PHIMCO Industries Inc. vs.

PHIMCO Industries Labor Assocation (PILA)

GR No. 170830, August 11, 2010

Before us is the petition for review on certiorari filed by petitioner Phimco Industries, Inc. (PHIMCO), seeking to
reverse and set aside the decision, dated February 10, 2004, and the resolution, dated December 12, 2005, of the Court
of Appeals (CA) in CA-G.R. SP No. 70336. The assailed CA decision dismissed PHIMCOs petition for certiorari that
challenged the resolution, dated December 29, 1998, and the decision, dated February 20, 2002, of the National Labor
Relations Commission (NLRC); the assailed CA resolution denied PHIMCOs subsequent motion for reconsideration.

FACTUAL BACKGROUND

The facts of the case, gathered from the records, are briefly summarized below.

PHIMCO is a corporation engaged in the production of matches, with principal address at Phimco Compound,
Felix Manalo St., Sta. Ana, Manila. Respondent Phimco Industries Labor Association (PILA) is the duly authorized
bargaining representative of PHIMCOs daily-paid workers. The 47 individually named respondents are PILA officers and
members. When the last collective bargaining agreement was about to expire on December 31, 1994, PHIMCO and PILA
negotiated for its renewal. The negotiation resulted in a deadlock on economic issues, mainly due to disagreements on
salary increases and benefits.

On March 9, 1995, PILA filed with the National Conciliation and Mediation Board (NCMB) a Notice of Strike on
the ground of the bargaining deadlock. Seven (7) days later, or on March 16, 1995, the union conducted a strike vote; a
majority of the union members voted for a strike as its response to the bargaining impasse. On March 17, 1995, PILA
filed the strike vote results with the NCMB. Thirty-five (35) days later, or on April 21, 1995, PILA staged a strike.

On May 3, 1995, PHIMCO filed with the NLRC a petition for preliminary injunction and temporary restraining
order (TRO), to enjoin the strikers from preventing through force, intimidation and coercion the ingress and egress of
non-striking employees into and from the company premises. On May 15, 1995, the NLRC issued an ex-parte TRO,
effective for a period of twenty (20) days, or until June 5, 1995.

On June 23, 1995, PHIMCO sent a letter to thirty-six (36) union members, directing them to explain within
twenty-four (24) hours why they should not be dismissed for the illegal acts they committed during the strike. Three days
later, or on June 26, 1995, the thirty-six (36) union members were informed of their dismissal.

On July 6, 1995, PILA filed a complaint for unfair labor practice and illegal dismissal (illegal dismissal case) with
the NLRC. The case was docketed as NLRC NCR Case No. 00-07-04705-95, and raffled to Labor Arbiter (LA) Pablo C.
Espiritu, Jr.

On July 7, 1995, then Acting Labor Secretary Jose S. Brillantes assumed jurisdiction over the labor dispute, and
ordered all the striking employees (except those who were handed termination papers on June 26, 1995) to return to
work within twenty-four (24) hours from receipt of the order. The Secretary ordered PHIMCO to accept the striking
employees, under the same terms and conditions prevailing prior to the strike. On the same day, PILA ended its strike.

On August 28, 1995, PHIMCO filed a Petition to Declare the Strike Illegal (illegal strike case) with the NLRC, with a
prayer for the dismissal of PILA officers and members who knowingly participated in the illegal strike. PHIMCO claimed
that the strikers prevented ingress to and egress from the PHIMCO compound, thereby paralyzing PHIMCOs operations.
The case was docketed as NLRC NCR Case No. 00-08-06031-95, and raffled to LA Jovencio Ll. Mayor.

On March 14, 1996, the respondents filed their Position Paper in the illegal strike case. They countered that they
complied with all the legal requirements for the staging of the strike, they put up no barricade, and conducted their
strike peacefully, in an orderly and lawful manner, without incident.
 LA Mayor decided the case on February 4, 1998, and found the strike illegal; the respondents committed
prohibited acts during the strike by blocking the ingress to and egress from PHIMCOs premises and preventing the non-
striking employees from reporting for work. He observed that it was not enough that the picket of the strikers was a
moving picket, since the strikers should allow the free passage to the entrance and exit points of the company premises.
Thus, LA Mayor declared that the respondent employees, PILA officers and members, have lost their employment status.

On March 5, 1998, PILA and its officers and members appealed LA Mayors decision to the NLRC.

THE NLRC RULING

The NLRC decided the appeal on December 29, 1998, and set aside LA Mayors decision. The NLRC did not give
weight to PHIMCOs evidence, and relied instead on the respondents evidence showing that the union conducted a
peaceful moving picket.

On January 28, 1999, PHIMCO filed a motion for reconsideration in the illegal strike case. In a parallel
development, LA Espiritu decided the unions illegal dismissal case on March 2, 1999. He ruled the respondents
dismissal as illegal, and ordered their reinstatement with payment of backwages. PHIMCO appealed LA Espiritus decision
to the NLRC. Pending the resolution of PHIMCOs motion for reconsideration in the illegal strike case and the appeal of
the illegal dismissal case, PHIMCO moved for the consolidation of the two (2) cases. The NLRC acted favorably on the
motion and consolidated the two (2) cases in its Order dated August 5, 1999.

On February 20, 2002, the NLRC rendered its Decision in the consolidated cases, ruling totally in the unions favor.
It dismissed the appeal of the illegal dismissal case, and denied PHIMCOs motion for reconsideration in the illegal strike
case. The NLRC found that the picket conducted by the striking employees was not an illegal blockade and did not
obstruct the points of entry to and exit from the companys premises; the pictures submitted by the respondents
revealed that the picket was moving, not stationary. With respect to the illegal dismissal charge, the NLRC observed that
the striking employees were not given ample opportunity to explain their side after receipt of the June 23, 1995 letter.
Thus, the NLRC affirmed the Decision of LA Espiritu with respect to the payment of backwages until the promulgation of
the decision, plus separation pay at one (1) month salary per year of service in lieu of reinstatement, and 10% of the
monetary award as attorneys fees. It ruled out reinstatement because of the damages sustained by the company
brought about by the strike.

On March 14, 2002, PHIMCO filed a motion for reconsideration of the consolidated decision.

On April 26, 2002, without waiting for the result of its motion for reconsideration, PHIMCO elevated its case to
the CA through a petition for certiorari under Rule 65 of the Rules of Court.

THE CA RULING

In a Decision promulgated on February 10, 2004, the CA dismissed PHIMCOs petition for certiorari. The CA noted
that the NLRC findings, that the picket was peaceful and that PHIMCOs evidence failed to show that the picket
constituted an illegal blockade or that it obstructed the points of entry to and exit from the company premises, were
supported by substantial evidence. PHIMCO came to us through the present petition after the CA denied PHIMCOs
motion for reconsideration.

THE PETITION

The petitioner argues that the strike was illegal because the respondents committed the prohibited acts under
Article 264(e) of the Labor Code, such as blocking the ingress and egress of the company premises, threat, coercion, and
intimidation, as established by the evidence on record.

THE CASE FOR THE RESPONDENTS

 The respondents, on the other hand, submit that the issues raised in this case are factual in nature that we
cannot generally touch in a petition for review, unless compelling reasons exist; the company has not shown any such
compelling reason as the picket was peaceful and uneventful, and no human barricade blocked the company premises.

THE ISSUE

In Montoya v. Transmed Manila Corporation, we laid down the basic approach that should be followed in the
review of CA decisions in labor cases, thus:

In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for
jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review of questions of law
raised against the assailed CA decision. In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorari it ruled upon was presented to it; we have to examine the CA decision from the
prism of whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision
before it, not on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we have
to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged
before it. This is the approach that should be basic in a Rule 45 review of a CA ruling in a labor case. In question form, the
question to ask is: Did the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the
case?

In this light, the core issue in the present case is whether the CA correctly ruled that the NLRC did not act with
grave abuse of discretion in ruling that the unions strike was legal.

OUR RULING

We find the petition partly meritorious.

Requisites of a valid strike

A strike is the most powerful weapon of workers in their struggle with management in the course of setting their
terms and conditions of employment. Because it is premised on the concept of economic war between labor and
management, it is a weapon that can either breathe life to or destroy the union and its members, and one that must also
necessarily affect management and its members.

In light of these effects, the decision to declare a strike must be exercised responsibly and must always rest on
rational basis, free from emotionalism, and unswayed by the tempers and tantrums of hot heads; it must focus on
legitimate union interests. To be legitimate, a strike should not be antithetical to public welfare, and must be pursued
within legal bounds. The right to strike as a means of attaining social justice is never meant to oppress or destroy anyone,
least of all, the employer.

Since strikes affect not only the relationship between labor and management but also the general peace and
progress of the community, the law has provided limitations on the right to strike. Procedurally, for a strike to be valid, it
must comply with Article 263 of the Labor Code, which requires that: (a) a notice of strike be filed with the Department
of Labor and Employment (DOLE) 30 days before the intended date thereof, or 15 days in case of unfair labor practice; (b)
a strike vote be approved by a majority of the total union membership in the bargaining unit concerned, obtained by
secret ballot in a meeting called for that purpose; and (c) a notice be given to the DOLE of the results of the voting at
least seven days before the intended strike.

These requirements are mandatory, and the unions failure to comply renders the strike illegal. The 15 to 30-day
cooling-off period is designed to afford the parties the opportunity to amicably resolve the dispute with the assistance of
the NCMB conciliator/mediator, while the seven-day strike ban is intended to give the DOLE an opportunity to verify
whether the projected strike really carries the imprimatur of the majority of the union members. In the present case, the
respondents fully satisfied the legal procedural requirements; a strike notice was filed on March 9, 1995; a strike vote
was reached on March 16, 1995; notification of the strike vote was filed with the DOLE on March 17, 1995; and the
actual strike was launched only on April 25, 1995.

Strike may be illegal for commission of prohibited acts

Despite the validity of the purpose of a strike and compliance with the procedural requirements, a strike may still
be held illegal where the means employed are illegal. The means become illegal when they come within the prohibitions
under Article 264(e) of the Labor Code which provides:
No person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to
or egress from the employer's premises for lawful purposes, or obstruct public thoroughfares.

Based on our examination of the evidence which the LA viewed differently from the NLRC and the CA, we find
the PILA strike illegal. We intervene and rule even on the evidentiary and factual issues of this case as both the NLRC and
the CA grossly misread the evidence, leading them to inordinately incorrect conclusions, both factual and legal. While
the strike undisputably had not been marred by actual violence and patent intimidation, the picketing that respondent
PILA officers and members undertook as part of their strike activities effectively blocked the free ingress to and egress
from PHIMCOs premises, thus preventing non-striking employees and company vehicles from entering the PHIMCO
compound. In this manner, the picketers violated Article 264(e) of the Labor Code.

The Evidence

We gather from the case record the following pieces of relevant evidence adduced in the compulsory arbitration
proceedings.

For the Company

1. Pictures taken during the strike, showing that the respondents prevented free ingress to and egress from the
company premises;
2. Affidavit of PHIMCO Human Resources Manager Francis Ferdinand Cinco, stating that he was one of the
employees prevented by the strikers from entering the PHIMCO premises;
3. Affidavit of Cinco, identifying Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo Pedro, Nathaniela R.
Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto Basconcillo, and Ramon Falcis as
PILA officers;
4. Affidavit of Cinco identifying other members of PILA;
5. Folder 1, containing pictures taken during the strike identifying and showing Leonida Catalan, Renato Ramos,
Arsenio Zamora, Reynaldo Ganitano, Amelia Zamora, Angelito Dejan, Teresa Permocillo, and Francisco Dalisay as
the persons preventing Cinco and his group from entering the company premises;
6. Folder 2, with pictures taken on May 30, 1995, showing Cinco, together with non-striking PHIMCO employees,
reporting for work but being refused entry by strikers Teofilo Manalili, Nathaniela Dimaculangan, Bernando
Cuadra, Maximo Pedro, Nicanor Ilagan, Julian Tuguin, Nemesio Mamonong, Abraham Caday, Ernesto Rio,
Benjamin Juan, Sr., Ramon Macaalay, Gerardo Feliciano, Alberto Basconcillo, Rodolfo Sanidad, Mariano Rosales,
Roger Caber, Angelito de Guzman, Angelito Balosa and Philip Garces who blocked the company gate;
7. Folder 3, with pictures taken on May 30, 1995, showing the respondents denying free ingress to and egress from
the company premises;
8. Folder 4, with pictures taken during the strike, showing that non-striking employees failed to enter the company
premises as a result of the respondents refusal to let them in;
9. Affidavit of Joaquin Aguilar stating that the pictures presented by Cinco were taken during the strike;
10. Pictures taken by Aguilar during the strike, showing non-striking employees being refused entry by the
respondents;
11. Joint affidavit of Orlando Marfil and Rodolfo Digo, identifying the pictures they took during the strike, showing
that the respondents blocked ingress to and egress from the company premises; and,
12. Testimonies of PHIMCO employees Rodolfo Eva, Aguilar and Cinco, as well as those of PILA officers Maximo
Pedro and Leonida Catalan.
For the Respondents

1. Affidavit of Leonida Catalan, stating that the PILA strike complied with all the legal requirements, and the
strike/picket was conducted peacefully with no incident of any illegality;
2. Affidavit of Maximo Pedro, stating that the strike/picket was conducted peacefully; the picket was always moving
with no acts of illegality having been committed during the strike;
3. Certification of Police Station Commander Bienvenido de los Reyes that during the strike there was no report of
any untoward incident;
4. Certification of Rev. Father Erick Adeviso of Dambanang Bayan Parish Church that the strike was peaceful and
without any untoward incident;
5. Certification of Priest-In-Charge Angelito Fausto of the Philippine Independent Church in Punta, Santa Ana, that
the strike complied with all the requirements for a lawful strike, and the strikers conducted themselves in a
peaceful manner;
6. Clearance issued by Punong Barangay Mario O. dela Rosa and Barangay Secretary Pascual Gesmundo, Jr. that
the strike from April 21 to July 7, 1995 was conducted in an orderly manner with no complaints filed; and,
7. Testimonies at the compulsory arbitration proceedings.

