G.R. No.

76273

July 31, 1987

FEU-DR.
NICANOR
REYES
MEDICAL
FOUNDATION,
INC., petitioner,
vs.
HON. CRESENCIANO TRAJANO and RICARDO C. CASTRO, FAR EASTERN UNIVERSITY DR.
NICANOR REYES MEDICAL FOUNDATION, INC. ALLIANCE OF FILIPINO WORKERS
(AFW), respondents.

Respondent Director affirmed said Order on appeal. In dismissing the appeal, however, respondent
Director said that:
... respondent's (petitioner herein, reliance on the petition with the Supreme Court involving as it
does the provisions of Article 244 of the Labor Code vis-a-vis the character of the hospital, which
has been alleged as a non-profit medical foundation, has been rendered moot and academic by
virtue of the amendatory BP #70, which allows employees of non-profit medical institutions to
unionize.

PARAS, J.:
This is a petition for certiorari seeking to annul and set aside the decision of the respondent Director which
affirmed the Order of the Med-Arbiter in the petition for certification election (NCR-LRD-N-2-050-86) filed
by private respondent, thus ordering the holding of a certification election among the rank and file
employees of the herein petitioner.
The facts of the case are as follows:
The petitioner, Far Eastern University-Dr. Nicanor Reyes Memorial Foundation, Inc., has a work force of
about 350 rank and file employees, majority of whom are members of private respondent Alliance of
Filipino Workers.

Whatever doubt there may be on the right of the workers in a medical institution has been laid to
rest by BP#70.
WHEREFORE, premises considered, the present appeal is hereby dismissed for lack of merit
and the Order of the Med-Arbiter dated 17 April 1986 affirmed. ... (p. 19, Rollo)
Hence, this petition, raising the issue of whether or not respondent Director gravely abused his discretion
in granting the petition for certification election, despite the pendency of a similar petition before the
Supreme Court (G.R. No. 49771) which involves the same parties for the same cause.
The Petition is devoid of merit.

1
On February 13, 1986, private respondent filed a Petition for Consent and/or Certification Election with The
Ministry of Labor and Employment. The petitioner opposed the petition on the ground that a similar petition
involving the same issues and the same parties is pending resolution before the Supreme Court, docketed
as G.R. No. L-49771.
In its position paper, private respondent admitted: that as early as May 10, 1976, private respondent filed a
similar petition for certification election with the Ministry of Labor and Employment but the petition was
denied by the MED Arbiter and the Secretary of Labor on appeal, on the ground that the petitioner was a
non-stock, non-profit medical institution, therefore, its employees may not form, join, or organize a union
pursuant to Article 244 of the Labor Code; that private respondent filed a petition for certiorari with the
Supreme Court (docketed as G.R. No. L-49771) assailing the constitutionality of Article 244 of the Labor
Code; that pending resolution of the aforesaid petition, or on May 1, 1980, Batas Pambansa Bilang 70 was
enacted amending Article 244 of the Labor Code, thus granting even employees of non-stock, non-profit
institutions the right to form, join and organize labor unions of their choice; and that in the exercise of such
right, private respondent filed another petition for certification election with the Ministry of Labor and
Employment (NCR-LRD-N-2-050-86).
On April 17, 1986, the Med Arbiter issued an Order granting the petition, declaring that a certification
election be conducted to determine the exclusive bargaining representative of all the rank and file
employees of the petitioner (p. 4, Rollo).

At the time private respondent filed its petition for certification election on February 13, 1986, Article 244 of
the Labor Code was already amended by Batas Pambansa Bilang 70, to wit:
Art. 244. Coverage and employees' right to self-organization. All persons employed in
commercial, industrial and charitable, medical or educational institutions whether operating for
profit or not, shall have the right to self-organizations of their own choosing for purposes of
collective bargaining. Ambulant intermittent and itinerant workers, self-employed people, rural
workers and those without any definite employers may form labor organizations for the purpose
of enhancing and defending their interests and for their mutual aid and protection. (underscoring
supplied).
Under the aforequoted provision, there is no doubt that rank and file employees of non-profit medical
institutions (as herein petitioner) are now permitted to form, organize or join labor unions of their choice for
purposes of collective bargaining. Since private respondent had complied with the requisites provided by
law for calling a certification election (p. 15, Rollo), it was incumbent upon respondent Director to conduct
such certification election to ascertain the bargaining representative of petitioner's employees (Samahang
Manggagawa Ng Pacific Mills, Inc. vs. Noriel, 134 SCRA 152).
As held in Quimpo v. Dela Victoria, 46 SCRA 139, in order that the pendency of another action between
the same parties for the same cause may be availed of as a ground to dismiss a case, there must be,

between the action under consideration and the other action: (1) Identity of parties, or at least such as
representing the same interest in both actions; (2) Identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (3) the Identity on the two preceding particulars should be such that
any judgment which may be rendered on the other action wig, regardless of which party is successful,
amount to res judicata in the action under consideration.1avvphi1
In the instant case, any judgment which may be rendered in the petition for certiorari pending before the
Supreme Court (G. R. No. L-49771) wig not constitute res judicata in the petition for certification election
under consideration, for while in the former, private respondent questioned the constitutionality of Article
244 of the Labor Code before its amendment, in the latter, private respondent invokes the same article as
already amended.
Petitioner, however, has pointed out that respondent Director should not have arrogated upon himself the
power to declare the aforesaid petition for certiorari (G.R. No. L-49771) moot and academic, as the same
is sub-judiceand only the Supreme Court can decide the matter. The Director cannot be faulted for he had
to make a decision.
WHEREFORE, this petition is DISMISSED, and the decision appealed from is hereby AFFIRMED.
SO ORDERED.

G.R. No. 77231 May 31, 1989

SAN
JOSE
CITY
ELECTRIC
SERVICE
COOPERATIVE,
INC.
(SAJELCO), petitioner,
vs.
MINISTRY OF LABOR AND EMPLOYMENT and MAGKAISA-ADLO, respondents.
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court. Petitioner San Jose City Electric
Service Cooperative, Inc. (SAJELCO, for brevity) seeks the reversal of the Order (pp. 38-40, Rollo) of Pura
Ferrer-Calleja, Director of Bureau of Labor Relations in BLR Case No. A-10-259-86 which affirmed the
Order of Med-Arbiter Antonio R. Cortez to conduct a certification election among the rank-and-file
employees of SAJELCO.
The antecedent facts of the instant case are as follows:
On July 29, 1986, private respondent Manggagawang Nagkakaisa ng SAJELCO-Association of
Democratic Labor Organization (MAGKAISA-ADLO) filed a petition (pp. 16-18, Rollo) for direct certification
election with the Regional Office No. 111 of the Department of Labor and Employment in San Fernando,
Pampanga. The petition alleged that MAGKAISA-ADLO is a legitimate labor organization duly registered

with the Ministry of Labor and Employment; that there are more or less fifty-four (54) rank and file
employees in SAJELCO; that almost 62% of the employees sought to be represented have supported the
filing of the petition; that there has been no valid certification election held in SAJELCO during the twelve
(12) month period prior to the filing of the petition and that there is no other union in the bargaining unit.
In its answer (pp. 19-21, Rollo), SAJELCO opposed the petition for direct certification election
contending, inter alia, that the employees who sought to be represented by private respondent are
members-consumers of the Cooperative itself and at the same time composed the General Assembly
which, pursuant to the By-laws is also the final arbiter of any dispute arising in the Cooperative. Thus:
xxx
5. That some, if not most, of the employees who sought to be represented by the petitioner, are memberconsumers, and as such are members of the General or Special Assembly which is the final arbiter on any
dispute which a member and/or the Board, or the Cooperative may have, and that such "some"of said
alleged supporters, in their capacity as member-consumers, enjoy two personalities in that as employees
and/or members of the General Assembly, and therefore cannot fairly and prudently represent such
opposing personalities that merge into one juridical or natural person, and these special and unique status
or personalities of the supposed supporters cannot qualify to be represented by the petitioner, without
doing injustice, in equity and unfair status or advantage to those member-consumers who have not that
destiny or status of becoming employees;
6 No valid and lawful representation can be obtained by petitioner in behalf of the supposed supporters,
who are also member-consumer, that are bound by the Article of Incorporation, By-laws of the respondent
Cooperative and pertinent Decrees and laws, to support and defend the basic policies of the Government
on Electric Cooperatives;
7. There is no possible legal way by which to dismantle the personalities of some of the supporters of the
petitioner, as employees, from their status as consumer-members, who are, under the By-laws, part and
parcels of the General or Special Assembly that finally decides any dispute, and no reasonable or valid
scale of justice could be invoked to divide a person who, in conscience, is also the other fellow against
whom a remedy is sought for in allowing this to happen is tantamount to slaughtering a man to his own
ends;
xxx
On September 5, 1986, the Med-Arbiter who was assigned to the case issued an Order (pp. 24-26, Rollo)
granting the petition for direct certification election on the basis of the pleadings filed. The Order said that
while some of the members of petitioner union are members of the cooperative, it cannot be denied that
they are also employees within the contemplation of the Labor Code and are therefore entitled to enjoy all
the benefits of employees, including the right to self-organization (pp. 25, Rollo). This Order was appealed
by SAJELCO to the Bureau of Labor Relations.

In its appeal, (pp. 27-36, Rollo) SAJELCO reiterated its position that:
. . . upon the principle that in electric cooperative as in the case of respondent, there is a mergerof the
consumer-members that composed of the assembly and that of the rank-and-file members of the
petitioners-into one person or juridical status thus rendering the proposed collective bargaining agent
ineffective and/or uncalled for considering that a grievance machinery for employees and/or memberconsumers of the cooperative-has been provided for by the By-laws as a built-in over-all arbiter involving
disputes affecting said cooperative;
Respondent Director of the Bureau of Labor Relations dismissed the appeal and sustained the ruling of
the Med-Arbiter in an order dated January 5, 1987.
On February 19, 1987, SAJELCO filed the instant petition for certiorari praying that the order of
respondent Director be set aside and another one rendered denying the holding or conduct of a
certification election among the rank and file employees of SAJELCO.
In a letter dated June 20, 1987, Atty. Ricardo Soto, Jr., counsel for private respondent union, manifested
that a direct certification election was conducted in SAJELCO, there being no restraining order from this
Court enjoining the holding thereof Likewise, Atty. Soto was of the opinion that in view of the direct
certification election conducted, the petition brought before this Court by SAJELCO has become moot and
academic (p.
3 48, Rollo). Attached to his letter is a copy of the minutes of the certification election held on
April 13, 1987 showing that of forty three (43) employees who voted, thirty (30) voted for respondent union
and thirteen (13) voted for "no union."
In the resolution of this court (First Division) dated September 29, 1987, respondents were required to
comment on the petition. The Solicitor General filed its comment dated October 30, 1987 wherein it took a
stand contrary to that of respondent Director. To support its stand, the Solicitor General argued firstly, that
the union members who seek to be represented by the union are the very members of the cooperative,
thereby resulting in a fusion of two personalities. Thus, it will be inconsistent for the union members to
bargain with themselves. Secondly, he said that article 243 of the Labor Code; requires that before one
can form, join or assist a labor union, he must first be employed and to be an employee one must be under
hire and must have no involvement in the ownership of the firm. A labor union is formed for purposes of
collective bargaining. The duty to bargain exists only between employer and employees and not between
an employer and his co-owners. Thirdly, he also said that under the National Electrification Decree (P.D.
No. 269, August 6, 1973) members of an electric cooperative such as petitioner, besides contributing
financially to its establishments and maintenance, participate in its management. In the latter aspect, they
possess the powers and prerogatives of managerial employees who are not eligible to join, assist or form
any labor organization (pp. 4-6 of Comment; pp 43-45, Rollo).
On November 25, 1987, We required Atty. Soto, Jr. to comment on the comment of the Solicitor General
(p. 47,Rollo). However, the notices sent to him were returned and stamped "moved to an unknown
address." But respondent Director of the Bureau of Labor Relations filed a comment on the aforesaid

comment of the Solicitor General reiterating his stand that members of private respondent union fall under
the general provision of Article 244 of the Code on who are qualified to form, join or assist in the formation
of unions as they are neither managerial employees nor persons belonging to subversive organizations.
Thus, on May 25, 1988, we gave due course to the petition (p. 79, Rollo).
The only issue presented for resolution in this petition is whether or not the employees-members of an
electric cooperative can organize themselves for purposes of collective bargaining.
This Court had the occasion to rule on this issue in the consolidated cases of Batangas I-Electric
Cooperative Labor Union vs. Romeo Young, et al., G.R. No. 62386, Bulacan II- Electric Cooperative, Inc.,
vs. Hon. Eliseo A. Penaflor, et al., G.R. No. 70880 and Albay Electric Cooperative vs. Crescencio B.
Trajano et. al., G.R. No. 74560 (November 9, 1988), citing the case of Cooperative Rural Bank of Davao
City, Inc. vs. Pura Ferrer-Calleja, G.R. No. 77951, September 26,1988, where it was held that:
A cooperative, therefore, is by its nature different from an ordinary business concern being run either, by
persons, partnerships or corporations. Its owners and/or members are the ones who run and operate the
business while the others are its employees. As above stated, irrespective of the name of shares owned
by its members they are entitled to cast one vote each in deciding upon the affair of the cooperative. Their
share capital earn limited interests, They enjoy special privileges as exemption from income tax and
sales taxes, preferential right to supply their products to State agencies and even exemption from
minimum wage laws.
An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the
right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the
opinion of August 14, 1981 of the Solicitor General, he corectly opined that employees of cooperatives
who are themselves members of the cooperative have no right to form or join labor organizations for
purposes of collective bargaining for being themselves co-owners of the cooperative.
However, in so far as it involves cooperatives with employees who are not members or co-owners thereof,
certainly such employees are entitled to exercise the rights of all workers to organization, collective
bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country.
In this petition, San Jose City Electric Service Cooperative, Inc. (SAJELCO) claims that its employees are
also members of the cooperative. It cited Section 17(18) of its By-laws which declares that:
The Board shall also create positions for subordinate employees and fix their duties and
remunerations. Only member-consumers or members of their immediate family shall be employed by the
cooperative (Emphasis supplied).
The above-cited provision, however, mentions two types of employees, namely: the members-consumers
and the members of their immediate families. As regards employees of SAJELCO who are membersconsumers, the rule is settled that they are not qualified to form, join or assist labor organizations for

purposes of collective bargaining. The reason for withholding from employees of a cooperative who are
members-co-owners the right to collective bargaining is clear: an owner cannot bargain with himself.
However, employees who are not members-consumers may form, join or assist labor organizations for
purposes of collective bargaining notwithstanding the fact that employees of SAJELCO who are not
members-consumers were employed ONLY because they are members of the immediate family of
members-consumers. The fact remains that they are not themselves members-consumers, and as such,
they are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and
others as are enshrined in Section 8, Article III and Section 3, Article XIII of the 1987 Constitution, Labor
Code of the Philippines and other related laws (Cooperative Rural Bank of Davao City, Inc., supra, p. 10).
ACCORDINGLY, the petition is GRANTED. The assailed Order of respondent Pura Ferrer-Calleja, Director
of the Bureau of Labor Relations is hereby MODIFIED to the effect that only the rank-and-file employees of
petitioner who are not its members-consumers are entitled to self-organization, collective bargaining, and
negotiations, while other employees who are members-consumers thereof cannot enjoy such right. The
direct certification election conducted on April 13, 1987 is hereby set aside. The Regional Office III of the
Department of Labor and Employment in San Fernando, Pampanga is hereby directed: (a) to determine
the number of rank and file employees of SAJELCO who are not themselves members-consumers; (b) to
resolve whether or not there is compliance with the requirements set forth in Article 257 of the Labor Code;
and (c) in the affirmative, to immediately conduct a direct certification election among the rank and file
employees of SAJELCO who are not members-consumers.

4
SO ORDERED.
G.R. No. 79025. December 29, 1989.
BENGUET
ELECTRIC
COOPERATIVE,
INC., petitioner,
vs.
HON. PURA FERRER-CALLEJA, Director of the Bureau of Labor Relations, and BENECO
EMPLOYEES LABOR UNION, respondents.

An opposition to the petition was filed by the Beneco Employees Labor Union (hereinafter referred to as
BELU) contending that it was certified as the sole and exclusive bargaining representative of the subject
workers pursuant to an order issued by the med-arbiter on October 20,1980; that pending resolution by the
National Labor Relations Commission are two cases it filed against BENECO involving bargaining
deadlock and unfair labor practice; and, that the pendency of these cases bars any representation
question.
BENECO, on the other hand, filed a motion to dismiss the petition claiming that it is a non-profit electric
cooperative engaged in providing electric services to its members and patron-consumers in the City of
Baguio and Benguet Province; and, that the employees sought to be represented by BWLU-ADLO are not
eligible to form, join or assist labor organizations of their own choosing because they are members and
joint owners of the cooperative.
On September 2, 1985 the med-arbiter issued an order giving due course to the petition for certification
election. However, the med-arbiter limited the election among the rank and file employees of petitioner
who are non-members thereof and without any involvement in the actual ownership of the cooperative.
Based on the evidence during the hearing the med-arbiter found that there are thirty-seven (37)
employees who are not members and without any involvement in the actual ownership of the cooperative.
The dispositive portion of the med-arbiter's order is as follows:
WHEREFORE, premises considered, a certification election should be as it is hereby
ordered to be conducted at the premises of Benguet, Electric Cooperative, Inc., at
Alapang, La Trinidad, Benguet within twenty (20) days from receipt hereof among all the
rank and file employees (non-members/consumers and without any involvement in the
actual ownership of the cooperative) with the following choices:
1. BENECO WORKERS LABOR UNION-ADLO
2. BENECO EMPLOYEES LABOR UNION

CORTES, J.:

3. NO UNION

On June 21, 1985 Beneco Worker's Labor Union-Association of Democratic Labor Organizations
(hereinafter referred to as BWLU- ADLO) filed a petition for direct certification as the sole and exclusive
bargaining representative of all the rank and file employees of Benguet Electric Cooperative, Inc.
(hereinafter referred to as BENECO) at Alapang, La Trinidad, Benguet alleging, inter alia, that BENECO
has in its employ two hundred and fourteen (214) rank and file employees; that one hundred and ninetyeight (198) or 92.5% of these employees have supported the filing of the petition; that no certification
election has been conducted for the last 12 months; that there is no existing collective bargaining
representative of the rank and file employees sought to represented by BWLU- ADLO; and, that there is no
collective bargaining agreement in the cooperative.

The payroll for the month of June 1985 shall be the basis in determining the qualified
voters who may participate in the certification election to be conducted.
SO ORDERED. [Rollo, pp. 22-23.]
BELU and BENECO appealed from this order but the same was dismissed for lack of merit on March
25,1986. Whereupon BENECO filed with this Court a petition for certiorari with prayer for preliminary
injunction and /or restraining order, docketed as G.R. No. 74209, which the Supreme Court dismissed for
lack of merit in a minute resolution dated April 28, 1986.

The ordered certification election was held on October 1, 1986. Prior to the conduct thereof BENECO's
counsel verbally manifested that "the cooperative is protesting that employees who are membersconsumers are being allowed to vote when . . . they are not eligible to be members of any labor union for
purposes of collective bargaining; much less, to vote in this certification election." [Rollo, p. 28]. Petitioner
submitted a certification showing that only four (4) employees are not members of BENECO and insisted
that only these employees are eligible to vote in the certification election. Canvass of the votes showed
that BELU garnered forty-nine (49) of the eighty-three (83) "valid" votes cast.
Thereafter BENECO formalized its verbal manifestation by filing a Protest. Finding, among others, that the
issue as to whether or not member-consumers who are employees of BENECO could form, assist or join a
labor union has been answered in the affirmative by the Supreme Court in G.R. No. 74209, the medarbiter dismissed the protest on February 17, 1987. On June 23, 1987, Bureau of Labor Relations (BLR)
director Pura Ferrer-Calleja affirmed the med-arbiter's order and certified BELU as the sole and exclusive
bargaining agent of all the rank and file employees of BENECO.
Alleging that the BLR director committed grave abuse of discretion amounting to lack or excess of
jurisdiction BENECO filed the instant petition for certiorari. In his Comment the Solicitor General agreed
with BENECO's stance and prayed that the petition be given due course. In view of this respondent
director herself was required by the Court to file a Comment. On April 19, 1989 the Court gave due course
to the petition and required the parties to submit their respective memoranda.

The main issue in this case is whether or not respondent director committed grave abuse of discretion in
certifying respondent BELU as the sole and exclusive bargaining representtative of the rank and file
employees of BENECO.
Under Article 256 of the Labor Code [Pres. Decree 442] to have a valid certification election, "at least a
majority of all eligible voters in the unit must have cast their votes. The labor union receiving the majority of
the valid votes cast shall be certified as the exclusive bargaining agent of all workers in the unit." Petitioner
BENECO asserts that the certification election held on October 1, 1986 was null and void since membersemployees of petitioner cooperative who are not eligible to form and join a labor union for purposes of
collective bargaining were allowed to vote therein.
Respondent director and private respondent BELU on the other hand submit that members of a
cooperative who are also rank and file employees are eligible to form, assist or join a labor union
[Comment of Respondent Director, p. 4; Rollo, p. 125; Comment of BELU, pp. 9-10; Rollo pp. 99-100].
The Court finds the present petition meritorious.
The issue of whether or not employees of a cooperative are qualified to form or join a labor organization
for purposes of collective bargaining has already been resolved and clarified in the case of Cooperative
Rural Bank of Davao City, Inc. vs. Ferrer Calleja, et al. [G.R. No. 7795, September 26,1988] and reiterated
in the cases ofBatangas-Electric Cooperative Labor Union v. Young, et al. [G.R. Nos. 62386, 70880 and

74560 November 9, 1988] and San Jose City Electric Service Cooperative, Inc. v. Ministry of Labor and
Employment, et al. [G.R. No. 77231, May 31, 1989] wherein the Court had stated that the right to collective
bargaining is not available to an employee of a cooperative who at the same time is a member and coowner thereof. With respect, however, to employees who are neither members nor co-owners of the
cooperative they are entitled to exercise the rights to self-organization, collective bargaining and
negotiation as mandated by the 1987 Constitution and applicable statutes.
Respondent director argues that to deny the members of petitioner cooperative the right to form, assist or
join a labor union of their own choice for purposes of collective bargaining would amount to a patent
violation of their right to self-organization. She points out that:
Albeit a person assumes a dual capacity as rank and file employee and as member of a
certain cooperative does not militate, as in the instant case, against his/her exercise of
the right to self-organization and to collective bargaining guaranteed by the Constitution
and Labor Code because, while so doing, he/she is acting in his/her capacity as rank
and file employee thereof. It may be added that while the employees concerned became
members of petitioner cooperative, their status employment as rank and filers who are
hired for fixed compensation had not changed. They still do not actually participate in the
management of the cooperative as said function is entrusted to the Board of Directors
and to the elected or appointed officers thereof. They are not vested with the powers
and prerogatives to lay down and execute managerial policies; to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees; and/or to effectively
recommend such managerial functions [Comment of Respondent Director, p. 4; Rollo, p.
125.]
Private respondent BELU concurs with the above contention of respondent director and, additionally,
claims that since membership in petitioner cooperative is only nominal, the rank and file employees who
are members thereof should not be deprived of their right to self-organization.
The above contentions are untenable. Contrary to respondents' claim, the fact that the membersemployees of petitioner do not participate in the actual management of the cooperative does not make
them eligible to form, assist or join a labor organization for the purpose of collective bargaining with
petitioner. The Court's ruling in the Davao City case that members of cooperative cannot join a labor union
for purposes of collective bargaining was based on the fact that as members of the cooperative they are
co-owners thereof. As such, they cannot invoke the right to collective bargaining for "certainly an owner
cannot bargain with himself or his co-owners." [Cooperative Rural Bank of Davao City, Inc. v. FerrerCalleja, et al., supra]. It is the fact of ownership of the cooperative, and not involvement in the
management thereof, which disqualifies a member from joining any labor organization within the
cooperative. Thus, irrespective of the degree of their participation in the actual management of the
cooperative, all members thereof cannot form, assist or join a labor organization for the purpose of
collective bargaining.

Respondent union further claims that if nominal ownership in a cooperative is "enough to take away the
constitutional protections afforded to labor, then there would be no hindrance for employers to grant, on a
scheme of generous profit sharing, stock bonuses to their employees and thereafter claim that since their
employees are not stockholders [of the corporation], albeit in a minimal and involuntary manner, they are
now also co-owners and thus disqualified to form unions." To allow this, BELU argues, would be "to allow
the floodgates of destruction to be opened upon the rights of labor which the Constitution endeavors to
protect and which welfare it promises to promote." [Comment of BELU, p. 10; Rollo, p. 100].
The above contention of respondent union is based on the erroneous presumption that membership in a
cooperative is the same as ownership of stocks in ordinary corporations. While cooperatives may exercise
some of the rights and privileges given to ordinary corporations provided under existing laws, such
cooperatives enjoy other privileges not granted to the latter [See Sections 4, 5, 6, and 8, Pres. Decree No.
175; Cooperative Rural Bank of Davao City v. Ferrer-Calleja, supra]. Similarly, members of cooperatives
have rights and obligations different from those of stockholders of ordinary corporations. It was precisely
because of the special nature of cooperatives, that the Court held in the Davao City case that membersemployees thereof cannot form or join a labor union for purposes of collective bargaining. The Court held
that:

A cooperative ... is by its nature different from an ordinary business concern being run
either by persons, partnerships, or corporations. Its owners and/or members are the
ones who run and operate the business while the others are its employees. As above
stated, irrespective of the number of shares owned by each member they are entitled to
cast one vote each in deciding upon the affairs of the cooperative. Their share capital
earn limited interest. They enjoy special privileges as-exemption from income tax and
sales taxes, preferential right to supply their products to State agencies and even
exemption from the minimum wage laws.
An employee therefore of such a cooperative who is a member and co-owner thereof
cannot invoke the right to collective bargaining for certainly an owner cannot bargain
with himself or his co-owners.

It is important to note that, in her order dated September 2, 1985, med-arbiter Elnora V. Balleras made a
specific finding that there are only thirty-seven (37) employees of petitioner who are not members of the
cooperative and who are, therefore, the only employees of petitioner cooperative eligible to form or join a
labor union for purposes of collective bargaining [Annex "A" of the Petition, p. 12; Rollo, p. 22]. However,
the minutes of the certification election [Annex "C" of the Petition: Rollo, p. 28] show that a total of eightythree (83) employees were allowed to vote and of these, forty-nine (49) voted for respondent union. Thus,
even if We agree with respondent union's contention that the thirty seven (37) employees who were
originally non-members of the cooperative can still vote in the certification election since they were only
"forced and compelled to join the cooperative on pain of disciplinary action," the certification election held
on October 1, 1986 is still null and void since even those who were already members of the cooperative at

the time of the issuance of the med-arbiter's order, and therefore cannot claim that they were forced to join
the union were allowed to vote in the election.
Article 256 of the Labor Code provides, among others, that:
To have a valid, election, at least a majority of all eligible voters in the unit must have
cast their votes. The labor union receiving the majority of the valid votes cast shall be
certified as the exclusive bargaining agent of all workers in the unit . . . [Italics supplied.]
In this case it cannot be determined whether or not respondent union was duly elected by the eligible
voters of the bargaining unit since even employees who are ineligible to join a labor union within the
cooperative because of their membership therein were allowed to vote in the certification election.
Considering the foregoing, the Court finds that respondent director committed grave abuse of discretion in
certifying respondent union as the sole and exclusive bargaining representative of the rank and file
employees of petitioner cooperative.
WHEREFORE, the petition is hereby GRANTED and the assailed resolution of respondent director is
ANNULLED. The certification election conducted on October 1, 1986, is SET ASIDE. The Regional Office
No. 1 of San Fernando, La Union is hereby directed to immediately conduct new certification election
proceedings among the rank and file employees of the petitioner who are not members of the cooperative.
SO ORDERED.
G.R. No. 85750 September 28, 1990
INTERNATIONAL
CATHOLIC
IMMIGRATION
COMMISSION, petitioner
vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU OF LABOR RELATIONS
AND TRADE UNIONS OF THE PHILIPPINES AND ALLIED SERVICES (TUPAS) WFTU respondents.
G.R. No. 89331 September 28, 1990
KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR ASSOCIATION IN LINE
INDUSTRIES
AND
AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND INTERNATIONAL RICE RESEARCH INSTITUTE,
INC.,respondents.
MELENCIO-HERRERA, J.:

Consolidated on 11 December 1989, these two cases involve the validity of the claim of immunity by the
International Catholic Migration Commission (ICMC) and the International Rice Research Institute, Inc.
(IRRI) from the application of Philippine labor laws.
I. Facts and Issues
A. G.R. No. 85750 the International Catholic Migration Commission (ICMC) Case.
As an aftermath of the Vietnam War, the plight of Vietnamese refugees fleeing from South Vietnam's
communist rule confronted the international community.
In response to this crisis, on 23 February 1981, an Agreement was forged between the Philippine
Government and the United Nations High Commissioner for Refugees whereby an operating center for
processing Indo-Chinese refugees for eventual resettlement to other countries was to be established in
Bataan (Annex "A", Rollo, pp. 22-32).
ICMC was one of those accredited by the Philippine Government to operate the refugee processing center
in Morong, Bataan. It was incorporated in New York, USA, at the request of the Holy See, as a non-profit
agency involved in international humanitarian and voluntary work. It is duly registered with the United
Nations Economic and Social Council (ECOSOC) and enjoys Consultative Status, Category II. As an
international
7 organization rendering voluntary and humanitarian services in the Philippines, its activities
are parallel to those of the International Committee for Migration (ICM) and the International Committee of
the Red Cross (ICRC) [DOLE Records of BLR Case No. A-2-62-87, ICMC v. Calleja, Vol. 1].
On 14 July 1986, Trade Unions of the Philippines and Allied Services (TUPAS) filed with the then Ministry
of Labor and Employment a Petition for Certification Election among the rank and file members employed
by ICMC The latter opposed the petition on the ground that it is an international organization registered
with the United Nations and, hence, enjoys diplomatic immunity.
On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC and dismissed the petition for lack
of jurisdiction.
On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor Relations (BLR), reversed the MedArbiter's Decision and ordered the immediate conduct of a certification election. At that time, ICMC's
request for recognition as a specialized agency was still pending with the Department of Foreign Affairs
(DEFORAF).
Subsequently, however, on 15 July 1988, the Philippine Government, through the DEFORAF, granted
ICMC the status of a specialized agency with corresponding diplomatic privileges and immunities, as
evidenced by a Memorandum of Agreement between the Government and ICMC (Annex "E",
Petition, Rollo, pp. 41-43), infra.

ICMC then sought the immediate dismissal of the TUPAS Petition for Certification Election invoking the
immunity expressly granted but the same was denied by respondent BLR Director who, again, ordered the
immediate conduct of a pre-election conference. ICMC's two Motions for Reconsideration were denied
despite an opinion rendered by DEFORAF on 17 October 1988 that said BLR Order violated ICMC's
diplomatic immunity.
Thus, on 24 November 1988, ICMC filed the present Petition for Certiorari with Preliminary Injunction
assailing the BLR Order.
On 28 November 1988, the Court issued a Temporary Restraining Order enjoining the holding of the
certification election.
On 10 January 1989, the DEFORAF, through its Legal Adviser, retired Justice Jorge C. Coquia of the
Court of Appeals, filed a Motion for Intervention alleging that, as the highest executive department with the
competence and authority to act on matters involving diplomatic immunity and privileges, and tasked with
the conduct of Philippine diplomatic and consular relations with foreign governments and UN
organizations, it has a legal interest in the outcome of this case.
Over the opposition of the Solicitor General, the Court allowed DEFORAF intervention.
On 12 July 1989, the Second Division gave due course to the ICMC Petition and required the submittal of
memoranda by the parties, which has been complied with.
As initially stated, the issue is whether or not the grant of diplomatic privileges and immunites to ICMC
extends to immunity from the application of Philippine labor laws.
ICMC sustains the affirmative of the proposition citing (1) its Memorandum of Agreement with the
Philippine Government giving it the status of a specialized agency, (infra); (2) the Convention on the
Privileges and Immunities of Specialized Agencies, adopted by the UN General Assembly on 21
November 1947 and concurred in by the Philippine Senate through Resolution No. 91 on 17 May 1949
(the Philippine Instrument of Ratification was signed by the President on 30 August 1949 and deposited
with the UN on 20 March 1950) infra; and (3) Article II, Section 2 of the 1987 Constitution, which declares
that the Philippines adopts the generally accepted principles of international law as part of the law of the
land.
Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity and seeks an affirmance of the
DEFORAF determination that the BLR Order for a certification election among the ICMC employees is
violative of the diplomatic immunity of said organization.
Respondent BLR Director, on the other hand, with whom the Solicitor General agrees, cites State policy
and Philippine labor laws to justify its assailed Order, particularly, Article II, Section 18 and Article III,

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

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

On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the opposition on the basis of Pres. Decree No.
1620 and dismissed the Petition for Direct Certification.

Instead of a Comment, the Solicitor General filed a Manifestation and Motion praying that he be excused
from filing a comment "it appearing that in the earlier case of International Catholic Migration Commission
v. Hon. Pura Calleja, G.R. No. 85750. the Office of the Solicitor General had sustained the stand of
Director Calleja on the very same issue now before it, which position has been superseded by respondent
Secretary of Labor in G.R. No. 89331," the present case. The Court acceded to the Solicitor General's
prayer.

On appeal, the BLR Director, who is the public respondent in the ICMC Case, set aside the Med-Arbiter's
Order and authorized the calling of a certification election among the rank-and-file employees of IRRI. Said

The Court is now asked to rule upon whether or not the Secretary of Labor committed grave abuse of
discretion in dismissing the Petition for Certification Election filed by Kapisanan.

Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting IRRI the status, privileges,
prerogatives and immunities of an international organization, invoked by the Secretary of Labor, is
unconstitutional in so far as it deprives the Filipino workers of their fundamental and constitutional right to
form trade unions for the purpose of collective bargaining as enshrined in the 1987 Constitution.

Art. 3. Immunity from Legal Process. The Institute shall enjoy immunity from any
penal, civil and administrative proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or his authorized
representatives.

