Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
1. G.R. No. 58768-70 December 29, 1989
LIBERTY FLOUR MILLS EMPLOYEES, ANTONIO EVARISTO and
POLICARPIO BIASCAN, petitioners,
vs.
LIBERTY FLOUR MILLS, INC. PHILIPPINE LABOR ALLIANCE COUNCIL
(PLAC) and NATIONAL LABOR RELATIONS COMMISSION,
(NLRC), respondents.
Julius A. Magno for petitioners.
De Leon, Diokno & Associates for respondent Liberty Flour Mills, Inc.

CRUZ, J.:
In this petition for certiorari, the resolution of the public respondent- NLRC dated
August 3, 1978, is faulted for: (a) affirming the decision of the labor arbiter
dismissing the employees' claim for emergency allowance for lack of jurisdiction;
and (b) modifying the said decision by disallowing the award of back wages to
petitioners Policarpio Biascan and Antonio Evaristo.

The basic facts are as follows:

On February 6, 1974, respondent Philippine Labor Alliance Council (PLAC) and
respondent Liberty Flour Mills, Inc. entered into a three-year collective bargaining
agreement effective January 1, 1974, providing for a daily wage increase of P2.00 for
1974, Pl.00 for 1975 and another Pl.00 for 1976. The agreement contained a
compliance clause, which will be explained later in this opinion. Additionally, the parties
agreed to establish a union shop by imposing "membership in good standing for the
duration of the CBA as a condition for continued employment" of workers. 1
On October 18, 1974, PLAC filed a complaint against the respondent company for
non-payment of the emergency cost of living allowance under P.D. No. 525. 2 A
similar complaint was filed on March 4, 1975, this time by the petitioners, who
apparently were already veering away from PLAC. 3

On March 20, 1975, petitioners Evaristo and Biascan, after organizing a union caged
the Federation of National Democratic Labor Unions, filed with the Bureau of
Labor Relations a petition for certification election among the rank-and-file
employees of the respondent company 4 PLAC then expelled the two for disloyalty
and demanded their dismissal by the respondent company, which complied on May
20, 1975. 5
The objection of Evaristo and Biascan to their termination were certified for
compulsory arbitration and assigned to Labor Arbiter Apolinario N. Lomabao, Jr.
Meanwhile, the claims for emergency allowance were referred for voluntary
arbitration to Edmundo Cabal, who eventually dismissed the same on the ground that
the allowances were already absorbed by the wage increases. This latter case was
ultimately also certified for compulsory arbitration and consolidated with the
termination case being heard by Lomabao. His decision was, on appeal, dealt with
by the NLRC as above stated, 6 and the motion for reconsideration was denied on
August 26, 1981. 7
At the outset, we note that the petitioners are taking an ambivalent position concerning
the CBA concluded in 1974. While claiming that this was entered into in bad faith
and to forestall the payment of the emergency allowances expected to be decreed,
they nonetheless invoke the same agreement to support their contention that their
complaint for emergency allowances was invalidly referred to voluntary arbitrator
Cabal rather than Froilan M. Bacungan.
We find there was no such violation as the choice of the voluntary arbitrator was not
limited to Bacungan although he was probably the first preference. Moreover, the
petitioners are estopped from raising this objection now because they did not seasonably
interpose it and instead willingly submitted to Cabal's jurisdiction when he undertook to
hear their complaint.
In sustaining Labor Arbiter Lomabao, the NLRC agreed that the decision of voluntary
Arbiter Cabal was final and unappealable under Article 262-A of the Labor Code and so
could no longer be reviewed by it. True enough. However, it is equally true that the same
decision is not binding on this Court, as we held in Oceanic Bic Division (FFW) v.
Romero 8 and reiterated in Mantrade/FMMC Division Employees and Workers Union v.
Bacungan. 9 The rule as announced in these cases is reflected in the following statements:
In spite of statutory provisions making "final" the decision of certain administrative
agencies, we have taken cognizance of petitions questioning these decisions where want
of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial
justice, or erroneous interpretation of the law were brought to our attention.
xxx xxx xxx
A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity.
There is no reason why her decisions involving interpretation of law should be beyond

this Court's review. Administrative officials are presumed to act in accordance with
law and yet we do not hesitate to pass upon their work where a question of law is
involved or where a showing of abuse of authority or discretion in their official acts
is properly raised in petitions for certiorari.
Accordingly, the validity of the voluntary arbiter's finding that the emergency allowance
sought by the petitioners are already absorbed in the stipulated wage increases will now
be examined by the Court itself.
The position of the company is that the emergency allowance required by P.D. No.
525 is already covered by the wage increases prescribed in the said CBA.
Furthermore, pursuant to its Article VIII, such allowances also include all other statutory
minimum wage increases that might be decreed during the lifetime of the said agreement.
That agreement provided in Section 2 thereof as follows:
Section 2. The wage increase in the amounts and during the period above set forth
shall, in the event of any statutory increase of the minimum wage, either as
allowance or as basic wage, during the life of this Agreement, be considered
compliance and payment of such required statutory increase as far as it will go and
under no circumstances will it be cumulative nor duplication to the differential
amount involved consequent to such statutory wage increase.
The Court holds that such allowances are indeed absorbed by the wage increases
required under the agreement. This is because Section 6 of the Interpretative Bulletin
on LOI No. 174 specifically provides:
Sec. 6. Allowances under LOI. -All allowances, bonuses, wage adjustments and other
benefits given by employers to their employees shall be treated by the Department of
Labor as in substantial compliance with the minimum standards set forth in LOI No. 174
if:
(a) they conform with at least the minimum allowances scales specified in the
immediately preceding Section; and
(b) they are given in response to the appeal of the President in his speech on 4 January
1974, or to countervail the quantum jump in the cost of living as a result of the energy
crisis starting in November 1973, or pursuant to Presidential Decree No. 390; Provided,
That the payment is retroactive to 18 February 1974 or earlier.
The allowances and other benefits may be granted unilaterally by the employer or
through collective bargaining, and may be paid at the same time as the regular wages of
the employees.
Allowances and other benefits which are not given in substantial compliance with
the LOI as interpreted herein shall not be treated by the Department of Labor as

emergency allowances in the contemplation of the LOI unless otherwise shown by

sufficient proof. Thus, without such proof, escalation clauses in collective bargaining
agreements concluded before the appeal of the President providing for automatic or
periodic wage increases shall not be considered allowances for purposes of the LOI.
(Emphasis supplied.)
The "immediately preceding section" referred to above states:
SEC. 5. Determination of Amount of Allowances. In determining the amount of
allowances that should be given by employers to meet the recommended minimum
standards, the LOI has classified employers into three general categories. As an
implementation policy, the Department of Labor shall consider as sufficient compliance
with the scales of allowances recommended by the LOI if the following monthly
allowances are given by employers:
(a) P50.00 or higher where the authorized capital stock of the corporation, or the total
assets in the case of other undertakings, exceeds P 1 million;
(b) P 30.00 or higher where the authorized capital stock of the corporation, or the total
assets in the case of other undertakings, is not less than P100,000.00 but not more than
P1million; and
(c) P15.00 or higher where the authorized capital stock or total assets, as the case may be,
is less than P100,000.00.
It is not denied that the company falls under paragraph (a), as it has a capitalization of
more than P l million, 10 and so must pay a minimum allowance of P50.00 a month. This
amount is clearly covered by the increases prescribed in the CBA, which required a
monthly increase (on the basis of 30 days) of P60.00 for 1974, to be increased by P30.00
in 1975 (to P90.00) and another P 30.00 in 1976 (to P120.00). The first increase in 1974
was already above the minimum allowance of P50.00, which was exceeded even more
with the increases of Pl.00 for each of the next two years.
Even if the basis used were 26 days a month (excluding Sundays), the conclusion would
remain unchanged as the raise in wage would be P52.00 for 1974, which amount was
increased to P78.00 in 1975 and to P104.00 in 1976.
But the petitioners contend that the wage increases were the result of negotiation
undertaken long before the promulgation of P.D. No. 525 and so should not be
considered part of the emergency allowance decreed. In support of this contention,
they cite Section 15 of the Rules implementing P.D. No. 525, providing as follows:
Nothing herein shall prevent the employer and his employees, from entering into any
agreement with terms more favorable to the employees than those provided herein, or be
construed to sanction the diminution of any benefits granted to the employees under
existing laws, agreements, and voluntary practice.

Obviously, this section should not be read in isolation but must be related to the other
sections above-quoted, to give effect to the intent and spirit of the decree. The meaning
of the section simply is that any benefit over and above the prescribed allowances
may still be agreed upon by the employees and the employer or, if already granted,
may no longer be withdrawn or diminished.
The petitioners also maintain that the above-quoted Section 2 of CBA is invalid because
it constitutes a waiver by the laborers of future benefits that may be granted them by law.
They contend this cannot be done because it is contrary to public policy.
While the principle is correct, the application is not, for there are no benefits being
waived under the provision. The benefits are already included in the wage increases. It is
the law itself that considers these increases, under the conditions prescribed in LOI No.
174, as equivalent to, or in lieu of, the emergency allowance granted by P.D. No. 525.
In fact, the company agreed to grant the emergency allowance even before the obligation
was imposed by the government. What the petitioners claim they are being made to waive
is the additional P50.00 allowance but the truth is that they are not entitled to this because
they are already enjoying the stipulated increases. There is no waiver of these increases.
Moreover, Section 2 provides that the wage increase shall be considered payment of any
statutory increase of the minimum wage "as far as it will go," which means that any
amount not covered by such wage increase will have to be made good by the company. In
short, the difference between the stipulated wage increase and the statutory minimum
wage will have to be paid by the company notwithstanding and, indeed, pursuant to the
said article. There is no waiver as to this.
Curiously, Article 2 was produced verbatim in the collective bargaining agreement
concluded by the petitioners with the company in 1977 after PLAC had been
replaced by the new labor union formed by petitioners Evaristo and Biascan. 11 It is
difficult to understand the petitioners' position when they blow hot and cold like
this.
Coming now to the second issue, we find that it must also be resolved against the
petitioners.
Evaristo and Biascan claim they were illegally dismissed for organizing another
labor union opposed to PLAC, which they describe as a company union. Arguing
that they were only exercising the right to self organization as guaranteed by the
Constitution, they insist they are entitled to the back wages which the NLRC
disallowed while affirming their reinstatement.
In its challenged decision, the public respondent held that in demanding the dismissal
of Evaristo and Biascan, PLAC had acted prematurely because the 1974 CBA
providing for union shop and pursuant to which the two petitioners were dismissed
had not yet been certified. 12 The implication is that it was not yet in effect and so could

not be the basis of the action taken against the two petitioners. This conclusion is
erroneous. It disregards the ruling of this Court in Tanduay Distillery Labor Union v.
NLRC, 13 were we held:
The fact, therefore, that the Bureau of Labor Relations (BLR) failed to certify or act on
TDLU's request for certification of the CBA in question is of no moment to the resolution
of the issues presented in this case. The BLR itself found in its order of July 8, 1982, that
the (un)certified CBA was duly filed and submitted on October 29, 1980, to last until
June 30, 1982 is certifiable for having complied with all the requirements for
certification. (Emphasis supplied.)
The CBA concluded in 1974 was certifiable and was in fact certified on April 11, 1975, It
bears stressing that Evaristo and Biascan were dismissed only on May 20, 1975, more
than a month after the said certification.
The correct view is that expressed by Commissioner Cecilio P. Seno in his concurring and
dissenting opinion, 14viz.:
I cannot however subscribe to the majority view that the 'dismissal of complainants
Biascan and Evaristo, ... was, to say the least, a premature action on the part of the
respondents because at the time they were expelled by PLAC the contract
containing the union security clause upon which the action was based was yet to be
certified and the representation status of the contracting union was still in question.
Evidence on record show that after the cancellation of the registration certificate of
the Federation of Democratic Labor Unions, no other union contested the exclusive
representation of the Philippine Labor Alliance Council (PLAC), consequently, there
was no more legal impediment that stood on the way as to the validity and enforceability
of the provisions of the collective bargaining agreement entered into by and between
respondent corporation and respondent union. The 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.
To be fair, it must be mentioned that in the certification election held at the Liberty
Flour Mills, Inc. on December 27, 1976, the Ilaw at Buklod ng Manggagawa, with
which the union organized by Biascan and Evaristo was affiliated, won
overwhelmingly with 441 votes as against the 5 votes cast for PLAC. 15 However, this
does not excuse the fact that the two disaffiliated from PLAC as early as March
1975 and thus rendered themselves subject to dismissal under the union shop clause
in the CBA.
The petitioners say that the reinstatement issue of Evaristo and Biascan has become
academic because the former has been readmitted and the latter has chosen to await the
resolution of this case. However, they still insist on the payment of their back wages

on the ground that their dismissal was illegal. This claim must be denied for the
reasons already given. The union shop clause was validly enforced against them and
justified the termination of their services.
It is the policy of the State to promote unionism to enable the workers to negotiate
with management on the same level and with more persuasiveness than if they were
to individually and independently bargain for the improvement of their respective
conditions. To this end, the Constitution guarantees to them the rights "to selforganization, collective bargaining and negotiations and peaceful concerted actions
including the right to strike in accordance with law." There is no question that these
purposes could be thwarted if every worker were to choose to go his own separate
way instead of joining his co-employees in planning collective action and presenting
a united front when they sit down to bargain with their employers. It is for this
reason that the law has sanctioned stipulations for the union shop and the closed
shop as a means of encouraging the workers to join and support the labor union of
their own choice as their representative in the negotiation of their demands and the
protection of their interest vis-a-vis the employer.
The Court would have preferred to resolve this case in favor of the petitioners, but
the law and the facts are against them. For all the concern of the State, for the wellbeing of the worker, we must at all times conform to the requirements of the law as
long as such law has not been shown to be violative of the Constitution. No such
violation has been shown here.
WHEREFORE, the petition is DISMISSED, without any pronouncement as to costs. It
is so ordered.
Narvasa, Gancayco, Grio-Aquino Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION
2. G.R. No. 80648 August 15, 1988
PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION - MANILA, petitioner,
vs.
ACTING SECRETARY CARMELO C. NORIEL of the Department of Labor and
Employment, PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION
EMPLOYEES UNION-FFW CHAPTER, EDGARDO B. REYES, WILLIAM
BUCE, RICARDO ABREU, LEILA ACUNA, MENDY FARRALES, SUSAN
CRUZ, CRISTINA PASICOLAN, MODESTO MEJIA, ERLINDA PINEDA,
DANILO SAMAR, NADIA YAMBAO, ANTONETTE SANCHEZ, ANNABELLA
YUTUC, MAXIMO TUNDAG, METODIO OLAHAY, GLORIA PEREZ, FELINO
REYES, VIRGINIA ANTONIO, FELIZARDA SALVIEJO, BENITO ANG, MARIO
DIAZ, LOURDES ESPION, ROMELLE TAMAYO, MA. LUISA PALMA,
CARLITO ANTONIO, ERLINDA BESANA, CYNTHIA LANDOY, ELIZABETH
MACATULAD, EDNA DE LOS SANTOS, PRISCILLA GARCIA, ASUNCION
ALON, MARIFE DE GUZMAN, EMMANUEL AGUSTIN, ENRIQUE ADALLA
and EMILIO ERANA, respondents.
Balgos & Perez Law Office for petitioner.
Ma. Vicenta Y. De Guzman for respondent Union and its individually named officers and
members.

CORTES, J.:
On September 8, 1987, respondent union, alleging the support of the majority of
petitioner's non-academic personnel in its Manila campus, filed with the Department of
Labor and Employment a petition for direct certification docketed as NLR-OD-M-9642-87 [Rollo, pp. 18-21.] On September 25, 1987, a notice of strike docketed as BLRNS-9-423-87 was filed by respondent union with the Bureau of Labor Relations,
alleging union busting, coercion of employees and harassment [Rollo, P. 26.]
Petitioner filed on October 2, 1987, its position paper in NLR-OD-M-9-642-87
praying for the denial of respondent union's petition on the ground that it did not
represent a majority of the non-academic personnel, and in support thereof attached
a letter from one Josefino Sacro, who claimed to represent a group composing the
majority [Rollo, pp. 22-25.] However, it was only on October 8, 1987 that PSBA-ALGR`O-WELL the group that Sacro represented, filed its application for registration
as a legitimate labor organization with the Bureau of Labor Relations.

On October 4, 1987, the members of respondent union, by a vote of 36 to 0, decided

to go on strike [Rollo, p. 103.1 Several conciliation conferences were held by the Bureau
of Labor Relations, but to no avail. The strike pushed through on October 16, 1987.
A complaint for unfair labor practice and for a declaration of illegality of the strike
with a prayer for preliminary injunction docketed as ULP Case No. 00-10-03666-87
was filed by petitioner against respondent union in the National Labor Relations
Commission on October 19, 1987 [Rollo, pp. 37-44.] The parties were again called to
conciliation conferences, including a scheduled meeting with the Secretary of Labor
and the Director of the Bureau of Labor Relations on November 9, 1987, but
petitioner refused to attend the conferences (Rollo, p. 15.]
While the certification, strike and unfair labor practice cases were pending in the
Department of Labor and Employment, a complaint docketed as Civil Case No. 8742470 was filed in the Regional Trial Court of Manila on October 19, 1987 by some
PSBA students against petitioner and respondent union and its members, basically
seeking to enjoin respondent union and its members from maintaining and
continuing with their picket and from barricading themselves in front of the school's
main gate [Rollo, pp. 27-35.] A temporary restraining order enjoining respondent
union and its members from picketing and barricading the school's main gate was issued
by the presiding judge [Rollo, p. 36.] In its answer filed on October 28, 1987, petitioner
joined the plaintiffs prayer for injunction and included a crossclaim against respondent
union, asking that it be indemnified by respondent union for any damages that may be
assessed against it and awarded P500,000.00 as and for expenses of litigation and
attorney's fees (Rollo, pp. 96-102.] On November 6, 1987, respondent union filed a
motion to dismiss the complaint on the premise that the case involves a labor dispute over
which the Regional Trial Court had no jurisdiction [Rollo, pp. 88-91.]
On November 17, 1987, respondent Acting Secretary Noriel issued the assailed order,
which we quote in full:
ORDER
On September 25, 1987, the PSBA Employees Union-FFW filed a Notice of Strike before
the Bureau of Labor Relations on the following grounds:
1. Union busting
2. Coercion of employees
3. Harassment
Several conciliation conferences were held by the Bureau of Labor Relations.
On October 16, 1987, the union struck.

The parties were again called for conciliation conferences including the scheduled
meeting with the Director of Labor Relations and the Secretary of Labor and
Employment on November 9, 1987, but still the management refused to attend the said
conferences.
In the meantime, the strike at the school continues.
There is no doubt that the on-going labor dispute at the School adversely affects the
national interest. The School is a duly registered educational institution of higher learning
with more or less 9,000 students. The ongoing work stoppage at the School unduly
prejudices the students and will entail great loss in terms of time, effort and money to
everyone concerned. More important, it is not amiss to mention that the school is engaged
in the promotion of the physical, intellectual and emotional well-being of the country's
youth.
WHEREFORE, this Office hereby assumes jurisdiction over the labor dispute at the
Philippine School of Bus. Administration-Manila pursuant to Article 263 (g) of the Labor
Code, as amended. Accordingly, all the striking employees are directed to return to
work immediately and for the management of PSBA to accept all the returning
employees under the same terms and conditions prevailing Prior to the strike.
The parties are strictly enjoined to maintain [the] status quo and to cease and desist from
committing any and all acts that will prejudice either party and aggravate the situation.
The Director, Bureau of Labor Relations is hereby directed to hear and receive evidence
of the parties and to submit her report and recommendation within ten (10) days from
submission of the dispute for resolution.
SO ORDERED.
Manila, Philippines, 17 November, 1987
(Sgd.) CARMELO C. NORIEL
Acting Secretary
[Rollo, pp. 15-16]
The members of respondent union returned to work but were allegedly prevented by
petitioner from doing so. Consequently, a motion for the issuance of a writ of
execution was filed by respondent union on November 23, 1987.
On November 23, 1987, petitioner filed the instant petition, which seeks the
nullification of the assailed order of November 17, 1987 and its enjoinment pending
resolution of the case, on the following grounds:

1. The respondent Secretary acted without or in excess of jurisdiction or with grave abuse
of discretion amounting to lack or excess of jurisdiction over the request for issuance of
a return to work order by an official otherwise disqualified from appearing before him.
2. The respondent Secretary erred in finding that the strike by a minority who had
already been restrained by a court of competent jurisdiction from preventing the
school, its faculty and its students from attending to their usual functions was a fit
subject for a return to work order.
3. The respondent Secretary erred when he ordered the petitioner "to accept all the
returning employees under the same terms and conditions prevailing prior to the strike"
despite the pendency of ULP Case No. 00-10-03666-87. [Rollo, pp. 5-6.]
On February 4, 1988, Secretary Drilon issued a writ of execution of the order dated
November 17, 1987, [Rollo, pp. 61-62.] Thus, petitioner filed in this Court on
February 8, 1988 an "Urgent Motion to Implead Secretary Drilon as Additional
Respondent and to Restrain Enforcement of Writ of Execution" [Rollo, pp. 57-65],
which the Court noted [Rollo, p. 66.]
In the meantime, the complaint in Civil Case No. 87-42470 was dismissed by the
Regional Trial Court on February 10, 1 988 for lack of jurisdiction.
After petitioner refused to readmit the striking employees, a motion for the issuance
of an alias writ of execution and motion to cite petitioner in contempt was filed by
respondent union in the Department of Labor and Employment on February 19,
1988. Secretary Drilon, after petitioner had complied with his show cause order, issued an
order dated March 30, 1988 ordering petitioner to pay a fine of P10,000.00 and to
immediately readmit the striking employees with full backwages and benefits computed
from November 17, 1987 up to the date of their actual readmission [Rollo, pp. 118-119.]
Thus, petitioner filed in this Court on April 8, 1988 an "Urgent Supplemental
Petition and Motion Reiterating Urgent Motion to Restrain Enforcement of Writ of
Execution" seeking the nullification of the order and the issuance of a restraining
order [Rollo, pp. 110-120.]
These are the antecedent and contemporaneous facts. Now, to consider petitioner's
arguments in support of the petition.
1. Petitioner makes much of the handwritten letter of Congressman Ramon Jabar, VicePresident of the Federation of Free Workers, to Secretary Drilon dated October 22, 1987,
which reads:
Dear Mr. Secretary,
The bearer is Mr. Rey Malilin of VEGA - FFW, together wit our leader, at PSBA which is
on strike.

