they can still pursue their
individual claims for reinstatement and backwages.
1

4.

COMPROMISE OF MONEY CLAIMS


Money claims due to laborers cannot be the object of settlement or
compromise effected by a union or counsel without the specific individual consent
of each laborer concerned. The beneficiaries are the individual complainants
themselves. The union to which they belong can only assist them but cannot
decide for them. Awards in favor of laborers after long years of litigation must
be attended to with mutual openness and in the best of faith. Only thus can we
really give meaning to the constitutional mandate of giving laborers maximum
protection and security.
,

The union officers authority to compromise must be presented in evidence.


A judgment based on a compromise agreement authorized by the members
does not bind the individual members or complainants who are not parties
thereto nor signatories therein.
2

Under the philosophy of collective responsibility, an employer who bargains


in good faith should be entitled to rely upon the promises and agreements of the
union representatives with whom he must deal under the compulsion of law and
contract. The collective bargaining process should be carried on between parties
who can mutually respect and rely upon the authority of each other. Where,
however, collective bargaining process is not involved, and what is at stake are
backwages already earned by the individual workers byway of overtime, premium
and differential pay, and final judgment has been rendered in their favor, as in
the present case, the real parties in interest with direct material interest, as against
the union which has only served as a vehicle for collective action to enforce their
just claims, are the individual workers themselves. Authority of the union to waive
or quitclaim all or part of the judgment award in favor of the individual workers
cannot be lightly presumed but must be expressly granted, and the employer,
as judgment debtor, must deal in all good faith with the union as the agent of
the individual workers. T h e court in turn should certainly verify and assure
itself the fact and extent of the authority of the union leadership to execute any
compromise or settlement of the judgment on behalf of the individual workers
who are the real judgment creditors.
3

In another case, the Court noted that the complainant union members
had not ratified the Return-to-Work Agreement. It follows that they cannot be
held bound by the Return-to-Work Agreement. T h e waiver of money claims,
^ l d e n Donuts vs. NLRC, et al, G.R. Nos. 113666-68, January 19, 2000.
Kaisahan ng mga Manggagawa sa La Campana vs. Sarmiento, 133 SCRA 220
[1984].
Heirs of Teodolo M. Cruz vs. Court of Industrial Relations, 30 SCRA 917
[1969].
2

238

RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS

ART. 242-A

which in this case were accrued money claims, by workers and employees must
be regarded as a personal right, that is, a right that must be personally exercised.
For a waiver thereof to be legally effective, the individual consent or ratification
of the workers or employees involved must be shown. Neither the officers nor the
majority of the union had any authority to waive the accrued rights pertaining to
the dissenting minority members, even under a collective bargaining agreement
which provided for a "union shop." The same consideration of public policy which
impelled the Court to reach the conclusion it did in Manggagawa sa La Campana
vs. Sarmiento (133 SCRA 220) are equally compelling in the present case. The
members of the union need the protective shield of this doctrine not only vis-a-vis
their employer but also, at times, vis-a-vis the management of their own union,
and at other times even against their own imprudence or impecuniousness.
1

5.

RIGHT TO BE FURNISHED WITH FINANCIAL STATEMENT

To better equip the union in preparing for or in negotiating with the


employer, the law (Article 212 [c]) gives it the right to be furnished with the
employer's audited financial statements. There are four points in time when
the union may ask in writing for these statements:
(1)
after the union has been recognized by the employer as sole
bargaining representative of the employees in the bargaining unit; or
(2)
after the union is certified by DOLE as such sole bargaining
representative; or
(3)

within the last 60 days of the life of a CBA; or

(4)

during the collective bargaining negotiation.

The audited financial statements, including the balance sheet and the profit
and loss statement, should be provided by the employer within 30 calendar days
after receipt of the union's request.
6.

RIGHT TO COLLECT DUES

T h e right of a union to collect union dues is already mentioned under the


topic of check-off in the comments under Article 241. Such right is explicitly
recognized in Article 2 7 7 ( a ) .
ART. 242-A. REPORTORIAL REQUIREMENTS
T h e following are documents required to be submitted to the Bureau
by the legitimate labor organization concerned.
(a) Its constitution and by-laws, or amendments thereto, the minutes
of ratification, and the list of members who took part in the ratification of the
constitution and by-laws within thirty ( 3 0 ) days from adoption or ratification
of the constitution and by-laws or amendments thereto;

^ n e r a l Rubber and Footwear Corp. vs. Drilon, 169 SCRA 808 [1989].
239

ART. 242-A

LABOR RELATIONS

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

240

Title V
COVERAGE
Overview/Key Questions
Box 11
1. In the private and public sectors, who are the persons
allowed and not allowed to form or j o i n labor organizations?
2. What law governs labor relations in the public sector?
3. May government employees hold protest actions? May
they go on strike legally?
4. In the private sector how does a manager differ from a
supervisor?
5. Supervisors and rank-and-file employees cannot j o i n
the same union. What happens if they do?
6. Who are considered confidential employees? May they
j o i n unions?
9

ART.
243.
COVERAGE AND EMPLOYEES RIGHT TO SELFORGANIZATION
All p e r s o n s employed in c o m m e r c i a l , industrial and agricultural
enterprises and in religious, charitable, medical or educational institutions
whether operating for profit or not, shall have the right to self-organization
and to form, join, or assist labor organizations of their own choosing for
purposes of collective bargaining. Ambulant, intermittent and itinerant
workers, self-employed people, rural workers and those without any definite
employers may form labor organizations for their mutual aid and protection.
COMMENTS AND CASES
1.

ORGANIZING IN GENERAL
T h e rights to organize and to bargain, in a general sense, are given not
exclusively to employees. Even workers who are not employees of any particular
employer may form their organizations to protect their interests. Movie actors
and actresses, for instance, have their organization although most of them, as
independent individual "talents," have no particular employer; young presidents
as well as retired generals have their organizations too. The organization enjoys
protection under the Bill of Rights.
Under Article 243 of this Code, the right to organize refers also to forming,
joining or assisting a labor organization. Connected to Article 246 this right
241

ART. 243

LABOR RELATIONS

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


support the organization's objective which is not necessarily collective bargaining
but, simply, to aid and protect its members. But this kind of group action must
be differentiated from strike which, because it is work stoppage, must observe
certain regulations; otherwise, the strike may be declared illegal and its leaders
may be thrown out of their jobs.
1.1

Coverage of the Right to Organize; Exceptions

The right to form, join or assist a labor organization is granted to all kinds
of employees of all kinds of employers public or private, profit or nonprofit,
commercial or religious. Their usual form of organization is a union and the
usual purpose is collective bargaining with their employers.
Consistent with the constitutional mandate, Article 243 of the Code allows
"all persons employed in commercial, industrial and agricultural enterprises"
to form, join or assist labor organizations of their own choosing for purposes
of collective bargaining. T h e right is extended even to those employed in
traditionally nonprofit organizations like religious, charitable, medical or
educational institutions. This extension of the right departs from the policy
under the old Industrial Peace Act (R.A. No. 875) which withheld the right to
organize from employees of nonprofit firms.
But the seemingly all-inclusive coverage of "all persons" in Article 243
actually admits of exceptions. Under Article 2 4 5 , for instance, managerial
employees, regardless of the kind of organization where they are employed, may
not join, assist or form any labor organization, meaning a labor union.
Accordingly, managerial employees cannot, in the absence of an agreement
to the contrary, be allowed to share in the concessions obtained by the labor
union through collective negotiation. Otherwise, they would be exposed to the
temptation of colluding with the union during the negotiations to the detriment
of the employer. However, there is nothing to prevent the employer from granting
benefits to managerial employees equal to or higher than those afforded to union
members.
1

Supervisors are allowed to organize, but they cannot form, j o i n or assist a


rank-and-file union.
More exceptions to the right to organize can be found in court decisions,
as we will see shortly.
2.

RIGHT TO ORGANIZE CANNOT BE BARGAINED AWAY


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

'Martinez vs. NLRC, GMCR, Inc. and M.A.Javier, G.R. No. 118743, October
12,1998.
242

COVERAGE

ART. 243

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

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


to be examined under Article 245.
3.

EMPLOYEES OF NONPROFIT INSTITUTIONS

Under Article 243 of the Labor Code, the rank-and-file employees of


nonprofit medical institutions are permitted to form, organize or join labor
unions of their choice for purposes of collective bargaining. If the union has
complied with the requisites provided by law for calling a certification election, it
is incumbent upon the [DOLE Regional] Director to conduct such certification
election to ascertain the bargaining representative of the hospital employees.
3

4.

EXCEPTION: EMPLOYEE-MEMBERS OF A COOPERATIVE


San Jose Electric Service Cooperative, Inc. vs. Ministry of Labor, G.R. No. 77231,
May 31,1989
A cooperative is by its nature different from an ordinary business concern being
run either by persons, partnerships, or corporations. Its owners and/or members
are the ones who run and operate the business while the others are its employees.
Irrespective of the number of shares owned by its members they are entitled to cast
one vote each in deciding upon the affair of the cooperative. Their share capital
earn limited interests. They enjoy special privileges as exemption from income tax
and sales taxes, preferential right to supply their products to State agencies and even
exemption from minimum wage laws.
An employee of such a cooperative who is a member and co-owner thereof
cannot invoke the right to collective bargaining, for certainly an owner cannot bargain
with himself or his co-owners.
However, insofar as it involves cooperatives with employees who are not
members or co-owners thereof, such employees are entitled to exercise the rights
of all workers to organization, collective bargaining negotiations and others as are
enshrined in the Constitution and existing laws of the country.
l

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

ART. 243

LABOR RELATIONS

A Fundamental Human Right


The rights of persons to come together are independent of
any positive law. The right to unionize has jurisprudential roots in
natural law, transcending any secular legal conventions. The right to
unionize, when understood as an aspect of the right to associate, is
certainly a fundamental human right. Unionization is the social and
political manifestation by workers of a most indispensable human
right. Individuals yearn to join in community.
When persons decide to come together in union, they move
from personal private life into the participatory political life of
community. The right to unionize builds upon the human right of
association and thus transforms initial pre-political individual choice.
Because the act of unionization incorporates aspects of community
and moves necessarily and deliberately into the realm of public
political life, it is also a civil, as well as a human, right. Community
is a compelling image and it can become a powerful reality. Workers
seeking to act in concert have long appreciated the truth of the
semantics; one cannot spell "community" without "unity" and
one cannot spell "unity" without **you" and "I". The effectuation of
the fundamental human and civil right to unionize is an especially
profound workplace empowerment of this truth.
DAVID L. GREGORY
Labor Law
(New York University Press, 1993)
In another case, the court clarified that it is the fact of ownership of the
cooperative, and not involvement in the management thereof, which disqualifies
a member from joining any labor organization within the cooperative. Thus,
irrespective of the degree of their participation in the actual management of the
cooperative, all members thereof cannot form, assist or join a labor organization
for the purpose of collective bargaining.
1

But member-employees of a cooperative may withdraw as members of


the cooperative in order to join a labor union. Membership in a cooperative is
voluntary; inherent in it is the right not to join.
2

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

244

COVERAGE

ART. 243

4.1. Exception to Exception: Association, not Union


While the members of a cooperative who are also its employees cannot
unionize for bargaining purposes, the law does not prohibit them from forming
an association for their mutual aid and protection as employees.
D.O. No. 40-03 allows and defines a ^workers' association" as one which is
organized for the mutual aid and protection of its members or for any legitimate
purpose other than collective bargaining. T h e right to self-organize, says Article
246, cannot be abridged by any person. In a case where the employer was a
cooperative, some employees were compulsorily retired and some officers of the
employees' association were singled out for early retirement. T h e association
filed a complaint with the NLRC against the cooperative. T h e court upheld the
complainants, declared them to have been illegally dismissed, and awarded them
damages all upon representation of the employees' Association (not union)
against the cooperative.
1

5.