A procedural issue is also raised. Kapisanan faults respondent Secretary of Labor for entertaining IRRI'S
appeal from the Order of the Director of the Bureau of Labor Relations directing the holding of a
certification election. Kapisanan contends that pursuant to Sections 7, 8, 9 and 10 of Rule V 2 of the
Omnibus Rules Implementing the Labor Code, the Order of the BLR Director had become final and
unappeable and that, therefore, the Secretary of Labor had no more jurisdiction over the said appeal.

Thus it is that the DEFORAF, through its Legal Adviser, sustained ICMC'S invocation of immunity when in
a Memorandum, dated 17 October 1988, it expressed the view that "the Order of the Director of the
Bureau of Labor Relations dated 21 September 1988 for the conduct of Certification Election within ICMC
violates the diplomatic immunity of the organization." Similarly, in respect of IRRI, the DEFORAF speaking
through The Acting Secretary of Foreign Affairs, Jose D. Ingles, in a letter, dated 17 June 1987, to the
Secretary of Labor, maintained that "IRRI enjoys immunity from the jurisdiction of DOLE in this particular
instance."

On the other hand, in entertaining the appeal, the Secretary of Labor relied on Section 25 of Rep. Act. No.
6715, which took effect on 21 March 1989, providing for the direct filing of appeal from the Med-Arbiter to
the Office of the Secretary of Labor and Employment instead of to the Director of the Bureau of Labor
Relations in cases involving certification election orders.
III
Findings in Both Cases.
There can be
9 no question that diplomatic immunity has, in fact, been granted ICMC and IRRI.
Article II of the Memorandum of Agreement between the Philippine Government and ICMC provides that
ICMC shall have a status "similar to that of a specialized agency." Article III, Sections 4 and 5 of the
Convention on the Privileges and Immunities of Specialized Agencies, adopted by the UN General
Assembly on 21 November 1947 and concurred in by the Philippine Senate through Resolution No. 19 on
17 May 1949, explicitly provides:
Art. III, Section 4. The specialized agencies, their property and assets, wherever located
and by whomsoever held, shall enjoy immunity from every form of legal process except
insofar as in any particular case they have expressly waived their immunity. It is,
however, understood that no waiver of immunity shall extend to any measure of
execution.
Sec. 5. The premises of the specialized agencies shall be inviolable. The property
and assets of the specialized agencies, wherever located and by whomsoever held shall
be immune from search, requisition, confiscation, expropriation and any other form of
interference, whether by executive, administrative, judicial or legislative action.
(Emphasis supplied).
IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit in its grant of immunity, thus:

The foregoing opinions constitute a categorical recognition by the Executive Branch of the Government
that ICMC and IRRI enjoy immunities accorded to international organizations, which determination has
been held to be a political question conclusive upon the Courts in order not to embarrass a political
department of Government.
It is a recognized principle of international law and under our system of separation of
powers that diplomatic immunity is essentially a political question and courts should
refuse to look beyond a determination by the executive branch of the government, and
where the plea of diplomatic immunity is recognized and affirmed by the executive
branch of the government as in the case at bar, it is then the duty of the courts to accept
the claim of immunity upon appropriate suggestion by the principal law officer of the
government . . . or other officer acting under his direction. Hence, in adherence to the
settled principle that courts may not so exercise their jurisdiction . . . as to embarrass the
executive arm of the government in conducting foreign relations, it is accepted doctrine
that in such cases the judicial department of (this) government follows the action of the
political branch and will not embarrass the latter by assuming an antagonistic
jurisdiction. 3
A brief look into the nature of international organizations and specialized agencies is in order. The term
"international organization" is generally used to describe an organization set up by agreement between
two or more states. 4 Under contemporary international law, such organizations are endowed with some
degree of international legal personality 5 such that they are capable of exercising specific rights, duties
and powers. 6 They are organized mainly as a means for conducting general international business in
which the member states have an interest. 7 The United Nations, for instance, is an international
organization dedicated to the propagation of world peace.
"Specialized agencies" are international organizations having functions in particular fields. The term
appears in Articles 57 8 and 63 9 of the Charter of the United Nations:

The Charter, while it invests the United Nations with the general task of promoting
progress and international cooperation in economic, social, health, cultural, educational
and related matters, contemplates that these tasks will be mainly fulfilled not by organs
of the United Nations itself but by autonomous international organizations established by
inter-governmental agreements outside the United Nations. There are now many such
international agencies having functions in many different fields, e.g. in posts,
telecommunications, railways, canals, rivers, sea transport, civil aviation, meteorology,
atomic energy, finance, trade, education and culture, health and refugees. Some are
virtually world-wide in their membership, some are regional or otherwise limited in their
membership. The Charter provides that those agencies which have "wide international
responsibilities" are to be brought into relationship with the United Nations by
agreements entered into between them and the Economic and Social Council, are then
to be known as "specialized agencies." 10
The rapid growth of international organizations under contemporary international law has paved the way
for the development of the concept of international immunities.

10

It is now usual for the constitutions of international organizations to contain provisions

conferring certain immunities on the organizations themselves, representatives of their
member states and persons acting on behalf of the organizations. A series of
conventions, agreements and protocols defining the immunities of various international
organizations in relation to their members generally are now widely in force; . . . 11

There are basically three propositions underlying the grant of international immunities to international
organizations. These principles, contained in the ILO Memorandum are stated thus: 1) international
institutions should have a status which protects them against control or interference by any one
government in the performance of functions for the effective discharge of which they are responsible to
democratically constituted international bodies in which all the nations concerned are represented; 2) no
country should derive any national financial advantage by levying fiscal charges on common international
funds; and 3) the international organization should, as a collectivity of States members, be accorded the
facilities for the conduct of its official business customarily extended to each other by its individual member
States. 12 The theory behind all three propositions is said to be essentially institutional in character. "It is
not concerned with the status, dignity or privileges of individuals, but with the elements of functional
independence necessary to free international institutions from national control and to enable them to
discharge their responsibilities impartially on behalf of all their members. 13 The raison d'etre for these
immunities is the assurance of unimpeded performance of their functions by the agencies concerned.
The grant of immunity from local jurisdiction to ICMC and IRRI is clearly necessitated by their international
character and respective purposes. The objective is to avoid the danger of partiality and interference by
the host country in their internal workings. The exercise of jurisdiction by the Department of Labor in these
instances would defeat the very purpose of immunity, which is to shield the affairs of international
organizations, in accordance with international practice, from political pressure or control by the host

country to the prejudice of member States of the organization, and to ensure the unhampered
performance of their functions.
ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its basic rights, which are
guaranteed by Article II, Section 18, 14 Article III, Section 8, 15 and Article XIII, Section 3 (supra), of the
1987 Constitution; and implemented by Articles 243 and 246 of the Labor Code, 16 relied on by the BLR
Director and by Kapisanan.
For, ICMC employees are not without recourse whenever there are disputes to be settled. Section 31 of
the Convention on the Privileges and Immunities of the Specialized Agencies of the United
Nations 17 provides that "each specialized agency shall make provision for appropriate modes of
settlement of: (a) disputes arising out of contracts or other disputes of private character to which the
specialized agency is a party." Moreover, pursuant to Article IV of the Memorandum of Agreement between
ICMC the the Philippine Government, whenever there is any abuse of privilege by ICMC, the Government
is free to withdraw the privileges and immunities accorded. Thus:
Art. IV. Cooperation with Government Authorities. 1. The Commission shall cooperate
at all times with the appropriate authorities of the Government to ensure the observance
of Philippine laws, rules and regulations, facilitate the proper administration of justice
and prevent the occurrences of any abuse of the privileges and immunities granted its
officials and alien employees in Article III of this Agreement to the Commission.
2. In the event that the Government determines that there has been an abuse of the
privileges and immunities granted under this Agreement, consultations shall be held
between the Government and the Commission to determine whether any such abuse
has occurred and, if so, the Government shall withdraw the privileges and immunities
granted the Commission and its officials.
Neither are the employees of IRRI without remedy in case of dispute with management as, in fact, there
had been organized a forum for better management-employee relationship as evidenced by the formation
of the Council of IRRI Employees and Management (CIEM) wherein "both management and employees
were and still are represented for purposes of maintaining mutual and beneficial cooperation between IRRI
and its employees." The existence of this Union factually and tellingly belies the argument that Pres.
Decree No. 1620, which grants to IRRI the status, privileges and immunities of an international
organization, deprives its employees of the right to self-organization.
The immunity granted being "from every form of legal process except in so far as in any particular case
they have expressly waived their immunity," it is inaccurate to state that a certification election is beyond
the scope of that immunity for the reason that it is not a suit against ICMC. A certification election cannot
be viewed as an independent or isolated process. It could tugger off a series of events in the collective
bargaining process together with related incidents and/or concerted activities, which could inevitably
involve ICMC in the "legal process," which includes "any penal, civil and administrative proceedings." The

eventuality of Court litigation is neither remote and from which international organizations are precisely
shielded to safeguard them from the disruption of their functions. Clauses on jurisdictional immunity are
said to be standard provisions in the constitutions of international Organizations. "The immunity covers the
organization concerned, its property and its assets. It is equally applicable to proceedings in
personam and proceedings in rem." 18
We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p. 161, Rollo), wherein
TUPAS calls attention to the case entitled "International Catholic Migration Commission v. NLRC, et als.,
(G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims that, having taken cognizance of that
dispute (on the issue of payment of salary for the unexpired portion of a six-month probationary
employment), the Court is now estopped from passing upon the question of DOLE jurisdiction petition over
ICMC.
We find no merit to said submission. Not only did the facts of said controversy occur between 1983-1985,
or before the grant to ICMC on 15 July 1988 of the status of a specialized agency with corresponding
immunities, but also because ICMC in that case did not invoke its immunity and, therefore, may be
deemed to have waived it, assuming that during that period (1983-1985) it was tacitly recognized as
enjoying such immunity.
Anent the procedural issue raised in the IRRI Case, suffice it to state that the Decision of the BLR Director,
dated 15 February 1989, had not become final because of a Motion for Reconsideration filed by IRRI Said
11
Motion was acted upon only on 30 March 1989 when Rep. Act No. 6715, which provides for direct appeals
from the Orders of the Med-Arbiter to the Secretary of Labor in certification election cases either from the
order or the results of the election itself, was already in effect, specifically since 21 March 1989. Hence, no
grave abuse of discretion may be imputed to respondent Secretary of Labor in his assumption of appellate
jurisdiction, contrary to Kapisanan's allegations. The pertinent portion of that law provides:
Art. 259. Any party to an election may appeal the order or results of the election as
determined by the Med-Arbiter directly to the Secretary of Labor and Employment on the
ground that the rules and regulations or parts thereof established by the Secretary of
Labor and Employment for the conduct of the election have been violated. Such appeal
shall be decided within 15 calendar days (Emphasis supplied).
En passant, the Court is gratified to note that the heretofore antagonistic positions assumed by two
departments of the executive branch of government have been rectified and the resultant embarrassment
to the Philippine Government in the eyes of the international community now, hopefully, effaced.
WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is GRANTED, the Order of the Bureau of
Labor Relations for certification election is SET ASIDE, and the Temporary Restraining Order earlier
issued is made PERMANENT.

In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave abuse of discretion having been
committed by the Secretary of Labor and Employment in dismissing the Petition for Certification Election.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 82914 June 20, 1988
KAPATIRAN SA MEAT AND CANNING DIVISION (TUPAS Local Chapter No. 1027), petitioner,
vs.
THE HONORABLE BLR DIRECTOR PURA FERRER CALLEJA, MEAT AND CANNING DIVISION
UNIVERSAL ROBINA CORPORATION and MEAT AND CANNING DIVISION NEW EMPLOYEES AND
WORKERS UNITED LABOR ORGANIZATION, respondents.
GRIO-AQUINO, J.:
The petitioner, Kapatiran sa Meat and Canning Division TUPAS Local Chapter No. 1027) hereinafter
referred to as "TUPAS," seeks a review of the resolution dated January 27, 1988 (Annex D) of public
respondent Pura Ferrer-Calleja, Director of the Bureau of Labor Relations, dismissing its appeal from the
Order dated November 17, 1987 (Annex C) of the Med-Arbiter Rasidali C. Abdullah ordering a certification
election to be conducted among the regular daily paid rank and file employees/workers of Universal
Robina Corporation-Meat and Canning Division to determine which of the contending unions:
a) Kapatiran sa Meat and Canning Division TUPAS Local Chapter No. 1027 (or "TUPAS"
for brevity);
b) Meat and Canning Division New Employees and Workers United Labor Organization
(or "NEW ULO" for brevity);
c) No union.
shall be the bargaining unit of the daily wage rank and file employees in the Meat and Canning Division of
the company.
From 1984 to 1987 TUPAS was the sole and exclusive collective bargaining representative of the workers
in the Meat and Canning Division of the Universal Robina Corporation, with a 3-year collective bargaining
agreement (CBA) which was to expire on November 15, 1987.

Within the freedom period of 60 days prior to the expiration of its CBA, TUPAS filed an amended notice of
strike on September 28, 1987 as a means of pressuring the company to extend, renew, or negotiate a new
CBA with it.
On October 8, 1987, the NEW ULO, composed mostly of workers belonging to the IGLESIA NI KRISTO
sect, registered as a labor union.
On October 12, 1987, the TUPAS staged a strike. ROBINA obtained an injunction against the strike,
resulting in an agreement to return to work and for the parties to negotiate a new CBA.

majority status, by filing a timely petition for certification election on October 13, 1987 before TUPAS' old
CBA expired on November 15, 1987 and before it signed a new CBA with the company on December 3,
1987. As pointed out by Med-Arbiter Abdullah, a "certification election is the best forum in ascertaining the
majority status of the contending unions wherein the workers themselves can freely choose their
bargaining representative thru secret ballot." Since it has not been shown that this order is tainted with
unfairness, this Court will not thwart the holding of a certification election (Associated Trade Unions [ATU]
vs. Noriel, 88 SCRA 96).
WHEREFORE, the petition for certiorari is denied, with costs against the petitioner.

The next day, October 13, 1987, NEW ULO, claiming that it has "the majority of the daily wage rank and
file employees numbering 191," filed a petition for a certification election at the Bureau of Labor Relations
(Annex A).

SO ORDERED.

TUPAS moved to dismiss the petition for being defective in form and that the members of the NEW ULO
were mostly members of the Iglesia ni Kristo sect which three (3) years previous refused to affiliate with
any labor union. It also accused the company of using the NEW ULO to defeat TUPAS' bargaining rights
(Annex B).

MANILA
ELECTRIC
COMPANY, petitioner,
vs.
THE HON. SECRETARY OF LABOR AND EMPLOYMENT, STAFF AND TECHNICAL EMPLOYEES
ASSOCIATION OF MERALCO, and FIRST LINE ASSOCIATION OF MERALCO SUPERVISORY
EMPLOYEES,respondents.

On November 17, 1987, the Med-Arbiter ordered the holding of a certification election within 20 days
(Annex C).
12

MEDIALDEA, J.:

TUPAS appealed to the Bureau of Labor Relations BLR. In the meantime, it was able to negotiate a new 3year CBA with ROBINA, which was signed on December 3, 1987 and to expire on November 15, 1990.
On January 27, 1988, respondent BLR Director Calleja dismissed the appeal (Annex D).
TUPAS' motion for reconsideration (Annex E) was denied on March 17, 1988 (Annex F). On April 30,
1988, it filed this petition alleging that the public respondent acted in excess of her jurisdiction and with
grave abuse of discretion in affirming the Med-Arbiter's order for a certification election.
After deliberating on the petition and the documents annexed thereto, We find no merit in the Petition. The
public respondent did not err in dismissing the petitioner's appeal in BLR Case No. A-12-389-87. This
Court's decision inVictoriano vs. Elizalde Rope Workers' Union, 59 SCRA 54, upholding the right of
members of the IGLESIA NI KRISTO sect not to join a labor union for being contrary to their religious
beliefs, does not bar the members of that sect from forming their own union. The public respondent
correctly observed that the "recognition of the tenets of the sect ... should not infringe on the basic right of
self-organization granted by the constitution to workers, regardless of religious affiliation."
The fact that TUPAS was able to negotiate a new CBA with ROBINA within the 60-day freedom period of
the existing CBA, does not foreclose the right of the rival union, NEW ULO, to challenge TUPAS' claim to

G.R. No. 91902

May 20, 1991

This petition seeks to review the Resolution of respondent Secretary of Labor and Employment Franklin M.
Drilon dated November 3, 1989 which affirmed an Order of Med-Arbiter Renato P. Parungo (Case No.
NCR-O-D-M-1-70), directing the holding of a certification election among certain employees of petitioner
Manila Electric Company (hereafter "MERALCO") as well as the Order dated January 16, 1990 which
denied the Motion for Reconsideration of MERALCO.
The facts are as follows:
On November 22, 1988, the Staff and Technical Employees Association of MERALCO (hereafter "STEAMPCWF") a labor organization of staff and technical employees of MERALCO, filed a petition for certification
election, seeking to represent regular employees of MERALCO who are: (a) non-managerial employees
with Pay Grades VII and above; (b) non-managerial employees in the Patrol Division, Treasury Security
Services Section, Secretaries who are automatically removed from the bargaining unit; and (c) employees
within the rank and file unit who are automatically disqualified from becoming union members of any
organization within the same bargaining unit.
Among others, the petition alleged that "while there exists a duly-organized union for rank and file
employees in Pay Grade I-VI, which is the MERALCO Employees and Worker's Association (MEWA)
which holds a valid CBA for the rank and file employees, 1 there is no other labor organization except
STEAM-PCWF claiming to represent the MERALCO employees.
The petition was premised on the exclusion/disqualification of certain MERALCO employees pursuant to
Art. I, Secs. 2 and 3 of the existing MEWA CBA as follows:

ARTICLE I

9. Financial Planning & Control Department

SCOPE

10. Treasury Department, except Cash Section

xxx

xxx

xxx

Sec. 2. Excluded from the appropriate bargaining unit and therefore outside the scope of this Agreement
are:

11. General Accounting Section

xxx

xxx

xxx

(p. 19, Rollo)

(a) Employees in Patrol Division;
MERALCO moved for the dismissal of the petition on the following grounds:
(b) Employees in Treasury Security Services Section;
I
(c) Managerial Employees; and
(d) Secretaries.
Any member of the Union who may now or hereafter be assigned or transferred to Patrol Division
or Treasury Security Services Section, or becomes Managerial Employee or a Secretary, shall be
considered automatically removed from the bargaining unit and excluded from the coverage of
this agreement. He shall thereby likewise be deemed automatically to have ceased to be member
of
13the union, and shall desist from further engaging in union activity of any kind.
Sec. 3. Regular rank-and-file employees in the organization elements herein below listed shall be
covered within the bargaining unit, but shall be automatically disqualified from becoming union
members:

The employees sought to be represented by petitioner are either 1) managerial who are
prohibited by law from forming or joining supervisory union; 2) security services personnel who
are prohibited from joining or assisting the rank-and-file union; 3) secretaries who do not consent
to the petitioner's representation and whom petitioner can not represent; and 4) rank-and-file
employees represented by the certified or duly recognized bargaining representative of the only
rank-and-file bargaining unit in the company, the Meralco Employees Workers Association
(MEWA), in accordance with the existing Collective Bargaining Agreement with the latter.
II
The petition for certification election will disturb the administration of the existing Collective
Bargaining Agreement in violation of Art. 232 of the Labor Code.

1. Office of the Corporate Secretary

III

2. Corporate Staff Services Department

The petition itself shows that it is not supported by the written consent of at least twenty percent
(20%) of the alleged 2,500 employees sought to be represented. (Resolution, Sec. of Labor, pp.
223-224, Rollo)

3. Managerial Payroll Office

4. Legal Service Department
5. Labor Relations Division
6. Personnel Administration Division
7. Manpower Planning & Research Division
8. Computer Services Department

Before Med-Arbiter R. Parungo, MERALCO contended that employees from Pay Grades VII and above
are classified as managerial employees who, under the law, are prohibited from forming, joining or
assisting a labor organization of the rank and file. As regards those in the Patrol Division and Treasury
Security Service Section, MERALCO maintains that since these employees are tasked with providing
security to the company, they are not eligible to join the rank and file bargaining unit, pursuant to Sec. 2(c),
Rule V, Book V of the then Implementing Rules and Regulations of the Labor Code (1988) which reads as
follows:
Sec. 2. Who may file petition. The employer or any legitimate labor organization may file the
petition.

The petition, when filed by a legitimate labor organization, shall contain, among others:
xxx

xxx

xxx

(c) description of the bargaining unit which shall be the employer unit unless circumstances
otherwise require, and provided, further: that the appropriate bargaining unit of the rank and file
employees shall not include security guards (As amended by Sec. 6, Implementing Rules of EO
111)
xxx

xxx

xxx

SO ORDERED. (p. 222, Rollo)

On April 4, 1989, MERALCO appealed, contending that "until such time that a judicial finding is made to
the effect that they are not managerial employee, STEAM-PCWF cannot represent employees from Pay
Grades VII and above, additionally reiterating the same reasons they had advanced for disqualifying
respondent STEAM-PCWF.
On April 7, 1989, MEWA filed an appeal-in-intervention, submitting as follows:
A. The Order of the Med-Arbiter is null and void for being in violation of Article 245 of the Labor
Code;

(p. 111, Labor Code, 1988 Ed.)

B. The Order of the Med-Arbiter violates Article 232 of the Labor Code; and
As regards those rank and file employees enumerated in Sec. 3, Art. I, MERALCO contends that since
they are already beneficiaries of the MEWA-CBA, they may not be treated as a separate and distinct
appropriate bargaining unit.
MERALCO raised the same argument with respect to employees sought to be represented by STEAMPCWF, claiming that these were already covered by the MEWA-CBA.
On March 15, 1989, the Med-Arbiter ruled that having been excluded from the existing Collective
Bargaining Agreement for rank and file employees, these employees have the right to form a union of their
14 those employees performing managerial functions. With respect to those employees who had
own, except
resented their alleged involuntary membership in the existing CBA, the Med-Arbiter stated that the holding
of a certification election would allow them to fully translate their sentiment on the matter, and thus directed
the holding of a certification election. The dispositive portion of the Resolution provides as follows:
WHEREFORE, premises considered, a certification election is hereby ordered conducted among
the regular rank-and-file employees of MERALCO to wit:
1. Non-managerial employees with Pay Grades VII and above;
2. Non-managerial employees of Patrol Division, Treasury Security Services Section and
Secretaries; and

C. The Order is invalid because the bargaining unit it delineated is not an appropriated (sic)
bargaining unit.
On May 4, 1989, STEAM-PCWF opposed the appeal-in-intervention.
With the enactment of RA 6715 and the rules and regulations implementing the same, STEAM-PCWF
renounced its representation of the employees in Patrol Division, Treasury Security Services Section and
rank-and-file employees in Pay Grades I-VI.
On September 13, 1989, the First Line Association of Meralco
Supervisory Employees. (hereafter FLAMES) filed a similar petition (NCR-OD-M-9-731-89) seeking to
represent those employees with Pay Grades VII to XIV, since "there is no other supervisory union at
MERALCO." (p. 266,Rollo). The petition was consolidated with that of STEAM-PCWF.
On November 3, 1989, the Secretary of Labor affirmed with modification, the assailed order of the MedArbiter, disposing as follows:

3. Employees prohibited from actively participating as members of the union.

WHEREFORE, premises considered, the Order appealed from is hereby affirmed but modified as
far as the employees covered by Section 3, Article I of the exist CBA in the Company are
concerned. Said employees shall remain in the unit of the rank-and-file already existing and may
exercise their right to self organization as above enunciated.

within 20 days from receipt hereof, subject to the usual pre-election conference with the following
choices:

Further, the First Line Association of Meralco Supervisory Employees (FLAMES) is included as
among the choices in the certification election.

1. Staff and Technical, Employees Association of MERALCO (STEAM-PCWF);

Let, therefore, the pertinent records of the case be immediately forwarded to the Office of origin
for the conduct of the certification election.

2. No Union.
SO ORDERED. (p. 7, Rollo)

MERALCO's motion for reconsideration was denied on January 16, 1990.

On February 9, 1990, MERALCO filed this petition, premised on the following ground:
RESPONDENT SECRETARY ACTED WITH GRAVE ABUSE OF DISCRETION AND/OR IN
EXCESS OF JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN RULING THAT:
I. ANOTHER RANK-AND-FILE BARGAINING UNIT CAN BE ESTABLISHED INDEPENDENT,
DISTINCT AND SEPARATE FROM THE EXISTING RANK-AND-FILE BARGAINING UNIT.
II. THE EMPLOYEES FROM PAY GRADES VII AND ABOVE ARE RANK-AND-FILE
EMPLOYEES.
III. THE SECURITY GUARDS OR PERSONNEL MAY BE LUMPED TOGETHER WITH THE
RANK-AND-FILE UNION AND/OR THE SUPERVISORY UNION. (p. 8, Rollo)
On February 26, 1990, We issued a temporary restraining order (TRO) against the implementation of the
disputed resolution.
In its petition, MERALCO has relented and recognized respondents STEAM-PCWF and FLAMES' desired
representation of supervisory employees from Grades VII up. However, it believes that all that the
Secretary of Labor has to do is to establish a demarcation line between supervisory and managerial rank,
15
and not to
classify outright the group of employees represented by STEAM-PCWF and FLAMES as rank
and file employees.
In questioning the Secretary of Labor's directive allowing security guards (Treasury/Patrol Services
Section) to be represented by respondents, MERALCO contends that this contravenes the provisions of
the recently passed RA 6715 and its implementing rules (specifically par. 2, Sec. 1, Rule II, Book V) which
disqualifies supervisory employees and security guards from membership in a labor organization of the
rank and file (p. 11, Rollo).
The Secretary of Labor's Resolution was obviously premised on the provisions of Art. 212, then par. (k), of
the 1988 Labor Code defining "managerial" and "rank and file" employees, the law then in force when the
complaint was filed. At the time, only two groups of employees were recognized, the managerial and rank
and file. This explains the absence of evidence on job descriptions on who would be classified managerial
employees. It is perhaps also for this reason why the Secretary of Labor limited his classification of the
Meralco employees belonging to Pay Grades VII and up, to only two groups, the managerial and rank and
file.
However, pursuant to the Department of Labor's goal of strenghthening the constitutional right of workers
to self-organization, RA 6715 was subsequently passed which reorganized the employee-ranks by
including a third group, or the supervisory employees, and laying down the distinction between supervisory
employees and those of managerial ranks in Art. 212, renumbered par. [m], depending on whether the
employee concerned has the power to lay down and execute management policies, in the case of
managerial employees, or merely to recommend them, in case of supervisory employees.

In this petition, MERALCO has admitted that the employees belonging to Pay Grades VII and up are
supervisory (p. 10, Rollo). The records also show that STEAM-PCWF had "renounced its representation of
the employees in Patrol Division, Treasury Security Service Section and rank and file employees in Pay
Grades I-VI" (p. 6, Rollo); while FLAMES, on the other hand, had limited its representation to employees
belonging to Pay Grades VII-XIV,generally accepted as supervisory employees, as follows:
It must be emphasized that private respondent First Line Association of Meralco Supervisory
Employees seeks to represent only the Supervisory Employees with Pay Grades VII to XIV.
Supervisory Employees with Pay Grades VII to XIV are not managerial employees. In fact the
petition itself of petitioner Manila Electric Company on page 9, paragraph 3 of the petition stated
as follows, to wit:
There was no need for petitioner to prove that these employees are not rank-and-file. As
adverted to above, the private respondents admit that these are not the rank-and-file but
the supervisory employees, whom they seek to represent. What needs to be established
is the rank where supervisory ends and managerial begins.
and First Line Association of Meralco Supervisory Employees herein states that Pay Grades VII
to XIV are not managerial employees. In fact, although employees with Pay Grade XV carry the
Rank of Department Managers, these employees only enjoys (sic) the Rank Manager but their
recommendatory powers are subject to evaluation, review and final action by the department
heads and other higher executives of the company. (FLAMES' Memorandum, p. 305, Rollo)
Based on the foregoing, it is clear that the employees from Pay Grades VII and up have been recognized
and accepted as supervisory. On the other hand, those employees who have been automatically
disqualified have been directed by the Secretary of Labor to remain in the existing labor organization for
the rank and file, (the condition in the CBA deemed as not having been written into the contract, as unduly
restrictive of an employee's exercise of the right to self-organization). We shall discuss the rights of the
excluded employees (or those covered by Sec. 2, Art. I, MEWA-CBA later.
Anent the instant petition therefore, STEAM-PCWF, and FLAMES would therefore represent supervisory
employees only. In this regard, the authority given by the Secretary of Labor for the establishment of two
labor organizations for the rank and file will have to be disregarded since We hereby uphold certification
elections only for supervisory employees from Pay Grade VII and up, with STEAM-PCWF and FLAMES as
choices.
As to the alleged failure of the Secretary of Labor to establish a demarcation line for purposes of
segregating the supervisory from the managerial employees, the required parameter is really not
necessary since the law itself, Art. 212-m, (as amended by Sec. 4 of RA 6715) has already laid down the
corresponding guidelines:
Art. 212. Definitions. . . .
(m) "Managerial employee" is one who is vested with 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
to Book.
In his resolution, the Secretary of Labor further elaborated:
. . . Thus, the determinative factor in classifying an employee as managerial, supervisory or rankand-file is the nature of the work of the employee concerned.
In National Waterworks and Sewerage Authority vs. National Waterworks and Sewerage
Authority Consolidated Unions (11 SCRA 766) the Supreme Court had the occasion to come out
with an enlightening dissertation of the nature of the work of a managerial employees as follows:
. . . that the employee's primary duty consists of the management of the establishment
or of a customarily recognized department or subdivision thereof, that he customarily
and regularly directs the work of other employees therein, that he has the authority to
hire or discharge other employees or that his suggestions and recommendations as to
the hiring and discharging and or to the advancement and promotion or any other
change of status of other employees are given particular weight, that he customarily and
regularly exercises discretionary powers . . . (56 CJS, pp. 666-668. (p. 226, Rollo)

16

We shall now discuss the rights of the security guards to self-organize. MERALCO has
questioned the legality of allowing them to join either the rank and file or the supervisory union,
claiming that this is a violation of par. 2, Sec. 1, Rule II, Book V of the Implementing Rules of RA
6715, which states as follows:
Sec 1. Who may join unions. . . .
xxx

xxx

xxx

Supervisory employees and security guards shall not be eligible for membership in a
labor organization of the rank-and-file employees but may join, assist or form separate
labor organizations of their own; . . .
xxx

xxx

xxx

Rule
REPRESENTATION
INTERNAL-UNION CONFLICTS

CASES

V.
AND

Sec. 1. . . .
Sec. 2. Who may file.Any legitimate labor organization or the employer, when
requested to bargain collectively, may file the petition.
The petition, when filed by a legitimate labor-organization shall contain, among others:
(a) . . .
(b) . . .
(c) description of the bargaining unit which shall be the employer unit unless
circumstances otherwise require; and provided further, that the appropriate bargaining
unit of the rank-and-file employees shall not include supervisory employees and/or
security guards;
xxx

xxx

xxx

(emphasis ours)
Both rules, barring security guards from joining a rank and file organization, appear to have been carried
over from the old rules which implemented then Art. 245 of the Labor Code, and which provided thus:
Art. 245. Ineligibility of security personnel to join any labor organization.Security guards and
other personnel employed for the protection and security of the person, properties and premises
of the employer shall not be eligible for membership in any labor organization.
On December 24, 1986, Pres. Corazon C. Aquino issued E.O. No. 111 which eliminated the above-cited
provision on the disqualification of security guards. What was retained was the disqualification of
managerial employees, renumbered as Art. 245 (previously Art. 246), as follows:
Art. 245. Ineligibility of managerial employees to joint any labor organization.Managerial
employees are not eligible to join, assist or form any labor organization.

(emphasis ours)
With the elimination, security guards were thus free to join a rank and file organization.
Paragraph 2, Sec. 1, Rule II, Book V, is similar to Sec. 2 (c), Rule V, also of Book V of the
implementing rules of RA 6715:

On March 2, 1989, the present Congress passed RA 6715. 2 Section 18 thereof amended Art. 245, to read
as follows:

Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees.Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor organization
of the rank-and-file employees but may join, assist, or form separate labor organizations of their
own. (emphasis ours)
As will be noted, the second sentence of Art. 245 embodies an amendment disqualifying supervisory
employeesfrom membership in a labor organization of the rank-and-file employees. It does not include
security guards in the disqualification.
The implementing rules of RA 6715, therefore, insofar as they disqualify security guards from joining a
rank and file organization are null and void, for being not germane to the object and purposes of EO 111
and RA 6715 upon which such rules purportedly derive statutory moorings. In Shell Philippines, Inc. vs.
Central Bank, G.R. No. 51353, June 27, 1988, 162 SCRA 628, We stated:
The rule-making power must be confined to details for regulating the mode or proceeding to carry
into effect the law as it has been enacted. The power cannot be extended to amending or
expanding the statutory requirements or to embrace matters not covered by the statute. Rules
that subvert the statute cannot be sanctioned. (citing University of Sto. Tomas vs. Board of Tax
Appeals, 93 Phil. 376).

management policies, pursuant to Art. 212 (m), of the Labor Code, as amended by Sec. 4 of RA 6715, with
respondents STEAM-PCWF and FLAMES as choices.
Employees of the Patrol Division, Treasury Security Services Section and Secretaries may freely join
either the labor organization of the rank and file or that of the supervisory union depending on their
employee rank. Disqualified employees covered by Sec. 3, Art. I of the MEWA-CBA, shall remain with the
existing labor organization of the rank and file, pursuant to the Secretary of Labor's directive:
By the parties' own agreement, they find the bargaining unit, which includes the positions
enumerated in Section 3, Article I of their CBA, appropriate for purposes of collective bargaining.
The composition of the bargaining unit should be left to the agreement of the parties, and unless
there are legal infirmities in such agreement, this Office will not substitute its judgment for that of
the parties. Consistent with the story of collective bargaining in the company, the membership of
said group of employees in the existing rank-and-file unit should continue, for it will enhance
stability in that unit already well establish. However, we cannot approve of the condition set in
Section 3, Article I of the CBA that the employees covered are automatically disqualified from
becoming union members. The condition unduly restricts the exercise of the right to self
organization by the employees in question. It is contrary to law and public policy and, therefore,
should be considered to have not been written into the contract. Accordingly, the option to join or
not to join the union should be left entirely to the employees themselves. (p. 229, Rollo)

While therefore under the old rules, security guards were barred from joining a labor organization of the
rank and file, under RA 6715, they may now freely join a labor organization of the rank and file or that of
17 union, depending on their rank. By accommodating supervisory employees, the Secretary
the supervisory
of Labor must likewise apply the provisions of RA 6715 to security guards by favorably allowing them free
access to a labor organization, whether rank and file or supervisory, in recognition of their constitutional
right to self-organization.

