FIRST DIVISION

G.R. No. 193816, November 21, 2016

ERSON ANG LEE DOING BUSINESS AS "SUPER LAMINATION SERVICES,"

Petitioner, v. SAMAHANG MANGGAGAWA NG SUPER LAMINATION (SMSLS-
NAFLU-KMU), Respondent.

DECISION

SERENO, C.J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of

Court on the Decision1 and Resolution2 of the Court of Appeals (CA)
affirming the assailed Decision3 of the Department of Labor and
Employment (DOLE). DOLE allowed the conduct of certification election
among the rank-and-file employees of Super Lamination Services (Super
Lamination), Express Lamination Services, Inc. (Express Lamination), and
Express Coat Enterprises, lnc. (Express Coat).

THE ANTECEDENT FACTS

Petitioner Erson Ang Lee (petitioner), through Super Lamination, is a duly

registered entity principally engaged in the business of providing lamination
services to the general public. Respondent Samahan ng mga Manggagawa
ng Super Lamination Services (Union A) is a legitimate labor organization,
which is also a local chapter affiliate of the National Federation of Labor
Unions - Kilusang Mayo Uno.4 It appears that Super Lamination is a sole
proprietorship under petitioner's name,5 while Express Lamination and
Express Coat are duly incorporated entities separately registered with the
Securities and Exchange Commission (SEC).6

On 7 March 2008, Union A filed a Petition for Certification Election7 to

represent all the rank-and-file employees of Super Lamination.8

Notably, on the same date, Express Lamination Workers' Union (Union B)

also filed a Petition for Certification Election to represent all the rank-and-
file employees of Express Lamination.9

Also on the same date, the Samahan ng mga Manggagawa ng Express Coat
Enterprises, Inc. (Union C) filed a Petition for Certification Election to
represent the rank-and-file employees of Express Coat.10

Super Lamination, Express Lamination, and Express Coat, all represented

by one counsel, separately claimed in their Comments and Motions to
Dismiss that the petitions must be dismissed on the same ground lack of
employer-employee relationship between these establishments and the
bargaining units that Unions A, B, and C seek to represent as well as these
unions' respective members.11 Super Lamination, in its Motion, posited that
a majority of the persons who were enumerated in the list of members and
officers of Union A were not its employees, but were employed by either
Express Lamination or Express Coat.12 Interestingly, both Express
Lamination and Express Coat, in turn, maintained the same argument that
a majority of those who had assented to the Petition for Certification
Election were not employees of either company, but of one of the two other
companies involved.13
All three Petitions for Certification Election of the Unions were denied. On 21
May 2008, an Order was issued by DOLE National Capital Region (NCR)
Med-Arbiter Michael Angelo Parado denying the respective petitions of
Unions B and C on the ground that there was no existing employer-
employee relationship between the members of the unions and the
companies concerned. On 23 May 2008, DOLE NCR Med-Arbiter Alma
Magdaraog-Alba also denied the petition of respondent Union A on the same
ground.14

The three unions filed their respective appeals before the Office of the DOLE
Secretary, which consolidated the appeal because the involved companies
alternately referred to one another as the employer of the members of the
bargaining units sought to be represented.15 The unions argued that their
petitions should have been allowed considering that the companies involved
were unorganized, and that the employers had no concomitant right to
oppose the petitions. They also claimed that while the questioned employees
might have been assigned to perform work at the other companies, they
were all under one management's direct control and supervision.16

DOLE, through Undersecretary Romeo C. Lagman, rendered the assailed

Decision, the dispositive portion of which reads as follows:

WHEREFORE, premises considered, the appeals filed by Express

Lamination Workers Union (ELWU-NAFLU-KMU), Samahang Manggagawa
ng Express Coat Enterprises, Inc. (SMEC-NAFLU-KMU) and Samahang
Manggagawa ng Super Lamination Services (SMSLS NAFLU-KMU) are
hereby GRANTED and the Orders dated 21 May 2008 of DOLE-NCR
Mediator-Arbiter Michael Angelo T. Parado are hereby REVERSED and SET
ASIDE. The Order dated 23 May 2008 of DOLE NCR Mediator-Arbiter Alma
E. Magdaraog-Alba is likewise REVERSED and SET ASIDE.
Accordingly, let the entire records of this be remanded to the regional office
of origin for the immediate conduct of certification election among the rank-
and-file employees of Express Lamination Services, Inc., Super Lamination
Services and Express Coat Enterprises Inc., after the conduct of pre-election
conference/s, with the following as choices;

1. Express Lamination Workers Union-NAFLU-KMU;

2. Samahan ng mga Manggagawa ng Super Lamination Services NAFLU-

KMU;

3. Samahang ng mga Manggagawa ng Express Coat Enterprises, Inc.-

NAFLU-KMU; and

4. "No Union."

The employer/s and/or contending union(s) are hereby directed to submit to

the Regional Office of origin, within ten (10) days from receipt of this
Decision, a certified list of employees in the bargaining unit or the payrolls
covering the members of the bargaining unit for the last three (3) months
prior to the issuance of the Decision.

SO DECIDED.17(Emphases in the original)

DOLE found that Super Lamination, Express Lamination, and Express Coat
were sister companies that had a common human resource department
responsible for hiring and disciplining the employees of the three
companies. The same department was found to have also given them daily
instructions on how to go about their work and where to report for work. It
also found that the three companies involved constantly rotated their
workers, and that the latter's identification cards had only one signatory.18

To DOLE, these circumstances showed that the companies were engaged in

a work-pooling scheme, in light of which they might be considered as one
and the same entity for the purpose of determining the appropriate
bargaining unit in a certification election.19 DOLE applied the concept of
multi-employer bargaining under Sections 5 and 6 of DOLE Department
Order 40-03, Series of 2003. Under that concept, the creation of a single
bargaining unit for the rank-and-file employees of all three companies was
not implausible and was justified under the given circumstances.20 Thus, it
considered these rank-and-file employees as one bargaining unit and
ordered the conduct of a certification election as uniformly prayed for by the
three unions.

Aggrieved, petitioner instituted an appeal before the CA, which denied his
Petition and affirmed the Decision of DOLE. It sided with DOLE in finding
that Super Lamination, Express Lamination, and Express Coat were sister
companies that had adopted a work-pooling scheme. Therefore, it held that
DOLE had correctly applied the concept of multi-employer bargaining in
finding that the three companies could be considered as the same entity,
and their rank-and-file employees as comprising one bargaining unit.21

Petitioner filed a Motion for Reconsideration of the CA Decision, but the

motion was denied.22 Therefore, he now comes to this Court through the
present Petition.
ISSUES

From the established facts and arguments, we cull the issues as follows:

Whether the application of the doctrine of piercing the corporate veil is

warranted

Whether the rank-and-file employees of Super Lamination, Express

Lamination, and Express Coat constitute an appropriate bargaining unit

THE COURT'S RULING

We deny the petition.

An application of the doctrine of

piercing the corporate veil is

warranted.

Petitioner argues that separate corporations cannot be treated as a single

bargaining unit even if their businesses are related,23 as these companies
are indubitably distinct entities with separate juridical personalities.24
Hence, the employees of one corporation cannot be allowed to vote in the
certification election of another corporation, lest the abovementioned rule be
violated.25

Petitioner's argument, while correct, is a general rule. This Court has time
and again disregarded separate juridical personalities under the doctrine of
piercing the corporate veil. It has done so in cases where a separate legal
entity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, among other grounds.26 In any of these situations, the law
will regard it as an association of persons or, in case of two corporations,
merge them into one.27

A settled formulation of the doctrine of piercing the corporate veil is that

when two business enterprises are owned, conducted, and controlled by the
same parties, both law and equity will, when necessary to protect the rights
of third parties, disregard the legal fiction that these two entities are distinct
and treat them as identical or as one and the same.28

This formulation has been applied by this Court to cases in which the
laborer has been put in a disadvantageous position as a result of the
separate juridical personalities of the employers involved.29 Pursuant to
veil-piercing, we have held two corporations jointly and severally liable for
an employee's back wages.30 We also considered a corporation and its
separately incorporated branches as one and the same for purposes of
finding the corporation guilty of illegal dismissal.31 These rulings were made
pursuant to the fundamental doctrine that the corporate fiction should not
be used as a subterfuge to commit injustice and circumvent labor laws.32

Here, a certification election was ordered to be held for all the rank-and-file
employees of Super Lamination, Express Lamination, and Express Coat. The
three companies were supposedly distinct entities based on the fact that
Super Lamination is a sole proprietorship while Express Lamination and
Express Coat were separately registered with the SEC.33 The directive was
therefore, in effect, a piercing of the separate juridical personalities of the
corporations involved. We find the piercing to be proper and in accordance
with the law as will be discussed below.
The following established facts show that Super Lamination, Express
Lamination, and Express Coat are under the control and management of the
same party petitioner Ang Lee. In effect, the employees of these three
companies have petitioner as their common employer, as shown by the
following facts:

Super Lamination, Express Lamination, and Express Coat were engaged in

the same business of providing lamination services to the public as admitted
by petitioner in his petition.34

The three establishments operated and hired employees through a common

human resource department as found by DOLE in a clarificatory hearing.35
Though it was not clear which company the human resource department
was officially attached to, petitioner admits in his petition that such
department was shared by the three companies for purposes of
convenience.36

The workers of all three companies were constantly rotated and periodically
assigned to Super Lamination or Express Lamination or Express Coat to
perform the same or similar tasks.37 This finding was further affirmed when
petitioner admitted in his petition before us that the Super Lamination had
entered into a work-pooling agreement with the two other companies and
shared a number of their employees.38

DOLE found and the CA affirmed that the common human resource
department imposed disciplinary sanctions and directed the daily
performance of all the members of Unions A, B, and C.39
Super Lamination included in its payroll and SSS registration not just its
own employees, but also the supposed employees of Express Lamination
and Express Coat. This much was admitted by petitioner in his Motion to
Dismiss40 which was affirmed by the Med-Arbiter in the latter's Order.41

Petitioner admitted that Super Lamination had issued and signed the
identification cards of employees who were actually working for Express
Lamination and Express Coat.42

Super Lamination, Express Lamination, and Express Coat were represented

by the same counsel who interposed the same arguments in their motions
before the Med-Arbiters and DOLE.43

Further, we discern from the synchronized movements of petitioner and the

two other companies an attempt to frustrate or defeat the workers' right to
collectively bargain through the shield of the corporations' separate juridical
personalities. We make this finding on the basis of the motions to dismiss
filed by the three companies. While similarly alleging the absence of an
employer-employee relationship, they alternately referred to one another as
the employer of the members of the bargaining units sought to be
represented respectively by the unions. This fact was affirmed by the Med-
Arbiters' Orders finding that indeed, the supposed employees of each
establishment were found to be alternately the employees of either of the two
other companies as well. This was precisely the reason why DOLE
consolidated the appeals filed by Unions A, B, and C.44

Due to the finger-pointing by the three companies at one another, the

petitions were dismissed. As a result, the three unions were not able to
proceed with the conduct of the certification election. This also caused
confusion among the employees as to who their real employer is, as Union A
claims in its Comment.45
We hold that if we allow petitioner and the two other companies to continue
obstructing the holding of the election in this manner, their employees and
their respective unions will never have a chance to choose their bargaining
representative. We take note that all three establishments were unorganized.
That is, no union therein was ever duly recognized or certified as a
bargaining representative.46

Therefore, it is only proper that, in order to safeguard the right of the

workers and Unions A, B, and C to engage in collective bargaining, the
corporate veil of Express Lamination and Express Coat must be pierced. The
separate existence of Super Lamination, Express Lamination, and Express
Coat must be disregarded. In effect, we affirm the lower tribunals in ruling
that these companies must be treated as one and the same unit for
purposes of holding a certification election.

Petitioner has cited Diatagon Labor Federation Local v. Ople47 and Indophil
Textile Mill Worker Union v. Calica48 in which this Court refused to treat
separate corporations as a single bargaining unit. Those cases, however, are
not substantially identical with this case and would not warrant their
application herein. Unlike in the instant case, the corporations involved
were found to be completely independent or were not involved in any act
that frustrated the laborers' rights.

In Diatagon,49 we refused to include the 236 employees of Georgia Pacific

International Corporation in the bargaining unit of the employees of Liangga
Bay Logging Co., Inc. This Court's refusal was in light of the fact that the
two corporations were indubitably distinct entities with separate corporate
identities and origins. Moreover, there was no discernible attempt to
frustrate any of their labor-related rights, as the only conflict was over which
bargaining unit they belonged to.

In Indophil,50 this Court refused to pierce the corporate veil of Indophil

Textile Mill and Indophil Acrylic Manufacturing. We found that the creation
of Indophil Acrylic was not a device to evade the application of the collective
bargaining agreement (CBA) between petitioner union and Indophil Textile
Mill. This Court further found that despite the similarity in their business
operations, the separate personalities of the two corporations were
maintained and were not used for any of the purposes specified under the
law that would warrant piercing. It is also apparent in this case that the
workers' rights were not being hampered by the employers concerned, as the
only issue between them was the extent of the subject CBA's application.

In this case, not only were Super Lamination, Express Lamination, and
Express Coat found to be under the control of petitioner, but there was also
a discernible attempt to disregard the workers' and unions' right to collective
bargaining.

The foregoing considered, we find no error in the CA's affirmance of the

DOLE directive. We affirm DOLE's application by analogy of the concept of
multi-employer bargaining to justify its Decision to treat the three
companies as one. While the multi-employer bargaining mechanism is
relatively new and purely optional under Department Order No. 40-03, it
illustrates the State's policy to promote the primacy of free and responsible
exercise of the right to collective bargaining.51 The existence of this
mechanism in our labor laws affirm DOLE's conclusion that its treatment of
the employees of the three companies herein as a single bargaining unit is
neither impossible nor prohibited.52 It is justified under the circumstances
discussed above.
Besides, it is an established rule that factual findings of labor officials, who
are deemed to have acquired expertise in matters within their jurisdiction,
are generally accorded by the courts not only respect but even finality when
supported by substantial evidence; i.e., that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a
conclusion.53

The bargaining unit of the rank-and file employees of the three companies is
appropriate.