The barricades at PSBA have already been removed, and our members are picketing
peacefully, however, police authorities prohibit them from engaging in peaceful
picketing.
They will explain to you everything, Conciliation conferences were held but management
refused to attend.
Possible solution is for you to order a return to work and early certification election.
Thank you very much.
Very truly yours,
(Sgd.) RAMON J. JABAR
[Rollo, p. 45.]
Petitioner contends that it was "totally improper and without jurisdiction and in grave
abuse of his discretion" for the Secretary to have acted on this request because of the
prohibition in Art. VI, Sec. 14 of the Constitution, which provides:
No Senator or Member of the House of Representatives may personally appear as counsel
before any court of justice or before the Electoral Tribunals, or quasi-judicial and other
administrative bodies. Neither shall he, directly or indirectly, be interested financially in
any contract with, or in any franchise or special privilege granted by the Government, or
any subdivision, agency, or instrumentality thereof, including any government-owned or
controlled corporation, or its subsidiary, during his term of office. He shall not intervene
in any matter before any office of the Government for his pecuniary benefit or where he
may be called upon to act on account of his office.
The premise of petitioner's argument, however, is flawed. Its conclusion that the Acting
Secretary's order was vitiated by a jurisdictional defect is anchored on the premise that
the only basis for, and what impelled him to issue, the order was Congressman Jabar's
letter to Secretary Drilon. But this is not so. Respondent union petitioned for its direct
certification as sole and exclusive bargaining representative of petitioner's nonacademic personnel. A notice of strike was filed by respondent union after petitioner
allegedly engaged in union busting, coercion and harassment. Conciliation
conferences were held, but to no avail. A strike took place, thereby causing the
disruption of the operations of the school. Thus, petitioner filed a complaint for
unfair labor practice and declaration of illegality of the strike with the National
Labor Relations Commission while some of its students filed a civil case and
obtained a temporary restraining order from the Regional Trial Court. In the
subsequent conciliation conferences petitioner's representatives failed to attend,
leading to an impasse. Given these circumstances, the existence of an unresolve
labor despite in petitioner's Manila campus which needed the immediate attention
of the labor authorities certainly cannot be denied.

In the opinion of Acting Secretary Noriel, the labor dispute adversely affected the
national interest, affecting as it did some 9,000 students. He was authorized by law to
assume jurisdiction over the labor dispute, after finding that it adversely affected the
national interest. This power is expressly granted by Art. 263 (g) of the Labor Code, as
amended by B.P. Blg. 227, which provides:
xxx xxx xxx
(g) When in his opinion there exists a labor dispute causing or likely to cause strikes or
lockouts adversely affecting the national interest, such as may occur in but not limited to
public utilities, companies engaged in the generation or distribution of energy, banks,
hospitals, and export-oriented industries, including those within export processing zones,
the Minister of Labor and Employment shall assume jurisdiction over the dispute and
decide it or certify the same to the Commission for compulsory arbitration. Such
assumption or certification shall have the effect of automatically enjoining the intended or
impending strike or lockout as specified in the assumption or certification order. If one
has already taken place at the time of assumption or certification, all striking or locked
out employees shall immediately return to work and the employer shall immediately
resume operations and readmit all workers under the same terms and conditions
prevailing before the strike or lock-out, The Minister may seek the assistance of law
enforcement agencies to ensure compliance with this provision as well as with such
orders as he may issue to enforce the same.
The foregoing notwithstanding, the President of the Philippines shall not be precluded
from determining the industries where in his opinion labor disputes may adversely affect
the national interest, and from intervening at any time and assuming jurisdiction over any
labor dispute adversely affecting the national interest in order to settle or terminate the
same.
Acting Secretary Noriel did exactly what he was supposed to do under the Labor Code.
Hence, even if the writing of the letter to Secretary Drilon constituted an appearance as
counsel by Congressman Jabar before a quasi-judicial body (although the Court is not
disposed to agree to such contention), still the fact remains that under the circumstances
the Acting Secretary had the power and the duty to assume jurisdiction over the
labor dispute and, corrollary to the assumption of jurisdiction, issue a return-towork order. Given this factual and legal backdrop, no grave abuse of discretion can be
attributed to the Acting Secretary.
2. Petitioner contends that the Acting Secretary erred when he found that the strike staged
by respondent union and its members, who had already been restrained by the Regional
Trial Court from picketing and barricading the main gate of the school, was a fit subject
of a return to work order.
However, the Court finds that no error was made by the Acting Secretary.

First of all, the Regional Trial Court was without jurisdiction over the subject matter of
the case filed by some PSBA students, involving as it does a labor dispute over which the
labor agencies had exclusive jurisdiction. That the regular courts have no jurisdiction
over labor disputes and to issue injunctions against strikes is well-settled [Art. 254,
Labor Code, amended; Leoquinco v. Canada Dry Bottling Co. of the Phils., Inc.
Employees Association, G.R. No. L-28621, February 22, 1971, 37 SCRA 535; Antipolo
Highway Lines Employees Union v. Aquino, G.R. No. L-31785, September 25, 1979, 93
SCRA 225; Kaisahan ng mga Manggagawa sa La Campana v. Sarmiento, G.R. No. L47853, November 16, 1984, 133 SCRA 220.] This the Regional Trial Court recognized
when it subsequently corrected its error and dismissed the complaint for damages and
injunction upon respondent union's motion.
Then, as discussed above in connection with petitioner's first argument, the facts and the
law fully support the Acting Secretary's assumption of jurisdiction over the labor dispute
and the issuance of a return-to-work order.
It may also be added that due to petitioner's intransigent refusal to attend the
conciliation conferences called after the union struck, assumption of jurisdiction by
the Secretary of Labor and the issuance of a return-to-work order had become the
only way of breaking the deadlock and maintaining the status quo ante pending
resolution of the dispute. The Solicitor General was correct when he stated that by
assuming jurisdiction over the labor dispute, the Acting Secretary of Labor merely
provided for a formal forum for the parties to ventilate their positions with the end in
view of settling the dispute [Rollo, p. 132.] Thus, the contention that the Acting Secretary
favored respondent union when he issued the assailed order cannot be seriously
considered. A similar charge that certification of a labor dispute and the issuance of a
return-to-work order favored a party was rejected by the Court in United CMC Textile
Workers Union v. Ople [G.R. No. L- 62037, January 27, 1983, 120 SCRA 335]:
It is, therefore, error for the petitioners to allege that by the mere act of certifying a
labor dispute for compulsory arbitration and issuing a return to work order, the
Minister of Labor and Employment thereby "enters the picture on the side of the
Company,' and violates the freedom of expression of workers engaged in picketing,
"in utter subversion of the constitutional rights of workers." As contended by the
Solicitor General, "there can be no such unconstitutional application (of Batas Pambansa
Blg. 227) because all that respondent Minister has done is to certify the labor dispute for
arbitration and thereafter personally assume jurisdiction over it. He has not rendered any
decision; he has not favored one party over the other.
With more reason should such a charge be rejected in this case, coming as it does from
management, for as explained by the Court in Free Telephone Workers Union vs.
Minister of Labor and Employment [G.R. No. L-58184, October 30, 1981, 108 SCRA
7571, the exercise of the power, to be in full accord with the Constitution, must be with a
view to the protection of labor:

... It must be stressed anew, however, that the power of compulsory arbitration, while
allowable under the [1973] Constitution, and quite understandable in labor disputes
affected with a national interest, to be free from the taint of unconstitutionality, must be
exercised in accordance with the constitutional mandate of protection to labor. The arbiter
then is called upon to take due care that in the decision to be reached, there is no violation
of "the rights of workers to self-organization, collective bargaining, security of tenure,
and just and humane conditions of work." [Art. II, Sec. 9, 1973 Constitution.] It is of
course manifest that there is such unconstitutional application if a law "fair on its face
and impartial in appearance (is) applied and administered by a public authority with an
evil eye and an unequal hand." Yick Wo v. Hopkins, 118 U.S. 356, 372 (1886).] It does
not even have to go that far. An instance of unconstitutional application would be
discernible if what is ordained by the fundamental law, the protection of law, is ignored or
disregarded.
3. Finally, petitioner contends that the Acting Secretary erred when he ordered petitioner
to accept all returning employees under the same terms and conditions prevailing prior to
the strike despite the pendency of the case for unfair labor practice and declaration of
illegality of the strike filed by petitioner (ULP Case No. 00-10-D-3666-87).
Again, the Court can discern no error on the part of the Acting Secretary.
The case filed by petitioner against respondent union in the National Labor
Relations Commission was not an isolated circumstance, but one in a series of cases
filed by the parties. Thus, it cannot be completely detached from the chain of events
that led to the filing of the instant petition in this Court. It will be recalled that
respondent union filed a petition for direct certification, that respondent union filed
a notice of strike, alleging union-busting, coercion and harassment; that petitioner
opposed the petition for direct certification, citing a letter from another group
(PSBA-AL-GRO-WELL) that purportedly represented the majority of petitioner's
non-academic personnel; that conciliation conferences were held but the dispute
remained unresolved; that respondent union conducted a strike vote wherein its
members voted to stage a strike; that respondent union and its members
subsequently staged a strike; that petitioner filed a case against respondent union in
the National Labor Relations Commission; that a civil case was filed and an order
was issued by the Regional Trial Court restraining respondent union from picketing
and barricading the main gate of the school; that petitioner refused to attend the
conciliation conferences called by labor authorities during the strike. These
circumstances, taken together, reveal the intensity of the dispute and how it had
worsened, which virtually left the Acting Secretary with no recourse but to assume
jurisdiction over it, to prevent the situation from getting out of hand.
Once the Secretary of Labor assumes jurisdiction over, or certifies for compulsory
arbitration, a labor dispute adversely affecting the national interest, the law mandates
that if a strike or lockout has already taken place at the time of assumption or
certification, "all striking or locked out employees shall immediately return to work
and the employer shall immediately resume operations and readmit all workers

under the same terms and conditions prevailing before the strike." [Art. 263 (g),
Labor Code, as amended.] Far from erring, the Acting Secretary, in issuing the return to
work order, merely implemented the clear mandates of the law. Thus, the contention that
error attended the issuance of such order is without any legal basis.
In conclusion, the Court cannot but note the apparent hostility exhibited by petitioner
towards respondent union and its members. Lest it be forgotten, the dispute arose
from a petition filed by respondent union to be directly certified as the sole and
exclusive bargaining representative of the non-academic personnel of PSBA Manila.
By doing so, the workers did not engage in any activity prejudicial to the leg itimate
interests of petitioner, for they were just exercising their rights to self-organization
and collective bargaining and negotiation guaranteed them by our Fundamental
Law. The harassment of employees to dissuade them from supporting respondent union
alleged to have been committed by petitioner was not warranted. But petitioner persisted
with its hostile actions against the union members through both legal and extra-legal
channels, taking an undue interest in opposing respondent union's petition when it should
have been PSBA-AL-GRO-WELL if at all it had already existed at that time, that should
have done so. That PSBA-AL-GRO-WELL was suspiciously silent all throughout the
proceedings before the labor authorities leaving the fight to petitioner, certainly lends
credence to the charge that PSBA-AL-GRO-WELL was a creation of management.
Petitioner may not have preferred respondent union as its non-academic personnel's
collective bargaining representative. But then it had no right to intervene. The
choice was for the employees to make, not petitioner.
Time and again the Court has reminded employers that the choice of their employees of
who shall be their collective bargaining representative is the employees' exclusive
concerned employers have no business dipping their fingers into this matter, unless it was
the employer which filed the petition for certification election after being requested by a
union to bargain collectively or when the contract-bar rule applies [Arts. 254 and 232,
Labor Code, as amended; Consolidated Farms, Inc. v. Noriel, G.R. No. L-47752, July 31,
1978, 84 SCRA 469; Filipino Metals Corp. v. Ople, G.R. No. L-43861, September 14,
1981, 107 SCRA 211; Trade Union of the Phils. and Allied Services v. Trajano, G.R. No.
L-61153, January 17, 1983, 120 SCRA 64.] It cannot be otherwise, for the Constitution
guarantees workers their rights to self-organization and collective bargaining and
negotiations [Art. XIII, Sec. 3], of which the choice of the collective bargaining
representative forms an integral part.
In the instant case, the undisguised interest of petitioner, an educational institution, in the
choice of the sole and exclusive bargaining agent of its non-academic personnel cannot
be ignored. To borrow the phraseology of the Solicitor General, petitioner has "shown his
hand" (Rollo, p. 130.] This much is home by the records.
The Court will not be a party to any attempt to deprive workers, or any other person for
that matter, of their constitutionally guaranteed rights. Petitioner's actions cannot be

countenanced in this jurisdiction if adherence to democratic principles and fealty to the

Constitution is to be observed and the rule of law upheld.
WHEREFORE, the instant petition is hereby DISMISSED and the Order dated
November 17, 1987 issued by Acting Secretary Noriel is AFFIRMED.
Petitioner's motion to restrain the enforcement of the writ of execution issued by
Secretary Drilon on February 4, 1988 is DENIED. Likewise, the "Urgent Supplemental
Petition and Motion Reiterating Urgent Motion to Restrain Enforcement of Writ of
Execution' dated April 7, 1988 is also DENIED.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin. JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

4. G.R. No. 91307 January 24, 1991

SINGER SEWING MACHINE COMPANY, petitioner
vs.
HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and
SINGER MACHINE COLLECTORS UNION-BAGUIO (SIMACUB), respondents.
Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for petitioner.
Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent.

GUTIERREZ, JR., J.:p

This is a petition for certiorari assailing the order of Med-Arbiter Designate Felix B.
Chaguile, Jr., the resolution of then Labor Secretary Franklin M. Drilon affirming
said order on appeal and the order denying the motion for reconsideration in the
case entitled "In Re: Petition for Direct Certification as the Sole and Exclusive
Collective Bargaining Agent of Collectors of Singer Sewing Machine Company-

Singer Machine Collectors Union-Baguio (SIMACUB)" docketed as OS-MA-A-7-11989 (IRD Case No. 02-89 MED).
On February 15, 1989, the respondent union filed a petition for direct certification as
the sole and exclusive bargaining agent of all collectors of the Singer Sewing
Machine Company, Baguio City branch (hereinafter referred to as "the Company").
The Company opposed the petition mainly on the ground that the union members
are actually not employees but are independent contractors as evidenced by the
collection agency agreement which they signed.
The respondent Med-Arbiter, finding that there exists an employer-employee
relationship between the union members and the Company, granted the petition for
certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it.
The motion for reconsideration of the Secretary's resolution was denied. Hence, this
petition in which the Company alleges that public respondents acted in excess of
jurisdiction and/or committed grave abuse of discretion in that:
a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case
since the existence of employer-employee relationship is at issue;
b) the right of petitioner to due process was denied when the evidence of the union
members' being commission agents was disregarded by the Labor Secretary;
c) the public respondents patently erred in finding that there exists an employer-employee
relationship;
d) the public respondents whimsically disregarded the well-settled rule that commission
agents are not employees but are independent contractors.
The respondents, on the other hand, insist that the provisions of the Collection Agency
Agreement belie the Company's position that the union members are independent
contractors. To prove that union members are employees, it is asserted that they
"perform the most desirable and necessary activities for the continuous and
effective operations of the business of the petitioner Company" (citing Article 280 of
the Labor Code). They add that the termination of the agreement by the petitioner
pending the resolution of the case before the DOLE "only shows the weakness of
petitioner's stand" and was "for the purpose of frustrating the constitutionally mandated
rights of the members of private respondent union to self-organization and collective
organization." They also contend that under Section 8, Rule 8, Book No. III of the
Omnibus Rules Implementing the Labor Code, which defines job-contracting, they
cannot legally qualify as independent contractors who must be free from control of
the alleged employer, who carry independent businesses and who have substantial
capital or investment in the form of equipment, tools, and the like necessary in the
conduct of the business.

The present case mainly calls for the application of the control test, which if not
satisfied, would lead us to conclude that no employer-employee relationship exists.
Hence, if the union members are not employees, no right to organize for purposes of
bargaining, nor to be certified as such bargaining agent can ever be recognized. The
following elements are generally considered in the determination of the employeremployee relationship; "(1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct although the latter is the most important element" (Mafinco
Trading Corporation v. Ople, 70 SCRA 139 [1976]; Development Bank of the Philippines
v. National Labor Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers, Inc.
v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987];
Brotherhood Labor Unity Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).
The Collection Agency Agreement defines the relationship between the Company and
each of the union members who signed a contract. The petitioner relies on the following
stipulations in the agreements: (a) a collector is designated as a collecting agent" who is
to be considered at all times as an independent contractor and not employee of the
Company; (b) collection of all payments on installment accounts are to be made monthly
or oftener; (c) an agent is paid his compensation for service in the form of a commission
of 6% of all collections made and turned over plus a bonus on said collections; (d) an
agent is required to post a cash bond of three thousand pesos (P3,000.00) to assure the
faithful performance and observance of the terms and conditions under the agreement; (e)
he is subject to all the terms and conditions in the agreement; (f) the agreement is
effective for one year from the date of its execution and renewable on a yearly basis; and
(g) his services shall be terminated in case of failure to satisfy the minimum monthly
collection performance required, failure to post a cash bond, or cancellation of the
agreement at the instance of either party unless the agent has a pending obligation or
indebtedness in favor of the Company.
Meanwhile, the respondents rely on other features to strengthen their position that the
collectors are employees. They quote paragraph 2 which states that an agent shall utilize
only receipt forms authorized and issued by the Company. They also note paragraph 3
which states that an agent has to submit and deliver at least once a week or as often as
required a report of all collections made using report forms furnished by the Company.
Paragraph 4 on the monthly collection quota required by the Company is deemed by
respondents as a control measure over the means by which an agent is to perform his
services.
The nature of the relationship between a company and its collecting agents depends on
the circumstances of each particular relationship. Not all collecting agents are employees
and neither are all collecting agents independent contractors. The collectors could fall
under either category depending on the facts of each case.
The Agreement confirms the status of the collecting agent in this case as an
independent contractor not only because he is explicitly described as such but also
because the provisions permit him to perform collection services for the company without

being subject to the control of the latter except only as to the result of his work. After a
careful analysis of the contents of the agreement, we rule in favor of the petitioner.
The requirement that collection agents utilize only receipt forms and report forms issued
by the Company and that reports shall be submitted at least once a week is not necessarily
an indication of control over the means by which the job of collection is to be performed.
The agreement itself specifically explains that receipt forms shall be used for the purpose
of avoiding a co-mingling of personal funds of the agent with the money collected on
behalf of the Company. Likewise, the use of standard report forms as well as the regular
time within which to submit a report of collection are intended to facilitate order in office
procedures. Even if the report requirements are to be called control measures, any
control is only with respect to the end result of the collection since the requirements
regulate the things to be done after the performance of the collection job or the rendition
of the service.
The monthly collection quota is a normal requirement found in similar contractual
agreements and is so stipulated to encourage a collecting agent to report at least the
minimum amount of proceeds. In fact, paragraph 5, section b gives a bonus, aside from
the regular commission every time the quota is reached. As a requirement for the
fulfillment of the contract, it is subject to agreement by both parties. Hence, if the other
contracting party does not accede to it, he can choose not to sign it. From the records, it is
clear that the Company and each collecting agent intended that the former take control
only over the amount of collection, which is a result of the job performed.
The respondents' contention that the union members are employees of the Company is
based on selected provisions of the Agreement but ignores the following circumstances
which respondents never refuted either in the trial proceedings before the labor
officials nor in its pleadings filed before this Court.
1. The collection agents are not required to observe office hours or report to Singer's
office everyday except, naturally and necessarily, for the purpose of remitting their
collections.
2. The collection agents do not have to devote their time exclusively for SINGER. There
is no prohibition on the part of the collection agents from working elsewhere. Nor are
these agents required to account for their time and submit a record of their activity.
3. The manner and method of effecting collections are left solely to the discretion of the
collection agents without any interference on the part of Singer.
4. The collection agents shoulder their transportation expenses incurred in the collections
of the accounts assigned to them.
5. The collection agents are paid strictly on commission basis. The amounts paid to them
are based solely on the amounts of collection each of them make. They do not receive any

commission if they do not effect any collection even if they put a lot of effort in
collecting. They are paid commission on the basis of actual collections.
6. The commissions earned by the collection agents are directly deducted by them from
the amount of collections they are able to effect. The net amount is what is then remitted
to Singer." (Rollo, pp. 7-8)
If indeed the union members are controlled as to the manner by which they are
supposed to perform their collections, they should have explicitly said so in detail by
specifically denying each of the facts asserted by the petitioner. As there seems to be
no objections on the part of the respondents, the Court finds that they miserably failed to
defend their position.
A thorough examination of the facts of the case leads us to the conclusion that the
existence of an employer-employee relationship between the Company and the collection
agents cannot be sustained.
The plain language of the agreement reveals that the designation as collection agent
does not create an employment relationship and that the applicant is to be
considered at all times as an independent contractor. This is consistent with the first
rule of interpretation that the literal meaning of the stipulations in the contract controls
(Article 1370, Civil Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of
Labor, Relations, 123 SCRA 679 [1983]). No such words as "to hire and employ" are
present. Moreover, the agreement did not fix an amount for wages nor the required
working hours. Compensation is earned only on the basis of the tangible results
produced, i.e., total collections made (Sarra v. Agarrado, 166 SCRA 625 [1988]).
In Investment Planning Corp. of the Philippines v. Social Security System, 21 SCRA 924
[1967] which involved commission agents, this Court had the occasion to rule, thus:
We are convinced from the facts that the work of petitioner's agents or registered
representatives more nearly approximates that of an independent contractor than that of
an employee. The latter is paid for the labor he performs, that is, for the acts of which
such labor consists the former is paid for the result thereof . . . .
xxx xxx xxx
Even if an agent of petitioner should devote all of his time and effort trying to sell its
investment plans he would not necessarily be entitled to compensation therefor. His right
to compensation depends upon and is measured by the tangible results he produces."
Moreover, the collection agent does his work "more or less at his own pleasure" without a
regular daily time frame imposed on him (Investment Planning Corporation of the
Philippines v. Social Security System, supra; See alsoSocial Security System v. Court of
Appeals, 30 SCRA 210 [1969]).