The Temporary Restraining Order (TRO) issued on February 26, 1990 is hereby LIFTED. Costs against
petitioner.

We are aware however of possible consequences in the implementation of the law in allowing security
personnel to join labor unions within the company they serve. The law is apt to produce divided loyalties in
the faithful performance of their duties. Economic reasons would present the employees concerned with
the temptation to subordinate their duties to the allegiance they owe the union of which they are members,
aware as they are that it is usually union action that obtains for them increased pecuniary benefits.

UNITED
PEPSI-COLA
SUPERVISORY
UNION
(UPSU), petitioner,
vs.
HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA PRODUCTS, PHILIPPINES, INC. respondents.

Thus, in the event of a strike declared by their union, security personnel may neglect or outrightly abandon
their duties, such as protection of property of their employer and the persons of its officials and employees,
the control of access to the employer's premises, and the maintenance of order in the event of
emergencies and untoward incidents.
It is hoped that the corresponding amendatory and/or suppletory laws be passed by Congress to avoid
possible conflict of interest in security personnel.1wphi1
ACCORDINGLY, the petition is hereby DISMISSED. We AFFIRM with modification the Resolution of the
Secretary of Labor dated November 3, 1989 upholding an employee's right to self-organization. A
certification election is hereby ordered conducted among supervisory employees of MERALCO, belonging
to Pay Grades VII and above, using as guideliness an employee's power to either recommend or execute

SO ORDERED.
G.R. No. 122226 March 25, 1998

MENDOZA, J.:
Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the union filed a petition
for certification election on behalf of the route managers at Pepsi-Cola Products Philippines, Inc. However,
its petition was denied by the med-arbiter and, on appeal, by the Secretary of Labor and Employment, on
the ground that the route managers are managerial employees and, therefore, ineligible for union
membership under the first sentence of Art. 245 of the Labor Code, which provides:
Ineligibility of managerial employees to join any labor organization; right of supervisory
employees. Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor organization
of the rank-and-file employees but may join, assist or form separate labor organizations of their
own.

Petitioner brought this suit challenging the validity of the order dated August 31, 1995, as reiterated in the
order dated September 22, 1995, of the Secretary of Labor and Employment. Its petition was dismissed by
the Third Division for lack of showing that respondent committed grave abuse of discretion. But petitioner
filed a motion for reconsideration, pressing for resolution its contention that the first sentence of Art. 245 of
the Labor Code, so far as it declares managerial employees to be ineligible to form, assist or join unions,
contravenes Art. III, 8 of the Constitution which provides:
The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.

====================
Operatives
or
Operating
Employees

For this reason, the petition was referred to the Court en banc.
The Issues in this Case
Two questions are presented by the petition: (1) whether the route managers at Pepsi-Cola Products
Philippines, Inc. are managerial employees and (2) whether Art. 245, insofar as it prohibits managerial
employees from forming, joining or assisting labor unions, violates Art. III, 8 of the Constitution.
In resolving these issues it would be useful to begin by defining who are "managerial employees" and
considering the types of "managerial employees."
Types of Managerial Employees

18

The term "manager" generally refers to "anyone who is responsible for subordinates and other
organizational resources."1 As a class, managers constitute three levels of a pyramid:
Top management

Middle
Management

FIRST-LINE MANAGERS The lowest level in an organization at which individuals are

responsible for the work of others is called first-line or first-level management. First-line managers
direct operating employees only; they do not supervise other managers. Examples of first-line
managers are the "foreman" or production supervisor in a manufacturing plant, the technical
supervisor in a research department, and the clerical supervisor in a large office. First-level
managers are often called supervisors.
MIDDLE MANAGERS The term middle management can refer to more than one level in an
organization. Middle managers direct the activities of other managers and sometimes also those
of operating employees. Middle managers' principal responsibilities are to direct the activities that
implement their organizations' policies and to balance the demands of their superiors with the
capacities of their subordinates. A plant manager in an electronics firm is an example of a middle
manager.
TOP MANAGERS Composed of a comparatively small group of executives, top
management is responsible for the overall management of the organization. It establishes
operating policies and guides the organization's interactions with its environment. Typical titles of
top managers are "chief executive officer,""president," and "senior vice-president." Actual titles
vary from one organization to another and are not always a reliable guide to membership in the
highest management classification.2
As can be seen from this description, a distinction exists between those who have the authority to devise,
implement and control strategic and operational policies (top and middle managers) and those whose task
is simply to ensure that such policies are carried out by the rank-and-file employees of an organization
(first-level managers/supervisors). What distinguishes them from the rank-and-file employees is that they
act in the interest of the employer in supervising such rank-and-file employees.

Management

"Managerial employees" may therefore be said to fall into two distinct categories: the "managers" per se,
who compose the former group described above, and the "supervisors" who form the latter group.
Whether they belong to the first or the second category, managers, vis-a-vis employers, are, likewise,
employees.3

(also called

The first question is whether route managers are managerial employees or supervisors.

First-Line

Supervisor)

Previous
Administrative
the
Question
Whether
are Managerial Employees

Determinations
Route

of
Managers

It appears that this question was the subject of two previous determinations by the Secretary of Labor and
Employment, in accordance with which this case was decided by the med-arbiter.
In Case No. OS-MA-10-318-91, entitled Worker's Alliance Trade Union (WATU) v. Pepsi-Cola Products
Philippines, Inc., decided on November 13, 1991, the Secretary of Labor found:
We examined carefully the pertinent job descriptions of the subject employees and other
documentary evidence on record vis-a-vis paragraph (m), Article 212 of the Labor Code, as
amended, and we find that only those employees occupying the position of route manager and
accounting manager are managerial employees. The rest i.e. quality control manager,
yard/transport manager and warehouse operations manager are supervisory employees.
To qualify as managerial employee, there must be a clear showing of the exercise of managerial
attributes under paragraph (m), Article 212 of the Labor Code as amended. Designations or titles
of positions are not controlling. In the instant case, nothing on record will support the claim that
the quality control manager, yard/transport manager and warehouse operations manager are
vested with said attributes. The warehouse operations manager, for example, merely assists the
plant finance manager in planning, organizing, directing and controlling all activities relative to
development and implementation of an effective management control information system at the
19 offices. The exercise of authority of the quality control manager, on the other hand, needs
sale
the concurrence of the manufacturing manager.
As to the route managers and accounting manager, we are convinced that they are managerial
employees. Their job descriptions clearly reveal so.
On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92. entitled In Re: Petition for Direct
Certification and/or Certification Election-Route Managers/Supervisory Employees of Pepsi-Cola Products
Phils.Inc., as follows:
The issue brought before us is not of first impression. At one time, we had the occasion to rule
upon the status of route manager in the same company vis a vis the issue as to whether or not it
is supervisory employee or a managerial employee. In the case of Workers Alliance Trade Unions
(WATU) vs. Pepsi Cola Products, Phils., Inc. (OS-MA-A-10-318-91 ), 15 November 1991, we
ruled that a route manager is a managerial employee within the context of the definition of the
law, and hence, ineligible to join, form or assist a union. We have once more passed upon the
logic of our Decision aforecited in the light of the issues raised in the instant appeal, as well as
the available documentary evidence on hand, and have come to the view that there is no cogent
reason to depart from our earlier holding. Route Managers are, by the very nature of their
functions and the authority they wield over their subordinates, managerial employees. The
prescription found in Art. 245 of the Labor Code, as amended therefore, clearly applies to them.4
Citing our ruling in Nasipit Lumber Co. v. National Labor Relations Commission,5 however, petitioner
argues that these previous administrative determinations do not have the effect of res judicata in this case,

because "labor relations proceedings" are "non-litigious and summary in nature without regard to legal
technicalities."6 Nasipit Lumber Co. involved a clearance to dismiss an employee issued by the
Department of Labor. The question was whether in a subsequent proceeding for illegal dismissal, the
clearance was res judicata. In holding it was not, this Court made it clear that it was referring to labor
relations proceedings of a non-adversary character, thus:
The requirement of a clearance to terminate employment was a creation of the Department of
labor to carry out the Labor Code provisions on security of tenure and termination of employment.
The proceeding subsequent to the filing of an application for clearance to terminate employment
was outlined in Book V, Rule XIV of the Rules and Regulations Implementing the Labor Code.
The fact that said rule allowed a procedure for the approval of the clearance with or without the
opposition of the employee concerned (Secs. 7 & 8), demonstrates the non-litigious and
summary nature of the proceeding. The clearance requirement was therefore necessary only as
an expeditious shield against arbitrary dismissal without the knowledge and supervision of the
Department of Labor. Hence, a duly approved clearance implied that the dismissal was legal or
for cause (Sec. 2).7
But the doctrine of res judicata certainly applies to adversary administrative proceedings. As early as 1956,
inBrillantes v. Castro,8 we sustained the dismissal of an action by a trial court on the basis of a prior
administrative determination of the same case by the Wage Administration Service, applying the principle
of res judicata. Recently, in Abad v. NLRC9 we applied the related doctrine of stare decisis in holding that
the prior determination that certain jobs at the Atlantic Gulf and Pacific Co., were project employments was
binding in another case involving another group of employees of the same company. Indeed, in Nasipit
Lumber Co., this Court clarified toward the end of its opinion that "the doctrine of res judicata applies . . . to
judicial or quasi judicial proceedings and not to the exercise of administrative powers." 10 Now proceedings
for certification election, such as those involved in Case No. OS-M-A-10-318-91 and Case No. OS-A-3-7192, are quasi judicial in nature and, therefore, decisions rendered in such proceedings can attain finality.11
Thus, we have in this case an expert's view that the employees concerned are managerial employees
within the purview of Art. 212 which provides:
(m) "managerial employee" is one who is vested with 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.
At the very least, the principle of finality of administrative determination compels respect for the finding of
the Secretary of Labor that route managers are managerial employees as defined by law in the absence of
anything to show that such determination is without substantial evidence to support it. Nonetheless, the
Court, concerned that employees who are otherwise supervisors may wittingly or unwittingly be classified
as managerial personnel and thus denied the right of self-organization, has decided to review the record of
this case.

DOLE's
Finding
that
Managerial
Employees
Substantial Evidence in the Record

Route

Managers
Supported

are
by

The Court now finds that the job evaluation made by the Secretary of Labor is indeed supported by
substantial evidence. The nature of the job of route managers is given in a four-page pamphlet, prepared
by the company, called "Route Manager Position Description," the pertinent parts of which read:

1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for possible adjustments to
maximize utilization of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before check-out and the proper sorting of bottles before
check-in.

A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan; and you achieve
this objective through the skillful MANAGEMENT OF YOUR JOB AND THE
MANAGEMENT OF YOUR PEOPLE.
These then are your functions as Pepsi-Cola Route Manager. Within these
functions managing your job and managing your people you are
accountable to your District Manager for the execution and completion of
various tasks and activities which will make it possible for you to achieve your
sales objectives.

1.2.2 Ensure the upkeep of all route sales reports and all other related reports and forms required on an
accurate and timely basis.
1.2.3 Ensure proper implementation of the various company policies and procedures incl. but not limited to
shakedown; route shortage; progressive discipline; sorting; spoilages; credit/collection; accident;
attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0 MANAGING YOUR PEOPLE
The Route Manager is accountable for the following:

B.
20PRINCIPAL ACCOUNTABILITIES

2.1 Route Sales Team Development

1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:
1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.

2.1.2 Conduct route rides to train, evaluate and develop all assigned route salesmen and helpers at least 3
days a week, to be supported by required route ride documents/reports & back check/spot check at least 2
days a week to be supported by required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training should focus on the enhancement of
effective sales and merchandizing [sic] techniques of the salesmen and helpers. Conduct group training at
least 1 hour each week on a designated day and of specific topic.

1.1.2 Achieve all distribution and new account objectives.

2.2 Code of Conduct
1.1.3 Develop new business opportunities thru personal contacts with dealers.
1.1.4 Inspect and ensure that all merchandizing [sic] objectives are achieved in all outlets.

2.2.1 Maintain the company's reputation through strict adherence to PCPPI's code of conduct and the
universal
standards
of
unquestioned
business
ethics.12

1.1.5 maintain and improve productivity of all cooling equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.

Earlier in this opinion, reference was made to the distinction between managers per se (top managers and
middle managers) and supervisors (first-line managers). That distinction is evident in the work of the route
managers which sets them apart from supervisors in general. Unlike supervisors who basically merely
direct operating employees in line with set tasks assigned to them, route managers are responsible for the
success of the company's main line of business through management of their respective sales teams.

Such management necessarily involves the planning, direction, operation and evaluation of their individual
teams and areas which the work of supervisors does not entail.

development to the discipline, training and monitoring of performance of their respective sales teams, and
so forth, if they are to fulfill the company's expectations in the "key result areas."

The route managers cannot thus possibly be classified as mere supervisors because their work does not
only involve, but goes far beyond, the simple direction or supervision of operating employees to
accomplish objectives set by those above them. They are not mere functionaries with simple oversight
functions but business administrators in their own right. An idea of the role of route managers as
managers per se can be gotten from a memo sent by the director of metro sales operations of respondent
company to one of the route managers. It reads:13

Article 212(m) says that "supervisory employees are those who, in the interest of the employer,
effectivelyrecommend such managerial actions if the exercise of such authority is not merely routinary or
clerical in nature but requires the use of independent judgment." Thus, their only power is to recommend.
Certainly, the route managers in this case more than merely recommend effective management action.
They perform operational, human resource, financial and marketing functions for the company, all of which
involve the laying down of operating policies for themselves and their teams. For example, with respect to
marketing, route managers, in accordance with B.1.1.1 to B.1.1.9 of the Route Managers Job Description,
are charged, among other things, with expanding the dealership base of their respective sales areas,
maintaining the goodwill of current dealers, and distributing the company's various promotional items as
they see fit. It is difficult to see how supervisors can be given such responsibility when this involves not
just the routine supervision of operating employees but the protection and expansion of the company's
business vis-a-vis its competitors.

03 April 1995
To : CESAR T . REOLADA
From : REGGIE M. SANTOS
Subj : SALARY INCREASE
Effective 01 April 1995, your basic monthly salary of P11,710 will be increased to P12,881 or an
increase of 10%. This represents the added managerial responsibilities you will assume due to
the recent restructuring and streamlining of Metro Sales Operations brought about by the
continuous losses for the last nine (9) months.

21

Let me remind you that for our operations to be profitable, we have to sustain the intensity and
momentum that your group and yourself have shown last March. You just have to deliver the
desired volume targets, better negotiated concessions, rationalized sustaining deals, eliminate or
reduced overdues, improved collections, more cash accounts, controlled operating expenses,
etc. Also, based on the agreed set targets, your monthly performance will be closely monitored.
You have proven in the past that your capable of achieving your targets thru better planning,
managing your group as a fighting team, and thru aggressive selling. I am looking forward to your
success and I expect that you just have to exert your doubly best in turning around our
operations from a losing to a profitable one!
Happy Selling!!
Sgd.) R.M. SANTOS
The plasticized card given to route managers, quoted in the separate opinion of Justice Vitug, although
entitled "RM's Job Description," is only a summary of performance standards. It does not show whether
route managers are managers per se or supervisors. Obviously, these performance standards have to be
related to the specific tasks given to route managers in the four-page "Route Manager Position
Description," and, when this is done, the managerial nature of their jobs is fully revealed. Indeed, if any,
the card indicates the great latitude and discretion given to route managers from servicing and
enhancing company goodwill to supervising and auditing accounts, from trade (new business)

While route managers do not appear to have the power to hire and fire people (the evidence shows that
they only "recommended" or "endorsed" the taking of disciplinary action against certain employees), this is
because
this
is a function of the Human Resources or Personnel Department of the company.14 And neither should it be
presumed that just because they are given set benchmarks to observe, they are ipso facto supervisors.
Adequate control methods (as embodied in such concepts as "Management by Objectives [MBO]" and
"performance appraisals") which require a delineation of the functions and responsibilities of managers by
means of ready reference cards as here, have long been recognized in management as effective tools for
keeping businesses competitive.
This brings us to the second question, whether the first sentence of Art. 245 of the Labor Code, prohibiting
managerial employees from forming, assisting or joining any labor organization, is constitutional in light of
Art. III, 8 of the Constitution which provides:
The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.
As already stated, whether they belong to the first category (managers per se) or the second category
(supervisors), managers are employees. Nonetheless, in the United States, as Justice Puno's separate
opinion notes, supervisors have no right to form unions. They are excluded from the definition of the term
"employee" in 2(3) of the Labor-Management Relations Act of 1947.15 In the Philippines, the question
whether managerial employees have a right of self-organization has arisen with respect to first-level
managers or supervisors, as shown by a review of the course of labor legislation in this country.
Right
of
Self-Organization
Employees under Pre-Labor Code Laws

of

Managerial

Before the promulgation of the Labor Code in 1974, the field of labor relations was governed by the
Industrial Peace Act (R.A. No. 875).
In accordance with the general definition above, this law defined "supervisor" as follows:

Sec. 2. . . .
(k) "Supervisor" means any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline other employees, or
responsibly to direct them, and to adjust their grievances, or effectively to recommend such acts,
if, in connection with the foregoing, the exercise of such authority is not of a merely routinary or
clerical nature but requires the use of independent judgment.16

having been duly registered, as did occur in this case, their union is entitled to all the rights under
Republic Act No. 875. Considering what is denominated as unfair labor practice under Section 4
of such Act and the facts set forth in our decision, there can be only one answer to the objection
raised that no unfair labor practice could be committed by respondent Company insofar as
managerial personnel is concerned. It is, as is quite obvious, in the negative.20
Actually, the case involved front-line managers or supervisors only, as the plantilla of employees, quoted in
the main opinion,21 clearly indicates:

The right of supervisors to form their own organizations was affirmed:

Sec. 3. Employees' Right to Self-Organization. Employees shall have the right to selforganization and to form, join or assist labor organizations of their own choosing for the purpose
of collective bargaining through representatives of their own choosing and to engage in concerted
activities for the purpose of collective bargaining and other mutual aid and protection. Individuals
employed as supervisors shall not be eligible for membership in a labor organization of
employees under their supervision but may form separate organizations of their own.17
For its part, the Supreme Court upheld in several of its decisions the right of supervisors to organize for
purposes of labor relations.18
Although it had a definition of the term "supervisor," the Industrial Peace Act did not define the term
"manager." But, using the commonly-understood concept of "manager," as above stated, it is apparent that
the law used the term "supervisors" to refer to the sub-group of "managerial employees" known as front22
line managers. The other sub-group of "managerial employees," known as managers per se, was not
covered.
However, in Caltex Filipino Managers and Supervisors Association v. Court of Industrial Relations,19 the
right of all managerial employees to self-organization was upheld as a general proposition, thus:
It would be going too far to dismiss summarily the point raised by respondent Company that of
the alleged identity of interest between the managerial staff and the employing firm. That should
ordinarily be the case, especially so where the dispute is between management and the rank and
file. It does not necessarily follow though that what binds the managerial staff to the corporation
forecloses the possibility of conflict between them. There could be a real difference between what
the welfare of such group requires and the concessions the firm is willing to grant. Their needs
might not be attended to then in the absence of any organization of their own. Nor is this to
indulge in empty theorizing. The record of respondent Company, even the very case cited by it, is
proof enough of their uneasy and troubled relationship. Certainly the impression is difficult to
erase that an alien firm failed to manifest sympathy for the claims of its Filipino executives. To
predicate under such circumstances that agreement inevitably marks their relationship, ignoring
that discord would not be unusual, is to fly in the face of reality.

CAFIMSA members holding the following Supervisory Payroll Position Title are Recognized by
the Company
Payroll Position Title
Assistant to Mgr. National Acct. Sales
Jr. Sales Engineer
Retail Development Asst.
Staff Asst. 0 Marketing
Sales Supervisor
Supervisory Assistant
Jr. Supervisory Assistant
Credit Assistant
Lab. Supvr. Pandacan
Jr. Sales Engineer B
Operations Assistant B
Field Engineer
Sr. Opers. Supvr. MIA A/S

. . . The basic question is whether the managerial personnel can organize. What respondent
Company failed to take into account is that the right to self-organization is not merely a statutory
creation. It is fortified by our Constitution. All are free to exercise such right unless their purpose
is contrary to law. Certainly it would be to attach unorthodoxy to, not to say an emasculation of,
the concept of law if managers as such were precluded from organizing. Having done so and

Purchasing Assistant
Jr. Construction Engineer

Sr. Sales Supervisor

Supervisory Accountant (Refinery)

Deport Supervisor A

Communications Supervisor (Refinery)

Terminal Accountant B

Finally, also deemed included are all other employees excluded from the rank and file unions but
not classified as managerial or otherwise excludable by law or applicable judicial precedents.

Merchandiser
Dist. Sales Prom. Supvr.
Instr. Merchandising
Asst. Dist. Accountant B
Sr. Opers. Supervisor
Jr. Sales Engineer A
Asst. Bulk Ter. Supt.
Sr. Opers. Supvr.

23

Credit Supervisor A
Asst. Stores Supvr. A
Ref. Supervisory Draftsman
Refinery Shift Supvr. B
Asst. Supvr. A Operations (Refinery)
Refinery Shift Supvr. B
Asst. Lab. Supvr. A (Refinery)
St. Process Engineer B (Refinery)
Asst. Supvr. A Maintenance (Refinery)
Asst. Supvr. B Maintenance (Refinery)

Right
of
Employees under the Labor Code

Self-Organization

of

Managerial

Thus, the dictum in the Caltex case which allowed at least for the theoretical unionization of top and
middle managers by assimilating them with the supervisory group under the broad phrase "managerial
personnel," provided the lynchpin for later laws denying the right of self-organization not only to top and
middle management employees but to front line managers or supervisors as well. Following the Caltex
case, the Labor Code, promulgated in 1974 under martial law, dropped the distinction between the first
and second sub-groups of managerial employees. Instead of treating the terms "supervisor" and
"manager" separately, the law lumped them together and called them "managerial employees," as follows:
Art. 212. Definitions . . . .
(k) "Managerial Employee" is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign
or discipline employees, or to effectively recommend such managerial actions. All employees not
falling within this definition are considered rank and file employees for purposes of this Book.22
The definition shows that it is actually a combination of the commonly understood definitions of both
groups of managerial employees, grammatically joined by the phrase "and/or."
This general definition was perhaps legally necessary at that time for two reasons. First, the 1974 Code
denied supervisors their right to self-organize as theretofore guaranteed to them by the Industrial Peace
Act. Second, it stood the dictum in the Caltex case on its head by prohibiting all types of managers from
forming unions. The explicit general prohibition was contained in the then Art. 246 of the Labor Code.
The practical effect of this synthesis of legal concepts was made apparent in the Omnibus Rules
Implementing the Labor Code which the Department of Labor promulgated on January 19, 1975. Book V,
Rule II, 11 of the Rules provided:
Supervisory unions and unions of security guards to cease operation. All existing supervisory
unions and unions of security guards shall, upon the effectivity of the Code, cease to operate as
such and their registration certificates shall be deemed automatically canceled. However, existing
collective agreements with such unions, the life of which extends beyond the date of effectivity of
the Code, shall be respected until their expiry date insofar as the economic benefits granted
therein are concerned.
Members of supervisory unions who do not fall within the definition of managerial employees
shall become eligible to join or assist the rank and file labor organization, and if none exists, to

form or assist in the forming of such rank and file organization. The determination of who are
managerial employees and who are not shall be the subject of negotiation between
representatives of the supervisory union and the employer. If no agreement is reached between
the parties, either or both of them may bring the issue to the nearest Regional Office for
determination.
The Department of Labor continued to use the term "supervisory unions" despite the demise of the legal
definition of "supervisor" apparently because these were the unions of front line managers which were
then allowed as a result of the statutory grant of the right of self-organization under the Industrial Peace
Act. Had the Department of Labor seen fit to similarly ban unions of top and middle managers which may
have been formed following the dictum in Caltex, it obviously would have done so. Yet it did not,
apparently because no such unions of top and middle managers really then existed.
Real Intent of the 1986 Constitutional Commission
This was the law as it stood at the time the Constitutional Commission considered the draft of Art. III, 8.
Commissioner Lerum sought to amend the draft of what was later to become Art. III, 8 of the present
Constitution:
MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to insert between the
words "people" and "to" the following: WHETHER EMPLOYED BY THE STATE OR PRIVATE
ESTABLISHMENTS. In other words, the section will now read as follows: "The right of the people
WHETHER EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS to form associations,
24
unions,
or societies for purposes not contrary to law shall not be abridged."23
Explaining his proposed amendment, he stated:
MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is granted to all
persons whether or not they are employed in the government. Under that provision, we allow
unions in the government, in government-owned and controlled corporations and in other
industries in the private sector, such as the Philippine Government Employees' Association,
unions in the GSIS, the SSS, the DBP and other government-owned and controlled
corporations. Also, we have unions of supervisory employees and of security guards. But what is
tragic about this is that after the 1973 Constitution was approved and in spite of an express
recognition of the right to organize in P.D. No. 442, known as the Labor Code, the right of
government workers, supervisory employees and security guards to form unions was abolished.
And we have been fighting against this abolition. In every tripartite conference attended by the
government, management and workers, we have always been insisting on the return of these
rights. However, both the government and employers opposed our proposal, so nothing came out
of this until this week when we approved a provision which states:
Notwithstanding any provision of this article, the right to self-organization shall
not be denied to government employees.

We are afraid that without any corresponding provision covering the private sector, the security
guards, the supervisory employees or majority employees [sic] will still be excluded, and that is
the purpose of this amendment.
I will be very glad to accept any kind of wording as long as it will amount to absolute recognition
of private sector employees, without exception, to organize.
THE PRESIDENT. What does the Committee say?
FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by Commissioner
Rodrigo is well-taken. Perhaps, we can lengthen this a little bit more to read: "The right of the
people WHETHER UNEMPLOYED OR EMPLOYED BY STATE OR PRIVATE
ESTABLISHMENTS.
I want to avoid also the possibility of having this interpreted as applicable only to the employed.
MR. DE LOS REYES. Will the proponent accept an amendment to the amendment, Madam
President?
MR. LERUM. Yes, as long as it will carry the idea that the right of the employees in the private
sector is recognized.24
Lerum thus anchored his proposal on the fact that (1) government employees, supervisory employees,
and security guards, who had the right to organize under the Industrial Peace Act, had been denied this
right by the Labor Code, and (2) there was a need to reinstate the right of these employees. In
consonance with his objective to reinstate the right of government, security, and supervisory employees to
organize, Lerum then made his proposal:
MR. LERUM. Mr. Presiding Officer, after a consultation with several Members of this
Commission, my amendment will now read as follows: "The right of the people INCLUDING
THOSE EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS to form associations, unions, or
societies for purposes not contrary to law shall not be abridged. In proposing that amendment I
ask to make of record that I want the following provisions of the Labor Code to be automatically
abolished, which read:
Art. 245. Security guards and other personnel employed for the protection and
security of the person, properties and premises of the employers shall not be
eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.
THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?
FR. BERNAS. The Committee accepts.

THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the amendment, as
amended.
Is there any objection? (Silence) The Chair hears none; the amendment, as amended, is
approved.25
The question is what Commissioner Lerum meant in seeking to "automatically abolish" the then Art. 246 of
the Labor Code. Did he simply want "any kind of wording as long as it will amount to absolute recognition
of private sector employees, without exception, to organize"?26 Or, did he instead intend to have his words
taken in the context of the cause which moved him to propose the amendment in the first place, namely,
the denial of the right of supervisory employees to organize, because he said, "We are afraid that without
any corresponding provision covering the private sector, security guards, supervisory employees or
majority [of] employees will still be excluded, and that is the purpose of this amendment"?27
It would seem that Commissioner Lerum simply meant to restore the right of supervisory employees to
organize. For even though he spoke of the need to "abolish" Art. 246 of the Labor Code which, as already
stated, prohibited "managerial employees" in general from forming unions, the fact was that in explaining
his proposal, he repeatedly referred to "supervisory employees" whose right under the Industrial Peace
Act to organize had been taken away by Art. 246. It is noteworthy that Commissioner Lerum never
referred to the then definition of "managerial employees" in Art. 212(m) of the Labor Code which put
together, under the broad phrase "managerial employees," top and middle managers and supervisors.
Instead, his repeated use of the term "supervisory employees," when such term then was no longer in the
statute books, suggests a frame of mind that remained grounded in the language of the Industrial Peace
Act.
25
Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial employees to
organize, despite the fact that the Industrial Peace Act did not expressly provide for the right of top and
middle managers to organize. If Lerum was aware of the Caltex dictum, then his insistence on the use of
the term "supervisory employees" could only mean that he was excluding other managerial employees
from his proposal. If, on the other hand, he was not aware of the Caltex statement sustaining the right to
organize to top and middle managers, then the more should his repeated use of the term "supervisory
employees" be taken at face value, as it had been defined in the then Industrial Peace Act.

Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.28
Implications of the Lerum Proposal
In sum, Lerum's proposal to amend Art. III, 8 of the draft Constitution by including labor unions in the
guarantee of organizational right should be taken in the context of statements that his aim was the
removal of the statutory ban against security guards and supervisory employees joining labor
organizations. The approval by the Constitutional Commission of his proposal can only mean, therefore,
that the Commission intended the absolute right to organize of government workers, supervisory
employees, and security guards to be constitutionally guaranteed. By implication, no similar absolute
constitutional right to organize for labor purposes should be deemed to have been granted to top-level and
middle managers. As to them the right of self-organization may be regulated and even abridged
conformably to Art. III, 8.
Constitutionality of Art. 245
Finally, the question is whether the present ban against managerial employees, as embodied in Art. 245
(which superseded Art. 246) of the Labor Code, is valid. This provision reads:
Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees. Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor organization
of the rank-and-file employees but may join, assist or form separate labor organizations of their
own.29
This provision is the result of the amendment of the Labor Code in 1989 by R.A. No. 6715, otherwise
known as the Herrera-Veloso Law. Unlike the Industrial Peace Act or the provisions of the Labor Code
which it superseded, R.A. No. 6715 provides separate definitions of the terms "managerial" and
"supervisory employees," as follows:
Art. 212. Definitions. . . .

At all events, that the rest of the Commissioners understood his proposal to refer solely to supervisors and
not to other managerial employees is clear from the following account of Commissioner Joaquin G.
Bernas, who writes:
In presenting the modification on the 1935 and 1973 texts, Commissioner Eulogio R. Lerum
explained that the modification included three categories of workers: (1) government employees,
(2) supervisory employees, and (3) security guards. Lerum made of record the explicit intent to
repeal provisions of P.D. 442, the Labor Code. The provisions referred to were:
Art. 245. Security guards and other personnel employed for the protection and
security of the person, properties and premises of the employers shall not be
eligible for membership in a labor organization.

(m) "managerial employee" is one who is vested with 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.
Although the definition of "supervisory employees" seems to have been unduly restricted to the last phrase
of the definition in the Industrial Peace Act, the legal significance given to the phrase "effectively
recommends" remains the same. In fact, the distinction between top and middle managers, who set
management policy, and front-line supervisors, who are merely responsible for ensuring that such policies
are carried out by the rank and file, is articulated in the present definition. 30 When read in relation to this

definition in Art. 212(m), it will be seen that Art. 245 faithfully carries out the intent of the Constitutional
Commission in framing Art. III, 8 of the fundamental law.

holding, Article 245 of the Labor Code is unconstitutional, as it abridges Section 8, Article III of the
Constitution.

Nor is the guarantee of organizational right in Art. III, 8 infringed by a ban against managerial employees
forming a union. The right guaranteed in Art. III, 8 is subject to the condition that its exercise should be
for purposes "not contrary to law." In the case of Art. 245, there is a rational basis for prohibiting
managerial employees from forming or joining labor organizations. As Justice Davide, Jr., himself a
constitutional commissioner, said in hisponencia in Philips Industrial Development, Inc. v. NLRC:31

Section 8, Article III of the 1987 Constitution was taken from Section 7, Article IV of the 1973 Constitution
which, in turn, was lifted from Section 6, Article III of the 1935 Constitution. Section 7 of the 1973
Constitution provided as follows:

In the first place, all these employees, with the exception of the service engineers and the sales
force personnel, are confidential employees. Their classification as such is not seriously disputed
by PEO-FFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them
as confidential employees. By the very nature of their functions, they assist and act in a
confidential capacity to, or have access to confidential matters of, persons who exercise
managerial functions in the field of labor relations. As such, the rationale behind the ineligibility of
managerial employees to form, assist or joint a labor union equally applies to them.
In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on this rationale,
thus:

26

. . . The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the latter
might not be assured of their loyalty to the Union in view of evident conflict of
interests. The Union can also become company-dominated with the presence
of managerial employees in Union membership.32

To be sure, the Court in Philips Industrial was dealing with the right of confidential employees to organize.
But the same reason for denying them the right to organize justifies even more the ban on managerial
employees from forming unions. After all, those who qualify as top or middle managers are executives
who receive from their employers information that not only is confidential but also is not generally available
to the public, or to their competitors, or to other employees. It is hardly necessary to point out that to say
that the first sentence of Art. 245 is unconstitutional would be to contradict the decision in that case.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Narvasa, C.J., Regalado, Romero, Bellosillo, Martinez and Purisima, JJ., concur.
Separate Opinions
DAVIDE, JR., J., concurring and dissenting;
I concur with the majority that the "route managers" of private respondent Pepsi-Cola Products
Philippines, Inc. are managerial employees. However, I respectfully submit that contrary to the majority's

Sec. 7. The right to form associations or societies for purpose not contrary to law shall not be
abridged.
This Section was adopted in Section 7 of Proposed Resolution No. 486 of the 1986 Constitutional
Commission, entitled Resolution to Incorporate in the New Constitution an Article on the Bill of
Rights,1 submitted by the Committee on Citizenship, Bill of Rights, Political Rights and Obligations, and
Human Rights, with a modification, however, consisting of the insertion of the word union between the
words "associations" and "societies." Thus the proposed Section 7 provided as follows:
Sec. 7. The right of the people to form associations, unions, or societies for purposes not contrary
to law shall not be abridged (emphasis supplied).
Commissioner Joaquin G. Bernas, in his sponsorship speech on the proposed Article on the Bill of Rights,
expounded on the nature of the proposed provision, in this wise:
Section 7 preserves the old provision not because it is strictly needed but because its removal
might be subject to misinterpretation. It reads:
xxx

xxx

xxx

It strictly does not prepare the old provision because it adds the word UNION, and in the
explanation we received from Commissioner Lerum, the term envisions not just unions in private
corporations but also in the government. This preserves our link with the Malolos Constitution as
far as the right to form associations or societies for purposes not contrary to law is concerned.2
During the period of individual amendments, Commissioner Lerum introduced an amendment to the
proposed section consisting of the insertion of the clause "WHETHER EMPLOYED BY THE STATE OR
PRIVATE ESTABLISHMENTS, which, after consulting other Commissioners, he modified his proposed
amendment to read: "INCLUDING THOSE EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS." At
that time, the section read:
Sec. 7. The right of the people including those employed in the public and private sectors to form
associations, unions or societies for purposes not contrary to law shall not be abridged.
Pertinently to this dispute Commissioner Lerum's intention that the amendment "automatically abolish"
Articles 245 and 246 of the Labor Code. The Committee accepted the amendment, and there having been
no objection from the floor, the Lerum amendment was approved, thus:

MR. LERUM: . . . In proposing that amendment I ask to make of record that I want the following
provisions of the Labor Code to be automatically abolished, which read:

mentioned by Commissioner Lerum) became Article 245. Thereafter, R.A. No. 6715 6 amended the new
Article 245 (originally Article 246) to read, as follows:

Art. 245. Security guards and other personnel employed for the protection and
security of the person, properties and premises of the employers shall not be
eligible for membership in a labor organization.