Petitioner argues that there is no showing that the rank-and-file employees

of the three companies would constitute an appropriate bargaining unit on
account of the latter's different geographical locations.54 This contention
lacks merit. The basic test for determining the appropriate bargaining unit is
the application of a standard whereby a unit is deemed appropriate if it
affects a grouping of employees who have substantial, mutual interests in
wages, hours, working conditions, and other subjects of collective
bargaining.55 We have ruled that geographical location can be completely
disregarded if the communal or mutual interests of the employees are not
sacrificed.56

In the present case, there was communal interest among the rank-and-file
employees of the three companies based on the finding that they were
constantly rotated to all three companies, and that they performed the same
or similar duties whenever rotated.57 Therefore, aside from geographical
location, their employment status and working conditions were so
substantially similar as to justify a conclusion that they shared a
community of interest. This finding is consistent with the policy in favor of a
single-employer unit, unless the circumstances require otherwise.58 The
more solid the employees are, the stronger is their bargaining capacity.59

As correctly observed by the CA and DOLE, while there is no prohibition on

the mere act of engaging in a work-pooling scheme as sister companies, that
act will not be tolerated, and the sister companies' separate juridical
personalities will be disregarded, if they use that scheme to defeat the
workers' right to collective bargaining. The employees' right to collectively
bargain with their employers is necessary to promote harmonious labor-
management relations in the interest of sound and stable industrial
peace.60

WHEREFORE, the Petition for Review on Certiorari under Rule 45 is

DENIED for lack of merit. The Court of Appeals Decision61 and
Resolution62 in CA-G.R. SP No. 109486 are hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 96490 February 3, 1992

INDOPHIL TEXTILE MILL WORKERS UNION-PTGWO, petitioner,

vs.

VOLUNTARY ARBITRATOR TEODORICO P. CALICA and INDOPHIL TEXTILE

MILLS, INC., respondents.

Romeo C. Lagman for petitioner.

Borreta, Gutierrez & Leogardo for respondent Indophil Textile Mills, Inc.

MEDIALDEA, J.:

This is a petition for certiorari seeking the nullification of the award issued
by the respondent Voluntary Arbitrator Teodorico P. Calica dated December
8, 1990 finding that Section 1 (c), Article I of the Collective Bargaining
Agreement between Indophil Textile Mills, Inc. and Indophil Textile Mill
Workers Union-PTGWO does not extend to the employees of Indophil Acrylic
Manufacturing Corporation as an extension or expansion of Indophil Textile
Mills, Incorporated.

The antecedent facts are as follows:

Petitioner Indophil Textile Mill Workers Union-PTGWO is a legitimate labor

organization duly registered with the Department of Labor and Employment
and the exclusive bargaining agent of all the rank-and-file employees of
Indophil Textile Mills, Incorporated. Respondent Teodorico P. Calica is
impleaded in his official capacity as the Voluntary Arbitrator of the National
Conciliation and Mediation Board of the Department of Labor and
Employment, while private respondent Indophil Textile Mills, Inc. is a
corporation engaged in the manufacture, sale and export of yarns of various
counts and kinds and of materials of kindred character and has its plants at
Barrio Lambakin. Marilao, Bulacan.

In April, 1987, petitioner Indophil Textile Mill Workers Union-PTGWO and

private respondent Indophil Textile Mills, Inc. executed a collective
bargaining agreement effective from April 1, 1987 to March 31, 1990.

On November 3, 1967 Indophil Acrylic Manufacturing Corporation was

formed and registered with the Securities and Exchange Commission.
Subsequently, Acrylic applied for registration with the Board of Investments
for incentives under the 1987 Omnibus Investments Code. The application
was approved on a preferred non-pioneer status.

In 1988, Acrylic became operational and hired workers according to its own
criteria and standards. Sometime in July, 1989, the workers of Acrylic
unionized and a duly certified collective bargaining agreement was executed.

In 1990 or a year after the workers of Acrylic have been unionized and a
CBA executed, the petitioner union claimed that the plant facilities built and
set up by Acrylic should be considered as an extension or expansion of the
facilities of private respondent Company pursuant to Section 1(c), Article I of
the CBA, to wit,.

c) This Agreement shall apply to the Company's plant facilities and

installations and to any extension and expansion thereat. (Rollo, p.4)
In other words, it is the petitioner's contention that Acrylic is part of the
Indophil bargaining unit.

The petitioner's contention was opposed by private respondent which

submits that it is a juridical entity separate and distinct from Acrylic.

The existing impasse led the petitioner and private respondent to enter into
a submission agreement on September 6, 1990. The parties jointly
requested the public respondent to act as voluntary arbitrator in the
resolution of the pending labor dispute pertaining to the proper
interpretation of the CBA provision.

After the parties submitted their respective position papers and replies, the
public respondent Voluntary Arbitrator rendered its award on December 8,
1990, the dispositive portion of which provides as follows:

PREMISES CONSIDERED, it would be a strained interpretation and

application of the questioned CBA provision if we would extend to the
employees of Acrylic the coverage clause of Indophil Textile Mills CBA.
Wherefore, an award is made to the effect that the proper interpretation and
application of Sec. l, (c), Art. I, of the 1987 CBA do (sic) not extend to the
employees of Acrylic as an extension or expansion of Indophil Textile Mills,
Inc. (Rollo, p.21)

Hence, this petition raising four (4) issues, to wit:

1. WHETHER OR NOT THE RESPONDENT ARBITRATOR ERRED IN
INTERPRETING SECTION 1(c), ART I OF THE CBA BETWEEN PETITIONER
UNION AND RESPONDENT COMPANY.

2. WHETHER OR NOT INDOPHIL ACRYLIC IS A SEPARATE AND

DISTINCT ENTITY FROM RESPONDENT COMPANY FOR PURPOSES OF
UNION REPRESENTATION.

3. WHETHER OR NOT THE RESPONDENT ARBITRATOR GRAVELY

ABUSED HIS DISCRETION AMOUNTING TO LACK OR IN EXCESS OF HIS
JURISDICTION.

4. WHETHER OR NOT THE RESPONDENT ARBITRATOR VIOLATED

PETITIONER UNION'S CARDINAL PRIMARY RIGHT TO DUE PROCESS.
(Rollo, pp. 6-7)

The central issue submitted for arbitration is whether or not the operations
in Indophil Acrylic Corporation are an extension or expansion of private
respondent Company. Corollary to the aforementioned issue is the question
of whether or not the rank-and-file employees working at Indophil Acrylic
should be recognized as part of, and/or within the scope of the bargaining
unit.

Petitioner maintains that public respondent Arbitrator gravely erred in

interpreting Section l(c), Article I of the CBA in its literal meaning without
taking cognizance of the facts adduced that the creation of the aforesaid
Indophil Acrylic is but a devise of respondent Company to evade the
application of the CBA between petitioner Union and respondent Company.
Petitioner stresses that the articles of incorporation of the two corporations
establish that the two entities are engaged in the same kind of business,
which is the manufacture and sale of yarns of various counts and kinds and
of other materials of kindred character or nature.

Contrary to petitioner's assertion, the public respondent through the

Solicitor General argues that the Indophil Acrylic Manufacturing
Corporation is not an alter ego or an adjunct or business conduit of private
respondent because it has a separate legitimate business purpose. In
addition, the Solicitor General alleges that the primary purpose of private
respondent is to engage in the business of manufacturing yarns of various
counts and kinds and textiles. On the other hand, the primary purpose of
Indophil Acrylic is to manufacture, buy, sell at wholesale basis, barter,
import, export and otherwise deal in yarns of various counts and kinds.
Hence, unlike private respondent, Indophil Acrylic cannot manufacture
textiles while private respondent cannot buy or import yarns.

Furthermore, petitioner emphasizes that the two corporations have

practically the same incorporators, directors and officers. In fact, of the total
stock subscription of Indophil Acrylic, P1,749,970.00 which represents
seventy percent (70%) of the total subscription of P2,500,000.00 was
subscribed to by respondent Company.

On this point, private respondent cited the case of Diatagon Labor

Federation v. Ople, G.R. No. L-44493-94, December 3, 1980, 10l SCRA 534,
which ruled that two corporations cannot be treated as a single bargaining
unit even if their businesses are related. It submits that the fact that there
are as many bargaining units as there are companies in a conglomeration of
companies is a positive proof that a corporation is endowed with a legal
personality distinctly its own, independent and separate from other
corporations (see Rollo, pp. 160-161).
Petitioner notes that the foregoing evidence sufficiently establish that Acrylic
is but an extension or expansion of private respondent, to wit:

(a) the two corporations have their physical plants, offices and facilities
situated in the same compound, at Barrio Lambakin, Marilao, Bulacan;

(b) many of private respondent's own machineries, such as dyeing

machines, reeling, boiler, Kamitsus among others, were transferred to and
are now installed and being used in the Acrylic plant;

(c) the services of a number of units, departments or sections of private

respondent are provided to Acrylic; and

(d) the employees of private respondent are the same persons manning
and servicing the units of Acrylic. (see Rollo, pp. 12-13)

Private respondent insists that the existence of a bonafide business

relationship between Acrylic and private respondent is not a proof of being a
single corporate entity because the services which are supposedly provided
by it to Acrylic are auxiliary services or activities which are not really
essential in the actual production of Acrylic. It also pointed out that the
essential services are discharged exclusively by Acrylic personnel under the
control and supervision of Acrylic managers and supervisors.

In sum, petitioner insists that the public respondent committed grave abuse
of discretion amounting to lack or in excess of jurisdiction in erroneously
interpreting the CBA provision and in failing to disregard the corporate
entity of Acrylic.

We find the petition devoid of merit.

Time and again, We stress that the decisions of voluntary arbitrators are to
be given the highest respect and a certain measure of finality, but this is not
a hard and fast rule, it does not preclude judicial review thereof 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. (see Ocampo, et al. v. National Labor Relations Commission,
G.R. No. 81677, 25 July 1990, First Division Minute Resolution citing
Oceanic Bic Division (FFW) v. Romero, G.R. No. L-43890, July 16, 1984, 130
SCRA 392)

It should be emphasized that in rendering the subject arbitral award, the

voluntary arbitrator Teodorico Calica, a professor of the U.P. Asian Labor
Education Center, now the Institute for Industrial Relations, found that the
existing law and jurisprudence on the matter, supported the private
respondent's contentions. Contrary to petitioner's assertion, public
respondent cited facts and the law upon which he based the award. Hence,
public respondent did not abuse his discretion.

Under the doctrine of piercing the veil of corporate entity, when valid
grounds therefore exist, the legal fiction that a corporation is an entity with
a juridical personality separate and distinct from its members or
stockholders may be disregarded. In such cases, the corporation will be
considered as a mere association of persons. The members or stockholders
of the corporation will be considered as the corporation, that is liability will
attach directly to the officers and stockholders. The doctrine applies when
the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, or when it is made as a shield to confuse the
legitimate issues, or where a corporation is the mere alter ego or business
conduit of a person, or where the corporation is so organized and controlled
and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation. (Umali et al. v. Court of
Appeals, G.R. No. 89561, September 13, 1990, 189 SCRA 529, 542)

In the case at bar, petitioner seeks to pierce the veil of corporate entity of
Acrylic, alleging that the creation of the corporation is a devise to evade the
application of the CBA between petitioner Union and private respondent
Company. While we do not discount the possibility of the similarities of the
businesses of private respondent and Acrylic, neither are we inclined to
apply the doctrine invoked by petitioner in granting the relief sought. The
fact that the businesses of private respondent and Acrylic are related, that
some of the employees of the private respondent are the same persons
manning and providing for auxilliary services to the units of Acrylic, and
that the physical plants, offices and facilities are situated in the same
compound, it is our considered opinion that these facts are not sufficient to
justify the piercing of the corporate veil of Acrylic.

In the same case of Umali, et al. v. Court of Appeals (supra), We already

emphasized that "the legal corporate entity is disregarded only if it is sought
to hold the officers and stockholders directly liable for a corporate debt or
obligation." In the instant case, petitioner does not seek to impose a claim
against the members of the Acrylic.

Furthermore, We already ruled in the case of Diatagon Labor Federation

Local 110 of the ULGWP v. Ople (supra) that it is grave abuse of discretion to
treat two companies as a single bargaining unit when these companies are
indubitably distinct entities with separate juridical personalities.
Hence, the Acrylic not being an extension or expansion of private
respondent, the rank-and-file employees working at Acrylic should not be
recognized as part of, and/or within the scope of the petitioner, as the
bargaining representative of private respondent.

All premises considered, the Court is convinced that the public respondent
Voluntary Arbitrator did not commit grave abuse of discretion in its
interpretation of Section l(c), Article I of the CBA that the Acrylic is not an
extension or expansion of private respondent.

ACCORDINGLY, the petition is DENIED and the award of the respondent

Voluntary Arbitrator are hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 188020, June 27, 2016

REN TRANSPORT CORP. AND/OR REYNALDO PAZCOGUIN III, Petitioners,

v. NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION),
SAMAHANG MANGGAGAWA SA REN TRANSPORT-ASSOCIATION OF
DEMOCRATIC LABOR ASSOCIATIONS (SMART-ADLO) REPRESENTED BY
ITS PRESIDENT NESTOR FULMINAR, Respondents.
G.R. No. 188252

SAMAHANG MANGGAGAWA SA REN TRANSPORT-ASSOCIATION OF

DEMOCRATIC LABOR ASSOCIATIONS (SMART-ADLO) REPRESENTED BY
NESTOR FULMINAR, Petitioner, v. REN TRANSPORT CORP. AND/OR
REYNALDO PAZCOGUIN III, Respondents.

DECISION

SERENO, C.J.:

Before this Court are consolidated Rule 45 petitions challenging the

Decision1 and the Resolution2 issued by the Court of Appeals (CA) in CA-
G.R. SP No. 100722.

THE FACTS

Samahan ng Manggagawa sa Ren Transport (SMART) is a registered union,

which had a five-year collective bargaining agreement (CBA) with Ren
Transport Corp. (Ren Transport) set to expire on 31 December 2004.3 The
60-day freedom period of the CBA passed without a challenge to SMART'S
majority status as bargaining agent.4 SMART thereafter conveyed its
willingness to bargain with Ren Transport, to which it sent bargaining
proposals. Ren Transport, however, failed to reply to the demand.5
Subsequently, two members of SMART wrote to the Department of Labor
and Employment - National Capital Region (DOLE-NCR). The office was
informed that a majority of the members of SMART had decided to
disaffiliate from their mother federation to form another union, Ren
Transport Employees Association (RTEA).6 SMART contested the alleged
disaffiliation through a letter dated 4 April 2005.7

During the pendency of the disaffiliation dispute at the DOLE-NCR, Ren

Transport stopped the remittance to SMART of the union dues that had
been checked off from the salaries of union workers as provided under the
CBA.8 Further, on 19 April 2005, Ren Transport voluntarily recognized
RTEA as the sole and exclusive bargaining agent of the rank-and-file
employees of their company.9

On 6 July 2005, SMART filed with the labor arbiter a complaint for unfair
labor practice against Ren Transport.10

THE LABOR ARBITER'S RULING

The labor arbiter rendered a decision11 finding Ren Transport guilty of acts
of unfair labor practice. The former explained that since the disaffiliation
issue remained pending, SMART continued to be the certified collective
bargaining agent; hence, Ren Transport's refusal to send a counter-proposal
to SMART was not justified. The labor arbiter also held that the company's
failure to remit the union dues to SMART and the voluntary recognition of
RTEA were clear indications of interference with the employees' exercise of
the right to self-organize.
Both parties elevated the case to the National Labor Relations Commission
(NLRC). SMART contested only the failure of the labor arbiter to award
damages.