EXCEPTION: INTERNATIONAL ORGANIZATIONS

A certification e l e c t i o n c a n n o t be c o n d u c t e d in an international
organization which the Philippine Government has granted immunity from local
jurisdiction. Examples of such organizations are the International Rice Research
Institute (IRRI) and the International Catholic Migration Commission (ICMC).
T h e grant of such immunity is a political question whose resolution by the
executive branch of government is conclusive upon the courts.
International Catholic Migration Commission vs. Hon. Pura Calleja, etc., et al., G.R.
No. 85750; Kapisanan Ng Manggagawa at TAC Sa IRRI-OIAUA vs. Secretary of
Labor, et al., G.R. No. 89331, September 28,1990
(1)
"International Organization" and "Specialized Agencies." The term
"international organization'' is generally used to describe an organization set up
by agreement between two or more states. Under contemporary international law,
such organizations are endowed with some degree of international legal personality
such that they are capable of exercising specific rights, duties and powers. They
are organized mainly as a means for conducting general international business in
which die member states have an interest. The United Nations, for instance, is an
international organization dedicated to the propagation of world peace. "Specialized
agencies" are international organizations having functions in particular fields. The
term appears in Articles 57 and 63 of die Charter of the United Nations.
(2) Principles Underlying the Grant of International Immunities to International
Organizations. There are basically three propositions underlying the grant of
international immunities to international organizations. These principles, contained
in the ILO Memorandum, are stated thus: 1) international institutions should have a
status which protects them against control or interference by any one government in
*Nueva Ecija Coop., Inc. (NEECO) Employees Association vs. NLRC, et al., G.R.
No. 116066, January 24, 2000.
245

ART. 243

LABOR RELATIONS

the performance of functions for the effective discharge of which they are responsible
to democratically constituted international bodies in which all the nations concerned
are represented; 2) no country should derive any national financial advantage by
levying fiscal charges on common international funds; and 3) the international
organization should, as a collectivity of States members, be accorded the facilities for
the conduct of its official business customarily extended to each other by its individual
member states. The theory behind all three propositions is said to be essentially
institutional in character. "It is not concerned with the status, dignity or privileges
of individuals, but with the elements of functional independence necessary to free
international institutions from national control and to enable them to discharge
their responsibilities impartially on behalf of all their members." The raison d'etre for
these immunities is the assurance of unimpeded performance of their functions by
the agencies concerned.
(3) Labors Basic Rights Remain. The immunity of the International Catholic
Migration Commission (ICMC) and the International Rice Research Institution
(IRRI) from local jurisdiction by no means deprives labor of its basic rights, which are
guaranteed by Article II, Section 18, Article III, Section 8, and Article XIII, Section 3,
of the 1987 Constitution; and implemented by Articles 243 and 246 of the Labor Code.
(4) Certification Election Barred by Immunity. The immunity granted being
"from every form of legal process except insofar as in any particular case they have
expressly waived their immunity," it is inaccurate to state that a certification election
is beyond the scope of that immunity for the reason that it is not a suit against ICMC.
A certification election cannot be viewed as an independent or isolated process. It
could trigger off a series of events in the collective bargaining process together with
related incidents and/or concerted activities, which could inevitably involve ICMC in
the "legal process," which includes "any penal, civil and administrative proceedings."
The eventuality of Court litigation is neither remote and from which international
organizations are precisely shielded to safeguard them from the disruption of their
functions. Clauses on jurisdictional immunity are said to be standard provisions in the
constitutions of international organizations. "The immunity covers the organizations
concerned, its property and its assets...."
5.1

Waiver of Immunity

Waiver of its immunity is discretionary to IRRI. Without such express waiver


the NLRC or its labor arbiters have no jurisdiction over IRRI even in cases of
alleged illegal dismissal of any of its employees.
1

5.2

Foreign Workers

Foreigners, whether natural or juridical, as well as foreign corporations,


are strictly prohibited from engaging directly or indirectly in all forms of trade
union activities. However, aliens working in the country with valid work permits
^allado vs. International Rice Research Institute, G.R. No. 106483, May 22,
1995.
246

COVERAGE

ART. 243

may exercise the right of self-organization if they are nationals of a country that
grants the same or similar right to Filipino workers.
1

6.

EXCEPTION: RELIGIOUS OBJECTORS; IGLESIA NI CRISTO MEMBERS

Under the Industrial Peace Act (1953) which preceded the Labor Code
(and even under the present Code) the employer and the union could enter
into a "closed shop" a g r e e m e n t which would compel employees to b e c o m e
union workers as a condition of continued employment. But in 1961 R.A. No.
3 3 5 0 was passed to e x e m p t from such compulsory union membership the
followers of any religious sect (such as the Iglesia ni Cristo) whose teachings
forbid membership in labor unions. T h e constitutionality of R.A. No. 3 3 5 0
was upheld by the Supreme Court in Victoriano vs. Elizalde.
Victoriano vs. Elizalde Rope Workers' Union, et al., G.R. No. L-25246, September
12,1974
What the exception provides, therefore, is that members of said religious
sects cannot be compelled or coerced to join labor unions even when said unions
have closed shop agreements with the employers; that in spite of any closed shop
agreement, members of said religious sectors cannot be refused employment or
dismissed from their jobs on the sole ground that they are not members of the
collective bargaining union.
It may not be amiss to point out here that the free exercise of religious
profession or belief is superior to contract rights. In case of conflicts, the latter must,
therefore, yield to the former. The Supreme Court of the United States has also
declared on several occasions that the rights in the First Amendment, which include
freedom of religion, enjoy a preferred position in the constitutional system. Religious
freedom, although not unlimited, is a fundamental personal right and liberty, and
has a preferred position in the hierarchy of values. Contractual rights, therefore,
must yield to freedom of religion. It is only where unavoidably necessary to prevent
an immediate and grave danger to the security and welfare of the community that
infringement of religious freedom may be justified, and only to the smallest extent
necessary to avoid the danger.
Appellant bewails that while Republic Act No. 3350 protects members of
certain religious sects, it leaves no right to, and is silent as to the protection of,
labor organizations. The purpose of Republic Act No. 3350 was not to grant rights
to labor unions. The rights of labor unions are amply provided for in Republic Act
No. 875 [the Industrial Peace Act] and the new Labor Code. As to the lamented
silence of the Act regarding the rights and protection of labor unions, suffice it
to say, first, that the validity of a statute is determined by its provisions, not by its
silence; and, second, the fact that the law may work hardship does not render it
unconstitutional.
The fear is entertained by appellant that unless the Act is declared
unconstitutional, employers will prefer employing members of religious sects mat
'Article 269.
247

ART. 243

LABOR RELATIONS

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

248

COVERAGE

ART. 244

6.2 Iglesia ni Kristo Members May Form and Join Own Union
Kapatiran Sa Meat And Canning Division (Tupas Local Chapter No. 1027) vs. The
Honorable BLR Director Pura Ferrer-CaUeja, et al, G.R. No. L-82914, June 20,
1988
This Court's decision in Victoriano vs. Elizalde Rope Workers* Union (59 SCRA 54)
upholding the right of members of the Iglesia ni Kristo sect not to join a labor union
for being contrary to their religious beliefs, does not bar the members of that sect
from forming their own union. The public respondent correctly observed that the
"recognition of die tenets of the sect x x x should not infringe on the basic right of selforganization granted by the Constitution to workers, regardless of religious affiliation."
The fact that TUPAS was able to negotiate a new CBA with ROBINA within the
60-day freedom period of the existing CBA, does not foreclose the right of the rival
union, NEW ULO, to challenge TUPAS* claim to majority status, by filing a timely
petition for certification election on October 13, 1987 before TUPAS' old CBA
expired on November 15,1987 and before it signed a new CBA with the company on
December 3,1987. As pointed out by Med-Arbiter Abdulla, a "certification election is
the best forum in ascertaining the majority status of the contending unions wherein
the workers themselves can freely choose their bargaining representative thru secret
ballot." Since it has not been shown that this order is tainted with unfairness, this
Court will not thwart the holding of a certification election.'
Note: In a J u n e 1992 decision the Supreme Court held that INK members
have the right to vote in a certification election. See Reyes vs. Trajano in the
chapter on employee representation in collective bargaining.
ART. 2 4 4 . RIGHT OF EMPLOYEES IN THE PUBLIC SERVICE
E m p l o y e e s o f g o v e r n m e n t c o r p o r a t i o n s established u n d e r the
Corporation Code shall have the right to organize and to bargain collectively
with their respective employers. All other employees in the civil service shall
have the right to form associations for purposes not contrary to law.

see art. 276


1.

COMMENTS AND CASES

GOVERNMENT EMPLOYEES' RIGHT TO ORGANIZE; LIMITATIONS

T h e highest law of the land guarantees to government employees the right


to organize and to negotiate, but not the right to strike.
T h e Supreme Court, through Justice (later C h i e f Justice) Narvasa
summarizes the laws covering the government employees' right to self-organize
in the Arizala case.
Arizala, et al. vs. Court of Appeals, et al, G.R. Nos. L-43633-34, September 14,
1990
(1)
Presidential Decree No. 807
'Associated Trade Unions [ATU] vs. Noriel, 88 SCRA 96.
249

ART. 244

LABOR RELATIONS

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

250

COVERAGE

ART. 244

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


Council (PSLMC) to implement the executive order. T h e Council has formulated
and issued the Implementing Rules and Regulations of E.O. No. 180, dated
September 28, 2004.
1.1

Limited Purpose
,

T h e extent of the government employees right of self-organization differs


significantly from that of employees in the private sector. T h e latter's right of
self-organization, i.e., "to form, j o i n or assist labor organizations for purposes of
collective bargaining," admittedly includes the right to deal and negotiate with their
respective employers in order to fix the terms and conditions of employment and
also, to engage in concerted activities for the attainment of their objectives, such
as strikes, picketing, boycotts. But the right of government employees to "form,
join or assist employees' organizations of their own choosing" under Executive
Order No. 180 is not regarded as existing or available for "purposes of collective
bargaining," but simply "for the furtherance and protection of their interests."
1

In other words, the right of Government employees to deal and negotiate


with their respective employers is not quite as extensive as that of private
employees. Excluded from negotiation by government employees are the "terms
and conditions of employment x x x that are fixed by law" it being only those
terms and conditions not otherwise fixed by law that "may be subject of negotiation
between the duly recognized employees' organizations and appropriate
government authorities." Declared to be "not negotiable" are matters "that
require appropriation of funds e.g., increase in salary emoluments and other
allowances, car plan, special hospitalization, medical and dental services, increase
in retirement benefits, and those "that involve the exercise of management
prerogatives e.g., appointment, promotion, assignment/detail, penalties as a
result of disciplinary action, etc? Considered negotiable are such matters as
schedule of vacation and other leaves, work assignment of pregnant women;
recreational, social, athletic, and cultural activities and facilities, etc.
2

1.2 No Signing Bonus


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

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


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

251

ART. 244

LABOR RELATIONS

'This Court has been very consistent in characterizing the funds being
administered by SSS as a trust fund for the welfare and benefit of workers and
employees in the private sector. In United Christian Missionary vs. Social Security
Commissions were unequivocal in declaring the funds contributed to the Social
Security System by compulsion of law as funds belonging to the members which
were merely held in trust by the government, and resolutely imposed the duty
upon the trustee to desist from any and all acts which would diminish the property
rights of owners and beneficiaries of the trust fund.
"We do not find the signing bonus to be a truly reasonable compensation.
The gratuity was of course the SSC's gesture of good will and benevolence for
the conclusion of collective negotiations between SSC and ACCESS, as the CNA
would itself state, but for what objective? Agitation and propaganda which are
so commonly practiced in private sector labor-management relations have no
place in the bureaucracy and that only a standard collective negotiation which
is concluded within a reasonable time must be the standard for interaction in
the public sector. This desired conduct among civil servants should not come,
we must stress, with a price tag which is what the signing bonus appears to be."
1.3

Excepted Employees

Excepted from the application of Executive Order 180, however, are


"members of the Armed Forces of the Philippines, including police officers,
policemen, firemen and jail guards." (Sec. 4.) For reasons of security and safety,
they are not allowed to unionize.
Executive Order No. 180 also declares that "high level employees whose
functions are normally considered as policy making or managerial, or whose
duties are of a highly confidential nature shall not be eligible to j o i n the
organization of rank-and-file government employees. A "high level employee" is
one "whose functions are normally considered policy determining, managerial
or one whose duties are highly confidential in nature. A managerial function
refers to the exercise of powers such as: (1) to effectively recommend such
managerial actions; (2) to formulate or execute management policies and
decisions; or (3) to hire, transfer, suspend, lay-off, recall, dismiss, assign or
discipline employees."
Noticeably, in the private sector the three levels of positions, for purposes
of unionization, are managerial, supervisory, and rank and file. T h e latter two
can unionize. In government, the levels are only two: high level and rank-andfile. The "high level" employees cannot unionize.
1.3a Professors as Rank-and-File Employees
Professors at the University of the Philippines who are not exercising
managerial or highly confidential functions are rank-and-file employees and
may unionize separately from the non-academic personnel.

252

COVERAGE

ART. 244

University of the Philippines vs. Ferrer-Calleja, G.R. No. 96189, July 14, 1992.
Facts: The University of the Philippines seeks the nullification of the Order of
the director of the Bureau of Labor Relations holding that "professors of the University
of the Philippines are rank-and-file employees and that, consequently, they should be
represented by only one labor organization together with the so-called non-academic
employees.
Issues: 1) Whether or not professors, associate professors and assistant
professors are "high-lever or "rank and file" employees; 2) Whether or not, they,
and other employees performing academic functions, should comprise a bargaining
unit distinct from that of the non-academic employees.
Ruling: [First issue:] In the light of Executive Order No. 180 and its
implementing rules, as well as the University's charter and relevant regulations,
the professors, associate professors and assistant professors (thereafter simply
referred to as professors) cannot be considered as exercising such managerial or
highly confidential functions as would justify their being categorized as "high-level
employees" of the institution.
It is the University Academic Personnel Committee, composed of deans,
the assistant for academic affairs and the chief of personnel, which formulates the
policies, rules and standards respecting selection, compensation and promotion of
members of the academic staff. The departmental and college academic personnel
committees' functions are purely recommendatory in nature, subject to review and
evaluation by the University Academic Personnel Board.
Neither can membership in the University Council elevate the professors to
the status of high-level employees. It is readily apparent that the policy-determining
functions of the University Council are subject to review, evaluation and final approval
by die Board of Regents. The Council's power of discipline is likewise circumscribed
by the limits imposed by the Board of Regents.
Also, the policy determining functions of the University Council refer to
academic matters, i.e., those governing the relationship between the University and
its students, and not the University as an employer and the professors as employees.
It is thus evident that no conflict of interest results in the professors' being members
of the University Council and being classified as rank-and-file employees.
[Second Issue:] Be that as it may, does it follow, as public respondent would
propose, that all rank-and-file employees of the university are to be organized into
a single collective bargaining unit?
The "community or mutuality of interests" test has provided the standard in
determining the proper constituency of a collective bargaining unit.
In the case at bar, the University employees may, as already suggested,
quite easily be categorized into two general classes: one, die group composed of
employees whose functions are non-academic, i.e., janitors, messengers, typists,
clerks, receptionists, carpenters, electricians, ground-keepers, chauffeurs, mechanics,
plumbers and, two, die group made up of those performing academic functions,
i.e., full professors, associate professors, assistant professors, instructors who may
253

LABOR RELATIONS

ART. 244

be judges or government executives and research, extensions and professional


staff. Not much reflection is needed to perceive that the community or mutuality of
interests which justifies the formation of a single collective bargaining unit is wanting
between the academic and non-academic personnel of the University.
In short, the professors, associate professors and assistant professors of the
University of the Philippines are rank-and-file employees. The full professors,
associate professors, assistant professors, instructors and the research, extension
and professional staff may, if so minded, organize themselves into a separate
collective bargaining unit.
1.4 Right to Strike
E.O. No. 180 also concedes to government employees, like their counterparts
in the private sector, the right to engage in concerted activities, including the
right to strike. But the executive order quickly adds that those activities must be
exercised in accordance with law, i.e., subject both to "Civil Service Law and rules"
and "any legislation that may be enacted by Congress." It further states that "the
resolution of complaints, grievances and cases involving government employees"
is not ordinarily left to collective bargaining or other related concerted activities,
but to "Civil Service Law and labor laws and procedures whenever applicable."
In case "any dispute remains unresolved after exhausting all available remedies
under existing laws and procedures, the parties may jointly refer the dispute
to the (Public Sector Labor-Management) Council for appropriate action;"
What is more, the Rules and Regulations implementing Executive Order No.
180 explicitly provide that since the "terms and conditions of employment in
the government, including any political subdivision or instrumentality thereof
and government-owned and -controlled corporations with original charters,
are governed by law, the employees therein shall not strike for the purpose of
securing changes thereof."
1

See further discussion in the topic Strike and Lockout.