Sec. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees. Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor organization
of the rank-and-file employees but may join, assist or form separate labor organizations of their
own.7

Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.
THE PRESIDING OFFICER (Mr. Bengzon):
What does the Committee say?
FR. BERNAS: The Committee accepts.
THE PRESIDING OFFICER (Mr. Bengzon):
The Committee has accepted the amendment, as amended.

27

Is there any objection? (Silence) The Chair hears none; the amendment, as
amended, is approved.3

The Committee on Style then recommended that commas be placed after the words people and sectors,
while Commissioner Lerum likewise moved to place the word unions before the word
associations.4 Section 7, which was subsequently renumbered as Section 8 as presently appearing in the
text ratified in the plebiscite of 2 February 1987, then read as follows:
The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.
It is then indubitably clear from the foregoing that the intent of the Constitutional Commission was to
abrogate the law prohibiting managerial employees from joining, assisting, or forming unions or labor
organizations. In this regard, there is absolutely no need to decipher the intent of the framers of the 1987
Constitution vis-a-vis Article 245 (originally 246) of the Labor Code, there being no ambiguity or
vagueness in the wording of the present Section 8, Article III of the 1987 Constitution. The provision is
clear and written in simple language; neither were there any confusing debates thereon. More importantly,
the purpose of Commissioner Lerum's amendments was unequivocal: he did not merely intend an implied
repeal, but an express repeal of the offending article of the Labor Code. The approval of the amendments
left no doubt whatsoever, as faithfully disclosed in the Records of the Constitutional Commission,
that all employees meaning rank-and-file, supervisory and managerial whether from the public or the
private sectors, have the right to form unions for purposes not contrary to law.
The Labor Code referred to by Commissioner Lerum was P.D. No. 442, promulgated on 1 May 1974. With
the repeal of Article 239 by Executive Order No. 111 issued on 24 December 1986, 5 Article 246 (as

With the abrogation of the former Article 246 of the Labor Code,8 and the constitutional prohibition against
any law prohibiting managerial employees from joining, assisting or forming unions or labor organizations,
the first sentence then of the present Article 245 of the Labor Code must be struck down as
unconstitutional.9 However, due to an obvious conflict of interest being closely identified with the
interests of management in view of the inherent nature of their functions, duties and responsibilities
managerial employees may only be eligible to join, assist or form unions or labor organizations of their
own rank, and not those of the supervisory employees nor the rank-and-file employees.
In the instant case, the petitioner's name United Pepsi-Cola Supervisory Union (UPSU) indubitably
attests that it is a union of supervisory employees. In light of the earlier discussion, the route
managers who aremanagerial employees, cannot join or assist UPSU. Accordingly, the Med-Arbiter and
public respondent Laguesma committed no error in denying the petition for direct certification or for
certification election.
I thus vote to GRANT, IN PART, the instant petition. That portion of the challenged resolution of public
respondent holding that since the route managers of private respondent Pepsi-Cola Products Philippines,
Inc., are managerial employees, they are "not eligible to assist, join or form a union or any other
organization" should be SET ASIDE for being violative of Section 8 of Article III of the Constitution, while
that portion thereof denying petitioner's appeal from the Med-Arbiter's decision dismissing the petition for
direct certification or for a certification election should be AFFIRMED.
PUNO, J., separate concurring;
With due respect, it is my submission that Article 245 of the Labor Code was not repealed by section 8,
Article III of the 1987 Constitution for reasons discussed below.
A. Types of Employees.
For purposes of applying the law on labor relations, the Labor Code in Article 212 (m) defines three (3)
categories of employees. They are managerial, supervisory and rank-and-file, thus:
Art. 212 (m). "Managerial Employee" is one who is vested with 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 recommended 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-andfile employees for purposes of this Book.
The test of "managerial" or "supervisory" status depends on whether a person possesses authority to act
in the interest of his employer and whether such authority is not routinary or clerical in nature but requires
the use of independent judgment.1 The rank-and-file employee performs work that is routinary and clerical
in nature. The distinction between these employees is significant because supervisory and rank-and-file
employees may form, join or assist labor organizations. Managerial employees cannot.

Labor-management relations in the Philippines were first regulated under the Industrial Peace Act 12 which
took effect in 1953. Hailed as the Magna Carta of Labor, it was modelled after the NLRA and LMRA of the
United States.13 Most of the basic principles of the NLRA have been carried over to the Industrial Peace
Act and the Labor Code.14 This is significant because we have ruled that where our labor statutes are
based on statutes in foreign jurisdiction, the decisions of the high courts in those jurisdictions construing
and interpreting the Act are given persuasive effects in the application of Philippine law.15
The Industrial Peace Act did not carry any provision prohibiting managerial employees from joining labor
organizations. Section 3 of said law merely provided:

B. The Exclusion of Managerial Employees: Its Historical Roots in the United States.
The National Labor Relations Act (NLRA), also known as the Wagner Act, enacted by the U.S. Congress
in 1935, was the first law that regulated labor relations in the United States and embodied its national labor
policy.2 The purpose of the NLRA was to eliminate obstructions to the free flow of commerce through the
practice of collective bargaining. The NLRA also sought to protect the workers' full freedoms of
association, self-organization, and designation of representatives of their own choosing, for the purpose of
negotiating the terms and conditions of their employment or other mutual aid and protection. 3 The NLRA
established the right of employees to organize, required employers to bargain with employees collectively
through employee-elected representatives, gave employees the right to engage in concerted activities for
collective bargaining purposes or other mutual aid or protection, and created the National Labor Relations
Board (NLRB) as the regulatory agency in labor-management matters.4
The NLRA was amended in 1947 by the Labor Management Relations Act (LMRA), also known as the
28Act. This Act sought to lessen industrial disputes and placed employers in a more nearly equal
Taft-Hartley
position with unions in bargaining and labor relations procedures.5
The NLRA did not make any special provision for "managerial employees." 6 The privileges and benefits of
the Act were conferred on "employees." Labor organizations thus clamored for the inclusion of supervisory
personnel in the coverage of the Act on the ground that supervisors were also employees. Although
traditionally, supervisors were regarded as part of management, the NLRB was constrained to recognize
supervisors as employees under the coverage of the law. Supervisors were then granted collective
bargaining rights.7 Nonetheless, the NLRB refused to consider managers as covered by the law.8
The LMRA took away the collective bargaining rights of supervisors. The sponsors of the amendment
feared that their unionization would break down industrial discipline as it would blur the traditional
distinction between management and labor. They felt it necessary to deny supervisory personnel the right
of collective bargaining to preserve their loyalty to the interests of their employers.9
Several amendments were later made on the NLRA but the exclusion of managers and supervisors from
its coverage was preserved. Until now managers and supervisors are excluded from the law.10 Their
exclusion hinges on the theory that the employer is entitled to the full loyalty of those whom it chooses for
positions of responsibility, entailing action on the employers' behalf. A supervisor's and manager's ability to
control the work of others would be compromised by his sharing of employee status with them.11
C. Historical Development in the Philippines.

Sec. 3. Employees' Right to Self-Organization. Employees shall have the right to selforganization and to form, join or assist labor organizations of their own choosing for the purpose
of collective bargaining through representatives of their own choosing and to engage in concerted
activities for the purpose of collective bargaining and other mutual aid and protection. Individuals
employed as supervisors shall not be eligible for membership in a labor organization of
employees under their supervision but may form separate organizations of their own.
Significantly, the Industrial Peace Act did not define a manager or managerial employee. It defined a
"supervisor" but not a "manager." Thus:
Sec. 2. . . .
(k) "Supervisor" means any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline other employees, or
responsibly to direct them, and to adjust their grievances, or effectively to recommend such acts,
if, in connection with the foregoing, the exercise of such authority is not of a merely routinary or
clerical nature but requires the use of independent judgment.
In 1972, we interpreted Section 3 of the Industrial Peace Act to give supervisors the right to join and form
labor organizations of their own.16 Soon we grappled with the right of managers to organize. In a case
involving Caltex managers, we recognized their right to organize, viz:
It would be going too far to dismiss summarily the point raised by respondent company, that of
the alleged identity of interest between the managerial staff and the employing firm. That should
ordinarily be the case, especially so where the dispute is between management and the rankand-file. It does not necessarily follow though that what binds the managerial staff to the
corporation forecloses the possibility of conflict between them. There could be a real difference
between what the welfare of such group requires and the concessions the firm is willing to grant.
Their needs might not be attended to then in the absence of any organization of their own. Nor is
this to indulge in empty theorizing. The records of respondent company, even the very case cited
by it, is proof enough of their uneasy and troubled relationship. Certainly the impression is difficult
to erase that an alien firm failed to manifest sympathy for the claims of its Filipino executives.17
The Industrial Peace Act was repealed in 1975 by P.D. 442, the Labor Code of the Philippines. The Labor
Code changed existing jurisprudence when it prohibited supervisory and managerial employees from
joining labor organizations. Supervisory unions were no longer recognized nor allowed to exist and
operate as such.18 We affirmed this statutory change in Bulletin Publishing Corp. v. Sanchez.19 Similarly,

Article 246 of the Labor Code expressly prohibited managerial employees from forming, assisting and
joining labor organizations, to wit:

In the same Bulletin case, the Court applied Article 246 and held that managerial employees are the very
type of employees who, by the nature of their positions and functions, have been decreed disqualified
from bargaining with management. This prohibition is based on the rationale that if managerial employees
were to belong or be affiliated with a union, the union might not be assured of their loyalty in view of
evident conflict of interest or that the union can be company-dominated with the presence of managerial
employees in the union membership.20 In the collective bargaining process, managerial employees are
supposed to be on the side of the employer, to act as its representative, and to see to it that its interests
are well protected. The employer is not assured of such protection if these employees themselves become
union members.21

of abstract meaning, it will be difficult to derive from this source much reliable assistance in
interpretation. Every member of such a convention acts upon such motives and reasons as
influence him personally, and the motions and debates do not necessarily indicate the purpose of
a majority of a convention in adopting a particular clause. It is quite possible for a particular
clause to appear so clear and unambiguous to the members of the convention as to require
neither discussion nor illustration; and the few remarks made concerning it in the convention
might have a plain tendency to lead directly away from the meaning in the minds of the majority.
It is equally possible for a part of the members to accept a clause in one sense and a part in
another. And even if we were certain we had attained to the meaning of the convention, it is by no
means to be allowed a controlling force, especially if that meaning appears not to be the one
which the words would most naturally and obviously convey. For as the constitution does not
derive its force from the convention which framed, but from the people who ratified it, the intent to
be arrived at is that of the people, and it is not to be supposed that they have looked for any dark
and abstruse meaning in the words employed, but rather that they have accepted them in the
sense most obvious to the common understanding, and ratified the instrument in the belief that
was the sense designed to be conveyed.24

The prohibition on managerial employees to join, assist or form labor organizations was retained in the
Labor Code despite substantial amendments made in 1989 by R.A. 6715, the Herrera-Veloso
Law. R.A. 6715 was passed after the effectivity of the 1987 Constitution and this law did not abrogate,
much less amend the prohibition on managerial employees to join labor organizations. The express
prohibition in Article 246 remained.However, as an addendum to this same Article, R.A. 6715 restored to
supervisory employees the right to join labor organizations of their own.22 Article 246 now reads:

It is for this reason that proceedings of constitutional conventions are less conclusive of the proper
construction of the instrument than are legislative proceedings of the proper construction of the
statute.25 In the statutes, it is the intent of the legislature that is being sought, while in constitutions, it is the
intent of the people that is being ascertained through the discussions and deliberations of their
representatives.26 The proper interpretation of constitutional provisions depends more on how it was
understood by the people adopting it than in the framers' understanding thereof.27

29 246. Ineligibility of managerial employees to join any labor organization; right of supervisory
Art.
employees. Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor organization
of the rank-and-file employees but may join, assist or form separate labor organizations of their
own.

Thus, debates and proceedings of the constitutional convention are never of binding force. They may be
valuable but are not necessarily decisive.28 They may shed a useful light upon the purpose sought to be
accomplished or upon the meaning attached to the words employed. And the courts are free to avail
themselves of any light that may be derived from such sources, but they are not bound to adopt it as the
sole ground of their decision.29

Article 246 became Article 245 after then Article 244 was repealed by E.O. 111. Article 246 is presently
Article 245 of the Labor Code.

Clearly then, a statute cannot be declared void on the sole ground that it is repugnant to a supposed intent
or spirit declared in constitutional convention proceedings.

Indeed, Article 245 of the Labor Code prohibiting managerial employees from joining labor organizations
has a social and historical significance in our labor relations law. This significance should be considered in
deciphering the intent of the framers of the 1987 Constitution vis-a-vis the said Article.

D. Freedom of Association

Art. 246. Ineligibility of managerial employees to join any labor organization. Managerial
employees are not eligible to join, assist or form any labor organization.

With due respect, I do not subscribe to the view that section 8, Article III of the Constitution abrogated
Article 245 of the Labor Code. A textual analysis of section 8, Article III of the Constitution will not justify
this conclusion. With due respect, the resort by Mr. Justice Davide to the deliberations of the Constitutional
Commission does not suffice. It is generally recognized that debates and other proceedings in a
constitutional convention are of limited value and are an unsafe guide to the intent of the people. 23 Judge
Cooley has stated that:
When the inquiry is directed to ascertaining the mischief designed to be remedied, or the purpose
sought to be accomplished by a particular provision, it may be proper to examine the proceedings
of the convention which framed the instrument. Where the proceedings clearly point out the
purpose of the provision, the aid will be valuable and satisfactory; but where the question is one

The right of association flows from freedom of expression. 30 Like the right of expression, the exercise of
the right of association is not absolute. It is subject to certain limitations.
Article 243 of the Labor Code reiterates the right of association of people in the labor sector. Article 243
provides:
Art. 243. Coverage of employees' right to self-organization. All persons employed in
commercial, industrial and agricultural enterprises and in religious, charitable, medical, or
educational institutions whether operating for profit or not, shall have the right to self-organization
and to form, join, or assist labor organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed people, rural workers and

those without any definite employers may form labor organizations for their mutual aid and
protection.
Article 243 guarantees the right to self-organization and association to "all persons." This seemingly allinclusive coverage of "all persons," however, actually admits of exceptions.
Article 24431 of the Labor Code mandates that all employees in the civil service, i.e, those not employed in
government corporations established under the Corporation Code, may only form associations but may
not collectively bargain on terms and conditions fixed by law. An employee of a cooperative who is a
member and co-owner thereof cannot invoke the right of collective bargaining and negotiation vis-a-vis the
cooperative.32 An owner cannot bargain with himself or his co-owners. 33 Employees in foreign embassies
or consulates or in foreign international organizations granted international immunities are also excluded
from the right to form labor organizations. 34 International organizations are organized mainly as a means
for conducting general international business in which the member-states have an interest and the
immunities granted them shield their affairs from political pressure or control by the host country and
assure the unimpeded performance of their functions.35
Confidential employees have also been denied the right to form labor-organizations. Confidential
employees do not constitute a distinct category for purposes of organizational right. Confidentiality may
attach to a managerial or non-managerial position. We have, however, excluded confidential employees
from joining labor organizations following the rationale behind the disqualification of managerial
employees in Article 245. In the case of National Association of Trade Unions-Republic Planters' Bank
Supervisors Chapter v. Torres,36 we held:

30

In the collective bargaining process, managerial employees are supposed to be on the side of the
employer, to act as its representatives, and to see to it that its interests are well protected. The
employer is not assured of such protection if these employees themselves are union members.
Collective bargaining in such a situation can become one-sided. It is the same reason that
impelled this Court to consider the position of confidential employees as included in the
disqualification found in Article 245 as if the disqualification of confidential employees were
written in the provision. If confidential employees could unionize in order to bargain for
advantages for themselves, then they could be governed by their own motives rather than the
interest of the employers. Moreover, unionization of confidential employees for the purpose of
collective bargaining would mean the extension of the law to persons or individuals who are
supposed to act "in the interest of" the employers. It is not farfetched that in the course of
collective bargaining, they might jeopardize that interest which they are duty-bound to protect.37
E. The disqualification extends only to labor organizations.
It must be noted that Article 245 of the Labor Code deprives managerial employees of their right to join
"labor organizations." A labor organization is defined under the Labor Code as:
Art. 212 (g). "Labor organization" means any union or association of employees which exists in
whole or in part for the purpose of collective bargaining or of dealing with the employer
concerning terms and conditions of employment.

A labor organization has two broad rights: (1) to bargain collectively and (2) to deal with the employer
concerning terms and conditions of employment. To bargain collectively is a right given to a labor
organization once it registers itself with the Department of Labor and Employment (DOLE). Dealing with
the employer, on the other hand, is a generic description of interaction between employer and employees
concerning grievances, wages, work hours and other terms and conditions of employment, even if the
employees' group is not registered with the DOLE.38 Any labor organization which may or may not be a
union may deal with the employer. This explains why a workers' Organization does not always have to be
a labor union and why employer-employee collective interactions are not always collective bargaining.39
In the instant case, it may be argued that managerial employees' labor organization will merely "deal with
the employer concerning terms and conditions of employment" especially when top management is
composed of aliens, following the circumstances in the Caltex case.
Although the labor organization may exist wholly for the purpose of dealing with the employer concerning
terms and conditions of employment, there is no prohibition in the Labor Code for it to become a legitimate
labor organization and engage in collective bargaining. Once a labor organization registers with the DOLE
and becomes legitimate, it is entitled to the rights accorded under Articles 242 and 263 (b) of the Labor
Code. And these include the right to strike and picket.
Notably, however, Article 245 does not absolutely disqualify managerial employees from exercising their
right of association. What it prohibits is merely the right to join labor organizations. Managerial employees
may form associations or organizations so long as they are not labor organizations. The freedom of
association guaranteed under the Constitution remains and has not been totally abrogated by Article 245.
To declare Article 245 of the Labor Code unconstitutional cuts deep into our existing industrial life and will
open the floodgates to unionization at all levels of the industrial hierarchy. Such a ruling will wreak havoc
on the existing set-up between management and labor. If all managerial employees will be allowed to
unionize, then all who are in the payroll of the company, starting from the president, vice-president,
general managers and everyone, with the exception of the directors, may go on strike or picket the
employer.40 Company officers will join forces with the supervisors and rank-and-file. Management and
labor will become a solid phalanx with bargaining rights that could be enforced against the owner of the
company.41 The basic opposing forces in the industry will not be management and labor but the operating
group on the one hand and the stockholder and bondholder group on the other. The industrial problem
defined in the Labor Code comes down to a contest over a fair division of the gross receipts of industry
between these two groups.42 And this will certainly bring ill-effects on our economy.
The framers of the Constitution could not have intended a major upheaval of our labor and socioeconomic systems. Their intent cannot be made to override substantial policy considerations and create
absurd or impossible situations.43 A constitution must be viewed as a continuously operative charter of
government. It must not be interpreted as demanding the impossible or the impracticable; or as effecting
the unreasonable or absurd.44 Courts should always endeavour to give such interpretation that would
make the constitutional provision and the statute consistent with reason, justice and the public interest.45
I vote to dismiss the petition.
VITUG, J., separate concurring and dissenting;

The pivotal issues raised in the case at bar, aptly stated by the Office of the Solicitor General, are:
(1) Whether or not public respondent, Undersecretary of the Department of Labor and Employment
("DOLE") Bienvenido E. Laguesma, gravely abused his discretion in categorizing the members of
petitioner union to be managerial employees and thus ineligible to form or join labor organizations; and
(2) Whether or not the provision of Article 245 of the Labor Code, disqualifying managerial employees
from joining, assisting or forming any labor organization, violates Section 8, Article III, of the 1987
Constitution, which expresses that "(t)he right of the people, including those employed in public and
private sectors to form unions, associations or societies for purposes not contrary to law shall not be
abridged."

employees," upon the other hand, and relating the matter particularly to the Labor Code, are those "vested
with powers or prerogatives to lay down and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees" as distinguished from the supervisory
employees whose duties in these areas are so designed as to verily be implementary to the policies or
rules and regulations already outstanding and priorly taken up and passed upon by management. The
managerial level is the source, as well as prescribes the compliance, of broad mandates which, in the field
of labor relations, are to be carried out through the next rank of employees charged with actually seeing to
the specific personnel action required. In fine, the real authority, such as in hiring or firing of employees,
comes from management and exercised by means of instructions, given in general terms, by the
"managerial employees;" the supervisory employees, although ostensibly holding that power, in truth,
however, only act in obedience to the directives handed down to them. The latter unit, unlike the former,
cannot be considered the alter ego of the owner of enterprise.

The case originated from a petition for direct certification or certification election among route
managers/supervisory employees of Pepsi-Cola Products Phils., Inc. ("Pepsi"), filed by the United PepsiCola Supervisory Union ("Union"), claiming to be a legitimate labor organization duly registered with the
Department of Labor and Employment under Registration Certificate No. NCR-UR-3-1421-95. Pepsi
opposed the petition on the thesis that the case was no more than a mere duplication of a previous
petition for direct certification 1 filed by the same route managers through the Pepsi-Cola Employees
Association (PCEA-Supervisory) which petition had already been denied by Undersecretary Laguesma.
The holding reiterated a prior decision in Workers Alliance Trade Unions ("WATU") vs. Pepsi-Cola
Products Phils., Inc.,2 that route managers were managerial employees.

The duties and responsibilities of the members of petitioner union, shown by their "job description" below

In its decision, dated 05 May 1995, Med-Arbiter Brigida C. Fadrigon dismissed for lack of merit the petition
31 stating that the issue on the proper classification and status of route managers had already
of the Union,
been ruled with finality in the previous decisions, aforementioned, rendered by DOLE.

To contribute to the growth and profitability of PCPPI via well-selected, trained

and motivated Route Sales Team who sell, collect and merchandise, following
the Pepsi Way, and consistent with Company policies and procedures as well
as the corporate vision of Customer Satisfaction.

The union appealed the decision. In his resolution of 31 August 1995, Undersecretary Laguesma
dismissed the appeal, saying that there was no compelling reason to abandon the ruling in the two old
cases theretofore decided by DOLE. In his order of 22 September 1995, Undersecretary Laguesma
denied the Union's motion for reconsideration.
The Union went to this Court, via a petition for certiorari, assailing the cancellation of its certificate of
registration. The Court, after considering the petition and the comments thereon filed by both public and
private respondents, as well as the consolidated reply of petitioner, dismissed the case in its resolution of
08 July 1996 on the premise that no grave abuse of discretion had been committed by public respondent.
Undaunted, the Union moved, with leave, for the reconsideration of the dismissal of its petition by the
Court En Banc. In its resolution of 16 June 1997, the case was referred to the Court En Banc en
consulta with the movant's invocation of unconstitutionality of Article 245 of the Labor Code vis-avis Section 8, Article III, of the 1987 Constitution.
There is merit, in my view, in petitioner's motion for reconsideration but not on constitutional grounds.
There are, in the hierarchy of management, those who fall below the level of key officers of an enterprise
whose terms and conditions of employment can well be, indeed are not infrequently, provided for in
collective bargaining agreements. To this group belong the supervisory employees. The "managerial

PCPPI
RM's JOB DESCRIPTION
A. GENERAL/OVERALL OBJECTIVE OF THIS POSITION

B. SPECIFIC JOB DESCRIPTION:

KEY RESULT AREAS STANDARD OR PERFORMANCE
SALES VOLUME *100% Vs. NRC Target
_____% NTG
DISTRIBUTION * Product Availability
70% Pepsi
80% Seven-Up
40% Mirinda
65% Mt. Dew

5% Out of Stock

75% Load Factor

ACCOUNTS RECEIVABLE 65% Current (Incl. Legal & Col.)

18 Productive Calls

MANAGEMENT 80:20 Cash to Credit Ratio

CUSTOMER SATISFACTION Customer Complaint attended to within the next

working day

DSO assigned Std. to Division

HUMAN RESOURCE 5% Absentism Excl. VL
by the District
MANAGEMENT (approved) 3 Documented RR/
ASSET MANAGEMENT 30 cases for ice-coolers
Week using SLM's Training Log
80 cases for electric coolers
ADMINISTRATIVE Complete, timely and accurate
BLOWAGA on Division Vehicles
MANAGEMENT reports.
60 cases on Rolling/Permanent
PCPPI
Kiosks
RM's BASIC DAILY ACTIVITIES

32

TRADE DEVELOPMENT 100% Buying Customers Based

A. AT THE SALES OFFICE
on master list that bought once
1. PRACTICES BLOWAGA ON SERVICE VEHICLE (AT HOME)
5 months payback on concessions
2. REPORTS FOR WORK ON OR BEFORE 6:15 A.M.
4 CED's/Rte.
3. REPORTS IN CLEAN AND NEAT UNIFORM (GOOD GROOMING)
EXPENSE MANAGEMENT a). 5% Absentism rate Excl. VL
4. DAILY BRIEFING WITH THE DM
b). 280 cases/route/day
5. CONDUCTS SKILLS ENHANCEMENT OR HUDDLES WITH RST's
c). 15% cost-to-sales ratio
a). ATTENDANCE/GROOMING
ROUTE MANAGEMENT 3 Days on RR/Wk
b). OPERATIONAL DIRECTIONS & PRIORITIES
Days on BC-SC- Financial &
c). ANNOUNCEMENT
Co. Assets
6. RM's PRESENCE DURING CHECK-OUT
Days on TD
a). SLM PRACTICES BLOWAGA ON ROUTE TRUCK

b). PRIVATE COUNSELING WITH RST (AM & PM IF

NECESSARY)

TRADE DEVELOPMENT
1. PREPARATION PRIOR TO CALL

c). PROPER HANDLING OF SELLING/MDSG. MATERIALS

2. ACTUAL CALL
d). YESTERDAY's FINAL SETTLEMENT REVIEW
3. POST CALL ANALYSIS
7. UPDATE REPORTS,
CONMATION

MONITORS,

DOCUMENTS

&

TELEPHONE

8. ATTENDS TO PRODUCT COMPLAINTS (GFM)

9. CONDUCTS ADMINISTRATIVE INVESTIGATION OR ATTENDS DM's
MEETING (on Saturdays)

4. FOLLOW-UP ACTION
C. AT CLOSE OF DAY
1. MAINTAINS & UPDATES CORRECT & ACCURATE RECORDS &
REPORTS

B. FIELD WORK
ROUTE RIDE

33

(HOW DID I FARE? WHY? WHAT ACTIONS TO TAKE)

2. RM-SLM DEBRIEFING
1. CHECKS SLMS. TRAINING LOG (PROGRESS & DEV'T.)

3. SLR DISCUSSION (BASED ON A.M. SLR)

2. SALESMAN's CPC

4. COORDINATES WITH DM ON PLANS & PROGRAMS

3. ROUTE COVERAGE EVALUATION

5. PREPARATIONS FOR NEXT DAY's ACTIVITIES3

4. LOAD FACTOR
5. SALESMAN's ROUTING SYSTEM EVALUATION

convey no more than those that are aptly consigned to the "supervisory" group by the relatively small
unit of "managerial" employees. Certain portions of a pamphlet, the so-called "Route Manager Position
Description" referred to by Mr. Justice Vicente Mendoza, in his ponencia, hereunder reproduced for easy
reference, thus

BC/SC
A. BASIC PURPOSE
1. FINANCIAL & ASSET VERIFICATION, CONFIRMATION & AUDIT
A Manager achieves objectives through others.
2. BACKCHECKS FIRST 5 CUSTOMERS SERVED FOR THE DAY
a). MERCHANDISING
b). SERVICING
c). RM's TERRITORY FAMILIARITY
d). KEY ACCOUNTS GOODWILL

As a Route Manager, your purpose is to meet the sales plan; and you achieve
this objective through the skillful management of your job and the management
of your people.
These then are your functions as Pepsi-Cola Route Manager. Within these
functions managing your job and managing your people you are
accountable to your District Manager for the execution and completion of
various tasks and activities which will make it possible for you to achieve your
sales objectives.

B. PRINCIPAL ACCOUNTABILITIES
1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:

2.1 Route Sales Team Development

The Route Manager is accountable for the following:

1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal contacts with dealers.
1.1.4 Inspect and ensure that all merchandising objectives are achieved in all outlets.
1.1.5 Maintain and improve productivity of all cooling equipment and kiosks.

2.1.1 Conduct route rides to train, evaluate and develop all assigned route salesmen and helpers at least
3 days a week, to be supported by required route ride documents/reports & back check/spot check at least
2 days a week to be supported by required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training should focus on the enhancement of
effective sales and merchandising techniques of the salesmen and helpers. Conduct group training at
least 1 hour each week on a designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company's reputation through strict adherence to PCPPI's code of conduct and the
universal standards of unquestioned business ethics.
offer nothing at all that can approximate the authority and functions of those who actually and genuinely
hold the reins of management.

1.1.6 Execute and control all authorized promotions.

1.1.7 Develop and maintain dealer goodwill.

34

1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for possible adjustments to
maximize utilization of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before check-out and the proper sorting of bottles before
check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other related reports and forms required on an
accurate and timely basis.
1.2.3 Ensure proper implementation of the various company policies and procedures include but not
limited to shakedown; route shortage; progressive discipline; sorting; spoilages; credit/collection; accident;
attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0 MANAGING YOUR PEOPLE

I submit, with due respect, that the members of petitioning union, not really being "managerial employees"
in the true sense of the term, are not disqualified from forming or joining labor organizations under Article
245 of the Labor Code.
I shall now briefly touch base on the constitutional question raised by the parties on Article 245 of the
Labor Code.
The Constitution acknowledges "the right of the people, including those employed in the public and private
sectors, to form unions, associations or societies for purposes not contrary to law . . . ."4 Perforce,
petitioner claims, that part of Article 245 5 of the Labor Code which states: "Managerial employees are not
eligible to join, assist or form any labor organization," being in direct collision with the Constitutional
provision, must now be declared abrogated in the law.
Frankly, I do not see such a "direct collision." The Constitution did not obviously grant a limitless right "to
form unions, associations or societies" for it has clearly seen it fit to subject its exercise to possible
legislative judgment such as may be appropriate or, to put it in the language of the Constitution itself, to
"purposes not contrary to law."
Freedom of association, like freedom of expression, truly occupies a choice position in the hierarchy of
constitutional values. Even while the Constitution itself recognizes the State's prerogative to qualify this
right, heretofore discussed, any limitation, nevertheless, must still be predicated on the existence of a
substantive evil sought to be addressed.6 Indeed, in the exercise of police power, the State may, by law,
prescribe proscriptions, provided reasonable and legitimate of course, against even the most basic rights
of individuals.

The restriction embodied in Article 245 of the Labor Code is not without proper rationale. Concededly, the
prohibition to form labor organizations on the part of managerial employees narrows down their freedom of
association. The very nature of managerial functions, however, should preclude those who exercise them
from taking a position adverse to the interest they are bound to serve and protect. The mere opportunity to
undermine that interest can validly be restrained. To say that the right of managerial employees to form a
"labor organization" within the context and ambit of the Labor Code should be deemed totally separable
from the right to bargain collectively is not justified by related provisions of the Code. For instance
Art. 212. Definitions.7 . . .
(g) "Labor organization" means any union or association of employees which exists in whole or in
part for the purpose of collective bargaining or of dealing with employers concerning terms and
conditions of employment.
xxx

xxx

non-statutory officers, i.e., those who occupy positions created by the corporate by-laws who are deemed
essential for effective management of the enterprise. I cannot imagine these officers as being legally and
morally capable of associating themselves into a labor organization and asserting collective bargaining
rights against the very entity in whose behalf they act and are supposed to act.
I submit, accordingly, that, firstly, the members of petitioner union or the so-called route managers, being
no more than supervisory employees, can lawfully organize themselves into a labor union within the
meaning of the Labor Code, and that, secondly, the questioned provision of Article 245 of the Labor Code
has not been revoked by the 1987 Constitution.
WHEREFORE, I vote, given all the foregoing, for the reversal of the resolution of 31 August 1995, and the
order of 22 September 1995, of public respondent.

xxx

(m) "Managerial employee" is one who is vested with 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
routinely 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.

35

Art. 263. . . .
(b) Workers shall have the right to engage in concerted activities for purposes of collective
bargaining or for their mutual benefit and protection. The right of legitimate labor organizations to
strike and picket and of employers to lockout, consistent with the national interest, shall continue
to be recognized and respected.
The maxim "ut res magis quam pereat" requires not merely that a statute should be given such a
consequence as to be deemed whole but that each of its express provisions equally should be given the
intended effect.