Ren Transport challenged the entire Decision, assigning four errors in its
Memorandum of Appeal, namely: (1) SMART was no longer the exclusive
bargaining agent; (2) Ren Transport did not fail to bargain collectively with
SMART; (3) Ren Transport was not obliged to remit dues to SMART; and (4)
SMART lacked the personality to sue Ren Transport.12 All the assigned
errors were based on the assertion that SMART had lost its majority status.

The appeals were consolidated.

THE NLRC RULING

The NLRC issued a decision13 affirming the labor arbiter's finding of unfair
labor practice on the part of Ren Transport. Union dues were ordered
remitted to SMART.

The NLRC also awarded moral damages to SMART, saying that Ren
transport's refusal to bargain was inspired by malice or bad faith. The
precipitate recognition of RTEA evidenced such bad faith, considering that it
was done despite the pendency of the disaffiliation dispute at the DOLE-
NCR.

Ren Transport filed a motion for reconsideration14 alleging, among others,

that the NLRC failed to resolve all the arguments the former had raised in its
memorandum of appeal.
The NLRC denied the motion for reconsideration,15 prompting Ren
Transport to file a Rule 65 petition with the CA.16

THE CA RULING

On 30 January 2009, the CA rendered a decision17 partially granting the

petition. It deleted the award of moral damages to SMART, but affirmed the
NLRC decision on all other matters. The CA ruled that SMART, as a
corporation, was not entitled to moral damages.18

On the contention that the NLRC decided the case without considering all
the arguments of Ren Transport, the CA found that the latter had passed
upon the principal issue of the existence of unfair labor practice.

Hence, both parties appealed to this Court.

THE ISSUES

Based on the foregoing facts and arguments raised in the petitions, the
threshold issues to be resolved are the following: (1) whether Ren Transport
committed acts of unfair labor practice; (2) whether the decision rendered by
the NLRC is valid on account of its failure to pass upon all the errors
assigned by Ren Transport; and (3) whether SMART is entitled to moral
damages.

OUR RULING
We deny the petitions for lack of merit.

Ren Transport committed acts of unfair labor practice.

Ren Transport violated its duty to bargain collectively with SMART.

Ren Transport concedes that it refused to bargain collectively with SMART.

It claims, though, that the latter ceased to be the exclusive bargaining agent
of the rank-and-file employees because of the disaffiliation of the majority of
its members.19

The argument deserves no consideration.

Violation of the duty to bargain collectively is an unfair labor practice under

Article 258(g) of the Labor Code. An instance of this practice is the refusal to
bargain collectively as held in General Milling Corp. v. CA.20 In that case,
the employer anchored its refusal to bargain with and recognize the union
on several letters received by the former regarding the withdrawal of the
workers' membership from the union. We rejected the defense, saying that
the employer had devised a flimsy excuse by attacking the existence of the
union and the status of the union's membership to prevent any
negotiation.21
It bears stressing that Ren Transport had a duty to bargain collectively with
SMART. Under Article 263 in relation to Article 267 of the Labor Code, it is
during the freedom period or the last 60 days before the expiration of the
CBA when another union may challenge the majority status of the
bargaining agent through the filing of a petition for a certification election. If
there is no such petition filed during the freedom period, then the employer
"shall continue to recognize the majority status of the incumbent bargaining
agent where no petition for certification election is filed."22

In the present case, the facts are not up for debate. No petition for
certification election challenging the majority status of SMART was filed
during the freedom period, which was from November 1 to December 31,
2004 the 60-day period prior to the expiration of the five-year CBA.
SMART therefore remained the exclusive bargaining agent of the rank-and-
file employees.

Given that SMART continued to be the workers' exclusive bargaining agent,

Ren Transport had the corresponding duty to bargain collectively with the
former. Ren Transport's refusal to do so constitutes an unfair labor practice.

Consequently, Ren Transport cannot avail itself of the defense that SMART
no longer represents the majority of the workers. The fact that no petition
for certification election was filed within the freedom period prevented Ren
Transport from challenging SMART'S existence and membership.

Moreover, it must be stressed that, according to the labor arbiter, the

purported disaffiliation from SMART was nothing but a convenient, self-
serving excuse.23 This factual finding, having been affirmed by both the CA
and the NLRC, is now conclusive upon the Court.24 We do not see any
patent error that would take the instant case out of the general rule.
Ren Transport interfered with the exercise of the employees' right to self-
organize.

Interference with the employees' right to self-organization is considered an

unfair labor practice under Article 258 (a) of the Labor Code. In this case,
the labor arbiter found that the failure to remit the union dues to SMART
and the voluntary recognition of RTEA were clear indications of interference
with the employees' right to self-organization.25 It must be stressed that
this finding was affirmed by the NLRC and the CA; as such, it is binding on
the Court, especially when we consider that it is not tainted with any blatant
error. As aptly pointed out by the labor arbiter, these acts were ill-timed in
view of the existence of a labor controversy over membership in the union.26

Ren Transport also uses the supposed disaffiliation from SMART to justify
the failure to remit union dues to the latter and the voluntary recognition of
RTEA. However, for reasons already discussed, this claim is considered a
lame excuse that cannot validate those acts.

II.

The NLRC decision is valid.

Ren Transport next argues that the decision rendered by the NLRC is
defective considering that it has failed to resolve all the issues in its
Memorandum of Appeal.27

We do not agree.
Section 14, Article VIII of the 1987 Constitution, states that "[n]o decision
shall be rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based." It has been held that
the constitutional provision does not require a "point-by-point consideration
and resolution of the issues raised by the parties."28

In the present case, the decision shows that the NLRC resolved the focal
issue raised by Ren Transport: whether or not SMART remained the
exclusive bargaining agent, such that Ren Transport could be found guilty of
acts of unfair labor practice. We quote the NLRC discussion:

At the outset, let it be stated that insofar as the principal issue of whether
unfair labor practice was committed by respondents, there is no occasion to
find, or even entertain, doubts that the findings and conclusion of the Labor
Arbiter that unfair labor practice (ULP) was committed against the
complainants, are infused with serious errors. We quote:

[I]t is our considered view that the respondents committed acts of unfair
labor practice even if the CBA between the complainant union and
respondent company already expired and majority of the workers of the
existing bargaining agent disaffiliated therefrom, formed its own union and
have it registered as an independent one, still the respondent Company has
the duty to bargain collectively with the existing bargaining agent. It bears
stressing that the disaffiliation issue of the members of the complainant
union is still pending before the DOLE and has not yet attained its finality;
that there is no new bargaining agent certified yet by the DOLE, there is no
legal basis yet for the respondent company to disregard the personality of
the complainant union and refused or ignored the agent for renewal of its
CBA. It is still the certified collective bargaining agent of the workers,
because there was no new [u]nion yet being certified by the DOLE as the
new bargaining agent of the workers.
The above discourse shows the factual and legal bases for the NLRC's
resolution of the issue of whether Ren Transport committed unfair labor
practice and thereby satisfies the constitutional provision on the contents of
a decision. The NLRC succeeded in disposing of all the arguments raised by
Ren Transport without going through every argument, as all the assigned
errors hinged on the majority status of SMART.29 All of these errors were
addressed and settled by the NLRC by finding that SMART was still the
exclusive bargaining agent of the employees of Ren Transport.

As aptly stated by the CA, a court or any other tribunal is not required to
pass upon all the errors assigned by Ren Transport; the resolution of the
main question renders the other issues academic or inconsequential.30

At this juncture, it is well to note that addressing every one of the errors
assigned would not be in keeping with the policy of judicial economy.
Judicial economy refers to "efficiency in the operation of the courts and the
judicial system; especially the efficient management of litigation so as to
minimize duplication of effort and to avoid wasting the judiciary's time and
resources."31 In Salud v. Court of Appeals,32 the Court remarked that
judicial economy is a "strong [norm] in a society in need of swift justice."33
Now, more than ever, the value of brevity in the writing of a decision
assumes greater significance, as we belong to an age in which dockets of the
courts are congested and their resources limited.

III.

SMART is not entitled to an award of moral damages.

We now address the petition of SMART, which faults the CA for deleting the
grant of moral damages.34

We hold that the CA correctly dropped the NLRC's award of moral damages
to SMART. Indeed, a corporation is not, as a general rule, entitled to moral
damages. Being a mere artificial being, it is incapable of experiencing
physical suffering or sentiments like wounded feelings, serious anxiety,
mental anguish or moral shock.35

Although this Court has allowed the grant of moral damages to corporations
in certain situations,36 it must be remembered that the grant is not
automatic. The claimant must still prove the factual basis of the damage
and the causal relation to the defendant's acts.37 In this case, while there is
a showing of bad faith on the part of the employer in the commission of acts
of unfair labor practice, there is no evidence establishing the factual basis of
the damage on the part of SMART.

WHEREFORE, premises considered, the petitions are DENIED. The Decision

dated 30 January 2009 and the Resolution dated 20 May 2009 issued by
the Court of Appeals in CA-G.R. SP No. 100722 are AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 171664 March 6, 2013

BANKARD, INC., Petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION- FIRST DIVISION, PAULO

BUENCONSEJO,BANKARD EMPLOYEES UNION-AWATU, Respondents.

DECISION

MENDOZA, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeks to review, reverse and set aside the October 20, 2005 Decision1 and
the February 21, 2006 Resolution2 of the Court of Appeals {CA), in CA-G.R.
SP No. 68303, which affirmed the May 31, 2001 Resolution3 and the
September 24, 2001 Order4 of the National Labor Relations Commission
(NLRC) in Certified Cases No. 000-185-00 and 000-191-00.

The Facts

On June 26, 2000, respondent Bankard Employees Union-AWATU (Union)

filed before the National Conciliation and Mediation Board (NCMB) its first
Notice of Strike (NOS), docketed as NS-06-225-00,5 alleging commission of
unfair labor practices by petitioner Bankard, Inc. (Bankard), to wit: 1) job
contractualization; 2) outsourcing/contracting-out jobs; 3) manpower
rationalizing program; and 4) discrimination.

On July 3, 2000, the initial conference was held where the Union clarified
the issues cited in the NOS. On July 5, 2000, the Union held its strike vote
balloting where the members voted in favor of a strike. On July 10, 2000,
Bankard asked the Office of the Secretary of Labor to assume jurisdiction
over the labor dispute or to certify the same to the NLRC for compulsory
arbitration. On July 12, 2000, Secretary Bienvenido Laguesma (Labor
Secretary) of the Department of Labor and Employment (DOLE) issued the
order certifying the labor dispute to the NLRC.6

On July 25, 2000, the Union declared a CBA bargaining deadlock. The
following day, the Union filed its second NOS, docketed as NS-07-265-00,7
alleging bargaining in bad faith on the part of Bankard. Bankard then again
asked the Office of the Secretary of Labor to assume jurisdiction, which was
granted. Thus, the Order, dated August 9, 2000, certifying the labor dispute
to the NLRC, was issued.8

The Union, despite the two certification orders issued by the Labor Secretary
enjoining them from conducting a strike or lockout and from committing
any act that would exacerbate the situation, went on strike on August 11,
2000.9

During the conciliatory conferences, the parties failed to amicably settle

their dispute. Consequently, they were asked to submit their respective
position papers. Both agreed to the following issues:

1. Whether job contractualization or outsourcing or contracting-out is an

unfair labor practice on the part of the management.

2. Whether there was bad faith on the part of the management when it
bargained with the Union.10
As regards the first issue, it was Bankards position that job
contractualization or outsourcing or contracting-out of jobs was a legitimate
exercise of management prerogative and did not constitute unfair labor
practice. It had to implement new policies and programs, one of which was
the Manpower Rationalization Program (MRP) in December 1999, to further
enhance its efficiency and be more competitive in the credit card industry.
The MRP was an invitation to the employees to tender their voluntary
resignation, with entitlement to separation pay equivalent to at least two (2)
months salary for every year of service. Those eligible under the companys
retirement plan would still receive additional pay. Thereafter, majority of the
Phone Center and the Service Fulfilment Division availed of the MRP. Thus,
Bankard contracted an independent agency to handle its call center
needs.11

As to the second issue, Bankard denied that there was bad faith on its part
in bargaining with the Union. It came up with counter-offers to the Unions
proposals, but the latters demands were far beyond what management
could give. Nonetheless, Bankard continued to negotiate in good faith until
the Memorandum of Agreement (MOA) re-negotiating the provisions of the
1997-2002, Collective Bargaining Agreement (CBA) was entered into
between Bankard and the Union. The CBA was overwhelmingly ratified by
the Union members. For said reason, Bankard contended that the issue of
bad faith in bargaining had become moot and academic.12

On the other hand, the Union alleged that contractualization started in

Bankard in 1995 in the Records Communications Management Division,
particularly in the mailing unit, which was composed of two (2) employees
and fourteen (14) messengers. They were hired as contractual workers to
perform the functions of the regular employees who had earlier resigned and
availed of the MRP.13 According to the Union, there were other departments
in Bankard utilizing messengers to perform work load considered for regular
employees, like the Marketing Department, Voice Authorizational
Department, Computer Services Department, and Records Retention
Department. The Union contended that the number of regular employees
had been reduced substantially through the management scheme of freeze-
hiring policy on positions vacated by regular employees on the basis of cost-
cutting measures and the introduction of a more drastic formula of
streamlining its regular employees through the MRP.14

With regard to the second issue, the Union averred that Bankards proposals
were way below their demands, showing that the management had no
intention of reaching an agreement. It was a scheme calculated to force the
Union to declare a bargaining deadlock.15

On May 31, 2001, the NLRC issued its Resolution16 declaring that the
management committed acts considered as unfair labor practice (ULP)
under Article 248(c) of the Labor Code. It ruled that:

The act of management of reducing its number of employees thru

application of the Manpower Rationalization Program and subsequently
contracting the same to other contractual employees defeats the purpose or
reason for streamlining the employees. The ultimate effect is to reduce the
number of union members and increasing the number of contractual
employees who could never be members of the union for lack of
qualification. Consequently, the union was effectively restrained in their
movements as a union on their rights to self-organization. Management had
successfully limited and prevented the growth of the Union and the acts are
clear violation of the provisions of the Labor Code and could be considered
as Unfair Labor Practice in the light of the provisions of Article 248
paragraph (c) of the Labor Code.17
The NLRC, however, agreed with Bankard that the issue of bargaining in
bad faith was rendered moot and academic by virtue of the finalization and
signing of the CBA between the management and the Union.18

Unsatisfied, both parties filed their respective motions for partial

reconsideration.1wphi1 Bankard assailed the NLRC's finding of acts of ULP
on its part. The Union, on the other hand, assailed the NLRC ruling on the
issue of bad faith bargaining.