2.

REGISTRATION

Government employees' organizations shall register with the Civil Service


Commission and the Department of Labor and Employment. T h e application
shall be filed with the Bureau of Labor Relations of the Department which shall
process the same in accordance with the provisions of the Labor Code of the
Philippines, as amended. Applications may also be filed with the Regional Offices
of the Department of Labor and employment which shall immediately transmit
the said applications to the Bureau of Labor Relations within three (3) days from
receipt thereof.
2

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

254

COVERAGE

ART. 244

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


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

3.

CERTIFICATION ELECTION IN GOVERNMENT CORPORATION

A certification election to choose the union that will represent the


employees may be conducted by the Bureau of Labor Relations in a government
corporation, whether governed by the Labor Code or the Civil Service rules.
2

Trade Unions of the Philippines and Allied Services vs. National Housing Corporation,
G.R. No. 49677, May 4, 1989
Facts: Respondent National Housing Corporation is a corporation organized in
1959 under Executive Order No. 399, known as the Uniform Charter of Government
Corporations, dated January 1, 1951. Its shares of stock are and have been one
hundred percent owned by the Government from its incorporation under Act No.
459, the former corporation law.
Ruling: The 1987 Constitution declares that "the civil service embraces all
branches, subdivisions, instrumentalities and agencies of the government, including
government-owned or -controlled corporations with original charters."
Consequently, the civil service now covers only government-owned or
-controlled corporations with original or legislative charters, that is, those created
by an act of Congress or by special law, and not those incorporated under and
pursuant to a general legislation.
There is, therefore, no impediment to the holding of a certification election
among the workers of NHC for it is clear that they are covered by the Labor Code,
the NHC being a government-owned and/or -controlled corporation without an
original charter.
Whether the employees of NHC are covered by the Labor Code or by the civil
service laws, a certification election may be conducted.
3.1 Election of Officers in Government Unions
Does the B L R have jurisdiction to call for and conduct the election of
officers of an employee's association in the public sector such as that at the
MWSS?
The authority of the B L R in assuming jurisdiction over a certification
election, or any inter-union or intra-union conflicts, is found in Article 226 of
the Labor Code of the Philippines, which reads: x x x
'Sec. 8, E.O. No. 180.
University of Life Foundation vs. Bureau of Labor Relations, G.R. No. 85050,
April 12, 1989.
255
2

ART. 244

LABOR RELATIONS

It is quite clear from this provision that BLR has the original and exclusive
jurisdiction on all inter-union and intra-union conflicts. The subject of the case
at bar, which is the election of the officers and members of the board of KMKKMWSS, is, clearly, an intra-union conflict, being within or inside a labor union.
It is well within the powers of the BLR to act upon.
1

4.

WHEN PSLMC MAY RULE ON LEGALITY OF DISMISSAL

The Public Sector Labor-Management Council, created by Executive Order


No. 180 (June 1, 1987) has jurisdiction to hear charges of unfair labor practice
filed by government employees against their employer, e.g., the Pamantasan ng
Lungsod ng Maynila. In deciding the ULP charge the PSLMC may also rule
on the complainants' dismissal if the two issues ULP and dismissal are
unavoidably interlinked.
The Civil Service Commission may adopt the findings of the PSLMC and
order the employer to reinstate the dismissed employees.
2

5.

UNION-BUSTING IN A GOVERNMENT AGENCY, U.L.P.

In the above-cited case of Pamantasan, the Civil Service Commission


adopted the findings and conclusion of the Public Sector Labor-Management
Council. The CSC's resolution described union busting in a government office
and the Supreme Court sustained it.
In the arbitration proceedings, the PSLMC found that PLM
committed unfair labor practice (U.L.P.) when it terminated the services
of the complainants. It is undisputed that the PLM Management did not
renew the appointments of these members of the faculty with temporary
contracts but those who were hired as replacements possess even lesser
qualifications than the 16 complainants. Further, the PLM Management
refused and still refuses to produce the results of their evaluation of
the performance of the complainants which can be an indication that
presentation of such evidence would be detrimental to its case. Hence,
this issue before us.
Had complainants not been among those active officers a n d / o r
members of the PLMFO [Pamantasan ng Lungsod ng Maynila Faculty
Organization], and had their qualifications, training, experience and
performance rating not been impressive, the Commission would have
agreed that the termination or nonrenewal of the contracts of complainants
does not constitute unfair labor practice. But the records reveal otherwise.
(Pamantasan ng Lungsod ng Maynila vs. Civil Service Commission, et al., G.R.
No. 107590, February 21, 1995.)
'Bautista vs. Hon. Court of Appeals, et al., G.R. No. 123375, February 28, 2005.
Pamantasan ng Lungsod ng Maynila vs. Civil Service Commission, et al., G.R.
No. 107590, February 21, 1995.
2

256

COVERAGE

5.1

ARTS. 245-245-A

Even Temporary Employees May Organize

Even temporary employees enjoy the basic right to form organization or


association for purposes not contrary to law. PLMFO is that organization. Thus,
its members cannot be separated from the service for the simple reason of
membership in the said organization. And when the appointment status of these
members happens to be temporary in nature, such becomes merely incidental
and the doctrine that temporary employees have no security of tenure must
yield or is not applicable. When the clear intent therefore of PLM Management
in terminating the services of these employees is to abridge their constitutional
right to self-organization, the Commission has the duty to give them protection
and uphold their basic right. This constitutional right of employees is superior
to the right of management not to renew the temporary appointment of its
employees. When the exercise of discretion by the management is calculated
to bust the union as what PLM Management had done, the Commission has no
choice but to declare it as a grave abuse of discretion.
1

Under Article 277(c) of the Labor Code, "any employee, whether employed
for a definite period or not, shall beginning on his first day of service, be
considered an employee for purposes of membership in any labor union."
2

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


LABOR ORGANIZATION; RIGHT OF SUPERVISORY EMPLOYEES
Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership
in the collective bargaining unit of the rank-and-file employees but may join,
assist or form separate collective bargaining units a n d / o r legitimate labor
organizations of their own. T h e rank-and-file union and the supervisors'
union operating within the same establishment may join the same federation
or national union.
(Note: T h e last sentence of this article was added by Sec. 8 of R A . No.
9 4 8 1 , effective J u n e 14, 2 0 0 7 . )
ART. 245-A. EFFECT OF INCLUSION AS MEMBERS OF EMPLOYEES
OUTSIDE THE BARGAINING UNIT
T h e inclusion as union members of employees outside the bargaining
unit shall not be a ground for the cancellation of the registration of the
union. Said employees are automatically deemed removed from the list of
membership of said union.
(Note: This amendatory article was inserted by R A . No. 9481, effective
June 14, 2 0 0 7 . )
'Pamantasan ng Lungsod ng Maynila vs. Civil Service Commission, et al., G.R.
No. 107590, February 21, 1995.
'Ibid.
257

ARTS. 245-245-A

LABOR

RELATIONS

COMMENTS AND CASES


1.

CATEGORIES OF EMPLOYEES
Early in Book V, in Article 212, the Code classifies and defines the three
categories of employees for purposes of applying the law on labor relations. They
are managerial, supervisory, and rank-and-file.
This three-tiered classification is made by R.A. No. 6715 (popularized as
Herrera-Veloso law). This law, which took effect on March 2 1 , 1989 (15 days
after its publication in the Philippine Daily Inquirer), provides that although
"supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees," they may, however "join, assist or
form separate labor organization of their own."
1

2.

INELIGIBILITY OF MANAGERS

Who are the managers prohibited from forming, joining, or assisting labor
unions? Is this prohibition constitutional? These fundamental questions are
tackled en banc by the Supreme Court in United Pepsi-Cola Supervisory Union vs.
Laguesma and Pepsi-Cola Products, Phils., Inc., G.R. No. 122226, March 25, 1998.
The Court upholds the constitutionality of the prohibition through the erudite
pen of Justice Mendoza. The learned Justice has to tread the field of management
to identify and classify the managerial positions that the law refers to.
2.1

Types of Managerial Employees

The term "manager," the Court explains, generally refers to "anyone who
is responsible for subordinates and other organizational resources." As a class,
managers constitute three levels of pyramid, namely, top management, middle
management, and first-line management which is also called supervisor. Below
this third level are the operatives or operating employees who, we may add, are
also called rank-and-file.
First-line Managers T h e lowest level in an organization at which
individuals are responsible for the work of others is called first-line or firstlevel management. First-line managers direct operating employees only;
they do not supervise other managers. Examples of first-line managers
are the "foreman" or production supervisor in a manufacturing plant, the
technical supervisor in a research department, and the clerical supervisor
in a large office. First-level managers are often called supervisors.
Middle Managers T h e term middle manager can refer to more
than one level in an organization. Middle managers direct the activities
of other managers and sometimes also those of operating employees.
Middle managers' principal responsibilities are to direct the activities that
^amboanga Wood Products, Inc. vs. National Labor Relations Commission,
G.R. No. 82088, October 15, 1989.
258

COVERAGE

ARTS. 245-245-A

implement their organizations' policies and to balance the demands of


their superiors with the capacities of their subordinates. A plant manager
in an electronics firm is an example of a middle manager.
Top Managers Composed of a comparatively small group of
executives, top management is responsible for the overall management of the
organization. It establishes operating policies and guides the organization's
interactions with its environment. Typical titles of top managers are "chief
executive officer," "president," and "senior vice-president." Actual titles
vary from one organization to another and are not always a reliable guide
to membership in the highest management classification.
As can be seen from this description, a distinction exists between [1]
those who have the authority to devise, implement and control strategic and
operational policies (top and middle managers); and [2] those whose task is
simply to ensure that such policies are carried out by the rank-and-file employees
of an organization (first-level managers/supervisors). What distinguishes them
from the rank-and-file employees is that they act in the interest of the employer
in supervising such rank-and-file employees.
"Managerial employees" may therefore be said to fall into two distinct
categories: the "managers" per se, who compose the former group described
above, and the "supervisors" who form the latter group. Whether they belong
to the first or the second category, managers, vis-a-vis employers, are, likewise,
employees.
After classifying managers, the Court (in this case of United Pepsi-Cola
Supervisory Union) examines the position description of route managers prepared
and submitted by the employer. It states that the basic purpose of a route manager
is "to meet the sales plan" and that this objective is to be achieved "through the
skillful management of your j o b and the management of your people." The
position description, reproduced lengthily in the decision, details the route
manager's principal accountabilities. From these the Court deduced:
Unlike supervisors who basically merely direct operating employees
in line with set tasks assigned to them, route managers are responsible for
the success of the company's main line of business through management
of their respective sales teams. Such management necessarily involves the
planning, direction, operation and evaluation of their individual teams
and areas which the work of supervisors does not entail.
T h e route managers cannot thus possibly be classified as mere
supervisors because their work does not only involve, but goes far
beyond, the simple direction or supervision of operating employees
to accomplish objectives set by those above them. They are not mere
functionaries with simple oversight functions but business administrators
in their own right.
259

ARTS. 245-245-A

LABOR

RELATIONS

Thus, the Court confirms the ruling of the med-arbiter and the Secretary
of Labor that the route managers of Pepsi-Cola are managerial employees who are
ineligible for union membership according to the first sentence of Article 245.
The Court turns next to the question of constitutionality.
2.2 Constitutionality of the Prohibition
The question is whether the first sentence of Article 245 of the Labor Code,
prohibiting managerial employees from forming, assisting or joining any labor
organization, is constitutional in light of Article III, Sec. 8 of the Constitution
which provides:
The right of the people, including those employed in the public
and private sectors, to form unions, associations, or societies for purposes
not contrary to law shall not be abridged.
United Pepsi-cola Supervisory Union vs. Laguesma and Pepsi-cola Products Phils.,
Inc., G.R. No. 122226, March 25, 1998
The present Article 245 is the result of the amendment of the Labor Code
in 1989 by R.A. No. 6715, otherwise known as the Herrera-Veloso Law. Unlike the
Industrial Peace Act or the provisions of the Labor Code which it superseded, R.A.
No. 6715 provides separate definitions of the terms "managerial" and "supervisory
employees."
Although the definition of "supervisory employees" seems to have been unduly
restricted to the last phrase of the definition in the Industrial Peace Act, the legal
significance given to the phrase "effectively recommends" remains the same. In fact,
the distinction between top and middle managers, who set management policy, and
front-line supervisors, who are merely responsible for ensuring that such policies
are carried out by the rank-and-file, is articulated in the present definition. When
read in relation to this definition in Article 212(m), it will be seen that Article 245
faithfully carries out the intent of the Constitutional Commission in framing Article
III, Sec. 8 of the fundamental law.
1

Nor is the guarantee of organizational right in Article HI, Sec. 8 infringed by a


ban against managerial employees forming a union. The right guaranteed in Article
III, Sec. 8 is subject to the condition that its exercise should be for purposes "not
contrary to law." In the case of Article 245, there is a rational basis for prohibiting
managerial employees from forming or joining labor organizations.
In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, this Court elaborated
on this rationale, thus:
"... The rationale for this inhibition has been stated to be, because if
these managerial employees would belong to or be affiliated with a Union,
the latter might not be assured of their loyalty to the Union in view of evident
See Article 212[m].
Azucena, The Labor Code with Comments and Cases, 172-173; 1996.

