Escolar Documentos
Profissional Documentos
Cultura Documentos
Private Interests
Prepared by:
Dustin Michael H. Garcia
15-079
The relationship of labor and capital is established through the direct and personal
interaction of the employer and employee. The would-be employee applies to work for the would-
be employer. He showcases his experience, skills, credentials, and character to him in hopes of
being hired to the exclusion of other applicants. In turn, the would-be employer evaluates the
would-be employee’s qualifications for the said work. Thereafter, he informs the applicant whether
Once accepted, the applicant becomes the employee. He works for the employer under the
terms and conditions that may have been agreed upon by them in an employment contract. Disputes
arise between them along the course of employment for any failure of one to perform their
obligation to the other or any demand left unheeded by one to the other. Said disputes may result
to either an agreement or disagreement. If they end in disagreements, either may terminate the
employer-employee relationship as per the terms of the contract or law. Then, the aggrieved party
Following this chain of events, we see that the relationship of employers and employees is
direct and personal. It is a relationship that requires constant interaction for moving forward their
interests whether it would be salaries for the employees or profits for the employers. Therefore, a
positive relationship between employers and employees generally result to mutual economic gains.
For that matter, the beneficial management and harmonious existence of the business is generally
For example, one of the most significant rights of employees is the right to participate as
expressly provided in the 1987 Constitution. This right empowers employees to participate in the
decision and policy-making process with their employers concerning their rights, duties, and
welfare.1 Generally, employees participate in the management of the business through the Labor
Management Council.2 The right to participate is effectively exercised upon satisfying the
following conditions:
expressed in the Constitution is the right to self-organization. Article XIII, Section 3 of the
1
PHIL. CONSTI. art. XIII, §3; Labor Code, Art. 255; Philippine Airlines, Inc. v. NLRC, G.R. No. 85985, August 13,
1993.
2
A Decree Instituting a Labor Code Thereby Revising and Consolidating Labor and Social Laws To Afford Protection
to labor, Promote Employment And Human Resources Development And Insure Industrial Peace Based On Social
Justice [LABOR Code], Presidential Decree No. 422, Art. 277 (h) (1974) as amended by Section 33, Republic Act No.
6715, March 21, 1989).
also participate in policy and decision-making processes affecting their rights
and benefits as may be provided by law.”3
Despite this participatory process and conditions in place under the Labor Code and
relevant labor legislations, still, labor disputes arise. In such cases, it is in the best interest of both
parties to resolve the dispute to resume economic gains and preserve industrial peace.
In this paper, the author focuses on arbitration as the most effective and suitable process of
settling labor disputes for two main reasons: the parties are afforded the opportunity to set the rules
of the arbitral proceedings and the arbitral tribunal renders an arbitral award which finally
terminates the dispute. Through arbitration, both employers and employees achieve the resolution
of their disputes through a speedy and confidential process that is conducted by an impartial and
In establishing arbitration as the preferred mode of dispute resolution, the author would
discuss relevant points in the legal history of arbitration in the Philippines, its unique features and
advantages compared to other dispute resolutions, and compare arbitration in the context of labor
law with arbitration in the context of commercial law. Ultimately, the author would suggest a
This paper is not intended, however, to displace the grievance machinery procedure as the
encouraged by no less than the Supreme Court because such dispute resolution effectively unclogs
3
PHIL CONSTI. art. XIII, §3; Contra the right to self-organization for government employees in Article IX, B, Section
2 (5): “[t]he right to self-organizati over don shall not be denied to government employees.”
judicial dockets and hasten the resolution of disputes.4 Further, the policy of the State is to actively
promote party autonomy in the resolution of disputes or the freedom of the parties to make their
own arrangements to resolve disputes such as arbitration.5 In this case, arbitration takes precedence
over other dispute settlement devices and precludes resort to strikes or lockouts.6
refer their dispute to an appointed arbitrator for a final and binding resolution.7 Voluntary
arbitrators have original and exclusive jurisdiction over the following cases:
under Article 262 of the Labor Code, upon agreement of both parties, all labor
disputes; and
under Article 261 of the Labor Code, based on grievance machinery provisions
of a CBA, all unresolved grievances arising from the interpretation or
implementation of the CBA and those arising from the interpretation or
enforcement of company personnel policies.8
Arbitration is compulsory when it is provided by law and conducted under the auspices of
the NLRC. For example, Article 217 of the Labor Code provides for the original and exclusive
jurisdiction of the NLRC, through the LA, over disputes of unfair labor practice cases,
termination disputes, (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
legality of strikes and lockouts, and money claims for more than P5,000.9 Article 218 (e) of the
Labor Code provides that the NLRC has jurisdiction over disputes concerning injunction to enjoin
4
LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc, G.R. No. 141833, March 26,
2003.
5
See An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines And to
Establish the Office for Alternative Dispute Resolution, and for Other Purposes [ADR Act of 2004], Republic Act No.
9285, §2 (2004).
6
C.A. AZUCENA, II THE LABOR CODE WITH COMMENTS AND CASES 545 (2004).
7
LABOR CODE, art. 262.
8
Id. arts. 261 & 262.