On September 24, 2001, the NLRC issued the Order19 denying both parties'
motions for lack of merit.

On December 28, 2001, Bankard filed a petition for certiorari under Rule 65
with the CA arguing that the NLRC gravely abused its discretion amounting
to lack or excess of jurisdiction when:

1. It issued the Resolution, dated May 31, 2001, particularly in finding that
Bankard committed acts of unfair labor practice; and,

2. It issued the Order dated September 24, 2001 denying Bankard's partial
motion for reconsideration.20

The Union filed two (2) comments, dated January 22, 2002, through its NCR
Director, Cornelio Santiago, and another, dated February 6, 2002, through
its President, Paulo Buenconsejo, both praying for the dismissal of the
petition and insisting that Bankard's resort to contractualization or
outsourcing of contracts constituted ULP. It further alleged that Bankard
committed ULP when it conducted CBA negotiations in bad faith with the
Union.

Ruling of the Court of Appeals

The CA dismissed the petition, finding that the NLRC ruling was supported
by substantial evidence.

The CA agreed with Bankard that job contracting, outsourcing and/or

contracting out of jobs did not per se constitute ULP, especially when made
in good faith and for valid purposes. Despite Bankard's claim of good faith in
resorting to job contractualization for purposes of cost-efficient operations
and its non-interference with the employees' right to self-organization, the
CA agreed with the NLRC that Bankard's acts impaired the employees right
to self-organization and should be struck down as illegal and invalid
pursuant to Article 248(c)21 of the Labor Code. The CA thus, ruled in this
wise:

We cannot agree more with public respondent. Incontrovertible is the fact

that petitioner's acts, particularly its promotion of the program enticing
employees to tender their voluntary resignation in exchange for financial
packages, resulted to a union dramatically reduced in numbers. Coupled
with the management's policy of "freeze-hiring" of regular employees and
contracting out jobs to contractual workers, petitioner was able to limit and
prevent the growth of the Union, an act that clearly constituted unfair labor
practice.22

In its assailed decision, the CA affirmed the May 31, 2001 Resolution and
the September 24, 2001 Order of the NLRC.
Aggrieved, Bankard filed a motion for reconsideration. The CA subsequently
denied it for being a mere repetition of the grounds previously raised. Hence,
the present petition bringing up this lone issue:

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER

BANKARD, INC. COMMITTED ACTS OF UNFAIR LABOR PRACTICE WHEN
IT DISMISSED THE PETITION FOR CERTIORARI AND DENIED THE
MOTION FOR RECONSIDERATION FILED BY PETITIONER.23

Ruling of the Court

The Court finds merit in the petition.

Well-settled is the rule that "factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are
generally accorded not only respect but even finality by the courts when
supported by substantial evidence."24 Furthermore, the factual findings of
the NLRC, when affirmed by the CA, are generally conclusive on this
Court.25 When the petitioner, however, persuasively alleges that there is
insufficient or insubstantial evidence on record to support the factual
findings of the tribunal or court a quo, then the Court, exceptionally, may
review factual issues raised in a petition under Rule 45 in the exercise of its
discretionary appellate jurisdiction.26

This case involves determination of whether or not Bankard committed acts

considered as ULP. The underlying concept of ULP is found in Article 247 of
the Labor Code, to wit:
Article 247. Concept of unfair labor practice and procedure for prosecution
thereof. -- Unfair labor practices violate the constitutional right of workers
and employees to self-organization, are inimical to the legitimate interests of
both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual
respect, disrupt industrial peace and hinder the promotion of healthy and
stable labor-management relations. x x x

The Court has ruled that the prohibited acts considered as ULP relate to the
workers right to self-organization and to the observance of a CBA. It refers
to "acts that violate the workers right to organize."27 Without that element,
the acts, even if unfair, are not ULP.28 Thus, an employer may only be held
liable for unfair labor practice if it can be shown that his acts affect in
whatever manner the right of his employees to self-organize.29

In this case, the Union claims that Bankard, in implementing its MRP which
eventually reduced the number of employees, clearly violated Article 248(c)
of the Labor Code which states that:

Art. 248. Unfair labor practices of employers. It shall be unlawful for an

employer to commit any of the following unfair labor practice:

xxxx

(c) To contract out services or functions being performed by union members

when such will interfere with, restrain or coerce employees in the exercise of
their rights to self-organization;
xxxx

Because of said reduction, Bankard subsequently contracted out the jobs

held by former employees to other contractual employees. The Union
specifically alleges that there were other departments in Bankard, Inc.
which utilized messengers to perform work load considered for regular
employees like the Marketing Department, Voice Authorizational
Department, Computer Services Department, and Records Retention
Department.30 As a result, the number of union members was reduced, and
the number of contractual employees, who were never eligible for union
membership for lack of qualification, increased.

The general principle is that the one who makes an allegation has the
burden of proving it.1avvphi1 While there are exceptions to this general rule,
in ULP cases, the alleging party has the burden of proving the ULP;31 and
in order to show that the employer committed ULP under the Labor Code,
substantial evidence is required to support the claim.32 Such principle finds
justification in the fact that ULP is punishable with both civil and/or
criminal sanctions.33

Aside from the bare allegations of the Union, nothing in the records strongly
proves that Bankard intended its program, the MRP, as a tool to drastically
and deliberately reduce union membership. Contrary to the findings and
conclusions of both the NLRC and the CA, there was no proof that the
program was meant to encourage the employees to disassociate themselves
from the Union or to restrain them from joining any union or organization.
There was no showing that it was intentionally implemented to stunt the
growth of the Union or that Bankard discriminated, or in any way singled
out the union members who had availed of the retirement package under
the MRP. True, the program might have affected the number of union
membership because of the employees voluntary resignation and availment
of the package, but it does not necessarily follow that Bankard indeed
purposely sought such result. It must be recalled that the MRP was
implemented as a valid cost-cutting measure, well within the ambit of the
so-called management prerogatives. Bankard contracted an independent
agency to meet business exigencies. In the absence of any showing that
Bankard was motivated by ill will, bad faith or malice, or that it was aimed
at interfering with its employees right to self-organize, it cannot be said to
have committed an act of unfair labor practice.34

"Substantial evidence is more than a mere scintilla of evidence. It means

such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion, even if other minds equally reasonable might
conceivably opine otherwise."35 Unfortunately, the Union, which had the
burden of adducing substantial evidence to support its allegations of ULP,
failed to discharge such burden.36

The employers right to conduct the affairs of its business, according to its
own discretion and judgment, is well-recognized.37 Management has a wide
latitude to conduct its own affairs in accordance with the necessities of its
business.38 As the Court once said:

The Court has always respected a company's exercise of its prerogative to

devise means to improve its operations. Thus, we have held that
management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments,
supervision and transfer of employees, working methods, time, place and
manner of work.
This is so because the law on unfair labor practices is not intended to
deprive employers of their fundamental right to prescribe and enforce such
rules as they honestly believe to be necessary to the proper, productive and
profitable operation of their business.39

Contracting out of services is an exercise of business judgment or

management prerogative. Absent any proof that management acted in a
malicious or arbitrary manner, the Court will not interfere with the exercise
of judgment by an employer.40Furthermore, bear in mind that ULP is
punishable with both civil and/or criminal sanctions.41 As such, the party
so alleging must necessarily prove it by substantial evidence. The Union, as
earlier noted, failed to do this. Bankard merely validly exercised its
management prerogative. Not shown to have acted maliciously or arbitrarily,
no act of ULP can be imputed against it.

WHEREFORE, the petition is GRANTED. The Decision of the Court of

Appeals in CA-G.R. SP No. 68303, dated October 20, 2005, and its
Resolution, dated February 21, 2006, are REVERSED and SET ASIDE.
Petitioner Bankard, Inc. is hereby declared as not having committed any act
constituting Unfair Labor Practice under Article 248 of the Labor Code.

SO ORDERED.

THIRD DIVISION

January 11, 2016

G.R. No. 214092

ECHO 2000 COMMERCIAL CORPORATION, EDWARD N. ENRIQUEZ,

LEONORA K. BENEDICTO and ATTY. GINA WENCESLAO, Petitioners,

vs.

OBRERO FILIPINO-ECHO 2000 CHAPTER-CLO, ARLO C. CORTES and

DAVE SOMIDO, Respondents.

DECISION

REYES, J.:

Before the Court is the petition for review on certiorari1 filed by Echo 2000
Commercial Corporation (Echo) to assail the Decision2 rendered on
September 24, 2013 and Resolution3 issued on March 28, 2014 by the
Court of Appeals (CA) in CA-G.R. SP No. 121393. The CA affirmed the
Decision4 dated April 15, 2011 of the National Labor Relations
Commission's (NLRC) Fifth Division, which declared that Arlo C. Cortes
(Cortes) and Dave Somido (Somido) (respondents) were illegally dismissed
from employment by Echo. Edward N. Enriquez (Enriquez), Leonora K.
Benedicto (Benedicto) and Atty. Gina Wenceslao (Atty. Wenceslao) used to be
Echo's General Manager, Operations and Human Resources Officer, and
External Counsel, respectively (Echo and the three officers are to be referred
collectively as the petitioners). The CA and NLRC's rulings reversed the
Decision5 of Labor Arbiter (LA) Renaldo O. Hernandez (Hernandez), who
found the respondents' termination from service as valid.

Antecedents
Echo is a provider of warehousing management and delivery services.

King 8 Commercial Corporation (King 8), Echo's predecessor, initially

employed Cortes on September 17, 2002, and Somido, on October 12, 2004.
Echo thereafter absorbed the respondents as employees on April 1, 2005. In
2008, Somido was made a Warehouse Checker, while Cortes, a Forklift
Operator.6

In January of 2009, the respondents and their co-workers formed Obrero

Pilipino-Echo 2000 Commercial Chapter (Union). Cortes was elected as Vice-
President while Somido became an active member. The respondents claimed
that the Union's President, Secretary and one of the board members were
subsequently harassed, discriminated and eventually terminated from
employment by Echo.7

In May of 2009, Echo received information about shortages in peso value

arising from the movement of products to and from its warehouse. After an
immediate audit, Echo suspected that there was a conspiracy among the
employees in the warehouse. Since an uninterrupted investigation was
necessary, Echo, in the exercise of its management prerogative, decided to
re-assign the staff. The respondents were among those affected.8

On July 7, 2009, Enriquez issued a memorandum informing the

respondents of their transfer to the Delivery Section, which was within the
premises of Echo's warehouse. The transfer would entail no change in
ranks, status and salaries.9

On July 14, 2009, Somido wrote Echo a letter10 indicating his refusal to be
promoted as a "Delivery Supervisor." He explained that he was already
happy as a Warehouse Checker. Further, he was not ready to be a Delivery
Supervisor since the position was sensitive and required more expertise and
training, which he did not have.

Cortes similarly declined Echo's offer of promotion claiming that he was

contented in his post then as a Forklift Operator. He also alleged that he
would be more productive as an employee if he remained in his post. He also
lacked prior supervisory experience.11

On July 16, 2009, Enriquez, sans consent of the respondents, informed the
latter of their assignments/designations, effective July 17, 2009, as Delivery
Supervisors with the following duties: (a) act as delivery dispatchers of
booked and planned deliveries for the day; (b) ensure the early loading of
goods to the delivery trucks to avoid late take-offs; (c) man delivery teams for
the trucks; (d) check the operational and cleanliness conditions of the
trucks; (e) attend to delivery concerns of account specialists of their outlets;
and (f) call the attention of other warehouse personnel and report the same
to the Human Resources Department regarding absences/tardiness,
incomplete uniforms, appearances, refusal to accept delivery trips and other
matters affecting warehouse productivity.12

Echo alleged that the respondents did not perform the new duties assigned
to them. Hence, they were each issued a memorandum, dated July 16,
2009, requiring them to explain in writing their failure to abide with the new
assignments.13

On July 18, 2009, Echo clarified through a memo that the respondents were
designated as "Delivery Coordinators" and not "Supervisors."14
Thereafter, successive memoranda were issued by Echo to the respondents,
who refused to acknowledge receipt and comply with the directives therein.
The Memoranda15 dated July 20, 2009 suspended them without pay for five
days for their alleged insubordination. The Memoranda16 dated August 8,
2009 informed them of their termination from employment, effective August
15, 2009, by reason of their repeated refusal to acknowledge receipt of
Echo's memoranda and flagrant defiance to assume the duties of Delivery
Coordinators.

The Proceedings Before the LA

On August 17, 2009, the respondents filed before the NLRC a complaint
against Echo for unfair labor practice, illegal dismissal, illegal suspension,
illegal deductions and payment of money claims, damages and attorney's
fees.17 The respondents claimed that they were offered promotions, which
were mere ploys to remove them as rank-and-file employees, and oust them
as Union members.18

The petitioners, on the other hand, insisted that the respondents were
merely transferred, and not promoted. Further, the respondents arrogantly
refused to comply with Enriquez's directives. Their insubordination
constituted just cause to terminate them from employment.19

On April 20, 2010, LA Hernandez dismissed the respondents' complaint for

reasons stated below: (a) the claims of union-busting, harassment and
discrimination were not supported by evidence;20 (b) no promotions
occurred as the duties of the Delivery Supervisors/Coordinators were merely
reportorial in nature and not indicative of any authority to hire, fire or
change the status of other employees;21 and (c) Echo properly exercised its
management prerogative to order the transfer, and this was done without
intended changes in the ranks, salaries, status or places of assignment of
the respondents.22

The Proceedings Before the NLRC

The respondents filed an appeal assailing LA Hernandez's ruling. The

dispositive portion of the NLRC's Decision dated April 15, 2011 is quoted
below:

WHEREFORE, premises considered, the appeal is GRANTED. The appealed

decision of the [LA] dated April 20, 2010 is REVERSED and SET ASIDE and
a new one is entered declaring [the petitioners] guilty of unfair labor practice
and illegal dismissal of the [respondents]. [The petitioners] are ordered to
immediately reinstate [the respondents] to their previous positions without
loss of seniority rights and other privileges/benefits and to pay [the
respondents] the following:

1. full backwages from the time of their dismissal up to their actual

reinstatement;

2. the sum of P20,000.00 as moral damages[;]

3. the sum of P20,000.00 as exemplary damages; and ten [percent (10%)] of

the monetary award as attorney's fees.