The grounds specified in the contract for termination of the relationship do not support
the view that control exists "for the causes of termination thus specified have no relation
to the means and methods of work that are ordinarily required of or imposed upon
employees." (Investment Planning Corp. of the Phil. v. Social Security System, supra)
The last and most important element of the control test is not satisfied by the terms and
conditions of the contracts. There is nothing in the agreement which implies control by
the Company not only over the end to be achieved but also over the means and methods
in achieving the end (LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132
[1961]).
The Court finds the contention of the respondents that the union members are
employees under Article 280 of the Labor Code to have no basis. The definition that
regular employees are those who perform activities which are desirable and necessary for
the business of the employer is not determinative in this case. Any agreement may
provide that one party shall render services for and in behalf of another for a
consideration (no matter how necessary for the latter's business) even without being hired
as an employee. This is precisely true in the case of an independent contractorship as well
as in an agency agreement. The Court agrees with the petitioner's argument that Article
280 is not the yardstick for determining the existence of an employment relationship
because it merely distinguishes between two kinds of employees, i.e., regular employees
and casual employees, for purposes of determining the right of an employee to certain
benefits, to join or form a union, or to security of tenure. Article 280 does not apply
where the existence of an employment relationship is in dispute.
Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code
does not apply to this case. Respondents assert that the said provision on job contracting
requires that for one to be considered an independent contractor, he must have
"substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business." There
is no showing that a collection agent needs tools and machineries. Moreover, the
provision must be viewed in relation to Article 106 of the Labor Code which provides:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract
with another person for the performance of the former's work, the employees of the
contractor and of the latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.
xxx xxx xxx

There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such
persons are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him." (p. 20)
It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are relevant in
determining whether the employer is solidarily liable to the employees of an alleged
contractor and/or sub-contractor for unpaid wages in case it is proven that there is a jobcontracting situation.
The assumption of jurisdiction by the DOLE over the case is justified as the case was
brought on appeal by the petitioner itself which prayed for the reversal of the Order of the
Med-Arbiter on the ground that the union members are not its employees. Hence, the
petitioner submitted itself as well as the issue of existence of an employment relationship
to the jurisdiction of the DOLE which was faced with a dispute on an application for
certification election.
The Court finds that since private respondents are not employees of the Company,
they are not entitled to the constitutional right to join or form a labor organization
for purposes of collective bargaining. Accordingly, there is no constitutional and
legal basis for their "union" to be granted their petition for direct certification. This
Court made this pronouncement in La Suerte Cigar and Cigarette Factory v. Director of
Bureau of Labor Relations, supra:
. . . The question of whether employer-employee relationship exists is a primordial
consideration before extending labor benefits under the workmen's compensation,
social security, medicare, termination pay and labor relations law. It is important in the
determination of who shall be included in a proposed bargaining unit because, it is
the sine qua non, the fundamental and essential condition that a bargaining unit be
composed of employees. Failure to establish this juridical relationship between the union
members and the employer affects the legality of the union itself. It means the
ineligibility of the union members to present a petition for certification election as well as
to vote therein . . . . (At p. 689)
WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix B.
Chaguile, Jr., the Resolution and Order of Secretary Franklin M. Drilon dated November
2, 1989 and December 14, 1989, respectively are hereby REVERSED and SET
ASIDE. The petition for certification election is ordered dismissed and the temporary
restraining order issued by the Court on December 21, 1989 is made permanent.
SO ORDERED.
Fernan, C.J., Feliciano and Bidin, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
6. G.R. No. L-49677 May 4, 1989
TRADE UNIONS OF THE PHILIPPINES AND ALLIED SERVICES, petitioner,
vs.
NATIONAL HOUSING CORPORATION and ATTY. VIRGILIO SY, as Officer-inCharge of the Bureau of Labor Relations, respondents.
Bonifacio V. Tupaz for petitioner.
The Government Corporate Counsel for respondent NHC.
Raul E. Espinosa for intervenor PACIWU.

REGALADO, J.:
The employees of the public sector comprise the largest bloc of workers in our
national work force. Governmental bureaucracy is continually being reorganized to
cope with the growing complexity of the problems and needs of political and
administrative governance. As the increase in the number of government employees
grows space, the need to enhance their welfare correspondingly becomes more
imperative. While it may be assumed that the Government is exerting efforts to
advance the interests of its employees, it is quite understandable that the employees
themselves should actively seek arrangements where by they can participate more
meaningfully in management and employment relationships. There is, thus, a
proliferation of unions or employees' organizations, each seeking concomitant
representational recognition.
The antecedent facts which led to the filing of this special civil action for certiorari
are clear and undisputed. The juridical status and relevant circumstances of respondent
corporation have been established in a case of illegal dismissal filed against it, as
previously decided by the Court and hereinafter discussed. However, submitted this time
for Our resolution is a controversy on the propriety of and requirements for
certification elections in government-owned or controlled corporations like the
respondent.
Respondent National Housing Corporation (hereinafter referred to as NHC) is a
corporation organized in 1959 in accordance with Executive Order No. 399, otherwise
known as the Uniform Charter of Government Corporations, dated January 1, 1951. Its

shares of stock are and have been one hundred percent (100%) owned by the
Government from its incorporation under Act 459, the former corporation law. The
government entities that own its shares of stock are the Government Service Insurance
System, the Social Security System, the Development Bank of the Philippines, the
National Investment and Development Corporation and the People's Homesite and
Housing Corporation. 1 Petitioner Trade Unions of the Philippines and Allied Services
(TUPAS, for brevity) is a legitimate labor organization with a chapter in NHC.
On July 13, 1977, TUPAS filed a petition for the conduct of a certification election
with Regional Office No. IV of the Department of Labor in order to determine the
exclusive bargaining representative of the workers in NHC. It was claimed that its
members comprised the majority of the employees of the corporation. 2 The petition was
dismissed by med-arbiter Eusebio M. Jimenez in an order, dated November 7, 1977,
holding that NHC "being a government-owned and/or controlled corporation its
employees/workers are prohibited to form, join or assist any labor organization for
purposes of collective bargaining pursuant to Section 1, Rule II, Book V of the Rules
and Regulations Implementing the Labor Code." 3
From this order of dismissal, TUPAS appealed to the Bureau of Labor
Relations 4 where, acting thereon in BLR Case No. A-984-77 (RO4-MED-1090-77),
Director Carmelo C. Noriel reversed the order of dismissal and ordered the holding
of a certification election. 5 This order was, however, set aside by Officer-in-Charge
Virgilio S.J. Sy in his resolution of November 21, 1978 6 upon a motion for
reconsideration of respondent NHC.
In the instant petition for certiorari, TUPAS seeks the reversal of the said resolution
and prays that a certification election be held among the rank and file employees of
NHC.
In retrospect, it will be recalled that in a former case of illegal dismissal involving the
same respondent corporation, 7We had ruled that the employees of NHC and of other
government owned or controlled corporations were governed by civil service laws, rules
and regulations pursuant to the 1973 Constitution which provided that "the civil service
embraces every branch, agency, subdivision and instrumentality of the government,
including government-owned or controlled corporations."8
It was therein stressed that to allow subsidiary corporations to be excluded from the civil
service laws would be to permit the circumvention or emasculation of the above-quoted
constitutional provision. As perceptively analyzed therein, "(i)t would be possible for a
regular ministry of government to create a host of subsidiary corporations under the
Corporation Code funded by a willing legislature. A government-owned corporation
could create several subsidiary corporations. These subsidiary corporation rations would
enjoy the best of two worlds. Their officials and employees would be privileged
individuals, free from the strict accountability required by the Civil Service Decree and
the regulations of the Commission on Audit. Their incomes would not be subject to the

competitive restraints of the open market nor to the terms and conditions of civil service
employment."
The rule, however, was modified in the 1987 Constitution, the corresponding provision
whereof declares that "(t)he civil service embraces all branches, subdivisions,
instrumentalities and agencies of the government, including government-owned or
controlled corporations with original charters." 9
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. As We recently held
..., the situations sought to be avoided by the 1973 Constitution and expressed by this
Court in theNational Housing Corporation case ... appear relegated to relative
insignificance by the 1987 Constitutional provision that the Civil Service embraces
government-owned controlled corporations with original charters and therefore, by clear
implication, the Civil Service does not include government-owned or controlled
corporations which are organized as subsidiaries of government-owned or
controlled corporations under the general corporation law. 10
While the aforecited cases sought different reliefs, that is, reinstatement consequent to
illegal dismissal, the same lis mota determinative of the present special civil action was
involved therein.
The workers or employees of NHC undoubtedly have the right to form unions or
employees' organizations. The right to unionize or to form organizations is now
explicitly recognized and granted to employees in both the governmental and the
private sectors. The Bill of Rights provides that "(t)he 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" 11
This guarantee is reiterated in the second paragraph of Section 3, Article XIII, on Social
Justice and Human Rights, which mandates 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 ...."
Specifically with respect to government employees, the right to unionize is
recognized in Paragraph (5), Section 2, Article IX B 12 which provides that "(t)he
right to self-organization shall not be denied to government employees." The
rationale of and justification for this innovation which found expression in the aforesaid
provision was explained by its proponents as follows:
... The government is in a sense the repository of the national sovereignty and, in that
respect, it must be held in reverence if not in awe. It symbolizes the unity of the nation,
but it does perform a mundane task as well. It is an employer in every sense of the word

except that terms and conditions of work are set forth through a Civil Service
Commission. The government is the biggest employer in the Philippines. There is an
employer-employee relationship and we all know that the accumulated grievances of
several decades are now beginning to explode in our faces among government workers
who feel that the rights afforded by the Labor Code, for example, to workers in the
private sector have been effectively denied to workers in government in what looks like a
grotesque, (sic) a caricature of the equal protection of the laws. For example, ... there
were many occasions under the old government when wages and cost of living
allowances were granted to workers in the private sector but denied to workers in the
government for some reason or another, and the government did not even state the
reasons why. The government employees were being discriminated against. As a general
rule, the majority of the world's countries now entertain public service unions. What they
really add up to is that the employees of the government form their own association.
Generally, they do not bargain for wages because these are fixed in the budget but they do
acquire a forum where, among other things, professional and self-development is (sic)
promoted and encouraged. They also act as watchdogs of their own bosses so that when
graft and corruption is committed, generally, it is the unions who are no longer afraid by
virtue of the armor of self-organization that become the public's own allies for detecting
graft and corruption and for exposing it.... 13
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. Statutory implementation of the last cited section of the Constitution is
found in Article 244 of the Labor Code, as amended by Executive Order No. 111,
thus:
... Right of employees in the public service Employees of the government corporations
established under 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.
The records do not show that supervening factual events have mooted the present action.
It is meet, however, to also call attention to the fact that, insofar as certification elections
are concerned, subsequent statutory developments have rendered academic even the
distinction between the two types of government-owned or controlled corporations and
the laws governing employment relations therein, as hereinbefore discussed. For,
whether the employees of NHC are covered by the Labor Code or by the civil service
laws, a certification election may be conducted.
For employees in corporations and entities covered by the Labor Code, the determination
of the exclusive bargaining representative is particularly governed by Articles 255 to 259
of said Code. Article 256 provides for the procedure when there is a representation issue
in organized establishments, while Article 257 covers unorganized establishments. These
Labor Code provisions are fleshed out by Rules V to VII, Book V of the Omnibus
Implementing Rules.

With respect to other civil servants, that is, employees of all branches, subdivisions,
instrumentalities and agencies of the government including government-owned or
controlled corporations with original charters and who are, therefore, covered by
the civil service laws, the guidelines for the exercise of their right to organize is
provided for under Executive Order No. 180. Chapter IV thereof, consisting of
Sections 9 to 12, regulates the determination of the "sole and exclusive employees
representative"; Under Section 12, "where there are two or more duly registered
employees' organizations in the appropriate organization unit, the Bureau of Labor
Relations shall, upon petition order the conduct of certification election and shall
certify the winner as the exclusive representative of the rank-and-file employees in
said organizational unit."
Parenthetically, note should be taken of the specific qualification in the Constitution that
the State "shall guarantee the rights of all workers to self-organization, collective
bargaining, and peaceful concerted activities, including the right to strike in accordance
with law" and that they shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law." 14 (Emphasis supplied.)
ON THE FOREGOING CONSIDERATIONS, the assailed resolution of the Bureau of
Labor Relations, dated November 21, 1978, is ANNULLED and SET ASIDE and the
conduct of a certification election among the affected employees of respondent
National Housing Corporation in accordance with the rules therefor is hereby
GRANTED.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla,
Bidin, Sarmiento, Cortes Grio Aquino and Medialdea, JJ., concur.
Gancayco, J., on leave.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
8. G.R. No. 80612-16 December 29, 1989
AIRTIME SPECIALISTS, INC., ABSOLUTE SOUND, INC., COUNTRY
WEALTH DEVELOPMENT CORP., AD PLANNERS & MARKETING

COUNSELLORS, INC., and ATLAS RESOURCES & MANAGEMENT

GROUP,petitioners,
vs.
HON. DIRECTOR OF LABOR RELATIONS PURA FERRER-CALLEJA, LABOR
REGULATION OFFICER EUSEBIO JIMENEZ, MED-ARBITER MANASES T.
CRUZ, SAMAHAN NG MGA MANGGAGAWA SA ASIA (SAMA-ASIA)-FFW
CHAPTER and PINAGBUKLOD NG MGA MANGGAGAWA SA ATACO (PMA)FFW CHAPTER, respondents.
Ruben F. Santos Law Office for petitioners.

PARAS, J.:
This certiorari proceeding was filed by petitioners to assail the orders of respondent
Med-Arbiter Manases T. Cruz and Director of Labor Relations Pura Ferrer-Calleja
ordering a certification election.
The pertinent background facts are as follows:
Respondent Samahan ng mga Manggagawa sa Asia-FFW Chapter (SAMA-ASIA,
for short) filed with the National Capital Region, Ministry of Labor and
Employment, on May 22, 1986, two separate petitions for direct certification and/or
certification election on behalf of the regular rank-and-file employees of the
petitioners Airtime Specialists and Absolute Sound, Inc. The other respondent
Pinagbuklod ng Manggagawa sa Ataco-FFW Chapter (PMA for short) also filed
with the same office, on the same day, similar separate petitions in behalf of the
regular rank and file employees of petitioners Country Wealth Development, Ad
Planner and Marketing Counsellors and Atlas Resources.
All these five cases were consolidated.
Petitioners filed their position paper with motion to dismiss on the following
grounds-disaffiliation of the rank and file employees, ineligibility of some signatories
because they had less than one (1) year of service resulting in the non-compliance
with the 30% requirement.
On March 9, 1987, the Med-Arbiter issued an Order the dispositive portion of which
reads
WHEREFORE, premises considered, a certification election is hereby ordered
conducted among the rank and file employees of the Airtime Specialists, Inc.;
Absolute Sound, Inc.; Commonwealth Development Corporation; Ad Planners &
Mktg. Corp.; and Atlas Resources & Management Group, within 20 days from
receipt of this Order. The parties are:

1. Samahan ng mga Manggagawa sa Asia (SAMA-ASIA) FFW Chapter & Pinagbuklod

ng mga Manggagawa sa Ataco (PMA-FFW); and
2. No union.
Pre-election conference shall be conducted to thresh out the details of the election.
SO ORDERED. (p. 25, Rollo)
Petitioners' motion for reconsideration having been denied, they filed the instant
petition for "Certiorari and Prohibition with Preliminary Injunction" with a Prayer
for the issuance of a temporary restraining order enjoining public respondents from
conducting any further proceedings in the said five cases.
The petition was given due course and the parties were required to submit simultaneously
their respective memoranda.
In assailing the aforesaid Order of public respondents, petitioners alleged that
I. Public respondents (Director Calleja and Med-Arbiter Cruz) gravely erred in
considering employees with less than one year of service, and even probationaries as
qualified participants in a certification election process; in direct violation of the ruling of
this Honorable Court in the Tarnate vs. Noriel case;
II. Public respondents gravely erred in not considering proven disaffiliation and
resignations from a petitioning union worse, from the company, and valid termination for
cause from the service as material consideration to support a petition for certification
and/or election.
III. Public respondent Director Calleja gravely misinterpreted the ruling of this Honorable
Court in the case of Albano vs. Noriel, 85 SCRA 499, even as she held that,
notwithstanding the absence of the statutory consent requirement of 30% (now 20%), the
Bureau of Labor Relations can in every such case still order a certification election,
giving the wrong impression that such exercise of discretion is absolute. (pp. 12-15,
Rollo)
Thus, petitioners argue that the public respondents committed grave abuse of
discretion when they considered (a) employees with less than one year of service and
even (b) probationary employees as qualified participants in the certification
election process. They contend that "by the very fact that such (probationary)-employees
have not earned regular status, they are not of the bargaining unit". (Reply, p. 21).
Petitioners maintain that this, "directly violates" the ruling of this Court in Tarnate
vs. Noriel, (100 SCRA 93) where it held that "at least one year of service is required
for an employee to enjoy the benefits of membership in any labor union."

Petitioners' contentions are untenable. It is Our holding in the case of B.F. Goodrich
Phils., Inc. vs. B.F. Goodrich Confidential & Salaried Employees Union-NATU (49
SCRA 532) that the objectives of the Industrial Peace Act would be sooner attained if at
the earliest opportunity the employees, all of them, in an appropriate bargaining unit be
pooled to determine which labor organization should be its exclusive representative. This
Court had made it clear that We should give discretion to the Court of Industrial
Relations, or in this case, the Bureau of Labor Relations in deciding whether or not
to grant a petition for certification election considering the facts and circumstances
of which it has intimate knowledge. Moreover, a perusal of Art. 258 of the Labor Code
as amended by Presidential Decree No. 442 reveals that compliance with the 30%
requirement (now 20%) makes it mandatory upon the Bureau of Labor Relations to order
the holding of a certification election in order to determine the exclusive-bargaining agent
of the employees. Stated otherwise, it means that with such, the Bureau is left
without any discretion but to order the holding of certification election.
Parenthetically, where the petition is supported by less than 30% (now 20%) the
Bureau of Labor Relations has discretion whether or not to order the holding of
certification election depending on the circumstances of the case. Thus, it is Our
holding in LVN Pictures vs. Musicians Guild, et al. (1 SCRA 132) that in connection with
certification election, the Court of Industrial Relations enjoys a wide discretion in
determining the procedure necessary to insure a fair and free choice of bargaining
representatives by employees, and having exercised its sound discretion, this Court
cannot interfere. (Arguelles v. Young, 153 SCRA 690).
In a certification election all rank-and-file employees in the appropriate bargaining unit
are entitled to vote. This principle is clearly stated in Art. 255 of the Labor Code which
states that the "labor organization designated or selected by the majority of the employees
in an appropriate bargaining unit shall be the exclusive representative of the employees in
such unit for the purpose of collective bargaining." Collective bargaining covers all
aspects of the employment relation and the resultant CBA negotiated by the certified
union binds all employees in the bargaining unit. Hence, all rank-and-file
employees, probationary or permanent, have a substantial interest in the selection of
the bargaining representative. The Code makes no distinction as to their
employment status as basis for eligibility in supporting the petition for certification
election. The law refers to "all" the employees in the bargaining unit. All they need
to be eligible to support the petition is to belong to the "bargaining unit.".
The case of Tarnate vs. Noriel relied upon by petitioners has no application in
certification election. That case involves the right of probationary employee to vote in the
election of union officers.
Petitioner argue at length that more than a majority of the signatories to the
petitions for certification election "have disaffiliated from the two private
respondent unions (PMA-FFW and SAMA-ASIA-FFW) and have joined another
union (ADLO)." Petitioners then contend that, with the mass disaffiliation the
petition for certification would fall short of the 20% consent requirement of the
Labor Code.