9
Id. art. 217.
or restrain 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.10 The Department of Labor and Employment
may also compulsorily arbitrate in cases of money claims not exceeding Php5,000.00.11
A further discussion on arbitration as a process for settling disputes is laid down in the
To understand arbitration, we must revisit its roots and the changes it underwent through
the decades. In doing so, we must pay particular attention not only to its legal changes but also the
Long before the Spanish occupation of the Philippines, local communities or barangays
have already resorted to arbitration in resolving conflicts concerning, for instance, property and
personal relationships.12 In cases of family quarrels, elders and parents may at times act as
arbitrators whose decisions are final and binding upon the parties concerned.13
Arbitration was conducted by the datu or the chieftain who hears the arguments of both
parties, establishes the facts, and resolves the dispute through an opinion.14 This opinion becomes
the basis of rights and duties of the respective parties to the dispute.15 Similar to the present feature
10
Id. art. 218.
11
Id. art. 129.
12
HANS CACDAC & TERESITA AUDEA, THE STATE OF PHILIPPINE VOLUNTARY ARBITRATION 5 (2005).
13
FRANCISCO LIM, COMMERCIAL ARBITRATION IN THE PHILIPPINES IN ATENEO LAW JOURNAL 396, 396 (2001).
14
Ibid.
15
HANS CACDAC & TERESITA AUDEA, supra note 12.
of an arbitral award, the datu’s opinion lays to rest with finality any dispute between the parties
During the Spanish period, the law on arbitration was governed by Book IV, Title XII, De
los transacciones y compromisos of the Codigo Civil.17 Arbitration was conducted by jucio de
amigables componedores or the friendly adjusters who were men with the ability to read and write.
The number of adjusters has to be an odd number which should not exceed five. The agreement to
arbitrate must be executed before the notary public. Otherwise, the agreement is void. An adjuster
could be challenged if he had an interest in the subject-matter of the dispute or that he was
antagonistic against a party. If the adjuster refused to resign, the aggrieved party may file before
When an arbitral award is issued, the losing party may file an appeal before the Supreme
Court of Spain sixty days thereafter. If no appeal was made, the award must be executed by the
During the American occupation and through the Commonwealth period, arbitration was
recognized as one of the modes of dispute settlement mechanisms in labor disputes. In fact, Article
XIV, Section 6 of the 1935 Constitution, or the “afford protection to labor” clause states that: “[t]he
state shall afford protection to labor, especially to working women and minors, regulating the
relations between landowner and tenant, and between labor and capital in industry and agriculture.
16
Ibid.
17
Chung Fu Industries v. CA, 206 SCRA 545 (1992).
18
Cordoba v. Conde, 2 Phil. 445 (1903).
19
Ibid.
20
1935 PHIL. CONSTI. art. XIV, §6.
By that constitutional mandate, the legislature framed arbitration as a private process
between consenting parties which precludes government intervention except for limited instances.
By force of this provision, employers and employees may agree to submit to arbitration
their labor disputes and even choose their individual arbitrators. Nevertheless, considering that
public interest dictates the protection of labor, the legislature seemed it best to have the minimum
involvement of the government through the participation of the Department of Justice in the
The judiciary, in accordance with State policy, adopted judicial restraint in taking
Assurance Corporation of London. In that case, the arbitration agreement is the law between the
parties should disputes arise in connection with their transaction. Hence, resort to arbitration was
a condition precedent before any party may invoke the jurisdiction of regular courts.23
21
An Act Providing for Mediation, Conciliation and Arbitration in Controversies between Landlords and Tenants and
Between Employers and Employees, and For Other Purposes, Act 4055, §3 (1933).
22
Id. §1.
23
Chang v. Royal Exchange Assurance Corporation of London, 8 Phil. 400 (1907).
In Allen v. Province of Tayabas, arbitration precludes the courts from exercising
jurisdiction over the dispute. Unless the arbitration agreement absolutely closed the door to judicial
review, the court would only interfere with the actions of the arbitrator with great reluctance.24
Then in 1936, the legislature enacted Commonwealth Act 103 to establish compulsory
arbitration as the principal mode of dispute settlement. In conjunction with this, the Court of
Industrial Relations was created to compulsorily arbitrate all labor disputes.25 Commonwealth Act
103 was the government’s response to the mounting insurgency in the rice haciendas and sugar
plantations.26
The Court of Industrial Relations had two functions. The first function is to decide labor
24
Allen v. Province of Tayabas, 38 Phil. 356 (1918).
25
An Act to Afford Protection of Labor by Creating a Court of Industrial Relations Empowered to Fix
Minimum Wages for Laborers and Maximum Rentals to be Paid by Tenants, and to Enforce Compulsory Arbitration
between Employees or Landlords, and Employees or Tenants, Respectively; and By Prescribing Penalties for the
Violation of Its Orders, Commonwealth Act 103, §4 (1936).
26
Ruben Torres & George Eduvala, Labor Relations Policy and Labor Movement IN PHILIPPINE LABOR REVIEW 4
(1977).
27
Commonwealth Act 103, supra note 25, §4.
