SUPREME COURT

SPECIAL FIRST DIVISION

MANILA ELECTRIC COMPANY,

Petitioner,

-versus- G.R. No. 127598

August 1, 2000

HON. SECRETARY OF LABOR

LEONARDO QUISUMBING and
MERALCO EMPLOYEES AND
WORKERS ASSOCIATION (MEWA),
Respondents.
x----------------------------------------------------x

RESOLUTION

YNARES-SANTIAGO, J.:

On February 22, 2000, this Court promulgated a Resolution with the

following decretal portion: chanroblespublishingcompany

WHEREFORE, the motion for reconsideration is PARTIALLY

GRANTED and the assailed Decision is MODIFIED as follows:
(1) the arbitral award shall retroact from December 1, 1995 to
November 30, 1997; and (2) the award of wage is increased
from the original amount of One Thousand Nine Hundred
Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the
years 1995 and 1996. This Resolution is subject to the monetary
 advances granted by petitioner to its rank-and-file employees
during the pendency of this case assuming such advances had
actually been distributed to them. The assailed Decision is
AFFIRMED in all other respects.

SO ORDERED.

Petitioner Manila Electric Company filed with this Court, on March

17, 2000, a “Motion for Partial Modification” (Re: Resolution Dated
22 February 2000) anchored on the following grounds:

With due respect, this Honorable Court’s ruling on the

retroactivity issue: (a) fails to account for previous rulings of the
Court on the same issue; (b) fails to indicate the reasons for
reversing the original ruling in this case on the retroactivity
issue; and (c) is internally inconsistent.chanroblespublishingcompany

II

With due respect, the Honorable Court’s ruling on the

retroactivity issue does not take into account the huge cost that
this award imposes on petitioner, estimated at no less than
P800 Million.

In the assailed Resolution, it was held:

Labor laws are silent as to when an arbitral award in a labor dispute

where the Secretary (of Labor and Employment) had assumed
jurisdiction by virtue of Article 263 (g) of the Labor Code shall
retroact. In general, a CBA negotiated within six months after the
expiration of the existing CBA retroacts to the day immediately
following such date and if agreed thereafter, the effectivity depends
on the agreement of the parties. On the other hand, the law is silent as
to the retroactivity of a CBA arbitral award or that granted not by
virtue of the mutual agreement of the parties but by intervention of
the government. Despite the silence of the law, the Court rules herein
that CBA arbitral awards granted after six months from the expiration
of the last CBA shall retroact to such time agreed upon by both
employer and the employees or their union. Absent such an
agreement as to retroactivity, the award shall retroact to the first day
after the six-month period following the expiration of the last day of
the CBA should there be one. In the absence of a CBA, the Secretary’s
determination of the date of retroactivity as part of his discretionary
powers over arbitral awards shall control.

Petitioner specifically assails the foregoing portion of the Resolution

as being logically flawed, arguing, first, that while it alludes to the
Secretary’s discretionary powers only in the absence of a CBA, Article
253-A of the Labor Code always presupposes the existence of a prior
or subsisting CBA; hence the exercise by the Secretary of his
discretionary powers will never come to pass. Second, petitioner
claims that the Resolution contravenes the jurisprudential rule laid
down in the cases of Union of Filipro Employees vs. NLRC,[1] Pier 8
Arrastre and Stevedoring Services vs. Roldan-Confesor[2] and St.
Luke’s Medical Center vs. Torres.[3] Third, petitioner contends that
this Court erred in holding that the effectivity of CBA provisions are
automatically retroactive. Petitioner invokes, rather, this Court’s
ruling in the Decision dated January 27, 1999, which was modified in
the assailed Resolution, that in the absence of an agreement between
the parties, an arbitrated CBA takes on the nature of any judicial or
quasi-judicial award; it operates and may be executed only
prospectively unless there are legal justifications for its retroactive
application. Fourth, petitioner assigns as error this Court’s
interpretation of certain acts of petitioner as consent to the
retroactive application of the arbitral award. Fifth, petitioner
contends that the Resolution is internally flawed because when it held
that the award shall retroact to the first day after the six-month
period following the expiration of the last day of the CBA, the
reckoning date should have been June 1, 1996, not December 1, 1995,
which is the last day of the three-year lifetime of the economic
provisions of the CBA. chanroblespublishingcompany