Even assuming the fact of such disaffiliation and even assuming further that the
20% requirement is not reached, this will not defeat the petition for certification
election. On the contrary, it becomes more imperative to conduct one. The alleged
disaffiliation from the petitioning unions (PMA-FFW and SAMA-ASIA-FFW) in favor
of the ADLO-KMU raised a genuine representation issue which can best be tested in a
certification election. In VICMICO Industrial Workers Association (VWA) vs. The
Honorable Carmelo Noriel, et al. (131 SCRA 569) this Court ruled upon the same
argument. Thus:
On the issue that more than 600 bona fide rank and file members of VIWA had
disaffiliated with respondents NFSW, this Court had occasion to state what should be
followed in case of withdrawal or retraction of signatures. In National Mines and Allied
Workers Union vs. Luna, 83 SCRA 607, it was held that the " best forum for determining
whether there were indeed retractions from some of the laborers is the certification
election itself wherein the workers can freely express their choice in a secret ballot ... To
hold otherwise would be violative of the liberal approach constantly followed by this
Court in matters of certification elections.
In the same vein, in George and Peter Lines, Inc. vs. ALU, et al., 134 SCRA 82, where it
was alleged that 80% of the membership of the Union had withdrawn but the union
claimed that the withdrawals were involuntary, the Court held that "the best forum to
determine if there was indeed undue pressure exerted upon the employees to retract their
membership is in the certification election itself."
The employees have the constitutional right to choose the labor organization which
they desire to join. The exercise of such right would be rendered nugatory and
ineffectual if they would be denied the opportunity to choose in a certification
election, which is not a litigation, but a mere investigation of a non-adversary
character, the bargaining unit to represent them (NAMAWUMIF vs. Estrella, 87
SCRA 84). The holding of a certification election is a statutory policy that should not
be circumvented (ATU vs. Noriel, 89 SCRA 264).
WHEREFORE, the petition is DISMISSED, the assailed orders of public respondents
are AFFIRMED.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

10. G.R. No. 85750 September 28, 1990

INTERNATIONAL CATHOLIC IMMIGRATION COMMISSION, petitioner
vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU
OF LABOR RELATIONS AND TRADE UNIONS OF THE PHILIPPINES AND
ALLIED SERVICES (TUPAS) WFTU respondents.
G.R. No. 89331 September 28, 1990
KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR
ASSOCIATION IN LINE INDUSTRIES AND AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPL OYMENT AND INTERNATIONAL RICE
RESEARCH INSTITUTE, INC.,respondents.
Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in 85750.
Dominguez, Armamento, Cabana & Associates for petitioner in G.R. No. 89331.
Jimenez & Associates for IRRI.
Alfredo L. Bentulan for private respondent in 85750.

MELENCIO-HERRERA, J.:

Consolidated on 11 December 1989, these two cases involve the validity of the claim of
immunity by the International Catholic Migration Commission (ICMC) and the
International Rice Research Institute, Inc. (IRRI) from the application of Philippine labor
laws.
I
Facts and Issues
A. G.R. No. 85750 the International Catholic Migration Commission (ICMC) Case.
As an aftermath of the Vietnam War, the plight of Vietnamese refugees fleeing from
South Vietnam's communist rule confronted the international community.
In response to this crisis, on 23 February 1981, an Agreement was forged between the
Philippine Government and the United Nations High Commissioner for Refugees
whereby an operating center for processing Indo-Chinese refugees for eventual
resettlement to other countries was to be established in Bataan (Annex "A", Rollo,
pp. 22-32).
ICMC was one of those accredited by the Philippine Government to operate the
refugee processing center in Morong, Bataan. It was incorporated in New York, USA,
at the request of the Holy See, as a non-profit agency involved in international
humanitarian and voluntary work. It is duly registered with the United Nations
Economic and Social Council (ECOSOC) and enjoys Consultative Status, Category
II. As an international organization rendering voluntary and humanitarian services in the
Philippines, its activities are parallel to those of the International Committee for
Migration (ICM) and the International Committee of the Red Cross (ICRC) [DOLE
Records of BLR Case No. A-2-62-87, ICMC v. Calleja, Vol. 1].
On 14 July 1986, Trade Unions of the Philippines and Allied Services (TUPAS) filed
with the then Ministry of Labor and Employment a Petition for Certification
Election among the rank and file members employed by ICMC The latter opposed
the petition on the ground that it is an international organization registered with the
United Nations and, hence, enjoys diplomatic immunity.
On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC and
dismissed the petition for lack of jurisdiction.
On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor Relations
(BLR), reversed the Med-Arbiter's Decision and ordered the immediate conduct of a
certification election. At that time, ICMC's request for recognition as a specialized
agency was still pending with the Department of Foreign Affairs (DEFORAF).
Subsequently, however, on 15 July 1988, the Philippine Government, through the
DEFORAF, granted ICMC the status of a specialized agency with corresponding

diplomatic privileges and immunities, as evidenced by a Memorandum of Agreement

between the Government and ICMC (Annex "E", Petition, Rollo, pp. 41-43), infra.
ICMC then sought the immediate dismissal of the TUPAS Petition for Certification
Election invoking the immunity expressly granted but the same was denied by
respondent BLR Director who, again, ordered the immediate conduct of a preelection conference. ICMC's two Motions for Reconsideration were denied despite
an opinion rendered by DEFORAF on 17 October 1988 that said BLR Order
violated ICMC's diplomatic immunity.
Thus, on 24 November 1988, ICMC filed the present Petition for Certiorari with
Preliminary Injunction assailing the BLR Order.
On 28 November 1988, the Court issued a Temporary Restraining Order enjoining
the holding of the certification election.
On 10 January 1989, the DEFORAF, through its Legal Adviser, retired Justice Jorge
C. Coquia of the Court of Appeals, filed a Motion for Intervention alleging that, as
the highest executive department with the competence and authority to act on
matters involving diplomatic immunity and privileges, and tasked with the conduct
of Philippine diplomatic and consular relations with foreign governments and UN
organizations, it has a legal interest in the outcome of this case.
Over the opposition of the Solicitor General, the Court allowed DEFORAF
intervention.
On 12 July 1989, the Second Division gave due course to the ICMC Petition and required
the submittal of memoranda by the parties, which has been complied with.
As initially stated, the issue is whether or not the grant of diplomatic privileges and
immunites to ICMC extends to immunity from the application of Philippine labor
laws.
ICMC sustains the affirmative of the proposition citing (1) its Memorandum of
Agreement with the Philippine Government giving it the status of a specialized agency,
(infra); (2) the Convention on the Privileges and Immunities of Specialized Agencies,
adopted by the UN General Assembly on 21 November 1947 and concurred in by the
Philippine Senate through Resolution No. 91 on 17 May 1949 (the Philippine Instrument
of Ratification was signed by the President on 30 August 1949 and deposited with the UN
on 20 March 1950) infra; and (3) Article II, Section 2 of the 1987 Constitution, which
declares that the Philippines adopts the generally accepted principles of international law
as part of the law of the land.
Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity and seeks an
affirmance of the DEFORAF determination that the BLR Order for a certification

election among the ICMC employees is violative of the diplomatic immunity of said
organization.
Respondent BLR Director, on the other hand, with whom the Solicitor General
agrees, cites State policy and Philippine labor laws to justify its assailed Order,
particularly, Article II, Section 18 and Article III, Section 8 of the 1987
Constitution, infra; and Articles 243 and 246 of the Labor Code, as amended, ibid. In
addition, she contends that a certification election is not a litigation but a mere
investigation of a non-adversary, fact-finding character. It is not a suit against
ICMC its property, funds or assets, but is the sole concern of the workers
themselves.
B. G.R. No. 89331 (The International Rice Research Institute [IRRI] Case).
Before a Decision could be rendered in the ICMC Case, the Third Division, on 11
December 1989, resolved to consolidate G.R. No. 89331 pending before it with G.R. No.
85750, the lower-numbered case pending with the Second Division, upon manifestation
by the Solicitor General that both cases involve similar issues.
The facts disclose that on 9 December 1959, the Philippine Government and the Ford and
Rockefeller Foundations signed a Memorandum of Understanding establishing the
International Rice Research Institute (IRRI) at Los Baos, Laguna. It was intended to be
an autonomous, philanthropic, tax-free, non-profit, non-stock organization designed to
carry out the principal objective of conducting "basic research on the rice plant, on all
phases of rice production, management, distribution and utilization with a view to
attaining nutritive and economic advantage or benefit for the people of Asia and other
major rice-growing areas through improvement in quality and quantity of rice."
Initially, IRRI was organized and registered with the Securities and Exchange
Commission as a private corporation subject to all laws and regulations. However, by
virtue of Pres. Decree No. 1620, promulgated on 19 April 1979, IRRI was granted the
status, prerogatives, privileges and immunities of an international organization.
The Organized Labor Association in Line Industries and Agriculture (OLALIA), is a
legitimate labor organization with an existing local union, the Kapisanan ng Manggagawa
at TAC sa IRRI (Kapisanan, for short) in respondent IRRI.
On 20 April 1987, the Kapisanan filed a Petition for Direct Certification Election with
Region IV, Regional Office of the Department of Labor and Employment (DOLE).
IRRI opposed the petition invoking Pres. Decree No. 1620 conferring upon it the status of
an international organization and granting it immunity from all civil, criminal and
administrative proceedings under Philippine laws.
On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the opposition on the basis of
Pres. Decree No. 1620 and dismissed the Petition for Direct Certification.

On appeal, the BLR Director, who is the public respondent in the ICMC Case, set aside
the Med-Arbiter's Order and authorized the calling of a certification election among the
rank-and-file employees of IRRI. Said Director relied on Article 243 of the Labor Code,
as amended, infra and Article XIII, Section 3 of the 1987 Constitution, 1 and held that
"the immunities and privileges granted to IRRI do not include exemption from coverage
of our Labor Laws." Reconsideration sought by IRRI was denied.
On appeal, the Secretary of Labor, in a Resolution of 5 July 1989, set aside the BLR
Director's Order, dismissed the Petition for Certification Election, and held that the grant
of specialized agency status by the Philippine Government to the IRRI bars DOLE from
assuming and exercising jurisdiction over IRRI Said Resolution reads in part as follows:
Presidential Decree No. 1620 which grants to the IRRI the status, prerogatives, privileges
and immunities of an international organization is clear and explicit. It provides in
categorical terms that:
Art. 3 The Institute shall enjoy immunity from any penal, civil and administrative
proceedings, except insofar as immunity has been expressly waived by the DirectorGeneral of the Institution or his authorized representative.
Verily, unless and until the Institute expressly waives its immunity, no summons,
subpoena, orders, decisions or proceedings ordered by any court or administrative
or quasi-judicial agency are enforceable as against the Institute. In the case at bar there
was no such waiver made by the Director-General of the Institute. Indeed, the Institute, at
the very first opportunity already vehemently questioned the jurisdiction of this
Department by filing an ex-parte motion to dismiss the case.
Hence, the present Petition for Certiorari filed by Kapisanan alleging grave abuse of
discretion by respondent Secretary of Labor in upholding IRRI's diplomatic immunity.
The Third Division, to which the case was originally assigned, required the respondents
to comment on the petition. In a Manifestation filed on 4 August 1990, the Secretary of
Labor declared that it was "not adopting as his own" the decision of the BLR Director in
the ICMC Case as well as the Comment of the Solicitor General sustaining said Director.
The last pleading was filed by IRRI on 14 August 1990.
Instead of a Comment, the Solicitor General filed a Manifestation and Motion praying
that he be excused from filing a comment "it appearing that in the earlier case
of International Catholic Migration Commission v. Hon. Pura Calleja, G.R. No. 85750.
the Office of the Solicitor General had sustained the stand of Director Calleja on the very
same issue now before it, which position has been superseded by respondent Secretary of
Labor in G.R. No. 89331," the present case. The Court acceded to the Solicitor General's
prayer.

The Court is now asked to rule upon whether or not the Secretary of Labor committed
grave abuse of discretion in dismissing the Petition for Certification Election filed by
Kapisanan.
Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting IRRI the status,
privileges, prerogatives and immunities of an international organization, invoked by the
Secretary of Labor, is unconstitutional in so far as it deprives the Filipino workers of their
fundamental and constitutional right to form trade unions for the purpose of collective
bargaining as enshrined in the 1987 Constitution.
A procedural issue is also raised. Kapisanan faults respondent Secretary of Labor for
entertaining IRRI'S appeal from the Order of the Director of the Bureau of Labor
Relations directing the holding of a certification election. Kapisanan contends that
pursuant to Sections 7, 8, 9 and 10 of Rule V 2 of the Omnibus Rules Implementing the
Labor Code, the Order of the BLR Director had become final and unappeable and that,
therefore, the Secretary of Labor had no more jurisdiction over the said appeal.
On the other hand, in entertaining the appeal, the Secretary of Labor relied on Section 25
of Rep. Act. No. 6715, which took effect on 21 March 1989, providing for the direct
filing of appeal from the Med-Arbiter to the Office of the Secretary of Labor and
Employment instead of to the Director of the Bureau of Labor Relations in cases
involving certification election orders.
III
Findings in Both Cases.
There can be no question that diplomatic immunity has, in fact, been granted ICMC
and IRRI.
Article II of the Memorandum of Agreement between the Philippine Government
and ICMC provides that ICMC shall have a status "similar to that of a specialized
agency." Article III, Sections 4 and 5 of the Convention on the Privileges and Immunities
of Specialized Agencies, adopted by the UN General Assembly on 21 November 1947
and concurred in by the Philippine Senate through Resolution No. 19 on 17 May 1949,
explicitly provides:
Art. III, Section 4. The specialized agencies, their property and assets, wherever located
and by whomsoever held, shall enjoy immunity from every form of legal process except
insofar as in any particular case they have expressly waived their immunity. It is,
however, understood that no waiver of immunity shall extend to any measure of
execution.
Sec. 5. The premises of the specialized agencies shall be inviolable. The property and
assets of the specialized agencies, wherever located and by whomsoever held shall be
immune from search, requisition, confiscation, expropriation and any other form of

interference, whether by executive, administrative, judicial or legislative action.

(Emphasis supplied).
IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit in its grant of
immunity, thus:
Art. 3. Immunity from Legal Process. The Institute shall enjoy immunity from any
penal, civil and administrative proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or his authorized
representatives.
Thus it is that the DEFORAF, through its Legal Adviser, sustained ICMC'S
invocation of immunity when in a Memorandum, dated 17 October 1988, it
expressed the view that "the Order of the Director of the Bureau of Labor Relations
dated 21 September 1988 for the conduct of Certification Election within ICMC
violates the diplomatic immunity of the organization." Similarly, in respect of IRRI,
the DEFORAF speaking through The Acting Secretary of Foreign Affairs, Jose D. Ingles,
in a letter, dated 17 June 1987, to the Secretary of Labor, maintained that "IRRI enjoys
immunity from the jurisdiction of DOLE in this particular instance."
The foregoing opinions constitute a categorical recognition by the Executive Branch of
the Government that ICMC and IRRI enjoy immunities accorded to international
organizations, which determination has been held to be a political question conclusive
upon the Courts in order not to embarrass a political department of Government.
It is a recognized principle of international law and under our system of separation
of powers that diplomatic immunity is essentially a political question and courts
should refuse to look beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is recognized and affirmed
by the executive branch of the government as in the case at bar, it is then the duty of the
courts to accept the claim of immunity upon appropriate suggestion by the principal law
officer of the government . . . or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so exercise their jurisdiction . . . as
to embarrass the executive arm of the government in conducting foreign relations, it is
accepted doctrine that in such cases the judicial department of (this) government follows
the action of the political branch and will not embarrass the latter by assuming an
antagonistic jurisdiction. 3
A brief look into the nature of international organizations and specialized agencies is in
order. The term "international organization" is generally used to describe an
organization set up by agreement between two or more states. 4 Under contemporary
international law, such organizations are endowed with some degree of international legal
personality 5 such that they are capable of exercising specific rights, duties and
powers. 6 They are organized mainly as a means for conducting general international
business in which the member states have an interest. 7 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 8 and 63 9 of the Charter of the United Nations:
The Charter, while it invests the United Nations with the general task of promoting
progress and international cooperation in economic, social, health, cultural, educational
and related matters, contemplates that these tasks will be mainly fulfilled not by organs of
the United Nations itself but by autonomous international organizations established by
inter-governmental agreements outside the United Nations. There are now many such
international agencies having functions in many different fields, e.g. in posts,
telecommunications, railways, canals, rivers, sea transport, civil aviation, meteorology,
atomic energy, finance, trade, education and culture, health and refugees. Some are
virtually world-wide in their membership, some are regional or otherwise limited in their
membership. The Charter provides that those agencies which have "wide international
responsibilities" are to be brought into relationship with the United Nations by
agreements entered into between them and the Economic and Social Council, are then to
be known as "specialized agencies." 10
The rapid growth of international organizations under contemporary international law has
paved the way for the development of the concept of international immunities.
It is now usual for the constitutions of international organizations to contain provisions
conferring certain immunities on the organizations themselves, representatives of their
member states and persons acting on behalf of the organizations. A series of conventions,
agreements and protocols defining the immunities of various international organizations
in relation to their members generally are now widely in force; . . . 11
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 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. 12 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. 13 The raison d'etre for these immunities is the assurance of unimpeded
performance of their functions by the agencies concerned.
The grant of immunity from local jurisdiction to ICMC and IRRI is clearly
necessitated by their international character and respective purposes. The objective
is to avoid the danger of partiality and interference by the host country in their

internal workings. The exercise of jurisdiction by the Department of Labor in these

instances would defeat the very purpose of immunity, which is to shield the affairs of
international organizations, in accordance with international practice, from political
pressure or control by the host country to the prejudice of member States of the
organization, and to ensure the unhampered performance of their functions.
ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its
basic rights, which are guaranteed by Article II, Section 18, 14 Article III, Section 8, 15 and
Article XIII, Section 3 (supra), of the 1987 Constitution; and implemented by Articles
243 and 246 of the Labor Code, 16 relied on by the BLR Director and by Kapisanan.
For, ICMC employees are not without recourse whenever there are disputes to be
settled. Section 31 of the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations 17 provides that "each specialized agency
shall make provision for appropriate modes of settlement of: (a) disputes arising out
of contracts or other disputes of private character to which the specialized agency is a
party." Moreover, pursuant to Article IV of the Memorandum of Agreement between
ICMC the the Philippine Government, whenever there is any abuse of privilege by
ICMC, the Government is free to withdraw the privileges and immunities accorded.
Thus:
Art. IV. Cooperation with Government Authorities. 1. The Commission shall cooperate
at all times with the appropriate authorities of the Government to ensure the observance
of Philippine laws, rules and regulations, facilitate the proper administration of justice
and prevent the occurrences of any abuse of the privileges and immunities granted its
officials and alien employees in Article III of this Agreement to the Commission.
2. In the event that the Government determines that there has been an abuse of the
privileges and immunities granted under this Agreement, consultations shall be held
between the Government and the Commission to determine whether any such abuse has
occurred and, if so, the Government shall withdraw the privileges and immunities granted
the Commission and its officials.
Neither are the employees of IRRI without remedy in case of dispute with management
as, in fact, there had been organized a forum for better management-employee
relationship as evidenced by the formation of the Council of IRRI Employees and
Management (CIEM) wherein "both management and employees were and still are
represented for purposes of maintaining mutual and beneficial cooperation between IRRI
and its employees." The existence of this Union factually and tellingly belies the
argument that Pres. Decree No. 1620, which grants to IRRI the status, privileges and
immunities of an international organization, deprives its employees of the right to selforganization.
The immunity granted being "from every form of legal process except in so far 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 tugger 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
organization concerned, its property and its assets. It is equally applicable to
proceedings in personam and proceedings in rem." 18
We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p.
161, Rollo), wherein TUPAS calls attention to the case entitled "International Catholic
Migration Commission v. NLRC, et als., (G.R. No. 72222, 30 January 1989, 169 SCRA
606), and claims that, having taken cognizance of that dispute (on the issue of payment of
salary for the unexpired portion of a six-month probationary employment), the Court is
now estopped from passing upon the question of DOLE jurisdiction petition over ICMC.
We find no merit to said submission. Not only did the facts of said controversy occur
between 1983-1985, or before the grant to ICMC on 15 July 1988 of the status of a
specialized agency with corresponding immunities, but also because ICMC in that case
did not invoke its immunity and, therefore, may be deemed to have waived it, assuming
that during that period (1983-1985) it was tacitly recognized as enjoying such immunity.
Anent the procedural issue raised in the IRRI Case, suffice it to state that the Decision of
the BLR Director, dated 15 February 1989, had not become final because of a Motion for
Reconsideration filed by IRRI Said Motion was acted upon only on 30 March 1989 when
Rep. Act No. 6715, which provides for direct appeals from the Orders of the Med-Arbiter
to the Secretary of Labor in certification election cases either from the order or the results
of the election itself, was already in effect, specifically since 21 March 1989. Hence, no
grave abuse of discretion may be imputed to respondent Secretary of Labor in his
assumption of appellate jurisdiction, contrary to Kapisanan's allegations. The pertinent
portion of that law provides:
Art. 259. Any party to an election may appeal the order or results of the election as
determined by the Med-Arbiter directly to the Secretary of Labor and Employment on the
ground that the rules and regulations or parts thereof established by the Secretary of
Labor and Employment for the conduct of the election have been violated. Such appeal
shall be decided within 15 calendar days (Emphasis supplied).
En passant, the Court is gratified to note that the heretofore antagonistic positions
assumed by two departments of the executive branch of government have been rectified
and the resultant embarrassment to the Philippine Government in the eyes of the
international community now, hopefully, effaced.

WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is GRANTED, the
Order of the Bureau of Labor Relations for certification election is SET ASIDE, and
the Temporary Restraining Order earlier issued is made PERMANENT.
In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave abuse of
discretion having been committed by the Secretary of Labor and Employment in
dismissing the Petition for Certification Election.
No pronouncement as to costs.
SO ORDERED.
Padilla, Sarmiento and Regalado, JJ., concur.
Paras, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
2. G.R. No. L-67158, 67159, 67160, 67161, & 67162 May 30, 1988
CLLC E.G. GOCHANGCO WORKERS UNION, CORNELIO L. PANGILINAN,
LEO TROPACIO, OLIMPIO GUMIN, JUANITO SUBA, ROLANDO SANTOS,
RUBEN BUELA, ODILON LISING, REYNALDO DAYRIT, ROGELIO
MANGUERRA, ORLANDO NACU, DIOSILINO PERDON, ERNESTO GALANG,
ORLANDO PANGILINAN, JESUS SEMBRANO, RENATO CASTANEDA,
EDILBERTO BINGCANG, ERNESTO CAPIO, RUFO A. BUGAYONG,
RICARDO S. DOMINGO, TERESITO CULLARIN, ISRAEL VINO, ERNESTO
RAMIREZ, ROMEO S. GINA, ARNEL CALILUNG, PEDRO A. SANTOS,
RODOLFO CAPITLY, BUENAVENTURA B. PUNO, EDILBERTO QUIAMBAO,
FERNANDO LISING, ERNESTO M. TUAZON, MARCELO LANGUNSAD,
MARCELINO VALERIO, SERAFIN PAWA, JESUS S. DAQUIGAN, and ISMAEL

CAYANAN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), and e.g.
GOCHANGCO, INC., respondents.
Navarro, Angeles, Anero & Falcon Law Notice for petitioners.
The Solicitor General, Isagani M. Jungco, and Bernardo P. Fernandez for respondents.

SARMIENTO, J.:
The cases before the Court pit labor against management, in which, on not a few
occasions, it is labor that has cause for complaint.
The Solicitor General states the facts as follows:
xxx xxx xxx
1. Petitioner union is a local chapter of the Central Luzon Labor Congress (CLLC), a
legitimate labor federation duly registered with the Ministry of Labor and Employment
(MOLE), while the individual petitioners are former employees of private respondent
who were officers and members of the petitioner union.
2. Private respondent is a corporation engaged in packing and crating, general
hauling, warehousing, sea van and freight forwarding,
3. Sometime in January 1980, the majority of the rank and file employees of
respondent firm organized the e.g. Gochangco Workers Union as an affiliate of the
CLLC. On January 23, 1980, the union filed a petition for certification election under
R03-LRD (MA) Case No. 178-80. The MOLE Region 111 office set the hearing for the
petition on February 27,1980.
4. On February 7,1980, the CLLC national president wrote the general manager of
respondent firm informing him of the organization of the union and requesting for a
labor management conference to normalize employer-employee relations (Annex
"D," Case 486-80).
5. On February 26,1980, the, union sent a written notice to respondent firm
requesting permission for certain member officers and members of the union to
attend the hearing of the petition for certification election. The management refused
to acknowledge receipt of said notice (Annex "E," Case 486-80).
6. On February 28, 1980, private respondent preventively suspended the union
officers and members who attended the hearing namely: Cornelio Pangilinan,

president; Leo Tropics, vice- president; Olimpio Gumin, treasurer; Buenaventura Puno,
director; Reynaldo Dayrit, sgt-at-arms; Ernesto Ramirez; Ernesto Galang; Odilon Lising;
Jesus Daquigan; and Edilberto Quiambao. The common ground alleged by private
respondent for its action was "abandonment of work on February 27, 1980." On the same
date, all the gate passes of all the above-mentioned employees to Clark Air Base were
confiscated by a Base guard.
7. Claiming that private respondent instigated the confiscation of their gate passes to
prevent them from performing their duties and that respondent firm did not pay
them their overtime pay, 13th month pay and other benefits, petitioner union and its
members filed a complaint for constructive lockout and unfair labor practice
against private respondent, docketed as R03-AB Case No. 486-80 on March 10, 1980.
8. On March 12, 1980, private respondent filed an application for clearance to
dismiss Cornelio Pangilinan, Leo Tropics, Olimpio Gumin, Reynaldo Dayrit, Odilon
Lising, Edilberto Quiambao; Ernesto Ramirez, Ernesto Galang, Buenaventura Puno,
Arnel Calilung, Romeo Guina, docketed as R03-AB Case No. 556-80. Subsequently
private respondent filed another clearance to dismiss Jesus Daquigan, Serafin Pawa and
Rufo Bugayong, docketed as R03-A-B Case No. 55780.
9. On April 22,1980, petitioner Ricardo Dormingo who was preventively suspended
on April 17, 1980 filed a complaint for unfair labor practice against the latter,
docketed as R03-AB Case No. 55880.
10. On April 30, 1980, the services of nine (9) more union members, namely: Ernesto
Tuason, Israel Vino, Pedro Santos, Juanita Suba, Edilberto Sarmiento, Diosalino Pandan,
Antonio Razon, Benjamin Capiz and Jesus Sembrano, were terminated by private
respondent on the ground that its contract with the U.S. Air Force had expired. The
rune employees filed a complaint for illegal dismissal against private respondents on
June 2, 1980. docketed as R03-AB Case No. 663-80.
11. On May 9, 1980, private respondent filed with MOLE, Region III, a Notice of
Termination of Contract together with a list of employees affected by the expiration
of the contract, among them, the 39 individual petitioners herein.
12. All the aforementioned cases were consolidated and assigned to Labor Arbiter Andres
Palumbarit.
13. After heating, Labor Arbiter Federico S. Bernardo who took over the cases from
Arbiter Palumbarit rendered a decision dated July 2, 1982, the dispositive portion of
which reads:
WHEREFORE, In view of all the foregoing, the instant complaint of complainants is
hereby granted and the respondent's application for clearance is hereby denied.
The respondent is hereby ordered:

1. To reinstate all the suspended/dismissed employees to their former positions

without loss of seniority rights and other privileges, with full backwages including
cost of emergency living allowance from the date of their suspension/dismissal up to
the supposed date of actual reinstatement, as follows:

NAME

BACK-

ECOLA

TOTAL

WAGES

1.Cornelio Pangilinan

P 11,266.00 P 7,738.00

P 19,004.00

2. Leo Tropico

11,266.00

7,738.00

19,004.00

3. Olimpio Gumin

11,266.00

7,738.00

19,004.00

4. Reynaldo Dayrit

11,266.00

7,738.00

19,004.00

5. Buenaventura Puno

11,266.00

7,738.00

19,004.00

6. Ernesto Galang

11,266.00

7,738.00

19,004.00

7. Ernesto Ramirez

11,266.00

7,738.00

19,004.00

8. Edilberto Quiambao

11,266.00

7,738.00

19,004.00

9 Jesus Daquigan

11,266.00

7,738.00

19,004.00

10. Renato Castaneda

11,134.00

7,633.00

19,004.00

11. Edilberto Bingcang

11,134.00

7,663.00

18,767.00

12. Benedicto Capio

11,134.00

7,663.00

18,767.00

13. Orlando Nacu

11,134.00

7,633.00

18,767.00

14. Rodolfo Capitly

11,134.00

7,663.00

18,767.00

15. Arnel Calilung

11,134.00

7,663.00

18,767.00

16. Romeo Gina

11,134.00

7,663.00

18,767.00

17. Orlando Pangilinan 11,134.00

7,663.00

18,767.00

18. Eduardo Alegado

11,134.00

7,663.00

18,767.00

19. Teresito Cullarin

11,134.00

7,663.00

18,767.00

20. Rogelio Manguerra 11,134.00

7,663.00

18,767.00

21. Ruben Buela

11,134.00

7,663.00

18,767.00

22. Rolando Santos

11,134 00

7,663.00

18,767.00

23. Ricardo Domingo

11,134.00

7,663.00

18,767.00

24. Serafin Pawa

11,134.00

7,663.00

18,767.00

25. Rufo Bugayong

11,134.00

7,663.00

18,767.00

26. Ernesto Santos

11,134.00

7,663.00

18,767.00

27. Ismael Cayanan

11,134.00

7,663.00

18,767.00

28. Marcelo Lagansad

11,134.00

7,663.00

18,767.00

29. Marcelino Valerio

11,134.00

7,663.00

18,767.00

30. Ernesto M. Tuazon

10,618.00

7,225.00

18,767.00

31. Israel Vino

10,618.00

7,225.00

17,843.00

32. Pedro Santos

10,618.00

7,225.00

17,843.00

33. Juanita Suba

10,618.00

7,225.00

17,843.00

Edilberto 10,618.00

7,225.00

17,843.00

34.
Sarmiento

35. Diosalino Pendon

10,618.00

7,225.00

17,843.00

36. Antonio Razon

10,618.00

7,225.00

17,843.00

37. Benjamin Capiz

10,618.00

7,225.00

17,843.00

38. Jesus Sembrano

10,618.00

7,225.00

17,843.00

GRAND TOTAL

P
419,636.00

P
706,973.00

P267,337.00

2. To restore transportation privilege as being extended before the filing of the instant
case; and
3. If their reinstatement is no longer possible due to closure of the establishment, in
addition to the payment of their full backwages and cost of living allowance, to pay their
respective separation pay as provided for under the Labor Code.
14. Private respondent appealed to the NLRC which rendered the questioned decision
on May 31, 1983 as follows:
WHEREFORE, in the light of foregoing premises, the appealed decision is hereby set
aside and another one issued dismissing the above-entitled cases filed by the
complainants-appellees for lack of merit and granting the application for clearance to
terminate the services of individual complainants-appellees filed by respondent-appellant.

15. Petitioners moved for a reconsideration of the above decision on July 12, 1983
which NLRC denied in a resolution dated December 6,1983.
16. Hence, this petition.1
xxx xxx xxx
The petitioners assign three errors in support of their petition:
I.
THAT PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION AND
SERIOUSLY COMMITTED ERRORS IN LAW IN CONSIDERING PRIVATE
RESPONDENTS EVIDENCE INTRODUCED FOR THE FIRST TIME ON APPEAL,
AND PUBLIC RESPONDENT NLRC HAS SERIOUSLY COMMITTED ERRORS IN
GIVING DUE COURSE TO PRIVATE RESPONDENT APPEAL FROM THE
DECISION OF LABOR ARBITER FEDERICO S. BERNARDO, ALTHOUGH SAID
APPEAL WAS NOT VALIDLY PERFECTED ON TIME;
II.
THAT PUBLIC RESPONDENT NLRC COMMITTED SERIOUS ERRORS IN LAW IN
RENDERING A DECISION THAT IS CONTRARY TO THE EVIDENCE ON
RECORD(S); and
III.
THAT PUBLIC RESPONDENT NLRC COMMITTED AN ERROR IN NOT
AWARDING BACK WAGES TO THE INDIVIDUAL PETITIONERS FOR REFUSAL
OF PRIVATE RESPONDENT TO REINSTATE THEM AFTER RENDERING OF THE
DECISION OF LABOR ARBITER FEDERICO S. BERNARDO AND AFTER SAID
LABOR ARBITER ORDERED PRIVATE RESPONDENT TO REINSTATE THEM. 2
On the first issue, the petitioners submit that the motion for reconsideration, treated
subsequently as an appeal, 3of the private respondent had been filed beyond the ten-day
period prescribed by the Labor Code, in the absence of any statement thereon as to
material dates. The respondent Commission ruled that it was, on the strength of receipts
in possession of the Labor Department disclosing such dates and showing that said appeal
had been seasonably filed. As a matter of practice, and in connection with ordinary civil
cases, this Court has assumed a stance of liberality towards the application of the material
data rule, if it in be otherwise verified from other evidence that the appeal had been
perfected within the time prescribed. 4 We see no reason why we should hold
otherwise as far as labor cases are concerned. Accordingly, we yield to the respondent
Commission's finding that the e.g. Gochangco, Inc. had filed its appeal on time. It may be
further noted that the petitioners themselves can offer no proof, other than vague
inferences from circumstances, of the belated appeal they allege.

This is not to say, however, that such an appeal has judgment. The Solicitor General
himself urges that we grant that, petition and hence, reverse the respondent Commission.
But apart from such urgings, the records themselves show that a reversal is in order.
We are convinced that the respondent company is indeed guilty of an unfair labor
practice. It is no coincidence that at the time said respondent issued its suspension and
termination orders, the petitioners were in the midst of a certification election preliminary
to a labor management conference, purportedly, "to normalize employer-employee
relations." 5 It was within the legal right of the petitioners to do so, 6 the
exercise of which was their sole prerogative, 7 and in which management may not as
a rule interfere. 8 In this connection, the respondent company deserves our strongest
condemnation for ignoring the petitioners' request for permission for some time out to
attend to the hearing of their petition before the med-arbiter. It is not only an act of
arrogance, but a brazen interference as well with the employees right to self-organization,
contrary to the prohibition of the Labor Code against unfair labor practices. 9
But as if to add insult to injury, the company suspended the petitioners on the ground of
"abandonment of work"10 on February 27, 1980, the date on which, apparently, the preelection conference had been scheduled. (The petitioners sought permission on February
26, 1980 while the suspension order was issued on February 28, 1980.) What unfolds
here is a clear effort by management to punish the petitioners for their union
activities.
As a consequence of such a suspension, the Clark Air Base guards confiscated the
employees' gate passes, and banned them from the base premises. We cannot be
befooled by the company's pretenses that "[t]he subsequent confiscation by the
Americans of the complainants' passes is beyond the powers of management." To
start with, those passes would not have been confiscated had not management ordered the
suspension. As put by the Solicitor General, "the U.S. Air Force authorities could not
have known who were supposed to report for work on February 27, 1980," 12and who
were under suspension. Conversely, in the absence of such a suspension order, there was
no ground to seize such gate passes. Base guards, by themselves, cannot bar legitimate
employees without the 'proper sanction of such employees'employers.
What disturbs us even more, however, is the perplexing gullibility with which the
respondent National Labor Relations Commission would fall for such an indefensible
position. Said the Commission: "So, with their gate passes confiscated, even if
management will reinstate them, without the gate passes, they cannot enter the US Clark
Airforce Base and perform their jobs, for the gate pass is a pre-requisite for their entrance
for employment."13 For surely, and as we stated, the petitioners were dispossessed of
those gate passes precisely because of the suspension meted out against them. It is not the
other way around, as the Commission would have us behave, for the confiscation of such
passes would not furnish a ground for suspension. Reinstatement then would have
deprived the base gullibility guards any right to hold on to such passes any further. In the
absence of superior orders, mere base guards are bereft of any discretion to act on such
matters.

In finding the petitioners' suspension illegal, with more reason do we hold their
subsequent dismissal to be illegal. We are not persuaded by the respondent firm's
argument that final termination should be effected as the contract has expired." 14
What impresses us is the Solicitor General's submission that the petitioners were regular
employees and as such, their tenure did not end with the expiration of the contract. We
quote:
The records show that petitioners were do so, 6 The ar employees whose employment did
not terminate with the expiration of private respondent's contract with the U.S. Air Force.
In their position paper in the arbitration proceedings, they averred that been employer
employed by private respondent for six (6) months or more before they were terminated
as follows:

NAMES

1.
Pangilinan

DATE
EMPLOYED
Cornelio Jan. 1976

POSITIO
N
Driver

2. Leo Tropico

Mar. 1977

Driver

3. Olimpio Gumin

Jan. 1977

Driver

4. Juanita Suba

June l976

Driver

5. Rolando Santos

Oct. 1978

Driver

6. Ruben Buela

Jan. 1975

Packer

7. Odilon Lising

May 1975

Packer

8. Reynaldo Dayrit

May 1976

Packer

9. Rogelio Manguerra Mar. 1977

Packer

10. Orlando Nacu

Packer

May 1977

11. Diosalino Perdon

May 1977

Packer

12. Ernesto Galang

June 1977

Packer

Orlando June l977

Packer

13.
Pangilinan

14. Jesus Sembrano

May 1977

Packer

15. Renato Castaneda

May 1976

Packer

16.
Edilberto Aug. 1977
Sarmiento

Packer

17, Eduardo Alegado

Dec. 1977

Packer

18. Benjamin Capiz

June l978

Packer

19. Antonio Razon

Nov. 1978

Packer

Edilberto May 1978

Packer

20.
Bingcang

21. Ernesto Santos

June 1978

Packer

22. Benedicto Capio

Oct. 1978

Packer

23. Rufo Bugayong

May 1977

Packer

S. Dec. 1978

Packer

24.
Ricardo
Domingo

25. Teresito Cullarin

Mar. 1978

Packer

26. Israel Vino

May 1979

Packer

27. Ernesto Ramirez

Mar. 1979

Packer

28. Romeo S. Gina

Sept. 1979

Packer

29. Arnel Calflung

Sept. 1979

Packer

30. Pedro A. Santos

May 1979

Packer

31. Rodolfo Capitly

Nov. 1978

Packer

32. Buenaventura B. Sept. 1979

Puno

Packer

33.
Edilberto Nov. 1978
Quiambao

Packer

34. Fernando Lising

Checker

35.
Ernesto
Tuazon

Jan. 1975

M. Feb. 1975

Mechanic

Marcelo Jan. 1963

Mechanic

37. Marcelino Valerio May 1979

Mechanic

38. Serafin Pawa

Feb. 1979

Packer

39. Jesus S. Daquigan May 1977

Packer

40. Ismael Cayanan

Packer

36.
Lagansad

May 1978

15

As regular employees, the petitioners' tenure are secure, and their dismissal must be
premised on a just cause.16
We find none here. What we find, instead, are flimsy attempts by the respondent
company to discredit the person of the petitioners' counsel, or their officers, and
other resorts to argumenta ad hominem. 17
There is no merit in the claim that the petitioners' terms were coterminous with the
duration of the contract. There is nothing in the records that would show that the
petitioners were parties to that contract. It appears furthermore that the petitioners 18
were in the employ of the respondent company long before that contract was concluded.
They were not contract workers whose work terms are tied to the agreement, but were,
rather, regular employees of their employer who entered into that contract.
But even if dismissal were warranted, the same nonetheless faces our disapproval in the
absence of a proper clearance then required under the Labor Code. 19 It is true that
efforts were undertaken to seek such a clearance, yet there is no showing that it was
issued. That still taints the dismissal with the vice of illegality.
The Court likewise rejects the claims of an alleged waiver by the petitioners of their
economic demands, in the light of an alleged order issued by Labor Arbiter Luciano
Aquino in connection with another case(s) involving the same parties. (It was Labor
Arbiter Federico Bernardo who penned the unfair labor practice/illegal dismissal case.)
The Honorable Aquino's disposition reads:
The records show that a "Waiver of Claims, Rights and Interest" was filed by abovenamed petitioners stating, among other things, that said petitioners are waiving their
claims, rights and interests against the respondents.
ACCORDINGLY, let the above-entitled cases be DISMISSED in view of the waiver
made by the petitioners. 20
Acting on these allegations, the respondent Commission, baring its clear bias for
management, ruled that the petitioners had waived their claims. Thus:
xxx xxx xxx
With respect to the second issue, that is, whether or not the waiver of rights and interests
executed by Fernando do so, 6 The G Lising, Odilon do so, 6 The G Lising, Jose C.
Tiamzon, Ernesto Tuazon, Pedro Santos, Ruben Buela, Eduardo Alegado, Estrael Vino,
Rogelio Manguerra, Edilberto Bingcang, Olimpio Gumin, Leo Tropico, Orlando Nacu,
Rodolfo T. Capitly and Juanito Suba, are valid, the alleged president of complainantappellee union Benigno Navarro, Sr., contends that Id Atty. Solomon has no authority to
appear floor and in behalf of individual complainants-appellees who waived their rights
and interests in these cases since there was no authority from him. Records, however,
disclose that said Atty. Solomon had been the attorney of record for complainants-

appellees since the inception of these cases, and, therefore, is authority to represent them
cannot be questioned- not even by Ministry. Navarro who allegedly took over the
presidency of complainant-appellee union after the disappearance of the former president,
Mr. Ficardo Alconga, Sr. And besides, the waiver of rights and interests were personally
executed by the signatories therein and all that Atty. Solomon did was to assist them. 21
xxx xxx xxx
We find this puzzling for clearly, Labor Arbiter Aquino's resolution refers to other cases
22
and not the instant unfair labor practice controversy. The Commission cannot feign
simple mistake for such a lapse. Wittingly or unwittingly, it had made itself a Dawn of the
respondent corporation or otherwise had yielded to its influence. The Court rebukes Atty.
Isagani M. Jungco counsel for the respondent company, for his unbecoming act and the
individual members of the Commission itself, for besmirching the integrity of the
Commission.
In any event, we have held that unfair labor practice cases are not, in view of the public
interest involved, subject to compromises. 23 Furthermore, these alleged waivers do
not appear to have been presented in the first instance. They cannot be introduced for the
first time on appeal.
We come, finally, to the respondent company's liability for backwages and for emergency
cost of living allowances (ECOLA). In its appeal, the company denies any liability,
pointing to "[r]epresentative samples of the documents evidencing payment was likewise
submitted due to the voluminous records which cannot be all produced." 24 The
Commission accepted this argument, noting that 'these xerox copies of payment of
allowances, were never spurned by complainants-appellees." 25 The Solicitor
General observes, on the other hand, that these alleged documents were never presented
at the hearing but surfaced only on appeal. 26 Indeed, there is no reference in the
Labor Arbiter's decision to these documents, and apparently, the respondent firm entered
the same in evidence at the appeal level only. As we have declared, a party is barred from
introducing fresh matters at the appellate stage. Besides, and as the Solicitor General
points out, "the ECOLA awarded to petitioners in the decision of the Labor Arbiter
include only those that pertain to them from the time of their dismissal up to July 1, 1982
" 27 the date the Labor Arbiter ordered their reinstatement. 28Accordingly, we rule
the respondent corporation liable for such unpaid claims.
Before Batas Blg. 70 29 was enacted into law, unfair labor practices were considered
administrative offenses, 30 and have been held akin to tort, 31 wherein damages
are payable. We therefore not only order herein the reinstatement of the petitioners and
the payment of backwages (including cost-of-living allowances) to them, but impose as
well moral and exemplary damages. With respect to backwages, we hold the respondent
e.g. Gochangco, Inc. liable, in line with the recommendation of the Solicitor General and
in accordance with accepted practice, for backwages equivalent to three (3) years without
qualification or deduction. 32