260

COVERAGE

ARTS. 245-245-A

conflict of interests. The Union can also become company-dominated with the
presence of managerial employees in Union membership." (Id. at 347-348.)
To be sure, the Court in Philips Industrial was dealing with the right of
confidential employees to organize. But the same reason for denying them the right
to organize justifies even more the ban on managerial employees from forming
unions. After all, those who qualify as top or middle managers are executives who
receive from their employers information that not only is confidential but also is not
generally available to the public, or to their competitors, or to other employees.
2.2a Other Opinions
T h e Court has spoken but there has to be a postscript. T h e Court's decision
is unreservedly concurred in by six other justices, but the Chief Justice [Mr.
Davide, Jr.] himself a member of the 1986 Constitutional Commission has
a different opinion. While he agrees that the route managers are managerial
employees, he believes, citing C o n c o m deliberations, that Article 245 is
unconstitutional, as it abridges Sec. 8, Art. Ill of the 1987 Constitution.
But this opinion is refuted by Mr. Justice Puno. He believes that "debates
and proceedings of the Constitutional Convention are never of binding force.
They may be valuable but are not necessarily decisive."
Mr. Puno's concurring opinion also clarifies that Article 245 does not
absolutely disqualify managerial employees from exercising their right of
association. What it prohibits is merely the right to j o i n labor organizations.
Managerial employees may form associations or organizations so long as they
are not labor organizations [as defined in Article 212(g) of the Labor Code].
T h e freedom of association guaranteed under the Constitution remains and has
not been totally abrogated by Article 245.
Justice Puno further airs a warning. "To declare Article 245 of the Labor
Code unconstitutional cuts deep into our existing industrial life and will open
the floodgates to unionization at all levels of the industrial hierarchy. Such a
ruling will wreak havoc on the existing set-up between management and labor.
If all managerial employees will be allowed to unionize, then all who are in the
payroll of the company, starting from the president, vice-president, general
managers and everyone, with the exception of the directors, may go on strike
or picket the employer. Company officers will join forces with the supervisors
and rank-and-file."
Still a fourth shade of opinion is that of Mr. Justice Vitug. He partially agrees
with the majority and with Mr. Puno that Article 245 is not unconstitutional.
But to his mind the route managers are not managerial employees; they are
supervisors.
The questions raised in the Pepsi-Cola case are evidently fundamental and
contentious a fact heightened by the variations in the opinions of the justices.
261

ARTS. 245-245-A

LABOR

RELATIONS

The majority opinion fortunately puts to rest the issue of constitutionality. But,
this writer thinks, the problem of drawing the line between a manager and a
supervisor will persist. The dividing line is still too unshapen and too situational
to serve as an effective standing formula to avert disputes.
3.

EVOLUTION OF SUPERVISORS' RIGHT TO ORGANIZE


Unlike managers, supervisors can unionize. This right is now established
after evolving through three periods searching for definitions.
3.1 First Period: Under the Industrial Peace Act
The first period is from 1953 under the Industrial Peace Act up until
1974 when the Labor Code took effect. During that period supervisors could
unionize separately from rank-and-file workers. T h e term "supervisor" was
defined as 'any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline
other employees, or responsibly to direct them, and to adjust their grievances,
or effectively to recommend such acts if, in connection with the foregoing, the
exercise of such authority is not of a merely routinary or clerical nature but
requires the use of independent judgment.'"
1

Upholding the supervisors' right to organize, the Court ruled in Fibril


Refinery Corp. vs. Filoil Supervisory and Confidential Employees Association and CIR
(46 SCRA 522) in August 1972:
Indeed, it is well settled that "in relation to his employer," a foreman
or supervisor "is an employee within the meaning of the Act." x x x For
this reason, supervisors are entitled to engage in union activities and any
discrimination against them by reason thereof constitutes an unfair labor
practice.
T h e problem was that although the Industrial Peace Act defined a
"supervisor," it failed to define a "manager" or "managerial employee." So the
question arose: Did the word "supervisor" include "manager"? Could managers
also unionize? In a case involving Caltex managers (decided only one month
after Filoil), the Court answered affirmatively, thus:
Ordinarily there should be identity of interest between the managerial
staff and the employing firm, especially if the dispute is between management
and the rank-and-file. Yet, conflict is possible between the managerial staff
and the corporation what the group's welfare requires may be different
from what the firm is willing to grant. (Caltex Filipino Managers and Supervisors
Association vs. CIR, 47 SCRA 112.)
T h e Caltex ruling in effect included managers in the term "supervisor,"
thus allowing the managers to unionize. T h e ruling naturally disturbed the
businessmen.
Section 2[k] of R.A. No. 875.
262

COVERAGE

3.2
No. 6715

ARTS. 245-245-A

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

The second period in the evolution of the supervisors' right to organize is


from the effectivity of the Labor Code in 1974 until March 21, 1989 when R.A.
No. 6715 (known as the Herrera-Veloso amendments) came into force.
T h e Labor Code as issued in 1974 dropped the old term "supervisor" but
replaced it with "managerial employee." Managerial employees were not allowed
to unionize. T h e Code defined a "managerial employee" as "one who is vested
with power or prerogative to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees,
or to effectively recommend such managerial actions. All employees not falling
within this definition are considered rank-and-file employees for purposes of
this Book."
1

This time the question was: Did "managerial employee" include "supervisor"?
Were supervisors also banned from unionizing? Yes. T h e prohibition was applied
to supervisors in the case of Bulletin Publishing Corp. vs. Sanchez, 144 SCRA 428,
decided on October 7, 1986:
Said the Court:
T h e supervisory employees of petitioner firm may not, under the
law, form a supervisors' union, separate and distinct from the existing
bargaining unit composed of the rank-and-file employees. It is distinctly
stated in Sec. 11, Rule II, of the Omnibus Rules Implementing the Labor
Code that supervisory unions are presently no longer recognized nor
allowed to exist and operate as such.
T h e Bulletin ruling in effect included "supervisors" among "managerial
employees" who could not unionize. This time it was the labor groups that rose
in protest.
3.3 Third Period: Under the Labor Code as Amended by R A . 6715
Apparently, the labor sector could not bear losing a right it had enjoyed for
more than twenty years prior to the Labor Code; hence, it sought its restoration
through the Herrera-Veloso amendments. Taking effect on March 21, 1989,
R.A. No. 6715 marks the third stage in the evolution of the supervisors' right to
organize.
R.A. No. 6715 presents a compromise formula: retain the ineligibility
of managerial employees but revive the right of supervisory employees to
unionize.
Now, under the aegis of R.A. No. 6715, the Supreme Court sighs in relief:
"Thus, the right of supervisory employees to organize under the Industrial
Article 246.
263

ARTS. 245-245-A

LABOR

RELATIONS

Peace Act is once more recognized under the present amendments to the
Labor Code."
1

4.

DEFINITIONS OF MANAGER AND SUPERVISOR

It is now settled that to avoid the mix-up that "managerial employee"


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

In short, a manager makes policy decisions or people decisions or both; a


supervisor recommends those decisions. O n e is a decision maker, the other, a
recommender.
In one case, the petitioner's motion for reconsideration outlined the
'Pagkakaisa ng mga Manggagawa sa Triumph International vs. Pura FerrerCalleja, G.R. No. 85915, January 17, 1990.
Franklin Baker Company vs. Trajano, G.R. No. 75039, January 28, 1988.
2

264

COVERAGE

ARTS. 245-245-A

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


Summary" provides:
"Assist the Foreman in the effective dispatching/distribution of
manpower and equipment to carry out approved work." While the first
duty enumerated in the position of Supervisor III states:
1.
Executes and coordinates work plans emanating from his
supervisors.
T h e Court said that it was clear from the above provisions that
the functions of the questioned positions were not managerial because
they only executed approved and established policies leaving little or
no discretion at all whether to implement the policies or not. (Southern
Philippines Federation of Labor vs. Calleja, 172 SCRA 676 [1989]. See also: Paper
Industries Corp. vs. Laguesma, G.R No. 101738, April 12, 2000.)
5.

TEST OF SUPERVISORY STATUS

T h e test of "supervisory" or "managerial status" depends on whether


a person possesses authority to act in the interest of his employer in the
matter specified in Article 2 1 2 ( m ) of the Labor Code and Section l ( m ) of its
Implementing Rules [now Sec. l ( t ) ] and whether such authority is not merely
routinary or clerical in nature, but requires the use of independent judgment.
Thus, where such recommendatory powers are subject to evaluation, review
and final action by the department heads and other higher executives of the
company, the same, although present, are not effective and not an exercise of
independent judgment as required by law.
1

T h e fact alone that a supervisor makes recommendations as to what


managerial actions to take in disciplinary cases by itself does not make one a
managerial employee. It is more a question of how effective the recommendation
is.
2

If the supervisory power enjoyed by the members of a union consists merely


in recommending as to what managerial actions to take in disciplinary cases,
such members are not prohibited from forming their own collective bargaining
unit. Their responsibilities do not inherently require the exercise of discretion
and independent judgment as supervisors or vested with power and authority
to lay down or execute management policies.
It is the nature of an employee's functions and not the nomenclature or tide
given to his j o b which determines whether he has a rank-and-file or managerial
status. Among the characteristics of managerial rank are: 1) he is not subject to
3

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

265

ARTS. 245-245-A

LABOR

RELATIONS

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

5.1

The Power to Recommend

The power to recommend, in order to qualify an employee as a supervisor,


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

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


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

1963.
266

COVERAGE

5.2

ARTS. 245-245-A

Examples of Ineffective or Clerical Recommendation

T h e assistant principal and g e n e r a l supervisor admitted that the


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

5.3

Managers or Supervisors: Under the ILO Convention

It is not necessarily incompatible with the [ILO Convention on Freedom of


Association] to deny managerial or supervisory employees the right to belong to
the same trade union as other workers, [provided] that two conditions are met:
First, that such workers have the right to form their own association to
defend their interest, and
Second, that the categories of such staff are not defined so broadly as
to weaken the organization of other workers in the enterprise or branch of
activity by depriving them of a substantial portion of their present or potential
membership.
2

6.

SEGREGATION OF RANK-AND-FILE AND SUPERVISORS


Article 245 allows supervisory employees to form, join, or assist separate
labor organizations of their own, but they are not eligible for membership in a
labor organization of the rank-and-file employees. Neither may a rank-and-file
join a union of supervisors.
1

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


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

267

ARTS. 245-245-A

LABOR

RELATIONS

This policy of segregating the supervisors' union from that of the rank-andfile is founded on fairness to the employer and the employees themselves. It will
be doubly detrimental to the employer if the supervisors and the rank-and-file, as
members of only one union, could take a common stand against the employer.
The Court has noted that a company foreman, while in the performance
of supervisory functions, may be the extension or alter ego of the management.
Adversely, the foreman, by his actuation, may influence the workers under his
supervision to engage in slowdown or similar activities detrimental to the policy,
interest or business objectives of the company or corporation.
1

In another case, the list of monthly paid employees submitted by the


petitioner company contains the names of about twenty-seven (27) supervisory
employees, six (6) Managerial employees, one (1) confidential employee and
twenty-six (26) office and technical employees holding various positions. T h e
list reveals that the positions occupied by the twenty-six (26) office and technical
employees are in fact rank-and-file positions, i.e., A / C mechanic, draftsmen,
storemen, motorpool mechanic, secretaries, accounts clerk, company nurses,
industrial mechanic, boiler men, laboratory technicians, payroll clerk, welder,
purchasing clerk, company drivers and electricians. It is fairly obvious that
these positions cannot be considered as supervisory positions for they do not
carry the authority to act in the interest of the employer or to recommend
managerial actions. It is not decisive that these employees are monthly paid
employees. Their mode of compensation is usually a matter of convenience
and does not necessarily determine the nature and character of their j o b .
2

6.1

Effects of Having Mixed Membership

To enforce the segregation of supervisors and rank-and-file employees,


the High Court had ruled that a union with commingled membership was not
a legitimate labor organization. Such a union should not have been registered
at all. But this ruling is rendered merely historical by the amendment made by
R.A. No. 9481 in 2007. As stated in Article 245-A the employees that should not
have been included in membership are automatically deemed removed from
the list of membership.
The reader who is interested in those past rulings may look up the cases
of: Toyota Motor Phil. Corp. vs. Toyota Motor Phil. Labor Union, G.R. No. 121084,
February 19,1997; San Miguel Corp. vs. Mandaue Packing Products Plant, Inc., etc.,
G.R. No. 152356, August 16, 2005; Negros Oriental Electric Cooperative vs. Secretary,
etc., G.R. No. 143615, May 9, 2001; Tagaytay Highlands, etc. vs. Tagaytay Highlands
Employees Union, G.R. No. 14200, January 22, 2003.
'Golden Farms, Inc. vs. Calleja, G.R. No. 78755, July 19, 1989.
Dunlop Slazenger (Phil.), Inc. vs. Hon. Secretary of Labor and Employment
and Dunlop Slazenger Staff Association-APSOTEU, G.R. No. 131248, December
11, 1998.
2

268

COVERAGE

6.2

ARTS. 245-245-A

Affiliation of Supervisors and Rank-and-File Unions

Aside from the rule on segregation, R.A. No. 9481 has also made changes
regarding affiliation of supervisors' union and rank and file union. Previously,
these unions in the same enterprise could not affiliate with the same federation
because to allow it would be an indirect violation of the segregation rule
(mentioned above).
Again, this ruling no longer holds because the last sentence added to
Article 245 by R.A. No. 9481 allows it.
T h e superseded rulings are in Atlas Lithographic Services vs. Undersecretary
Laguesma, G.R. No. 96566, January 6 , 1 9 9 2 and De la Salle University Medical Center
vs. Laguesma, G.R. No. 102084, August 12, 1998.
7.