The second function refers to endeavor the reconciliation of the parties when proper. The
“[t]he Court shall, before hearing the dispute and in the course of such
hearing, endeavor to reconcile the parties and induce them to settle the
dispute by amicable agreement. If any agreement as to the whole or any
part of the dispute is arrived at by the parties, a memorandum of its terms
shall be made in writing, signed and acknowledged by the parties thereto
before the Judge of the Court or any official acting in his behalf and
authorized to administer oaths or acknowledgments, or, before a notary
public. The memorandum shall be filed in the office of the Clerk of the Court,
and, unless otherwise ordered by the Court, shall, as between the parties to
the agreement, have the same effect as, and be deemed to be, a decision or
award.”28
While the law mentions arbitration as the mode of dispute settlement, the term used should
not be confused with its usage under the present legal framework. Unlike the present form of
arbitration wherein parties to the agreement choose their own arbitrators, Judges of the Court of
Industrial Relations are appointed by the President upon the confirmation of the Commission on
Appointments of the National Assembly. Further, the Court of Industrial Relations operated under
However, the Court of Industrial as a project of the government failed to contain both
organized and spontaneous strikes which it sought to prevent. The Court suffered from protracted
delays in the disposition of cases that resulted to the clogging of case dockets.30
As a response, in 1953, Congress enacted Republic Act 875 or the Magna Carta of Labor
or the Industrial Peace Act. This law shifted the labor relations policy from compulsory arbitration
to collective bargaining.31 Section 1 of Republic Act of 875 states that it is the policy of the State:
28
Ibid.
29
Id. §1.
30
ALFONSO ATIENZA, VOLUNTARY ARBITRATION AND COLLECTIVE BARGAINING IN THE PHILIPPINES 3 (2000).
31
HANS CACDAC & TERESITA AUDEA, supra note 12, at 5, 9.
of collective bargaining and for the promotion of their moral, social, and
economic well-being.
(b) To promote sound stable industrial peace and the advancement of the
general welfare, health and safety and the best interests of employers and
employees by the settlement of issues respecting terms and conditions of
employment through the process of collective bargaining between employers
and representatives of their employees.
It is important to note that the law recognized that real industrial peace cannot be achieved
by compulsion of law, and that sound and stable industrial relations must rest on a voluntary and
bilateral basis. Thus, it upheld the principle of voluntarism and broadened the base of
Moving forward to the Marcos regime, the 1973 Constitution, Article II, Section 9
reaffirmed the State policy on arbitration for the settlement of labor disputes. The provision
provides that
establish the mandatory grievance procedure and voluntary arbitration as the mode of dispute
settlement, to wit:
Then, in 1974, the Labor Code of the Philippines was enacted which covered collective
bargaining, voluntary arbitration, and compulsory arbitration. On the one hand, voluntary
arbitration occurs when both employers and employee agree that their disputes must be settled
through arbitration that operates in accordance with the agreed processes of the parties. On the
other hand, compulsory arbitration operates under the auspices of the government with the
During this period, the law on arbitration with respect to labor disputes underwent several
changes. Hans Cacdac of then Executive Director of the National Conciliation and Mediation
Board of the Department of Labor and Employment summarized these changes as follows:
33
HANS CACDAC, TIERS OF RESOLUTION IN PHILIPPINE LABOR DISPUTE SETTLEMENT, 8, 10 (2005).
A brief review of the amendments of the law on arbitration reveal that arbitration is created
by private consenting parties that is governed by the law as stipulated by the parties. As such, the
trend of the mentioned amendments shows the intention of the government to distance itself in an
arbitration that interests only the parties who are directly involved in the dispute.
However, there still remain instances wherein the government become directly involved in
labor disputes specially when the circumstances are of certain gravity to call for such intervention.
In Presidential Decree 570-A issued on November 1, 1974, arbitral awards on money claims
lower, may be appealed to the NLRC on the grounds of either abuse of discretion or gross
incompetence. The same rule was provided in Presidential Decree 850 issued on December 16,
1975. In Policy Instructions No. 14 issued on April 23, 1976, termination cases, with or without
collective bargaining agreement, are placed under the jurisdiction of the Regional Director.
These instances of government intervention are similar to those found in the present legal
Then in the 1987 Constitution, the policy of the State in settling labor disputes was widened
in scope. Arguable, arbitration, albeit not mentioned, as a voluntary mode of dispute resolution
“The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment
opportunities for all.
34
LABOR CODE, art. 263 (g).
in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production
and the right of enterprises to reasonable returns to investments, and to
expansion and growth.”
The provision is an acknowledgment of Filipino cultural values and usual modes of conduct
in dealing with disagreements. The objective is to prevent strikes, lockouts and confrontation by
creating a cooperative labor relations climate that will render resort to economic leverage
unnecessary. Most notably, the provision presents a new policy framework for the development of
a more cooperative labor relations policy that balances the rights of workers and employers,
the State retains a certain level of control over the resolution of such disputes. For instance,
although the arbitral award is final and binding, it may still be subject to an appeal to the Court of
Appeal through Rule 43 of the Rules of Court. Here, arbitrators in the context of voluntary
arbitration act in a quasi-judicial capacity. Thereafter, the losing party may appeal to the Supreme
Based on the foregoing, the present form of arbitration can be said to be an accumulation
As regards the pre-colonial period, arbitration then is similar to the present arbitration. The
issues subject of the arbitration were those submitted by the parties. Further, these issues were
personal to the parties involved and within the knowledge of the arbitrator.