Anent the second ground, petitioner alleges that the retroactive

application of the arbitral award will cost it no less than P800
Million. Thus, petitioner prays that the two-year term of the CBA be
fixed from December 28, 1996 to December 27, 1998. Petitioner also
seeks this Court’s declaration that the award of P2,000.00 be paid to
petitioner’s rank-and-file employees during this two-year period. In
the alternative, petitioner prays that the award of P2,000.00 be made
to retroact to June 1, 1996 as the effectivity date of the CBA.

Private respondent MEWA filed its Comment on May 19, 2000,

contending that the Motion for Partial Modification was unauthorized
inasmuch as Mr. Manuel M. Lopez, President of petitioner
corporation, has categorically stated in a memorandum to the rank-
and-file employees that management will comply with this Court’s
ruling and will not file any motion for reconsideration; and that the
assailed Resolution should be modified to conform to the St. Luke’s
ruling, to the effect that, in the absence of a specific provision of law
prohibiting retroactivity of the effectivity of arbitral awards issued by
the Secretary of Labor pursuant to Article 263(g) of the Labor Code,
he is deemed vested with plenary and discretionary powers to
determine the effectivity thereof.chanroblespublishingcompany

This Court has re-examined the assailed portion of the Resolution in

this case vis-a-vis the rulings cited by petitioner. Invariably, these
cases involve Articles 253-A in relation to Article 263 (g)[4] of the
Labor Code. Article 253-A is hereunder reproduced for ready
reference:

ARTICLE 253-A. Terms of a collective bargaining agreement. —

Any Collective Bargaining Agreement that the parties may enter
into shall, insofar as the representation aspect is concerned, be
for a term of five (5) years. No petition questioning the majority
status of the incumbent bargaining agent shall be entertained
and no certification election shall be conducted by the
Department of Labor and Employment outside of the sixty-day
period immediately before the date of expiry of such five year
term of the Collective Bargaining Agreement. All other
provisions of the Collective Bargaining Agreement shall be
renegotiated not later than three (3) years after its execution.
Any agreement on such other provisions of the Collective
Bargaining; Agreement entered into within six (6) months from
the date of expiry of the term of such other provisions as fixed
in such Collective Bargaining Agreement, shall retroact to the
day immediately following such dates If any such agrees is
entered into beyond six months, the parties shall agree on the
duration of retroactivity thereof. In case of a deadlock in the
 renegotiation of the collective bargaining agreement, the parties
may exercise their rights under this Code.[5]

The parties’ respective positions are both well supported by

jurisprudence. For its part, petitioner invokes the ruling in Union of
Filipro Employees,[6] wherein this Court upheld the NLRC’s act of
giving prospective effect to the CBA, and argues that the two-year
arbitral award in the case at bar should likewise be applied
prospectively, counted from December 28, 1996 to December 27,
1998. Petitioner maintains that there is nothing in Article 253-A of
the Labor Code which states that arbitral awards or renewals of a
collective bargaining agreement shall always have retroactive effect.
The Filipro case was applied more recently in Pier 8 Arrastre &
Stevedoring Services, Inc. vs. Roldan-Confesor[7] thus: chanroblespublishingcompany

In Union of Filipro Employees v NLRC, 192 SCRA 414 (1990), this

Court interpreted the above law as follows:

“In light of the foregoing, this Court upholds the

pronouncement of the NLRC holding the CBA to be signed by
the parties effective upon the promulgation of the assailed
resolution. It is clear and explicit from Article 253-A that any
agreement on such other provisions of the CBA shall be given
retroactive effect only when it is entered into within six (6)
months from its expiry date. If the agreement was entered into
outside the six (6) month period, then the parties shall agree on
the duration of the retroactivity thereof.