In its resolution of December 29, 1998, the NLRC declared that the string of proofs the company presented was
overwhelmingly counterbalanced by the numerous pieces of evidence adduced by respondents x x x all depicting a
common story that respondents put up a peaceful moving picket, and did not commit any illegal acts x x x specifically
obstructing the ingress to and egress from the company premises [.]

We disagree with this finding as the purported peaceful moving picket upon which the NLRC resolution was
anchored was not an innocuous picket, contrary to what the NLRC said it was; the picket, under the evidence presented,
did effectively obstruct the entry and exit points of the company premises on various occasions.

To strike is to withhold or to stop work by the concerted action of employees as a result of an industrial or labor
dispute. The work stoppage may be accompanied by picketing by the striking employees outside of the company
compound. While a strike focuses on stoppage of work, picketing focuses on publicizing the labor dispute and its
incidents to inform the public of what is happening in the company struck against. A picket simply means to march to
and from the employers premises, usually accompanied by the display of placards and other signs making known the
facts involved in a labor dispute. It is a strike activity separate and different from the actual stoppage of work.

While the right of employees to publicize their dispute falls within the protection of freedom of expression and the
right to peaceably assemble to air grievances, these rights are by no means absolute. Protected picketing does not
extend to blocking ingress to and egress from the company premises. That the picket was moving, was peaceful and was
not attended by actual violence may not free it from taints of illegality if the picket effectively blocked entry to and exit
from the company premises.

The NLRC resolution itself noted the above testimonial evidence, all building up a scenario that the moving
picket put up by [the] respondents obstructed the ingress to and egress from the company premises, yet it ignored the
clear import of the testimonies as to the true nature of the picket. Contrary to the NLRC characterization that it was a
peaceful moving picket, it stood, in fact, as an obstruction to the companys points of ingress and egress.

Significantly, the testimonies adduced were validated by the photographs taken of the strike area, capturing the
strike in its various stages and showing how the strikers actually conducted the picket. While the picket was moving, it
was maintained so close to the company gates that it virtually constituted an obstruction, especially when the strikers
joined hands, as described by Aguilar, or were moving in circles, hand-to-shoulder, as shown by the photographs, that,
for all intents and purposes, blocked the free ingress to and egress from the company premises. In fact, on closer
examination, it could be seen that the respondents were conducting the picket right at the company gates. The
obstructive nature of the picket was aggravated by the placement of benches, with strikers standing on top, directly in
front of the open wing of the company gates, clearly obstructing the entry and exit points of the company compound.
 With a virtual human blockade and real physical obstructions (benches and makeshift structures both outside
and inside the gates), it was pure conjecture on the part of the NLRC to say that [t]he non-strikers and their vehicles were
x x x free to get in and out of the company compound undisturbed by the picket line. Notably, aside from non-strikers
who wished to report for work, company vehicles likewise could not enter and get out of the factory because of the
picket and the physical obstructions the respondents installed. The blockade went to the point of causing the build-up of
traffic in the immediate vicinity of the strike area, as shown by photographs. This, by itself, renders the picket a
prohibited activity. Pickets may not aggressively interfere with the right of peaceful ingress to and egress from the
employers shop or obstruct public thoroughfares; picketing is not peaceful where the sidewalk or entrance to a place of
business is obstructed by picketers parading around in a circle or lying on the sidewalk.

What the records reveal belies the NLRC observation that the evidence x x x tends to show that what
respondents actually did was walking or patrolling to and fro within the company vicinity and by word of mouth, banner
or placard, informing the public concerning the dispute.

The peaceful moving picket that the NLRC noted, influenced apparently by the certifications (Mayor delos Reyes,
Fr. Adeviso, Fr. Fausto and Barangay Secretary Gesmundo presented in evidence by the respondents, was peaceful only
because of the absence of violence during the strike, but the obstruction of the entry and exit points of the company
premises caused by the respondents picket was by no means a petty blocking act or an insignificant obstructive act.

As we have stated, while the picket was moving, the movement was in circles, very close to the gates, with the
strikers in a hand-to-shoulder formation without a break in their ranks, thus preventing non-striking workers and vehicles
from coming in and getting out. Supported by actual blocking benches and obstructions, what the union demonstrated
was a very persuasive and quietly intimidating strategy whose chief aim was to paralyze the operations of the company,
not solely by the work stoppage of the participating workers, but by excluding the company officials and non-striking
employees from access to and exit from the company premises. No doubt, the strike caused the company operations
considerable damage, as the NLRC itself recognized when it ruled out the reinstatement of the dismissed strikers.

Intimidation

Article 264(e) of the Labor Code tells us that picketing carried on with violence, coercion or intimidation is
unlawful. According to American jurisprudence, what constitutes unlawful intimidation depends on the totality of the
circumstances. Force threatened is the equivalent of force exercised. There may be unlawful intimidation without direct
threats or overt acts of violence. Words or acts which are calculated and intended to cause an ordinary person to fear an
injury to his person, business or property are equivalent to threats.

The manner in which the respondent union officers and members conducted the picket in the present case had
created such an intimidating atmosphere that non-striking employees and even company vehicles did not dare cross the
picket line, even with police intervention. Those who dared cross the picket line were stopped. The compulsory
arbitration hearings bear this out.

Maximo Pedro, a PILA officer, testified, on July 30, 1997, that a group of PHIMCO managers led by Cinco,
together with several monthly-paid employees, tried to enter the company premises on May 27, 1995 with police escort;
even then, the picketers did not allow them to enter. Leonida Catalan, another union officer, testified that she and the
other picketers did not give way despite the instruction of Police Major de los Reyes to the picketers to allow the group
to enter the company premises. (To be sure, police intervention and participation are, as a rule, prohibited acts in a
strike, but we note this intervention solely as indicators of how far the union and its members have gone to block ingress
to and egress from the company premises.)

Further, PHIMCO employee Rodolfo Eva testified that on May 22, 1995, a company coaster or bus attempted to
enter the PHIMCO compound but it was refused entry by the moving picket. Cinco, the company personnel manager,
also testified that on May 27, 1995, when the NLRC TRO was in force, he and other employees tried to enter the PHIMCO
compound, but they were not allowed entry; on May 29, 1995, Cinco was with the PHIMCO production manager in a
pick-up and they tried to enter the company compound but, again, they were not allowed by the strikers. Another
employee, Joaquin Aguilar, when asked how the strikers blocked the ingress of the company, replied that the strikers
hold around, joining hands, moving picket and, because of the moving picket, no employee or vehicle could come in and
go out of the premises.

The evidence adduced in the present case cannot be ignored. On balance, it supports the companys submission
that the respondent PILA officers and members committed acts during the strike prohibited under Article 264(e) of the
Labor Code. The testimonies of non-striking employees, who were prevented from gaining entry into the company
premises, and confirmed no less by two officers of the union, are on record.

The photographs of the strike scene, also on record, depict the true character of the picket; while moving, it, in
fact, constituted a human blockade, obstructing free ingress to and egress from the company premises, reinforced by
benches planted directly in front of the company gates. The photographs do not lie these photographs clearly show that
the picketers were going in circles, without any break in their ranks or closely bunched together, right in front of the
gates. Thus, company vehicles were unable to enter the company compound, and were backed up several meters into
the street leading to the company gates.

Despite all these clear pieces of evidence of illegal obstruction, the NLRC looked the other way and chose not to
see the unmistakable violations of the law on strikes by the union and its respondent officers and members. Needless to
say, while the law protects the rights of the laborer, it authorizes neither the oppression nor the destruction of the
employer. For grossly ignoring the evidence before it, the NLRC committed grave abuse of discretion; for supporting
these gross NLRC errors, the CA committed its own reversible error.

Liabilities of union officers and members

In the determination of the liabilities of the individual respondents, the applicable provision is Article 264(a) of
the Labor Code:

Art. 264. Prohibited activities. (a) x x x

xxxx

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

We explained in Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Sulpicio Lines, Inc. that the effects of
illegal strikes, outlined in Article 264 of the Labor Code, make a distinction between participating workers and union
officers. The services of an ordinary striking worker cannot be terminated for mere participation in an illegal strike; proof
must be adduced showing that he or she committed illegal acts during the strike. The services of a participating union
officer, on the other hand, may be terminated, not only when he actually commits an illegal act during a strike, but also if
he knowingly participates in an illegal strike.

In all cases, the striker must be identified. But proof beyond reasonable doubt is not required; substantial
evidence, available under the attendant circumstances, suffices to justify the imposition of the penalty of dismissal on
participating workers and union officers as above described.

In the present case, respondents Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo Pedro, Nathaniela
Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto Basconcillo, and Ramon Falcis stand to be
dismissed as participating union officers, pursuant to Article 264(a), paragraph 3, of the Labor Code. This provision
imposes the penalty of dismissal on any union officer who knowingly participates in an illegal strike. The law grants the
employer the option of declaring a union officer who participated in an illegal strike as having lost his employment.

PHIMCO was able to individually identify the participating union members thru the affidavits of PHIMCO
employees Martimer Panis and Rodrigo A. Ortiz, and Personnel Manager Francis Ferdinand Cinco, and the photographs of
Joaquin Aguilar. Identified were respondents Angelita Balosa, Danilo Banaag, Abraham Caday, Alfonso Claudio, Francisco
Dalisay, Angelito Dejan, Philip Garces, Nicanor Ilagan, Florencio Libongcogon, Nemesio Mamonong, Teofilo Manalili,
Alfredo Pearson, Mario Perea, Renato Ramos, Mariano Rosales, Pablo Sarmiento, Rodolfo Tolentino, Felipe Villareal,
Arsenio Zamora, Danilo Baltazar, Roger Caber, Reynaldo Camarin, Bernardo Cuadra, Angelito de Guzman, Gerardo
Feliciano, Alex Ibaez, Benjamin Juan, Sr., Ramon Macaalay, Gonzalo Manalili, Raul Miciano, Hilario Pea, Teresa Permocillo,
Ernesto Rio, Rodolfo Sanidad, Rafael Sta. Ana, Julian Tuguin and Amelia Zamora as the union members who actively
participated in the strike by blocking the ingress to and egress from the company premises and preventing the passage of
non-striking employees. For participating in illegally blocking ingress to and egress from company premises, these union
members stand to be dismissed for their illegal acts in the conduct of the unions strike.

PHIMCO failed to observe due process

We find, however, that PHIMCO violated the requirements of due process of the Labor Code when it dismissed
the respondents.

Under Article 277(b) f the Labor Code, the employer must send the employee, who is about to be terminated, a
written notice stating the cause/s for termination and must give the employee the opportunity to be heard and to
defend himself.

We explained in Suico v. National Labor Relations Commission, that Article 277(b), in relation to Article 264(a)
and (e) of the Labor Code recognizes the right to due process of all workers, without distinction as to the cause of their
termination, even if the cause was their supposed involvement in strike-related violence prohibited under Article 264(a)
and (e) of the Labor Code.

To meet the requirements of due process in the dismissal of an employee, an employer must furnish him or her
with two (2) written notices: (1) a written notice specifying the grounds for termination and giving the employee a
reasonable opportunity to explain his side and (2) another written notice indicating that, upon due consideration of all
circumstances, grounds have been established to justify the employer's decision to dismiss the employee.

In the present case, PHIMCO sent a letter, on June 23, 1995, to thirty-six (36) union members, generally directing
them to explain within twenty-four (24) hours why they should not be dismissed for the illegal acts they committed
during the strike; three days later, or on June 26, 1995, the thirty-six (36) union members were informed of their
dismissal from employment.

We do not find this company procedure to be sufficient compliance with the due process requirements that the law
guards zealously. It does not appear from the evidence that the union officers were specifically informed of the charges
against them and given the chance to explain and present their side. Without the specifications they had to respond to,
they were arbitrarily separated from work in total disregard of their rights to due process and security of tenure.