35
HANS CACDAC & TERESITA AUDEA, supra note 12, at 17.
36
Rules of Court, Rules 43 & 45.
The arbitrator were neutral third parties who possess authority over the parties and receive
the utmost respect of the community. Hence, their decisions become binding and final to the parties
The Spanish introduced the civil law system of courts wherein arbitral awards are similar
to decisions of regular courts which may be appealed to a higher authority. A similar system was
adopted the Americans, albeit more restrictive in application, wherein appeals or resort to courts
are only applicable when the parties have participated in arbitration and they wish to appeal
therefrom.
which covered all labor disputes under the jurisdiction of a tribunal called the Court of Industrial
Relations. At the same time, since labor was still a matter of public policy, the government
As such form of arbitration was ineffective at the time, the government shifted to a policy
Then during the time of the Marcos regime, the government incorporated both collective
bargaining and arbitration in the legal framework of labor disputes. Further, they added grievance
machinery as the mandatory process preceding arbitration. Arbitration then was characterized as a
mode of dispute settlement wherein the parties have virtually full control over the law and
processes governing their arbitration and the appointment of arbitrators subject to cases which call
Presently, employers and employees are highly encouraged to refer their disputes to
Capital and labor continue to be the driving forces of the economy and the basic blocks of
society. As a result, the relationship between these forces is clothed with public interest.
For the State, the relationship between two forces must be preserved and strengthened.
Hence, the State protects the rights of the workers and promote their welfare.37 At the same time,
In the event of capital-labor disputes, it is the policy of the State to promote the principle
of shared responsibility between workers and employers and the preferential use of voluntary
modes in settling disputes, including conciliation, and shall enforce their mutual compliance
therewith to foster industrial peace.39 These voluntary modes of dispute resolution include
jurisdiction of the labor arbiter and the National Labor Relations Commission.42 Here, labor
facilitates communication and negotiation, and assists the parties in reaching a voluntary
37
PHIL. CONSTI. art. II, §18.
38
PHIL. CONSTI. art. II, §20.
39
PHIL. CONSTI. art. XIII, §3.
40
See Department of Justice, Implementing Rules and Regulations of the Alternative Dispute Resolution Act of 2004
[IRR of ADR], Department Circular No. 98, Art. 1.6 (2009).
41
HANS CACDAC, supra note 33, at 6, 7.
42
See 2011 NLRC Rules of Procedure, as amended [2011 NLRC Rules of Procedure] (2011).
agreement regarding a dispute.43 Conciliation is a mild form of intervention by a neutral party,
who relies on persuasive expertise and takes an active role in assisting parties to amicably
settle a dispute.44 Both process are non-litigious/non-adversarial, less expensive, and expeditious.
Under this informal set-up, the parties find it more expedient to fully ventilate their respective
positions without running around with legal technicalities and, in the course thereof, afford them
Mediation and conciliation can be availed of any party to a labor dispute by submitting an
informal or formal request for conciliation and mediation service with the National Conciliation
and Mediation Board (NCMB) or any of its regional branches. These processes may result to either
an agreement or disagreement. In case of agreement, the parties are bound to honor said agreement
entered into by them. It must be pointed out that such an agreement came into existence as a result
of painstaking efforts among the union, management, and the Conciliator/Mediator. It must be
noted that mediation and conciliation may be availed of even during strikes or submission by the
B. Collective Bargaining
Collective bargaining is presently the primary mode of settling labor and industrial
disputes.47 Labor and management settle issues respecting terms and conditions of employment.
This relationship exists between an exclusive bargaining unit dealing with the employer48 and
43
IRR of ADR, supra note 40, art. 1.6 (B) (6).
44
National Conciliation and Mediation Board, Department of Labor and Employment accessed at:
http://co.ncmb.ph/conciliation-mediation/ (accessed on June 6, 2018).
45
Ibid.
46
Ibid.
47
LABOR CODE, art. 246; See HANS CACDAC, supra note 33, at 6 (2005)
48
Id. art. 242 (b).
49
Id. art. 253-A.
In this way, collective bargaining acts as a preventive and curative measure. It prevents
labor disputes from occurring by establishing mutual understanding on the terms and conditions
employment.
As a guarantee to the promotion of sound and stable industrial peace through the process
of collective bargaining, the law restrained the intervention of the government in in relations of
the union and the management.50 It follows then that courts, commissions, or boards have no
jurisdiction to issue restraining orders or injunctions involving or growing out of a labor dispute.