“The assailed resolution which incorporated the CBA to be

signed by the parties was promulgated June 5, 1989, and hence,
outside the 6 month period from June 30, 1987, the expiry date
of the past CBA. Based on the provision of Section 253-A, its
retroactivity should be agreed upon by the parties. But since no
agreement to that effect was made, public respondent did not
abuse its discretion in giving the said CBA a prospective effect.
The action of the public respondent is within the ambit of its
authority vested by existing laws.”chanroblespublishingcompany

In the case of Lopez Sugar Corporation vs. Federation of Free

Workers, 189 SCRA 179 (1991), this Court reiterated the rule that
although a CBA has expired, it continues to have legal effects as
between the parties until a new CBA has been entered into. It is the
duty of both parties to the CBA to keep the status quo, and to
continue in full force and effect the terms and conditions of the
existing agreement during the 60-day freedom period and/or until a
new agreement is reached by the parties (National Congress of
Unions in the Sugar Industry of the Philippines vs. Ferrer-Calleja,
205 SCRA 478 [1992]). Applied to the case at bench, the legal effects
of the immediate past CBA between petitioner and private respondent
terminated, and the effectivity of the new CBA began, only on March
4, 1993, when public respondent resolved their disputes.[8] chanroblespublishingcompany

On the other hand, respondent. MEWA invokes the ruling in St.

Luke’s Medical Center, Inc. vs. Torres,[9] which held that the Secretary
of Labor has plenary and discretionary powers to determine the
effectivity of arbitral awards.[10] Thus, respondent maintains that the
arbitral award in this case should be made effective from December 1,
1995 to November 30, 1997. The ruling in the St. Luke’s case was
restated in the 1998 case of Manila Central Line Corporation vs.
Manila Central Line Free Workers Union-National Federation of
Labor, et al.,[11] where it was held that:
chanroblespublishingcompany

Art. 253-A refers to collective bargaining agreements entered

into by the parties as a result of their mutual agreement. The
CBA in this case, on the other hand, is part of an arbitral award.
As such, it may be made retroactive to the date of expiration of
the previous agreement. As held in St. Luke’s Medical Centers
Inc. vs. Torres:

Finally, the effectivity of the Order of January 28, 1991,

must retroact to the date of the expiration of the previous
CBA, contrary to the position of petitioner. Under the
circumstances of the case, Article 253-A cannot be
properly applied to herein case. As correctly stated by
public respondent in his assailed Order of April 12, 1991
dismissing petitioner’s Motion for Reconsideration —

Anent the alleged lack of basis for the retroactivity

provisions awarded, we would stress that the
provision of law invoked by the Hospital, Article
 253-A of the Labor Code, speaks of agreements by
and between the parties, and not arbitral awards.
(p. 818 Rollo)

Therefore, in the absence of a specific provision of law prohibiting

retroactivity of the effectivity of arbitral awards issued by the
Secretary of Labor pursuant to Article 263(g) of the Labor Code, such
as herein involved, public respondent is deemed vested with plenary
and discretionary powers to determine the effectivity thereof (223
SCRA 779, 792-793 [1993]; reiterated in Philippine Airlines, Inc. vs.
Confessor 231 SCRA 41 [1994]).

Indeed, petitioner has not shown that the question of effectivity was
not included in the general agreement of the parties to submit their
dispute for arbitration: To the contrary, as the order of the labor
arbiter states, this question was among those submitted for
arbitration by the parties:

As regards the “Effectivity and Duration” clause, the company

proposes that the collective bargaining agreement shall take effect
only upon its signing and shall remain in full force and effect for a
period of five years. The union proposes that the agreement shall take
effect retroactive to March 15, 1989, the expiration date of the old
CBA.

And after an evaluation of the parties’ respective contention and

argument thereof, it is believed that that of the union is fair and
reasonable. It is the observation of this Arbitrator that in almost
subsequent CBAs, the effectivity of the renegotiated CBA, usually and
most often is made effective retroactive to the date when the
immediately preceding CBA expires so as to give a semblance of
continuity. Hence, for this particular case, it is believed that there is
nothing wrong adopting the stand of the union, that is that this CBA
be made retroactive effective March 15, 1989.[12]

Parenthetically, the Decision rendered in the case at bar on January

27, 1999[13] ordered that the CBA should be effective for a term of two
years counted from December 28, 1996 (the date of the Secretary of
Labor’s disputed Order on the parties’ motion for reconsideration) up
to December 27, 1998.[14] That is to say, the arbitral award was given
prospective effect.