As to the union members, only thirty-six (36) of the thirty-seven (37) union members included in this case were notified
of the charges against them thru the letters dated June 23, 1995, but they were not given an ample opportunity to be
heard and to defend themselves; the notice of termination came on June 26, 1995, only three (3) days from the first
notice - a perfunctory and superficial attempt to comply with the notice requirement under the Labor Code. The short
interval of time between the first and second notice speaks for itself under the circumstances of this case; mere token
recognition of the due process requirements was made, indicating the companys intent to dismiss the union members
involved, without any meaningful resort to the guarantees accorded them by law.
 Under the circumstances, where evidence sufficient to justify the penalty of dismissal has been adduced but the
workers concerned were not accorded their essential due process rights, our ruling in Agabon v. NLRC finds full
application; the employer, despite the just cause for dismissal, must pay the dismissed workers nominal damages as
indemnity for the violation of the workers right to statutory due process. Prevailing jurisprudence sets the amount of
nominal damages at P30, 000.00, which same amount we find sufficient and appropriate in the present case.

WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the decision dated February 10,
2004 and the resolution dated December 12, 2005 of the Court of Appeals in CA-G.R. SP No. 70336, upholding the
rulings of the National Labor Relations Commission.
Dominador Anuncension, et. Al vs. National Labor Union, et. Al
GR No. L-26097, November 29, 1977

Petition for review on certiorari of the decision of the Court of Industrial Relations in its Case No. 49-IPA, the
dispositive portion of which reads as follows:

"IN VIEW OF THE FOREGOING, the Court concludes that Republic Act No. 3350 excluding from the coverage of Section 4
(a) (4) of the Industrial Peace Act (referring to closed-shop) any religious sects which prohibits affiliation of their
members in any labor organization is unconstitutional and declares the Collective Bargaining Agreement of August 2,
1962, valid and binding upon the parties, and for the Hacienda to discharge the 115 followers of the Iglesia who resigned
from the Union on May 8, 1964 if they do not withdraw their resignation as indicated in the preceding paragraph of this
decision.

"Meanwhile all the workers should return to work immediately upon receipt of a copy of this Order."
virtua1aw library
Separate motions for reconsideration filed by the 115 petitioners, who are agricultural workers of Hacienda Luisita,
owned and operated by respondent Tarlac Development Corporation (hereinafter referred to as Hacienda), and who are
members of the United Luisita Workers Union, an affiliate of the other respondent National Labor Union (hereinafter
referred to as Union), as well as by respondent Union, having been denied by respondent court (Judge Paredes
dissenting for lack of jurisdiction), the petitioners appealed to this Court, praying, among other things:

"c) That after due hearing, judgment be rendered setting aside the Resolution of the respondent Court dated October 24
(27), 1964 (Promulgated only on May 13, 1966), as well as the Decision dated August 15, 1964, and dismissing Case No.
49-IPA with costs against the private respondents, or should be respondent Court be found to have jurisdiction over the
case, declaring that Republic Act No. 3350 is valid and restraining the respondents from dismissing petitioners from their
employment." library

On July 11, 1964, then Executive Secretary Calixto O. Zaldivar (subsequently an Associate Justice of this Court, now
retired), acting by authority of the President of the Philippines, sent a letter to the Presiding Judge of the respondent
court, certifying the labor dispute between the management of the Hacienda and the 115 members of the United Luisita
Workers Union, an affiliate of respondent Union, based on Section 10 of Republic Act 875, otherwise known as the
Industrial Peace Act (Annex A, Petition; p. 1, rec.). Immediately upon receipt of said letter, respondent court caused the
dispute to be docketed as Case No. 49-IPA and then proceeded to hear the same.

The pertinent portions of the findings of fact of the respondent court are quoted hereunder:

"Petitioner union and the Hacienda entered into a collective bargaining agreement on August 2, 1962, which, among
others, embodies union security provisions as follows: 1aw library

SEC. 3. Except only for present members of the Iglesia ni Cristo who are not now members of the UNION, all employees
and workers within the appropriate bargaining unit who are not members of the UNION at the time of the execution of
this agreement shall have fifteen (15) days from the date of the execution of this agreement within which to apply for
membership in the UNION. The UNION agrees to accept said employees into membership, under the same terms and
conditions under which the employees and workers now members were admitted into membership.

SEC. 4. Persons who may hereafter be employed to hold positions included in the bargaining unit shall be required to
become members of the UNION within fifteen (15) days after they shall have been included within the said bargaining
unit.

SEC. 5. Employees and workers within the appropriate bargaining unit who are now members of the UNION, as well as
those who may subsequently join the UNION pursuant to Sections 3 and 4 above, shall remain members of the UNION
during the effectivity of this agreement as a condition of continued employment.
(a) The HACIENDA, upon the written request of the UNION, shall discharge any employee who shall fail to fulfill the
conditions aforesaid or who resigns or is suspended from membership in the UNION for disloyalty, violation of the
Constitution or By-Laws of the UNION, or for any valid cause, but it assumes no obligation to discharge any employee if it
has reasonable grounds for believing that membership in the UNION was not available to the employee on the same
terms and conditions generally applicable to other members (Exhibit 1-Company).

"The agreement is to take effect from July 1, 1962 to June 30, 1965, or for a period of three years.

"Prior to the execution of the collective contract of August 2, 1962, the same union security provisions appeared
verbatim in the collective bargaining contract that was in force from 1959 to 1962.

"In a letter to the union president, Rufino D. Lagman, dated May 8, 1964, a group of more than one hundred and fifty
persons representing themselves to be members of the United Luisita Workers Union (NLU), and followers of a religious
sect known as the Iglesia ni Cristo, made manifest their irrevocable resignation from the United Luisita Workers Union
(NLU), herein called the UNION for short. The letter ended with the statement that We believe our resignation is legal
and it is within the purview of the freedom of religion guaranteed by our Constitution. Hence, it can not be made a
ground for the termination of our employment nor a cause for discrimination against us (Exhibit D-Union).

"Earlier, that is, on September 1, 1963, a letter of the same tenor signed by practically the same persons, alleged
followers of Iglesia ni Cristo, whose names appear in Exhibit D-Union, was delivered personally on said date by Jeremias
Mendoza, minister of the Church, Ernesto C. Teopeco, Administrator of the Hacienda (Exhibits 5, 5-A and 5-B).
Teopeco promised Mendoza that he would bring the matter to the attention of the higher authorities of the Hacienda in
Tarlac, Tarlac. The Union never received a copy of the letter dated September 1, 1963. As the Hacienda did not take any
action or the matter treated in the letter of September 1, 1963, the group of Iglesia ni Cristo followers who signed the
letter informed the Union officially of their irrevocable resignation on May 8, 1964 as hereinabove indicated as shown by
Exhibit D-Union.

"The evidence discloses that the followers of Iglesia ni Cristo were prompted to resign from the union because of the
circular, dated April 1, 1959, from the Iglesia ni Cristo, thru its Secretary-General, Teofilo C. Ramos, enjoining all members
of the sect not to join any outside association or organization of whatever kind or nature or that if they are already
members of such association or organization that they disaffiliate themselves, otherwise they would be expelled from
the church. 1aw library

TANGGAPAN NG IGLESIA NI CRISTO

154 Riverside, San Juan, Rizal

Abril 1, 1959

SA LAHAT NG MGA KAPATID

SA IGLESIA NI CRISTO

SA KAPULUANG PILIPINAS

Buong higpit na aming ibinababala sa inyo na sinomang kapatid sa Iglesia ay huwag aanib sa anumang uri ng kapisanan o
samahang labas sa Iglesia Ni Cristo. Ang sinomang kapatid na sa kasalukuyan ay kaanib sa anumang uri ng kapisanan o
samahan, ay dapat na umalis at huwag ng kailanman uugnay sa mga ito. Ito ay salig sa utos ng Dios na tayo ay huwag
makikipamatok ng kabilang sa mga hindi sumasampalataya (II Cor. 6:14).

Si ROSENDO PAULINO, dating kaanib sa Iglesia ni Cristo, ay itinitiwalag sa Iglesia mula ngayon. Siya ay itiniwalag sa Iglesia
hindi lamang dahil sa ayaw niyang umalis sa kapisanang kaniyang kinaaniban kundi naman kaniya pang ipinagkanulo ang
Iglesia. Kaya, itinatagubilin namin sa inyo na siya ay huwag niyong kakausapin o babatiin man lamang at huwag din ninyo
siyang tatanggapin sa inyong mga tahanan (II Juan 1:10-11).

Gayon din naman, aming ibinababala sa inyo na sinomang kapatid sa Iglesia ang lumabag sa mga tagubilin ng circular
na ito ay lubusang ititiwalag sa Iglesia upang kailanman ay huwag na muling mabalik.

UMAASA kami na ang mga tagubilin sa circular na ito ay inyong tutuparing may katapatan upang manatili sa Iglesia at
sa piling ng Sugo ng Dios sa Huling Araw.

Tutulungan nawa tayo ng Dios.

Ang inyong kapatid sa

Panginoon

(Sgd.) T. RAMOS

TEOFILO C. RAMOS

(Exh. "J")

"Upon the passage by Congress of Republic Act No. 3350, the Iglesia ni Cristo, in another circular dated October 13,
1961, informed all its followers about the provisions of the said Act, as follows:chanrob1es virtual 1aw library

Nais naming ipagbigay alam sa inyo na nagkaroon ng susog ang batas ukol sa manggagawa ng pagawaan na tinatawag ng
Industrial Peace Act na ngayon ay kilala sa tawag na Republic Act Blg. 3350. Gaya ng alam na ninyo ipinagbabawal ng
ating pananampalataya na umanib ang sinomang kapatid sa alinmang unyon o samahan ng mga manggagawa. Ang ating
pananampalatayang ito ay kinilala ng panibagong batas na nagsasaad na hindi inaalis ang karapatan ng alinmang
pagawaan na makipagsundo sa alinmang unyon o samahan ng paggawa sa nasabing pagawaan, datapuwat

. . . ang nasabing kasunduan ay hindi maaaring sumaklaw sa mga kaanib ng alinmang sekta ng relihiyon na
ipinagbabawal ang pakikiugnay ng kanilang kaanib sa alinmang kapisanan ng paggawa.

Dahil dito, aming tinatagubilin sa inyo na kayo ay pumanatag sa inyong pagtatrabaho sa pagawaang inyong pinapasukan,
gumawa kayo na may kasipagan at katapatan at huwag ninyong ikabalisa na kayo ay aalisin sa trabaho dahil sa hindi
ninyo pagsama o pagsanib sa unyon o kapisanan sa pagawaan ninyong pinapasukan.

Hanggang dito na po lamang muna at umaasa kami na itoy malinaw sa inyo.

(Exhibit "A", also

marked Exhibit "2")

"Be that as it may, the Union, upon receipt of the letter of mass resignation dated May 8, 1964, sent a letter dated May
22, 1964 to Vivencio M. Pineda, representing the group of Iglesia ni Cristo followers, informing the latter that of those
whose names appear in the letter of resignation, two (2) are already dead (Dalencio Catacutan and Mariano de la Cruz),
twenty-seven (27) were not union members at the time of their resignation, eight (8) have not signed their names in the
letter of resignation, thus reducing the number of workers covered by the tender of resignation to 115, (Exhibit E). On
the same date, May 22, 1964, the Union informed the Hacienda by letter that 115 followers of Iglesia ni Cristo have
resigned from the Union as of May 8, 1964, indicating therein the names of such workers. (Exhibit 3-Company, also
marked Exhibit 3-Iglesia). Finally, on May 26, 1964, the Union, in another letter dated May 26, 1964, demanded from
the Hacienda the immediate lay-off of employment of those mentioned laborers as provided for in Article 2, Section 5(a)
of our present collective bargaining. The body of said letter is hereby quoted in full, for ready reference:chanrob1esrary
This is with respect to the irrevocable resignation from the union tendered by some 115 laborers that took effect on
May 8, 1964 whose names were transmitted to the personnel officer on May 22, 1964.

However, in justice and in fairness to them, our office exerted all efforts appealing and convincing each and every one of
them to reconsider their resignation from the union, but to no avail, except for few who reconsidered theirs as evidenced
by their attached letters.

"For this reason, the union has no alternative but to demand from the management for the immediate lay-off of
employment of those mentioned laborers as provided for in Article 2, Section 5(a) of our present collective bargaining
agreement.

Hoping for your prompt action on the above matter.

(Exhibit "2-Company")

"Sensing that their resignation from the Union might cause the termination of their employment with the Hacienda, the
followers of Iglesia ni Cristo who resigned, through their counsel, Eliseo M. Cruz, sent a letter dated May 25, 1964 to the
Hacienda (Exhibit A-Union) with the plea that Should the contractee union take any drastic step to compel the
Hacienda to dismiss those workers pursuant to your current collective bargaining agreement, it is most urgently
requested that I be informed so that I may take proper steps to protect their interest, and thereby save the Hacienda
from any lawsuit.