Further, no court has the power to set wages, rates of pay, hours of employment or conditions of
employment, to prevent undue restriction of free enterprise for capital and labor to encourage the
truly democratic method of regulating the relations between the employer and employee by means
C. Grievance Procedure
While collective bargaining relates to generally disputes that arise at the start of the
employment relationship, grievance procedure refers to disputes that arise after the start of
employment relationship. An employee may then have the right to present grievances to his
employer at any time.52 Surely, this statement does not mean that the employee alone directly deals
with his employer. Grievance machinery can be undertaken through the Labor Management
The procedures for grievance machinery may be governed by either the law or by the
agreement of the parties in a collective bargaining agreement. By agreement of the parties, under
50
Id. art. 3.
51
Id. art. 211 (B).
52
LABOR CODE, art. 255.
53
AZUCENA, supra note 6, at 321.
Article 260 of the Labor Code, parties to a collective bargaining agreement should include
provisions that ensure the mutual observance of its terms and conditions. They shall establish a
machinery for the adjustment and resolution of grievances arising from the interpretation or
implementation of the collective bargaining agreement and those arising from the interpretation or
enforcement of company personnel policies. The Supreme Court has defined “company personnel
policies” as guiding principles stated in broad, long-range terms that express the philosophy
or beliefs of an organization’s top authority regarding personnel matters. The usual sources of
By force of the law, grievance procedure applies to collective bargaining agreement with
no specific procedures for handling grievances and management personnel policies in unorganized
establishments that do not prescribe such procedures. The default procedure is laid down as
follows:
If the grievance is valid, the shop steward shall immediately bring the
complaint to the employee’s immediate supervisor. The shop steward, the
employee, and his immediate supervisor shall exert efforts to settle the grievance
at their level.
54
San Miguel Corp. v. NLRC, G.R. No. 108001, March 15, 1996.
D. The Labor Arbiter and the National Labor Relations Commission
The Labor Arbiter (LA) and the National Labor Relations Commission (NLRC) are the
government agencies tasked to resolve labor disputes in cases specified by the law. As earlier
The original and exclusive jurisdiction of the LA covers the following 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
employer-employee relations;
5. Cases arising from any violation of Article 264 of the Labor Code, as amended,
including questions involving the legality of strikes and lockouts;
6. Except claims for employees compensation not included in the next succeesing
paragraph, social security, medicare, and maternity benefits, all other claims arising
from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding Five Thousand Pesos (P5,000.00),
whether or not accompanied with a claim for reinstatement;
For the NLRC, the following cases fall under its jurisdiction:
55
2011 NLRC Rules of Procedure, supra note 42, Rule V, §1.
1. Cases decided by the Labor Arbiter;
4. Petitions for injunctions or temporary restraining order under Article 218 (e) of the
Labor Code, as amended; and
5. Petition to annul or modify the order or resolution (including those issued during
execution proceedings) of the Labor Arbiter.56
After having discussed some dispute settlement mechanism and arbitration in the context
of labor disputes, let us now expand our discussion to arbitration in the context of commerce. In
doing so, we can draw lessons from another field of law to further develop the concept of
arbitration in the field of labor. For this reason, the author intends to use the commercial arbitration
The adoption of the Republic Act of 876 or the Arbitration Law marked the policy of the
disputes. In fact, this policy was reiterated in Republic Act 9285, Section 2 which states that: “the
policy of the State to actively promote party autonomy in the resolution of disputes or the freedom
of the parties to make their own arrangement to resolve disputes.” Further, it bears stressing that
the Philippines is a party to the United Nations Commission on International Trade Law Model
Law on International Commercial Arbitration which is the model law for arbitration in the world.
The following are the advantages and disadvantages of commercial arbitration as compared
and contrasted with voluntary arbitration and compulsory arbitration in Labor law.
56
National Labor Relations Commission, Department of Labor and Employment accessed at:
http://nlrc.dole.gov.ph/?q=node/7 (accessed on June 11, 2018).
A. Advantages of Arbitration
i. Appointment of Arbitrators
In commercial arbitration, parties are free to appoint their arbitrators and prescribe the
number of arbitrators subject only to the following qualifications: must be of legal age, in full
enjoyment of civil rights, and knows how to read and write, shall not be interested in the case and
shall not be related to any of the parties within the sixth degree of consanguinity or affinity. Most
importantly, the arbitrator must not advocate for any of the parties.57
Labor and Employment, appoints the Labor Arbiters.58 The Labor Arbiters who actually conduct
the arbitration are chosen through a raffle.59 In voluntary arbitration, the preferred arbitrators are
those listed under the list of accredited voluntary arbitrators of the National Conciliation and
Mediation Board who are either members of the Philippine Association on Voluntary Arbitration,
independent and impartial for the entire duration of the proceedings.61 On the one hand,
impartiality is the “test for the lack of impermissible bias in the mind of the arbitrator toward a
57
IRR, Rule 5.10.
58
National Labor Relations Commission, NLRC Recommends Filling-in of 15 Labor Arbiter Positions accessed at:
http://nlrc.dole.gov.ph/?q=node/44 (accessed on: June 11, 2018).
59
National Labor Relations Commission, Process Flow accessed at: http://nlrc.dole.gov.ph/?q=node/6 (accessed on
June 11, 2018).
60
Voluntary Arbitration accessed at:
http://www.ncmb.ph/VAP/Voluntary_Arbitrators/Qualifications%20&%20Types%20of%20VA.html (accessed on
June 11, 2018).