All other monetary claims are dismissed for lack of substantiation.

SO ORDERED.23

In sustaining the respondents' arguments, the NLRC explained that at the

time of the farmer's dismissal, they had been employed by Echo for several
years since 2002 and 2004, respectively. There were no prior untoward
incidents. However, things changed when the Union was formed. When the
two did not agree to be transferred, they were terminated for
insubordination, a mere ploy to lend a semblance of legality to a pre-
conceived management strategy.24

The NLRC denied the petitioners' motion for reconsideration.25

The Proceedings Before the CA

The petitioners thereafter filed a Petition for Certiorari.26 In the herein

assailed Decision dated September 24, 2013, the CA affirmed in toto the
NLRC's ruling citing the following as grounds:

A transfer is a movement from one position to another which is of equivalent

rank, level or salary, without break in service. Promotion, on the other hand,
is the advancement from one position to another with an increase in duties
and responsibilities as authorized by law, and usually accompanied by an
increase in salary.

x x x There is no doubt that said position of Delivery

Supervisor/Coordinator entails great duties and responsibilities of
overseeing ECHO's business and involves discretionary powers. x x x What
is important is the change in the nature of work which resulted in an
upgrade of their work condition and increase of duties and responsibilities
which constitute promotion and not a mere transfer.

A transfer that results in promotion cannot be done without the employee's

consent since there is no law that compels an employee to accept a
promotion for the reason that a promotion is in the nature of a gift or
reward, which a person has a right to refuse. When [the respondents]
refused to accept their promotion as Delivery Supervisors/Coordinators,
they were exercising a right and they cannot be punished for it. He who uses
his own legal right injures no one. Thus, [the respondents'] refusal to be
promoted was not a valid cause for their dismissal.

Anent the award of moral damages, exemplary damages and attorney's fees,
We agree with the NLRC that [the respondents] are entitled to the same.

xxxx

x x x We agree with the NLRC that the dismissal of [the respondents] was
tainted with bad faith as they were dismissed by ECHO for refusing to
accept their promotion as Delivery Supervisor[s]/Coordinator[s]. x x x The
NLRC also found that ECHO's act of transferring [the respondents] from
Forklift Operator and Warehouse Checker x x x to Delivery
Supervisors/Coordinators was aimed to remove them among the rank-and-
file employees which amounts to union interference. Without the leadership
of Cortes, as Vice-President, and Somido, as an active member, the union
would be severely weakened, especially since most of its officers were
already terminated by ECHO. xx x.27 (Citations omitted)
The petitioners filed a motion for reconsideration, which the CA denied
through the Resolution28 dated March 28, 2014.1wphi1

Issues

Unperturbed, the petitioners are now before the Court raising the issues of
whether or not:

(1) the respondents were illegally suspended and terminated, hence, entitled
to payment of their money claims, damages and attorney's fees;

(2) Echo and its officers are guilty of unfair labor practice; and

(3) Echo's officers, who are sued as nominal parties, should be held liable to
pay the respondents their money claims.29

In support thereof, the petitioners claim that the respondents' refusal to

comply with the management's transfer order constitutes just cause to
terminate the latter from employment. Echo also points out that before it
closed shop on July 6, 2011, the Union continued existing despite the
respondents' dismissal from service. Hence, there is no factual basis in the
NLRC and CA's ruling that the respondents' termination is intertwined with
union-busting.30

The petitioners further argue that the respondents failed to establish by

substantial evidence that Echo's officers, namely, Enriquez, Benedicto and
Atty. Wenceslao, acted with malice. Thus, they cannot be held liable as
well.31
Corollarily, the dismissal being valid, there is no ground to grant the
respondents' prayer for reinstatement and payment of money claims and
damages.32

In their Comment,33 the respondents reiterate that their transfer/promotion

was conceived to pave the way for their eventual termination from
employment. Moreover, even before the respondents could convey their
acceptance or refusal to the transfer/promotion, they were promptly
replaced by newly-hired contractual employees.

Ruling of the Court

The Court partially grants the instant petition.

The first two issues, being interrelated, shall be discussed jointly.

The offer of transfer is, in legal contemplation, a promotion, which the

respondents validly refused. Such refusal cannot be the basis for the
respondents' dismissal from service. The finding of unfair labor practice and
the award of moral and exemplary damages do not however follow solely by
reason of the dismissal.

Article 212(13) of the Labor Code distinguishes from each other as follows
the concepts of managerial, supervisory and rank-and-file employees:
"Managerial employee" is one who is vested with the powers or prerogatives
to lay down and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this
Book. (Italics ours)

As to the extent of management prerogative to transfer/promote employees,

and the differences between transfer on one hand, and promotion, on the
other, Coca-Cola Bottlers Philippines, Inc. v. Del Villar34 is instructive, viz:

[L]abor laws discourage interference in employers' judgment concerning the

conduct of their business.

In the pursuit of its legitimate business interest, management has the

prerogative to transfer or assign employees from one office or area of
operation to another - provided there is no demotion in rank or diminution
of salary, benefits, and other privileges; and the action is not motivated by
discrimination, made in bad faith, or effected as a form of punishment or
demotion without sufficient cause. xx x.

x x x In the case of Blue Dairy Corporation v. National Labor Relations

Commission, we described in more detail the limitations on the right of
management to transfer employees:
x x x [I]t cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker. In particular, the employer must be able to show that
the transfer is not unreasonable, inconvenient or prejudicial to the
employee; nor does it involve a demotion in rank or a diminution of his
salaries, privileges and other benefits. xxx.

xxxx

A transfer is a movement from one position to another which is of equivalent

rank, level or salary, without break in service. Promotion, on the other hand,
is the advancement from one position to another with an increase in duties
and responsibilities as authorized by law, and usually accompanied by an
increase in salary. Conversely, demotion involves a situation where an
employee is relegated to a subordinate or less important position
constituting a reduction to a lower grade or rank, with a corresponding
decrease in duties and responsibilities, and usually accompanied by a
decrease in salary.35 (Citations omitted and emphasis and underscoring
ours)

For promotion to occur, there must be an advancement from one position to

another or an upward vertical movement of the employee's rank or position.
Any increase in salary should only be considered incidental but never
determinative of whether or not a promotion is bestowed upon an
employee.36

An employee is not bound to accept a promotion, which is in the nature of a

gift or reward. Refusal to be promoted is a valid exercise of a right.37 Such
exercise cannot be considered in law as insubordination, or willful
disobedience of a lawful order of the employer, hence, it cannot be the basis
of an employee's dismissal from service.38
In the case at bench, a Warehouse Checker and a Forklift Operator are
rank-and-file employees. On the other hand, the job of a Delivery
Supervisor/Coordinator requires the exercise of discretion and judgment
from time to time. Specifically, a Delivery Supervisor/Coordinator assigns
teams to man the trucks, oversees the loading of goods, checks the
conditions of the trucks, coordinates with account specialists in the outlets
regarding their delivery concerns, and supervises other personnel about
their performance in the warehouse. A Delivery Supervisor/Coordinator's
duties and responsibilities are apparently not of the same weight as those of
a Warehouse Checker or Forklift Operator. Hence, despite the fact that no
salary increases were effected, the assumption of the post of a Delivery
Supervisor/Coordinator should be considered a promotion. The
respondents' refusal to accept the same was therefore valid.

Notwithstanding the illegality of the respondents' dismissal, the Court finds

no sufficient basis to award moral and exemplary damages.

A dismissal may be contrary to law but by itself alone, it does not establish
bad faith to entitle the dismissed employee to moral damages. The award of
moral and exemplary damages cannot be justified solely upon the premise
that the employer dismissed his employee without just or authorized
cause.39

In the instant case, the right not to accept an offered promotion pertained to
each of the respondents. However, they exhibited disrespectful behavior by
their repeated refusal to receive the memoranda issued by Echo and by their
continued presence in their respective areas without any work output.40
The Court thus finds that although the respondents' dismissal from service
for just cause was unwarranted, there is likewise no basis for the award of
moral and exemplary damages in their favor. Echo expectedly imposed
disciplinary penalties upon the respondents for the latter's intransigence.
Albeit the Court is not convinced of the character and extent of the
measures taken by Echo, bad faith cannot be inferred solely from the said
impositions.

Anent the NLRC and CA's conclusion that Echo committed unfair labor
practice, the Court disagrees.

Unfair labor practices violate the constitutional right of workers and

employees to self-organization, are inimical to the legitimate interests of
both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual
respect, disrupt industrial peace and hinder the promotion of healthy and
stable labor-management relations.41

The respondents allege that their transfer/promotion was intended to

deprive the Union of leadership and membership. They claim that other
officers were already dismissed. The foregoing, however, lacks
substantiation. Unfair labor practice is a serious charge, and the
respondents failed to show that the petitioners conclusively interfered with,
restrained, or coerced employees in the exercise of their right to self-
organization.

Enriquez, Benedicto and Atty. Wenceslao cannot be held personally liable for
the respondents' money claims.
Lambert Pawnbrokers and Jewelry Corporation, et al. v. Binamira42
expounds on the liabilities of corporate officers to illegally dismissed
employees. The Court declared:

As a general rule, only the employer-corporation, partnership or association

or any other entity, and not its officers, which may be held liable for illegal
dismissal of employees or for other wrongful acts. This is as it should be
because a corporation is a juridical entity with legal personality separate
and distinct from those acting for and in its behalf and, in general, from the
people comprising it. A corporation, as a juridical entity, may act only
through its directors, officers and employees. Obligations incurred as a
result of the directors' and officers' acts as corporate agents, are not their
personal liability but the direct responsibility of the corporation they
represent. It is settled that in the absence of malice and bad faith, a
stockholder or an officer of a corporation cannot be made personally liable
for corporate liabilities. They are only solidarily liable with the corporation
for the illegal termination of services of employees if they acted with malice
or bad faith. In Philippine American Life and General Insurance v. Gramaje,
bad faith is defined as a state of mind affirmatively operating with furtive
design or with some motive of self-interest or ill will or for ulterior purpose.
It implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity.43 (Citations omitted and underlining
ours)

In the instant petition, the respondents failed to specify and sufficiently

prove the alleged acts of Enriquez, Benedicto and Atty. Wenceslao from
which malice or bad faith can be concluded. Hence, there is no reason to
invoke the exception to the general rule on non-liability of corporate officers.

In lieu of actual reinstatement, the respondents are entitled to separation

pay.
"In cases of illegal dismissal, the accepted doctrine is that separation pay is
available in lieu of reinstatement when the latter recourse is no longer
practical or in the best interest of the parties."44

The Court notes that the respondents were terminated from service on
August 15, 2009, or more than six years ago. Their reinstatement will not be
practical and to the best interest of the parties. The Court thus finds more
prudence in awarding separation pay to the respondents equivalent to one
(1) month pay for every year of service, with a fraction of at least six (6)
months considered as one (1) whole year, from the time of their illegal
dismissal up to the finality of this Decision.

An annual interest of six percent (6%) is imposed on the monetary award.

In accordance with Nacar v. Gallery Frames,45 the Court now imposes an

interest on the monetary awards at the rate of six percent (6%) per annum
from the date of finality of this Decision until full payment

WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision

and Resolution of the Court of Appeals in CA-G.R. SP No. 121393, dated
September 24, 2013 and March 28, 2014, respectively, are MODIFIED.

The petitioner, Echo 2000 Commercial Corporation, is hereby declared guilty

of illegal dismissal. In addition to the National Labor Relations Commission's
award of attorney's fees, Echo 2000 Commercial Corporation is likewise
ORDERED to pay the respondents, Arlo C. Cortes and Dave Somido, the
following:
(a) separation pay in lieu of actual reinstatement equivalent to one (1) month
pay for every year of service, with a fraction of at least six (6) months
considered as one (1) whole year from the time of the dismissal up to the
finality of this Decision;

(b) full backwages from the time of the illegal dismissal up to the finality of
this Decision; and

(c) interest on all monetary awards at the rate of 6% per annum from the
finality of this Decision until full payment.

The amounts awarded as moral and exemplary damages by the National

Labor Relations Commission to Arlo C. Cortes and Dave Somido are however
deleted for lack of basis.

The case is REMANDED to the Labor Arbiter, who is hereby DIRECTED to

COMPUTE the monetary benefits awarded in accordance with this Decision.

SO ORDERED.

FIRST DIVISION

G.R. No. 156635, January 11, 2016

THE HONGKONG & SHANGHAI BANKING CORPORATION EMPLOYEES
UNION, MA. DALISAY P. DELA CHICA, MARVILON B. MILITANTE, DAVID Z.
ATANACIO, JR., CARMINA C. RIVERA, MARIO T. FERMIN(T), ISABELO E.
MOLO, RUSSEL M. PALMA, IMELDA G. HERNANDEZ, VICENTE M.
LLACUNA, JOSEFINA A. ORTIGUERRO, MA. ASUNCION G. KIMSENG,
MIGUEL R. SISON, RAUL P. GERONIMO, MARILOU E. CADENA, ANA N.
TAMONTE, AVELINO Q. RELUCIO, JORALYN R. GONGORA, CORAZON E.
ALBOS, ANABELLA J. GONZALES, MA. CORAZON Q. BALTAZAR, MARIA
LUZ I. JIMENEZ, ELVIRA A. ORLINA, SAMUEL B. ELLARMA, ROSARIO A.
FLORES, EDITHA L. BROQUEZA, REBECCA T. FAJARDO, MA. VICTORIA C.
LUNA, MA. THERESA G. GALANG, BENIGNO V. AMION, GERARDO J. DE
LEON, ROWENA T. OCAMPO, MALOU P. DIZON, RUBEN DE C. ATIENZA,
MELO E. GABA, HERNAN B. CAMPOSANTO, NELIA D. M. DERIADA,
LOLITO L. HILIS, GRACE C. MABUNAY, FE ESPERANZA C. GERONG,
MANUEL E. HERRERA, JOSELITO J. GONZAGA, ULDARTCO D. PEDIDA,
ROSALINA JULIET B. LOQUELLANO, MARCIAL F. GONZAGA, MERCEDES
R. PAULE, JOSE TEODORO A. MOTUS, BLANCHE D. MOTUS, DAISY M.
FAGUTAO, ANTONIO A. DEL ROSARIO, EMMANUEL JUSTIN S. GREY,
FRANCISCA DEL MUNDO, JULIETA A. CRUZ, RODRIGO J. DURANO,
CATALINA R. YEE, MENANDRO CALIGAGAN, MAIDA M. SACRO
MILITANTE, LEONILA M. PEREZ, AND EMMA MATEO, Petitioners, v.
NATIONAL LABOR RELATIONS COMMISSION AND THE HONGKONG &
SHANGHAI BANKING CORPORATION, LTD., Respondents.