"As matters were coming to a head, the resigning Iglesia ni Cristo workers, through Samuel Gana and Vivencio Pineda,
assisted by their legal counsel, Eliseo M. Cruz, filed on June 1, 1964, a notice of strike against the Hacienda for alleged
mass dismissal of INC agricultural laborers in violation of Rep. Act 3350, for violation of collective bargaining contract to
favor contracting union and unlawful encouragement of union membership (Exhibit B-Union). The group did not go
on strike, but on July 7, 1964, they filed a complaint with the Court of Agrarian Relations, docketed as Case No. 1888-T-
64, alleging, among others, that they were laid off from the time they resigned en masse on May 8, 1964 until they were
recalled to work on June 3, 1964 by the Hacienda (Exhibit 1-Iglesia). The prayer for an interlocutory order was denied by
said Court in an order dated July 9, 1964 (Exhibit K).

"Meanwhile, the Union, on June 8, 1964, filed a notice of strike (Exhibit 4) against the Hacienda for violation of the
collective contract dated August 2, 1962. The Union actually staged the strike in the afternoon of July 10, 1964, and is still
going on, for failure of the Hacienda to dismiss the 115 alleged Iglesia ni Cristo members who had resigned from the
Union. The Acting Secretary of Labor intervened to effect a settlement of the dispute but no settlement could be reached
by the parties involved. Obviously the case was certified to this Court for compulsory arbitration, under the existing law"
(pp. 2-10, Decision; pp. 25-33, rollo).

One issue raised by the petitioners in this appeal by certiorari on questions of law is: since the case involved agricultural
laborers, and the petitioners themselves are engaged in agricultural pursuits, the case was not within the jurisdiction of
the Court of Industrial Relations but in that of the Court of Agrarian Relations. WE find merit in this contention.

There is no dispute that respondent Hacienda is an agricultural enterprise. No less than the respondent court arrived at
this finding in its decision under review. Respondent Union never denied such finding of fact by respondent court.
Petitioners, including members of the respondent Union, are all agricultural workers. This fact had likewise been
admitted and established. There is no showing, whether from the records of the case or from the briefs of the parties,
much less from the appealed decision, that the tasks assigned to petitioners were totally unconnected with agricultural
operations. Hence, there is complete absence of any showing that said petitioners do no agricultural work of any kind at
all (cf. Pampanga Sugar Mills v. Pasumil Workers Union, 98 Phil. 558; 52 O.G. [16] 6924). Under the circumstances, we
are constrained to hold that the conflict was not within the competence of the Court of Industrial Relations But in that of
the Court of Agrarian Relations created by Republic Act 1267 (Sec. 7). This issue has been previously considered and
decided in the case of Santos v. Court of Industrial Relations, Et Al., 113 Phil. 725, where WE said:
"The question to be determined is: considering that complainants are agricultural laborers in the legal sense can their
claim relative to an unfair labor practice committed by petitioner be filed with the Court of Industrial Relations? In other
words, can the latter court take cognizance of this claim under Republic Act No. 875 considering that the complainants
are agricultural laborers?

"We are inclined to uphold the negative view not only because an agricultural laborer does not come within the purview
of the word employee defined in Section 2(d) of Republic Act No. 875 but also because any matter that may pertain to
the relation of tenant and landlord comes under the Agricultural Tenancy Act (Republic Act No. 1199, as amended by
Republic Act No. 2263), and any controversy that may arise between them as an incident of their relationship comes
under the exclusive jurisdiction of the Court of Agrarian Relations created by Republic Act No. 1267.
x x x

"With regard to Our conclusion that the present controversy comes under the exclusive jurisdiction of the Court of
Agrarian Relations, suffice it to state, that the latter court was created for the enforcement of all laws and regulations
governing the relation of capital and labor on all agricultural lands under any system of cultivation (Section 1, Republic
Act 1267, and amended by Republic Act 1409), and was given exclusive jurisdiction over the entire Philippines to
consider, investigate, decide, and settle all questions, matters, controversies, or disputes involving all those relationships,
established by law which determine the varying rights of persons in the cultivation or and use of agricultural land where
one of the parties works the land (Section 7, ibid.). Complainants, therefore, should have lodged their complaint with
the agrarian court for the redress of the grievance considering this broad power given to it by law even if nothing is said
therein relative to unfair labor practice. The subsequent enactment of Republic Act No. 2263 which grants to agricultural
workers the right to file an action of this nature merely serves to confirm this jurisdiction of the agrarian court. The
conclusion is, therefore, inescapable that the industrial court has improperly assumed jurisdiction over the present case
for it comes under the exclusive jurisdiction of the agrarian court" (Emphasis supplied; cited in Hacienda Esperanza and
Hacienda Cammisana v. Court of Ind. Relations and Nat. Sugar Workers Union, 116 Phil. 951, 954-955).

Another issue raised by petitioners is that the respondent court improperly assumed the power and authority to declare,
as it did declare, Republic Act 3350 unconstitutional.

The Act in question is an amendment, consisting of the underlined phrase added to paragraph (4), subsection (a) of
section four of the Industrial Peace Act, which provides:

"SEC. 4. UNFAIR LABOR PRACTICE.

(a) It shall be unfair labor practice for an employer:chanrob1es virtual 1aw library
x x x

"(4) To discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or
discourage membership in any labor organization: Provided, That nothing in this act or in any other act or statute of the
Republic of the Philippines shall preclude an employer from making an agreement with a labor organization to require as
a condition of employment membership therein, if such labor organization is the representative of the employees as
provided in section twelve, but such agreement shall not cover members of any religious sects which prohibit affiliation
of their members in any such labor organization."
In the decision appealed from, the respondent court maintains that the Act is unconstitutional because it suffers from
constitutional infirmities such as the following:

(a) It abridges the freedom of workers to form associations for purposes not contrary to law;

(b) It impairs the obligation of contracts;

(c) It discriminates in favor of the religious sect known as Iglesia ni Cristo in violation of the constitutional provision
prohibiting legislation for the support of any religious sect; and
(d) It denies to the workers their constitutional rights to equal protection of the laws.

Although, as pointed out earlier, it is the Court of Agrarian Relations, and not respondent court, that had exclusive
jurisdiction over the subject matter and therefore it becomes unnecessary to resolve the remaining issue of
constitutionality of Republic Act 3350, nevertheless, in view of the provocative nature of the arguments of respondent
court in support of its stand on unconstitutionality, it behooves US to resolve said issue once more.

This issue had twice been considered and decided by this Court: first, in the case of Benjamin Victoriano v. Elizalde Rope
Workers Union, Et. Al. (G.R. No. L-25246, September 12, 1974); and again in the case of Basa v. Federacion Obrera de la
Industria Tabaquera y Otros Trabajadores de Filipinas (FOITAF) [L-27113, November 19, 1974; 61 SCRA 93, 102-113]. In
these two cases, WE declared the constitutionality of Republic Act 3350. WE have noted, however, that the grounds
relied upon and the arguments of the respondent court in support thereof, imputing to Republic Act 3350 certain
constitutional infirmities, are similar, if not wholly identical, to those asserted by appellants in the two cases aforecited.
Hence, WE can do no better than reiterate and reproduce hereunder the pertinent portions of what WE said in the
Victoriano case, which were reproduced for the first time in the Basa case, as follows:jgc:chanrobles.com.ph

"Both the Constitution and Republic Act No. 875 recognized freedom of association. Section 1(6) of Article III of the
Constitution of 1935, as well as Section 7 of Article IV of the Constitution of 1973, provide that the right to form
associations or societies for purposes not contrary to law shall not be abridge. Section 3 of Republic Act No. 875 provides
that 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 and to engage in concerted activities for the purpose of collective
bargaining and other mutual aid or protection. What the Constitution and the Industrial Peace Act recognize and
guarantee is the right to form or join associations. Notwithstanding the different theories propounded by the different
schools of jurisprudence regarding the nature and contents of a right, it can be safely said that whatever theory one
subscribes to, a right comprehends at least two broad notions, namely; first, liberty or freedom, i.e., the absence of legal
restraint, whereby an employee may, as he pleases, join or refrain from joining an association. It is, therefore, the
employee who should decide for himself whether he should join or not an association; and should he choose to join, he
himself make up his mind as to which association he would join; and even after he has joined, he still retains the liberty
and the power to leave and cancel his membership with said organization at any time. It is clear, therefore, that the right
to join a union includes the right to abstain from joining any union. Inasmuch as what both the Constitution and the
Industrial Peace Act have recognized, and guaranteed to the employee, is the right to join associations of his choice, it
would be absurd to say that the law also imposes, in the same breath, upon the employee the duty to join associations.
The law does not enjoin an employee to sign up with any association.

"The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however,
limited. The legal protection, granted to such right to refrain from joining is withdrawn by operation of law, where a labor
union and an employer have agreed on a closed shop, by virtue of the collective bargaining unit, and the employees
must continue to be members of the union for the duration of the contract in order to keep their jobs. Thus Section 4 [a]
(4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350, provides that although it would be an
unfair labor practice for an employer to discriminate in regard to hire or tenure of employment or any term or condition
of employment to encourage or discourage membership in any labor organization the employer is, however, not
precluded "from making an agreement with a labor organization to require as a condition of employment membership
therein, if such labor organization is the representative of the employees. By virtue, therefore, of a closed shop
agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs, wishes to be
employed or to keep his employment, he must become a member of the collective bargaining union. Hence, the right of
said employee not to join the labor union is curtailed and withdrawn.

"To that all-embracing coverage of the closed shop arrangement, Republic Act No. 3350 introduced an exception, when it
added to Section 4 [a] (4) of the Industrial Peace Act the following proviso: but such agreement shall not cover members
of any religious sects which prohibit affiliation of their members in any such labor organization. Republic Act No. 3350
merely excludes ipso jure from the application and coverage of the closed shop agreement the employees belonging to
any religious sects which prohibit affiliation of their members with any labor organization. What the exception provides,
therefore, is that members of said religious sects cannot be compelled or coerced to join labor unions even when said
unions have closed shop agreements with the employers; that in spite of any closed shop agreement, members of said
religious sects cannot be refused employment or dismissed from their jobs on the sole ground that they are not
members of the collective bargaining union. It is clear, therefore, that the assailed Act, far from infringing the
constitutional provision on freedom of association, upholds and reinforces it. It does not prohibit the members of said
religious sects from affiliating with labor unions. It still leaves to said members the liberty and the power to affiliate, or
not to affiliate, with labor unions. If, notwithstanding their religious beliefs, the members of said religious sects prefer to
sign up with the labor union, they can do so. If in deference and fealty to their religious faith, they refuse to sign up, they
can do so; the law does not coerce them to join; neither does the law prohibit them from joining; and neither may the
employer or labor union compel them to join. Republic Act No. 3350, therefore, does not violate the constitutional
provision on freedom of association.

"2. Appellant Union also contends that the Act is unconstitutional for impairing the obligation of its contract, specifically,
the union security clause embodied in its Collective Bargaining Agreement with the Company, by virtue of which
membership in the union was required as a condition for employment for all permanent employees workers. This
agreement was already in existence at the time Republic Act No. 3350 was enacted on June 18, 1961, and it cannot,
therefore, be deemed to have been incorporated into the agreement. But by reason of this amendment, appellee, as
well as others similarly situated, could no longer be dismissed from his job even if he should cease to be a member, or
disaffiliate from the Union, and the Company could continue employing him notwithstanding his disaffiliation from the
Union. The Act, therefore, introduced a change into the express terms of the union security clause; the Company was
partly absolved by law from the contractual obligation it had with the Union of employing only Union members in
permanent positions. It cannot be denied, therefore, that there was indeed an impairment of said union security clause.

"It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and
unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the details. The
prohibition is not to be read with literal exactness like a mathematical formula, for it prohibits unreasonable impairment
only. In spite of the constitutional prohibition, the State continues to possess authority to safeguard the vital interests of
its people. Legislation appropriate to safeguard said interest may modify or abrogate contracts already in effect. For not
only are existing laws read into contracts in order to fix the obligations as between the parties, but the reservation of
essential attributes of sovereign power is also read into contracts as a postulate of the legal order. All contracts made
with reference to any matter that is subject to regulation under the police power must be understood as made in
reference to the possible exercise of that power. Otherwise, important and valuable reforms may be precluded by the
simple device of entering into contracts for the purpose of doing that which otherwise may be prohibited. The policy of
protecting contracts against impairment presupposes the maintenance of a government by virtue of which contractual
relations are worthwhile a government which retains adequate authority to secure the peace and good order of
society. The contract clause of the Constitution must, therefore, be not only in harmony with, but also in subordination
to, in appropriate instances, the reserved power of the state to safeguard the vital interests of the people. It follows that
not all legislations, which have the effect of impairing a contract are obnoxious to the constitutional prohibition as to
impairment, and a statute passed in the legitimate exercise of police power, although it incidentally destroys existing
contract rights, must be upheld by the courts. This has special application to contracts regulating relations between
capital and labor which are not merely contractual, and said labor contracts, for being impressed with public interest,
must yield to the common good.
x x x

"In order to determine whether legislation unconstitutionally impairs contract obligations, no unchanging yardstick,
applicable at all times and under all circumstances, by which the validity of each statute may be measured or
determined, has been fashioned, but every case must be determined upon its own circumstances. Legislation impairing
the obligation of contracts can be sustained when it is enacted for the promotion of the general good of the people, and
when the means adopted to secure that end are reasonable. Both the end sought and the means adopted must be
legitimate, i.e., within the scope of the reserved power of the state construed in harmony with the constitutional
limitation of that power.