CONFIDENTIAL EMPLOYEES

Article 245 does not mention confidential employees at all; under said
article, therefore, confidential employees do not constitute a distinct category
of employees for purposes of the right to self-organize. This is understandable
because confidentiality may attach to a managerial, supervisory, or even rankand-file j o b . Confidentiality is not a matter of official rank, it is a matter of j o b
content and authority. It is not measured by closeness to or distance from top
management but by the significance of the jobholder's role in the pursuit of
corporate objectives and strategy. In principle, every managerial position is
confidential one does not become a manager without having gained the
confidence of the appointing authority. But not every confidential employee
is managerial; he may be a supervisory or even a rank-and-file employee.
Confidentiality, in other words, cuts across the pyramid of j o b s from the base to
the apex, from messengerial to managerial.
For this reason the confidential employees' inclusion in or exclusion from
a union, either of supervisors or of rank-and-file, is a recurrent contentious issue.
And the court rulings have not been easy to track down. They have swung back
and forth, like a pendulum, from unhindered inclusion to outright exclusion to
limited inclusion. It will be helpful to review the evolution (or the back and
forth swings) of the rulings, ending up with Metrolab (1996) which seems to have
settled the question, at last.
7.1 First Swing: Inclusion Among Rank-and-File
In an April 1989 case, the Court upheld the union's argument that
confidential rank-and-file employees should be included in the bargaining unit.
The Court inter alia said: if the confidential employees are not managers, they
can unionize and no CBA provision can take away that right. The words of the
Court
As regards the employees in the confidential payroll, the petitioner
has not shown that the nature of their jobs is classified as managerial except
269

ARTS. 245-245-A

LABOR

RELATIONS

for its allegation that they are considered by management as occupying


managerial positions and highly confidential. Neither can payment or
nonpayment of union dues be the determining factor of whether the
challenged employees should be excluded from the bargaining unit since
the union shop provision in the CBA applies only to newly hired employees
but not to members of the bargaining unit who were not members of the
union at the time of the signing of the CBA. It is, therefore, not impossible
for employees to be members of the bargaining unit even though they
are non-union members or not paying union dues. {Southern Philippines
Federation of Labor vs. Calleja, G.R No. 80882, April 24, 1989.)
7.2 Second Swing: Exclusion from Rank-and-File
Just three months later in Golden Farms case the Court upheld the validity
of the agreement of the parties excluding confidential employees from the CBA
coverage. The Court observed that confidential employees such as accounting
personnel, radio and telegraph operators, having access to confidential
information, may become the source of undue advantage. Said employees may
act as spies of either party to a collective bargaining agreement. Thus, it was
held that to allow the confidential employees to join the existing union of the
rank-and-file would be in violation of the terms of the Collective Bargaining
Agreement, wherein the confidential employees, by nature of their functions/
positions are expressly excluded.
1

In a 1992 decision, in Philips Industrial Development vs. NLRC (G.R. No.


88957, J u n e 25, 1992), the court again sustained the exclusion of confidential
rank-and-file employees from the rank-and-file union.
In this leading case, the company had a history of five collective bargaining
agreements since 1971, where confidential employees, along with others, were
excluded. During negotiations for the sixth CBA, the question of exclusion of
confidential employees, among others, was submitted for arbitration. T h e Labor
Arbiter affirmed the exclusion, but the NLRC reversed this, so the employer
went up to the Supreme Court. T h e Court excluded the confidential employees
and justified the decision by saying:
By the nature of their functions, they assist and act in a confidential
capacity to, or have access to confidential matters of persons who exercise
managerial functions in the field of labor relations. As such, the rationale
behind the ineligibility of managerial employees to form, assist or join a labor union
equally applies to them. [Emphasis supplied]
7.3

Third Swing: Inclusion Among Supervisors

T h e outright disqualification enunciated in Philips was not adopted in the


1994 decision in Phil. Phosphate Fertilizer Corp. vs. Torres and Philphos Movement
'Golden Farms, Inc. vs. Calleja, G.R. No. 78755, July 19, 1989.
270

COVERAGE

ARTS. 245-245-A

for Progress, Inc. (G.R. No. 98050, March 17, 1994). In this case, the petitioner
employer raised the question whether its professional/technical and confidential
employees may validly j o i n respondent PMPI union which was composed of
supervisors.
Based mainly on the testimony of the Personnel Officer, the Supreme
Court ruled for the exclusion of the professional/technical but did not stop the
inclusion of the confidential employees. T h e Court said:
T h e certification of Personnel Officer Duhaylungsod that its
professional/technical employees occupy positions that are nonsupervisory is
evidence that said employees belong to the rank-and-file. Quite obviously,
these professional/technical employees cannot effectively recommend
managerial actions with the use of independent judgment because they
are under the supervision of superintendents and supervisors.
As to the confidential employees of the petitioner, the latter has not
shown any proof or compelling reason to exclude them from joining
respondent PMPI and from participating in the certification election,
unless these confidential employees are the same professional/technical
employees whom we find to be occupying rank-and-file positions.
In short, the Court allowed the confidential, if they are not managers or
rank-and-file, to j o i n the supervisor's union.
7.4

Fourth Swing: Inclusion Among Monthly Paid Rank-and-File

T h e Golden Farms case of 1989 had a sequel in 1994. In the case of Golden
Farms, Inc. vs. Secretary of Labor and Progressive Federation of Labor (G.R. No. 102130,
July 26, 1 9 9 4 ) , the sole issue for resolution was whether or not petitioner's
monthly-paid rank-and-file employees can constitute a bargaining unit separate
from the existing bargaining unit of its daily-paid rank-and-file employees.
T h e Court essentially said yes without excluding the monthly-paid confidential
employees.
Our decision in Golden Farms, Inc. vs. Honorable Pura Ferrer-Calleja
(G.R. No. 78755, July 19, 1989) does not pose any obstacle in holding
a certification election among petitioner's monthly-paid rank-and-file
employees. The issue brought to fore in that case was totally different, i.e.,
whether or not petitioner's confidential employees, considering the nature
of their work, should be included in the bargaining unit of the daily-paid
rank-and-file employees. In the case at bench, the monthly-paid rank-andfile employees of petitioners are being separated as bargaining unit from its
daily-paid rank-and-file employees, on the ground that they have different
interest to protect. The principle of res judicata is, therefore, inapplicable.
Under this decision, the confidential employees (who, in 1989, were
ordered excluded from the daily-paid rank-and-file) were allowed to be included
in the union of the monthly-paid rank-and-filers.
271

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RELATIONS

7.4a Limited Exclusion; Doctrine of Necessary Implication


Up to this point, the rulings have not given definitive answer to die question
of whether confidential employees may join unions.
A definitive answer seems to have emerged, however, from more recent
decisions. In a December 1994 case of Republic Planters Bank and in the February
1995 ruling in Pier 8 Arrastre, the Supreme Court reiterated the Philips ruling
that confidential personnel, like managers, cannot join unions.
In National Association of Trade Unions (NATU) - Republic Planters Bank
Supervisors Chapter vs. Hon. Ruben Torres (G.R. No. 93468, December 29, 1994,)
the Court declared that the Bank branch managers/cashiers, controllers are
not managers but only supervisors. At the same time they are confidential
employees. A confidential employee is one entrusted with confidence on delicate
matters, or with the custody, handling, or care and protection of the employer's
property. The Court noted that "While Article 245 of the Labor Code singles out
managerial employees as ineligible to join, assist, or form any labor organization,
under the doctrine of necessary implication, confidential employees are similarly
disqualified."
The doctrine of necessary implication means that what is implied in a
statute is as much a part thereof as that which is expressed.
The Court took pains to list down the reasons for disqualifying managerial
[and confidential] employees, then the Court concluded: "Inasmuch as the
Branch Managers/OICs, Controllers and Cashiers of the Bank were shown to be
confidential employees, they are disqualified from joining or assisting the union
of supervisors, or joining, assisting or forming any other labor organization."
After arriving at this conclusion, however, the Court made this ambivalent
reservation:
But this ruling should be understood to apply only to the present case
based on the evidence of the parties, as well as to those similarly situated.
It should not be understood in any way to apply to banks in general.
T h e ineligibility of confidential employees, first enunciated in Philips
and ambivalently reiterated in Republic Planters Bank is further repeated in the
1995 case of Pier 8 Arrastre vs. Confessor and General Maritime and Stevedores Union
(G.R. No. 110854, February 1 3 , 1 9 9 5 ) . Here, the Court observed that foremen,
in modern industrial plants, are links in the chain of command between
management and labor; they are supervisory employees and cannot be part
of rank-and-file unions. But legal secretaries, though neither managers nor
supervisors, are confidential employees. "Thus, to them applies our holding in
the case of Philips Industrial Dev., Inc. vs. NLRC (210 SCRA 339 [ 1 9 9 2 ] ) .
n

These reiterations of the Philips ruling lead to the conclusion that


confidential employees, like managers, are not eligible to form, join, or assist
labor organizations.
272

COVERAGE

ARTS. 245-245-A

7.4b T h e Metrolab and Meralco Summations: Exclusion from bargaining


unit and Closed-shop Clause
The issue appears to have been put to rest by the Court's ruling in Metrolab,
given below. Confidential employees should be exempted not only from the
closed-shop provision of the CBA but also from membership in the rank-and-file
bargaining unit.
Metrolab Industries, Inc. vs. Hon. Nieves Roldan-Confesor and Metro Drug Corp.
Employees Assn.-FFW, G.R. No. 108855, February 28, 1996
Facts: Metro Drug Corporation Employees Association-Federation of Free
Workers (the Union) represents the rank-and-file employees of petitioner Metrolab
Industries, Inc. (Metrolab/Mil) and of Metro Drug, Inc.
On December 31, 1990, the CBA between Metrolab and the Union expired.
The negotiations for a new CBA started, but was caught in a deadlock. The Union
filed a notice of strike.
The Secretary of Labor took over the dispute, enjoined the strike, and directed
the parties to submit their position papers and evidence on the deadlocked issues.
Subsequently, the Secretary resolved all disputed items in the CBA and ordered
the parties to execute a new CBA. But Metrolab laid off 167 rank- and-file employees
on ground of redundancy due to lack of work, which dismissal the new Secretary of
Labor nullified. She also ruled that executive secretaries were part of the bargaining
unit of rank-and-file employees..
On February 4, 1993, the Union filed a motion for execution which Metrolab
opposed.
Metrolab argued that executive secretaries of the General Manager and the
executive secretaries of the Quality Assurance Manager, Product Development
Manager, Finance Director, Management System Manager, Human Resources
Manager, Marketing Director, Engineering Manager, Materials Manager and
Production Manager, who were all members of the company's Management
Committee, should not only be exempted from the closed-shop provision but should
also be excluded from membership in the bargaining unit of the rank-and-file
employees because those executive secretaries were confidential employees, having
access to "vital labor information."
Ruling: We concur with Metrolab.
Although Article 245 of the Labor Code limits the ineligibility to join, form, and
assist any labor organization to managerial employees, jurisprudence has extended
this prohibition to confidential employees or those who by reason of their positions
or nature of work are required to assist or act in a fiduciary manner to managerial
employees and, hence, are likewise privy to sensitive and highly confidential records.
The rationale behind the exclusion of confidential employees from the
bargaining unit of the rank-and-file employees and their qualification to join
any labor organization was succinctly discussed in Philips Industrial Development
vs. NLRC:
273

ARTS. 245-245-A

LABOR

RELATIONS

On the main issue raised before Us, it is quite obvious that respondent
NLRC committed grave abuse of discretion in reversing the decision of the
Executive Labor Arbiter and in decreeing that PIDI's "Service Engineers,
Sales Force, divisions secretaries, all Staff of General Management, Personnel
and Industrial Relations Department, Secretaries of Audit, EDP and Financial
Systems are included within the rank-and-file bargaining unit."
In die first place, all these employees, with the exception of the service engineers
and the sales force personnel, are confidential employees. Their classification as such
is not seriously disputed by PEO-FFW; the five (5) previous CBAs between PIDI and
PEO-FFW explicitly considered them as confidential employees. By the very nature
of their functions, they assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the field of
labor relations. As such, the rationale behind the ineligibility of managerial employees
to form, assist or join a labor union equally applies to them.
In the case at bench, the Union does not disagree with petitioner that the
executive secretaries are confidential employees. It, however, makes the following
contentions:
There would be no danger of company domination of the Union since
the confidential employees would not be members of and would not participate
in the decision-making processes of the Union.
Neither would there be a danger of espionage since the confidential
employees would not have any conflict of interest, not being members of the
Union. In any case, there is always the danger that any employee would leak
management secrets to the Union out of sympathy for his fellow rank-and-filer
even if he were not a member of the union nor of the bargaining unit.
Confidential employees are rank-and-file employees and they, like all the
other rank-and-file employees, should be granted the benefits of the Collective
Bargaining Agreement. There is no valid basis for discriminating against them.
The mandate of the Constitution and the Labor Code, primarily of protection
to Labor, compels such conclusion.
The Union's assurances fail to convince. The dangers sought to be prevented,
particularly the threat of conflict of interest and espionage, are not eliminated by
non-membership of Metrolab's executive secretaries or confidential employees in the
Union. Forming part of the bargaining unit, the executive secretaries stand to benefit
from any agreement executed between the Union and Metrolab. Such a scenario,
thus, gives rise to a potential conflict between personal interests and their duty as
confidential employees to act for and in behalf of Metrolab. They do not have to be
union members to affect or influence either side.
Finally, confidential employees cannot be classified as rank-and-file. As
previously discussed, the nature of employment of confidential employees is quite
distinct from the rank-and-file, thus, warranting a separate category. Excluding
confidential employees from the rank-and-file bargaining unit, therefore, is not
tantamount to discrimination.