G.R. No. 74262 October 29, 1987

GENERAL
RUBBER
and
FOOTWEAR
CORPORATION, petitioner,
vs.
BUREAU OF LABOR RELATIONS, NATIONAL ASSOCIATION OF TRADE UNION OF MONTHLY PAID
EMPLOYEES-NATU, respondents.
PARAS, J.:

I find it hard to believe that the fundamental law could have envisioned the use by managerial employees
of coercive means against their own employers over matters entrusted by the latter to the former.
Whenever trust and confidence is a major aspect of any relationship, a conflict of interest on the part of the
person to whom that trust and confidence is reposed must be avoided and when, unfortunately, it does still
arise its containment can rightly be decreed.
Article 245 of the Labor Code indeed aligns itself to the Corporation Code, the basic law on by far the most
commonly used business vehicle the corporation which prescribes the tenure of office, as well as the
duties and functions, including terms of employment (governed in most part by the Articles of
Incorporation, the By-laws of the Corporation, or resolutions of the Board of Directors), of corporate
officers for both the statutory officers,i.e., the president, the treasurer and the corporate secretary, and the

Petitioner is a corporation engaged in the business of manufacturing rubber sandals and oilier rubber
products. In 1985, the Samahang Manggagawa sa General Rubber Corporation ANGLO was formed by
the daily paid rank and file employees as their union for collective bargaining, after the expiration on
October 15, 1985 of the collective bargaining agreement previously executed by petitioner with General
Rubber Workers Union (Independent) on October 15, 1982. Be it noted however that on July 17, 1985, the
monthly paid employees of the petitioner-corporation, after forming their own collective bargaining unit
the National Association of Trade Unions of Monthly Paid Employees-NATU, filed a petition for direct
certification with tile Bureau of Labor Relations which petition was opposed by herein petitioner. On
September 2, 1985, the Med-Arbiter issued an Order for the holding of a certification election after finding

that a certification election is in order in this case and observing that it is the fairest remedy to determine
whether employees of petitioner desire to have a union or not. On appeal, the Bureau of Labor Relations
denied both the appeal and motion for reconsideration interposed by petitioner and affirmed the ruling of
the Med-Arbiter. Hence, the present petition, imputing serious error's of law and grave abuse of discretion
on the part of the Bureau of Labor Relations in issuing the assailed order which sanctioned the creation of
two (2) bargaining units within petitioner-corporation with the following:

3. The Bureau of Labor Relations overlooked the fact that these monthly-paid-employees are excluded
from the first existing bargaining unit of the daily-paid rank and file employees because in the year 1963,
when the employees of petitioner initially started to exercise their right to self-organization, herein
petitioner bargained for the exclusion of the monthly-paid employees from the existing bargaining unit
because they are performing vital functions of management. In view of this exclusion, petitioner took upon
itself to take care of them and directly gave them the benefits or privileges without having to bargain for
them or without the aid of the bargaining arm or force of a union.

GROUNDS FOR REVIEW

Petitioner's contentions are devoid of merit.
I
Among other issues answered in the assailed order are the following findings of fact:
The Bureau of Labor Relations committed serious error of law and grave abuse of
discretion in ordering the creation of a new bargaining unit at petitioner, notwithstanding
that there is already an existing bargaining unit, whose members are represented for
collective bargaining purposes by Samahang Manggagawa sa General Rubber
Corporation- ANGLO.
II

36

The Bureau of Labor Relations committed serious error of law in holding that managerial
employees or those employees exercising managerial functions can legally form and
join a labor organization and be members of the new bargaining unit.
III
The Bureau of Labor Relations committed grave abuse of discretion in holding that
supervisors, employees perform- ing managerial, confidential and technical functions
and office personnel, who are negotiated by petitioner to be excluded from the existing
bargaining unit because they are performing vital functions to management, can form
and join a labor organization and be members of the new bargaining unit.

Expounding on its position, petitioner argues that:

1. The order violates the thrust of the Labor Code insofar as formation of a bargaining unit is concerned. A
policy is in favor of a larger unit and not the creation of smaller units in one establishment which might lead
to formation, thus impractical.
2. Article 246 of the Labor Code explicitly provides that managerial employees are ineligible to join or form
any labor organization. Since it has been shown by the petitioners that 30% of the monthly-paid
employees are managers or employees exercising managerial functions, it was grave error for the Bureau
of Labor Relations to allow these monthly paid employees to form a union and/or a bargaining unit.

Regarding the second issue, we deem it necessary to examine the respective functions
of the employees. It appears therefrom that they perform supervisory functions. Verily
they make recommendation petitions as to what Managerial actions to take in
disciplinary cases. However, that fact alone does not make them managerial employees
already, It is more a question of how effective are those recommendations which aspect
has not been clearly established in this case. As defined in the Labor Code, a
"managerial employee is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees, or to effectively recommend such managerial actions."
Thus, employees who do not fall within this definition are considered rank-and-file
employees.
Lastly, we find that the third issue has been raised for the first time on appeal. It has
been the policy of the Bureau to encourage the formation of an employer unit "unless
circumstances otherwise require. The proliferation of unions in an employer unit is
discouraged as a matter of policy unless there are compelling reasons which would
deny a certain class of employees the right to self-organization for purposes of collective
bargaining, This case does not fall squarely within the exception. It is undisputed that the
monthlies who are rank-and-file have been historically excluded from the bargaining unit
composed of daily-paid rank-and-filers that is, since 1963 when the existing rank- andfile union was recognized. In fact, the collective bargaining agreement (CBA) which
expired last 15 October 1985 provides as follows:
ARTICLE I
SCOPE
Section 1. Appropriate bargaining unit. This Agreement covers all
regular employees and workers employed by the company at its
factory in Malabon, Metro Manila. The words "employee," "laborer"

and "workers" when used in this Agreement shall be deemed to refer

to those employees within the bargaining unit. Employees who occupy
managerial, confidential or technical positions, supervisors, contract
employees, monthly-paid employees, security as wen as office
personnel are excluded from the appropriate bargaining unit
(emphasis supplied).
In view of the above, the monthly-paid rank-and-file employees ran form a union of their
own, separate and distinct from the existing rank-and-file union composed of daily-paid
workers. (Rollo, pp. 1920)
Thus, it can be readily seen from the above findings of the Bureau of labor Relations that the members of
private respondent are not managerial employees as claimed by petitioners but merely considered as
rank-and-file employees who have every right to self-organization or to be heard through a duly certified
collective bargaining union. The Supervisory power of the members of private respondent union consists
merely in recommending as to what managerial actions to take in disciplinary cases. These members of
private respondent union do not fit the definition of managerial employees which We laid down in the case
of Bulletin Publishing Corporation v. Sanchez (144 SCRA 628). These members of private respondent
union are therefore not prohibited from forming their own collective bargaining unit since it has not been
shown by petitioner that "the responsibilities (of these monthly-paid-employees) inherently require the
exercise of discretion and independent judgment as supervisors" or that "they possess the power and
authority 37
to lay down or exercise management policies." Similarly, he held in the same case that "Members
of supervisory unions who do not fall within the definition of managerial employees shall become eligible to
loin or assist the rank-and-file labor organization, and if none exists, to form or assist in the forming of such
rank-and-file organizations.
Perhaps it is unusual for the petitioner to have to deal with two (2) collective bargaining unions but there is
no one to blame except petitioner itself for creating the situation it is in. From the beginning of the
existence in 1963 of a bargaining limit for the employees up to the present, petitioner had sought to
indiscriminately suppress the members of the private respondent"s right to self-organization provided for
by law. Petitioner, in justification of its action, maintained that the exclusion of the members of the private
respondent from the bargaining union of the rank-and-file or from forming their own union was agreed
upon by petitioner corporation with the previous bargaining representatives namely: the General "Rubber
Workers Union PTGWO the General Workers Union NAFLU and the General Rubber Workers Union
(independent). Such posture has no leg to stand on. It has not been shown that private respondent was
privy to this agreement. And even if it were so, it can never bind subsequent federations and unions
particularly private respondent-union because it is a curtailment of the right to self-organization guaranteed
by the labor laws. However, to prevent any difficulty. and to avoid confusion to all concerned and, more
importantly, to fulfill the policy of the New Labor Code as well as to be consistent with Our ruling in
the Bulletin case, supra, the monthly-paid rank-and-file employees should be allowed to join the union of
the daily-paid-rank-and-file employees of petitioner so that they can also avail of the CBA benefits or to
form their own rank-and-file union, without prejudice to the certification election that has been ordered.

WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of merit.
SO ORDERED.
G.R. No. L-59221 December 26, 1984
ENGINEERING
EQUIPMENT,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER JOSE T. COLLADO, AND
RICARDO PILI,respondents.
GUTIERREZ, JR., J.:
This is a petition for certiorari to set aside the resolutions of respondent National Labor Relations
Commission (NLRC) which affirmed the decision of the respondent Labor Arbiter declaring the private
respondent's dismissal illegal and directing his reinstatement to his former position with full backwages.
Respondent Ricardo Pili was an employee of petitioner Engineering Equipment, Inc. beginning December
11, 1973 until July 18, 1976 when his services were terminated. At that time, he was assigned as foreman
in the Central Bank building construction project of the petitioner at Diliman, Quezon City. As a result of the
termination of his services, Pili filed a complaint for illegal dismissal against the petitioner before the
Manila Labor Regional Office.
No amicable settlement could be reached at the conciliation level. hence the case docketed as NLRC
Case No. RB-IV-11874-77 entitled Ricardo Pili v. Engineering Equipment Inc. was certified for compulsory
arbitration and assigned to the respondent Labor Arbiter.
During the arbitration proceedings, the parties tried to establish the following facts:
Complainant alleged that he was first employed by respondent on 11 December 1973;
that his last salary was P650.00 a month; that he was assigned at the respondent's
construction project of Central Bank Building in Quezon City as a field foreman; that on
16 July 1976, he received a letter from the respondent dated 18 July 1976 terminating
his services; that he admits having been verbally informed by the Project Field Engineer
that some workers around 40 of them protested against him, but said Field Engineer did
not show him any written protest despite his request but was asked only as to the truth
of whether he brought inside the job site a jungle bolo which complainant denied and
that he was told that the other charges or protest are small and minor and not to mind
about them and that he was just told not to report for work for one month until things
cooled off; that on 8 July 1976, he was told to see the Company legal counsel who also
informed him of some complaints by some workers but again he was not shown the

names nor the complaint itself despite his request, specially to confront those allegedly
protesting against him; that said legal counsel merely asked him about the jungle bolo
which he allegedly brought inside the job site which he denied saying that the same was
impossible because of the strict security service at the jobsite; that he was not given any
opportunity to explain in writing his side on the alleged protest of some workers; nor was
he in, investigated formally on the same; that he was never the subject of any
disciplinary measure for any infraction of company rules prior to his dismissal; that as a
matter of fact he was the recipient of a merit increase for his good performance three
months prior to his dismissal.
For the Respondent

38

On the other hand, the respondent alleged that respondent received on 24 June 1976 a
letter protest (Exh. "4") containing 8 charges by some 40 workers against the
complainant; that upon receipt of said protest-letter, the Labor Relations Supervisor
immediately investigated the matter by asking the alleged signatories thereof; that the
said Labor Relations Officer also talked to the complainant and assured him that he
would given opportunity to explain his side in a formal investigation; that the
complainant, in an act of reprisal, allegedly threatened the signatories to the protestletter so that the complainant had to be. dismissed before he could be formally
investigated and given the opportunity to explain in writing his side of the charges made
by the workers; that the charges made by the workers against the complainant
constituted gross and habitual neglect of duties; that the immediate cause of
complainant's dismissal was his inefficiency and incompetence.

After a review of the conflicting evidence for both parties, the respondent Labor Arbiter issued the
questioned decision which was in favor of the complainant. The dispositive portion reads:
WHEREFORE, in view of all the foregoing considerations, we find the respondent
Engineering Equipment, Inc., guilty of illegal dismissal as charged, Resultancy, the
complainant should be entitled to reinstatement without loss of seniority rights and to his
back wages computed from June 28, 1978 up to the tune of his actual reinstatement.
As earlier stated, the Labor Arbiter's decision was affirmed by the NLRC and a motion for reconsideration
was denied. Hence, the instance petition.
In a resolution dated January 6, 1982, we issued a temporary restraining order enjoining the respondents
from enforcing the Labor Arbiter's decision and the NLRC resolution.
The records show that the petitioner company received a letter - protest on June 24, 1976 from forty (40)
of its construction workers complaining against respondent Ricardo Pili. The workers had eight (8) charges

against Pili but four were considered minor or were ignored by the petitioner, so it investigated only four
charges, to wit:
(a) Interfering with the conduct of work properly within the competence of other foremen
to supervise.
(b) Ordering specific jobs to be done in a 'hit-or-miss' fashion to such extent that such
jobs had to be later repaired and/ or completely re-done.
(c) Unauthorized establishment of a canteen inside the project premises, where he
spent more time than what he devoted to supervision and direction of the workers under
him.
(d) Unauthorized possession of a deadly weapon (jungle bolo) on the project premises.
(Exh. "4 ").
Respondent NLRC decided in favor of the private respondent on the following grounds:
It is very clear from respondent's own assertion that the grounds upon which it anchors
its quest for terminating the services of complainant herein, are that contained in the
petition/complaint allegedly signed by forty (40) of its rank-and-file employees against
complainant herein. Parenthetically, complainant's separation from his employment must
necessarily likewise rest upon the truth and veracity of the charges leveled therein
against complainant, and ancillarily, the observance of the tenural due process in
effecting his dismissal.
A close examination of the records of this case reveals that respondent miserably failed
to establish and support its claim that complainant's separation from the service is for
cause. It will be observed that while respondent insists that forty (40) of its rank-and-file
employees signed a petition/complaint against complainant herein, for various offense,
not one ever testified to establish, much more corroborate, the due execution of such a
petition/complaint, if it was really executed.
The petitioner was ordered to reinstate the respondent with full backwages and without loss of seniority
rights because the NLRC considered the evidence submitted by the petitioner inadequate to support just
cause for dismissal.
We are constrained to grant the petition.

The petitioner terminated the services of respondent Pili not only for the reasons stated in the complaint of
the forty (40) workers but also because he instigated labor unrest when he took reprisal action against its
signatories. This is clearly stated in the petitioner's position paper filed with the public respondents.
The records show that when respondent Pili learned of the letter-complaint and the on-the-spot
investigation being conducted by the labor relations manager of the firm, he threatened the signatories and
told them they would be the ones separated from employment. The workers trooped to the petitioner's
personnel department and threatened to file complaints against the firm with the Ministry of Labor. The
unrest was averted when the workers were assured that the investigation of Pili would continue and that
their having written a formal complaint would not be taken against them.
The respondents are correct in stating that the best evidence to support the four charges would have been
the presentation of some of the 40 worker-complainants as witnesses before the Ministry of Labor and
Employment. However, the labor unrest caused by the respondent is supported by substantial evidence.
Messrs. Romeo Cabrera and Normandie B. Pizarro testified on matters within their personal knowledge
and about which they were the most qualified to testify. There is furthermore the admission of respondent
Pili that he took a leave of absence for one month to let the heated atmosphere cool down. There was no
need to go on leave if there was no charged atmosphere in the workplace.
The petitioner may have been remiss in introducing as witnesses before the labor arbiter only the labor
relations manager and the supervisor who conducted the investigation. There is one important point,
39
however, which the public respondents ignored. Whether or not foreman Pili had a jungle bolo strapped to
his side while supervising construction workers in the Central Bank project, whether or not he interfered
with the conduct of work assigned to other foremen, and whether or not he ordered jobs to be done in a
hit-or-miss fashion that these had to be redone, the fact remains that no less than forty (40) construction
workers felt sufficiently aggrieved at his improper behavior or conduct as to sign a formal letter of protest
against him. And after he was investigated these same workers were threatened by the respondent, thus
aggravating an already difficult situation. Under the circumstances, it would be expecting too much from
the employer for the public respondents or this Court to order the reinstatement of Mr. Pili.
The operation of the canteen by the respondent and his wife at the Central Bank project is admitted. The
respondent's defense is that he was given permission by his superior to operate it and it had been in
operation for some months before the petitioner investigated him about it. The records show that the
private respondent was disciplined on the basis of the charge about the canteen not only because of its
operation but also because he used some of his subordinates to maintain it. There was conflict of interest,
not only as regards the time that he spent on this private business but also the use of services of workmen
who should devote full-time to the company.
Respondent NLRC also blamed the petitioner for not giving the private respondent an opportunity to meet
his accusers face to face. The petitioner answered this alleged lack of due process by stating that it
conducted a formal investigation but the respondent "after one or two questions did not appear anymore."
He took a one month leave of absence of cool off the tense situation. Moreover, the petitioner states that

confrontation was unwise at the start because emotions were running high and, moreover, the respondent
himself pre-empted it when he took reprisal action against the signatories.
We also note that the respondent NLRC did not categorically rule on whether or not Mr. Pili was a
managerial employee and, therefore, whether or not the requirement of prior clearance to terminate was
necessary.
The petitioner's explanation reads;
It should also be added that even private respondent himself has not denied that he
exercised supervision and control over around fifty (50) project workers. Foremen like
private respondent are outside the rank-and-file unit and are in fact excluded therefrom
by contractual stipulation and legal mandate. They do not maintain time cards and are
exempt from the hours-of-work provision of the Labor Code, which private respondent
conveniently understood to mean that he could sleep during working hours. They also
have the power of "direct hires" (T.S.N., Aug. 12, 1977, p. 43). They exercise
discretionary powers "in distinguishing the skills of workers" under the supervision for
the purpose of determining wages (Ibid., p. 46).
In a company with around three thousand (3,000) workers such as petitioner, it is, of
course, logical to expect a departmentalization of functions for efficient operations. Thus,
the "formulation of policies in the hiring of personnel is within the scope of the Personnel
Department" (T.S.N., August 12, 1977, p. 42). The "job evaluation program" is within the
competence of the Wage and Salary Administration Section (Ibid., p. 48). Petitioner even
has an Employee Relations Office which approves or disapproves applications to
operate canteens within project premises (T.S.N., October 28, 1977, p. 48). In brief, it is
unnatural to expect foremen in a giant construction firm to actually perform executive
managerial status. In point of law, there could not be any serious dispute that petitioner's
foremen cannot and are not in fact unionized because the are managerial employees
under the law.
It is the nature of an employee's functions and not the nomenclature or title given to his job which
determines whether he has rank-and-file or managerial status. Among the characteristics of managerial
rank are: (1) He is not subject to the rigid observance of regular office hours; (2) His work requires the
consistent exercise of discretion and judgment in its performance; (3) the output produced or the result
accomplished cannot be standardized in relation to a given period of time; (4) He manages a customarily
recognized department or subdivision of the establishment, customarily and regularly directing the work of
other employees therein; (5) He either has the authority to hire or discharge other employees or his
suggestions and recommendations as to hiring and discharging, advancement and promotion or other
change of status of other employees are given particular weight; and (6) As a rule, he is not paid hourly
wages nor subjected to maximum hours of work. (SeeNational Waterworks and Sewerage Authority v.
NWSA Consolidated Unions, 11 SCRA 766).

The petitioner has made out a satisfactory case as to why it did not seek prior clearance but limited itself to
making a belated report.
At any rate, the employer has a right to dismiss an employee whose continuance in the service is inimical
to the employer's interest, The law protects the rights of workers but it cannot authorize the oppression or
self-destruction of the employer. (Manila Trading and Supply Co. v. Philippine labor Union, 71 Phil. 124; El
Hogar Filipino Mutual Bldg. and loan Association, et al. v. Building Employees Inc, et al., 107 Phil. 473;
Philippine Airlines Inc. v. Philippine Air lines Employees Association, 57 SCRA 489). The step taken by the
employer in this case was a measure of self-protection.
Under the facts of the case, we rule that the petitioner had valid grounds to terminate the services of the
private respondent. However, we also take into account some equities of the case. The respondent had
worked for almost three years with the petitioner. Top management should have become aware of the
problem earlier instead of awaiting an explosive situation where forty (40) construction workers prepare a
formal protest against their foreman and question his competence and conduct. Considering the boundary
line nature of the respondent's job whether or not it is managerial, it would have been more prudent for
the firm, which has very competent counsel, to have asked for a prior clearance. In the light of the
foregoing, we hold that the private respondent is entitled to full separation pay but not reinstatement with
back wages.
WHEREFORE, the petition is hereby GRANTED. The decisions of the respondent National Labor
40
Relations Commission and the respondent Labor Arbiter are REVERSED and SET ASIDE. Our restraining
order dated January 6, 1982 is made PERMANENT. The petitioner is ordered to grant full separation pay
to the private respondent.

Through a petition filed in the Court of Industrial Relations, the National Merchandising Corporation asked
for its aid in ascertaining, whether the Goodwill Labor Organization CCLU, which had sought to bargain
collectively with it (the Company) for and in behalf of its employees, may properly act as bargaining agent
for the latter. It was therein claimed that petitioner had in its employ 10 supervisors, 1 confidential
employee, 3 salesmen, 22 office employees, and 54 mechanics, painters, carpenters, and laborers, and it
doubts whether the aforesaid union represents a majority thereof.
Respondent union answered maintaining its right to represent the Company's employees, and prayed the
court for the holding of a certification election after all the employees entitled to vote shall have been
determined.
The parties entered into trial solely to determine the appropriate unit and bargaining agent for the
employees. During the hearing, the Company and the Union agreed to the holding of a certification
election, the appropriate bargaining unit or Employer Unit to be composed of all regular and temporary
employees and laborers working in the different departments of the company, while a Casual Unit shall be
constituted by the casual employees. However, aside from the 16 officers and employees who, by reason
of their managerial, supervisory/or confidential positions, were to be excluded from the appropriate
bargaining unit, the Company insisted in the non-inclusion therein of 8 employees allegedly performing
supervisory functions, namely:
1. Cornelio Vitug Chief Mechanic, Agricultural Shop, Repairs & Maintenance Department;
2. Eufronio & Atienza Chief Mechanic, Industrial Shop, Repairs & Maintenance Department;

SO ORDERED.
G.R. No. L-18710

Insofar as pertinent to the instant proceeding, the following facts had been established:.

March 30, 1963

NATIONAL
MERCHANDISING
CORPORATION, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS, GOODWILL LABOR ORGANIZATION-CCLU and
NAMERCO EMPLOYEES and LABOR ASSOCIATION (FTLO), respondents.
BARRERA, J.:
This petition was filed by the National Merchandising Corporation to contest the correctness of the order of
the Court of Industrial Relations (in Case No. 857-MC), and affirmed by the court en banc on July 21,
1961, holding that petitioner's 8 section chiefs are minor supervisory employees who should be included in
the appropriate Employer's Unit, and entitled to vote in his certification election to be conducted for the
purpose of determining the proper bargaining agent for the employees.

3. Ricardo Rodriguez In Charge, Automotive Shop, Repairs & Maintenance Department;

4. Edilberto Enriquez Chief Mechanic, Lambretta Shop, Repairs & Maintenance Department;
5. Jesus Avila Chief Welder, Welding Shop, Repairs & Maintenance Department;
6. Jose Padilla Chief Mechanic, Motor Pool, Repairs & Maintenance Department;
7. Alejandro Justo Chief Painter, Painting Shop, Repairs & Maintenance Department;
8. Eulogio Candelaria Chief Carpenter, Carpentry Shop, Repairs & Maintenance Department;
In its order of May 5, 1961, the court, finding them to be at most minor supervisory employees who work in
close association with the few men under them, allowed their inclusion in the Employer Unit, and directed
the Department of Labor to conduct secret-ballot-elections among the employees to determine the

exclusive bargaining representative for the 2 groups constituting the Employer and Casual Units. 1 Hence,
the institution of the instant proceeding by the petitioner company on the sole issue of whether the 8
employees concerned are supervisors, as defined in Section 2(k) of Republic Act 875, which reads:
SEC. 2. Definition. As used in this Act
xxx

xxx

xxx

(k) "Supervisor" means any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign recommend or discipline other employees, or
responsibly to direct them, and to adjust their grievances, or effectively to recommend such acts
if, in connection with the foregoing, the exercise of such authority is not of a merely routinary or
clerical nature but requires the use of independent judgment.
In rejecting this claim of petitioner, also raised in the court below, the trial judge took into account the
following:
Alfonso Panganiban, Personnel Manager, declared that he has the direct supervision over all
personnel of the Company; that Vitug, Atienza, Rodriguez, Enriquez, Avila, Padilla, and
Candelaria are in charge of supervision of the work and personnel working under them in their
respective
sections; that as section heads, they can recommend the hiring, expulsion or dismissal
41
of workers under their respective shops whenever proper and necessary. No evidence, however,
was adduced with respect to Alejandro Justo.
According to the list of officers and employees (Exh. X-Court), Vitug has 7 men under him;
Atienza, 3; Rodriguez, 1; Enriquez, 5; Avila, 3; Padilla, 3; and Candelaria, 2 men all working in the
Repairs and Maintenance Department. Granting arguendo that these controverted employees are
group or unit heads exercising such functions and recommendatory prerogatives, yet we believe
that that alone do not encompass them within the meaning and definition of 'supervisor'.
According to the evidence, they are directly under the Service Manager, Justo Sycip, who gives
work assignments to all personnel under the Repairs and Maintenance Department. As admitted
by the Company, they have no authority to hire, promote, transfer, suspend or fire employees. As
regards their alleged recommendatory powers, it is correct to state that the same are subject to
evaluation, review and final approval by the department head and other higher executives of the
company. There was, however, no showing that such recommendatory prerogatives had been
exercised by these employees effectively and of their own independent judgment. The Company
failed to adduce evidence-nay, even a superficial attempt to show concrete instances that
these controverted employees ever exercised such alleged recommendatory powers. As a matter
of fact, Personnel Manager Panganiban, on cross examination, admitted that he had no occasion
to know of anyone who was recommended by the said employees for hiring, expulsion,
separation, transfer, reprimand, or for increase in salary to the management. This must be so,
because according to the unrebutted testimony of Cornelio Vitug, although he sometimes makes

work assignment of the four or five mechanics under him, he has not hired or fired nor
recommended anybody for hiring or firing and that he had reprimanded nobody because he has
no power to reprimand. It may be noteworthy to note that Vitug, who is claimed to be a supervisor
for being allegedly a section head, is only receiving P200.00, whereas, a mechanic under him
Federico Balbalosa, is receiving P250.00 a month. This fact was never denied or contradicted by
the Company.
Petitioner now contends that neither the absence of power to hire, discharge, promote, transfer, discipline,
etc. subordinate personnel, nor the lack of the use thereof, if present, is determinative of the supervisory
status or classification of an employee under the Industrial Peace Act. It is proposed that to be classified
as a supervisor, it would be sufficient that he has the power to recommend the hiring, dismissal, promotion,
disciplining, etc. of personnel under him or responsibly direct them, which the 8 employees involved in the
cases allegedly have.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by
this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not
covered by this stipulation of facts. 1wph1.t
It is to be noted, however, that the power to recommend, in order to qualify an employee as a supervisor,
must not only be effective but the exercise of such authority should not be merely of a routinary or clerical
nature but should require the use of independent judgment. In the case at bar, it appears in the first place
that, as found by the trial court, there are no clear appointments in favor of the employees in question
including the alleged power or recommend, and while Alfonso Panganiban, Personnel Manager of the
petitioner company, declared that these employees as section heads could recommend the hiring,
expulsion or dismissal of the workers under their respective shops, the fact remains that as admitted by
him, no such recommendations have ever been made by them. There is also evidence that other
employees have been appointed, transferred, or discharged and laid-off without any recommendation of
the employees involved in these proceedings. Furthermore, such recommendatory powers are subject to
evaluation, review and final action by the department heads and other higher executives of the company.
It, therefore, appears that the conclusion of the trial court that the authority to recommend even if present,
is not effective and not an exercise of independent judgment as required by law, is not incorrect.
Neither is it borne by the records that the employees herein involved can responsibly direct those under
them, for the evidence discloses that the service manager, Justo Sycip, is the one who gives work
assignments to all personnel under the Repairs and Maintenance Department in which the employees
herein concerned are working. The mere designation of these employees as chief mechanic, chief welder,
chief painter and chief carpenter does not indicate more than the fact that they are the number one
mechanic, welder, painter or carpenter among the many of the same category.
WHEREFORE, finding no error in the order and resolution of the court en banc subject to this
proceedings, the same are hereby affirmed, with costs against the petitioner. The preliminary injunction
herein issued is dissolved. So ordered.

G.R. No. 142000

January 22, 2003

TAGAYTAY
HIGHLANDS
INTERNATIONAL
GOLF
CLUB
vs.
TAGAYTAY HIGHLANDS EMPLOYEES UNION-PGTWO, respondent.

INCORPORATED, petitioner,

53

Rank-and-file employees of The Country Club at Tagaytay Highlands, Inc.

14

Supervisors of The Country Club at Tagaytay Highlands, Inc.

Resigned employees of The Country Club at Tagaytay Highlands, Inc.

Terminated employees of The Country Club at Tagaytay Highlands, Inc.

AWOL employees of The Country Club at Tagaytay Highlands, Inc.

Signatures that cannot be deciphered

16

Names in list that were erased

Names with first names only

CARPIO-MORALES, J.:
Before this Court on certiorari under Rule 45 is the petition of the Tagaytay Highlands International Golf
Club Incorporated (THIGCI) assailing the February 15, 2002 decision of the Court of Appeals denying its
petition to annul the Department of Labor and Employment (DOLE) Resolutions of November 12, 1998
and December 29, 1998.
On October 16, 1997, the Tagaytay Highlands Employees Union (THEU)Philippine Transport and
General Workers Organization (PTGWO), Local Chapter No. 776, a legitimate labor organization said to
represent majority of the rank-and-file employees of THIGCI, filed a petition for certification election before
the DOLE Mediation-Arbitration Unit, Regional Branch No. IV.
1

THIGCI, in its Comment filed on November 27, 1997, opposed THEUs petition for certification election on
the ground that the list of union members submitted by it was defective and fatally flawed as it included the
names and signatures of supervisors, resigned, terminated and absent without leave (AWOL) employees,
as well as employees of The Country Club, Inc., a corporation distinct and separate from THIGCI; and that
out of the 192 signatories to the petition, only 71 were actual rank-and-file employees of THIGCI.

42

THIGCI thus submitted a list of the names of its 71 actual rank-and-file employees which it annexed 2 to its
Comment to the petition for certification election. And it therein incorporated the following
tabulation3 showing the number of signatories to said petition whose membership in the union was being
questioned as disqualified and the reasons for disqualification:

#
of
Reasons for Disqualification
Signatures

13

Supervisors of THIGCI

Resigned employees of THIGCI

THIGCI also alleged that some of the signatures in the list of union members were secured through
fraudulent and deceitful means, and submitted copies of the handwritten denial and withdrawal of some of
its employees from participating in the petition. 4Replying to THIGCIs Comment, THEU asserted that it had
complied with all the requirements for valid affiliation and inclusion in the roster of legitimate labor
organizations pursuant to DOLE Department Order No. 9, series of 1997,5 on account of which it was duly
granted a Certification of Affiliation by DOLE on October 10, 1997; 6 and that Section 5, Rule V of said
Department Order provides that the legitimacy of its registration cannot be subject to collateral attack, and
for as long as there is no final order of cancellation, it continues to enjoy the rights accorded to a legitimate
organization.

AWOL employees of THIGCI

THEU thus concluded in its Reply7 that under the circumstances, the Med-Arbiter should, pursuant to
Article 257 of the Labor Code and Section 11, Rule XI of DOLE Department Order No. 09, automatically
order the conduct of a certification election.

By Order of January 28, 1998, 8 DOLE Med-Arbiter Anastacio Bactin ordered the holding of a certification
election among the rank-and-file employees of THIGCI in this wise, quoted verbatim:
We evaluated carefully this instant petition and we are of the opinion that it is complete in form
and substance. In addition thereto, the accompanying documents show that indeed
petitioner union is a legitimate labor federation and its local/chapter was duly reported to
this Office as one of its affiliate local/chapter. Its due reporting through the submission of all
the requirements for registration of a local/chapter is a clear showing that it was already included
in the roster of legitimate labor organizations in this Office pursuant to Department Order No. 9
Series of 1997 with all the legal right and personality to institute this instant petition. Pursuant
therefore to the provisions of Article 257 of the Labor Code, as amended, and its Implementing
Rules as amended by Department Order No. 9, since the respondents establishment is
unorganized, the holding of a certification election is mandatory for it was clearly established that
petitioner is a legitimate labor organization. Giving due course to this petition is therefore proper
and appropriate.9 (Emphasis supplied)
Passing on THIGCIs allegation that some of the union members are supervisory, resigned and AWOL
employees or employees of a separate and distinct corporation, the Med-Arbiter held that the same should
be properly raised in the exclusion-inclusion proceedings at the pre-election conference. As for the
allegation that some of the signatures were secured through fraudulent and deceitful means, he held that it
should be coursed through an independent petition for cancellation of union registration which is within the
jurisdiction of the DOLE Regional Director. In any event, the Med-Arbiter held that THIGCI failed to
submit the job descriptions of the questioned employees and other supporting documents to
bolster its claim that they are disqualified from joining THEU.

43

THIGCI appealed to the Office of the DOLE Secretary which, by Resolution of June 4, 1998, set aside the
said Med-Arbiters Order and accordingly dismissed the petition for certification election on the ground that
there is a "clear absence of community or mutuality of interests," it finding that THEU sought to represent
two separate bargaining units (supervisory employees and rank-and-file employees) as well as employees
of two separate and distinct corporate entities.
Upon Motion for Reconsideration by THEU, DOLE Undersecretary Rosalinda Dimalipis-Baldoz, by
authority of the DOLE Secretary, issued DOLE Resolution of November 12, 1998 10 setting aside the June
4, 1998 Resolution dismissing the petition for certification election. In the November 12, 1998 Resolution,
Undersecretary Dimapilis-Baldoz held that since THEU is a local chapter, the twenty percent (20%)
membership requirement is not necessary for it to acquire legitimate status, hence, "the alleged retraction
and withdrawal of support by 45 of the 70 remaining rank-and-file members . . . cannot negate the
legitimacy it has already acquired before the petition;" that rather than disregard the legitimate status
already conferred on THEU by the Bureau of Labor Relations, the names of alleged disqualified
supervisory employees and employees of the Country Club, Inc., a separate and distinct corporation,
should simply be removed from the THEUs roster of membership; and that regarding the participation of
alleged resigned and AWOL employees and those whose signatures are illegible, the issue can be
resolved during the inclusion-exclusion proceedings at the pre-election stage.
The records of the case were thus ordered remanded to the Office of the Med-Arbiter for the conduct of
certification election.