"What then was the purpose sought to be achieved by Republic Act No. 3350? Its purpose was to insure freedom of
belief and religion, and to promote the general welfare by preventing discrimination against those members of religious
sects which prohibit their members from joining labor unions, confirming thereby their natural, statutory and
constitutional right to work, the fruits of which work are usually the only means whereby they can maintain their own
life and the life of their dependents. It cannot be gainsaid that said purpose is legitimate.

"The questioned Act also provides protection to members of said religious sects against two aggregates of group strength
from which the individual needs protection. The individual employee, at various times in his working life, is confronted
by two aggregates of power - collective labor, directed by a union, and collective capital, directed by management. The
union, an institution developed to organize labor into a collective force and thus protect the individual employee from
the power of collective capital, is paradoxically, both champion of employee rights, and a new source of their frustration.
Moreover, when the Union interacts with management, it produces yet a third aggregate of group strength from which
the individual also needs protection the collective bargaining relationship.

"It may not be amiss to point out here that the free exercise of religious profession or belief is superior to contract rights.
In case of conflict, the latter must, therefore, yield to the former. The Supreme Court of the United States has also
declared on several occasions that the rights in the First Amendment, which include freedom of religion, enjoy a
preferred position in the constitutional system. Religious freedom, although not unlimited, is a fundamental personal
right and liberty, and has a preferred position in the hierarchy of values. Contractual rights, therefore, must yield to
freedom of religion. It is only where unavoidably necessary to prevent an immediate and grave danger to the security
and welfare of the community that infringement of religious freedom may be justified, and only to the smallest extent
necessary to avoid the danger.

"3. In further support of its contention that Republic Act No. 3350 is unconstitutional, appellant Union averred that said
Act discriminates in favor of members of said religious sects in violation of Section I (7) of Article III of the 1935
Constitution, and which is now Section 8 of Article IV of the 1973 Constitution, which provides:chanrob1es virtual 1aw
library
No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free
exercise and enjoyment of religious profession and worship, without discrimination and preference, shall forever be
allowed. No religious test shall be required for the exercise of civil or political rights.

"The constitutional provision not only prohibits legislation for the support of any religious tenets or the modes of
worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the practice of any form of
worship but also assures the free exercise of ones chosen form of religion within the limits of utmost amplitude. It has
been said that the religion clauses of the Constitution are all designed to protect the broadest possible liberty of
conscience, to allow each man to believe as his conscience directs, to profess his beliefs, and to live as he believes he
ought to live, consistent with the liberty of others and with the common good. Any legislation whose effect or purpose is
to impede the observance of one or all religions, or to discriminate invidiously between the religions, is invalid, even
though the burden may be characterized as being only indirect. But if the state regulates conduct by enacting, within its
power, a general law which has for its purpose and effect to advance the states secular goals, the statute is valid despite
its indirect burden on religious observance, unless the state can accomplish its purpose without imposing such burden.

"In Aglipay v. Ruiz, this Court had occasion to state that the government should not be precluded from pursuing valid
objectives secular in character even if the incidental result would be favorable to a religion or sect. It has likewise been
held that the statute, in order to withstand the strictures of constitutional prohibition, must have a secular legislative
purpose and a primary effect that neither advances nor inhibits religion. Assessed by these criteria, Republic Act No.
3350 cannot be said to violate the constitutional inhibition of the no-establishment (of religion) clause of the
Constitution.

"The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not spiritual or religious or holy and eternal. It
was intended to serve the secular purpose of advancing the constitutional right to the free exercise of religion, by
averting that certain persons be refused work, or be dismissed from work, or be dispossessed of their right to work and
of being impeded to pursue a modest means of livelihood, by reason of union security agreements. To help its citizens to
find gainful employment whereby they can make a living to support themselves and their families is a valid objective of
the state. In fact, the state is enjoined, in the 1935 Constitution, to afford protection to labor, and regulate the relations
between labor and capital and industry. More so now in the 1973 Constitution where it is mandated that the State shall
afford protection to labor, promote full employment and security in employment, ensure equal work opportunities
regardless of sex, race or creed and regulate the relation between workers and employers.

The primary effects of the exemption from closed shop agreements in favor of members of religious sects that prohibit
their members from affiliating with a labor organization, is the protection of said employees against the aggregate force
of the collective bargaining agreement, and relieving certain citizens of a burden on their religious beliefs; and by
eliminating to a certain extent economic insecurity due to unemployment, which is a serious menace to the health,
morals, and welfare of the people of the State, the Act also promotes the well-being of society. It is our view that the
exemption from the effects of closed shop agreement does not directly advance, or diminish, the interests of any
particular religion. Although the exemption may benefit those who are members of religious sects that prohibit their
members from joining labor unions, the benefit upon the religious sects is merely incidental and indirect. The
establishment clause (of religion) does not ban regulation on conduct whose reason or effect merely happens to
coincide or harmonize with the tenets of some or all religions. The free exercise clause of the Constitution has been
interpreted to required that religious exercise be preferentially aided.

"We believe that in enacting Republic Act No. 3350, Congress acted consistently with the spirit of the constitutional
provision. It acted merely to relieve the exercise of religion, by certain persons, of a burden that is imposed by union
security agreements. It was Congress itself that imposed that burden when it enacted the Industrial Peace Act (Republic
Act 875), and, certainly Congress, if it so deems advisable, could take away the same burden. It is certain that not every
conscience can be accommodated by all the laws of the land; but when general laws conflict with scruples of conscience,
exemptions ought to be granted unless some compelling state interest intervenes. In the instant case, We see no such
compelling state interest to withhold the exemption.

"Appellant bewails that while Republic Act No. 3350 protects members of certain religious sects, it leaves no right to, and
is silent as to the protection of, labor organizations. The purpose of Republic Act No. 3350 was not to grant rights to labor
unions. The rights of labor unions are amply provided for in Republic Act No. 3350 was not to grant rights to labor union.
The rights of labor union are amply provided for in Republic Act No. 875 and the new Labor Code. As to the lamented
silence of the Act regarding the rights and protection of labor unions, suffice it to say, first, that the validity of a statute is
determined by its provisions, not by its silence; and, second, the fact that the law may work hardship does not render it
unconstitutional.

"It would not be amiss to state, regarding this matter, that to compel persons to join and remain members of a union to
keep their jobs in violation of their religious scruples, would hurt, rather than help, labor unions, Congress has seen it fit
to exempt religious objectors lest their resistance spread to other workers, for religious objections have contagious
potentialities more than political and philosophic objections.

"Furthermore, let it be noted that coerced unity and loyalty even to the country, and a fortiori to a labor union
assuming that such unity and loyalty can be attained through coercion is not a goal that is constitutionally obtainable
at the expense of religious liberty. A desirable end cannot be promoted by prohibited means.
x x x

"5. Appellant avers as its fifth ground that Republic Act No. 3350 is a discriminatory legislation, inasmuch as it grants to
the members of certain religious sects undue advantage over other workers, thus violating Section 1 of Article Ill of the
1935 Constitution which forbids the denial to any person of the equal protection of the laws.

"The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens
of the State. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that
every man, woman and child should be affected alike by a statute. Equality of operation of statutes does not mean
indiscriminate operation on persons merely as such, but on persons according to the circumstances surrounding them. It
guarantees equality, not identity of rights. The Constitution does not require that things which are different in fact be
treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that
are different. It does not prohibit legislation which is limited either in the object to which it is directed or by the territory
within which it is to operate.

"The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other
departments of knowledge or practice, is the grouping of things in speculation or practice because they agree with one
another in certain particulars. A law is not invalid because of simple inequality. The very idea of classification is that of
inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of
constitutionality. All that is required of a valid classification is that it he reasonable, which means that the classification
should be based on substantial distinctions which make for real differences that it must not be limited to existing
conditions only; and that it must apply equally to each member of the class. This Court has held that the standard is
satisfied if the classification or distinction is based on a reasonable foundation or rational basis and is not palpably
arbitrary.

"In the exercise of its power to make classifications for the purpose of enacting laws over matters within its jurisdiction,
the state is recognized as enjoying a wide range of discretion. It is not necessary that the classification be based on
scientific or marked differences of things or in their relation. Neither is it necessary that the classification be made with
mathematical nicety. Hence legislative classification may in many cases properly rest on narrow distinctions, for the equal
protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and legislation is
addressed to evils as they may appear.

"We believe that Republic Act No. 3350 satisfies the aforementioned requirements. The act classifies employees and
workers, as to the effect and coverage of union shop security agreements, into those who by reason of their religious
beliefs and convictions cannot sign up with a labor union, and those whose religion does not prohibit membership in
labor unions. The classification rests on real or substantial, not merely imaginary or whimsical, distinctions. There is such
real distinction in the beliefs, feelings and sentiments of employees. Employees do not believe in the same religious faith
and different religions differ in their dogmas and canons. Religious beliefs, manifestations and practices, though they are
found in all place, and in all times, take so may varied forms as to be almost beyond imagination. There are diverse
manners in which beliefs, equally paramount in the lives of their possessor, may be articulated. Today the country is far
more heterogeneous in religion than before, differences in religion do exist, and these differences are important and
should not be ignored.

"Even from the psychological point of view, the classification is based on real and important differences. Religious beliefs
are not mere beliefs, mere ideas existing only in the mind, for they carry with them practical consequences and are the
motives of certain rules of human conduct and the justification of certain acts. Religious sentiment makes a man view
things and events in their relation to his God. It gives to human life its distinctive characters, its tone, its happiness, or
unhappiness. Its enjoyment or irksomeness. Usually, a strong and passionate desire is involved in a religious belief. To
certain persons, no single factor of their experience is more important to them than their religion, or their not having any
religion. Because of differences in religious belief and sentiments, a very poor person may consider himself better than
the rich, and the man who even lacks the necessities of life may be more cheerful than the one who has all possible
luxuries. Due to their religious beliefs people, like the martyrs, became resigned to the inevitable and accepted cheerfully
even the most painful and excruciating pains. Because of differences in religious beliefs, the world has witnessed turmoil,
civil strife, persecution, hatred, bloodshed and war, generated to a large extent by members of sects who were intolerant
of other religious beliefs. The classification, introduced by Republic Act No. 3350, therefore, rests on substantial
distinctions.

"The classification introduced by said Act is also germane to its purpose. The purpose of the law is precisely to avoid
those who cannot, because of their religious belief, join labor unions, from being deprived of their right to work and from
being dismissed from their work because of union shop security agreements.
x x x

"As comprehensively observed by Justice Fernando in his concurring opinion in that case:

"3. There is, however, the question of whether such an exception possess an implication that lessens the effectiveness of
state efforts to protect labor, likewise, as noted, constitutionally ordained. Such a view, on the surface, may not be
lacking in plausibility, but upon closer analysis, it cannot stand scrutiny. Though must be given to the freedom of
association, likewise an aspects of intellectual liberty. For the late Professor Howe, a constitutionalist and in his lifetime
the biographer of the great Holmes, it even partakes of the political theory of pluralistic sovereignty. So great is the
respect for the autonomy accorded voluntary societies. Such a right implies at the very least that one can determine for
himself whether or not he should join or refrain from joining a labor organization, an institutional device for promoting
the welfare of the working man. A closed shop, on the other hand, is inherently coercive. That is why, as is unmistakably
reflected in our decisions, the latest of which is Guijarno v. Court of Industrial Relations, it is far from being a favorite of
the law. For a statutory provision then to further curtain its operation, is precisely to follow the dictates of sound public
policy."

In resume, WE come to the inescapable conclusion that the petitioners cannot be summarily dismissed from their
employment in the Hacienda as a result of their resignation from the respondent Union, notwithstanding the existence
of a union shop security clause in the Collective Bargaining Agreement of August 2, 1962, since Republic Act 3350, which
is constitutional, exempts them from joining any labor organization, when such is contrary to their religious beliefs and
convictions.

WHEREFORE, THE DECISION OF THE COURT OF INDUSTRIAL RELATIONS HEREIN APPEALED FROM IS HEREBY VACATED
AND SET ASIDE, AND THE CASE ORDERED DISMISSED. WITH COSTS AGAINST PRIVATE RESPONDENTS.