DECISION

BERSAMIN, J.:

A strike staged without compliance with the requirements of Article 2631 of

the Labor Code is illegal, and may cause the termination of the employment
of the participating union officers and members. However, the liability for
the illegal strike is individual, not collective. To warrant the termination of
an officer of the labor organization on that basis, the employer must show
that the officer knowingly participated in the illegal strike. An ordinary
striking employee cannot be terminated based solely on his participation in
the illegal strike, for the employer must further show that the employee
committed illegal acts during the strike.

The Case

Under appeal is the decision promulgated on January 31, 2002 by the Court
of Appeals (CA) in CA-GR. SP No. 56797 entitled The Hongkong & Shanghai
Banking Corporation Employees Union, et al. v. National Labor Relations
Commission and The Hongkong & Shanghai Banking Corporation, Ltd.,2
which disposed as follows:

WHEREFORE, the instant petition is DISMISSED and the questioned

decision of the National Labor Relations Commission is AFFIRMED with
MODIFICATION.

Private respondent Hongkong & Shanghai Banking Corporation is ordered to

pay each of the following: Isabelo Molo, Elvira Orlina, Samuel Ellarma,
Rosario Flores, Rebecca Fajardo, Ma. Victoria Luna, Malou Dizon, Ruben
Atienza, Melo Gaba, Nelia Deriada, Fe Esperanza Gerong, Manuel Herrera,
Rosalina Juliet Loquellano, Mercedes Paule, Binche Motus, Antonio del
Rosario, Francisca del Mundo and Maida Militante:

(a) full backwages from the time of their dismissal in 1993 up to the time
this decision becomes final; and
(b) separation pay equivalent to one-half (1/2) month salary for every year of
service up to 1993.

SO ORDERED.3

Also under review is the resolution promulgated on December 9, 2002

whereby the CA denied the petitioners' motion for reconsideration.4

Antecedents

In the period material to this case, petitioner Hongkong & Shanghai Banking
Corporation Employees Union (Union) was the duly recognized collective
bargaining agent of the rank-and-file employees of respondent Hongkong &
Shanghai Banking Corporation (HSBC). A collective bargaining agreement
(CBA) governed the relations between the Union and its members, on one
hand, and HSBC effective April 1, 1990 until March 31, 1993 for the non-
representational (economic) aspect, and effective April 1, 1990 until March
31, 1995 for the representational aspect.5 The CBA included a salary
structure of the employees comprising of grade levels, entry level pay rates
and the individual pays depending on the length of service.6

On January 18, 1993, HSBC announced its implementation of a job

evaluation program (JEP) retroactive to January 1, 1993. The JEP consisted
of a job designation per grade level with the accompanying salary scale
providing for the minimum and maximum pay the employee could receive
per salary level.7 By letter dated January 20, 1993,8 the Union demanded
the suspension of the JEP, which it labeled as an unfair labor practice
(ULP). In another letter dated January 22, 1993, the Union informed HSBC
that it would exercise its right to concerted action. On the same day of
January 22, 1993, the Union members started picketing during breaktime
while wearing black hats and black bands on their arms and other
appendages.9 In its letter dated January 25, 1993, HSBC responded by
insisting that the JEP was an express recognition of its obligation under the
CBA.10 The Union's concerted activities persisted for 11 months,11
notwithstanding that both sides had meanwhile started the re-negotiation of
the economic provisions of their CBA12 on March 5, 1993.13 The continued
concerted actions impelled HSBC to suspend the negotiations on March 19,
1993,14 and to issue memoranda, warnings and reprimands to remind the
members of the Union to comply with HSBC's Code of Conduct.

Due to the sustained concerted actions, HSBC filed a complaint for ULP in
the Arbitration Branch of the National Labor Relations Commission (NLRC),
docketed as NLRC-NCR Case No. 00-04-02481-93. The Labor Arbiter's
decision was appealed to the NLRC whose disposition to remand the case to
the Labor Arbiter for further proceedings was in turn assailed. Ultimately, in
G.R. No. 125038 entitled The Hongkong & Shanghai Banking Corporation
Employees Union v. National Labor Relations Commission and The
Hongkong & Shanghai Banking Corporation, Ltd., the Court affirmed the
disposition of the NLRC, and directed the remand of the case to the Labor
Arbiter for further proceedings.15

The Union conducted a strike vote on December 19, 1993 after HSBC
accorded regular status to Patrick King, the first person hired under the
JEP. The majority of the members of the Union voted in favor of a strike.16
The following day, the Union served its letter on HSBC in protest of the
continued implementation of the JEP, and insisted that HSBC's modification
of the salary structure under the JEP constituted ULP.

On December 22, 1993, at around 12:30 p.m., the Union's officers and
members walked out and gathered outside the premises of HSBC's offices on
Ayala Avenue, Makati and Ortigas Center, Pasig.17 According to HSBC, the
Union members blocked the entry and exit points of the bank premises,
preventing the bank officers, including the chief executive officer, from
entering and/or leaving the premises.18 This prompted HSBC to resort to a
petition for habeas corpus on behalf of its officials and employees thus
prevented from leaving the premises, whom it airlifted on December 24,
1993 to enable them to leave the bank premises.19

On December 24, 1993, HSBC filed its complaint to declare the strike
illegal.20 The HSBC also petitioned for injunction (with prayer for temporary
restraining order (TRO)/writ of prohibitory injunction) in the NLRC, which
issued the TRO on January 6, 1994, and the writ of preliminary injunction
on January 31, 1994.21 On November 22, 2001, the Court upheld the
actions taken in that case in The Hongkong and Shanghai Banking
Corporation Employees Union v. National Labor Relations Commission and
The Hongkong and Shanghai Banking Corporation Limited.22

In the meantime, HSBC issued return-to-work notices to the striking

employees on December 22, 1993. Only 25 employees complied and
returned to work. Due to the continuing concerted actions, HSBC
terminated the individual petitioners on December 27, 1993.23 The latter,
undeterred, and angered by their separation from work, continued their
concerted activities.

Ruling of the Labor Arbiter

On August 2, 1998, Labor Arbiter (LA) Felipe P. Pati declared the strike
illegal for failure of the Union to file the notice of strike with the Department
of Labor and Employment (DOLE); to observe the cooling-off period; and to
submit the results of the strike vote to the National Conciliation and
Mediation Board (NCMB) pursuant to Article 263 of the Labor Code. He
concluded that because of the illegality of the strike the Union members and
officers were deemed to have lost their employment status. Lie disposed
thusly:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. The 22 December 1993 strike conducted by the union is hereby declared

illegal;

2. The following Union officers and members who participated in the 22

December 1993 strike are hereby deemed to have lost their employment
status as of that date, namely: Dalisay Dela Chica, Isabelo Molo, Danilo
Alonso, Alvar Rosales, Russel Palma, Imelda Hernandez, Vicente Llacuna,
Josefina Ortiguero, Agustin Iligan, Ma. Asuncion Kimseng, Miguel Sison,
Raul Geronimo, Marilou Cadena, Ana Tamonte, Yolanda Enciso, Avelino
Relucio, Joralyn Gongora, Corazon Albos, Anabella Gozales, Ma. Corazon
Baltazar, Maria Luz Jimenez, Concordio Madayag, Elvira Orlina, Ma.
Lourdes Austria, Josephine Landas, Samuel Ellarma, Rosario Flores, Editha
Broqueza, Marina Sal vac ion, Ma. Cecilia Ocampo, Rebecca Fajardo, Ma.
Victoria Luna, Ma. Theresa Ofelia Galang, Benigno Amion, Mercedes Castro,
Gerardo de Leon, Rowena Ocampo, Malou Dizon, Juliet Dacumos, Blandina
dela Pena, Ruben Atienza, Ma. Fe Temporal, Mcllo Gaba, Herman
Camposanto, Nelia Deriada, Lolito Hilis, Ma. Dulce Abellar, Grace Mabunay,
Fe Esperanza Gerong, Romeo Tumlos, Sonia Argos, Manuel Herrera, Joselito
Gonzaga, Uldarico Pedida, Cynthia Calangi, Rosalina Loquellano, Marcial
Gonzaga, Mercedes Paule, Jess Nicolas, Teodoro Motus, Blanche Motus,
Daisy Martinez Fagutao, Antonio del Rosario, Emmanuel Justin Grey,
Francisca del Mundo, Juliet Cruz, Rodrigo Durano, Carmina Rivera, David
Atanacio, Jr., Ofelia Rabuco, Alfred Tan Jr., Catalina Yee, Menandro
Caligaga, Melorio Maida Militante, Antonio Marilon, and Leonila Peres,
Emma Mateo, Felipe Vital, Jr., Mario Fermin, and Virgilio Reli;
3. The Union, its officers and members are hereby held jointly and severally
liable to pay the Bank the amount of P45,000.00 as actual damages.

All the other claims for moral and exemplary damages are denied for lack of
merit.

SO ORDERED.24

Decision of the NLRC

On appeal, the NLRC modified the ruling of LA Pati, and pronounced the
dismissal of the 18 Union members unlawful for failure of LISBC to accord
procedural due process to them, viz.:

xxx [W]e note, however, that as per the submission of the parties, not all the
respondents (members) have been identified by complainant as having
violated the law on free ingress and egress (i.e., Article 264[e]). A meticulous
review of the testimonies given during trial and a comparison of the same
show that 25 respondents were not named by complainant's witnesses.

Of the 25, 6 of them (Rabuco, Salvacion, Castro, Dacumos, Calangi and

Nicolas) have already settled with the complainant during the pendency of
the appeal. Of the remaining 19, one respondent is a union officer (Rivera)
while the remaining 18 respondents (Molo, Orlina, Ellarma, Flores, Fajardo,
Luna, Dizon, Atienza, Gaba, Deriada, Gerong, Herrera, Loquellano, Paule,
Motus, Del Rosario, Mundo and Militante) are neither officers nor members
who have been pinpointed as having committed illegal act[s]. We, therefore,
disagree with the Labor Arbiter's generalization that these 18 respondents
have similarly lost their employment status simply because they
participated in or acquiesced to the holding of the strike.

xxxx

Only insofar as the xxx 18 respondents are concerned, We rule that

complainant did fail to give them sufficient opportunity to present their side
and adequate opportunity to answer the charges against them. More was
expected from complainant and its observance of due process may not be
dispensed with no matter how brazen and blatant the violation or its rules
and regulations may have perceived. The twin requirement of notice and
hearing in termination cases are as much indispensable and mandatory as
the procedural requirements enumerated in Article 262 of the Labor Code.
In this case, We cannot construe complainant's notice to return-to-work as
substantial compliance with due process requirement.

Contrary however to respondents' insistence that complainant failed to

observe due process in the case of the 18 respondents does not mean that
they are automatically entitled to backwages or reinstatement. Consistent
with decided cases, these respondents are entitled only to indemnity for
complainant's omission, specifically to the amount of P5,000.00 each, xxx

As a final word, and only as regard these 18 respondents, We take note of

the fact that they have remained silent spectators, if not mere bystanders, in
the illegal strike and illegal acts committed by the other individual
respondents, and since the grounds for which they have been terminated do
not involve moral turpitude, the consequences for their acts must
nevertheless be tempered with some sense of compassion. Consistent with
prevailing jurisprudence and in the interest of social justice, We find the
award of separation pay to each of the 18 respondents equivalent to one-half
(1/2) month salary for every year of service as equitable and proper.

XXXX

WHEREFORE, the decision dated 26 August 1998 is hereby AFFIRMED with

the modification that complainant is ordered to pay (a) P5,000.00 and (b)
one-half (1/2) month salary for every year of service up to December 1993 to
each of the following respondents: Isabelo Molo, Elvira Orlina, Samuel
Ellarma, Rosario Flores, Rebecca Fajardo, Ma. Victoria Luna, Malou Dizon,
Ruben Atienza, Melo Gaba, Nelia Deriada, Fe Esperanza Gerong, Manuel
Herrera, Rosalina Juliet Loquellano, Mercedes Paule. Binche Motus, Antonio
del Rosario, Francisca del Mundo and Maida Militante.

SO ORDERED.25

The petitioners filed their motion for reconsideration, but the NLRC denied
their motion.26

Judgment of the CA

On certiorari, the CA, through the assailed judgment promulgated on

January 31, 2002,27 deleted the award of indemnity, but ordered HSBC to
pay baekwages to the 18 employees in accordance with Serrano v. National
Labor Relations Commission,28 to wit:

In Ruben Serrano v. NLRC and Isetcmn Department Store xxx, the Court
ruled that an employee who is dismissed, whether or not for just or
authorized cause but without prior notice of his termination, is entitled to
full baekwages from the time he was terminated until the decision in his
case becomes final, when the dismissal was for cause; and in case the
dismissal was without just or valid cause, the backwages shall be computed
from the time of his dismissal until his actual reinstatement. In the case at
bar, where the requirement of notice and hearing was not complied with, the
aforecited doctrine laid down in the Serrano case applies.29

On motion for reconsideration, the CA reiterated its judgment, and denied

HSBC's motion to delete the award of backwages.30

Hence, this appeal by petition for review on certiorari.

Pending the appeal, petitioners Elvira A. Orlina, Rosario A. Flores, Ma.

Victoria C. Luna, Malou Dizon, Fe Esperanza Gerong, Francisca del Mundo,
and Ruben Atienza separately presented motions to withdraw as petitioners
herein by virtue of their having individually executed compromise
agreements/quitclaims with HSBC.31 The Court granted all the motions to
withdraw;32 hence, this adjudication relates only to the remaining
petitioners.