61
NIGEL BLACKABY, ET. AL, REDFERN AND HUNTER ON INTERNATIONAL ARBITRATION 266, 268 (2009);
Matti S. KURKELA AND SANTTU TURUNEN, DUE PROCESS IN INTERNATIONAL COMMERCIAL ARBITRATION
107 (2010).
party or toward the subject-matter in dispute.” This test is a subjective one and it is not directed at
the appearance of bias but to its actual presence, which is “inferred from the facts and
Independence, on the other hand, is a term that refers to the relationship between the
arbitrator and the parties and indicates prior or current personal, social or business contact between
them. The closer the relationship between these “spheres,” the less “independent” the arbitrator or
tribunal is considered to be. Unlike the test for impartiality, the test for independence is an
Arbitrators who are not impartial or independent may be removed, or shall render an
arbitral award null and avoid for violation of due process.63 The same requirement of arbitrators is
In compulsory arbitration, It must be noted that labor arbiters and commissioners of the
NLRC must likewise be independent and impartial in dealing with labor disputes under their
jurisdiction.64 A labor arbiter or commissioner who is not impartial or independent may be subject
to inhibition by his volition or by upon any party’s motion.65 For example, a labor arbiter may be
inhibited on the ground of relationship with one of the parties, or counsel, until the fourth degree
iii. Consensual
62
Sam Luttrell, Bias Challenges in International Commercial Arbitration: The Need for a “Real Danger”
Test IN KLUWER LAW INTERNATIONAL 20-24 (2009).
63
RCBC v. BDO, G.R. No. 196171, December 10, 2012.
64
See Code of Conduct for Commissioners and Labor Arbiters, Rules 1-3.
65
2011 NLRC Rules of Procedure, supra note 42, Rule V, Sec. 17.
66
See Ang Tibay v. CIR, G.R. No. L-46496, February 27, 1940.
Commercial arbitration arises from a contract mutually agreed upon by the parties or an
arbitration agreement.67 An arbitration agreement occurs when two or more persons or parties
submit to the arbitration of one or more arbitrators any controversy existing between them at the
time of the submission and which may be the subject of an action, or the parties to any contract
may in such contract agree to settle by arbitration a controversy thereafter arising between them.68
There are two types of arbitration agreement: arbitration clause and submission agreement.
The former refers to an agreement that any dispute may arise out of or in connection with the
contract will be referred to arbitration. The latter refers to an agreement made after a dispute has
arisen. While both agreements have the same effect, in a submission agreement, the parties have
the better opportunity to frame the issues that would be submitted to arbitration because the issues
In Labor law, the same set-up applies to voluntary arbitration. Further, voluntary arbitration
has original and exclusive jurisdiction, as previously discussed, over disputes concerning the
The case is different for compulsory arbitration in that arbitration is not agreed upon by the parties
but are compelled to arbitrate by force of the law in certain instances as previously discussed.
iv. Confidentiality
In commercial arbitration, the arbitration proceedings, including the records, evidence and
the arbitral award and other confidential information, shall be considered privileged and
confidential and shall not be published, except: with the consent of the parties or for the limited
67
An Act to Ordain and Institute the Civil Code of the Philippines [CIVIL Code], Republic Act No. 386, art. 1305
(1950).
68
An Act to Authorize the Making of Arbitration and Submission Agreements, to Provide for the Appointment of
Arbitrators and the Procedure for Arbitration in Civil Controversies, and for Other Purposes [The Arbitration Law],
Republic Act No. 876, §2 (1953).
69
GARY BORN, INTERNATIONAL ARBITRATION: LAW AND PRACTICE, 34-35 (2012).
purpose of disclosing to the court relevant documents in cases where resort to the court is allowed
by law.70
In compulsory arbitration, with respect to the labor arbiter or the NLRC, decisions,
resolutions and orders are open to the parties to the case and their counsel or authorized
representative during regular hours. Access to pleadings and other documents filed by parties to
the case are, however, restricted. Further, reports, drafts of decisions, records of deliberations or
documents of the labor arbiter and the NLRC involving private parties are confidential.71
v. Judicial Restraint
Commercial arbitration should always take precedence before resorting to regular courts.
If at least one party invokes the jurisdiction of the arbitral tribunal before pre-trial conference in
the regular courts, said court should refer the case to arbitration.72
Even when a regular court is asked to vacate an arbitral award, said regular court would
suspend the setting aside proceedings for a period of time determined by it in order to give the
tribunal an opportunity to resume arbitral proceedings or to take such other action as in arbitral
tribunal’s opinion will eliminate the grounds for setting aside an award.73
In compulsory arbitration, recourse to the courts can only be made through Rule 65 of the
Rules of Court or Certiorari after the Labor Arbiter and the NLRC have decided on the case in
appeal may be taken to the Court of Appeal through Rule 43 because the arbitral tribunal exercised
quasi-judicial powers.75
70
IRR of ADR, supra note 40, art. 5.42.
71
2011 NLRC Rules of Procedure, supra note 42, Rule XIII, §8.
72
ADR Act of 2004, supra note 5, §24.