As for moral damages, we hold the said respondent liable therefor under the provisions of
Article 2220 of the Civil Code providing for damages for "breaches of contract where the
defendant acted fraudulently or in bad faith." We deem just and proper the sum of
P5,000.00 each in favor of the terminated workers, in the concept of such damages.
We likewise grant unto said workers another P5,000.00 each to answer for exemplary
damages based on the provisions of Articles 2229 and 2231 and/or 2232 of the Civil
Code. For "act[ing] in gross and evident bad faith in refusing to satisfy the [petitioners']
plainly valid, just and demandable claim[s] " 33 the respondent firm is further
condemned to pay attorney's fees. The Court considers the total sum of P20,000.00 fair
and reasonable.
If only for emphasis, the new Constitution considers "labor as a primary social economic
force." 34 As the conscience of the government, it is this Court's sworn duty to ensure
that none trifles with labor rights.
WHEREFORE, the petition is GRANTED. The decision of the public respondent, the
National Labor Relations Commission, is REVERSED and SET ASIDE. Judgment is
hereby rendered:
1. Ordering the private respondent, e.g. Gochangco, Inc., to REINSTATE the terminated
workers;
2. Ordering the private respondent to PAY them backwages equivalent to three (3) years
without qualification or deduction;
3. Ordering it to PAY them the sum of FIVE THOUSAND (P5,000.00) PESOS EACH, as
and for moral damages;
4. Ordering it to PAY them the sum of FIVE THOUSAND (P5,000.00) PESOS EACH, as
and for exemplary damages; and
5. Ordering it to PAY them the sum of TWENTY THOUSAND (P20,000.00) PESOS as
and for attorney's fees.
This Decision is IMMEDIATELY EXECUTORY.
Costs against the private respondent.
IT IS SO ORDERED.
Yap, C.J., Melencio-Herrera, Paras and Padilla, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC
5. G.R. No. L-18939

August 31, 1964

NATIONAL WATERWORKS and SEWERAGE AUTHORITY, petitioner,

vs.
NWSA CONSOLIDATED UNIONS, ET AL., respondents.
Govt. Corp. Counsel Simeon M. Gopengco and Asst. Govt. Corp. Counsel Arturo B.
Santos for petitioner.
Cipriano Cid and Associates and Israel Bocobo for respondents.
Alfredo M. Montesa for intervenor-respondent.
BAUTISTA ANGELO, J.:
Petitioner National Waterworks & Sewerage Authority is a government-owned and
controlled corporation created under Republic Act No. 1383, while respondent NWSA
Consolidated Unions are various labor organizations composed of laborers and
employees of the NAWASA. The other respondents are intervenors Jesus Centeno, et
al., hereinafter referred to as intervenors.
Acting on a certification of the President of the Philippines, the Court of Industrial
Relations conducted a hearing on December 5, 1957 on the controversy then existing
between petitioner and respondent unions which the latter embodied in a
"Manifesto" dated December 51, 1957, namely: implementation of the 40-Hour Week
Law (Republic Act No. 1880); alleged violations of the collective bargaining agreement
dated December 28, 1956 concerning "distress pay"; minimum wage of P5.25;
promotional appointments and filling of vacancies of newly created positions; additional
compensation for night work; wage increases to some laborers and employees; and strike
duration pay. In addition, respondent unions raised the issue of whether the 25%
additional compensation for Sunday work should be included in computing the daily
wage and whether, in determining the daily wage of a monthly-salaried employee, the
salary should be divided by 30 days.
On December 13, 1957, petitioner and respondent unions, conformably to a suggestion of
the Court of Industrial Relations, submitted a joint stipulation of facts on the issues
concerning the 40-Hour Week Law, "distress pay," minimum wage of P5.25, filling of
vacancies, night compensation, and salary adjustments, reserving the right to present
evidence on matters not covered therein. On December 4, 1957, respondent intervenors
filed a petition in intervention on the issue for additional compensation for night work.
Later, however, they amended their petition by including a new demand for overtime pay
in favor of Jesus Centeno, Cesar Cabrera, Feliciano Duiguan, Cecilio Remotigue, and
other employees receiving P4,200.00 per annum or more.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1wph1.t
On February 5, 1958, petitioner filed a motion to dismiss the claim for overtime pay
alleging that respondent Court of Industrial Relations was without jurisdiction to pass
upon the same because, as mere intervenors, the latter cannot raise new issues not
litigated in the principal case, the same not being the lis mota therein involved. To this
motion the intervenors filed an opposition. Thereafter, respondent court issued an order
allowing the issue to be litigated. Petitioner's motion to reconsider having been denied, it
filed its answer to the petition for intervention. Finally, on January 16, 1961, respondent
court rendered its decision stating substantially as follows:
The NAWASA is an agency not performing governmental functions and, therefore, is
liable to pay additional compensation for work on Sundays and legal holidays
conformably to Commonwealth Act No. 444, known as the Eight-Hour Labor Law, even
if said days should be within the staggered five work days authorized by the President;
the intervenors do not fall within the category of "managerial employees" as
contemplated in Republic Act 2377 and so are not exempt from the coverage of the EightHour Labor Law; even those intervenors attached to the General Auditing Office and the
Bureau of Public Works come within the purview of Commonwealth Act No. 444; the
computation followed by NAWASA in computing overtime compensation is contrary to
Commonwealth Act 444; the undertime of a worker should not be set-off against the
worker in determining whether the latter has rendered service in excess of eight hours for
that day; in computing the daily wage of those employed on daily basis, the additional
25% compensation for Sunday work should be included; the computation used by the
NAWASA for monthly salaried employees to wit, dividing the monthly basic pay by 30 is
erroneous; the minimum wage awarded by respondent court way back on November 25,
1950 in Case No. 359-V entitled MWD Workers Union v. Metropolitan Water District,
applies even to those who were employed long after the promulgation of the award and
even if their workers are hired only as temporary, emergency and casual workers for a
definite period and for a particular project; the authority granted to NAWASA by the
President to stagger the working days of its workers should be limited exclusively to
those specified in the authorization and should not be extended to others who are not
therein specified; and under the collective bargaining agreement entered into between the
NAWASA and respondent unions on December 28, 1956, as well as under Resolution No.
29, series of 1957 of the Grievance Committee, even those who work outside the
sewerage chambers should be paid 25% additional compensation as "distress pay."
Its motion for reconsideration having been denied, NAWASA filed the present petition for
review raising merely questions of law. Succinctly, these questions are:
1. Whether NAWASA is performing governmental functions and, therefore, essentially a
service agency of the government;

2. Whether NAWASA is a public utility and, therefore, exempted from paying additional
compensation for work on Sundays and legal holidays;
3. Whether the intervenors are "managerial employees" within the meaning of Republic
Act 2377 and, therefore, not entitled to the benefits of Commonwealth Act No. 444, as
amended;
4. Whether respondent Court of Industrial Relations has jurisdiction to adjudicate
overtime pay considering that this issue was not among the demands of respondent union
in the principal case but was merely dragged into the case by the intervenors;
5. Whether those attached to the General Auditing Office and the Bureau of Public Works
come within the purview of Commonwealth Act No. 444, as amended;
6. In determining whether one has worked in excess of eight hours, whether the
undertime for that day should be set off;
7. In computing the daily wage, whether the additional compensation for Sunday work
should be included;
8. What is the correct method to determine the equivalent daily wage of a monthly
salaried employee, especially in a firm which is a public utility?;
9. Considering that the payment of night compensation is not by virtue of any statutory
provision but emanates only from an award of respondent Court of Industrial Relations,
whether the same can be made retroactive and cover a period prior to the promulgation of
the award;
10. Whether the minimum wage fixed and awarded by respondent Court of Industrial
Relations in another case (MWD Workers Union v. MWD CIR Case No. 359-V) applies
to those employed long after the promulgation thereof, whether hired as temporary,
emergency and casual workers for a definite period and for a specific project;
11. How should the collection bargaining agreement of December 28, 1956 and
Resolution No. 29, series of 1957 of the Grievance Committee be interpreted and
construed insofar as the stipulations therein contained relative to "distress pay" is
concerned?; and
12. Whether, under the first indorsement of the President of the Philippines dated August
12, 1957, which authorizes herein petitioner to stagger the working days of its employees
and laborers, those whose services are indispensably continuous throughout the year may
be staggered in the same manner as the pump, valve, filter and chlorine operators, guards,
watchmen, medical services, and those attached to the recreational facilities.
DISCUSSION OF THE ISSUES

1. Is NAWASA an agency that performs governmental functions and, therefore,

essentially a service agency of the government? Petitioner sustains the affirmative
because, under Republic Act No. 1383, it is a public corporation, and such it exist a an
agency independent of the Department of Public Works of our government. It also
contends that under the same Act the Public Service Commission does not have control,
supervision or jurisdiction over it in the fixing of rates concerning of the operation of the
service. It can also incur indebtedness or issue bonds that are exempt from taxation which
circumstance implies that it is essentially a government- function corporation because it
enjoys that attribute of sovereignty. Petitioner likewise invokes the opinion of the
Secretary of Justice which holds that the NAWASA being essentially a service agency of
the government can be classified as a corporation performing governmental function.
With this contention, we disagree. While under republic Act No. 1383 the NAWASA is
considered as a public corporation it does not show that it was so created for the
government of a portion of the State. It should be borne in mind that there are two kinds
of public corporation, namely, municipal and non-municipal. A municipal corporation in
its strict is the body politic constituted by the inhabitants of a city or town for the purpose
of local government thereof. It is the body politic established by law particularly as an
agency of the State to assist in the civil government of the country chiefly to regulate the
local and internal affairs of the city or town that is incorporated (62 C.J.S., p. 61). Nonmunicipal corporations, on the other hand, are public corporations created as agencies of
the State for limited purposes to take charge merely of some public or state work other
than community government (Elliot, Municipal Corporations, 3rd ed., p. 7; McQuillin,
Mun. Corp., 3rd ed., Vol. 1, p. 476).
The National Waterworks and Sewerage Authority was not created for purposes of local
government. It was created for the "purpose of consolidating and centralizing all
waterworks, sewerage and drainage system in the Philippines under one control and
direction and general supervision." The NAWASA therefore, though a public corporation,
is not a municipal corporation, because it is not an agency of the State to regulate or
administer the local affairs of the town, city, or district which is incorporated.
Moreover, the NAWASA, by its charter, has personality and power separate and distinct
from the government. It is an independent agency of the government although it ids
placed, for administrative purposes, under the Department of Public Works and
Communications. It has continuous succession under its corporate name and sue and be
sued in court. It has corporate power to exercised by its board of directors; it has its own
assets and liabilities; and it may charge rates for its services.
In Bacani vs. National Coconut Corporation, 53 O.G., 2798, we stated: "To recapitulate,
we may mention that the term 'Government of the Republic of the Philippines'... refers
only to that government entity through which the functions of the government are
exercised as an attribute of sovereignty, and in this are included those arms through which
political authority is made effective whether they be provincial, municipal or other form
of local government. These are what we call municipal corporations. They do not include
government entities which are given a corporate personality separate and distinct from

the government and which are governed by the Corporation Law. Their powers, duties
and liabilities have to be determined in the light of that law and of their corporate
charter."
The same conclusion may be reached by considering the powers, functions and activities
of the NAWASA which are enumerated in Section 2, Republic Act No. 1383, among
others, as follows:
(e) To construct, maintain and operate mains pipes, water reservoirs, machinery, and other
waterworks for the purpose of supplying water to the inhabitants of its zone, both
domestic and other purposes; to purify the source of supply, regulate the control and use,
and prevent the waste of water; and to fix water rates and provide for the collection of
rents therefor;
(f) To construct, maintain and operate such system of sanitary sewers as may be
necessary for the proper sanitation of the cities and towns comprising the Authority and
to charge and collect such sums for construction and rates for this service as may be
determined by the Board to be equitable and just;
(g) To acquire, purchase, hold, transfer, sell, lease, rent, mortgage, encumber, and
otherwise dispose of real and personal property, including rights and franchises, within
the Philippines, as authorized by the purpose for which the Authority was created and
reasonably and necessarily required of the transaction of the lawful business of the same,
unless otherwise provided in this Act;
The business of providing water supply and sewerage service, as this Court held, "may
for all practical purposes be likened to an industry engaged in by coal companies, gas
companies, power plants, ice plants, and the like" (Metropolitan Water District v. Court of
Industrial Relations, et al., L-4488, August 27, 1952). These are but mere ministrant
functions of government which are aimed at advancing the general interest of society. As
such they are optional (Bacani v. National Coconut Corporation, supra). And it has been
held that "although the state may regulate the service and rates of water plants owned and
operated by municipalities, such property is not employed for governmental purposes and
in the ownership operation thereof the municipality acts in its proprietary capacity, free
from legislative interference" (1 McQuillin, p. 683). In Mendoza v. De Leon, 33 Phil.,
508, 509, this Court also held:
Municipalities of the Philippine Islands organized under the Municipal Code have both
governmental and corporate or business functions. Of the first class are the adoption of
regulations against fire and disease, preservation of the public peace, maintenance of
municipal prisons, establishment of primary schools and post-offices, etc. Of the latter
class are the establishment of municipal waterworks for the use of the inhabitants, the
construction and maintenance of municipal slaughterhouses, markets, stables, bathing
establishments, wharves, ferries, and fisheries. ...

On the strength of the foregoing considerations, our conclusions is that the NAWASA is
not an agency performing governmental functions. Rather, it performs proprietary
functions, and as such comes within the coverage of Commonwealth Act No. 444.
2. We agree with petitioner that the NAWASA is a public utility because its primary
function is to construct, maintain and operate water reservoirs and waterworks for the
purpose of supplying water to the inhabitants, as well as consolidate and centralize all
water supplies and drainage systems in the Philippines. We likewise agree with petitioner
that a public utility is exempt from paying additional compensation for work on Sundays
and legal holidays conformably to Section 4 of Commonwealth Act No. 444 which
provides that the prohibition, regarding employment of Sundays and holidays unless an
additional sum of 25% of the employee's regular remuneration is paid shall not apply to
public utilities such as those supplying gas, electricity, power, water or providing means
of transportation or communication. In other words, the employees and laborers of
NAWASA can be made to work on Sundays and legal holidays without being required to
pay them an additional compensation of 25%.
It is to be noted, however, that in the case at bar it has been stipulated that prior to the
enactment of Republic Act No. 1880, providing for the implementation of the 40-Hour
Week Law, the Metropolitan Water District had been paying 25% additional
compensation for work on Sundays and legal holidays to its employees and laborers by
virtue of Resolution No. 47, series of 1948, of its board of Directors, which practice was
continued by the NAWASA when the latter took over the service. And in the collective
bargaining agreement entered into between the NAWASA and respondent unions it was
agreed that all existing benefits enjoyed by the employees and laborers prior to its
effectivity shall remain in force and shall form part of the agreement, among which
certainly is the 25% additional compensation for work on Sundays and legal holidays
therefore enjoyed by said laborers and employees. It may, therefore, be said that while
under Commonwealth Act No. 444 a public utility is not required to pay additional
compensation to its employees and workers for work done on Sundays and legal
holidays, there is, however, no prohibition for it to pay such additional compensation if it
voluntarily agrees to do so. The NAWASA committed itself to pay this additional
compensation. It must pay not because of compulsion of law but because of contractual
obligation.
3. This issue raises the question whether the intervenors are "managerial employees"
within the meaning of Republic Act 2377 and as such are not entitled to the benefits of
Commonwealth Act No. 444, as amended. Section 2 of Republic Act 2377 provides:
Sec. 2. This Act shall apply to all persons employed in any industry or occupation,
whether public or private with the exception of farm laborers, laborers who prefer to be
paid on piece work basis, managerial employees, outside sales personnel, domestic
servants, persons in the personal service of another and members of the family of the
employer working for him.

The term "managerial employee" in this Act shall mean either (a) any person whose
primary duty consists of the management of the establishment in which he is employed or
of a customarily recognized department or subdivision thereof, or (b) ally officer or
member of the managerial staff.
One of the distinguishing characteristics managerial employee may be known as
expressed in the explanatory note of Republic Act No. 2377 is that he is not subject to the
rigid observance of regular office hours. The true worth of his service does not depend so
much on the time he spends in office but more on the results he accomplishes. In fact, he
is free to go out of office anytime.
On the other hand, in the Fair Labor Standards Act of the United States, which was taken
into account by the sponsors of the present Act in defining the degree of work of a
managerial employee, we find interesting the following dissertation of the nature of work
o a managerial employee:
Decisions have consumed and applied a regulation in substance providing that the term
"professional" employee shall mean any employee ... who is engaged in work
predominantly intellectual and varied in character, and requires the consistent exercise of
discretion and judgment in its performance and is of such a character that the output
produced or the result accomplished cannot be standardized in relation to a given period
of time, and whose hours of work of the same nature as that performed by non-exempt
employees do not exceed twenty percent of the hours worked in the work week by the
non-exempt employees, except where such work is necessarily incident to work of a
professional nature; and which requires, first, knowledge of an advanced type in a field of
science or learning customarily acquired by a prolonged course or specialized intellectual
instruction and study, or, second, predominantly original and creative in character in a
recognized field of artistic endeavor. Stranger v. Vocafilm Corp., C.C.A. N.Y., 151 F. 2d
894, 162 A.L.R. 216; Hofer v. Federal Cartridge Corp., D.C. Minn. 71 F. Supp.
243; Aulen v. Triumph Explosive, D.C. Md., 58 P. Supp. 4." (56 C.J.S., p. 666).
Under the provisions of the Fair Labor Standards Act 29 U.S.C.A., Section 23 (a) (1),
executive employees are exempted from the statutory requirements as to minimum wages
and overtime pay. ...
Thus the exemption attaches only where it appears that the employee's primary duty
consists of the management of the establishment or of a customarily recognized
department or subdivision thereof, that he customarily and regularly directs the work of
other employees therein, that he has the authority to hire or discharge other employees or
that his suggestions and recommendations as to the hiring or discharging and as to the
advancement and promotion or any other change of status of other employees are given
particular weight, that he customarily and, regularly exercises discretionary powers, ... .
(56 C.J.S., pp. 666-668.)
The term "administrative employee" ordinarily applies only to an employee who is
compensated for his services at a salary or fee of not less than a prescribed sum per

month, and who regularly and directly assists an employee employed in a bona fide
executive or administrative capacity, where such assistance is nonmanual in nature and
requires the exercise of discretion and independent judgment; or who performs under
only general supervision, responsible non-manual office or field work, directly related to
management policies or general business operations, along specialized or technical lines'
requiring special training experience, or knowledge, and the exercise of discretion and
independent judgment; ... . (56 C.J.S., p. 671.)
The reason underlying each exemption is in reality apparent. Executive, administrative
and professional workers are not usually employed at hourly wages nor is it feasible in
the case of such employees to provide a fixed hourly rate of pay nor maximum hours of
labor, Helena Glendale Perry Co. v. Walling, C.C.A. Ark. 132 F. 2d 616, 619. (56 C.J.S.,
p. 664.)
The philosophy behind the exemption of managerial employees from the 8-Hour Labor
Law is that such workers are not usually employed for every hour of work but their
compensation is determined considering their special training, experience or knowledge
which requires the exercise of discretion and independent judgment, or perform work
related to management policies or general business operations along specialized or
technical lines. For these workers it is not feasible to provide a fixed hourly rate of pay or
maximum hours of labor.
The intervenors herein are holding position of responsibility. One of them is the Secretary
of the Board of Directors. Another is the private secretary of the general manager.
Another is a public relations officer, and many other chiefs of divisions or sections and
others are supervisors and overseers. Respondent court, however, after examining
carefully their respective functions, duties and responsibilities found that their primary
duties do not bear any direct relation with the management of the NAWASA, nor do they
participate in the formulation of its policies nor in the hiring and firing of its employees.
The chiefs of divisions and sections are given ready policies to execute and standard
practices to observe for their execution. Hence, it concludes, they have little freedom of
action, as their main function is merely to carry out the company's orders, plans and
policies.
To the foregoing comment, we agree. As a matter of fact, they are required to observe
working hours and record their time work and are not free to come and go to their offices,
nor move about at their own discretion. They do not, therefore, come within the category
of "managerial employees" within the meaning of the law.
4. Petitioner's claim is that the issue of overtime compensation not having been raised in
the original case but merely dragged into it by intervenors, respondent court cannot take
cognizance thereof under Section 1, Rule 13, of the Rules of Court.
Intervenors filed a petition for intervention alleging that being employees of petitioner
who have worked at night since 1954 without having been fully compensated they desire
to intervene insofar as the payment of their night work is concerned. Petitioner opposed

the petition on the ground that this matter was not in the original case since it was not
included in the dispute certified by the President of the Philippines to the Court of
Industrial Relations. The opposition was overruled. This is now assigned as error.
There is no dispute that the intervenors were in the employ of petitioner when they
intervened and that their claim refers to the 8-Hour Labor Law and since this Court has
held time and again that disputes that call for the application of the 8-Hour Labor Law are
within the jurisdiction of the Court of Industrial Relations if they arise while the
employer-employee relationship still exists, it is clear that the matter subject of
intervention comes within the jurisdiction of respondent court.1 The fact that the question
of overtime payment is not included in the principal casein the sense that it is not one of
the items of dispute certified to by the President is of no moment, for it comes within the
sound discretion of the Court of Industrial Relations. Moreover, in labor disputes
technicalities of procedure should as much as possible be avoided not only in the interest
of labor but to avoid multiplicity of action. This claim has no merit.
5. It is claimed that some intervenors are occupying positions in the General Auditing
Office and in the Bureau of Public Works for they are appointed either by the Auditor
General or by the Secretary of Public Works and, consequently, they are not officers of
the NAWASA but of the insular government, and as such are not covered by the EightHour Labor Law.
The status of the GAO employees assigned to, and working in, government-controlled
corporations has already been decided by this Court in National Marketing Corporation,
et al. v. Court of Industrial Relations, et al., L-17804, January 31, 1963. In said case, this
Court said:
We agree with appellants that members of the auditing force can not be regarded as
employees of the PRISCO in matters relating to their compensation. They are appointed
and supervised by the Auditor General, have an independent tenure, and work subject to
his orders and instructions, and not to those of the management of appellants. Above all,
the nature of their functions and duties, for the purpose of fiscal control of appellants'
operations, imperatively demands, as a matter of policy, that their positions be completely
independent from interference or inducement on the part of the supervised management,
in order to assure a maximum of impartiality in the auditing functions. Both
independence and impartiality require that the employees in question be utterly free from
apprehension as to their tenure and from expectancy of benefits resulting from any action
of the management, since in either case there would be an influence at work that could
possibly lead, if not to positive malfeasance, to, laxity and indifference that would
gradually erode and endanger the critical supervision entrusted to these auditing
employees.
The inclusion of their items in the PRISCO budget should be viewed as no more than a
designation by the national government of the fund or source from which their
emoluments are to be drawn, and does not signify that they are thereby made PRISCO
employees.