MAYNILAD Water Supervisors Association, represented by Roberta Estino vs. MAYNILAD Water Services, Inc.
GR. No. 198935, November 27, 2013
 For resolution is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse, annul
and set aside the Amended Decision and Resolution issued by the Court of Appeals (CA) in CA-G.R. S.P. No. 101911,
specifically the (a) Amended Decision dated 31 January 2011 which reversed its earlier Decision dated 31 May 2010 and
(b) Resolution dated 12 September 2011 which denied petitioner s Motion for Reconsideration.
Culled from the records are the following antecedent facts:
Petitioner Maynilad Water Supervisors Association (MWSA) is an association composed of former supervisory
employees of Metropolitan Waterworks and Sewerage System (MWSS). These employees claim that during their
employment with MWSS, they were receiving a monthly cost of living allowance (COLA) equivalent to 40% of their basic
pay. The payment of these allowances and other additional compensation, including the COLA were, however,
discontinued without qualification effective 1 November 1989 when the Department of Budget and Management (DBM)
issued Corporate Compensation Circular No. 10 (CCC No. 10). In 1997, MWSS was privatized and part of it, MWSS West,
was acquired by Maynilad Water Services, Inc. (Maynilad). Some of the employees of MWSS, which included members of
MWSA, were absorbed by Maynilad subject to the terms and conditions of a Concession Agreement, a portion of which
reads:
Article 6.1.1 (ii): One month prior to the Commencement Date, the Concessionaire shall make an offer to employ
each Concessionaire Employee, subject to a probationary period of six months following the Commencement Date, at a
salary or pay scale and with benefits at least equal to those enjoyed by such Employee on the date of his or her
separation from MWSS. x x x

Article 6.1.3. Non-Diminution of Benefits

The Concessionaire shall grant to all Concessionaire Employees employee benefits no less favorable than those
granted to such employees by the MWSS at the time of their separation from MWSS, particularly those set forth in
Exhibit F and the following:
xxxx
The payment of COLA was not among those listed as benefits in Exhibit "F."

In 1998, the Supreme Court promulgated a Decision declaring DBM CCC No.10 ineffective for failure to comply
with the publication requirement. Consequently, MWSS partially released the COLA payments for its employees,
including members of MWSA, covering the years 1989 to 1997, and up to year 1999 for its retained employees.
In 2002, MWSA filed a complaint before the Labor Arbiter praying for the payment of their COLA from the year 1997, the
time its members were absorbed by Maynilad, up to the present. MWSA argued that since DBM CCC No. 10 was
rendered ineffective, the COLA should be paid as part of the benefits enjoyed by their members at the time of their
separation from MWSS, and which should form part of their salaries and benefits with Maynilad.
In a decision dated 10 November 2006, the Labor Arbiter granted MWSAs claim and directed Maynilad to pay the COLA
of the supervisors retroactive to the date when they were hired in 1997, with legal interest from the date of
promulgation of the decision. It also directed Maynilad to take necessary measures to ensure that the benefit is
incorporated in the employees monthly compensation.
On 11 December 2006, Maynilad appealed the decision before the National Labor Relations Commission (NLRC) and filed
an Urgent Manifestation and Motion to Reduce Bond.
The NLRC granted Maynilads motion and reversed on appeal the decision of the Labor Arbiter. On 28 September 2007,
MWSA filed a motion for reconsideration but this was denied by the NLRC in its 23 October 2007 resolution.
Aggrieved, MWSA filed a petition for certiorari with the CA on 11 January 2008.

In a Decision dated 31 May 2010, the CA Ninth Division annulled and set aside the decision of the NLRC. It thus
reinstated the decision of the Labor Arbiter. Maynilad filed a motion for reconsideration of the 31 May 2010 CA Decision.
On 31 January 2011, the CA Ninth Division reconsidered its earlier Decision. The decretal portion of the amended
decision reads:
WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED. Consequently, the Courts 31
May 2010 Decision is REVERSED and SET ASIDE, and the 07 September 2007 Decision and 23 October 2007 Resolution of
the NLRC are AFFIRMED, and are thus REINSTATED.
MWSA filed a Motion for Reconsideration of the amended decision. Pending resolution of the Motion for
Reconsideration, MWSA moved for the inhibition of the members of the Ninth Division of the CA. The members of the
division recused from the case in a Resolution dated 3 June 2011. Thereafter, the Second Division of the CA, to which the
case was raffled, issued a Resolution9 on 12 September 2011 denying MWSAs Motion for Reconsideration.
Hence, this Petition for Review on Certiorari under Rule 45 of the Rules of Court.

ISSUES:
Whether the CA erred in not holding that the MWSA members are entitled to COLA under the Concession
Agreement.
Whether the CA erred in not finding grave abuse of discretion on the part of NLRC when the latter granted
Maynilads appeal despite insufficiency of the appeal bond.

OUR RULING
Simply stated, the main issue in this case is whether Maynilad bound itself under the Concession Agreement to
pay the COLA of the employees it absorbed from MWSS. A careful review of the Concession Agreement led us to
conclude that both MWSS and Maynilad never intended to include COLA as one of the benefits to be granted to the
absorbed employees.
The benefits agreed upon by the parties are stated in Exhibit "F" of the Concession Agreement, to wit:
Existing MWSS Fringe Benefits
A. ALLOWANCES
PERA - P500.00 Salary Grade 1 to 23 except those with RATA
ACA P500.00 Salary Grade 1 to 25
RATA- 40% of basic Supervisory Level, Section Chiefs and up or equivalent ranks. Technical and Executive
Assistants
Medical 2,500/year
Rice 500/month
Uniform 2,000/year
Meal 25.00/day (for medical personnel P30.00/day)
Longevity 50.00/year of service/month
Children 30.00/child/month, maximum four (4) children below 21 years old
Hazard 50.00/month
B. BONUSES
Year-End Financial Assistance One (1) month Gross pay (Basic Salary plus PERA, ACA, rice, meal, longevity,
Children and RATA
Mid-Year One (1) month Gross Pay Christmas Bonus and Cash Gift One (1) month Basic salary plus P1,000
cash gift
Anniversary (Bigay-pala) 4,000.00 or 50% of basic, whichever is greater
Productivity as of December 1995 Amount equivalent to P5,000 or 60% of gross pay, exclusive of RATA,
whichever is higher
C. PREMIUMS
Graveyard 50% (12MN 6:00 AM)
Nightwork 25% (6PM 6AM)
Holiday 125%
Sunday 150%
Overtime 125%
Distress 25% of basic pay (For Sewerage Department only)
D. PAID LEAVES
Vacation 15 days/year
Sick 15 days/year
Maternity 60 calendar days
Paternity 7 working days
Emergency Leave - 3 days/year
(Birthday/Funeral/Mourning/Graduation/Enrollment/Wedding/
Anniversary/Hospitalization/Accident/Relocation)
 E. STUDY LEAVE
Study now pay later scheme
Grant (with contract to serve MWSS)

It is clear from the aforesaid enumeration that COLA is not among the benefits to be received by the absorbed
employees. Contrary to the contention of MWSA, the declaration by the Court of the ineffectiveness of DBM CCC No. 10
due to its non-publication in the Official Gazette or in a newspaper of general circulation in the country, did not give rise
to the employees right to demand payment of the subject benefit from Maynilad.

As far as their employment relationship with Maynilad is concerned, the same is not affected by the De Jesus
ruling because it is governed by a separate compensation package provided for under the Concession Agreement. It
would be erroneous to presume that had the COLA been received during the time of the execution of the contract, the
benefit would have been included in Exhibit "F." First of all, we note that the Courts ruling in the De Jesus case applies
only to government-owned and controlled corporations and not to private entities. Secondly, the parties to the
Concession Agreement could not have thought of including the COLA in Exhibit "F" because as early as 1989, the
government already resolved to remove the COLA, among others, from the list of allowances being received by
government employees. Hence, the enactment of Republic Act R.A. No. 6758 or the Compensation and Position
Classification Act of 1989 which integrated the COLA into the standardized salary rate. Section 12 thereof provides:

Consolidation of Allowances and Compensation. All allowances, except for representation and transportation
allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government
vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other
additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in
the standardized salary rates herein prescribed. x x x

From the aforesaid provision, we note that all allowances were deemed integrated into the standardized salary rates
except:
1. representation and transportation allowances;
2. clothing and laundry allowances;
3. subsistence allowances of marine officers and crew on board government vessels;
4. subsistence allowances of hospital personnel;
5. hazard pay;
6. allowances of foreign service personnel stationed abroad; and
7. such other additional compensation not otherwise specified in Section 12 as may be determined by the DBM.

In Gutierrez v. DBM, which is a consolidated case involving over 20 government-owned and controlled
corporations, the Court found proper the inclusion of COLA in the standardized salary rates. It settled that COLA, not
being an enumerated exclusion, was deemed already incorporated in the standardized salary rates of government
employees under the general rule of integration. In explaining its inclusion in the standardized salary rates, the Court
cited its ruling in National Tobacco Administration v. COA, in that the enumerated fringe benefits in items (1) to (6) have
one thing in common they belong to one category of privilege called allowances which are usually granted to officials
and employees of the government to defray or reimburse the expenses incurred in the performance of their official
functions. Consequently, if these allowances are consolidated with the standardized salary rates, then the government
official or employee will be compelled to spend his personal funds in attending to his duties. On the other hand, item (7)
is a "catch-all proviso" for benefits in the nature of allowances similar to those enumerated.

Clearly, COLA is not in the nature of an allowance intended to reimburse expenses incurred by officials and
employees of the government in the performance of their official functions. It is not payment in consideration of the
fulfillment of official duty. As defined, cost of living refers to "the level of prices relating to a range of everyday items" or
"the cost of purchasing those goods and services which are included in an accepted standard level of consumption."
Based on this premise, COLA is a benefit intended to cover increases in the cost of living. Thus, it is and should be
integrated into the standardized salary rates.
 From the aforesaid discussion, it is evident therefore, that at the time the MWSS employees were absorbed by
Maynilad in 1997, the COLA was already part and parcel of their monthly salary. The non-publication of DBM CCC No. 10
in the Official Gazette or newspaper of general circulation did not nullify the integration of COLA into the standardized
salary rates upon the effectivity of R.A. No. 6758. As held by this Court in Phil. International Trading Corp. v. COA, the
validity of R.A. No. 6758 should not be made to depend on the validity of its implementing rules. To grant COLA to herein
petitioners now would create an absurd situation wherein they would be receiving an additional COLA in the amount
equivalent to 40% of their basic salary even if the Court has already ruled that the COLA is already integrated in the
employees basic salary. Such conclusion would give the absorbed employees far greater rights than their former co-
employees or other government employees from whom COLA was eventually disallowed.

The ruling of the Labor Arbiter which MWSA insists on is also erroneous in that it seeks to have the COLA
incorporated in the monthly compensation to be received by the absorbed employees. It failed to consider that the
employment contracts of the MWSA members with MWSS were terminated prior to their employment with MAYNILAD.
Although they may have continued performing the same function, their employment is already covered by an entirely
new employment contract.

This Court has ruled that unless expressly assumed, labor contracts such as employment contracts and collective
bargaining agreements are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus
binding only between the parties. In the instant case, the only commitment of Maynilad under the Concession
Agreement it entered with MWSS was to provide the absorbed employees with a compensation package "no less
favorable than those granted to [them] by the MWSS at the time of their separation from MWSS, particularly those set
forth in Exhibit F x x x." It is undisputed that Maynilad complied with such commitment. It cannot, however, be
compelled to assume the payment of an allowance which was not agreed upon. Such would not only be unreasonable
but also unfair for Maynilad. MWSS and Maynilad could not have presumed that the COLA was part of the agreement
when it was no longer being received by the employees at the time of the execution of the contract, which is the
reckoning point of their new employment.

In Norton Resources and Development Corporation v. All Asia Bank Corporation, this Court ruled that the
agreement or contract between the parties is the formal expression of the parties rights, duties and obligations. It is the
best evidence of the intention of the parties. Thus, when the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be no evidence of such terms other than the contents
of the written agreement between the parties and their successors in interest. Time and again, we have stressed the rule
that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as it is not
contrary to law, morals, good customs or public policy. Otherwise, courts would be interfering with the freedom of
contract of the parties. Simply put, courts cannot stipulate for the parties or amend the latters agreement, for to do so
would be to alter the real intention of the contracting parties when the contrary function of courts is to give force and
effect to the intention of the parties.

In fine, contrary to the allegation of MWSA, there is no ambiguity in the Concession Agreement. 1wphi1 Thus,
there is nothing to be construed.

Anent the issue of the insufficiency of the appeal bond posted by Maynilad, we agree with the NLRC that there
was merit in the arguments forwarded in support of the prayer for the reduction of the appeal bond. Maynilad sought
the reduction of the appeal bond to ten percent (10%) for the following reasons: a) that it had filed a Petition for
Rehabilitation before the Regional Trial Court of Quezon City; and b) that as a result thereof, the Rehabilitation Court
issued a Stay Order prohibiting it from selling, encumbering, transferring or disposing in any manner any of its properties
making it impossible for it to fully comply with the appeal bond requirement. Our ruling in Garcia, et al. v. KJ Commercial
that the requirement on appeals may be relaxed when there is substantial compliance with the Rules of Procedure of the
NLRC or when the appellant shows willingness to post a partial bond. Here, we note that Maynilad s appeal was
accompanied by an appeal bond in the amount of Twenty Five Million Pesos (P25, 000,000.00) with an Urgent
Manifestation and Motion to Reduce Bond on the ground that the labor arbiter failed to specify the exact amount of
monetary award from which the amount of the appeal bond is to be based.
 In University Plans v. Solano, this Court reiterated the guidelines which the NLRC must exercise in considering the
motions for reduction of bond:

The bond requirement on appeals involving monetary awards has been and may be relaxed in meritorious cases. These
cases include instances in which (1) there was substantial compliance with the Rules, (2) surrounding facts and
circumstances constitute meritorious grounds to reduce the bond, (3) a liberal interpretation of the requirement of an
appeal bond would serve the desired objective of resolving controversies on the merits, or (4) the appellants, at the very
least, exhibited their willingness and/or good faith by posting a partial bond during the reglementary period. It is evident
that the aforesaid instances are present in the instant case.