73
Supreme Court, Special Rules on Alternative Dispute Resolution [SRADR], A.M. No. 07-11-08-SC, Rule. 5.34
(2009).
74
Olores v. Manila Doctors College, G.R. No. 201663, March 31, 2014.
75
Rules of Court, Rule 43.
vi. Interim Measures
In commercial arbitration, the arbitral tribunal, once constituted through the appointment
of arbitrators, may take interim measures which are necessary in respect of the subject matter of
the dispute or procedure. Said interim measures may include a preliminary injunction against a
party, appointment of receivers or detention of property that is the subject of the dispute in
If the arbitral tribunal has yet to be constituted, the parties may seek interim measures from
regular courts. In the event that the interim measures conflict with that of the regular courts, those
of the arbitral tribunal shall prevail.76 This, however, does not preclude the parties from seeking
assistance with the regular courts in the enforcement of interim measures issued by the arbitral
tribunal.77
As regards compulsory arbitration, only the NLRC, through its divisions, has the power to
issue injunctions.78 The Labor Arbiter, in this case, can only receive evidence if ordered to do so
by the NLRC.79
vii. Competence-Competence
In commercial arbitration, the arbitral tribunal may rule on its own jurisdiction, including
any objections with respect to the existence or validity of the arbitration agreement.80 This is a
common feature of tribunals exercising judicial or quasi-judicial functions such as the labor arbiter
76
SRADR, supra note 73, Rule 5.13-5.14.
77
SRADR, supra note 73, Rule 5.16.
78
2011 NLRC Rules of Procedures, supra note 42, Rule X, §1.
79
Lahm III and James P. Concepcion v Labor Arbiter Jovencio Mayor, Jr., A.C. No. 7430, February 15, 2012.
80
United Nations Commission on International Trade Law, Model Law on International Commercial Arbitration, art.
16 (2006).
In commercial arbitration, since arbitration is governed by consent, it follows that the
parties may stipulate the rules or procedures to be followed by the arbitral tribunal. In default of
such stipulation, the arbitral tribunal, subject to the Alternative Dispute Resolution Act, may fix
its rules to the extent necessary for the resolution of the dispute.81 In this case, the parties may even
stipulate the venue or the place of arbitration.82 The same procedural flexibility is allowed in
voluntary arbitration.
In compulsory arbitration, the proceedings conducted therein are non-litigious and are
subject to the rules provided by the NLRC en banc such as the 2011 NLRC Rules of Procedure.
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 apply thereto.83 As in the case of venue, the
complainant may file in the Regional Arbitration Branch having jurisdiction over the workplace
of the complainant.84
In commercial, arbitral awards are immediately final and binding upon the parties. This is
a necessary consequence of the parties’ submission of their disputes to the arbitration. 85 With
respect to decisions of the voluntary86 and compulsory arbitrators, they are final upon the lapse of
the period to appeal or ten calendar days from receipt of the order.87
x. Appeal
81
SRADR, supra note 73, Rule 5.18.
82
SRADR, supra note 73, Rule 5.19.
83
2011 NLRC Rules of Procedure, supra note 42, Rule V, §2.
84
2011 NLRC Rules of Procedure, supra note 42, Rule IV, §1.
85
CIVIL CODE, art. 2044.
86
Coca-cola Bottlers Philippines, Inc. Sales Force Union-PTGWO-BALAIS v. Coca Cola-Bottlers Philippines, Inc.,
464 SCRA 507 (2005).
87
2011 NLRC Rules of Procedure, supra note 42, Rule XI, §1.
Arbitral awards are not subject to appeal as they are final and binding upon the parties. The
issuance of arbitral awards terminates the proceedings in the arbitration stage. Said award may,
The arbitral award was procured through corruption, fraud or other undue means;
There was evident partiality or corruption in the arbitral tribunal or any of its
members;
The arbitral tribunal was guilty of misconduct or any form of misbehavior that has
materially prejudiced the rights of any party such as refusing to postpone a hearing
upon sufficient cause shown or to hear evidence pertinent and material to the
controversy;
One or more of the arbitrators was disqualified to act as such under the law and
willfully refrained from disclosing such disqualification; or
The arbitral tribunal exceeded its powers, or so imperfectly executed them, such
that a complete, final and definite award upon the subject matter submitted to them
was not made.88
The abovementioned grounds relate only to the conduct of arbitral proceedings but not with
respect to the merits of the arbitration since arbitral awards are final and binding. Thus, an action
Decisions rendered in compulsory arbitration are subject to appeal. The may entertain an
If there is prima facie evidence of abuse of discretion on the part of the Labor
Arbiter;
If the decision, order or award was secured through fraud or coercion, including
graft and corruption;
88
SRADR, supra note 73, Rule 11.4.
89
Korea Technologies v. Lerma, G.R. No. 143581, January 7, 2008.