The GAO employees assigned to the NAWASA are exactly in the same position
regarding their status, compensation and right to overtime pay as the rest of the GAO
employees assigned to the defunct PRISCO, and following our ruling in the PRISCO
case, we hold that the GAO employees herein are not covered by the 8-Hour Labor Law,
but by other pertinent laws on the matter.
The same thing may be said with regard to the employer of the Bureau of Public Works
assigned to, and working in, the NAWASA. Their position is the same as that of the GAO
employees. Therefore, they are not also covered by the 8-Hour Labor Law.
The respondent court, therefore, erred in considering them as employees of the NAWASA
for the mere reason that they are paid out of its fund and are subject to its administration
and supervision.
6. A worker is entitled to overtime pay only for work in actual service beyond eight
hours. If a worker should incur in undertime during his regular daily work, should said
undertime be deducted in computing his overtime work? Petitioner sustains the
affirmative while respondent unions the negative, and respondent court decided the
dispute in favor of the latter. Hence this error.
There is merit in the decision of respondent court that the method used by petitioner in
offsetting the overtime with the undertime and at the same time charging said undertime
to the accrued leave of the employee is unfair, for under such method the employee is
made to pay twice for his undertime because his leave is reduced to that extent while he
was made to pay for it with work beyond the regular working hours. The proper method
should be to deduct the undertime from the accrued leave but pay the employee the
overtime to which he is entitled. This method also obviates the irregular schedule that
would result if the overtime should be set off against the undertime for that would place
the schedule for working hours dependent on the employee.
7. and 8. How is a daily wage of a weekly employee computed in the light of Republic
Act 1880?
According to petitioner, the daily wage should be computed exclusively on the basic
wage, without including the automatic increase of 25% corresponding to the Sunday
differential. To include said Sunday differential would be to increase the basic pay which
is not contemplated by said Act. Respondent court disagrees with this manner of
computation. It holds that Republic Act 1880 requires that the basic weekly wage and the
basic monthly salary should not be diminished notwithstanding the reduction in the
number of working days a week. If the automatic increase corresponding to the salary
differential should not be included there would be a diminution of the weekly wage of the
laborer concerned. Of course, this should only benefit those who have been working
seven days a week and had been regularly receiving 25% additional compensation for
Sunday work before the effectivity of the Act.

It is evident that Republic Act 1880 does not intend to raise the wages of the employees
over what they are actually receiving. Rather, its purpose is to limit the working days in a
week to five days, or to 40 hours without however permitting any reduction in the weekly
or daily wage of the compensation which was previously received. The question then to
be determined is: what is meant by weekly or daily wage? Does the regular wage include
differential payments for work on Sundays or at nights, or is it the total amount received
by the laborer for whatever nature or concept?
It has been held that for purposes of computing overtime compensation a regular wage
includes all payments which the parties have agreed shall be received during the work
week, including piece work wages, differential payments for working at undesirable
times, such as at night or on Sundays and holidays, and the cost of board and lodging
customarily furnished the employee (Walling v. Yangermah-Reynolds Hardwook Co.,
325 U.S. 419; Walling v. Harischfeger Corp., 325 U.S. 427.) The "regular rate" of pay
also ordinarily includes incentive bonus or profit-sharing payments made in addition to
the normal basic pay (56 C.J.S., pp. 704-705), and it was also held that the higher rate for
night, Sunday and holiday work is just as much a regular rate as the lower rate for
daytime work. The higher rate is merely an inducement to accept employment at times
which are not as desirable from a workman's standpoint (International L. Ass'n v.
National Terminals Corp. C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunao v.
National Terminals Corp. 139 F. 2d 853).
Respondent court, therefore, correctly included such differential pay in computing the
weekly wages of those employees and laborers who worked seven days a week and were
continuously receiving 25% Sunday differential for a period of three months immediately
preceding the implementation of Republic Act 1880.
The next issue refers to the method of computing the daily rate of a monthly-salaried
employee. Petitioner in computing this daily rate divides the monthly basic pay of the
employee by 30 in accordance with Section 254 of the Revised Administrative Code
which in part provides that "In making payment for part of a month, the amount to be
paid for each day shall be determined by dividing the monthly pay into as many parts as
there are days in the particular month." The respondent court disagrees with this method
and holds that the way to determine the daily rate of a monthly employee is to divide the
monthly salary by the actual number of working hours in the month. Thus, according to
respondent court, Section 8 (g) of Republic Act No. 1161, as amended by Republic Act
1792, provides that the daily rate of compensation is the total regular compensation for
the customary number of hours worked each day. In other words, according to respondent
court, the correct computation shall be (a) the monthly salary divided by the actual of
working hours in a month or (b) the regular monthly compensation divided by the
number of working days in a month.
This finding of respondent court should be modified insofar as the employees of the
General Auditing Office and of the Bureau of Public Works assigned to work in the
NAWASA are concerned for, as already stated, they are government employees and
should be governed by Section 254 of the Revised Administrative Code. This section

provides that in making payments for part of a month, the amount to be paid for each day
shall be determined by dividing the monthly pay. Into as many parts as there are days in
the particular month. With this modification we find correct the finding of the respondent
court on this issue.
9. The Court of Industrial Relations awarded an additional 25% night compensation to
some, workers with retroactive effect, that is, effective even before the presentation of the
claim, provided that they had been given authorization by the general manager to perform
night work. It is petitioner's theory that since there is no statute requiring payment of
additional compensation for night work but it can only be granted either by the voluntary
act of the employer or by an award of the industrial court under its compulsory arbitration
power, such grant should only be prospective in operation, and not retroactive, as
authorized by the court.
It is of common occurrence that a working man who has already rendered night time
service takes him a long time before he can muster enough courage to confront his
employer with the demand for payment for it for fear of possible reprisal. It happens that
many months or years are allowed to pass by before he could be made to present such
claim against his employer, and so it is neither fair nor just that he be deprived of what is
due him simply because of his silence for fear of losing the means of his livelihood.
Hence, it is not erroneous for the Court of Industrial Relations to make the payment of
such night compensation retroactive to the date when the work was actually performed.
The power of the Court of Industrial Relations to order the payment of compensation for
overtime service prior to the date of the filing of the claim has been recognized by this
Court (Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et al., L-9265,
April 29, 1957). The same reasons given therein for the retroactivity of overtime
compensation may also be given for the retroactivity of payment of night compensation,
as such reasoning runs along the line already above-stated.
10. The Court of Industrial Relations in its resolution dated November 25, 1950 issued in
Case No. 359-V entitled MWD Workers Union, et al. v. Metropolitan Water District,
fixed the following rates of minimum daily wage: P5.25 for those working in Manila and
suburbs; P4.50 for those working in Quezon City; and P4.00 for those working in Ipo.
Montalban and Balara. It appears that in spite of the notice to terminate said award filed
with the court on December 29, 1953, the Metropolitan Water District continued paying
the above wages and the NAWASA which succeeded it adopted the same rates for
sometime. In September, 1955, the NAWASA hired the claimants as temporary workers
and it is now contended that said rates cannot apply to these workers.
The Court of Industrial Relations, however, held that the discontinuance of this minimum
wage rate was improper and ordered the payment of the difference to said workers from
the date the payment of said rates was discontinued, advancing, among others, the
following reasons: that the resolution of November 25, 1950 is applicable not only to
those laborers already in the service but also to those who may be employed thereafter;
the notice of determination of said award given on December 29, 1953 is not legally

effective because the same was given without hearing and the employer continued paying
the minimum wages even after the notice of termination; and there is no showing that the
minimum wages violate Civil Service Law or the principles underlying the WAPCO.
We find no valid reason to disagree with the foregoing finding of the Court of Industrial
Relations considering that the award continued to be valid and effective in spite of the
notice of termination given by the employer. No good reason is seen why such award
should not apply to those who may be employed after its approval by the court there
being nothing therein that may prevent its extension to them. Moreover, the industrial
court can at any time during the effectiveness of an award or reopen any question
involved therein under Section 17 of Commonwealth Act No. 103, and such is what said
court has done when it made the award extensive to the new employees, more so when
they are similarly situated. To do otherwise would be to foster discrimination.
11. This issue has to do with the meaning of "distress pay." Paragraph 3, Article VIII, of
the collective bargaining agreement entered into between the employer and respondent
unions, provides:
Because of the peculiar nature of the function of those employees and laborers of the
Sewerage Division who actually work in the sewerage chambers, causing "unusual
distress" to them, they shall receive extra compensation equivalent to twenty-five (25%)
of their basic wage.
Pursuant to said agreement, a grievance committee was created composed of
representatives of management and labor which adopted the following resolution:
Resolution
Series of 1957

No.

BE IT RESOLVED, That the employees and laborers of the Sewerage Division who
actually work in the sewerage chambers causing unusual distress to them, be paid extra
compensation equivalent to 25% of their basic wage, as embodied in Article VIII,
Paragraph 3 of the Collective Bargaining Agreement; PROVIDED, however, that any
employee who may be required to work actually in the sewerage chambers shall also be
paid 25% extra compensation and, PROVIDED FURTHER, that the term "sewerage
chambers" shall include pits, trenches, and other excavations that are necessary to tap the
sewer line, and PROVIDED FINALLY that this will not prejudice any laborer or
employee who may be included in one way or another in the term "unusual distress"
within the purview of Paragraph 3 of Article VIII, of the Collective Bargaining
Agreement.
And in a conference held between management and labor on November 25, 1957, the
following was agreed upon: "Distress Management agreed to pay effective October 1,
1956 25% additional compensation for those who actually work in and outside sewerage
chambers in accordance with Resolution No. 9 of the Grievance Committee."

The question that arose in connection with this distress pay is with regard to the meaning
of the phrase "who actually work in and outside sewerage chambers." Petitioner contends
that the distress pay should be given only to those who actually work inside the sewerage
chambers while the union maintains that such pay should be given to all those whose
work have to do with the sewerage chambers, whether inside or outside. The Court of
Industrial Relations sustained the latter view holding that the distress pay should be given
to those who actually work in and outside the sewerage chambers effective October 1,
1956. This view is now disputed by petitioner.
The solution of the present issue hinges upon the interpretation of paragraph 3, Article
VIII of the collective bargaining agreement, copied above, as explained by Resolution
No. 9, and the agreement of November 25, 1957, also copied above, which stipulation has
to be interpreted as a whole pursuant to Article 1374 of the Civil Code. As thus
interpreted, we find that those who are entitled to the distress pay are those employees
and laborers who work in the sewerage chambers whether they belong to the sewerage
division or not, and by sewerage chambers should be understood to mean as the
surroundings where the work is actually done, not necessarily "inside the sewerage
chambers." This is clearly inferred from the conference held in the Department of Labor
on November 25, 1957 where it was agreed that the compensation should be paid to those
who work "in and outside" the sewerage chambers in accordance with the terms of
Resolution No. 9 of the Grievance Committee. It should be noted that according to said
resolution, sewerage chambers include "pits, trenches, and other excavations that are
necessary to tap the sewer lines." And the reason given for this extra compensation is the
"unusual distress" that is caused to the laborers by working in the sewerage chambers in
the form and extent above-mentioned.
It is clear then that all the laborers whether of the sewerage division or not assigned to
work in and outside the sewerage chambers and suffer in unusual distress because of the
nature of their work are entitled to the extra compensatory. And this conclusion is further
bolstered by the findings of the industrial court regarding the main activities of the
sewerage division.
Thus, the Court of Industrial Relations found that the sewerage division has three main
activities, to wit: (a) cooperation of the sewerage pumping stations; (b) cleaning and
maintenance of sewer mains; and (c) installation and repairs of house sewer connections.
The pump operators and the sewer attendants in the seven pumping stations in Manila,
according to the industrial court, suffer unusual distress. The pump operators have to go
to the wet pit to see how the cleaning of the screen protecting the pump is being
performed, and go also to the dry pit abutting the wet pit to make repairs in the
breakdown of the pumps. Although the operators used to stay near the motor which is but
a few meters from the pump, they unavoidably smell the foul odor emitting from the pit.
Thesewerage attendants go down and work in the wet pit containing sewerage materials
in order to clean the screen.

A group assigned to the cleaning and maintenance of the sewer mains which are located
in the middle of the streets of Manila is usually composed of a capataz and four sewerage
attendants. These attendants are rotated in going inside the manholes, operation of the
window glass, bailing out from the main to the manhole and in supplying the water
service as necessity demand. These attendants come into contact with dirt, stink, and
smell, darkness and heat inside and near the sewage pipes. The capataz goes from one
manhole to another seeing to it that the work is properly performed and as such also
suffers unusual distress although to a lesser degree.
The group resigned to the third kind of activity is also usually composed of a capataz and
four attendants. Their work is to connect sewer pipes from houses to the sewer mains and
to do this they excavate the trench across the street from the proper line to the sewer main
and then they install the pipe after tapping the sewer main. In the tapping, the sewer pipe
is opened and so the sewerage gets out and fills up the trench and the men have to wade
in and work with the sewerage water. The capataz has to go near the filthy excavations or
trenches full of filthy sewerage, matter to aid the attendants in making pipe connections,
especially when these are complicated.
It cannot therefore be gainsaid that all there laborers suffer unusual distress. The wet pits,
trenches, manholes, which are full of sewage matters, are filthy sources of germs and
different diseases. They emit foul and filthy odor dangerous to health. Those working in
such places and exposed directly to the distress of contamination.
Premises considered, the decision of the Court of Industrial Relations in this respect
should be modified in the sense that all employees and laborers, whether or not they
belong to the sewerage division, who actually work in and outside the sewerage
chambers, should be paid the distress pay or the extra compensation equivalent to 25% of
their basic wage effective October 1, 1956.
12. On August 6, 1957, the NAWASA requested the President of the Philippines for
exemption from Executive Order No. 251 which prescribes the office hours to be
observed in government and government-owned or controlled corporations in order that it
could stagger the working hours of its employees and laborers. The request is based on
the fact that there are essential and indispensable phases in the operation of the NAWASA
that are required to be attended to continuously for twenty-four hours for the entire seven
days of the week without interruption some of which being the work performed by pump
operators, valve operators, filter operators, chlorine operators, watchmen and guards, and
medical personnel. This request was granted and, accordingly, the NAWASA staggered
the work schedule of the employees and laborers performing the activities abovementioned. Respondent unions protested against this staggering schedule of work and this
protest having been unheeded, they brought the matter to the Court of Industrial
Relations.
In resolving this issue, the industrial court justified the staggering of the work days of
those holding positions as pump operators, valve operators, filter operators, chlorine
operators, watchmen and guards, and those in the medical service for the reason that the

same was made pursuant to the authority granted by the President who in the valid
exercise of the powers conferred upon him by Republic Act No. 1880 could prescribe the
working days of employees and laborers in government-owned and controlled
corporations depending upon the exigencies of the service. The court, however, stated
that the staggering should not apply to the personnel in the construction, sewerage,
maintenance, machineries and shops because they work below 365 days a year and their
services are not continuous to require staggering. From this portion of the decision, the
petitioner appeals.
Considering that respondent court found that the workers in question work less than 365
days a year and their services are not continuous to require staggering, we see no reason
to disturb this finding. This is contrary to the very essence of the request that the
staggering should be made only with regard to those phases of the operation of the
NAWASA that have to be attended to continuously for twenty-four hours without
interruption which certainly cannot apply to the workers mentioned in the last part of the
decision of the respondent court on the matter.
RECAPITULATION
In resume, this Court holds:
(1) The NAWASA, though a public corporation, does not perform governmental
functions. It performs proprietary functions, and hence, it is covered by Commonwealth
Act No. 444;
(2) The NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth
Act 444 it is not obliged to pay an additional sum of 25% to its laborers for work done on
Sundays and legal holidays, yet it must pay said additional compensation by virtue of the
contractual obligation it assumed under the collective bargaining agreement;
(3) The intervenors are not "managerial employees" as defined in Republic Act No. 2377,
hence they are covered by Commonwealth Act No. 444, as amended;
(4) The Court of Industrial Relations has jurisdiction to adjudicate overtime pay in the
case at bar there being an employer-employee relationship existing between intervenors
and petitioner;
(5) The GAO employees assigned to work in the NAWASA cannot be regarded as
employees of the NAWASA on matters relating to compensation. They are employees of
the national government and are not covered by the Eight-Hour Labor Law. The same
may be said of the employees of the Bureau of Public Works assigned to work in the
NAWASA;
(6) The method used by the NAWASA in off-setting the overtime with the undertime and
at the same time charging said undertime to the accrued leave is unfair;

(7) The differential pay for Sundays is a part of the legal wage. Hence, it was correctly
included in computing the weekly wages of those employees and laborers who worked
seven days a week and were regularly receiving the 25% salary differential for a period of
three months prior to the implementation of Republic Act 1880. This is so even if
petitioner is a public utility in view of the contractual obligation it has assumed on the
matter;
(8) In the computation of the daily wages of employees paid by the month distinction
should be made between government employees like the GAO employees and those who
are not. The computation for government employees is governed by Section 254 of the
Revised Administrative Code while for others the correct computation is the monthly
salary divided by the actual number of working hours in the month or the regular monthly
compensation divided by the number of working days in the month;
(9) The Court of Industrial Relations did not err in ordering the payment of night
compensation from the time such services were rendered. The laborer must be
compensated for nighttime work as of the date the same was rendered;
(10) The rates of minimum pay fixed in CIR Case No. 359-V are applicable not only to
those who were already in the service as of the date of the decision but also to those who
were employed subsequent to said date;
(11) All the laborers, whether assigned to the sewerage division or not who are actually
working inside or outside the sewerage chambers are entitled to distress pay; and
(12) There is no valid reason to disturb the finding of the Court of Industrial Relations
that the work of the personnel in the construction, sewerage, maintenance, machineries
and shops of petitioner is not continous as to require staggering.
CONCLUSION
With the modification indicated in the above resume as elaborated in this decision, we
hereby affirm the decision of respondent court in all other respects, without
pronouncement as to costs.
Bengzon, C.J., Concepcion, Reyes, J.B.L., Paredes, Regala and Makalintal, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
9. G.R. No. 80882 April 24, 1989

SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL), petitioner,

vs.
HONORABLE PURA FERRER CALLEJA, Director, Bureau of Labor Relations,
Department of Labor and Employment, public respondent. MINDANAO MINERS
EMPLOYEE UNION SANDIGAN NG MANGGAGAWANG PILIPINO
(SANDIGAN), forced intervenor-private respondent. APEX MINING COMPANY,
INC., employer-private respondent.
Proculo P. Fuentes, Jr. for petitioner.
Valeriano F. Pasquil and Ruben V. Abarquez for respondent Apex Mining Co., Inc.
Raul C. Nengasca and Antonio G. Jolejole for respondent Sandigan.

GUTIERREZ, JR., J.:

This petition for certiorari seeks to annul and set aside the Order issued by public
respondent Director Pura Ferrer Calleja of the Bureau of Labor Relations dated June 23,
1987 which certified the respondent union, Mindanao Miners Employees UnionSandigan ng Manggagawang Pilipino (MMEU-Sandigan), as the sole and exclusive
bargaining representative of the rank-and-file employees of respondent Apex Mining
Company (Apex) after the said public respondent denied the motion of herein petitioner
to exclude one hundred ninety-seven (197) employees from voting in the certification
election. The denial is based on the ground that they are rank-and-file employees.
As summarized by the Solicitor General in his Comment, the facts are as follows:
On December 29, 1986, petitioner Southern Philippines Federation of Labor filed a
petition for certification election among the rank-and-file employees of private
respondent Apex Mining Company, Incorporated with the Department of Labor in
Region XI, Davao City.
On February 6, 1987, Med-Arbiter Conrado 0. Macasa, Sr. issued an Order calling
for the holding of the certification election on February 23, 1987 among the rank-andfile employees of APEX with the following choices:
l. Southern Philippines Federation of Labor (SPFL)
2. Mindanao Miners Employees Union-Sandigan ng Manggagawang Pilipino (MMEUSandigan) and
3. No union.