274

COVERAGE

ARTS. 245-245-A

T h e Metrolab ruling that confidential employees are not members of the


rank-and-file bargaining unit is reiterated in Manila Electric Co. vs. Hon. Secretary
of Labor and Meralco Employees and Workers Association (MEWA), G.R. No. 127598,
January 2 7 , 1 9 9 9 .
Citing Metrolab, the Supreme Court in 2008 declared: ' T h e disqualification
of managerial and confidential employees from joining a bargaining unit for
rank-and-file employees is already well-entrenched in jurisprudence."
1

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.
2

T h e union insisting that the employees in question are not confidential


employees should buttress its claim. If the union fails to substantiate its claim,
then the confidential employees are rightfully excluded from the bargaining
unit.
3

7.4c Who Are Confidential Employees?


It is now settled that confidential employees cannot form, join or assist
rank-and-file unions; they cannot even be made to pay agency fees or be subjected
to union security clause since they are not part of the bargaining unit. But who,
precisely, is a confidential employee?
T h e definition in Philips says:
Confidential employees assist and act in a confidential capacity to,
or have access to confidential matters of, persons who exercise managerial
functions in the field of labor relations. As such, the rationale behind the
ineligibility of managerial employees to form, assist or join a labor union
equally applies to them. (Philips Industrial Development vs. NLRC, G.R. No.
88957, June 25, 1992.)
T h e definition in Metrolab states: Confidential employees are those
who by reason of their positions or nature of work are required to assist or
act in a fiduciary manner to managerial employees and hence, are likewise
privy to sensitive and highly confidential records. It also states: "By the
very nature of their functions, they assist in a confidential capacity to, or
have access of confidential matters of, persons who exercise managerial
functions in the field of labor relations." (Metrolab Industries vs. Confesor, et
al., G.R No. 108855, February 28, 1996.)

Standard Chartered Bank Employees Union vs. Standard Chartered Bank, et


al, G.R. No. 161933, April 22, 2008.
Ibid.
Ibid.
275

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LABOR

RELATIONS

7.4d The Labor Nexus


The phrase "in the field of labor relations" is important. It stresses labor
nexus, that is, the confidentiality of the position should relate to labor relations
matters.
Citing US authorities and speaking through Mme. Justice Romero, the
Court elaborates on the definition.
San Miguel Corp. Supervisors and Exempt Union, et al vs. Hon. Laguesma, et al.,
G.R. No. 110399, August 15, 1997
Confidential employees are those who (1) assist or act in a confidential
capacity, (2) to persons who formulate, determine, and effectuate management
policies in the field of labor relations. The two criteria are cumulative, and both
must be met if an employee is to be considered a confidential employee that is,
the confidential relationship must exist between the employee and his supervisor,
and the supervisor must handle the prescribed responsibilities relating to labor
relations.
The exclusion from bargaining units of employees who, in the normal
course of their duties, become aware of management policies relating to labor
relations is a principal objective sought to be accomplished by the "confidential
employee rule." The broad rationale behind this rule is that employees should not be
placed in a position involving a potential conflict of interest. "Management should
not be required to handle labor relations matters through employees who are
represented by the union with which the company is required to deal and who
in the normal performance of their duties may obtain advance information of
the company's position with regard to contract negotiations, the disposition of
grievances, or other labor relations matters."
An important element of the "confidential employee rule" is the employee's
need to use labor relations information. Thus, in determining the confidentiality
of certain employees, a key question frequently considered is the employees'
necessary access to confidential labor relations information.
Granting arguendo that an employee has access to confidential labor
relations information but such is merely incidental to his duties and knowledge
thereof is not necessary in the performance of such duties, said access does not
render the employee a confidential employee. " I f access to confidential labor
relations information is to be a factor in the determination of an employee's
confidential status, such information must relate to the employer's labor
relations policies. Thus, an employee of a labor union, or of a management
association, must have access to confidential labor relations information
with respect to his employer, the union, or the association, to be regarded
a confidential employee, and knowledge of labor relations information
pertaining to the companies with which the union deals, or which the
association represents, will not cause an employee to be excluded from the
276

COVERAGE

ARTS. 245-245-A

bargaining unit representing employees of the union or association." "Access


to information which is regarded by the employer to be confidential from the
business standpoint, such as financial information or technical trade secrets,
will not render an employee a confidential employee."
T h e following paragraph may well summarize the confidential-employee
rule:
Article 245 of the Labor Code does not directly prohibit confidential
employees from engaging in union activities. However, under the doctrine
of necessary implication, the disqualification of managerial employees
equally applies to confidential employees. T h e confidential-employee
rule justifies exclusion of confidential employees because in the normal
course of their duties they become aware of management policies relating
to labor relations. It must be stressed, however, that when the employee
does not have access to confidential labor relations information, there is no
legal prohibition against confidential employees from forming, assisting,
or joining a union. (Sugbuanon Rural Bank vs. Laguesma, G.R. No. 116194,
February 2, 2000.)
7.4e New CBA may Include Employees Excluded from Old CBA; Expired
CBA may be Modified, not just Renewed
Regardless of the swinging court rulings, the employer and the union in
an enterprise may negotiate and agree whom to cover in their CBA. And they
are free to change their agreement: people excluded before may be included
now, or vice-versa.
T h e Supreme Court agrees with the Solicitor General that the express
exclusion of the computer operators and discipline officers from the bargaining
unit of rank-and-file employees in the 1986 collective bargaining agreement does
not bar any renegotiation for the future inclusion of the said employees in the
bargaining unit. During the freedom period, the parties may not only renew
the existing collective bargaining agreement but may also propose and discuss
modifications or amendments thereto. With regard to the alleged confidential
nature of the said employees' functions, after a careful consideration of the
pleadings filed before this Court, we rule that the said computer operators and
discipline officers are not confidential employees. As carefully examined by the
Solicitor General, the service record of a computer operator reveals that his
duties are basically clerical and non-confidential in nature. As to the discipline
officers, we agree with the voluntary arbitrator that based on the nature of their
duties, they are not confidential employees and should therefore be included
in the bargaining unit of rank-and-file employees.
1

*De la Salle University vs. DLSUEA, G.R. No. 109002, April 12, 2000.
277

ARTS, 245-245-A

LABOR

RELATIONS

The Court also affirms the findings of the voluntary arbitrator that the
employees of the College of St. Benilde should be excluded from the bargaining
unit of the rank-and-file employees of De la Salle University, because the two
educational institutions have their own separate juridical personality and no
sufficient evidence was shown to justify the piercing of the veil of corporate
fiction.
The ruling that a CBA may be modified, and not merely renewed, is
explained further under Article 253.
1

8.

SECURITY GUARDS MAY JOIN RANK-AND-FILE OR SUPERVISORS


UNION
Under the old rules, security guards were barred from joining a labor
organization of the rank-and-file. Under R.A. 6715, they may now freely join
a labor organization of the rank-and-file or that of the supervisory union,
depending on their rank.
2

Aware of risks, the Court further said:


We are aware however of possible consequences in the implementation
of the law in allowing security personnel to join labor unions within the
company they serve. T h e law is apt to produce divided loyalties in the
faithful performance of their duties. Economic reasons would present
the employees concerned with the temptation to subordinate their duties
to the allegiance they owe the union of which they are members, aware
as they are that it is usually union action that obtains for them increased
pecuniary benefits. (Manila Electric Co. vs. Secretary of Labor and Employment,
G.R No. 91902, May 20, 1991.)
Thus, in the event of a strike declared by their union, security
personnel may neglect or outrightly abandon their duties, such as protection of property of their employer and the persons of its officials
and employees, the control of access to the employer's premises, and
the maintenance of order in the event of emergencies and untoward
incidents. (Ibid.)
It is hoped that the corresponding amendatory a n d / o r suppletory
laws be passed by Congress to avoid possible conflict of interest in security
personnel. (Ibid.)
9.

WORKERS IN EXPORT PROCESSING ZONES

Export processing zones, anywhere in the Philippines, are part of Philippine


territory which is subject to its sovereignty and laws. To them therefore applies
with undiminished force the Philippine Constitution that guarantees the workers'
*De la Salle University vs. DLSUEA, G.R. No. 109002, April 12, 2000.
Manila Electric Co. vs. Secretary of Labor and Employment, G.R. No. 91902,
May 20, 1991.
2

278

COVERAGE

ART. 246

rights to organize, to strike and so forth. T h e zone workers cannot be denied


these constitutional rights. Moreover, the model corporate code of conduct
issued in 1977 by ILO titled Tripartite Declaration of Principles Concerning
Multinational Enterprises and Social Policy states:
"Where governments of host countries offer special incentives
to attract foreign investments, these incentives should not include any
limitations on the workers' freedom of association or the right to organize
and bargain collectively." (Neville Rubin, [ed.], Code of International Labor Law
[Cambridge, 2005], p. 130. See also: John W. Budd, Labor Relations: Striking a
Balance [McGraw-Hill, 2008], p. 450.)
ART. 2 4 6 . NON-ABRIDGMENT OF RIGHT TO SELF-ORGANIZATION
It shall be unlawful for any person to restrain, c o e r c e , discriminate
against or unduly interfere with employees and workers in their exercise of
the right to self-organization. Such right shall include the right to form, join,
or assist labor organizations for the purpose of collective bargaining through
representatives of their own choosing and to engage in lawful concerted
activities for the same purpose or for their mutual aid and protection, subject
to the provisions of Article 2 6 4 of this Code.
COMMENTS
1.

CONCEPT OF THE RIGHT TO SELF-ORGANIZATION

This is a key article that offers an inclusionary definition of the right to


self-organization (S.O.) by saying not what it is but what it includes. It includes
at least two rights: (1) the right to form, j o i n or assist labor organizations, and
(2) the right to engage in lawful concerted activities. The "labor organization"
may be a union or association of employees, as mentioned in Article 212(g). Its
purposes may be collective bargaining or dealing with the employer.
T h e right to form labor organization is twin to the right to engage in
concerted activity. Such group action, which should be held peacefully to remain
lawful, can similarly be for collective bargaining purpose, but it can simply be
for aid and protection of the members. T h e latter purpose implies that a group
action, such as protest action (kilos protesta), can be held even if the group is
not involved in collective bargaining. Such peaceful group action, according to
rulings, is an exercise of the right to freedom of speech under the Bill of Rights.
The group action is not necessarily a work stoppage or strike because it may be
done during off-hours. If it is a strike, the restrictions in Article 264 should be
observed.
T h e labor organization entitled to protection does not have to be a
registered organization. And it does not have to be the bargaining union.
But, if unregistered, does it have a right to represent its members? No, because
it is not a legal person. Thus, it cannot claim the rights under Article 242.
279

ART. 246

LABOR RELATIONS

It is worth noting, finally, that the right to self-organization is granted


not only to employees but to "workers," whether employed or not. In fact,
constitutionally speaking, the right to form associations or societies is a right of
the "people," whether workers or not.
No "person"inside or outside of government, employer or non-employer,
unionist or non-unionistmay abridge these rights. If abridged in the workplace,
the abridgement is termed ULP (unfair labor practice).
Article 246 is both (in mixed metaphors) the conceptual mother and the
formidable fortress of the prohibited ULP acts expounded in the next three
articles.

280

Title VI
UNFAIR LABOR PRACTICES
Chapter I
CONCEPT
Overview/Key Questions
Box 12
1. Unfair labor practice is an act of abridgment which
Article 246 prohibits. Is it ULP to stop a "protest action"
by ununionized employees?
2. Under Article 247, ULP is both civil and criminal
offense. Why?
3. What are the elements of ULP as an offense?