Issues

The remaining petitioners raise the following grounds in support of their

appeal, namely:

I
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN
HOLDING THAT ALL THE PETITIONERS WERE VALIDLY DISMISSED

The Court of Appeals cannot selectively apply the right to due process in
determining the validity of the dismissal of the employee

The refusal to lift the strike upon orders of the HSBC is not just cause for
the dismissal of the employees

The HSBC is liable for damages for having acted in utter bad faith by
dismissing the petitioners after having previously submitted the dispute to
the NLRC

Union officers who did not knowingly participate in the strike do not lose
their employment status

The responsibility for illegal acts committed in the course of a strike is

individual and not collective

F
The January 5, 1994 incident does not warrant the dismissal of the
petitioners involved thereat

The penalty, if any, imposable on union officers should be suspension and

not dismissal

II

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN

HOLDING THAT THE STRIKE WAS ILLEGAL

The test of good faith laid down by this Honorable Court is whether the
union is of the reasonable belief that the management was committing an
unfair labor practice

The decision as to when to declare the strike is wholly dependent on the

union, and the same cannot negate good faith

The Court of Appeals committed grave error in concluding that this Court
had already ruled on the validity of the implementation of the Job
Evaluation Program and no longer considered the evidence presented by
petitioners to establish unfair labor practice on the part of the HSBC
D

The doctrine automatically making a strike illegal due to non-compliance

with the mandatory procedural requirements needs to be revisited

The petitioners argue that they were illegally dismissed; that the CA erred in
selectively applying the twin notice requirement; that in the case of the
Union officers, there must be a prior showing that they had participated in
the illegal strike before they could be terminated from employment, but that
HSBC did not make such showing, as, in fact, petitioners Carmina C. Rivera
and Mario T. Fermin were on leave during the period of the strike;33 that
they could not be dismissed on the ground of insubordination or
abandonment in view of participation in a concerted action being a
guaranteed right; that their participation in the concerted activities out of
their sincere belief that HSBC had committed ULP in implementing the JEP
constituted good faith to be appreciated in their favor; that their actions
merited only their suspension at most, not the extreme penalty of dismissal;
and that the prevailing rule that non-compliance with the procedural
requirements under the Labor Code before staging a strike would invalidate
the strike should be revisited because the amendment under Batas
Pambansa Blg. 227 indicated the legislative intent to ease the restriction on
the right to strike.

HSBC counters that the appeal raises factual issues already settled by the
CA, NLRC, and the LA, rendering such issues inappropriate for
determination in this appeal; that it was not liable for illegal dismissal
because the petitioners had willfully staged their illegal strike without prior
compliance with Article 263 of the Labor Code;34 that the procedural
requirements of Article 263 of the Labor Code were mandatory and
indispensable conformably with Article 26435 of the Labor Code, which, in
relation to Article 263(c), (d) and (f), expressly made such non-compliance a
prohibited activity; that for this reason Article 264 penalized the Union
officers who had participated in the illegal strike with loss of their
employment status;36 that good faith could not be accorded to the
petitioners because aside from the non-compliance with the mandatory
procedure, they did not present proof to show that the strike had been held
for a lawful purpose, or that the JEP had amounted to ULP, or that they had
made a sincere effort to settle the disagreement;37 and that as far as the 18
employees were concerned, they were entitled only to nominal damages, not
backwages, following the ruling in Agabon v. National Labor Relations
Commission38 that meanwhile modified the doctrine in Serrano v. National
Labor Relations Commission.39

Two main issues to be resolved are, therefore, namely: (1) whether the strike
commenced on December 22, 1993 was lawfully conducted; and (2 whether
the petitioners were illegally dismissed.

Ruling of the Court

We PARTLY GRANT the petition for review on certiorari.

Non-compliance with Article 263 of the

Labor Code renders a labor strike illegal

The right to strike is a constitutional and legal right of all workers because
the strike, which seeks to advance their right to improve the terms and
conditions of their employment, is recognized as an effective weapon of labor
in their struggle for a decent existence. However, the right to strike as a
means for the attainment of social justice is never meant to oppress or
destroy the employers. Thus, the law prescribes limits on the exercise of the
right to strike.40

Article 263 of the Labor Code specifies the limitations on the exercise of the
right to strike, viz.:

Article 263. Strikes, picketing, and lockouts, x x x

xxxx

(c) In cases of bargaining deadlocks, the duly certified or recognized

bargaining agent may file a notice of strike or the employers may file a notice
of lockout with the [Department] at least 30 days before the intended date
thereof. In cases of unfair labor practices, the period of notice shall be 15
days and in the absence of a duly certified or recognized bargaining agent,
the notice of strike may be filed by any legitimate labor organization in
behalf of its members. However, in case of dismissal from employment of
union officers duly elected in accordance with the union constitution and
by-laws, which may constitute union busting, where the existence of the
union is threatened, the 15-day cooling off period shall not apply and the
union may take action immediately.

(d) The notice must be in accordance with such implementing rules and
regulations as the [Secretary] of Labor and Employment may promulgate.

(e) During the cooling-off period, it shall be the duty of the [Department] to
exert all efforts at mediation and conciliation to effect a voluntary
settlement. Should the dispute remain unsettled until the lapse of the
requisite number of clays from the mandatory filing of the notice, the labor
union may strike or the employer may declare a lockout.

(f) A decision to declare a strike must be approved by a majority of the total

union membership in the bargaining unit concerned, obtained by secret
ballot in meetings or referenda called for that purpose. A decision to declare
a lockout must be approved by a majority of the board of directors of the
corporation or association or of the partners in a partnership, obtained by
secret ballot in a meeting called for that purpose. The decision shall be valid
for the duration of the dispute based on substantially the same grounds
considered when the strike or lockout vote was taken. The [Department]
may, at its own initiative or upon request of any affected party, supervise
the conduct of the secret balloting. In every case, the union or the employer
shall furnish the [Department] the results of the voting at least seven days
before the intended strike or lockout, subject to the cooling-off period herein
provided.

xxxx

The procedural requirements for a valid strike are, therefore, the following,
to wit: (1) a notice of strike filed with the DOLE at least 30 days before the
intended date thereof, or 15 days in case of ULP; (2) a strike vote approved
by the majority of the total union membership in the bargaining unit
concerned, obtained by secret ballot in a meeting called for that purpose;
and (3) a notice of the results of the voting at least seven days before the
intended strike given to the DOLE. These requirements are mandatory, such
that non-compliance therewith by the union will render the strike illegal.41
According to the CA, the petitioners neither filed the notice of strike with the
DOLE, nor observed the cooling-off period, nor submitted the result of the
strike vote. Moreover, although the strike vote was conducted, the same was
done by open, not secret, balloting,42 in blatant violation of Article 263 and
Section 7, Rule XIII of the Omnibus Rules Implementing the Labor Code.43
It is not amiss to observe that the evident intention of the requirements for
the strike-notice and the strike-vote report is to reasonably regulate the
right to strike for the attainment of the legitimate policy objectives embodied
in the law.44 As such, the petitioners committed a prohibited activity under
Article 264(a) of the Labor Code, and rendered their strike illegal.

We underscore that the language of the law itself unmistakably bears out
the mandatory character of the limitations it has prescribed, to wit:

Art. 264. Prohibited activities. - (a) No labor organization or employer shall

declare a strike or lockout without first having bargained collectively in
accordance with Title VII of this Book or without first having filed the notice
required in the preceding Article or without the necessary strike or lockout
vote first having been obtained and reported to the [Department], (emphasis
supplied)

xxxx

Accordingly, the petitioners' plea for the revisit of the doctrine to the effect
that the compliance with Article 263 was mandatory was entirely
unwarranted. It is significant to remind that the doctrine has not been
established by judicial declaration but by congressional enactment. Verba
legis non est recedendum. The words of a statute, when they are clear, plain
and free from ambiguity, must be given their literal meaning and must be
applied without interpretation.45 Had the legislators' intention been to relax
this restriction on the right of labor to engage in concerted activities, they
would have stated so plainly and unequivocally.

II

Commission of unlawful acts during

the strike further rendered the same illegal

The petitioners insist that all they did was to conduct an orderly, peaceful,
and moving picket. They deny employing any act of violence or obstruction
of HSBC's entry and exit points during the period of the strike.

The contrary was undeniably true. The strike was far from orderly and
peaceful. HSBC's claim that from the time when the strike was commenced
on December 22, 1993 the petitioners had on several instances obstructed
the ingress into and egress from its offices in Makati and in Pasig was not
competently disputed, and should thus be accorded credence in the light of
the records. We agree with HSBC, for all the affidavits46 and testimonies of
its witnesses,47 as well as the photographs48 and the video recordings49
reviewed by LA Pati depicted the acts of obstruction, violence and
intimidation committed by the petitioners during their picketing. It was
undeniable that such acts of the strikers forced HSBC's officers to resort to
unusual means of gaining access into its premises at one point.50 In this
connection, LA Pati even observed as follows:

[I]t must be pointed out that the Bank has shown by clear and indubitable
evidence that most of the respondents have actually violated the
prescription provided for in paragraph (b) of Article 264 on free ingress and
egress. The incident depicted in the video footage of 05 January 1994, which
has been viewed several times during the trial and even privately,
demonstrates beyond doubt that the picket was a non-moving, stationary
one - nothing less but a barricade. This office is more than convinced that
the respondents, at least on that day, have demonstrated an abnormally
high degree of hatred and anger at the Bank and its officers (including the
Bank's chief executive officer who fell to the ground as a result of the
pushing and shoving) leading them to do anything to carry out their resolve
not to let anymore inside the Bank. Additionally, as observed by this Labor
Arbiter, the tensed and disquieting relation between the parties became all
the more apparent during the actual hearings as clearly evident from the
demeanor and actuations of the respondents.51 (Emphasis supplied)

The situation during the strike actually went out of hand because of the
petitioners' illegal conduct, compelling HSBC to secure an injunction from
the NLRC as well as to file its petition for habeas corpus in the proper court
in the interest of its trapped officers and employees; and at one point to
lease an helicopter to extract its employees and officers from its premises on
the eve of Christmas Day of 1993.

For sure, the petitioners could not justify their illegal strike by invoking the
constitutional right of labor to concerted actions. Although the Constitution
recognized and promoted their right to strike, they should still exercise the
right within the bounds of law.52 Those bounds had been well-defined and
well-known. Specifically, Article 264(e) of the Labor Code expressly enjoined
the striking workers engaged in picketing from committing any act of
violence, coercion or intimidation, or from obstructing the free ingress into
or egress from the employer's premises for lawful purposes, or from
obstructing public thoroughfares.53 The employment of prohibited means in
carrying out concerted actions injurious to the right to property of others
could only render their strike illegal. Moreover, their strike was rendered
unlawful because their picketing which constituted an obstruction to the
free use of the employer's property or the comfortable enjoyment of life or
property, when accompanied by intimidation, threats, violence, and coercion
as to constitute nuisance, should be regulated.54 In fine, the strike, even if
justified as to its ends, could become illegal because of the means employed,
especially when the means came within the prohibitions under Article 264(e)
of the Labor Code:55

III

Good faith did not avail because of the

patent violation of Article 263 of the Labor Code

The petitioners assert their good faith by maintaining that their strike was
conducted out of their sincere belief that HSBC had committed ULP in
implementing the JEP. They had also hoped that HSBC would be willing to
negotiate matters related to the JEP considering that the economic aspect of
the CBA was set to expire on March 31, 1993.

We rule out good faith on the part of the petitioners.

The petitioners' disregard of the procedural requirements for conducting a

valid strike negated their claim of good faith. For their claim to be upheld, it
was not enough for them to believe that their employer was guilty of ULP, for
they must also sufficiently show that the strike was undertaken with a
modicum of obeisance to the restrictions on their exercise of the right to
strike prior to and during its execution as prescribed by the law. They did
not establish their compliance with the requirements specifically for the
holding of the strike vote and the giving of the strike notice.56
The petitioners should entirely bear the consequence of their non-
compliance with the legal requirements. As we said in Pilipino Telephone
Corporation v. Pilipino Telephone Employees Association (PILTEA):57

[W]e do not find any reason to deviate from our rulings in Gold City
Integrated Port Service, Inc. and Nissan Motors Philippines, Inc. It bears
emphasis that the strike staged by the Union in the instant case was illegal
for its procedural infirmities and for defiance of the Secretary's assumption
order. The CA, the NLRC and the Labor Arbiter were unanimous in finding
that bad faith existed in the conduct of the subject strike. The relevant
portion of the CA Decision states:

xxx We cannot go to the extent of ascribing good faith to the means taken in
conducting the strike. The requirement of the law is simple, that is 1.
Give a Notice of Strike; 2. Observe the cooling period; 3. Observe the
mandatory seven day strike ban; 3. If the act is union busting, then the
union may strike doing away with the cooling-off period, subject only to the
seven-day strike ban. To be lawful, a strike must simply have a lawful
purpose and should be executed through lawful means. Here, the union
cannot claim good faith in the conduct of the strike because, as can be
gleaned from the findings of the Labor Arbiter, this was an extensively
coordinated strike having been conducted all throughout the offices of
PILTEL all over the country. Evidently, the strike was planned. Verily, they
cannot now come to court hiding behind the shield of "good faith." Be that
as it may, petitioners claim good faith only in so far as their grounds for the
strike but not on the conduct of the strike. Consequently, they still had to
comply with the procedural requirements for a strike, which, in this case,
they failed to do so.58

IV

The finding on the illegal strike did not justify the

wholesale termination of the strikers from employment

The next issue to resolve is whether or not HSBC lawfully dismissed the
petitioners for joining the illegal strike.

As a general rule, the mere finding of the illegality of the strike does not
justify the wholesale termination of the strikers from their employment.59
To avoid rendering the recognition of the workers' right to strike illusory, the
responsibility for the illegal strike is individual instead of collective.60 The
last paragraph of Article 264(a) of the Labor Code defines the norm for
terminating the workers participating in an illegal strike, viz.:

Article 264. Prohibited Activities -xxx

xxxx

Any worker whose employment has been terminated as a consequence of

any unlawful lockout shall be entitled to reinstatement with full backwages.
Any union officer who knowingly participates in an illegal strike and any
worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall
not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike,
(emphasis supplied)

Conformably with Article 264, we need to distinguish between the officers

and the members of the union who participate in an illegal strike. The
officers may be deemed terminated from their employment upon a finding of
their knowing participation in the illegal strike, but the members of the
union shall suffer the same fate only if they are shown to have knowingly
participated in the commission of illegal acts during the strike. Article 264
expressly requires that the officer must have knowingly participated in the
illegal strike. We have explained this essential element in Club Filipino, Inc.
v. Bautista,61 thusly:

Note that the verb "participates" is preceded by the adverb "knowingly." This
reflects the intent of the legislature to require "knowledge" as a condition
sine qua non before a union officer can be dismissed from employment for
participating in an illegal strike. The provision is worded in such a way as to
make it very difficult for employers to circumvent the law by arbitrarily
dismissing employees in the guise of exercising management prerogative.
This is but one aspect of the State's constitutional and statutory mandate to
protect the rights of employees to self-organization.62

The petitioners assert that the CA erroneously affirmed the dismissal of

Carmina Rivera and Mario Fermin by virtue of their being officers of the
Union despite lack of proof of their having participated in the strike.