THIGCIs Motion for Reconsideration of the November 12, 1998 Resolution having been denied by the
DOLE Undersecretary by Resolution of December 29, 1998,11 it filed a petition for certiorari before this
Court which, by Resolution of April 14, 1999, 12 referred it to the Court of Appeals in line with its
pronouncement in National Federation of Labor (NFL) v. Hon. Bienvenido E. Laguesma, et al.,13 and in
strict observance of the hierarchy of courts, as emphasized in the case of St. Martin Funeral Home v.
National Labor Relations Commission.14
By Decision of February 15, 2000,15 the Court of Appeals denied THIGCIs Petition for Certiorari and
affirmed the DOLE Resolution dated November 12, 1998. It held that while a petition for certification
election is an exception to the innocent bystander rule, hence, the employer may pray for the dismissal of
such petition on the basis of lack of mutuality of interests of the members of the union as well as lack of
employer-employee relationship following this Courts ruling in Toyota Motor Philippines Corporation v.
Toyota Motor Philippines Corporation Labor Union et al.16 and Dunlop Slazenger [Phils.] v. Hon. Secretary
of Labor and Employment et al,17 petitioner failed to adduce substantial evidence to support its
allegations.
Hence, the present petition for certiorari, raising the following
"ISSUES/ASSIGNMENT OF ERRORS:
THE COURT OF APPEALS GRIEVOUSLY ERRED IN AFFIRMING THE RESOLUTION DATED
12 NOVEMER 1998 HOLDING THAT SUPERVISORY EMPLOYEES AND NON-EMPLOYEES
COULD SIMPLYBE REMOVED FROM APPELLEES ROSTER OF RANK-AND-FILE
MEMBERSHIP INSTEAD OF RESOLVING THE LEGITIMACY OF RESPONDENT UNIONS
STATUS
THE COURT OF APPEALS GRIEVOUSLY ERRED IN AFFIRMING THE RESOLUTION DATED
12 NOVEMBER 1998 HOLDING THAT THE DISQUALIFIED EMPLOYEES STATUS COULD
READILY BE RESOLVED DURING THE INCLUSION AND EXCLUSION PROCEEDINGS
THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT HOLDING THAT THE
ALLEGATIONS OF PETITIONER HAD BEEN DULY PROVEN BY FAILURE OF RESPONDENT
UNION TO DENY THE SAME AND BY THE SHEER WEIGHT OF EVIDENCE INTRODUCED BY
PETITIONER AND CONTAINED IN THE RECORDS OF THE CASE"18
The statutory authority for the exclusion of supervisory employees in a rank-and-file union, and vice-versa,
is Article 245 of the Labor Code, to wit:
Article 245. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees. Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor organization
of the rank-and-file employees but may join, assist or form separate labor organizations of their
own.

While above-quoted Article 245 expressly prohibits supervisory employees from joining a rank-and-file
union, it does not provide what would be the effect if a rank-and-file union counts supervisory employees
among its members, or vice-versa.

petitioner) (Dunlop Slazenger (Phils.), v. Secretary of Labor, 300 SCRA 120 [1998];
Underscoring and emphasis supplied by petitioner.)

Citing Toyota19 which held that "a labor organization composed of both rank-and-file and supervisory
employees is no labor organization at all," and the subsequent case of Progressive Development Corp.
Pizza Hut v. Ledesma20 which held that:

The petition fails. After a certificate of registration is issued to a union, its legal personality cannot be
subject to collateral attack. It may be questioned only in an independent petition for cancellation in
accordance with Section 5 of Rule V, Book IV of the "Rules to Implement the Labor Code" (Implementing
Rules) which section reads:

"The Labor Code requires that in organized and unorganized establishments, a petition for
certification election must be filed by a legitimate labor organization. The acquisition of rights by
any union or labor organization, particularly the right to file a petition for certification election, first
and foremost, depends onwhether or not the labor organization has attained the status of a
legitimate labor organization.

Sec. 5. Effect of registration. The labor organization or workers association shall be deemed
registered and vested with legal personality on the date of issuance of its certificate of
registration. Such legal personality cannot thereafter be subject to collateral attack, but may be
questioned only in an independent petition for cancellation in accordance with these Rules.
(Emphasis supplied)

In the case before us, the Med-Arbiter summarily disregarded the petitioners prayer that the
former look into the legitimacy of the respondent Union by a sweeping declaration that the union
was in the possession of a charter certificate so that for all intents and purposes, Sumasaklaw sa
Manggagawa sa Pizza Hut (was) a legitimate organization," 21 (Underscoring and emphasis
supplied),

The grounds for cancellation of union registration are provided for under Article 239 of the Labor Code, as
follows:

petitioner contends that, quoting Toyota, "[i]t becomes necessary . . ., anterior to the granting of an order
allowing a certification election, to inquire into the composition of any labor organization whenever the
status of the labor organization is challenged on the basis of Article 245 of the Labor Code."22

(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of
the constitution and by-laws or amendments thereto, the minutes of ratification, and the list of
members who took part in the ratification;

Continuing, petitioner argues that without resolving the status of THEU, the DOLE Undersecretary
"conveniently deferred the resolution on the serious infirmity in the membership of [THEU] and ordered the
holding of the certification election" which is frowned upon as the following ruling of this Court shows:

(b) Failure to submit the documents mentioned in the preceding paragraph within thirty (30) days
from adoption or ratification of the constitution and by-laws or amendments thereto;

44

We also do not agree with the ruling of the respondent Secretary of Labor that the infirmity in the
membership of the respondent union can be remedied in "the pre-election conference thru the
exclusion-inclusion proceedings wherein those employees who are occupying rank-and-file
positions will be excluded from the list of eligible voters." Public respondent gravely
misappreciated the basic antipathy between the interest of supervisors and the interest of rankand-file employees. Due to the irreconcilability of their interest we held in Toyota Motor
Philippines v. Toyota Motors Philippines Corporation Labor Union,viz:
x x x
"Clearly, based on this provision [Article 245], a labor organization composed of both
rank-and-file and supervisory employees is no labor organization at all. It cannot, for any
guise or purpose, be a legitimate labor organization. Not being one, an organization
which carries a mixture of rank-and-file and supervisory employees cannot posses any
of the rights of a legitimate labor organization, including the right to file a petition for
certification election for the purpose of collective bargaining. It becomes necessary,
therefore, anterior to the granting of an order allowing a certification election, to inquire
into the composition of any labor organization whenever the status of the labor
organization is challenged on the basis of Article 245 of the Labor Code." (Emphasis by

Art. 239. Grounds for cancellation of union registration. The following shall constitute grounds for
cancellation of union registration:

(c) Misrepresentation, false statements or fraud in connection with the election of officers,
minutes of the election of officers, the list of voters, or failure to subject these documents together
with the list of the newly elected/appointed officers and their postal addresses within thirty (30)
days from election;
(d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the
losing of every fiscal year and misrepresentation, false entries or fraud in the preparation of the
financial report itself;
(e) Acting as a labor contractor or engaging in the "cabo" system, or otherwise engaging in any
activity prohibited by law;
(f) Entering into collective bargaining agreements which provide terms and conditions of
employment below minimum standards established by law;
(g) Asking for or accepting attorneys fees or negotiation fees from employers;

(h) Other than for mandatory activities under this Code, checking off special assessments or any
other fees without duly signed individual written authorizations of the members;
(i) Failure to submit list of individual members to the Bureau once a year or whenever required by
the Bureau; and

Designation should be reconciled with the actual job description of subject employees x x x The
mere fact that an employee is designated manager does not necessarily make him one.
Otherwise, there would be an absurd situation where one can be given the title just to be
deprived of the right to be a member of a union. In the case of National Steel Corporation vs.
Laguesma (G. R. No. 103743, January 29, 1996), it was stressed that:
What is essential is the nature of the employees function and not the nomenclature
or titlegiven to the job which determines whether the employee has rank-and-file or
managerial status or whether he is a supervisory employee. (Emphasis supplied).27

(j) Failure to comply with the requirements under Articles 237 and 238, (Emphasis supplied),
while the procedure for cancellation of registration is provided for in Rule VIII, Book V of the
Implementing Rules.
The inclusion in a union of disqualified employees is not among the grounds for cancellation, unless such
inclusion is due to misrepresentation, false statement or fraud under the circumstances enumerated in
Sections (a) and (c) of Article 239 of above-quoted Article 239 of the Labor Code.

WHEREFORE, the petition is hereby DENIED. Let the records of the case be remanded to the office of
origin, the Mediation-Arbitration Unit, Regional Branch No. IV, for the immediate conduct of a certification
election subject to the usual pre-election conference.
SO ORDERED.

THEU, having been validly issued a certificate of registration, should be considered to have already
acquired juridical personality which may not be assailed collaterally.

G.R. No. 160352

As for petitioners allegation that some of the signatures in the petition for certification election were
obtained through fraud, false statement and misrepresentation, the proper procedure is, as reflected
above, for it to file a petition for cancellation of the certificate of registration, and not to intervene in a
petition for certification election.

REPUBLIC OF THE PHILIPPINES, represented by Department of Labor and Employment

(DOLE), Petitioner,
vs.
KAWASHIMA TEXTILE MFG., PHILIPPINES, INC., Respondent.

Regarding the alleged withdrawal of union members from participating in the certification election, this
Courts following ruling is instructive:

DECISION

45

"[T]he best forum for determining whether there were indeed retractions from some of the
laborers is in thecertification election itself wherein the workers can freely express their choice in
a secret ballot. Suffice it to say that the will of the rank-and-file employees should in every
possible instance be determined by secret ballot rather than by administrative or quasi-judicial
inquiry. Such representation and certification election cases are not to be taken as contentious
litigations for suits but as mere investigations of a non-adversary, fact-finding character as to
which of the competing unions represents the genuine choice of the workers to be their sole and
exclusive collective bargaining representative with their employer."23
As for the lack of mutuality of interest argument of petitioner, it, at all events, does not lie given, as found
by the court a quo, its failure to present substantial evidence that the assailed employees are actually
occupying supervisory positions.
While petitioner submitted a list of its employees with their corresponding job titles and ranks, 24 there is
nothing mentioned about the supervisors respective duties, powers and prerogatives that would show that
they can effectively recommend managerial actions which require the use of independent judgment.25
As this Court put it in Pepsi-Cola Products Philippines, Inc. v. Secretary of Labor:26

July 23, 2008

AUSTRIA-MARTINEZ, J.:
The Republic of the Philippines assails by way of Petition for Review on Certiorari under Rule 45 of the
Rules of Court, the December 13, 2002 Decision1 of the Court of Appeals (CA), which reversed the August
18, 2000 Decision2 of the Department of Labor and Employment (DOLE), and reinstated the May 17, 2000
Order3 of Med-Arbiter Anastacio L. Bactin, dismissing the petition of Kawashima Free Workers UnionPTGWO Local Chapter No. 803 (KFWU) for the conduct of a certification election in Kawashima Textile
Mfg. Phils., Inc. (respondent); and the October 7, 2003 CA Resolution 4 which denied the motion for
reconsideration.
The relevant facts are of record.
On January 24, 2000, KFWU filed with DOLE Regional Office No. IV, a Petition for Certification Election to
be conducted in the bargaining unit composed of 145 rank-and-file employees of respondent. 5 Attached to
its petition are a Certificate of Creation of Local/Chapter 6 issued on January 19, 2000 by DOLE Regional
Office No. IV, stating that it [KFWU] submitted to said office a Charter Certificate issued to it by the national
federation Phil. Transport & General Workers Organization (PTGWO), and a Report of Creation of
Local/Chapter.7

Respondent filed a Motion to Dismiss8 the petition on the ground that KFWU did not acquire any legal
personality because its membership of mixed rank-and-file and supervisory employees violated Article 245
of the Labor Code, and its failure to submit its books of account contravened the ruling of the Court
in Progressive Development Corporation v. Secretary, Department of Labor and Employment.9

WHEREFORE, premises considered, the petition for certification election is hereby dismissed for lack of
requisite legal status of petitioner to file this instant petition.

In an Order dated May 17, 2000, Med-Arbiter Bactin found KFWUs legal personality defective and
dismissed its petition for certification election, thus:

On the basis of the aforecited decision, respondent filed with DOLE Regional Office No. IV a Petition for
Cancellation of Charter/Union Registration of KFWU,13 the final outcome of which, unfortunately, cannot be
ascertained from the records.

We scrutinize the facts and evidences presented by the parties and arrived at a decision that at least two
(2) members of [KFWU], namely: Dany I. Fernandez and Jesus R. Quinto, Jr. are supervisory employees,
having a number of personnel under them. Being supervisory employees, they are prohibited under Article
245 of the Labor Code, as amended, to join the union of the rank and file employees. Dany I. Fernandez
and Jesus R. Quinto, Jr., Chief Engineers of the Maintenance and Manufacturing Department,
respectively, act as foremen to the line engineers, mechanics and other non-skilled workers and
responsible [for] the preparation and organization of maintenance shop fabrication and schedules,
inventory and control of materials and supplies and tasked to implement training plans on line engineers
and evaluate the performance of their subordinates. The above-stated actual functions of Dany I.
Fernandez and Jesus R. Quinto, Jr. are clear manifestation that they are supervisory employees.
xxxx

46

Since petitioners members are mixture of rank and file and supervisory employees, petitioner
union, at this point [in] time, has not attained the status of a legitimate labor organization.
Petitioner should first exclude the supervisory employees from it membership before it can attain
the status of a legitimate labor organization. The above judgment is supported by the decision of the
Supreme Court in the Toyota Case10 wherein the High Tribunal ruled:
"As respondent unions membership list contains the names of at least twenty seven (27) supervisory
employees in Level Five Positions, the union could not prior to purging itself of its supervisory employee
members, attain the status of a legitimate labor organization. Not being one, it cannot possess the
requisite personality to file a petition for certification election." (Underscoring omitted.)
xxxx
Furthermore, the commingling of rank and file and supervisory employees in one (1) bargaining unit
cannot be cured in the exclusion-inclusion proceedings [at] the pre-election conference. The above ruling
is supported by the Decision of the Supreme Court in Dunlop Slazenger (Phils.), Inc. vs. Honorable
Secretary of Labor and Employment, et al., G.R. No. 131248 dated December 11, 199811 x x x.
xxxx

SO ORDERED.12 (Emphasis supplied)

Meanwhile, KFWU appealed14 to the DOLE which issued a Decision on August 18, 2000, the dispositive
portion of which reads:
WHEREFORE, the appeal is GRANTED. The Order dated 17 May 2000 of the Med-Arbiter is REVERSED
and SET ASIDE. Accordingly, let the entire records of the case be remanded to the office of origin for the
immediate conduct of certification election, subject to the usual pre-election conference, among the rankand-file employees of Kawashima Textile Manufacturing Philippines, Inc. with the following choices:
1. Kawashima Free Workers Union-PTGWO Local Chapter No. 803; and
2. No union.
Pursuant to Rule XI, Section 11.1 of the New Implementing Rules, the employer is hereby directed to
submit to the office of origin the certified list of current employees in the bargaining unit for the last three
months prior to the issuance of this decision.
SO DECIDED.15
The DOLE held that Med-Arbiter Bactin's reliance on the decisions of the Court in Toyota Motor
Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union 16 and Dunlop Slazenger, Inc.
v. Secretary of Labor and Employment17 was misplaced, for while Article 245 declares supervisory
employees ineligible for membership in a labor organization for rank-and-file employees, the provision did
not state the effect of such prohibited membership on the legitimacy of the labor organization and its right
to file for certification election. Neither was such mixed membership a ground for cancellation of its
registration. Section 11, Paragraph II, Rule XI of Department Order No. 9 "provides for the dismissal of a
petition for certification election based on lack of legal personality of a labor organization only on the
following grounds: (1) [KFWU] is not listed by the Regional Office or the Bureau of Labor Relations in its
registry of legitimate labor organizations; or (2) [KFWU's] legal personality has been revoked or canceled
with finality."18 The DOLE noted that neither ground existed; on the contrary, KFWU's legal personality was
well-established, for it held a certificate of creation and had been listed in the registry of legitimate labor
organizations.

As to the failure of KFWU to file its books of account, the DOLE held that such omission was not a ground
for revocation of union registration or dismissal of petition for certification election, for under Section 1,
Rule VI of Department Order No. 9, a local or chapter like KFWU was no longer required to file its books of
account.19

Second, whether the legitimacy of a duly registered labor organization can be collaterally attacked in a
petition for a certification election through a motion to dismiss filed by an employer such as Kawashima
Textile Manufacturing Phils., Inc.24
The petition is imbued with merit.

Respondent filed a Motion for Reconsideration20 but the DOLE denied the same in its September 28, 2000
Resolution.21
However, on appeal by respondent, the CA rendered the December 13, 2002 Decision assailed herein,
reversing the August 18, 2000 DOLE Decision, thus:
Since respondent union clearly consists of both rank and file and supervisory employees, it cannot
qualify as a legitimate labor organization imbued with the requisite personality to file a petition for
certification election. This infirmity in union membership cannot be corrected in the inclusionexclusion proceedings during the pre-election conference.
Finally, contrary to the pronouncement of public respondent, the application of the doctrine enunciated
in Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Corporation Labor Union was not
construed in a way that effectively denies the fundamental right of respondent union to organize and seek
bargaining representation x x x.

47

For ignoring jurisprudential precepts on the matter, the Court finds that the Undersecretary of Labor, acting
under the authority of the Secretary of Labor, acted with grave abuse of discretion amounting to lack or
excess of jurisdiction.
WHEREFORE, premises considered, the Petition is hereby GRANTED. The Decision dated 18 August
2000 of the Undersecretary of Labor, acting under the authority of the Secretary, is hereby REVERSED
and SET ASIDE. The Order dated 17 May 2000 of the Med-Arbiter dismissing the petition for certification
election filed by Kawashima Free Workers Union-PTGWO Local Chapter No. 803 is REINSTATED.
SO ORDERED.22 (Emphasis supplied)
KFWU filed a Motion for Reconsideration23 but the CA denied it.
The Republic of the Philippines (petitioner) filed the present petition to seek closure on two issues:
First, whether a mixed membership of rank-and-file and supervisory employees in a union is a ground for
the dismissal of a petition for certification election in view of the amendment brought about by D.O. 9,
series of 1997, which deleted the phraseology in the old rule that "[t]he appropriate bargaining unit of the
rank-and-file employee shall not include the supervisory employees and/or security guards;" and

The key to the closure that petitioner seeks could have been Republic Act (R.A.) No. 9481. 25 Sections 8
and 9 thereof provide:
Section 8. Article 245 of the Labor Code is hereby amended to read as follows:
"Art. 245. Ineligibility of Managerial Employees to Join any Labor Organization; Right of Supervisory
Employees. - Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in the collective bargaining unit of the rankand-file employees but may join, assist or form separate collective bargaining units and/or legitimate labor
organizations of their own. The rank and file union and the supervisors' union operating within the same
establishment may join the same federation or national union."
Section 9. A new provision, Article 245-A is inserted into the Labor Code to read as follows:
"Art. 245-A. Effect of Inclusion as Members of Employees Outside the Bargaining Unit. - The inclusion as
union members of employees outside the bargaining unit shall not be a ground for the cancellation
of the registration of the union. Said employees are automatically deemed removed from the list of
membership of said union." (Emphasis supplied)
Moreover, under Section 4, a pending petition for cancellation of registration
will not hinder a legitimate labor organization from initiating a certification election, viz:
Sec. 4. A new provision is hereby inserted into the Labor Code as Article 238-A to read as follows:
"Art. 238-A. Effect of a Petition for Cancellation of Registration. - A petition for cancellation of union
registration shall not suspend the proceedings for certification election nor shall it prevent the
filing of a petition for certification election.
In case of cancellation, nothing herein shall restrict the right of the union to seek just and equitable
remedies in the appropriate courts." (Emphasis supplied)
Furthermore, under Section 12 of R.A. No. 9481, employers have no personality to interfere with or thwart
a petition for certification election filed by a legitimate labor organization, to wit:

Sec. 12. A new provision, Article 258-A is hereby inserted into the Labor Code to read as follows:
"Art. 258-A. Employer as Bystander. - In all cases, whether the petition for certification election is filed by
an employer or a legitimate labor organization, the employer shall not be considered a party thereto
with a concomitant right to oppose a petition for certification election. The employer's participation
in such proceedings shall be limited to: (1) being notified or informed of petitions of such nature;
and (2) submitting the list of employees during the pre-election conference should the Med-Arbiter
act favorably on the petition." (Emphasis supplied)
However, R.A. No. 9481 took effect only on June 14, 2007;26 hence, it applies only to labor representation
cases filed on or after said date. 27 As the petition for certification election subject matter of the present
petition was filed by KFWU on January 24, 2000, 28 R.A. No. 9481 cannot apply to it. There may have been
curative labor legislations29 that were given retrospective effect,30 but not the aforecited provisions of R.A.
No. 9481, for otherwise, substantive rights and interests already vested would be impaired in the
process.31
Instead, the law and rules in force at the time of the filing by KFWU of the petition for certification election
on January 24, 2000 are R.A. No. 6715, 32 amending Book V of Presidential Decree (P.D.) No. 442 (Labor
Code),33as amended, and the Rules and Regulations Implementing R.A. No. 6715, 34 as amended by
Department Order No. 9, series of 1997.35

48

It is within the parameters of R.A. No. 6715 and the Implementing Rules that the Court will now resolve the
two issues raised by petitioner.

eligible for membership in a labor organization of employees under their supervision but may form
separate organizations of their own. (Emphasis supplied)
Nothing in R.A. No. 875, however, tells of how the questioned mingling can affect the legitimacy of the
labor organization. Under Section 15, the only instance when a labor organization loses its legitimacy is
when it violates its duty to bargain collectively; but there is no word on whether such mingling would also
result in loss of legitimacy. Thus, when the issue of whether the membership of two supervisory employees
impairs the legitimacy of a rank-and-file labor organization came before the Court En Banc in Lopez v.
Chronicle Publication Employees Association,41 the majority pronounced:
It may be observed that nothing is said of the effect of such ineligibility upon the union itself or on the
status of the other qualified members thereof should such prohibition be disregarded. Considering that the
law is specific where it intends to divest a legitimate labor union of any of the rights and privileges granted
to it by law, the absence of any provision on the effect of the disqualification of one of its organizers upon
the legality of the union, may be construed to confine the effect of such ineligibility only upon the
membership of the supervisor. In other words, the invalidity of membership of one of the organizers does
not make the union illegal, where the requirements of the law for the organization thereof are,
nevertheless, satisfied and met.42 (Emphasis supplied)
Then the Labor Code was enacted in 1974 without reproducing Sec. 3 of R.A. No. 875. The provision in
the Labor Code closest to Sec. 3 is Article 290,43 which is deafeningly silent on the prohibition against
supervisory employees mingling with rank-and-file employees in one labor organization. Even the
Omnibus Rules Implementing Book V of the Labor Code 44 (Omnibus Rules) merely provides in Section 11,
Rule II, thus:

If there is one constant precept in our labor laws be it Commonwealth Act No. 213 (1936), 36 R.A. No. 875
(1953),37 P.D. No. 442 (1974), Executive Order (E.O.) No. 111 (1986) 38 or R.A. No. 6715 (1989) - it is that
only a legitimate labor organization may exercise the right to be certified as the exclusive representative of
all the employees in an appropriate collective bargaining unit for purposes of collective bargaining. 39 What
has varied over the years has been the degree of enforcement of this precept, as reflected in the shifting
scope of administrative and judicial scrutiny of the composition of a labor organization before it is allowed
to exercise the right of representation.

Sec. 11. Supervisory unions and unions of security guards to cease operation. All existing supervisory
unions and unions of security guards shall, upon the effectivity of the Code, cease to operate as such and
their registration certificates shall be deemed automatically cancelled. However, existing collective
agreements with such unions, the life of which extends beyond the date of effectivity of the Code shall be
respected until their expiry date insofar as the economic benefits granted therein are concerned.

One area of contention has been the composition of the membership of a labor organization, specifically
whether there is a mingling of supervisory and rank-and-file employees and how such questioned mingling
affects its legitimacy.

Members of supervisory unions who do not fall within the definition of managerial employees shall become
eligible to join or assist the rank and file organization. The determination of who are managerial employees
and who are not shall be the subject of negotiation between representatives of supervisory union and the
employer. If no agreement s reached between the parties, either or both of them ma bring the issue to the
nearest Regional Office for determination. (Emphasis supplied)

It was in R.A. No. 875, under Section 3, that such questioned mingling was first prohibited,40 to wit:
Sec. 3. Employees right to self-organization. Employees shall have the right to self-organization and to
form, join or assist labor organizations of their own choosing for the purpose of collective bargaining
through representatives of their own choosing and to engage in concerted activities for the purpose of
collective bargaining and other mutual aid or protection. Individuals employed as supervisors shall not be

The obvious repeal of the last clause of Sec. 3, R.A. No. 875 prompted the Court to declare in Bulletin v.
Sanchez45 that supervisory employees who do not fall under the category of managerial employees may
join or assist in the formation of a labor organization for rank-and-file employees, but they may not form
their own labor organization.

While amending certain provisions of Book V of the Labor Code, E.O. No. 111 and its implementing
rules46continued to recognize the right of supervisory employees, who do not fall under the category of
managerial employees, to join a rank-and-file labor organization.47
Effective 1989, R.A. No. 6715 restored the prohibition against the questioned mingling in one labor
organization, viz:
Sec. 18. Article 245 of the same Code, as amended, is hereby further amended to read as follows
"Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees. Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file
employees but may join, assist or form separate labor organizations of their own." (Emphasis supplied)
Unfortunately, just like R.A. No. 875, R.A. No. 6715 omitted specifying the exact effect any violation of the
prohibition would bring about on the legitimacy of a labor organization.
It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules) which
supplied the deficiency by introducing the following amendment to Rule II (Registration of Unions):
Sec. 1. Who
49 may join unions. x x x Supervisory employees and security guards shall not be eligible for
membership in a labor organization of the rank-and-file employees but may join, assist or form separate
labor organizations of their own; Provided, that those supervisory employees who are included in an
existing rank-and-file bargaining unit, upon the effectivity of Republic Act No. 6715, shall remain in that unit
x x x. (Emphasis supplied)
and Rule V (Representation Cases and Internal-Union Conflicts) of the Omnibus Rules, viz:
Sec. 1. Where to file. A petition for certification election may be filed with the Regional Office which has
jurisdiction over the principal office of the employer. The petition shall be in writing and under oath.
Sec. 2. Who may file. Any legitimate labor organization or the employer, when requested to bargain
collectively, may file the petition.
The petition, when filed by a legitimate labor organization, shall contain, among others:
xxxx
(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise
require; and provided further, that the appropriate bargaining unit of the rank-and-file employees shall not
include supervisory employees and/or security guards. (Emphasis supplied)

By that provision, any questioned mingling will prevent an otherwise legitimate and duly registered labor
organization from exercising its right to file a petition for certification election.
Thus, when the issue of the effect of mingling was brought to the fore in Toyota, 48 the Court, citing Article
245 of the Labor Code, as amended by R.A. No. 6715, held:
Clearly, based on this provision, a labor organization composed of both rank-and-file and supervisory
employees is no labor organization at all. It cannot, for any guise or purpose, be a legitimate labor
organization. Not being one, an organization which carries a mixture of rank-and-file and supervisory
employees cannot possess any of the rights of a legitimate labor organization, including the right
to file a petition for certification election for the purpose of collective bargaining. It becomes
necessary, therefore, anterior to the granting of an order allowing a certification election, to inquire into the
composition of any labor organization whenever the status of the labor organization is challenged on the
basis of Article 245 of the Labor Code.
xxxx
In the case at bar, as respondent union's membership list contains the names of at least twenty-seven (27)
supervisory employees in Level Five positions, the union could not, prior to purging itself of its supervisory
employee members, attain the status of a legitimate labor organization. Not being one, it cannot possess
the requisite personality to file a petition for certification election.49 (Emphasis supplied)
In Dunlop,50 in which the labor organization that filed a petition for certification election was one for
supervisory employees, but in which the membership included rank-and-file employees, the Court
reiterated that such labor organization had no legal right to file a certification election to represent a
bargaining unit composed of supervisors for as long as it counted rank-and-file employees among its
members.51
It should be emphasized that the petitions for certification election involved in Toyota and Dunlop were filed
on November 26, 1992 and September 15, 1995, respectively; hence, the 1989 Rules was applied in both
cases.
But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further amended by Department
Order No. 9, series of 1997 (1997 Amended Omnibus Rules). Specifically, the requirement under Sec. 2(c)
of the 1989 Amended Omnibus Rules - that the petition for certification election indicate that the bargaining
unit of rank-and-file employees has not been mingled with supervisory employees - was removed. Instead,
what the 1997 Amended Omnibus Rules requires is a plain description of the bargaining unit, thus:
Rule
Certification Elections

XI

xxxx

inclusion is due to misrepresentation, false statement or fraud under the circumstances enumerated in
Sections (a) and (c) of Article 239 of the Labor Code.61lavvphil

Sec. 4. Forms and contents of petition. - The petition shall be in writing and under oath and shall contain,
among others, the following: x x x (c) The description of the bargaining unit.52
In Pagpalain Haulers, Inc. v. Trajano,53 the Court had occasion to uphold the validity of the 1997 Amended
Omnibus Rules, although the specific provision involved therein was only Sec. 1, Rule VI, to wit:
Sec. 1. Chartering and creation of a local/chapter.- A duly registered federation or national union may
directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the
following: a) a charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter; (b) the names of the local/chapters officers, their addresses, and the
principal office of the local/chapter; and (c) the local/ chapters constitution and by-laws; provided that
where the local/chapters constitution and by-laws is the same as that of the federation or national union,
this fact shall be indicated accordingly.
All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of
the local/chapter and attested to by its President.
which does not require that, for its creation and registration, a local or chapter submit a list of its members.

50
Then came Tagaytay Highlands Intl. Golf Club, Inc. v. Tagaytay Highlands Employees Union-PGTWO 54 in
which the core issue was whether mingling affects the legitimacy of a labor organization and its right to file
a petition for certification election. This time, given the altered legal milieu, the Court abandoned the view
in Toyota and Dunlop and reverted to its pronouncement in Lopez that while there is a prohibition against
the mingling of supervisory and rank-and-file employees in one labor organization, the Labor Code does
not provide for the effects thereof.55Thus, the Court held that after a labor organization has been
registered, it may exercise all the rights and privileges of a legitimate labor organization. Any mingling
between supervisory and rank-and-file employees in its membership cannot affect its legitimacy for that is
not among the grounds for cancellation of its registration, unless such mingling was brought about by
misrepresentation, false statement or fraud under Article 239 of the Labor Code.56
In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San
Miguel Packaging Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW,57 the Court explained
that since the 1997 Amended Omnibus Rules does not require a local or chapter to provide a list of its
members, it would be improper for the DOLE to deny recognition to said local or chapter on account of any
question pertaining to its individual members.58
More to the point is Air Philippines Corporation v. Bureau of Labor Relations, 59 which involved a petition for
cancellation of union registration filed by the employer in 1999 against a rank-and-file labor organization
on the ground of mixed membership:60 the Court therein reiterated its ruling in Tagaytay Highlands that the
inclusion in a union of disqualified employees is not among the grounds for cancellation, unless such

All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as interpreted by
the Court in Tagaytay Highlands, San Miguel and Air Philippines, had already set the tone for it. Toyota and
Dunlop no longer hold sway in the present altered state of the law and the rules.
Consequently, the Court reverses the ruling of the CA and reinstates that of the DOLE granting the petition
for certification election of KFWU.
Now to the second issue of whether an employer like respondent may collaterally attack the legitimacy of a
labor organization by filing a motion to dismiss the latters petition for certification election.
Except when it is requested to bargain collectively,62 an employer is a mere bystander to any petition for
certification election; such proceeding is non-adversarial and merely investigative, for the purpose thereof
is to determine which organization will represent the employees in their collective bargaining with the
employer.63 The choice of their representative is the exclusive concern of the employees; the employer
cannot have any partisan interest therein; it cannot interfere with, much less oppose, the process by filing
a motion to dismiss or an appeal from it; 64 not even a mere allegation that some employees participating in
a petition for certification election are actually managerial employees will lend an employer legal
personality to block the certification election.65 The employer's only
right in the proceeding is to be notified or informed thereof.66
The amendments to the Labor Code and its implementing rules have buttressed that policy even more.
WHEREFORE, the petition is GRANTED. The December 13, 2002 Decision and October 7, 2003
Resolution of the Court of Appeals and the May 17, 2000 Order of Med-Arbiter Anastacio L. Bactin
are REVERSED and SETASIDE, while the August 18, 2000 Decision and September 28, 2000 Resolution
of the Department of Labor and Employment are REINSTATED.
No costs.
SO ORDERED.

G.R. No. 110399 August 15, 1997

SAN MIGUEL CORPORATION SUPERVISORS AND EXEMPT UNION AND ERNESTO L. PONCE,
President,petitioners,
vs.
HONORABLE BIENVENIDO E. LAGUESMA IN HIS CAPACITY AS UNDERSECRETARY OF LABOR
AND EMPLOYMENT, HONORABLE DANILO L. REYNANTE IN HIS CAPACITY AS MED-ARBITER
AND SAN MIGUEL CORPORATION, respondents.
ROMERO, J.:
This is a Petition for Certiorari with Prayer for the Issuance of Preliminary Injunction seeking to reverse
and set aside the Order of public respondent, Undersecretary of the Department of Labor and
Employment, Bienvenido E. Laguesma, dated March 11, 1993, in Case No. OS MA A-2-70-91 1 entitled "In
Re: Petition for Certification Election Among the Supervisory and Exempt Employees of the San Miguel
Corporation Magnolia Poultry Plants of Cabuyao, San Fernando and Otis, San Miguel Corporation
Supervisors and Exempt Union, Petitioner." The Order excluded the employees under supervisory levels 3
and 4 and the so-called exempt employees from the proposed bargaining unit and ruled out their
participation in the certification election.
The antecedent facts are undisputed:

On September 21, 1991, respondent company, San Miguel Corporation filed a Motion for Reconsideration
with Motion to suspend proceedings.
On March 11, 1993, an Order was issued by the public respondent granting the Motion, citing the doctrine
enunciated in Philips Industrial Development, Inc. v. NLRC 2 case. Said Order reads in part:
. . . Confidential employees, like managerial employees, are not allowed to form, join or
assist a labor union for purposes of collective bargaining.
In this case, S3 and S4 Supervisors and the so-called exempt employees are admittedly
confidential employees and therefore, they are not allowed to form, join or assist a labor
union for purposes of collective bargaining following the above court's ruling.
Consequently, they are not allowed to participate in the certification election.
WHEREFORE, the Motion is hereby granted and the Decision of this Office dated 03
September 1991 is hereby modified to the extent that employees under supervisory
levels 3 and 4 (S3 and S4) and the so-called exempt employees are not allowed to join
the proposed bargaining unit and are therefore excluded from those who could
participate in the certification election. 3

On October
51 5, 1990, petitioner union filed before the Department of Labor and Employment (DOLE) a
Petition for Direct Certification or Certification Election among the supervisors and exempt employees of
the SMC Magnolia Poultry Products Plants of Cabuyao, San Fernando and Otis.