Upon a reconsideration of the Decision, this Court issued the assailed

Resolution which ruled that where an arbitral award granted beyond
six months after the expiration of the existing CBA, and there is no
agreement between the parties as to the date of effectivity thereof, the
arbitral award shall retroact to the first day after the six-month period
following the expiration of the last day of the CBA. In the dispositive
portion, however, the period to which the award shall retroact was
inadvertently stated as beginning on December 1, 1995 up to
November 30, 1997.

In resolving the motions for reconsideration in this case, this Court

took into account the fact that petitioner belongs to an industry
imbued with public interest. As such, this Court can not ignore the
enormous cost that petitioner will have to bear as a consequence of
the full retroaction of the arbitral award to the date of expiry of the
CBA, and the inevitable effect that it would have on the national
economy. On the other hand, under the policy of social justice, the
law bends over backward to accommodate the interests of the
working class on the humane justification that those with less
privilege in life should have more in law.[15] Balancing these two
contrasting interests, this Court turned to the dictates of fairness and
equitable justice and thus arrived at a formula that would address the
concerns of both sides. Hence, this Court held that the arbitral award
in this case be made to retroact to the first day after the six-month
period following the expiration of the last day of the CBA, i.e., from
June 1, 1996 to May 31, 1998. chanroblespublishingcompany

This Court, therefore, maintains the foregoing rule in the assailed

Resolution pro hac vice. It must be clarified, however, that consonant
with this rule, the two-year effectivity period must start from June 1,
1996 up to May 31, 1998, not December 1, 1995 to November 30,
1997.

During the interregnum between the expiration of the economic

provisions of the CBA and the date of effectivity of the arbitral award,
it is understood that the hold-over principle shall govern, viz:
 “It shall be the duty of both parties to keep the status quo and to
continue in full force and effect the terms and conditions of the
existing agreement during the 60-day freedom period and/or
until a new agreement is reached by the parties.” Despite the
lapse of the formal effectivity of the CBA the law still considers
the same as continuing in force and effect until a new CBA shall
have been validly executed.[16]

Finally, this Court finds that petitioner’s prayer, that the award of
Two Thousand Pesos shall be paid to rank-and-file employees during
the two-year period, is well-taken. The award does not extend to
supervisory employees of petitioner. chanroblespublishingcompany

WHEREFORE, the Motion for Partial Modification is GRANTED.

The Resolution of February 22, 2000 is PARTIALLY MODIFIED
as follows: (a) the arbitral award shall retroact to the two-year period
from June 1, 1996 to May 31, 1998; (b) the increased wage award of
Two Thousand Pesos (P2,000.00) shall be paid to the rank-and-file
employees during the said two-year period. This Resolution is subject
to the monetary advances granted by petitioner to said employees
during the pendency of this case, assuming such advances had
actually been distributed to them. chanroblespublishingcompany

SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.

[1] 192 SCRA 414 (1990).

[2] 241 SCRA 294 (1995).
[3] 223 SCRA 779 (1993).
[4] “When, in his opinion, there exists a labor dispute causing or likely to cause a
strike or lockout in an industry indispensable to the national interest, the
Secretary of Labor and Employment may assume jurisdiction over the dispute
and decide it or certify the same to the Commission for compulsory
arbitration.”
chanroblespublishingcompany

[5] Underscoring provided.

[6] Op. cit., note 1.
[7] 241 SCRA 294 (1995).
[8] Ibid., at 307.
[9] Op. Cit. note 3
[10] Ibid., at 793.
[11] 290 SCRA 690 (1998).
[12] Ibid., at 702-703.
[13] 302 SCRA 173 (1999).
[14] Erroneously written in the Decision as “December 27 1999”.
[15] Felix Uy, et al. vs. Commission on Audit, G.R. No. 130685, March 21, 2000;
citing Ditan vs. POEA Administrator, 191 SCRA 823, 829 (1990).
[16] National Congress of Unions in the Sugar Industry of the Philippines vs.
Ferrer-Calleja, 205 SCRA 478, 485 (1992).