The assertion is partly correct.

In the case of Fermin, HSBC did not satisfactorily prove his presence during
the strike, much less identify him as among the strikers. In contrast, Union
president Ma. Dalisay dela Chica testified that Fermin was not around when
the Union's Board met after the strike vote to agree on the date of the
strike.63 In that regard, Corazon Fermin, his widow, confirmed the Union
president's testimony by attesting that her husband had been on leave from
work prior to and during the strike because of his heart condition.64
Although Corazon also attested that her husband had fully supported the
strike, his extending moral support for the strikers did not constitute
sufficient proof of his participation in the strike in the absence of a showing
of any overt participation by him in the illegal strike. The burden of proving
the overt participation in the illegal strike by Fermin solely belonged to
HSBC, which did not discharge its burden. Accordingly, Fermin, albeit an
officer of the Union, should not be deemed to have lost his employment
status.

However, the dismissal of Rivera and of the rest of the Union's officers,
namely: Ma. Dalisay dela Chica, Marvilon Militante and David Atanacio, is
upheld. Rivera admitted joining the picket line on a few occasions.65 Dela
Chica, the Union president, had instigated and called for the strike on
December 22, 1993.66 In addition, HSBC identified Dela Chica67 and
Militante68 as having actively participated in the strike. Their responsibility
as the officers of the Union who led the illegal strike was greater than the
responsibility of the members simply because the former had the duty to
guide their members to obey and respect the law.69 When said officers
urged and made their members violate the law, their dismissal became an
appropriate penalty for their unlawful act.70 The law granted to HSBC the
option to dismiss the officers as a matter of right and prerogative.71

Unlike the Union's officers, the ordinary striking members could not be
terminated for merely taking part in the illegal strike. Regardless of whether
the strike was illegal or not, the dismissal of the members could be upheld
only upon proof that they had committed illegal acts during the strike. They
must be specifically identified because the liability for the prohibited acts
was determined on an individual basis.72 For that purpose, substantial
evidence available under the attendant circumstances justifying the penalty
of dismissal sufficed.73
We declare the illegality of the termination of the employment of the 18
members of the Union for failure of HSBC to prove that they had committed
illegal acts during the strike. We also declare that Daisy Fagutao was
unlawfully dismissed because HSBC did not adduce substantial evidence
establishing her presence and her commission of unlawful acts during the
strike.

We clarify that the 18 employees, including Fagutao and Union officer

Fermin, were illegally dismissed because of lack of any valid ground to
dismiss them, and for deprivation of procedural due process. Thus, we take
exception to that portion of the NLRC ruling that held:

We here note that all of the herein named respondents were terminated by
complainant for reasons other than their holding of an participation in the
illegal strike. Specifically, the grounds for their termination were
enumerated in the notices of termination sent out by complainant as
follows: abandonment, insubordination and seriously hampering operations.
To Our mind, the complainant in the exercise of its management
prerogative, had every reason to discipline these respondents for their
disregard of the complainant's return-to-work order and for the damage
sustained by reason thereof. Although these 18 respondents did not commit
any illegal act during the strike, We can not simply ignore the fact that they
nonetheless breached complainant's rules and regulations and which acts
serve as valid causes to terminate their employment. These respondents
took a risk when they refused to heed complainant's lawful order and
knowingly caused damage and prejudice to complainant's operations; they
should be prepared to take the consequences and be held accountable for
their actions. Whether or not complainant observed due process prior to the
termination of these respondents is however a totally different matter.74
We hold that said employees' right to exercise their right to concerted
activities should not be defeated by the directive of HSBC for them to report
back to work. Any worker who joined the strike did so precisely to assert or
improve the terms and conditions of his work.75 Otherwise, the mere
expediency of issuing the return to work memorandum could suffice to stifle
the constitutional right of labor to concerted actions. Such practice would
vest in the employer the functions of a strike breaker,76 which is prohibited
under Article 264(c) of the Labor Code.

The petitioners' refusal to leave their cause against HSBC constituted

neither insubordination nor abandonment. For insubordination to exist, the
order must be: (1) reasonable and lawful; (2) sufficiently known to the
employee; and (3) in connection to his duties.77 None of these elements
existed in this case.

As to abandonment, two requirements need to be established, namely: (1)

the failure to report for work or absence must be without valid or justifiable
reason; and (2) there must be a clear intention to sever the employer-
employee relationship. The second element is the more decisive factor and
must be manifested by overt acts.78 In that regard, the employer carries the
burden of proof to show the employee's deliberate and unjustified refusal to
resume his employment without any intention of returning.79 However, the
petitioners unquestionably had no intention to sever the employer-employee
relationship because they would not have gone to the trouble of joining the
strike had their purpose been to abandon their employment.80

Moreover, we cannot subscribe to the view that the striking employees

should be dismissed for having seriously hampered and damaged HSBC's
operations. In this aspect of the case, HSBC did not discharge its burden to
prove that the acts of the employees constituted any of the just causes
under the Labor Code or were prohibited under the company's code of
conduct as to warrant their dismissal.

Non-compliance with due process resulted

in illegal dismissal; the employer's liability

depended on the availing circumstances

While Article 264 authorizes the termination of the union officers and
employees, it does not remove from the employees their right to due process.
Regardless of their actions during the strike, the employees remain entitled
to an opportunity to explain their conduct and why they should not be
penalized. In Suico v. National Labor Relations Commission,81 we have
reiterated the need for the employers to comply with the twin-notice
requirement despite the cause for the termination arising from the
commission of the acts prohibited by Article 264, thus:

Art. 277(b) in relation to Art. 264(a) and (e) recognizes the right to due
process of all workers, without distinction as to the cause of their
termination. Where no distinction is given, none is construed. Hence, the
foregoing standards of due process apply to the termination of employment
of Suico, et al. even if the cause therefor was their supposed involvement in
strike-related violence prohibited under Art. 264 (a) and (e).82

Consequently, failure of the employer to accord due process to its employees

prior to their termination results in illegal dismissal.
The petitioners maintain that the CA applied the twin-notice requirement in
favor of the 18 employees. HSBC disagrees, claiming instead that the award
of backwages in favor of said employees should be modified following
Agabon.

We partially agree with both parties.

Article 277(b)83 of the Labor Code mandates compliance with the twin-
notice requirement in terminating an employee, viz.:

Article 277. Miscellaneous Provisions. -

xxxx

(b) Subject to the constitutional right of workers to security of tenure and

their right to be protected against dismissal except for a just and authorized
cause and without prejudice to the requirement of notice under Article 283
of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative, if he
so desires, in accordance with company rules and regulations promulgated
pursuant to guidelines set by the Department of Labor and Employment, x x
x (Emphasis supplied)

In King of Kings Transport, Inc. v. Mamac,84 we have laid down the

contents of the notices to be served upon an employee prior to termination,
as follows:
(1) The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that
the employees are given the opportunity to submit their written explanation
within a reasonable period. "Reasonable opportunity" under the Omnibus
Rules means every kind of assistance that management must accord to the
employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from
receipt of the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data and
evidence, and decide on the defenses they will raise against the complaint.
Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against
the employees. A general description of the charge will not suffice. Lastly,
the notice should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 282 is being charged
against the employees.

xxxx

(3) After determining that termination of employment is justified, the

employers shall serve the employees a written notice of termination
indicating that: (1) all circumstances involving the charge against the
employees have been considered; and (2) grounds have been established to
justify the severance of their employment.85 (Emphasis supplied)

HSBC admitted issuing two pro forma notices to the striking employees. The
first notice, sent on December 22, 1993, reads as follows:
Re: NOTICE OF RETURN TO WORK

__________________________________________________

On ___________________ at ________ o'clock in the morning/afternoon, you

"walked-out" by leaving your assigned work station without prior
permission/leave during work hours.

You arc hereby directed to report back for work at the start of banking
hours on the day immediately following knowledge or receipt of this notice.
Should you report for work no disciplinary action shall be imposed on you.
Ibis is without prejudice to any action the Bank may take against the Union.

Should you fail to report back for work within the period abovestated, the
Bank shall be forced to terminate your employment and take all appropriate
measures to continue serving its clients.86

As the notice indicates, HSBC did not fully apprise the strikers of the
ground under the Labor Code that they had supposedly violated. It also
thereby deprived them the ample opportunity to explain and justify their
actions. Instead, it manifested therein its firm resolve to impose the extreme
penalty of termination should they not comply with the order. Plainly, the
tenor of the notice was short of the requirements of a valid first notice.

The second notice was as follows:

Re: NOTICE OF TERMINATION

__________________________________________________________
On_________ , 1993, you and a majority of the rank-and-file staff "walked
out" by leaving your respective work stations without prior leave and failed
to return.

You were directed to report back for work when a copy of the Bank's
Memorandum/Notice to Return to Work dated________________ 1993 was:

1. [ ] Posted on the Bank's premises on_______________

2. [ ] served on your (sic) personally on____________________.

3. [ ] delivered to your last known address on file with the Bank and received
by you (your representative) on

Despite being directed to return to work, you have failed to comply.

Your "walk-out" is an illegal act amounting to abandonment,

insubordination, and seriously hampering and damaging the bank's
operations. Consequently, your employment with the Bank is terminated
effective ____________________, 1993.87

The second notice merely ratified the hasty and unilateral decision to
terminate the petitioners without the benefit of a notice and hearing. Hence,
this notice should be struck down for having violated the right of the
affected employees to due process.
The failure by HSBC to strictly observe the twin-notice requirement resulted
in the illegal dismissal. However, the extent of its liability should depend on
the distinct circumstances of the employees.

HSBC should be held liable for two types of illegal dismissal the first type
was made without both substantive and procedural due process, while the
other was based on a valid cause but lacked compliance with procedural
due process. To the first type belonged the dismissal of Fermin, Fagutao and
the 18 employees initially identified by the NLRC, while the second type
included the rest of the petitioners.

HSBC maintains that the dismissed 18 employees should not be entitled to

backwages in conformity with Agabon.

We disagree. Agabon involved the second type of dismissal, not the first type
to which the 18 employees belonged. The rule for employees unlawfully
terminated without substantive and procedural due process is to entitle
them to the reliefs provided under Article 27988 of the Labor Code, that is,
reinstatement without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and other benefits or their monetary
equivalent computed from the time the compensation was withheld up to
the time of actual reinstatement. However, the award of baekwages is
subject to the settled policy that when employees voluntarily go on strike, no
baekwages during the strike shall be awarded.89

As regards reinstatement, the lapse of 22 years since the strike now

warrants the award of separation pay in lieu of reinstatement, the same to
be equivalent of one (1) month for every year of service.90 Accordingly,
Fermin who did not participate in the strike, should be paid full baekwages
plus separation pay of one (1) month per year of service, while petitioners
Isabelo Molo, Samuel Ellarma, Rebecca Fajardo, Melo Gaba, Nelia Deriada,
Manuel Herrera, Rosalina Juliet Loquellano, Mercedes Paule, Blanche
Motus, Antonio del Rosario, Maida Militante and Daisy Fagutao, who
admitted their participation in the strike, were entitled to baekwages except
during the period of the strike, and to separation pay of one (1) month per
year of service in lieu of reinstatement.

In Agabon, we said that a dismissal based either on a just or authorized

cause but effected without due process should be upheld. The employer
should be nonetheless liable for non-compliance with procedural due
process by paying indemnity in the form of nominal damages amounting to
P30,000.00.

In view of the non-observance of procedural due process by HSBC, the

following petitioners should be entitled to nominal damages of P30,000.00
each,91 namely: Ma. Dalisay dela Chica, Marvilon Militante, David Atanacio,
Carmina Rivera, Russel Palma, Imelda Hernandez, Vicente Llacuna, Josefina
A. Ortiguerro, Ma. Asuncion Kimseng, Miguel R. Sison, Raul P. Geronimo,
Marilou Cadena, Ana Tamonte, Avelino Relucio, Joralyn Gongora, Corazon
Albos, Anabella Gonzales, Ma. Corazon Baltazar, Maria Luz Jimenez, Editha
Broqueza, Ma. Theresa Galang, Benigno Amoin, Gerardo de Leon, Rowena
Ocampo, Hernan Camposanto, Lolito Hilis, Grace Mabunay, Joselito
Gonzaga, Uldarico Pedida, Marcial Gonzaga, Jose Teodoro Motus,
Emmanuel Justin Grey, Julieta Cruz, Rodrigo Durano, Catalina Yee,
Menandro Caligagan, Leonila Perez, and Emma Mateo.

ACCORDINGLY, the Court AFFIRMS the decision promulgated on January

31, 2002 in CA-G.R. SP No. 56797 with MODIFICATION that respondent
Hongkong & Shanghai Banking Corporation (HSBC) shall pay:
Mario S. Fermin, full backwages and separation pay equivalent to one (1)
month per year of service in lieu of reinstatement;

Isabelo Molo, Samuel Ellarma, Rebecca Fajardo, Melo Gaba, Nelia Deriada,
Manuel Herrera, Rosalina Juliet Loquellano, Mercedes Paule, Blanche
Motus, Antonio del Rosario, Maida Militante and Daisy Fagutao, backwages
except during the period of the strike, and separation pay equivalent to one
(1) month per year of service in lieu of reinstatement; and

Ma. Dalisay dela Chica, Marvilon Militante, David Atanacio, Carmina Rivera,
Russel Palma, Imelda Hernandez, Vicente Llacuna, Josefina A. Ortiguerro,
Ma. Asuncion Kimseng, Miguel R. Sison, Raul P. Geronimo, Marilou Cadena,
Ana Tamonte, Avelino Relucio, Joralyn Gongora, Corazon Albos, Anabella
Gonzales, Ma. Corazon Baltazar, Maria Luz Jimenez, Editha Broqueza, Ma.
Theresa Galang, Benigno Amion, Gerardo de Leon, Rowena Ocampo, Hernan
Camposanto, Lolito Hilis, Grace Mabunay, Joselito Gonzaga, Uldarico
Pedida, Marcial Gonzaga, Jose Teodoro Motus, Emmanuel Justin Grey,
Julieta Cruz, Rodrigo Durano, Catalina Yee, Menandro Caligagan, Leonila
Perez and Emma Mateo, indemnity in the form of nominal damages in the
amount of P30,000.00 each.

No pronouncement as to costs.

SO ORDERED.