Hence this petition.

On December 19, 1990, Med-Arbiter Danilo L. Reynante issued an Order ordering the conduct of
certification election among the supervisors and exempt employees of the SMC Magnolia Poultry Products
Plants of Cabuyao, San Fernando and Otis as one bargaining unit.

1. Whether Supervisory employees 3 and 4 and the exempt employees of the company are considered
confidential employees, hence ineligible from joining a union.

On January 18, 1991, respondent San Miguel Corporation filed a Notice of Appeal with Memorandum on
Appeal, pointing out, among others, the Med-Arbiter's error in grouping together all three (3) separate
plants, Otis, Cabuyao and San Fernando, into one bargaining unit, and in including supervisory levels 3
and above whose positions are confidential in nature.
On July 23, 1991, the public respondent, Undersecretary Laguesma, granted respondent company's
Appeal and ordered the remand of the case to the Med-Arbiter of origin for determination of the true
classification of each of the employees sought to be included in the appropriate bargaining unit.
Upon petitioner-union's motion dated August 7, 1991, Undersecretary Laguesma granted the
reconsideration prayed for on September 3, 1991 and directed the conduct of separate certification
elections among the supervisors ranked as supervisory levels 1 to 4 (S1 to S4) and the exempt employees
in each of the three plants at Cabuyao, San Fernando and Otis.

For resolution in this case are the following issues:

2. If they are not confidential employees, do the employees of the three plants constitute an appropriate
single bargaining unit.
On the first issue, this Court rules that said employees do not fall within the term "confidential employees"
who may be prohibited from joining a union.
There is no question that the said employees, supervisors and the exempt employees, are not vested with
the powers and prerogatives to lay down and execute management policies and/or to hire, transfer,
suspend, layoff, recall, discharge or dismiss employees. They are, therefore, not qualified to be classified
as managerial employees who, under Article 245 4 of the Labor Code, are not eligible to join, assist or form
any labor organization. In the very same provision, they are not allowed membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor organizations of
their own. The only question that need be addressed is whether these employees are properly classified
as confidential employees or not.

Confidential employees are those who (1) assist or act in a confidential capacity, (2) to persons who
formulate, determine, and effectuate management policies in the field of labor relations. 5 The two criteria
are cumulative, and both must be met if an employee is to be considered a confidential employee that
is, the confidential relationship must exist between the employee and his supervisor, and the supervisor
must handle the prescribed responsibilities relating tolabor relations. 6
The exclusion from bargaining units of employees who, in the normal course of their duties, become aware
of management policies relating to labor relations is a principal objective sought to be accomplished by the
''confidential employee rule." The broad rationale behind this rule is that employees should not be placed
in a position involving a potential conflict of interests. 7 "Management should not be required to handle
labor relations matters through employees who are represented by the union with which the company is
required to deal and who in the normal performance of their duties may obtain advance information of the
company's position with regard to contract negotiations, the disposition of grievances, or other labor
relations matters." 8
There have been precedents in this regards, thus in Bulletin Publishing Company v. Hon. Augusto
Sanchez, 9 the Court held that "if these managerial employees would belong to or be affiliated with a
Union, the latter might not be assured of their loyalty to the Union in view of evident conflict of interest. The
Union can also become company-dominated with the presence of managerial employees in Union
membership." The same rationale was applied to confidential employees in "Golden Farms, Inc. v. FerrerCalleja" 10 and in the more recent case of "Philips Industrial Development, Inc. v. NLRC" 11which held that
52employees, by the very nature of their functions, assist and act in a confidential capacity to, or
confidential
have access to confidential matters of, persons who exercise managerial functions in the field of labor
relations. Therefore, the rationale behind the ineligibility of managerial employees to form, assist or join a
labor union was held equally applicable to them. 12
An important element of the "confidential employee rule" is the employee's need to use labor relations
information. Thus, in determining the confidentiality of certain employees, a key question frequently
considered is the employee's necessary access to confidential labor relations information. 13
It is the contention of respondent corporation that Supervisor employees 3 and 4 and the exempt
employees come within the meaning of the term "confidential employees" primarily because they
answered in the affirmative when asked "Do you handle confidential data or documents?" in the Position
Questionnaires submitted by the Union. 14 In the same questionnaire, however, it was also stated that the
confidential information handled by questioned employees relate to product formulation, product standards
and product specification which by no means relate to "labor relations." 15
Granting arguendo that an employee has access to confidential labor relations information but such is
merely incidental to his duties and knowledge thereof is not necessary in the performance of such duties,
said access does not render the employee a confidential employee. 16 "If access to confidential labor
relations information is to be a factor in the determination of an employee's confidential status, such
information must relate to the employer's labor relations policies. Thus, an employee of a labor union, or of

a management association, must have access to confidential labor relations information with respect to his
employer, the union, or the association, to be regarded a confidential employee, and knowledge of labor
relations information pertaining to the companies with which the union deals, or which the association
represents, will not cause an employee to be excluded from the bargaining unit representing employees of
the union or association." 17 "Access to information which is regarded by the employer to be confidential
from the business standpoint, such as financial information 18 or technical trade secrets, will not render an
employee a confidential employee."19
Herein listed are the functions of supervisors 3 and higher:
1. To undertake decisions to discontinue/temporarily stop shift operations when situations require.
2. To effectively oversee the quality control function at the processing lines in the storage of chicken and
other products.
3. To administer efficient system of evaluation of products in the outlets.
4. To be directly responsible for the recall, holding and rejection of direct manufacturing materials.
5. To recommend and initiate actions in the maintenance of sanitation and hygiene throughout the plant. 20
It is evident that whatever confidential data the questioned employees may handle will have to relate to
their functions. From the foregoing functions, it can be gleaned that the confidential information said
employees have access to concern the employer's internal business operations. As held in Westinghouse
Electric Corporation v.National Labor Relations Board, 21 "an employee may not be excluded from
appropriate bargaining unit merely because he has access to confidential information concerning
employer's internal business operations and which is not related to the field of labor relations."
It must be borne in mind that Section 3 of Article XIII of the 1987 Constitution mandates the State to
guarantee to "all" workers the right to self-organization. Hence, confidential employees who may be
excluded from bargaining unit must be strictly defined so as not to needlessly deprive many employees of
their right to bargain collectively through representatives of their choosing. 22
In the case at bar, supervisors 3 and above may not be considered confidential employees merely
because they handle "confidential data" as such must first be strictly classified as pertaining to labor
relations for them to fall under said restrictions. The information they handle are properly classifiable as
technical and internal business operations data which, to our mind, has no relevance to negotiations and
settlement of grievances wherein the interests of a union and the management are invariably adversarial.
Since the employees are not classifiable under the confidential type, this Court rules that they may
appropriately form a bargaining unit for purposes of collective bargaining. Furthermore, even assuming

that they are confidential employees, jurisprudence has established that there is no legal prohibition
against confidential employees who are not performing managerial functions to form and join a union. 23
In this connection, the issue of whether the employees of San Miguel Corporation Magnolia Poultry
Products Plants of Cabuyao, San Fernando, and Otis constitute a single bargaining unit needs to be
threshed out.
It is the contention of the petitioner union that the creation of three (3) separate bargaining units, one each
for Cabuyao, Otis and San Fernando as ruled by the respondent Undersecretary, is contrary to the onecompany, one-union policy. It adds that Supervisors level 1 to 4 and exempt employees of the three plants
have a similarity or a community of interests.

allowed to participate in a certification election. We rule that the distance among the three plants is not
productive of insurmountable difficulties in the administration of union affairs. Neither are there regional
differences that are likely to impede the operations of a single bargaining representative.
WHEREFORE, the assailed Order of March 11, 1993 is hereby SET ASIDE and the Order of the MedArbiter on December 19, 1990 is REINSTATED under which a certification election among the supervisors
(level 1 to 4) and exempt employees of the San Miguel Corporation Magnolia Poultry Products Plants of
Cabuyao, San Fernando, and Otis as one bargaining unit is ordered conducted.
SO ORDERED.
G.R. No. 146206

August 1, 2011

This Court finds the contention of the petitioner meritorious.

An appropriate bargaining unit may be defined as "a group of employees of a given employer, comprised
of all or less than all of the entire body of employees, which the collective interest of all the employees,
consistent with equity to the employer, indicate to be best suited to serve the reciprocal rights and duties of
the
parties
under
the
collective
bargaining
provisions
of
the
law." 24
A unit to 53
be appropriate must effect a grouping of employees who have substantial, mutual interests in
wages, hours, working conditions and other subjects of collective bargaining. 25
It is readily seen that the employees in the instant case have "community or mutuality of interests," which
is the standard in determining the proper constituency of a collective bargaining unit. 26 It is undisputed that
they all belong to the Magnolia Poultry Division of San Miguel Corporation. This means that, although they
belong to three different plants, they perform work of the same nature, receive the same wages and
compensation, and most importantly, share a common stake in concerted activities.
In light of these considerations, the Solicitor General has opined that separate bargaining units in the three
different plants of the division will fragmentize the employees of the said division, thus greatly diminishing
their bargaining leverage. Any concerted activity held against the private respondent for a labor grievance
in one bargaining unit will, in all probability, not create much impact on the operations of the private
respondent. The two other plants still in operation can well step up their production and make up for the
slack caused by the bargaining unit engaged in the concerted activity. This situation will clearly frustrate
the provisions of the Labor Code and the mandate of the Constitution. 27
The fact that the three plants are located in three different places, namely, in Cabuyao, Laguna, in Otis,
Pandacan, Metro Manila, and in San Fernando, Pampanga is immaterial. Geographical location can be
completely disregarded if the communal or mutual interests of the employees are not sacrificed as
demonstrated in UP v. Calleja-Ferrer where all non-academic rank and file employee of the University of
the Philippines in Diliman, Quezon City, Padre Faura, Manila, Los Baos, Laguna and the Visayas were

SAN
MIGUEL
FOODS,
INCORPORATED, Petitioner,
vs.
SAN MIGUEL CORPORATION SUPERVISORS and EXEMPT UNION, Respondent.
DECISION
PERALTA, J.:
The issues in the present case, relating to the inclusion of employees in supervisor levels 3 and 4 and the
exempt employees in the proposed bargaining unit, thereby allowing their participation in the certification
election; the application of the "community or mutuality of interests" test; and the determination of the
employees who belong to the category of confidential employees, are not novel.
In G.R. No. 110399, entitled San Miguel Corporation Supervisors and Exempt Union v. Laguesma, 1 the
Court held that even if they handle confidential data regarding technical and internal business operations,
supervisory employees 3 and 4 and the exempt employees of petitioner San Miguel Foods, Inc. (SMFI)
are not to be considered confidential employees, because the same do not pertain to labor relations,
particularly, negotiation and settlement of grievances. Consequently, they were allowed to form an
appropriate bargaining unit for the purpose of collective bargaining. The Court also declared that the
employees belonging to the three different plants of San Miguel Corporation Magnolia Poultry Products
Plants in Cabuyao, San Fernando, and Otis, having "community or mutuality of interests," constitute a
single bargaining unit. They perform work of the same nature, receive the same wages and compensation,
and most importantly, share a common stake in concerted activities. It was immaterial that the three plants
have different locations as they did not impede the operations of a single bargaining representative.2
Pursuant to the Court's decision in G.R. No. 110399, the Department of Labor and Employment National
Capital Region (DOLE-NCR) conducted pre-election conferences.3 However, there was a discrepancy in
the list of eligible voters, i.e., petitioner submitted a list of 23 employees for the San Fernando plant and 33
for the Cabuyao plant, while respondent listed 60 and 82, respectively.4

On August 31, 1998, Med-Arbiter Agatha Ann L. Daquigan issued an Order 5 directing Election Officer
Cynthia Tolentino to proceed with the conduct of certification election in accordance with Section 2, Rule
XII of Department Order No. 9.
On September 30, 1998, a certification election was conducted and it yielded the following results,6 thus:
Cabuyao
Plant

San
Plant

Fernando Total

Yes

23

23

46

No

Spoiled

Segregated

41

35

76

Total Votes Cast

66

58

124

votes, 72 were cast for "Yes" and 3 for "No," with one "spoiled" ballot.12
Based on the results, the Med-Arbiter issued the Order 13 dated April 13, 1999, stating that since the "Yes"
vote received 97% of the valid votes cast, respondent is certified to be the exclusive bargaining agent of
the supervisors and exempt employees of petitioner's Magnolia Poultry Products Plants in Cabuyao, San
Fernando, and Otis.
On appeal, the then Acting DOLE Undersecretary, in the Resolution 14 dated July 30, 1999, in OS-A-2-7091 (NCR-OD-M-9010-017), affirmed the Order dated April 13, 1999, with modification that George C.
Matias, Alma Maria M. Lozano, Joannabel T. Delos Reyes, and Marilyn G. Pajaron be excluded from the
bargaining unit which respondent seeks to represent. She opined that the challenged voters should be
excluded from the bargaining unit, because Matias and Lozano are members of Magnolia Poultry
Processing Plants Monthly Employees Union, while Delos Reyes and Pajaron are employees of San
Miguel Corporation, which is a separate and distinct entity from petitioner.
Petitioners Partial Motion for Reconsideration15 dated August 14, 1999 was denied by the then Acting
DOLE Undersecretary in the Order16 dated August 27, 1999.

On the date of the election, September 30, 1998, petitioner filed the Omnibus Objections and Challenge to
Voters,7 questioning the eligibility to vote by some of its employees on the grounds that some employees
do not belong to the bargaining unit which respondent seeks to represent or that there is no existence of
employer-employee relationship with petitioner. Specifically, it argued that certain employees should not be
allowed to vote as they are: (1) confidential employees; (2) employees assigned to the live chicken
54which are not covered by the bargaining unit; (3) employees whose job grade is level 4, but
operations,
are performing managerial work and scheduled to be promoted; (4) employees who belong to the Barrio
Ugong plant; (5) non-SMFI employees; and (6) employees who are members of other unions.

In the Decision17 dated April 28, 2000, in CA-G.R. SP No. 55510, entitled San Miguel Foods, Inc. v. The
Honorable Office of the Secretary of Labor, Bureau of Labor Relations, and San Miguel Corporation
Supervisors and Exempt Union, the Court of Appeals (CA) affirmed with modification the Resolution dated
July 30, 1999 of the DOLE Undersecretary, stating that those holding the positions of Human Resource
Assistant and Personnel Assistant are excluded from the bargaining unit.

On October 21, 1998, the Med-Arbiter issued an Order directing respondent to submit proof showing that
the employees in the submitted list are covered by the original petition for certification election and belong
to the bargaining unit it seeks to represent and, likewise, directing petitioner to substantiate the allegations
contained in its Omnibus Objections and Challenge to Voters.8

Hence, petitioner filed this present petition raising the following issues:

Petitioners Motion for Partial Reconsideration18 dated May 23, 2000 was denied by the CA in the
Resolution19dated November 28, 2000.

I.

In compliance thereto, respondent averred that (1) the bargaining unit contemplated in the original petition
is the Poultry Division of San Miguel Corporation, now known as San Miguel Foods, Inc.; (2) it covered the
operations in Calamba, Laguna, Cavite, and Batangas and its home base is either in Cabuyao, Laguna or
San Fernando, Pampanga; and (3) it submitted individual and separate declarations of the employees
whose votes were challenged in the election.9

WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE WHEN IT

EXPANDED THE SCOPE OF THE BARGAINING UNIT DEFINED BY THIS COURT'S RULING
IN G.R. NO. 110399.

Adding the results to the number of votes canvassed during the September 30, 1998 certification election,
the final tally showed that: number of eligible voters 149; number of valid votes cast 121; number of
spoiled ballots - 3; total number of votes cast 124, with 118 (i.e., 46 + 72 = 118 ) "Yes" votes and 3 "No"
votes.10

WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE SPECIFICALLY, THIS COURT'S DEFINITION OF A "CONFIDENTIAL EMPLOYEE" - WHEN IT
RULED FOR THE INCLUSION OF THE "PAYROLL MASTER" POSITION IN THE BARGAINING
UNIT.

The Med-Arbiter issued the Resolution11 dated February 17, 1999 directing the parties to appear before
the Election Officer of the Labor Relations Division on March 9, 1999, 10:00 a.m., for the opening of the
segregated ballots. Thereafter, on April 12, 1999, the segregated ballots were opened, showing that out of
the 76 segregated

III.

II.

WHETHER THIS PETITION IS A "REHASH" OR A "RESURRECTION" OF THE ISSUES RAISED

IN G.R. NO. 110399, AS ARGUED BY PRIVATE RESPONDENT.

separate and distinct from each other, the specific tasks of each division are actually interrelated and there
exists mutuality of interests which warrants the formation of a single bargaining unit.

Petitioner contends that with the Court's ruling in G.R. No. 110399 20 identifying the specific employees who
can participate in the certification election, i.e., the supervisors (levels 1 to 4) and exempt employees of
San Miguel Poultry Products Plants in Cabuyao, San Fernando, and Otis, the CA erred in expanding the
scope of the bargaining unit so as to include employees who do not belong to or who are not based in its
Cabuyao or San Fernando plants. It also alleges that the employees of the Cabuyao, San Fernando, and
Otis plants of petitioners predecessor, San Miguel Corporation, as stated in G.R. No. 110399, were
engaged in "dressed" chicken processing, i.e., handling and packaging of chicken meat, while the new
bargaining unit, as defined by the CA in the present case, includes employees engaged in "live" chicken
operations, i.e., those who breed chicks and grow chickens.

Petitioner asserts that the CA erred in not excluding the position of Payroll Master in the definition of a
confidential employee and, thus, prays that the said position and all other positions with access to salary
and compensation data be excluded from the bargaining unit.

Respondent counters that petitioners proposed exclusion of certain employees from the bargaining unit
was a rehashed issue which was already settled in G.R. No. 110399. It maintains that the issue of union
membership coverage should no longer be raised as a certification election already took place on
September 30, 1998, wherein respondent won with 97% votes.
Petitioners contentions are erroneous. In G.R. No. 110399, the Court explained that the employees of San
Miguel Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando, and Otis constitute a
single bargaining unit, which is not contrary to the one-company, one-union policy. An appropriate
bargaining unit is defined as a group of employees of a given employer, comprised of all or less than all of
the entire body of employees, which the collective interest of all the employees, consistent with equity to
the employer,
55 indicate to be best suited to serve the reciprocal rights and duties of the parties under the
collective bargaining provisions of the law.21
In National Association of Free Trade Unions v. Mainit Lumber Development Company Workers Union
United Lumber and General Workers of the Phils,22 the Court, taking into account the "community or
mutuality of interests" test, ordered the formation of a single bargaining unit consisting of the Sawmill
Division in Butuan City and the Logging Division in Zapanta Valley, Kitcharao, Agusan [Del] Norte of the
Mainit Lumber Development Company. It held that while the existence of a bargaining history is a factor
that may be reckoned with in determining the appropriate bargaining unit, the same is not decisive or
conclusive. Other factors must be considered. The test of grouping is community or mutuality of interest.
This is so because the basic test of an asserted bargaining units acceptability is whether or not it is
fundamentally the combination which will best assure to all employees the exercise of their collective
bargaining rights.23 Certainly, there is a mutuality of interest among the employees of the Sawmill Division
and the Logging Division. Their functions mesh with one another. One group needs the other in the same
way that the company needs them both. There may be differences as to the nature of their individual
assignments, but the distinctions are not enough to warrant the formation of a separate bargaining unit.24
Thus, applying the ruling to the present case, the Court affirms the finding of the CA that there should be
only one bargaining unit for
the employees in Cabuyao, San Fernando, and Otis25 of Magnolia Poultry Products Plant involved in
"dressed" chicken processing and Magnolia Poultry Farms engaged in "live" chicken operations. Certain
factors, such as specific line of work, working conditions, location of work, mode of compensation, and
other relevant conditions do not affect or impede their commonality of interest. Although they seem

This argument must fail. Confidential employees are defined as those who (1) assist or act in a confidential
capacity, in regard (2) to persons who formulate, determine, and effectuate management policies in the
field of labor relations.26 The two criteria are cumulative, and both must be met if an employee is to be
considered a confidential employee - that is, the confidential relationship must exist between the employee
and his supervisor, and the supervisor must handle the prescribed responsibilities relating to labor
relations. The exclusion from bargaining units of employees who, in the normal course of their duties,
become aware of management policies relating to labor relations is a principal objective sought to be
accomplished by the "confidential employee rule."27
A confidential employee is one entrusted with confidence on delicate, or with the custody, handling or care
and protection of the employers property.28 Confidential employees, such as accounting personnel, should
be excluded from the bargaining unit, as their access to confidential information may become the source of
undue advantage.29 However, such fact does not apply to the position of Payroll Master and the whole
gamut of employees who, as perceived by petitioner, has access to salary and compensation data. The
CA correctly held that the position of Payroll Master does not involve dealing with confidential labor
relations information in the course of the performance of his functions. Since the nature of his work does
not pertain to company rules and regulations and confidential labor relations, it follows that he cannot be
excluded from the subject bargaining unit.
Corollarily, although Article 24530 of the Labor Code limits the ineligibility to join, form and assist any labor
organization to managerial employees, jurisprudence has extended this prohibition to
confidential employees or those who by reason of their positions or nature of work are required to assist or
act in a fiduciary manner to managerial employees and, hence, are likewise privy to sensitive and highly
confidential records.31 Confidential employees are thus excluded from the rank-and-file bargaining unit.
The rationale for their separate category and disqualification to join any labor organization is similar to the
inhibition for managerial employees, because if allowed to be affiliated with a union, the latter might not be
assured of their loyalty in view of evident conflict of interests and the union can also become companydenominated with the presence of managerial employees in the union membership. 32 Having access to
confidential information, confidential employees may also become the source of undue advantage. Said
employees may act as a spy or spies of either party to a collective bargaining agreement.331avvphi1
In this regard, the CA correctly ruled that the positions of Human Resource Assistant and Personnel
Assistant belong to the category of confidential employees and, hence, are excluded from the bargaining
unit, considering their respective positions and job descriptions. As Human Resource Assistant, 34 the
scope of ones work necessarily involves labor relations, recruitment and selection of employees, access
to employees' personal files and compensation package, and human resource management. As regards a
Personnel Assistant,35 one's work includes the recording of minutes for management during collective
bargaining negotiations, assistance to management during grievance meetings and administrative
investigations, and securing legal advice for labor issues from the petitioners team of lawyers, and

implementation of company programs. Therefore, in the discharge of their functions, both gain access to
vital labor relations information which outrightly disqualifies them from union membership.
The proceedings for certification election are quasi-judicial in nature and, therefore, decisions rendered in
such proceedings can attain finality.36 Applying the doctrine of res judicata, the issue in the
present case pertaining to the coverage of the employees who would constitute the bargaining unit is now
a foregone conclusion.
It bears stressing that a certification election is the sole concern of the workers; hence, an employer lacks
the personality to dispute the same. The general rule is that an employer has no standing to question the
process of certification election, since this is the sole concern of the workers. 37 Law and policy demand
that employers take a strict, hands-off stance in certification elections. The bargaining representative of
employees should be chosen free from any extraneous influence of management. A labor bargaining
representative, to be effective, must owe its loyalty to the employees alone and to no other. 38 The only
exception is where the employer itself has to file the petition pursuant to Article 258 39 of the Labor Code
because of a request to bargain collectively.40
With the foregoing disquisition, the Court writes finis to the issues raised so as to forestall future suits of
similar nature.
WHEREFORE, the petition is DENIED. The Decision dated April 28, 2000 and Resolution dated
November 28, 2000 of the Court of Appeals, in CA-G.R. SP No. 55510, which affirmed with modification
56
the Resolutions dated July 30, 1999 and August 27, 1999 of the Secretary of Labor, are AFFIRMED.
SO ORDERED.
G.R. No. 116194

February 2, 2000

SUGBUANON
RURAL
BANK,
INC., petitioner,
vs.
HON. UNDERSECRETARY BIENVENIDO E. LAGUESMA, DEPARTMENT OF LABOR AND
EMPLOYMENT, MED-ARBITER ACHILLES MANIT, DEPARTMENT OF LABOR AND EMPLOYMENT,
REGIONAL OFFICE NO. 7, CEBU CITY, AND SUGBUANON RURAL BANK, INC. ASSOCIATION OF
PROFESSIONAL, SUPERVISORY, OFFICE, AND TECHNICAL EMPLOYEES UNION-TRADE UNIONS
CONGRESS OF THE PHILIPPINES, respondents.

Petitioner Sugbuanon Rural Bank, Inc., (SRBI, for brevity) is a duly-registered banking institution with
principal office in Cebu City and a branch in Mandaue City. Private respondent SRBI Association of
Professional, Supervisory, Office, and Technical Employees Union (APSOTEU) is a legitimate labor
organization affiliated with the Trade Unions Congress of the Philippines (TUCP).1wphi1.nt
On October 8, 1993, the DOLE Regional Office in Cebu City granted Certificate of Registration No. R07009310-UR-0064 to APSOTEU-TUCP, hereafter referred to as the union.
On October 26, 1993, the union filed a petition for certification election of the supervisory employees of
SRBI. It alleged, among others, that: (1) APSOTEU-TUCP was a labor organization duly-registered with
the Labor Department; (2) SRBI employed 5 or more supervisory employees; (3) a majority of these
employees supported the petition: (4) there was no existing collective bargaining agreement (CBA)
between any union and SRBI; and (5) no certification election had been held in SRBI during the past 12
months prior to the petition.
On October 28, 1993, the Med-Arbiter gave due course to the petition. The pre-certification election
conference between SRBI and APSOTEU-TUCP was set for November 15, 1993.
On November 12, 1993, SRBI filed a motion to dismiss the union's petition. It sought to prevent the holding
of a certification election on two grounds. First, that the members of APSOTEU-TUCP were in fact
managerial or confidential employees. Thus, following the doctrine in Philips Industrial Development
Corporation v. National Labor Relations Commission,1 they were disqualified from forming, joining, or
assisting any labor organization. Petitioner attached the job descriptions of the employees concerned to its
motion. Second, the Association of Labor Unions-Trade Unions Congress of the Philippines or ALU-TUCP
was representing the union. Since ALU-TUCP also sought to represent the rank-and-file employees of
SRBI, there was a violation of the principle of separation of unions enunciated in Atlas Lithographic
Services, Inc. v. Laguesma.2
The union filed its opposition to the motion to dismiss on December 1, 1993. It argued that its members
were not managerial employees but merely supervisory employees. The members attached their affidavits
describing the nature of their respective duties. The union pointed out that Article 245 of the Labor Code
expressly allowed supervisory employees to form, join, or assist their own unions.
On December 9, 1993, the Med-Arbiter denied petitioner's motion to dismiss. He scheduled the inclusionexclusion proceedings in preparation for the certification election on December 16, 1993.

QUISUMBING, J.:
In this special civil action for certiorari and prohibition, petitioner seeks the annulment of the April 27, 1994
Resolution of the Department of Labor and Employment, affirming the order of the Med-Arbiter, dated
December 9, 1993, which denied petitioner's motion to dismiss respondent union's petition for certification
election.

SRBI appealed the Med-Arbiter's decision to the Secretary of Labor and Employment. The appeal was
denied for lack of merit. The certification election was ordered.
On June 16, 1994, the Med-Arbiter scheduled the holding of the certification election for June 29, 1994.
His order identified the following SRBI personnel as the voting supervisory employees in the election: the

Cashier of the Main Office, the Cashier of the Mandaue Branch, the Accountant of the Mandaue Branch,
and the Acting Chief of the Loans Department.
On June 17, 1994, SRBI filed with the Med-Arbiter an urgent motion to suspend proceedings. The MedArbiter denied the same on June 21, 1994. SRBI then filed a motion for reconsideration. Two days later,
the Med-Arbiter cancelled the certification election scheduled for June 29, 1994 in order to address the
motion for reconsideration.
The Med-Arbiter later denied petitioner's motion for reconsideration, SRBI appealed the order of denial to
the DOLE Secretary on December 16, 1993..
On December 22, 1993, petitioner proceeded to file a petition with the DOLE Regional Office seeking the
cancellation of the respondent union's registration. It averred that the APSOTEU-TUCP members were
actually managerial employees who were prohibited by law from joining or organizing unions.
On April 22, 1994, respondent DOLE Undersecretary denied SRBI's appeal for lack of merit. He ruled that
APSOTEU-TUCP was a legitimate labor organization. As such, it was fully entitled to all the rights and
privileges granted by law to a legitimate labor organization, including the right to file a petition for
certification election. He also held that until and unless a final order is issued cancelling APSOTEUTUCP's registration certificate, it had the legal right to represent its members for collective bargaining
purposes.57
Furthermore, the question of whether the APSOTEU-TUCP members should be considered as
managerial or confidential employees should not be addressed in the proceedings involving a petition for
certification election but best threshed out in other appropriate proceedings.
On May 25, 1994, SRBI moved for reconsideration of the Undersecretary's decision which was denied on
July 7, 1994. The Med-Arbiter scheduled the holding of certification elections on August 12, 1994.
Hence the instant petition grounded on the following assignments of error:
I
RESPONDENT UNDERSECRETARY LAGUESMA ACTED WITH GRAVE ABUSE OF DISCRETION AND
PALPABLY ERRED:
A: IN HOLDING THAT ART. 257 OF THE LABOR CODE REQUIRES THE MED-ARBITER TO CONDUCT
A CERTIFICATION ELECTION IN ANY UNORGANIZED ESTABLISHMENT EVEN WHEN THE
PETITIONING UNION DOES NOT POSSESS THE QUALIFICATION FOR AN APPROPRIATE
BARGAINING AGENT; AND
B. IN REFUSING TO ASSUME JURISDICTION OVER THE PETITIONER'S APPEAL AND TO DISMISS
THE RESPONDENT UNION'S PETITION FOR CERTIFICATION ELECTION.

II
RESPONDENT UNDERSECRETARY LAGUESMA ACTED WITH GRAVE ABUSE OF DISCRETION AND
PALPABLY ERRED IN DENYING THE PETITIONER'S APPEAL DESPITE THE FACT THAT:
A. THE ALLEGED MEMBERS OF RESPONDENT UNION ARE MANAGERIAL EMPLOYEES WHO ARE
LEGALLY DISQUALIFIED FROM JOINING ANY LABOR ORGANIZATION.
B. AT THE VERY LEAST, THE ALLEGED MEMBERS OF RESPONDENT UNION ARE OCCUPYING
HIGHLY CONFIDENTIAL POSITIONS IN PETITIONER AND, THUS, THE LEGAL DISQUALIFICATION
OF MANAGERIAL EMPLOYEES EQUALLY APPLY TO THEM.
III
IN ANY EVENT, THE CONCLUSIONS REACHED IN THE SUBJECT RESOLUTIONS ARE CONTRARY
TO LAW AND ARE DIAMETRICALLY OPPOSED TO RESPONDENT UNION'S RECORDED
ADMISSIONS AND REPRESENTATIONS.
Considering petitioner's assigned errors, we find two core issues for immediate resolution:
(1) Whether or not the members of the respondent union are managerial employees and/or
highly-placed confidential employees, hence prohibited by law from joining labor organizations
and engaging in union activities?
(2) Whether or not the Med-Arbiter may validly order the holding of a certification election upon
the filing of a petition for certification election by a registered union, despite the petitioner's appeal
pending before the DOLE Secretary against the issuance of the union's registration?
The other issues based on the assigned errors could be resolved easily after the core issues are settled.
Respecting the first issue, Article 212 (m) of the Labor Code defines the terms "managerial employee" and
"supervisory employees" as follows:
Art. 212. Definitions
(m) "Managerial employee" is one who is vested with powers or prerogatives to lay down and
execute management policies and/or 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 (Emphasis supplied).
Petitioner submitted detailed job descriptions to support its contention that the union members are
managerial employees and/or confidential employees proscribed from engaging in labor
activities.3 Petitioner vehemently argues that the functions and responsibilities of the employees involved
constitute the "very core of the bank's business, lending of money to clients and borrowers, evaluating
their capacity to pay, approving the loan and its amount, scheduling the terms of repayment, and
endorsing delinquent accounts to counsel for collection." 4Hence, they must be deemed managerial
employees.
Petitioner
cites Tabacalera
Insurance
Co. v. National
Labor
Relations
Commission,5 and Panday v. National Labor Relations Commission,6 to sustain its submission.
InTabacalera, we sustained the classification of a credit and collection supervisor by management as a
managerial/supervisory personnel. But in that case, the credit and collection supervisor "had the power to
recommend the hiring and appointment of his subordinates, as well as the power to recommend any
promotion and/or increase."7 For this reason he was deemed to be a managerial employee. In the present
case, however, petitioner failed to show that the employees in question were vested with similar powers. At
best they only had recommendatory powers subject to evaluation, review, and final decision by the bank's
management. The job description forms submitted by petitioner clearly show that the union members in
question may not transfer, suspend, lay-off, recall, discharge, assign, or discipline employees. Moreover,
the forms also do not show that the Cashiers, Accountants, and Acting Chiefs of the Loans Department
formulate and execute management policies which are normally expected of management officers.