WHEREFORE, premises considered, the instant Petition is hereby DENIED and the 31 January 2011 Amended
Decision and 12 September 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 101911 is AFFIRMED in toto.

Rodrigo G. Habana vs. NLRC, Omanfil International Manpower Development Corp. & Hyundai Engineering Company
GR No. 129418, September 10, 1999
 Petitioner Rodrigo G. Habana was hired in January 1995 by private respondent Omanfil International Manpower
Development Corporation (OMANFIL) to work for its foreign principal, respondent Hyundai Engineering Company, Ltd.
(HYUNDAI), in Sabia, Kuwait. His employment contract was good for two (2) years commencing upon his arrival at his
work station on 29 January 1995. However on 6 February 1996, after only one (1) year, HYUNDAI issued a Resignation
Notice terminating Habanas employment. Habana was forced to return to the Philippines and, together with one
Adjuthor P. De Guzman, another dismissed employee, filed a complaint for illegal dismissal against OMANFIL and
HYUNDAI.

Summons dated 28 March 1996 was served on private respondents requiring them to file their answer within
ten (10) days from receipt thereof. On 10 April 1996, two (2) days beyond the period set in the summons, OMANFIL and
HYUNDAI filed a Motion for Bill of Particulars instead of an answer. It alleged that the NLRC pro-forma complaint sheet
filled up by Habana and De Guzman lacked the required narration of facts constituting the causes of action and other
relevant information as to enable private respondents to prepare an intelligent and responsive pleading to the charges
and/or money claims of Habana and De Guzman.

For their part, Habana and De Guzman moved to declare private respondents in default for failure to submit
their answer as ordered. Private respondents opposed the motion and reiterated that Habana and De Guzman should
file their bill of particulars. The latter however insisted that the Labor Arbiter should first resolve their motion before the
case could proceed. Later, the parties agreed to submit their respective motions for the consideration of the Labor
Arbiter.
On 11 June 1996, without waiting for the resolution of the pending motions, complainants filed their bill of particulars
which they adopted at the same time as their position paper. OMANFIL and HYUNDAI were furnished a copy thereof by
registered mail on the same day. Then on 5 July 1996, the Labor Arbiter rendered a decision in favor of Habana and De
Guzman holding that -
x x x x to the date of this decision, respondents have not submitted their answer/position paper. Thus, on motion of
complainants, we proceeded to resolve the present case on the basis of complainants position paper and other
supporting documents they submitted to support their claims x x x x

On appeal, the NLRC in its Resolution of 15 January 1997 vacated and set aside the judgment of the Labor
Arbiter and remanded the case to the court of origin for further proceedings. The NLRC held that OMANFIL and HYUNDAI
were denied due process, thus -

x x x x while the Labor Arbiter is given the discretion to determine if a hearing is necessary, the discretion must be
exercised prudently. Where it appears that such power would result in grave injustice to any or both, by depriving him or
them of the fundamental right to due process, we, in the exercise of the power of review, shall act to correct the error. In
the case at bar, it is crystal clear that there remain several factual issues that still need to be ventilated, threshed, heard,
tried and resolved which are within the competence, original and exclusive jurisdiction of the Labor Arbiter. Certainly,
further hearings and appropriate proceedings, which would allow the parties to present witnesses and other
documentary evidences, in their respective behalf, or at least for the respondents-appellants to submit their position
paper, would also allow the Labor Arbiter to fulfill his duty to ascertain the truth as to the factual issues involved x x x x

In this petition for certiorari Habana imputes grave abuse of discretion to the NLRC in reversing the Labor Arbiter,
arguing that: (a) determination of the necessity of hearing is discretionary on the Labor Arbiter; (b) the subsequent filing
by petitioner of his bill of particulars had the effect of abandoning his motion to declare OMANFIL and HYUNDAI in
default; and (c) OMANFIL and HYUNDAI received petitioners Bill of Particulars, hence, they cannot invoke denial of due
process.

The sole issue to be resolved is whether private respondents OMANFIL and HYUNDAI were denied due process
when the Labor Arbiter decided the case solely on the basis of the position paper and supporting documents submitted
in evidence by Habana and De Guzman.

We rule in the affirmative. The manner in which this case was decided by the Labor Arbiter left much to be
desired in terms of respect for the right of private respondents to due process -
 First, there was only one conciliatory conference held in this case. This was on 10 May 1996. During the
conference, the parties did not discuss at all the possibility of amicable settlement due to petitioners stubborn
insistence that private respondents be declared in default.

Second, the parties agreed to submit their respective motions - petitioners motion to declare respondents in
default and private respondents motion for bill of particulars - for the consideration of the Labor Arbiter. The Labor
Arbitration Associate, one Ms. Gloria Vivar, then informed the parties that they would be notified of the action of the
Labor Arbiter on the pending motions.

Third, since the conference on 10 May 1996 no order or notice as to what action was taken by the Labor Arbiter
in disposing the pending motions was ever received by private respondents. They were not declared in default by the
Labor Arbiter nor was petitioner required to submit a bill of particulars.
Fourth, neither was there any order or notice requiring private respondents to file their position paper, nor an order
informing the parties that the case was already submitted for decision. What private respondents received was the
assailed decision adverse to them.

It is clear from the foregoing that there was an utter absence of opportunity to be heard at the arbitration level,
as the procedure adopted by the Labor Arbiter virtually prevented private respondents from explaining matters fully and
presenting their side of the controversy. They had no chance whatsoever to at least acquaint the Labor Arbiter with
whatever defenses they might have to the charge that they illegally dismissed petitioner. In fact, private respondents
presented their position paper and documentary evidence only for the first time on appeal to the NLRC.
The essence of due process is that a party be afforded a reasonable opportunity to be heard and to submit any evidence
he may have in support of his defense. Where, as in this case, sufficient opportunity to be heard either through oral
arguments or position paper and other pleadings is not accorded a party to a case, there is undoubtedly a denial of due
process.

It is true that Labor Arbiters are not bound by strict rules of evidence and of procedure. The manner by which
Arbiters dispose of cases before them is concededly a matter of discretion. However, that discretion must be exercised
regularly, legally and within the confines of due process. They are mandated to use every reasonable means to ascertain
the facts of each case, speedily, objectively and without regard to technicalities of law or procedure, all in the interest of
justice and for the purpose of accuracy and correctness in adjudicating the monetary awards.
In the instant case, what should have been done by the Labor Arbiter was to rule on the pending motions, or at least
notify private respondents that he would no longer resolve their motions, and to direct them forthwith to submit within
a reasonable time their position paper as well as all the evidence they might want to introduce before the case would be
resolved. These are essential not only in the interest of orderly procedure but, more importantly, as part of due process.
But as has been said, not a single order or notice was received by private respondents from the Labor Arbiter, other than
the assailed decision.

Official action must be responsive to the supremacy of reason and the dictates of justice. What due process
contemplates is freedom from arbitrariness, the substance rather than the form being paramount. Surely, employers are
equally entitled as the employees to due process.
It may be true that petitioner eventually submitted his bill of particulars, and thus impliedly abandoned his motion to
declare private respondents in default. But failure of private respondents to file their answer or comment within a
reasonable time from receipt of the bill of particulars could not fairly be taken against them. There were pending
motions which the parties mutually and expressly agreed to submit for resolution by the Labor Arbiter, and both of them
were advised by Labor Arbitration Associate Gloria Vivar to await further orders and notices from the Labor Arbiter in
connection therewith. Under these circumstances, private respondents were just following instructions and should not
be faulted for their inaction regarding the case.

To subscribe to petitioners argument - i.e., the bill of particulars rendered moot and academic petitioners motion
and the resolution thereof x x x x [and] should have alerted respondents into taking appropriate steps on the pending
case - would be to put him in control of the proceedings. Petitioner as a mere litigant should not be allowed to dictate
the tempo of the proceedings. He could not obstinately insist on a prior resolution of his motion to declare private
respondents in default, only to abandon it impliedly later with the expectation that the other party would take such
implicit abandonment as having the effect of automatically divesting the Labor Arbiter of the authority to act on the
submitted motions.
While the speedy disposition of labor cases may be the policy of the law, it must be emphasized that speed alone is not
the chief objective of a trial. It is the careful and deliberate consideration for the administration of justice, a genuine
respect for the rights of all parties and the requirements of procedural due process, and an adherence to this Courts
standing admonition that the disposition of cases should always be predicated on the consideration that more than the
mere convenience of the courts and of the parties in the case, the ends of justice and fairness would be served thereby.
These are more important than a race to end the trial. As eloquently expressed by the US Supreme Court in one case,
which, although not legally controlling in this jurisdiction, nevertheless has persuasive effect -

The establishment of prompt efficacious procedures to achieve legitimate state ends is a proper state interest worthy of
cognizance in constitutional adjudication. But the Constitution recognizes higher values than speed and efficiency.
Indeed, one may fairly say of the Bill of Rights in general, and the Due Process Clause in particular, that they were
designed to protect the fragile values of a vulnerable citizenry from the overbearing concern for efficiency and efficacy
that may characterize x x x government officials x x x
Finally, complaints of this character on the part of management could have been avoided had the labor official
concerned been more sensitive to the need to observe procedural regularity. Had he thus been, as he should be, the
beneficiary is not only the employer who, as he ought to, should be allowed the fullest opportunity to resist unwarranted
claims, but also the employee or laborer involved as there would be no undue delay in the event the verdict would favor
him.

WHEREFORE, the petition for certiorari is DISMISSED. The 15 January 1997 Resolution of the National Labor
Relations Commission vacating and setting aside the decision of the Labor Arbiter, and ordering the remand of the case
to the Labor Arbitration Branch of origin for further hearings on the factual issues involved, to be resolved with dispatch
consistent with due process, is AFFIRMED. No costs.
Bank of the Philippine Islands vs. BPI Employees Union Davao ChapterFederation of Unions in BPI Unibank
GR No. 164301, August 10, 2010

In the present incident, petitioner Bank of the Philippine Islands (BPI) moves for reconsideration of our Decision
dated August 10, 2010, holding that former employees of the Far East Bank and Trust Company (FEBTC) "absorbed" by
BPI pursuant to the two banks merger in 2000 were covered by the Union Shop Clause in the then existing collective
bargaining agreement (CBA) of BPI with respondent BPI Employees Union-Davao Chapter-Federation of Unions in BPI
Unibank (the Union).
To recall, the Union Shop Clause involved in this long standing controversy provided, thus:

ARTICLE II
xxxx
Section 2. Union Shop - New employees falling within the bargaining unit as defined in Article I of this Agreement, who
may hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join
the Union as a condition of their continued employment. It is understood that membership in good standing in the Union
is a condition of their continued employment with the Bank. (Emphases supplied.)

The bone of contention between the parties was whether or not the "absorbed" FEBTC employees fell within the
definition of "new employees" under the Union Shop Clause, such that they may be required to join respondent union
and if they fail to do so, the Union may request BPI to terminate their employment, as the Union in fact did in the
present case. Needless to state, BPI refused to accede to the Unions request. Although BPI won the initial battle at the
Voluntary Arbitrator level, BPIs position was rejected by the Court of Appeals which ruled that the Voluntary Arbitrators
interpretation of the Union Shop Clause was at war with the spirit and rationale why the Labor Code allows the existence
of such provision. On review with this Court, we upheld the appellate courts ruling and disposed of the case as follows:
WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of the Court of Appeals is
AFFIRMED, subject to the thirty (30) day notice requirement imposed herein. Former FEBTC employees who opt not to
become union members but who qualify for retirement shall receive their retirement benefits in accordance with law,
the applicable retirement plan, or the CBA, as the case may be.

Notwithstanding our affirmation of the applicability of the Union Shop Clause to former FEBTC employees, for
reasons already extensively discussed in the August 10, 2010 Decision, even now BPI continues to protest the inclusion of
said employees in the Union Shop Clause.

In seeking the reversal of our August 10, 2010 Decision, petitioner insists that the parties to the CBA clearly
intended to limit the application of the Union Shop Clause only to new employees who were hired as non-regular
employees but later attained regular status at some point after hiring. FEBTC employees cannot be considered new
employees as BPI merely stepped into the shoes of FEBTC as an employer purely as a consequence of the merger.