ART. 247. CONCEPT OF UNFAIR LABOR PRACTICE AND PROCEDURE


PROSECUTION THEREOF
Unfair labor practices violate the constitutional right of workers and
employees to self-organization, are inimical to the legitimate interests of
both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual
respect, disrupt industrial peace and binder the promotion of healthy and
stable labor-management relations.
Consequently, unfair labor practices are not only violations of the civil
rights of both labor and management but are also criminal offenses against
the State which shall be subject to prosecution and punishment as herein
provided.
Subject to the exercise by the President or by the Secretary of Labor
and Employment of the powers vested in them by Articles 263 and 264 of this
Code, the civil aspects of all cases involving unfair labor practices, which may
include claims for actual, moral, exemplary and other forms of damages,
attorney's fees and other affirmative relief, shall be under the jurisdiction
of the Labor Arbiters. The Labor Arbiters shall give utmost priority to the
hearing and resolution of all cases involving unfair labor practices. They
shall resolve such cases within thirty (30) calendar days from the time they
are submitted for decision.

FOR

281

ART. 247

LABOR RELATIONS

Recovery of civil liability in the administrative proceedings shall bar


recovery under the Civil Code.
No criminal prosecution under this title
Tide may be instituted without a
final judgment, finding that an unfair labor practice was committed, having
been first obtained in the preceding paragraph. During the pendency of such
administrative proceedings, the running of the period of prescription of the
criminal offense herein penalized shall be considered interrupted: Provided,
however, That the final judgment in the administrative proceedings shall not
be binding in the criminal case nor be considered as evidence of guilt but
merely as proof of compliance of the requirements herein set forth.
COMMENTS AND CASES
1.

CONCEPT OF UNFAIR LABOR PRACTICE

As noted at the start of Book V a major aim of labor relations policy is


industrial democracy whose realization is most felt in free collective bargaining
or negotiation over terms and conditions of employment. But for bargaining or
negotiation to be true and meaningful, the employees, first of all, must organize
themselves. Because self-organization is a prerequisite the lifeblood of
industrial democracy, the right to self-organize has been enshrined in the
Constitution, and any act intended to weaken or defeat the right is regarded by
law as an offense. The offense is technically called "unfair labor practice" (ULP).
Literally, it does not mean an unfair practice by labor but a practice unfair to
labor, although the offender may either be an employer or a labor organization.
As already noted, Article 246 is the conceptual mother of unfair labor
practice. It declares that it is unlawful for any person to restrain, coerce,
discriminate against or unduly interfere with the exercise of the right to selforganization.
The victim of the offense is not just the workers as a body and the wellmeaning employers who value industrial peace, but the State as well. Thus, the
attack to this constitutional right is considered a crime which therefore carries
both civil and criminal liabilities.
Even prior to the Labor Code, ULP was a criminal act, and the Court
explained thus "A consideration of the entire law on the matter clearly discloses
the intention of the lawmaker to consider acts which are alleged to constitute
unfair labor practices as violations of the law or offenses, to be prosecuted in
the same manner as a criminal offense. T h e reason for this provisions is that
the commission of an unfair labor practice is an offense against a public right
or interest and should be prosecuted in the same manner as a public offense.
The reason for the distinction between an unfair labor practice case and a mere
violation of an employer of its contractual obligation towards an employee is, x
x x that unfair labor practice cases involve violation of public right or policy, to
be prosecuted like criminal offenses, whereas a breach of an obligation of the
282

CONCEPT

ART. 247

employer to his employees is only a contractual breach to be redressed like an


ordinary contract or obligation.
1

1.1

Elements

Commission of unfair labor practice at the enterprise level needs the


presence of certain elements: first, there is employer-employee relationship
between the offender and the offended; and second, the act done is expressly
defined in the Code as an act of unfair labor practice. T h e first element is required
because ULP is negation of, a counteraction to, the right to organize which is
available only to employees in relation to their employer. No organizational
right can be negated or assailed if employer-employee relationship is absent in
the first place.
T h e second element is that the act done is prohibited by the Code,
specifically in Articles 2 4 8 and 261 for an employer and Article 249 for a labor
organization. Article 2 1 2 ( k ) emphatically defines "unfair labor practice" as "any
unfair labor practice as expressly defined by this Code." Article 261 amplifies
Article 248(i) by stating that violation of a CBA is unfair labor practice only if
the violation is gross in character.
T h e prohibited acts, it should be stressed, are all related to the workers' selforganizational right and to the observance of a collective bargaining agreement
(CBA). T h e only possible exception is Article 248(f) referring to dismissing or
prejudicing an employee for giving testimony under this Code [regardless of
the subject of the testimony].
Because ULP is and has to be related to the right to self-organization and
to the observance of the CBA, it follows that not every unfair act is "unfair labor
practice." A businessman, for instance, who eases out his loyal partner so that he
alone can amass the profits, may be unfair and ungrateful to his partner, but he
is not committing ULP. T h e partner is not an employee and removing him has
nothing to do with workers' right to organize. Similarly, if a manager promotes
an employee on the basis of personal acquaintance and not of qualifications and
performance, he may be unfair to the better qualified employees, but is not guilty
of ULP. Promoting an employee not on the basis of merits may be bad human
resource management but does not amount to ULP.
2

ULP, therefore, has a limited, technical meaning because it is a labor


relations concept with a statutory definition. It refers only to acts opposed to
workers' right to organize. Without that element, the act, no matter how unfair,
is not unfair labor practice as legally defined.
'National Labor Union vs. Insular-Yebana Tobacco Corporation, G.R. No.
H 5 3 6 3 , J u l y 3 1 , 1961.
See Philcom Employees Union vs. Philippine Global Communications, et al,
G.R. No. 144315, July 17, 2006.
2

283

LABOR RELATIONS

ART. 247

Stripped of legalese, unfair labor practice, when committed by the


employer, commonly connotes anti-unionism.
1.2 Prejudice to Public Interest not an Element of U.L.P.
The SOLE (Secretary of Labor and Employment) dismissed the charges
of ULP of both the Union and the Bank, explaining that both parties failed to
substantiate their claims. Citing National Labor Union v. Insular-Yebana Tobacco
Corporation, 2 SCRA 9 2 4 (1961) the S O L E stated that ULP charges would
prosper only if shown to have directly prejudiced the public interest. On this,
the Supreme Court disagreed. A showing of prejudice to public interest is not
a requisite for ULP charges to prosper. But still it cannot be concluded that
the SOLE gravely abused her discretion. Grave abuse of discretion implies
such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or where the power is exercised in an arbitrary or despotic manner
by reason of passion or personal hostility which must be so patent and gross as
to amount to an invasion of positive duty or to a virtual refusal to perform the
duty enjoined or to act at all in contemplation of law. Mere abuse of discretion
is not enough.
1

2.

PROSECUTION OF U.L.P.

Under Article 247 ULP has civil as well as criminal aspects. T h e civil aspect
may include liability for damages and these may be passed upon by a labor arbiter.
To prosecute ULP as criminal offense is not possible until after finality
of judgment in the labor case, finding that the respondent indeed committed
unfair labor practice. But such judgment will not serve as evidence of ULP in
the criminal case; the criminal charge must be proved independently from the
labor case. Moreover, while only substantial evidence is required in the labor
case in the NLRC, proof beyond reasonable doubt is needed to convict in the
criminal case of ULP.
T h e criminal charge, states Article 2 8 8 , falls under the concurrent
jurisdiction of the Municipal or Regional Trial Court. T h e same article defines
the penalty of fine a n d / o r imprisonment.
Under Article 289, the penalty shall be imposed upon the guilty officers
of a corporation, partnership, association or entity. If the ULP is committed by
a labor organization the parties liable are those mentioned in Article 249.
T h e offense prescribes in one year.

'Standard Chartered Bank Employees Union (NUBE) vs. Hon. N.R. Confessor,
G.R. No. 114974, June 16, 2004.
Article 290.
2

284

CONCEPT

ART. 247

RIGHT CULTURE
INSTEAD OF ANTI-UNIONISM
"... [C]ulture is the key factor influencing any organization's
effectiveness and efficiency. T h e reason is that culture determines
how people in any organization behave and interact. Culture defines
values, so it determines such things as the redefinition of success, how
success is recognized, what constitutes a problem, and how problems
are handled. Culture also determines how people communicate
with one another, including how open they will be and whether bad
news is shared as freely as is good news. In fact, the culture of an
organization defines every aspect of the way in which the people in
that organization interact with one another.
"As business leaders, we have to deal with culture, and this can
only be done in one of two ways. We, as leaders, can create the culture
which we want in our organization or we can simply accept whatever
culture develops naturally. Obviously, this latter approach is very risky
and is likely to compromise the effectiveness of our people.
"Even though leading an organization through culture was not
really formally recognized until the early 80s, the practice has existed
for a long time. This is evident in some of industry's biggest and oldest
success stories. IBM to this day lives off the culture established by their
founder, Thomas Watson. He developed a powerful organization
based on core principles such as "Respect for the Individual" and
"IBM Means Service." In Procter & Gamble, our core cultural belief is
that "the interest of our employees and our company are inseparable.
What is good for the people is good for the company; what is good
for the company is good for the people."
WALKER JAMES WALLACE
Speech in receiving PMAP's
"Employer of the Year" Award for
Procter 8c Gamble Phil., Inc., Dec. 21, 1987

285

Chapter II
UNFAIR LABOR PRACTICES OF EMPLOYERS
Overview/Key Questions
Box 13
1. What acts are considered unfair labor practice by an
employer?
2. What is discrimination that may constitute ULP?
3. Is it ULP for an employer to contract out jobs being
done by union members?
4. Is it ULP for an employer to favor a particular union?
5. Is it lawful to compel an employee to join a union?

ART. 2 4 8 . UNFAIR LABOR PRACTICES OF EMPLOYERS


It shall be unlawful for an employer to commit any of the following
unfair labor practices:
(a) To interfere with, restrain or c o e r c e employees in the exercise
of their right to self-organization;
(b) To require as a condition of employment that a person or an
employee shall not join a labor organization or shall withdraw from one to
which he belongs;
(c) To contract out services or functions being p e r f o r m e d by union
members when such will interfere with, restrain or c o e r c e employees in the
exercise of their right to self-organization;
(d) To initiate, dominate, assist or otherwise interfere with the
formation or administration of any labor organization, including the giving
of financial or other support to it or its organizers or supporters;
(e) To discriminate in regard to wages, hours of work, and other
terms and conditions of employment in o r d e r to encourage or discourage
membership in any labor organization. Nothing in this C o d e or in any other
law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition of employment, except those employees
who are already members of another union at the time of the signing of the
collective bargaining agreement. Employees of an appropriate collective
bargaining unit who are not members of the recognized collective bargaining
agent may be assessed a reasonable fee equivalent to the dues and other fees
paid by members of the recognized collective bargaining agent, if such non286

UNFAIR LABOR PRACTICES OF EMPLOYERS

ART. 248

union members accept the benefits under the collective agreement. Provided,
That the individual authorization required under Article 242, paragraph (o)
of this Code shall not apply to the nonmembers of the recognized collective
bargaining agent;
(f)
To dismiss, discharge, or otherwise prejudice or discriminate
against an employee for having given or being about to give testimony under
this Code;
(g) To violate the duty to bargain collectively as prescribed by this
Code; art 251, 252 and 253.
(h) To pay negotiation or attorney's fees to the union or its officers
or agents as p a r t of the settlement of any issue in collective bargaining or
any other dispute; or
(i)
To violate a collective bargaining agreement.
T h e provisions of the preceding paragraph notwithstanding, only the
officers and agents of corporations, associations or partnerships who have
actually participated in, authorized or ratified unfair labor practices shall
be held criminally liable.
COMMENTS AND CASES
1.

CONDITIONS PRECEDENT TO U.L.P. CHARGE

Before an employee may be considered aggrieved by an alleged unfair labor


practice (ULP) by an employer, it must be demonstrated, firstly, that the injured
party comes within the definition of "employee" as that term is defined by the
Code, and secondly, the act charged as ULP must fall under the prohibitions of
Article 248 (acts of the employer) or 249 (acts of the union).
Mariano vs. Royal Interocean Lines, G.R. No. H 2 4 2 9 , February 27, 1961
Facts: Ms. Mariano, a stenographer-typist in Royal Interocean Lines sent a
letter to the managing directors of the company in Hong Kong, coursed through
its Philippine manager, complaining about the latter's "inconsiderate and untactful
attitude" towards the employees and clients of the company.
Subsequently, the manager advised Ms. Mariano that in view of the contents
and tenor of her letter, the managing directors believed with the manager that it was
impossible to maintain her further in the service of the company. She was dismissed.
The employee filed a complaint charging the employer with "unfair labor
practice" for having dismissed her from the service "for the reason that she wrote a
letter to the Managing Directors in Hong Kong."
Ruling: Considering that the employee's dismissal, because of charges against
the manager "is not connected with or necessarily arising from union activities," the
dismissal did not constitute ULP. Despite the employees' right to self-organization,
the employer still retains his inherent right to discipline his employees, "his normal
prerogative to hire or dismiss them."
287