If serious errors in the findings of facts are raised which would cause grave or
irreparable damage or injury to the appellant.90
While the appellate proceedings are not part of the compulsory arbitration already
terminated at the stage of the Labor Arbiter,91 the NLRC may still set aside the findings and
decision of the Labor Arbiter and enter a new one in lieu thereof.92
A losing party in the NLRC may seek recourse to the Court of Appeal through Rule 65 of
In cases of voluntary arbitration, the losing party may file an appeal, based on error of law
xi. Enforcement
Enforcement of an arbitral award has the same force with court judgments.95 But unlike
commercial arbitration can be enforced after being confirmed by the Regional Trial Court.96 An
action for enforcement is treated as a special proceeding and may be filed in any of the following
courts: where the arbitration proceedings were conducted, where the asset to be attached or levied
upon, or the act to be enjoined, where any of the parties to the dispute resides or has its place of
90
LABOR CODE, art. 229.
91
Philippine Airlines, Inc. v. NLRC, G.R. No. 55159, December 22, 1989.
92
Coca-Cola Bottlers Phil., Inc. v Hingpit, et al., G.R. no. 127238, August 25, 1998.
93
St. Martin Funeral Home v. NLRC, G.R. No. 130866, September 16, 1998.
94
Rules of Court, Rule 43.
95
IRR of ADR, supra note 40, art. 5.37.
96
Id; The Arbitration Law, supra note 68, §23.
97
IRR of ADR, supra note 40, art. 5.39.
In Labor Law, arbitral awards of compulsory of compulsory arbitrators (i.e. Labor Arbiters)
may be enforced after the perfection of the time to appeal or 10 calendar days from receipt of any
xii. Settlement
In the course of the arbitration, parties may agree to settle the dispute which shall terminate
the arbitration proceedings and be recorded as an arbitral award. This award is called the consent
award based on compromise.99 The same rule applies to arbitration in Labor law.100
B. Disadvantages
i. Costs
In commercial arbitration, considering that the submission is entirely private, the costs shall
be shouldered either by both parties or by the losing party, depending on their agreement. In default
of such agreement, the arbitral tribunal may set the amount of costs and the party/ies to pay for the
costs.101 In compulsory arbitration, the government shoulders the expenses of the proceedings
subject to the payment of filing fees of the parties concerned.102 In voluntary arbitration, a portion
of the costs may be funded by the government through the Special Voluntary Arbitration Fund.103
Arbitral awards do not have the effect of stare decisis. They do not establish precedent.104
98
LABOR CODE, art. 229 in relation to Vir-jen Shipping and Marine Services, Inc. v. NLRC, et al., G.R. Nos. 58011-
12, May 11, 2000.
99
IRR of ADR, supra note 40, Art. 5.30; See CIVIL CODE, art. 2038-2040.
100
Philippine Journalists, Inc. et al. v. NLRC, G.R. No. 166421, September 5, 2006.
101
IRR of ADR, supra note 40, art. 5.46.
102
National Labor Relations Commission, Process Flow accessed at: http://nlrc.dole.gov.ph/?q=node/6 (accessed on
June 11, 2018).
103
LABOR CODE, art. 231.
104
GARY BORN, supra note 69, at 432.
105
See Purisimo Cabaobas, et al. v. Pepsi-Cola Products Phil, Inc., G.R. No. 176908, March 25, 2015.
Below is a table of the advantages and disadvantages of commercial arbitration as
compared and contrasted with those of voluntary and compulsory arbitration. This paper highlights
that commercial arbitration model may best suit resolving labor disputes. Said model allows the
parties to virtually control how the arbitral tribunal may conduct its proceedings and at the same
time provides the parties with a speedy resolution of the dispute through a final and binding arbitral
award.
The next table presents a comparison of the different modes of settling disputes.
In the current legal framework, voluntary arbitration only acquires original and exclusive
jurisdiction over two instances: disputes regarding the interpretation or application of collective
bargaining agreements, and disputes regarding the interpretation or application of company
personnel policies. To the mind of the author, arbitration as a mode of settling labor disputes is
underutilized.
Throughout this paper, the different aspects of arbitration were discussed. Its legal history
showed the arbitration has been used as a mode of settling disputes between parties since pre-
colonial times until the present. That the State has always endeavored, by force of the Constitution,
the promotion of arbitration to resolve differences between employers and employees.
The different modes of settling disputes in the context of labor disputes were enumerated
and dissected to show the advantages and disadvantages of arbitration vis-à-vis such other modes
of settling disputes. This paper looked at the commercial arbitration model in order to highlight
improvements that can be made upon arbitration in the context of arbitration law.
As a final word, the author hopes that arbitration, based on the commercial arbitration
model, should be used in settling all labor disputes between employers and employees. As initially
stated in this paper, the dispute between employers and employees is direct and personal. Only the
parties concerned know the cause of the dispute and its possible resolutions. In the event of a
deadlock between the parties, they can resort to arbitration which is a model that they can control.
Further, such model is conducted by third-party/ies that are appointed by the parties based on trust
and expertise. Through arbitration, the parties can dictate the conduct of the proceedings and, at
the same time, are guaranteed to attain a final and binding arbitral award that finally settles the
disputes between the parties. This mode is in contrast with compulsory arbitration, or even in
voluntary arbitration, which are conducted under the auspices of the government which has a lesser
grasp of the issue of the parties compared to an arbitrator handpicked by the parties in the dispute
themselves.