58

Petitioner's reliance on Panday is equally misplaced. There, we held that a branch accountant is a
managerial employee because the said employee had managerial powers, similar to the supervisor
in Tabaculera. Their powers included recommending the hiring and appointment of his subordinates, as
well as the power to recommend any promotion and/or increase.8
Here, we find that the Cashiers, Accountant, and Acting Chief of the Loans Department of the petitioner did
not possess managerial powers and duties. We are, therefore, constrained to conclude that they are not
managerial employees.
Now may the said bank personnel be deemed confidential employees? Confidential employees are those
who (1) assist or act in a confidential capacity, in regard (2) to persons who formulate, determine, and
effectuate management policies [specifically in the field of labor relations]. 9 The two criteria are cumulative,
and both must be met if an employee is to be considered a confidential employee that is, the
confidential relationship must exist between the employee and his superior officer; and that officer must
handle the prescribed responsibilities relating to labor relations.10
Art. 245 of the Labor Code11 does not directly prohibit confidential employees from engaging in union
activities. However, under the doctrine of necessary implication, the disqualification of managerial
employees equally applies to confidential employees.12 The confidential-employee rule justifies exclusion
of confidential employees because in the normal course of their duties they become aware of

management policies relating to labor relations.13 It must be stressed, however, that when the employee
does not have access to confidential labor relations information, there is no legal prohibition against
confidential employees from forming, assisting, or joining a union.14
Petitioner contends that it has only 5 officers running its day-to-day affairs. They assist in confidential
capacities and have complete access to the bank's confidential data. They form the core of the bank's
management team. Petitioner explains that:
. . . Specifically: (1) the Head of the Loans Department initially approves the loan applications
before they are passed on to the Board for confirmation. As such, no loan application is even
considered by the Board and approved by petitioner without his stamp of approval based upon
his interview of the applicant and determination of his (applicant's) credit standing and financial
capacity. The same holds true with respect to renewals or restructuring of loan accounts. He
himself determines what account should be collected, whether extrajudicially or judicially, and
settles the problems or complaints of borrowers regarding their accounts;
(2) the Cashier is one of the approving officers and authorized signatories of petitioner. He
approves the opening of accounts, withdrawals and encashment, and acceptance of check
deposits. He deals with other banks and, in the absence of the regular Manager, manages the
entire office or branch and approves disbursements of funds for expenses; and
(3) the Accountant, who heads the Accounting Department, is also one of the authorized
signatories of petitioner and, in the absence of the Manager or Cashier, acts as substitute
approving officer and assumes the management of the entire office. She handles the financial
reports and reviews the debit/credit tickets submitted by the other departments.15
Petitioner's explanation, however, does not state who among the employees has access to information
specifically relating to its labor to relations policies. Even Cashier Patricia Maluya, who serves as the
secretary of the bank's Board of Directors may not be so classified. True, the board of directors is
responsible for corporate policies, the exercise of corporate powers, and the general management of the
business and affairs of the corporation. As secretary of the bank's governing body. Patricia Maluya serves
the bank's management, but could not be deemed to have access to confidential information specifically
relating to SRBI's labor relations policies, absent a clear showing on this matter. Thus, while petitioner's
explanation confirms the regular duties of the concerned employees, it shows nothing about any duties
specifically connected to labor relations.
As to the second issue. One of the rights of a legitimate labor organization under Article 242(b) of the
Labor Code is the right to be certified as the exclusive representative of all employees in an appropriate
bargaining unit for purposes of collective bargaining. Having complied with the requirements of Art. 234, it
is our view that respondent union is a legitimate labor union. Article 257 of the Labor Code mandates that
a certification election shall automatically be conducted by the Med-Arbiter upon the filing of a petition by a
legitimate labor organization.16 Nothing is said therein that prohibits such automatic conduct of the

certification election if the management appeals on the issue of the validity of the union's registration. On
this score, petitioner's appeal was correctly dismissed.
Petitioner argues that giving due course to respondent union's petition for certification election would
violate the separation of unions doctrine. 17 Note that the petition was filed by APSOTEU-TUCP, a
legitimate labor organization. It was not filed by ALU. Nor was it filed by TUCP, which is a national labor
federation of with which respondent union is affiliated. Petitioner says that respondent union is a mere alter
ego of ALU. The records show nothing to this effect. What the records instead reveal is that respondent
union was initially assisted by ALU during its preliminary stages of organization. A local union maintains its
separate personality despite affiliation with a larger national federation. 18 Petitioner alleges that ALU seeks
to represent both respondent union and the rank-and-file union. Again, we find nothing in the records to
support this bare assertion.
The law frowns on a union where the membership is composed of both supervisors and rank-and-file
employees, for fear that conflicts of interest may arise in the areas of discipline, collective bargaining, and
strikes.19 However, in the present case, none of the members of the respondent union came from the rankand-file employees of the bank.
Taking into account the circumstances in this case, it is our view that respondent Undersecretary
committed no reversible error nor grave abuse of discretion when he found the order of the Med-Arbiter
scheduling a certification election in order. The list of employees eligible to vote in said certification election
59
was also found in order, for none was specifically disqualified from union membership.1wphi1.nt
WHEREFORE, the instant petition is hereby DISMISSED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 72555

July 31, 1987

Respondent Domingo Simborio was hired by petitioner company on March 1, 1961 as Clerk.
On October 1, 1975, respondent Domingo Simborio was promoted to the position of Credit and Collection
Supervisor on a six-month probationary basis per Memo dated September 25, 1975 from Mr. Carlos Uy,
Jr., then manager of the company (Rollo, p. 218).
On April 1, 1976, upon successfully completing the said six-month probationary period, respondent
Domingo Simborio obtained his regular status as Credit and Collection Supervisor (Rollo, p. 219).
On June 28, 1983, respondent Domingo Simborio was dismissed from work on the grounds of misconduct
and loss of confidence (Rollo, p. 248).
Respondent Simborio filed a complaint for unfair labor practice, reinstatement and damages against
petitioners before the NLRC Arbitration Branch, Manila, docketed therein as NLRC Case No. 7-3092-83.
In a Decision rendered on January 24, 1984, Labor Arbiter Ernilo V. Penalosa found the dismissal neither
illegal nor constitutive of any unfair labor practice. The dispositive portion of the decision reads:
WHEREFORE, pursuant to all the foregoing, let this case be, at it is hereby dismissed without
prejudice to complainant being paid by the respondent company his separation pay in
accordance with law by way of financial assistance.
SO ORDERED. (Labor Arbiter's Decision, Rollo, p. 147-151)
The case was appealed to the National Labor Relations Commission (Rollo, pp. 152-160) which on August
5, 1985, rendered a Decision (Rollo, pp. 210-216) reinstating said respondent to his former position with
one (1) year backwages. The Decision states:

TABACALERA
INSURANCE
CO.
AND
ALEJANDRO
ROS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DOMINGO SIMBORIO, respondents.

WHEREFORE, the appealed Decision is hereby Modified in Chat respondents are ordered to
immediately reinstate complainant to his former position with one (1) year backwages without
qualification and deductions whatsoever and without loss of seniority rights and privileges.
Decision affirmed in all other respects.

PARAS, J.:

SO ORDERED.

This is a special civil action for certiorari with prayer for preliminary injunction seeking to annul and set
aside: (a) the Decision of the respondent National Labor Relations Commission promulgated on August 5,
1985 in NLRC Case No. 7-309283 modifying the Decision of Labor Arbiter Ernilo V. Penalosa and directing
petitioners to reinstate respondent Domingo Simborio to his former position with payment of one (1) year
back wages, and (b) the Resolution of the respondent Commission dated September 27, 1985 denying
petitioners' Motion for Reconsideration.

Petitioner Company moved for the reconsideration of the aforesaid decision (Rollo, pp. 175-184) but the
same was denied on September 30, 1985 (Rollo, p. 217).
Hence, this petition filed on October 31, 1985 (Rollo, pp. 214).
The ground relied upon for this petition is as follows:

THE RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION WHEN IT UNDULY

FAVORED PRIVATE RESPONDENT BY ORDERING HIS REINSTATEMENT WITH PAYMENT OF
BACKWAGES DESPITE THE CLEAR FINDING OF THE LABOR ARBITER THAT PRIVATE
RESPONDENT WAS DISMISSED FOR JUST AND VALID CAUSES.
Without giving due course to the petition the Court required respondents to Comment thereon (Rollo, p.
185) and as prayed for, A Temporary Restraining Order was issued enjoining respondent Commission from
implementing and executing the questioned decision (Rollo, p. 186).
On December 3, 1985, in compliance with this Court's Resolution (Rollo, p. 185) private respondent filed
his comment (Rollo, pp. 196-207) while respondent Commission filed its comment on February 17, 1986
(Rollo, pp. 265-274).
Petitioners were required to file a Consolidated Reply (Rollo, p, 277) which was filed on April 11, 1986
(Rollo, pp. 285-294).
On May 13, 1986, private respondent filed his rejoinder (Rollo, p. 303), and petitioners their Sur-Rejoinder
on August 27, 1986 (Rollo, p. 344).
In a Resolution dated November 5, 1986, the Court resolved to give due course to the petition (Rollo, p.
345).
60
Private respondent, on December 24, 1986, moved for the reconsideration of the aforesaid Resolution
(Rollo, p. 346). On January 28, 1987 the Court required the petitioners to Comment on said "Motion for
Reconsideration" (Rollo, p. 347).
In compliance therewith petitioners filed their Comment on March 9, 1987 (Rollo, p. 350), while private
respondent filed their Reply thereto on March 27, 1987 (Rollo, p. 351).

(b) Private respondent's used disrespectful and abusive language when addressing his superiors
and customers. More specifically, he unjustifiably used threatening language against petitioners'
personnel manager and no less than five (5) of their Regular clients reported that private
respondent had been conducting his transactions with them in a very unprofessional and
offensive manner; and
(c) Private respondent was proved to have frequently hung his clothes in the Ladies' Room
despite the ladies' complaints regarding his presence there. (Position Paper of Petitioners, Rollo,
pp. 31-42)
Petitioners argue that private respondent's behavior constitutes serious misconduct sufficient to warrant
his termination. They claimed that they had to send letters of apology to their customers and this has
definitely caused grave prejudice to their business operations and interests.
On the other hand, it is private respondent's position that his dismissal was the result of several concocted
or simulated complaints imputed against him by petitioners after he and some of his co-supervisors joined
as members of the rank-and-file union in the company. He claims that he started to incur the ire and
irritation of petitioner company when he opposed the reorganization of the company which tended to lower
the category of his department and when he later discovered the wide disparity between the services and
responsibilities of the supervisors and their corresponding salary increases as compared to those of the
contractual workers under the Collective Bargaining Agreement, which discrepancies triggered the move
of the supervisors for a higher salary adjustment and for inclusion in the union. The request for increase in
salary was rejected by the company with alleged insinuation of disciplinary action against private
respondent should the latter pursue the issue further. As he expected, he was made to explain the
complaints filed against him and was preventively suspended on June 21, 1983. His services were
terminated on June 28, 1983 for gross misconduct/loss of confidence. (Rollo, pp. 102-109)

Finally, on April 8, 1987, this case was deliberated upon and assigned for decision (Rollo, p. 352).1avvphi1

Claiming that petitioners did not have sufficient grounds to terminate his services, private respondent filed
a complaint with the Regional Office of the National Capital Region of the MOLE for illegal dismissal,
coupled with the charge of unfair labor practice and claims for moral, actual and exemplary damage plus
attorney's fees. (Rollo, p. 147)

This petition is impressed with merit.

The findings of facts of the Labor Arbiter are as follows:

Petitioners contend that their dismissal of private respondent is legally valid. Their contention claims
support from the acts of private respondent in the course of his employment as Credit and Collection
Supervisor where he proved himself to be an unruly, uncooperative and irresponsible manager as shown
by the following instances:
(a) For the period from February 1980 up to his dismissal in June 1983 private respondent
reported late for work no less than 75 times with excuses ranging from flat tires to fictitious
customer calls;

Whether or not the dismissal of the complainant is illegal, a careful review of the facts and
evidence on record will readily disclose a negative answer. As supervisors, the complainant is
indeed duty bound to maintain an impeccable record of attendance and punctuality not only to
boost the morale of his peers and subordinates but also for him to attend to important business
matters that may arise during the first hours of each work day. In fact, his being found to have
been reporting late for work for no less than seventy-five (75) times during a two-year period does
not speak well of his commitment to his functions and responsibilities as a supervisor, especially

considering the lame excuses he used to justify his frequent tardiness, E.G., "Flat Tires, personal
matters, car repairs, etc."
In the same breath, complainant's reaction to the memorandum of the Personnel Manager which
asked him to refrain from entering and hanging his clothes in the Ladies' Room clearly constitutes
conduct unbecoming of a managerial employee, for instead of displaying a certain degree of
decorum and respect he responded with uncalled for outburst and language not expected of him
by reason of his position.
Moreover, as a Credit and Collection Supervisor whose functions require constant rapport with
the customers of the respondent company, he was expected to use at all times tact and
diplomacy when dealing with the customers. But contrary to this expectation, complaints were
received from regular clients that he was conducting his transactions with the latter in a very
unprofessional and offensive manner, thereby forcing the respondents thru their Assistant
Manager to write letters of apology to said complaining clients inasmuch as said unprofessional
behavior is causing grave prejudice to the business operations and interests of the respondents.
This has been aggravated when he shouted at a client and even went to the extent of challenging
the latter to a fist-fight.

Regarding complainant's claim that his dismissal was in retaliation against his having filed a
petition with the National Capital Region, Ministry of Labor and Employment, seeking for a
declaration that supervisors are non-managerial employees qualified for membership in the rankand-file union existing in the respondent company, it appears that the filing of said petition on
June 21, 1983, the very same day complainant was placed under preventive suspension, was
more of an anticipation of whatever action the respondents may take against him so that, as
convincingly theorized by the respondents, any subsequent termination action taken against him
would be viewed as a retaliatory measure. This fact could be viewed from his deceptive claim that
he was joined in said petition by four (4) other co-supervisors and yet, the latter had executed
individual affidavits declaring that the filing of the petition was without their consent and that they
have no intention to sue the respondents.
Under Art. 283 of the Labor Code, an employer may terminate any employment for any of the following just
causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;

Under the foregoing facts and circumstances it could be said that if on account of the acts and
unprofessional conduct of complainant he had shown that he could not effectively perform his
61
duties and responsibilities when quarreling with the clients and that he could not set himself as a
good example when he is the first one to break the rules of discipline and good conduct, then the
respondents had enough reason in dispensing with his services due to serious misconduct and to
loss of trust and confidence in him.
On Appeal, respondent National Labor Relations Commission reversed the findings of the Labor Arbiter
and opted instead to base its decision on the possibility or supposition that there was a premeditated plan
on the part of management to do away with private respondent's services. (Rollo, p. 211)
A careful review of the records fails to show however, any supposed connection between the requests of
private respondent for salary increase and for affiliation in the union with the replies and action of the
petitioner-employers thereon from which such premeditated plan was inferred. On the contrary, private
respondent failed to refute the charges brought by the petitioners against him which are based on
documentary evidence. Instead, he confined himself to bare denials and counter charges of trumped-up
investigation which are not supported by the records. (Rollo, pp. 108-110) More than that, he was found to
have adopted deceptive claims and measures which would tend to becloud the issues of this case. (Rollo,
pp. 108-110)
Thus the Labor Arbiter correctly found the following:

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the Employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
Loss of confidence as a ground for dismissal does not entail proof beyond reasonable doubt of the
employee's misconduct. It is enough that there be "some basis" for such loss of confidence or that "the
employer has reasonable grounds to believe, if not to entertain the moral conviction that the employee
concerned is responsible for the misconduct and that the nature of his participation therein rendered him
absolutely unworthy of the trust and confidence demanded by his position" (Reyes vs. Zamora, 90 SCRA
92, 111 [1979]); Galsim vs. PNB, 29 SCRA 293 [1969]).
In the case at bar, private respondent occupied the position of Credit and Collection Supervisor, classified
under Sec. 5 of the company's Collective Bargaining Agreement (Rollo, p. 79) as managerial/supervisory
personnel. In addition to his regular functions as such, he also had the power to recommend the hiring and
appointment of his subordinates, as well as the power to recommend any promotion and/or increase
(Rollo, p. 4). Otherwise stated, he is "one in whom petitioner Company has given its complete trust and
confidence. ... The Company, therefore, was justified in expecting that his actuations should be above
suspicion" (Reyes vs. Zamora, 90 SCRA 92 [1979]).

Moreover, while there is no question that the right of an employer to freely select or discharge his
employees, is subject to regulation by the State basically in the exercise of its paramount police power
(Manila Trading & Supply Co. vs. Zulueta, et al., 69 Phil. 485, [1940]), there is also an equally established
principle that an employer cannot be compelled to continue in employment an employee guilty of acts
inimical to the interest of the employer and justifying loss of confidence in him (Manila Trading and Supply
Co. vs. Manila Trading Laborers Asso., 83 Phil. 297 [1949]; PECO vs. PECO, Employees Union, 107 Phil.
1003 [1960]; Devans vs. CIR, 23 SCRA 1321 [1968]; Gas Corporation of the Hardwood and Veneer Co. of
the Phil. vs. Leogardo, 117 SCRA 967 [1982]; Dole Phil. Inc. vs. NLRC, 123 SCRA 673, 677 [1983]).
The records reveal that private respondent has the knack for saying harsh and rough words both to his
superiors and to the company's clients. When his attention was called by the Assistant Manager of
petitioner Company concerning his entering the Ladies' Room to hang up his clothes, he replied in this
wise:
What forced me to enter the ladies Room to hang-up my clothes is the very inhuman acts
committed against me by somebody in this office who had, on two instances, thrown my clothes
inside the men's room. (Pasalamat siya hindi ko nahuli sa acto); Finally, if you are thinking that
I'm up to doing something bad against our ladies in this office, rest-assured that this will not
happen, for, as you are well aware, all of them do not meet my standard and none of them for
that matter, will get my sympathy nor tempt me to commit a wrong. (ANNEX " D, " Rollo, p. 6 7)

62

With this frame of mind, it can hardly be doubted that he has breached the trust and confidence reposed in
him by his employer resulting in acts inimical to the interests of the company. In the case of Sea-Land
Service, Inc. vs. NLRC, 136 SCRA 544 (1985), the Court in sustaining the dismissal of one Joselito Reyes,
a warehouse clerk ruled that it is sufficient that the employer should have a basis for believing that the
employee "breached the trust and confidence reposed in him" by his employer within the meaning of
Section 283 (c) of the Labor Code. This fact need not be proven beyond reasonable doubt.
PREMISES CONSIDERED, the assailed Decision of the National Labor Relations Commission dated
August 5, 1985, and its Resolution dated September 27, 1985, are hereby SET ASIDE, and the Decision
of the Labor Arbiter dated January 24, 1984, is hereby REINSTATED:
SO ORDERED.
G.R. No. 149240

This is a petition for certiorari under Rule 64 of the 1997 Rules of Civil Procedure praying that this Court
assess against the workers social security fund the amount of P5,000.00 as contract signing bonus of
each official and employee of the SSS. The gratuity emanated from the collective negotiation agreement
(CNA) executed on 10 July 1996 between the Social Security Commission (SSC) in behalf of the SSS and
the Alert and Concerned Employees for Better SSS (ACCESS), the sole and exclusive negotiating agent
for employees of the SSS.1 In particular, Art. XIII of the CNA provided As a gesture of good will and benevolence, the Management agrees that once the Collective
Negotiation Agreement is approved and signed by the parties, Management shall grant each
official and employee of the SYSTEM the amount of P5,000.00 as contract signing bonus.2
To fund this undertaking, the SSC allocated P15,000,000.00 in the budgetary appropriation of the SSS.3
On 18 February 1997 the Department of Budget and Management (DBM) declared as illegal the contract
signing bonus which the CNA authorized to be distributed among the personnel of the SSS. 4 On 1 July
1997 the SSS Corporate Auditor disallowed fund releases for the signing bonus since it was "an allowance
in the form of additional compensation prohibited by the Constitution."5
Two (2) years later, in a letter dated 29 September 1999, ACCESS appealed the disallowance to the
Commission on Audit (COA).6 On 5 July 2001 despite the delay in the filing of the appeal, a procedural
matter which COA considered to be inconsequential, 7 COA affirmed the disallowance and ruled that the
grant of the signing bonus was improper.8 It held that the provision on the signing bonus in the CNA had no
legal basis since Sec. 16 of RA 7658 (1989)9 had repealed the authority of the SSC to fix the
compensation of its personnel.10 Hence the instant petition which, curiously, was filed in the name of the
Social Security System (and not ACCESS) by authority of the officer-in-charge for the SSS 11 through its
legal staff.12

July 11, 2002

SOCIAL
SECURITY
vs.
COMMISSION ON AUDIT, respondent.
BELLOSILLO, J.:

THE FUNDS contributed to the Social Security System (SSS) are not only imbued with public interest, they
are part and parcel of the fruits of the workers labors pooled into one enormous trust fund under the
administration of the System designed to insure against the vicissitudes and hazards of their working lives.
In a very real sense, the trust funds are the workers property which they could turn to when necessity
beckons and are thus more personal to them than the taxes they pay. It is therefore only fair and proper
that charges against the trust fund be strictly scrutinized for every lawful and judicious opportunity to keep
it intact and viable in the interest of enhancing the welfare of their true and ultimate beneficiaries.

SYSTEM, petitioner,

Petitioner SSS argues that a signing bonus may be granted upon the conclusion of negotiations leading to
the execution of a CNA where it is specifically authorized by law and that in the case at bar such legal
authority is found in Sec. 3, par. (c), of RA 1161 as amended (Charter of the SSS) which allows the SSC to
fix the compensation of its personnel. On the other hand, respondent COA asserts that the authority of the
SSC to fix the compensation of its personnel has been repealed by Secs. 12 and 16 of RA 6758 and is
therefore no longer effective.

We find no legitimate and compelling reason to reverse the COA. To begin with, the instant petition is
fatally defective. It was filed in the name of the SSS although no directive from the SSC authorized the
instant suit and only the officer-in-charge in behalf of petitioner executed the purported directive. Clearly,
this is irregular since under Sec. 4, par. 10, in relation to par. 7, 13 RA 1161 as amended by RA 8282 (The
Social Security Act of 1997,which was already effective14 when the instant petition was filed), it is the SSC
as a collegiate body which has the power to approve, confirm, pass upon or review the action of the SSS
to sue in court. Moreover, the appearance of the internal legal staff of the SSS as counsel in the present
proceedings is similarly questionable because under both RA 1161 and RA 8282 it is the Department of
Justice (DoJ) that has the authority to act as counsel of the SSS. 15 It is well settled that the legality of the
representation of an unauthorized counsel may be raised at any stage of the proceedings 16 and that such
illicit representation produces no legal effect.17 Since nothing in the case at bar shows that the approval or
ratification of the SSC has been undertaken in the manner prescribed by law and that the DoJ has not
delegated the authority to act as counsel and appear herein, the instant petition must necessarily fail.
These procedural deficiencies are serious matters which this Court cannot take lightly and simply ignore
since the SSS is in reality confessing judgment to charge expenditure against the trust fund under its
custodianship.
In Premium Marble Resources v. Court of Appeals18 we held that no person, not even its officers, could
validly sue in behalf of a corporation in the absence of any resolution from the governing body authorizing
the filing of such suit. Moreover, where the corporate officers power as an agent of the corporation did not
derive from such resolution, it would nonetheless be necessary to show a clear source of authority from
63the by-laws or the implied acts of the governing body. 19 Unfortunately there is no palpable
the charter,
evidence in the records to show that the officer-in-charge could all by himself order the filing of the instant
petition without the intervention of the SSC, nor that the legal staff of SSS could act as its counsel and
appear therein without the intervention of the DoJ. The power of attorney supposedly authorizing this suit
as well as the signature of the legal counsel appearing on the signing page of the instant petition is
therefore ineffectual.
Indeed we find no merit in the claim that the employees and officers of SSS are entitled to the signing
bonus provided for in the CNA. In the first place, the process of collective negotiations in the public sector
does not encompass terms and conditions of employment requiring the appropriation of public funds Sec. 13. Terms and conditions of employment or improvements thereof, except those that are
fixed by law, may be the subject of negotiations between duly recognized employees
organizations and appropriate government authorities.20
More particularly -

Sec. 3. Those that require appropriation of funds, such as the following, are not negotiable: (a)
Increase in salary emoluments and other allowances not presently provided for by law; (b)
Facilities requiring capital outlays; (c) Car plan; (d) Provident fund; (e) Special hospitalization,
medical and dental services; (f) Rice/sugar/other subsidies; (g) Travel expenses; (h) Increase in
retirement benefits.
Sec. 4. Matters that involve the exercise of management prerogatives, such as the following, are
likewise not subject to negotiation: (a) Appointment; (b) Promotion; (c) Assignment/Detail; (d)
Reclassification/ upgrading of position; (e) Revision of compensation structure; (f) Penalties
imposed as a result of disciplinary actions; (g) Selection of personnel to attend seminar, trainings,
study grants; (h) Distribution of work load; (I) External communication linkages.21
Petitioner however argues that the charter of SSS authorizes the SSC to fix the compensation of its
employees and officers so that in reality the signing bonus is merely the fruit of the exercise of such
fundamental power. On this issue, we have to explain the relevant amendments to the SSS charter in
relation to the passage of RA 6758(1989) entitled "An Act Prescribing a Revised Compensation and
Position Classification in the Government and for other Purposes."
When the signing bonus was bestowed upon each employee and officer of the SSS on 10 July 1996,
which was earlier approved by the SSC on 3 July 1996, the governing charter of the SSS was RA 1161 as
amended by Sec. 1, RA 2658, and Sec. 1, PD 735. Under this amended statute, the SSC was empowered
to "appoint an actuary, and such other personnel as may be deemed necessary" and to "fix their
compensation."22 The law also provided that "the personnel of the SSS shall be selected only from civil
service eligibles and be subject to civil service rules and regulations."23
On 9 August 1989 Congress passed RA 6758 which took effect on 1 July 1989.24 Its goal was to "provide
equal pay for substantially equal work and to base differences in pay upon substantive differences in
duties and responsibilities, and qualification requirements of the positions."25 Towards this end, RA
6758 provided for the consolidation of allowances and compensation in the prescribed standardized salary
rates except certain specified allowances26 and such other additional compensation as may be determined
by the Department of Budget and Management. 27 The law also repealed "[a]ll laws, decrees, executive
orders, corporate charters, and other issuances or parts thereof, that exempt agencies from the coverage
of the System, or that authorize and fix position classification, salaries, pay rates or allowances of
specified positions, or groups of officials and employees or of agencies, which are inconsistent with the
System, including the proviso under Section 2 and Section 16 of Presidential Decree No. 985."28
Although it was the clear policy intent of RA 6758 to standardize salary rates among government
personnel, the Legislature under Secs. 1229 and 1730 of the law nonetheless saw the need for equity and
justice in adopting the policy of non-diminution of pay when it authorized incumbents as of 1 July 1989 to
receive salaries and/or allowances over and above those authorized by RA 6758. In Philippine Ports
Authority v. Commission on Audit31we held that no financial or non-financial incentive could be awarded to

employees of government owned and controlled corporations aside from benefits which were being
received by incumbent officials and employees as of 1 July 1989. This Court also observed The consequential outcome, under sections 12 and 17, is that if the incumbent resigns or is
promoted to a higher position, his successor is no longer entitled to his predecessors RATA
privilege x x x or to the transition allowance x x x x [A]fter July 1, 1989, additional financial
incentives such as RATA may no longer be given by GOCCs with the exception of those which
were authorized to be continued under Section 12 of RA 6758.
Evidently, while RA 6758 intended to do away with multiple allowances and other incentive packages and
the resulting differences in compensation among government personnel, the statute clearly did not revoke
existing benefits being enjoyed by incumbents of government positions at the time of the passage of RA
6758 by virtue of Secs. 12 and 17 thereof. In previous rulings of this Court, among the financial and nonfinancial incentives which we allowed certain government employees to enjoy after the effectivity of RA
6758 were car plan benefits32 and educational funding assistance33 for incumbents of existing positions as
of 1 July 1989 until such gratuity packages were gradually phased out.
We have no doubt that RA 6758 modified, if not repealed, Sec. 3, par. (c), of RA 1161 as amended, at
least insofar as it concerned the authority of SSC to fix the compensation of SSS employees and officers.
This means that whatever salaries and other financial and non-financial inducements that the SSC was
minded to fix for them, the compensation must comply with the terms of RA 6758. Consequently, only the
64
remuneration which was being offered as of 1 July 1989, and which was then being enjoyed by incumbent
SSS employees and officers, could be availed of exclusively by the same employees and officers separate
from and independent of the prescribed standardized salary rates. Unfortunately, however, the signing
bonus in question did not qualify under Secs. 12 and 17 of RA 6758. It was non-existent as of 1 July 1989
as it accrued only in 1996 when the CNA was entered into by and between SSC and ACCESS. The
signing bonus therefore could not have been included in the salutary provisions of the statute nor would it
be legal to disburse to the intended recipients.

Decision No. 98-048 dated January 27, 1998, the exemption granted to the PITC has been
repealed and revoked by the repealing provisions of RA 6758, particularly Section 16 thereof
which provides:
Sec. 16. Repeal of Special Salary Laws and Regulations. - All laws, decrees, executive
orders, corporate charters, and other issuances or parts thereof, that exempt agencies
from the coverage of the System, or that authorize and fix position classifications,
salaries, pay rates or allowances of specified positions, or groups of officials, and
employees or of agencies, which are inconsistent with the System, including the proviso
under Section 2 and Section 16 of PD No. 985 are hereby repealed.
To this, [PITC] argues that RA 6758 which is a law of general application cannot repeal provisions
of the Revised Charter of PITC and its amendatory laws expressly exempting PITC from OCPC
coverage being special laws x x x x In the case at bar, the repeal by Section 16 of RA 6758 of "all
corporate charters that exempt agencies from the coverage of the System" was clear and
expressed necessarily to achieve the purposes for which the law was enacted, that is, the
standardization of salaries of all employees in government owned and / or controlled corporations
to achieve "equal pay for substantially equal work." Henceforth, PITC should now be considered
as covered by laws prescribing a compensation and position classification system in the
government including RA 6758. This is without prejudice, however, as discussed above, to the
non-diminution of pay of incumbents as of July 1, 1989 as provided in Sections 12 and 17 of said
law.
So we also rule in the instant case involving the charter of the SSS or RA 1161 as amended.
The enactment of RA 8282 entitled "The Social Security Act of 1997" does not change our holding. While it
is true that Sec. 3, par. (c), of RA 8282 expressly exempted the SSS from the provisions of RA
6758 and RA 7430 (The Attrition Law of 1992) thus -

Philippine International Trading Corporation v. Commission on Audit 34 is instructive on this point. Like the
SSS, the Philippine International Trading Corporation (PITC) is a government-owned and controlled
corporation which was created under PD 252 (1973) primarily for the purpose of promoting and developing
Philippine trade in pursuance of national economic development. In the same judgment which affirmed the
car financing program and allied incentives being implemented prior to 1 July 1989 we held that the
charter of PITC was impliedly repealed by RA 6758 -

The Commission, upon the recommendation of the SSS President, shall appoint an actuary and
such other personnel as may be deemed necessary; fix their reasonable compensation,
allowances and other benefits x x x x [t]hat the personnel of the SSS shall be selected only from
civil service eligibles and be subject to civil service rules and regulations: Provided, finally, That
the SSS shall be exempt from the provisions of Republic Act No. 6758 and Republic Act No.
7430,

We deem it necessary though to resolve the third issue as to whether PITC is exempt from PD
985 as subsequently amended by RA 6758. According to petitioner, PITCs Revised Charter, PD
1071 dated January 25, 1977, as amended by EO 756 dated December 29, 1981, and further
amended by EO 1067 dated November 25, 1985, expressly exempted PITC from the Office of the
Compensation and Position Classification (OCPC) rules and regulations. Petitioner cites Section
28 of P.D. 1071; Section 6 of EO 756; and Section 3 of EO 1067. According to the COA in its

it bears emphasis that RA 8282 took effect only on 23 May 1997, i.e., fifteen (15) days after its complete
publication in two (2) newspapers of general circulation on 7 May 199735 and 8 May 1997.36 It holds to
reason that the prospective application of the statute renders irrelevant to the case at bar whatever effects
this exemption may have on the power of the SSC to fix the compensation of SSS personnel.
Ironically, RA 8282 in fact buttresses our ruling that the signing bonus cannot escape the provisions of RA
6758. The need to expressly stipulate the exemption of the SSS can only mean that prior to the effectivity

of RA 8282, the SSS was subject toRA 6758 and even RA 7430 for, otherwise, there would have been no
reason to rope in such provision in RA 8282.
This Court has been very consistent in characterizing the funds being administered by SSS as a trust fund
for the welfare and benefit of workers and employees in the private sector. 37 In United Christian Missionary
v. Social Security Commission38 we were unequivocal in declaring the funds contributed to the Social
Security System by compulsion of law as funds belonging to the members which were merely held in trust
by the government, and resolutely imposed the duty upon the trustee to desist from any and all acts which
would diminish the property rights of owners and beneficiaries of the trust fund. Consistent with this
declaration, it would indeed be very reasonable to construe the authority of the SSC to provide for the
compensation of SSS personnel in accordance with the established rules governing the remuneration of
trustees x x x x the modern rule is to give the trustee a reasonable remuneration for his skill and industry x
x x x In deciding what is a reasonable compensation for a trustee the court will consider the
amount of income and capital received and disbursed, the pay customarily given to agents or
servants for similar work, the success or failure of the work of the trustee, any unusual skill which
the trustee had and used, the amount of risk and responsibility, the time consumed, the character
of the work done (whether routine or of unusual difficulty) and any other factors which prove the
worth of the trustees services to the cestuis x x x x The court has power to make extraordinary
compensation allowances, but will not do so unless the trustee can prove that he has performed
65 beyond the ordinary duties of his office and has engaged in especially arduous work.39
work

On the basis of the foregoing pronouncement, we do not find the signing bonus to be a truly reasonable
compensation. The gratuity was of course the SSCs gesture of good will and benevolence for the
conclusion of collective negotiations between SSC and ACCESS, as the CNA would itself state, but for
what objective? Agitation and propaganda which are so commonly practiced in private sector labormanagement relations have no place in the bureaucracy and that only a peaceful collective negotiation
which is concluded within a reasonable time must be the standard for interaction in the public sector. This
desired conduct among civil servants should not come, we must stress, with a price tag which is what the
signing bonus appears to be.
WHEREFORE, the instant Petition for Certiorari under Rule 64, 1997 Rules of Civil
Procedure, is DISMISSED. TheDecision No. 2001-123 of the Commission on Audit and the Notice of
Disallowance No. 97-002-0101 (96) of the Social Security System Corporate Auditor prohibiting the
payment of P5,000.00 signing bonus to each employee and officer of the Social Security System as
stipulated in Art. XIII of the Collective Negotiation Agreement and as approved in Resolution No. 593 of the
Social Security Commission are AFFIRMED. No pronouncement as to costs.
SO ORDERED.