ART. 248

LABOR RELATIONS

Nevertheless, the dismissal of the appellee was without cause, because her
inefficiency as the ground or reason of her dismissal as claimed by the appellants is
belied by the successive increases of her compensation.
In other words, the Court ruled that the dismissal of the employee was
unjustified, but that the employer did not commit ULP because the act has no
union connection.
1.1 Historical Evidence of the Link
The link between the term "unfair labor practice" and the workers' right
to organize is easily verifiable from the legislative history of labor relations laws
in the US after which was patterned the Philippine law on the matter (R.A. No.
875, succeeded by the Labor Code). Earlier, there was no U.S. law allowing
the formation of labor unions; in fact, workers' groups were judicially labeled
as violations of anti-trust laws or as unlawful "combinations or conspiracies of
workers." But in 1914, the Clayton Act was passed granting workers the right to
organize for purposes of "mutual assistance" and stating that such organizations
shall not be considered as conspiracies. Firmly resisting the formation and
legalization of unions, the employers continued vigorously the use of fellow-dog"
contracts by which employees promised not to form or j o i n unions. To enforce
such contracts, the employers would obtain court injunctions to force unions
to respect the "yellow dog" commitments.
Strongly reacting, organized labor secured passage in 1932 of the NorrisLa Guardia Act which stopped courts from issuing injunctions in labor disputes.
This was quickly followed in 1933 by the National Industrial Recovery Act (NIRA)
which advanced the labor cause by affirming the workers' right not only to
organize but also "to bargain collectively" with their employer. Those rights,
NIRA further stated, must be "free from the interference, restrain or coercion of
employers." But, on May 2 7 , 1 9 3 5 , the Court declared the NIRA unconstitutional.
Senator Robert Wagner, - who was also chairman of a National Labor Board
and of the New York Factory Investigating Commission and was instrumental
in the passage of the NIRA - rebounded to take up the cudgels for labor. He
sponsored a stronger NIRA - National Industrial Relations Act - which Wagner's
fellow New Yorker, President Roosevelt, approved on July 5, 1935.
Shortly after its passage, the Wagner Law was the subject of heated reactions
from the business community, culminating in numerous modifications by the
Taft-Hardey Law "to balance" the interests of labor and capital.
The Taft-Hardey amendments affirm in its Section 7 the Wagner Act's grant
of the employees' rights to organize for collective bargaining and mutual aid and
protection as well as to engage in concerted activities. Section 8(a) confirms that it
is "an unfair labor practice" for an employer to interfere with, restrain or coerce
employees "in the exercise of the rights guaranteed in Section 7;" in the same
288

UNFAIR LABOR PRACTICES OF EMPLOYERS

ART. 248

breath Section 8 ( b ) declares it "an unfair labor practice" for a labor organization
to restrain or coerce employees "in the exercise of the rights guaranteed in
Section 7." Clearly, the three provisions Section 7, Section 8 ( a ) , and Section
8 ( b ) are interconnected. O n e gives rise to the other: Section 7 recognizes
the employees' organizational rights; Section 8(a) protects those rights from
employer's assault or evasion; and Section 8 ( b ) shields those rights from misuse
or abuse by the labor organization. ULP in Section 8, a and b, was conceived
because of and in particular relation to the Section 7 organizational right.
1

Nonetheless, specific denomination of the objectionable act is not necessary


to prosecute ULP. In resolving the question of whether or not an employer
committed the act charged in the complaint, it is of no consequence, either
as a matter of procedure or of substantive law, how the act is denominated
whether as a restraint, interference or coercion, or as discriminatory discharge,
or as a refusal to bargain, or even as a combination of any or all of these. For
however the employer's conduct may be characterized, what is important is that
it constituted an unfair labor practice.
2

T h e Code enumerates the acts or categories of acts considered as ULP. The


enumeration does not mean an exhaustive listing of ULP incidents. The Court
says: "The Labor Code does not undertake the impossible task of specifying in
precise and unmistakeable language each incident which constitutes an unfair
labor practice. Rather, it leaves to the court the work of applying the law's general
prohibitory language in light of infinite combinations of events which may be
charged as violative of its terms."
3

2.

ILO CONVENTION NO. 98


Without using the term "unfair labor practice," Convention No. 98 of the
International Labor Organization frowns upon anti-union discrimination and
interference. Its pertinent provisions state:
Article 1.1 Workers shall enjoy adequate protection against acts of anti-union
discrimination in respect of their employment.
2.
Such protection shall apply more particularly in respect of acts
calculated to
(a)
make the employment of a worker subject to the condition that he
shall not join a union or shall relinquish trade union membership;
1 See: John W, Budd, Labor Relations: Striking a Balance [McGraw-Hill Irwin,
2008], p. 172-179; Dale Yoder, Labor Economics and Labor Problems [McGraw-Hill, 1939],
pp. 540-551.
Republic Savings Bank vs. Court of Industrial Relations, 21 SCRA 661, October
3,1967.
'The Hongkong and Shanghai Banking Corp. Employees Union vs. NLRC,
G.R. No. 125038, November 6, 1997.
2

289

ART. 248

LABOR RELATIONS

(b) cause the dismissal of or otherwise prejudice a worker by reason of


union membership or because of participation in union activities outside working
hours or, with the consent of the employer, within working hours.
Article 2.1 Workers' and employers' organizations shall enjoy adequate
protection against any acts of interference by each other or each other's agent
or members in their establishment, functioning or administration.
2.
In particular, acts which are designed to promote the establishment
of workers' organizations under the domination of employers' organizations, or
to support workers' organizations by financial or other means, with the object
of placing such organizations under the control of employers or employers'
organizations, shall be deemed to constitute acts of interference within the
meaning of this Article.
3.

NO U.L.P: ILLUSTRATIVE INSTANCES OF VALID EXERCISE OF


MANAGEMENT RIGHTS

The law on "unfair labor practices" is not intended to deprive the employer of
his fundamental right to prescribe and enforce such rules as he honestly believes to
be necessary to the proper, productive, and profitable operation of his business. Nor
are his rights of selection and discharge of his employees wrested from him by the
Act. Rothenberg stresses that an employer, subject to the provisions of his contract
with his employees, has the same full measure of control over his business as he
had prior to the enactment of the Wagner Act and undiminished by the amended
Act. The only condition imposed upon this control is that it must not be exercised
so as to effect a violation of the Act and its several prohibitions.
1

Where, however, an employer does violate the Act and is found guilty of
the commission of an "unfair labor practice," it is no excuse that his conduct
was unintentional and innocent.
2

3.1

Personnel Movements

As a rule, it is the prerogative of the company to promote, transfer or


even demote its employees to other position when the interests of the company
reasonably demand it. Unless there are instances which directly point to
interference by the company with the employee's rights to self-organization,
the transfer of an employee should be considered as within the bounds allowed
by law, e.g., where despite his transfer to a lower position, his original rank and
salary remained undiminished.
3

Similarly, the management does not commit unfair labor practice if it


exercises the option given to it in the Collective Bargaining Agreement to retire
'See Rothenberg on Labor Relations, p. 366. See also Philcom Employees
Union vs. Phil. Global Communications, G.R. No. 144315, July 17, 2006.
See Rothenberg on Labor Relations, p. 367.
Rubberworld [Phils.], Inc., et al. vs. NLRC, G.R. No. 75704, July 19, 1989.
2

290

UNFAIR LABOR PRACTICES OF EMPLOYERS

ART. 248

an employee who either has rendered 25 years of service or reached the age of
60.
1

It is likewise the company's prerogative to promote its employees to


managerial positions. Managerial positions are offices which can only be held by
persons who have the trust of the corporation and its officers. They should not
be prevented from doing so. A promotion which is manifestly beneficial to an
employee should not give rise to a gratuitous speculation that such a promotion
was made simply to deprive the union of the membership of the promoted
employee.
2

In another illustrative case the employee was not promoted, so he cried


ULP. He charged his employer with having discriminated against him in the
giving of promotions because he was not a member of any labor organization.
T h e Court of Industrial Relations dismissed the charge, finding that the alleged
discriminatory acts against the employee did not arise from union membership
or activity because he was not in fact a union member. On appeal, the Supreme
Court ruled that the employee's allegation that he was discriminated against to
force him to join a labor organization is unconvincing since no specific union was
mentioned in his complaint. It is unbelievable that the employer would harass
and oppress him to force him to j o i n any labor union, for it cannot be seen how
that can possibly be advantageous to the employer.
3

3.2

Acceptance of Mass Resignation

Acceptance of a voluntary resignation is not ULP. In a Philippine Airlines


case the court said that the pilots' "protest retirement/resignation" was not a
concerted activity which was protected by law. They did not assume the status
of strikers. They cannot, therefore, validly claim that the company committed
unfair labor practice. When the pilots voluntarily terminated their employment
relationship with the company, they cannot claim that they were dismissed.
A legitimate concerted activity cannot be used to circumvent judicial orders
or be tossed around like a plaything. Definitely, neither employers nor employees
should be allowed to make of judicial authority a now-you've-got-it-now-you-don't
affair. T h e courts cannot hopefully effectuate and vindicate the sound policies
of the Industrial Peace Act and all our labor laws if employees, particularly those
who on account of their highly advanced technical background and relatively
better life status are far above the general working class, will be permitted to
defy and invoke the jurisdiction of the courts whenever the alternative chosen
will serve to feather their pure and simple economic demands.
4

bulletin Publishing Corporation vs. Sanchez, G.R. No. 74425, October 7,1986.
Ibid.
Bondoc vs. Court of Industrial Relations, G.R. No. 33955, January 26, 1989.
Enriquez vs. Zamora, G.R. No. 51382, December 29, 1986.
Ibid.

291

ART. 248

LABOR RELATIONS

3.3 Grant of Profit-Sharing Benefits to Non-Union Members


Management has the prerogative to regulate, according to its discretion
and judgment, all aspects of employment. This flows from the established
rule that labor law does not authorize the substitution of the judgment of the
employer in the conduct of its business. Such management prerogative may
be availed of without fear of any liability so long as it is exercised in good faith
for the advancement of the employers' interest and not for the purpose of
defeating or circumventing the rights of employees under special laws or valid
agreement and are not exercised in a malicious, harsh, oppressive, vindictive or
wanton manner or out of malice or spite.
1

Wise and Co., Inc. vs. Wise & Co., Inc. Employees Union, G.R. No. 87672, October
13, 1989
Facts: When the management introduced a profit-sharing scheme for its
managers and supervisors, the Union wrote the management to ask that the union
members be allowed to participate in the profit-sharing program. The management
denied the request on the ground that such participation was not provided in the
collective bargaining agreement.
Later, when renegotiation of the CBA was approaching, the management
wrote the union that it was willing to consider including the union members in the
profit-sharing scheme if the negotiations would be concluded before December
1987.
On March 30, 1988, the company distributed the profit-sharing benefit
not only to managers and supervisors but also to all rank-and-file employees not
covered by the CBA because they were excluded from their agreed definition of
bargaining unit, such as the regular rank-and-file employees in the office of the
president, vice-president, security office, corporate affairs office, accounting and
treasury department.
Issue: Whether the grant by management of profit-sharing benefits to its
employees who are non-union members is discriminatory against die union members.
Is the act discriminatory amounting to ULP?
Ruling: There can be no discrimination committed by the employer as die
situation of the union employees is different from that of die nonunion employees.
Discrimination per se is not unlawful. There can be no discrimination where die
employees concerned are not similarly situated.
The grant by the employer of profit-sharing benefits to die employees outside
the "bargaining unit" falls under die ambit of its managerial prerogative. It appears
to have been done in good faith and without ulterior motive. More so when as in this
case there is a clause in the CBA where the employees are classified into those who
are members of the union and those who are not. In die case of die union members,
they derive their benefits from the terms and conditions of the CBA which constitutes
'Wise and Co., Inc. vs. Wise 8c Co., Inc. Employees Union, G.R. No. 87672,
October 13, 1989.
292

UNFAIR LABOR PRACTICES OF EMPLOYERS

ART. 248

the law between the contracting parties. Both the employer and the union members
are bound by such agreement.
However, the Court serves notice that it will not hesitate to strike down any act
of the employer that tends to be discriminatory against union members. It is only
because of the peculiar circumstances of this case showing there is no such intention
that this court has ruled otherwise.
3.4

Forced Vacation Leave

Where the vacation leave without pay, which the employer requires
employees to take in view of the economic crisis, is neither malicious, oppressive
or vindictive, ULP is not committed.
Philippine Graphic Arts, Inc. vs. NLRC, et al., No. Lr80737, September 29,1988
Facts: In October 1984, the petitioner corporation was forced by economic
circumstances to require its workers to go on mandatory vacation leave in batches
of seven or nine for periods ranging from 15, 30, to 45 days. The workers were paid
while on leave but the pay was charged against their respective earned leaves.
The affected employees filed complaints for unfair labor practice and
discrimination.
Ruling: The Court is convinced from the records now before it that there was no
unfair labor practice. As found by the NLRC, the private respondents themselves never
questioned the existence of an economic crisis but, in fact, admitted its existence.
There is basis for the petitioner's contentions that the reduction of work schedule was
temporary, that it was taken only after notice and consultations with the workers and
supervisors, that a consensus was reached on how to deal with deteriorating economic
conditions and reduced sales and that the temporary reduction of working days was
a more humane solution instead of a retrenchment and reduction of personnel. The
petitioner further points out that this is in consonance with the CBA between the
employer and its employees.
Likewise, the forced leave was enforced neither in a malicious, harsh,
oppressive, vindictive nor wanton manner, or out of malice or spite. Apart from private
respondents' concurrence that the forced leave was implemented due to economic
crisis, what only 'hurts' them 'is that said management's plan was not even discussed
in the grievance procedure so that the Union members thereof may well be apprised
of the reason therefor.'
The decision to resort to forced leaves was, under the circumstances, a
management prerogative. The workers' claim of non-resort to the grievance
machinery is negated by their failure to initiate steps for its employment.
3.5 Issuance of Rules or Policy
In San Miguel Brewery Sales Farce Union (PTGWO) vs. Ople and SMC, G.R. No.
53515, February 8, 1989, the facts show that in September 1979, the company
introduced a marketing scheme known as the 'Complementary distribution
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ART. 248

system' (CDS) whereby its beer products were offered for sale directly to
wholesalers through San Miguel's sales offices.
The labor union (petitioner) filed a complaint for unfair labor practice,
with a notice of strike, on the ground that the CDS was contrary to the existing
marketing scheme whereby the route salesmen sold their stocks of beer within
assigned specific territories and the wholesalers had t