On February 9, 1987, a pre-election conference was conducted among the petitioner

Union; private respondent Union, MMEU-Sandigan; and APEX to settle details in the
conduct of the election such as the venue of the election and the list of employees
qualified to vote in the election.
During the pre-election conference, the parties agreed to delete from the list of
workers prepared and submitted by APEX numbering One Thousand Seven
Hundred Sixteen (1,716), the names of nineteen (1 9) managerial employees and
seventy-three probationary employees who were statutorily disqualified from voting.
Petitioner Union objected to the inclusion in said list of the following: (1) employees
occupying the positions of Supervisor I, II, and III; (2) employees under
confidential/special payrolls; and (3) employees who were not paying Union dues.
The petitioner Union contends that the aforementioned employees were disqualified
from participating in the certification election since the Supervisors were
managerial employees while the last two were disqualified by virtue of their nonmembership in the Union and their exclusion from the benefits of the collective
bargaining agreement.
In view of the lack of agreement among the parties on the list of qualified voters, MedArbiter Macasa issued an Order on February 20, 1987, the dispositive portion of which
reads:
"Wherefore, premises considered it is hereby declared that the following groups of
workers be not included in the list of employees qualified to vote in the consent election
on February 23, 1987, as follows:
1 Nineteen (19) managerial employees;
2 Seventy-three (73) probationary employees; and
3 Nineteen (19) Supervisors 1;
All other workers except the foregoing will be allowed to vote."
On February 23, 1987, the day of the certification election, petitioner Union filed a
Motion for Reconsideration of Macasa's Order dated February 20, 1987. The
certification election was nonetheless conducted, with the result as follows:
l. Southern Philippines Federation of Labor............. 614
2.
Mindanao
Miners
(MMEU- Sandigan)................................................... 528

Employees

3. No Union......................................................................... 9
4. Challenged Ballots......................................................197

union

5. Spoiled............................................................................25
TOTAL VOTES CAST............................................................1,373
On the basis of the foregoing results, respondent Union filed an Urgent Motion to
Open the Challenged Ballots, with the prayer, to wit:
"Wherefore, premises considered, it is most respectfully prayed of this Honorable office
that this instant motion be given due course and that an order be issued to open and count
the challenged ballots in order to determine, once and for all, the winner in the
certification and/or consent election and thereafter certify the sole and exclusive
collective bargaining representative of all rank-and-file employees and workers of Apex
Mining Company, Incorporated."
xxx xxx xxx
On March 11, 1987, APEX filed a Manifestation and Motion manifesting its interest
in the speedy resolution of the case and primary concern for "the restoration of
normalcy and the preservation of industrial peace in the already explosive situation
in the mining area."
xxx xxx xxx
On March 19, 1987, Med-Arbiter Macasa issued an Order, the dispositive portion of
which reads:
"Wherefore, the interest of industrial peace considered, it is hereby directed that the
challenged ballots be opened and inventoried on 26 March 1987 at 3:00 p.m., before
the entire records of the case be indorsed to the BLR for review."
xxx xxx xxx
Petitioner Union appealed Macasa's Order dated March 19, 1987 to the Bureau of
Labor Relations. On April 14, 1987, BLR Director Pura Ferrer-Calleja issued an Order,
the dispositive portion of which reads:
"WHEREFORE, the Appeal of petitioner Southern Philippines Federation of Labor
(SPFL) is hereby dismissed for lack of merit and the Med- Arbiter's Order dated 19
March 1987 is affirmed with modification that the 197 ballots should be opened and
canvassed by Labor Regional Office XI, Davao City. Let, therefore, the records of this
case be immediately remanded to the said office, for the immediate implementation of
this Resolution."
Petitioner Union moved for a reconsideration of the resolution dated April 14, 1987.
Meanwhile, on May 21, 1987, Med-Arbiter Macasa opened and canvassed the 197
challenged ballots with the result as follows:

SPFL
SANDIGAN
No
Spoiled
Envelop
no ballots 1 vote

12
178
Union

2
4

votes
votes
votes
votes
with

__________
TOTAL 197 votes
As a consequence of the opening and canvass of the challenged ballots, the outcome of
the certification election became:
SPFL
SANDIGAN
No Union 11 votes

626
706

votes
votes

___________
TOTAL 1,343 votes
Based on the aforementioned results, respondent Union filed a Manifestation with
the BLR with prayer for the issuance of Certification Order certifying it as the sole
and exclusive bargaining representative of the rank-and-file employees of APEX. On
June 23, 1987, Director Calleja issued an Order, the dispositive portion of which
reads:
"WHEREFORE, the Motion for reconsideration of Petitioner SPFL is hereby denied for
lack of merit. Meanwhile, intervenor Mindanao Employees Union-Sandigan Ng
Manggagawang Pilipino (MMEU- SANDIGAN) is hereby certified as the sole and
exclusive bargaining representative of the rank-and-file employees of respondent Apex
Mining Company, Inc. Accordingly, the management of Apex Mining Company, Inc., is
directed to negotiate with (MMEU-SANDIGAN) for the conclusion of a collective
bargaining agreement (CBA)."
Hence, this petition.
The issue raised in this petition is whether or not the public respondent committed grave
abuse of discretion in allowing the 197 employees to vote in the certification election
when, as alleged by the petitioner, they are disqualified by express provision of law or
under the existing collective bargaining agreement.
It is maintained by the petitioner that under the Labor Code, managerial employees are
excluded from forming or joining a collective bargaining unit; and under the collective
bargaining agreement executed between Apex and respondent union, among those who
are excluded from the bargaining unit are: a) managerial employees as defined in
paragraph K, Article 212 of the Labor Code; b) those performing supervisory functions;

and c) those holding confidential positions as determined by the company. Therefore, the
employees holding the positions of Supervisors II and III and those in the confidential
payrolls should be excluded from joining the bargaining unit and from voting in the
certification election. Likewise, those employees who are not paying union dues should
be excluded from the same since the existing CBA contains a Union shop provision.
The contentions have no merit.
Although we have upheld the validity of the CBA as the law among the parties, (see
Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989), its provisions
cannot override what is expressly provided by law that only managerial employees
are ineligible to join, assist or form any labor organization (See Art. 247, Labor
Code). Therefore, regardless of the challenged employees' designations, whether
they are employed as Supervisors or in the confidential payrolls, if the nature of
their job 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.
Hence, it is important to determine whether the positions of Supervisors II and III are
considered "managerial" under the law.
As defined in the Labor Code and as we have held in the case of Franklin Baker
Company of the Phils. v. Trajano,(1 57 SCRA 416, 421-423, [1988]):
A managerial employee is defined as one who is vested with powers or prerogatives
to lay down and execute management policies and/or to hire, transfer, suspend, layoff, recall, discharge, assign or discipline employees, or to effectively recommend
such managerial actions. (Reynolds Phil. Corp. v. Eslava, 137 SCRA [1985], citing
Section 212 (K), Labor Code.)
xxxxxxxxx
The 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 212 (k) of
the Labor Code and Section 1 (m) of its Implementing Rules and whether such authority
is not merely routinary or clerical in nature, but requires the use of independent judgment.
Thus, where such recommendatory powers as in the case at bar, 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 (National Warehousing Corp. v. CIR, 7 SCRA 602-603
[1963]).
Furthermore, in line with the ruling of this Court, subject employees are not managerial
employees because as borne by the records, they do not participate in policy making but

are given ready policies to execute and standard practices to observe, thus having little
freedom of action (National Waterworks and Sewerage Authority v. NWSA Consolidated,
L-18938, 11 SCRA 766 [1964]).
The petitioner's motion for reconsideration before the public respondent outlined the job
description of Supervisors. In the category of Supervisory II, the "General Summary"
provides:
GENERAL SUMMARY:
Assists the Foreman in the effective dispatching/distribution of manpower and equipment
to carry out approved work. (p. 30, Rollo)
while the first duty enumerated in the position of Supervisor III states:
1. Executes and coordinates work plans emanating from his supervisors. (p. 32, Rollo)
Thus, it is clear from the above provisions that the functions of the questioned positions
are not managerial in nature because they only execute approved and established policies
leaving little or no discretion at all whether to implement the said policies or not. The
respondent Director, therefore, did not commit grave abuse of discretion in dismissing the
petitioner's appeal from the Med-Arbiter's Order to open and count the challenged ballots
in denying the petitioner's motion for reconsideration and in certifying the respondent
Union as the sole and exclusive bargaining representative of the rank-and-file employees
of respondent Apex .
As regards the employees in the confidential payroll, the petitioner has not shown that the
nature of their jobs is classified as managerial except for its allegation that they are
considered by management as occupying managerial positions and highly confidential.
Neither can payment or non-payment 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.
WHEREFORE, the petition is hereby DISMISSED for LACK OF MERIT. Costs
against the petitioner.
SO ORDERED.
Fernan, C.J., Feliciano, Bidin and Cortes, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
7. G.R. No. 79025. December 29, 1989.
BENGUET ELECTRIC COOPERATIVE, INC., petitioner,
vs.
HON. PURA FERRER-CALLEJA, Director of the Bureau of Labor Relations, and
BENECO EMPLOYEES LABOR UNION, respondents.
E.L. Gayo & Associates for petitioner.

CORTES, J.:
On June 21, 1985 Beneco Worker's Labor Union-Association of Democratic Labor
Organizations (hereinafter referred to as BWLU- ADLO) filed a petition for direct
certification as the sole and exclusive bargaining representative of all the rank and
file employees of Benguet Electric Cooperative, Inc. (hereinafter referred to as
BENECO) at Alapang, La Trinidad, Benguet alleging, inter alia, that BENECO has in its
employ two hundred and fourteen (214) rank and file employees; that one hundred and
ninety-eight (198) or 92.5% of these employees have supported the filing of the petition;
that no certification election has been conducted for the last 12 months; that there is no
existing collective bargaining representative of the rank and file employees sought to
represented by BWLU- ADLO; and, that there is no collective bargaining agreement in
the cooperative.
An opposition to the petition was filed by the Beneco Employees Labor Union
(hereinafter referred to as BELU) contending that it was certified as the sole and
exclusive bargaining representative of the subject workers pursuant to an order issued
by the med-arbiter on October 20,1980; that pending resolution by the National Labor
Relations Commission are two cases it filed against BENECO involving bargaining
deadlock and unfair labor practice; and, that the pendency of these cases bars any
representation question.
BENECO, on the other hand, filed a motion to dismiss the petition claiming that it is
a non-profit electric cooperative engaged in providing electric services to its members

and patron-consumers in the City of Baguio and Benguet Province; and, that the
employees sought to be represented by BWLU-ADLO are not eligible to form, join or
assist labor organizations of their own choosing because they are members and joint
owners of the cooperative.
On September 2, 1985 the med-arbiter issued an order giving due course to the
petition for certification election. However, the med-arbiter limited the election
among the rank and file employees of petitioner who are non-members thereof and
without any involvement in the actual ownership of the cooperative. Based on the
evidence during the hearing the med-arbiter found that there are thirty-seven (37)
employees who are not members and without any involvement in the actual ownership of
the cooperative. The dispositive portion of the med-arbiter's order is as follows:
WHEREFORE, premises considered, a certification election should be as it is hereby
ordered to be conducted at the premises of Benguet, Electric Cooperative, Inc., at
Alapang, La Trinidad, Benguet within twenty (20) days from receipt hereof among all the
rank and file employees (non-members/consumers and without any involvement in the
actual ownership of the cooperative) with the following choices:
1. BENECO WORKERS LABOR UNION-ADLO
2. BENECO EMPLOYEES LABOR UNION
3. NO UNION
The payroll for the month of June 1985 shall be the basis in determining the qualified
voters who may participate in the certification election to be conducted.
SO ORDERED. [Rollo, pp. 22-23.]
BELU and BENECO appealed from this order but the same was dismissed for lack
of merit on March 25,1986. Whereupon BENECO filed with this Court a petition
for certiorari with prayer for preliminary injunction and /or restraining order,
docketed as G.R. No. 74209, which the Supreme Court dismissed for lack of merit in
a minute resolution dated April 28, 1986.
The ordered certification election was held on October 1, 1986. Prior to the conduct
thereof BENECO's counsel verbally manifested that "the cooperative is protesting
that employees who are members-consumers are being allowed to vote when . . .
they are not eligible to be members of any labor union for purposes of collective
bargaining; much less, to vote in this certification election." [Rollo, p. 28]. Petitioner
submitted a certification showing that only four (4) employees are not members of
BENECO and insisted that only these employees are eligible to vote in the certification
election. Canvass of the votes showed that BELU garnered forty-nine (49) of the eightythree (83) "valid" votes cast.

Thereafter BENECO formalized its verbal manifestation by filing a Protest.

Finding, among others, that the issue as to whether or not member-consumers who
are employees of BENECO could form, assist or join a labor union has been
answered in the affirmative by the Supreme Court in G.R. No. 74209, the medarbiter dismissed the protest on February 17, 1987. On June 23, 1987, Bureau of
Labor Relations (BLR) director Pura Ferrer-Calleja affirmed the med-arbiter's
order and certified BELU as the sole and exclusive bargaining agent of all the rank
and file employees of BENECO.
Alleging that the BLR director committed grave abuse of discretion amounting to lack or
excess of jurisdiction BENECO filed the instant petition for certiorari. In his
Comment the Solicitor General agreed with BENECO's stance and prayed that the
petition be given due course. In view of this respondent director herself was required by
the Court to file a Comment. On April 19, 1989 the Court gave due course to the petition
and required the parties to submit their respective memoranda.
The main issue in this case is whether or not respondent director committed grave abuse
of discretion in certifying respondent BELU as the sole and exclusive bargaining
representtative of the rank and file employees of BENECO.
Under Article 256 of the Labor Code [Pres. Decree 442] to have a valid certification
election, "at least a majority of all eligible voters in the unit must have cast their
votes. The labor union receiving the majority of the valid votes cast shall be certified
as the exclusive bargaining agent of all workers in the unit." Petitioner BENECO
asserts that the certification election held on October 1, 1986 was null and void since
members-employees of petitioner cooperative who are not eligible to form and join a
labor union for purposes of collective bargaining were allowed to vote therein.
Respondent director and private respondent BELU on the other hand submit that
members of a cooperative who are also rank and file employees are eligible to form,
assist or join a labor union [Comment of Respondent Director, p. 4; Rollo, p. 125;
Comment of BELU, pp. 9-10; Rollo pp. 99-100].
The Court finds the present petition meritorious.
The issue of whether or not employees of a cooperative are qualified to form or join
a labor organization for purposes of collective bargaining has already been resolved
and clarified in the case of Cooperative Rural Bank of Davao City, Inc. vs. Ferrer
Calleja, et al. [G.R. No. 7795, September 26,1988] and reiterated in the cases
ofBatangas-Electric Cooperative Labor Union v. Young, et al. [G.R. Nos. 62386, 70880
and 74560 November 9, 1988] and San Jose City Electric Service Cooperative, Inc. v.
Ministry of Labor and Employment, et al. [G.R. No. 77231, May 31, 1989] wherein the
Court had stated that the right to collective bargaining is not available to an
employee of a cooperative who at the same time is a member and co-owner thereof.
With respect, however, to employees who are neither members nor co-owners of the
cooperative they are entitled to exercise the rights to self-organization, collective

bargaining and negotiation as mandated by the 1987 Constitution and applicable

statutes.
Respondent director argues that to deny the members of petitioner cooperative the right to
form, assist or join a labor union of their own choice for purposes of collective bargaining
would amount to a patent violation of their right to self-organization. She points out that:
Albeit a person assumes a dual capacity as rank and file employee and as member of a
certain cooperative does not militate, as in the instant case, against his/her exercise of the
right to self-organization and to collective bargaining guaranteed by the Constitution and
Labor Code because, while so doing, he/she is acting in his/her capacity as rank and file
employee thereof. It may be added that while the employees concerned became members
of petitioner cooperative, their status employment as rank and filers who are hired for
fixed compensation had not changed. They still do not actually participate in the
management of the cooperative as said function is entrusted to the Board of Directors and
to the elected or appointed officers thereof. They are not vested with the powers and
prerogatives to lay down and execute managerial policies; to hire, transfer, suspend, layoff, recall, discharge, assign or discipline employees; and/or to effectively recommend
such managerial functions [Comment of Respondent Director, p. 4; Rollo, p. 125.]
Private respondent BELU concurs with the above contention of respondent director and,
additionally, claims that since membership in petitioner cooperative is only nominal, the
rank and file employees who are members thereof should not be deprived of their right to
self-organization.
The above contentions are untenable. Contrary to respondents' claim, the fact that the
members-employees of petitioner do not participate in the actual management of the
cooperative does not make them eligible to form, assist or join a labor organization for
the purpose of collective bargaining with petitioner. The Court's ruling in the Davao
City case that members of cooperative cannot join a labor union for purposes of
collective bargaining was based on the fact that as members of the cooperative they
are co-owners thereof. As such, they cannot invoke the right to collective bargaining for
"certainly an owner cannot bargain with himself or his co-owners." [Cooperative
Rural Bank of Davao City, Inc. v. Ferrer-Calleja, et al., supra]. It is the fact of ownership
of the cooperative, and not involvement in the management thereof, which disqualifies a
member from joining any labor organization within the cooperative. Thus, irrespective of
the degree of their participation in the actual management of the cooperative, all members
thereof cannot form, assist or join a labor organization for the purpose of collective
bargaining.
Respondent union further claims that if nominal ownership in a cooperative is "enough to
take away the constitutional protections afforded to labor, then there would be no
hindrance for employers to grant, on a scheme of generous profit sharing, stock bonuses
to their employees and thereafter claim that since their employees are not stockholders [of
the corporation], albeit in a minimal and involuntary manner, they are now also coowners and thus disqualified to form unions." To allow this, BELU argues, would be "to

allow the floodgates of destruction to be opened upon the rights of labor which the
Constitution endeavors to protect and which welfare it promises to promote." [Comment
of BELU, p. 10; Rollo, p. 100].
The above contention of respondent union is based on the erroneous presumption that
membership in a cooperative is the same as ownership of stocks in ordinary corporations.
While cooperatives may exercise some of the rights and privileges given to ordinary
corporations provided under existing laws, such cooperatives enjoy other privileges not
granted to the latter [See Sections 4, 5, 6, and 8, Pres. Decree No. 175; Cooperative Rural
Bank of Davao City v. Ferrer-Calleja, supra]. Similarly, members of cooperatives have
rights and obligations different from those of stockholders of ordinary corporations. It
was precisely because of the special nature of cooperatives, that the Court held in the
Davao City case that members-employees thereof cannot form or join a labor union for
purposes of collective bargaining. The Court held that:
A cooperative ... is by its nature different from an ordinary business concern being run
either by persons, partnerships, or corporations. Its owners and/or members are the ones
who run and operate the business while the others are its employees. As above stated,
irrespective of the number of shares owned by each member they are entitled to cast one
vote each in deciding upon the affairs of the cooperative. Their share capital earn limited
interest. They enjoy special privileges as-exemption from income tax and sales taxes,
preferential right to supply their products to State agencies and even exemption from the
minimum wage laws.
An employee therefore of such a cooperative who is a member and co-owner thereof
cannot invoke the right to collective bargaining for certainly an owner cannot bargain
with himself or his co-owners.
It is important to note that, in her order dated September 2, 1985, med-arbiter Elnora V.
Balleras made a specific finding that there are only thirty-seven (37) employees of
petitioner who are not members of the cooperative and who are, therefore, the only
employees of petitioner cooperative eligible to form or join a labor union for
purposes of collective bargaining [Annex "A" of the Petition, p. 12; Rollo, p. 22].
However, the minutes of the certification election [Annex "C" of the Petition: Rollo,
p. 28] show that a total of eighty-three (83) employees were allowed to vote and of
these, forty-nine (49) voted for respondent union. Thus, even if We agree with
respondent union's contention that the thirty seven (37) employees who were originally
non-members of the cooperative can still vote in the certification election since they were
only "forced and compelled to join the cooperative on pain of disciplinary action," the
certification election held on October 1, 1986 is still null and void since even those who
were already members of the cooperative at the time of the issuance of the med-arbiter's
order, and therefore cannot claim that they were forced to join the union were allowed to
vote in the election.
Article 256 of the Labor Code provides, among others, that:

To have a valid, election, at least a majority of all eligible voters in the unit must have
cast their votes. The labor union receiving the majority of the valid votes cast shall be
certified as the exclusive bargaining agent of all workers in the unit . . . [Italics supplied.]
In this case it cannot be determined whether or not respondent union was duly elected
by the eligible voters of the bargaining unit since even employees who are ineligible to
join a labor union within the cooperative because of their membership therein were
allowed to vote in the certification election. Considering the foregoing, the Court finds
that respondent director committed grave abuse of discretion in certifying respondent
union as the sole and exclusive bargaining representative of the rank and file employees
of petitioner cooperative.
WHEREFORE, the petition is hereby GRANTED and the assailed resolution of
respondent director is ANNULLED. The certification election conducted on October 1,
1986, is SET ASIDE. The Regional Office No. 1 of San Fernando, La Union is hereby
directed to immediately conduct new certification election proceedings among the rank
and file employees of the petitioner who are not members of the cooperative.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., and Bidin, JJ., concur.
Feliciano, J., on leave.