Petitioner likewise relies heavily on the dissenting opinions of our respected colleagues, Associate Justices
Antonio T. Carpio and Arturo D. Brion. From both dissenting opinions, petitioner derives its contention that "the situation
of absorbed employees can be likened to old employees of BPI, insofar as their full tenure with FEBTC was recognized by
BPI and their salaries were maintained and safeguarded from diminution" but such absorbed employees "cannot and
should not be treated in exactly the same way as old BPI employees for there are substantial differences between
them."6 Although petitioner admits that there are similarities between absorbed and new employees, they insist there
are marked differences between them as well. Thus, adopting Justice Brions stance, petitioner contends that the
absorbed FEBTC employees should be considered "a sui generis group of employees whose classification will not be
duplicated until BPI has another merger where it would be the surviving corporation." Apparently borrowing from Justice
Carpio, petitioner propounds that the Union Shop Clause should be strictly construed since it purportedly curtails the
right of the absorbed employees to abstain from joining labor organizations.

Pursuant to our directive, the Union filed its Comment on the Motion for Reconsideration. In opposition to
petitioners arguments, the Union, in turn, adverts to our discussion in the August 10, 2010 Decision regarding the
voluntary nature of the merger between BPI and FEBTC, the lack of an express stipulation in the Articles of Merger
regarding the transfer of employment contracts to the surviving corporation, and the consensual nature of employment
contracts as valid bases for the conclusion that former FEBTC employees should be deemed new employees. 10 The Union
argues that the creation of employment relations between former FEBTC employees and BPI (i.e., BPIs selection and
engagement of former FEBTC employees, its payment of their wages, power of dismissal and of control over the
employees conduct) occurred after the merger, or to be more precise, after the Securities and Exchange Commissions
(SEC) approval of the merger. 11 The Union likewise points out that BPI failed to offer any counterargument to the Courts
reasoning that:

The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the individual
employee's right or freedom of association, is not to protect the union for the union's sake. Laws and jurisprudence
promote unionism and afford certain protections to the certified bargaining agent in a unionized company because a
strong and effective union presumably benefits all employees in the bargaining unit since such a union would be in a
better position to demand improved benefits and conditions of work from the employer. x x x.
x x x Nonetheless, settled jurisprudence has already swung the balance in favor of unionism, in recognition that
ultimately the individual employee will be benefited by that policy. In the hierarchy of constitutional values, this Court
has repeatedly held that the right to abstain from joining a labor organization is subordinate to the policy of encouraging
unionism as an instrument of social justice.

While most of the arguments offered by BPI have already been thoroughly addressed in the August 10, 2010
Decision, we find that a qualification of our ruling is in order only with respect to the interpretation of the provisions of
the Articles of Merger and its implications on the former FEBTC employees security of tenure.

Taking a second look on this point, we have come to agree with Justice Brions view that it is more in keeping
with the dictates of social justice and the State policy of according full protection to labor to deem employment contracts
as automatically assumed by the surviving corporation in a merger, even in the absence of an express stipulation in the
articles of merger or the merger plan. In his dissenting opinion, Justice Brion reasoned that:
To my mind, due consideration of Section 80 of the Corporation Code, the constitutionally declared policies on work,
labor and employment, and the specific FEBTC-BPI situation i.e., a merger with complete "body and soul" transfer of
all that FEBTC embodied and possessed and where both participating banks were willing (albeit by deed, not by their
written agreement) to provide for the affected human resources by recognizing continuity of employment should
point this Court to a declaration that in a complete merger situation where there is total takeover by one corporation
over another and there is silence in the merger agreement on what the fate of the human resource complement shall be,
the latter should not be left in legal limbo and should be properly provided for, by compelling the surviving entity to
absorb these employees. This is what Section 80 of the Corporation Code commands, as the surviving corporation has
the legal obligation to assume all the obligations and liabilities of the merged constituent corporation.

Not to be forgotten is that the affected employees managed, operated and worked on the transferred assets and
properties as their means of livelihood; they constituted a basic component of their corporation during its existence. In a
merger and consolidation situation, they cannot be treated without consideration of the applicable constitutional
declarations and directives, or, worse, be simply disregarded. If they are so treated, it is up to this Court to read and
interpret the law so that they are treated in accordance with the legal requirements of mergers and consolidation, read
in light of the social justice, economic and social provisions of our Constitution. Hence, there is a need for the surviving
corporation to take responsibility for the affected employees and to absorb them into its workforce where no
appropriate provision for the merged corporation's human resources component is made in the Merger Plan.

By upholding the automatic assumption of the non-surviving corporations existing employment contracts by the
surviving corporation in a merger, the Court strengthens judicial protection of the right to security of tenure of
employees affected by a merger and avoids confusion regarding the status of their various benefits which were among
the chief objections of our dissenting colleagues. However, nothing in this Resolution shall impair the right of an
employer to terminate the employment of the absorbed employees for a lawful or authorized cause or the right of such
an employee to resign, retire or otherwise sever his employment, whether before or after the merger, subject to existing
contractual obligations. In this manner, Justice Brions theory of automatic assumption may be reconciled with the
majoritys concerns with the successor employers prerogative to choose its employees and the prohibition against
involuntary servitude.
Notwithstanding this concession, we find no reason to reverse our previous pronouncement that the absorbed
FEBTC employees are covered by the Union Shop Clause.

Even in our August 10, 2010 Decision, we already observed that the legal fiction in the law on mergers (that the
surviving corporation continues the corporate existence of the non-surviving corporation) is mainly a tool to adjudicate
the rights and obligations between and among the merged corporations and the persons that deal with them. Such a
legal fiction cannot be unduly extended to an interpretation of a Union Shop Clause so as to defeat its purpose under
labor law. Hence, we stated in the Decision that:

In any event, it is of no moment that the former FEBTC employees retained the regular status that they possessed while
working for their former employer upon their absorption by petitioner. This fact would not remove them from the scope
of the phrase "new employees" as contemplated in the Union Shop Clause of the CBA, contrary to petitioner's insistence
that the term "new employees" only refers to those who are initially hired as non-regular employees for possible regular
employment.

The Union Shop Clause in the CBA simply states that "new employees" who during the effectivity of the CBA
"may be regularly employed" by the Bank must join the union within thirty (30) days from their regularization. There is
nothing in the said clause that limits its application to only new employees who possess non-regular status, meaning
probationary status, at the start of their employment. Petitioner likewise failed to point to any provision in the CBA
expressly excluding from the Union Shop Clause new employees who are "absorbed" as regular employees from the
beginning of their employment. What is indubitable from the Union Shop Clause is that upon the effectivity of the CBA,
petitioner's new regular employees (regardless of the manner by which they became employees of BPI) are required to
join the Union as a condition of their continued employment.

Although by virtue of the merger BPI steps into the shoes of FEBTC as a successor employer as if the former had
been the employer of the latters employees from the beginning it must be emphasized that, in reality, the legal
consequences of the merger only occur at a specific date, i.e., upon its effectivity which is the date of approval of the
merger by the SEC. Thus, we observed in the Decision that BPI and FEBTC stipulated in the Articles of Merger that they
will both continue their respective business operations until the SEC issues the certificate of merger and in the event no
such certificate is issued, they shall hold each other blameless for the non-consummation of the merger. We likewise
previously noted that BPI made its assignments of the former FEBTC employees effective on April 10, 2000, or after the
SEC approved the merger. In other words, the obligation of BPI to pay the salaries and benefits of the former FEBTC
employees and its right of discipline and control over them only arose with the effectivity of the merger. Concomitantly,
the obligation of former FEBTC employees to render service to BPI and their right to receive benefits from the latter also
arose upon the effectivity of the merger. What is material is that all of these legal consequences of the merger took place
during the life of an existing and valid CBA between BPI and the Union wherein they have mutually consented to include
a Union Shop Clause.

From the plain, ordinary meaning of the terms of the Union Shop Clause, it covers employees who (a) enter the
employ of BPI during the term of the CBA; (b) are part of the bargaining unit (defined in the CBA as comprised of BPIs
rank and file employees); and (c) become regular employees without distinguishing as to the manner they acquire their
regular status. Consequently, the number of such employees may adversely affect the majority status of the Union and
even its existence itself, as already amply explained in the Decision.

Indeed, there are differences between (a) new employees who are hired as probationary or temporary but later
regularized, and (b) new employees who, by virtue of a merger, are absorbed from another company as regular and
permanent from the beginning of their employment with the surviving corporation. It bears reiterating here that these
differences are too insubstantial to warrant the exclusion of the absorbed employees from the application of the Union
Shop Clause. In the Decision, we noted that:
Verily, we agree with the Court of Appeals that there are no substantial differences between a newly hired non-regular
employee who was regularized weeks or months after his hiring and a new employee who was absorbed from another
bank as a regular employee pursuant to a merger, for purposes of applying the Union Shop Clause. Both employees were
hired/employed only after the CBA was signed. At the time they are being required to join the Union, they are both
already regular rank and file employees of BPI. They belong to the same bargaining unit being represented by the Union.
They both enjoy benefits that the Union was able to secure for them under the CBA. When they both entered the
employ of BPI, the CBA and the Union Shop Clause therein were already in effect and neither of them had the
opportunity to express their preference for unionism or not. We see no cogent reason why the Union Shop Clause should
not be applied equally to these two types of new employees, for they are undeniably similarly situated.

Again, it is worthwhile to highlight that a contrary interpretation of the Union Shop Clause would dilute its
efficacy and put the certified union that is supposedly being protected thereby at the mercy of management. For if the
former FEBTC employees had no say in the merger of its former employer with another bank, as petitioner BPI
repeatedly decries on their behalf, the Union likewise could not prevent BPI from proceeding with the merger which
undisputedly affected the number of employees in the bargaining unit that the Union represents and may negatively
impact on the Unions majority status. In this instance, we should be guided by the principle that courts must place a
practical and realistic construction upon a CBA, giving due consideration to the context in which it is negotiated and
purpose which it is intended to serve.

We now come to the question: Does our affirmance of our ruling that former FEBTC employees absorbed by BPI
are covered by the Union Shop Clause violate their right to security of tenure which we expressly upheld in this
Resolution?
We answer in the negative.

In Rance v. National Labor Relations Commission, 20 we held that:

It is the policy of the state to assure the right of workers to "security of tenure" (Article XIII, Sec. 3 of the New
Constitution, Section 9, Article II of the 1973 Constitution). The guarantee is an act of social justice. When a person has
no property, his job may possibly be his only possession or means of livelihood. Therefore, he should be protected
against any arbitrary deprivation of his job. Article 280 of the Labor Code has construed security of tenure as meaning
that "the employer shall not terminate the services of an employee except for a just cause or when authorized by" the
Code. x x x (Emphasis supplied.)

We have also previously held that the fundamental guarantee of security of tenure and due process dictates that
no worker shall be dismissed except for a just and authorized cause provided by law and after due process is observed.
Even as we now recognize the right to continuous, unbroken employment of workers who are absorbed into a new
company pursuant to a merger, it is but logical that their employment may be terminated for any causes provided for
under the law or in jurisprudence without violating their right to security of tenure. As Justice Carpio discussed in his
dissenting opinion, it is well-settled that termination of employment by virtue of a union security clause embodied in a
CBA is recognized in our jurisdiction. In Del Monte Philippines, Inc. v. Saldivar, we explained the rationale for this policy in
this wise:

Article 279 of the Labor Code ordains that "in cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by [Title I, Book Six of the Labor Code]." Admittedly,
the enforcement of a closed-shop or union security provision in the CBA as a ground for termination finds no
extension within any of the provisions under Title I, Book Six of the Labor Code. Yet jurisprudence has consistently
recognized, thus: "It is State policy to promote unionism to enable workers to negotiate with management on an even
playing field and with more persuasiveness than if they were to individually and separately bargain with the employer.
For this reason, the law has allowed stipulations for 'union shop' and 'closed shop' as means of encouraging workers to
join and support the union of their choice in the protection of their rights and interests vis-a-vis the employer." (Emphasis
supplied.)

Although it is accepted that non-compliance with a union security clause is a valid ground for an employees
dismissal, jurisprudence dictates that such a dismissal must still be done in accordance with due process. This much we
decreed in General Milling Corporation v. Casio, to wit:
The Court reiterated in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos that:
While respondent company may validly dismiss the employees expelled by the union for disloyalty under the union
security clause of the collective bargaining agreement upon the recommendation by the union, this dismissal should not
be done hastily and summarily thereby eroding the employees' right to due process, self-organization and security of
tenure. The enforcement of union security clauses is authorized by law provided such enforcement is not characterized
by arbitrariness, and always with due process. Even on the assumption that the federation had valid grounds to expel the
union officers, due process requires that these union officers be accorded a separate hearing by respondent company.
The twin requirements of notice and hearing constitute the essential elements of procedural due process. The law
requires the employer to furnish the employee sought to be dismissed with two written notices before termination of
employment can be legally effected: (1) a written notice apprising the employee of the particular acts or omissions for
which his dismissal is sought in order to afford him an opportunity to be heard and to defend himself with the assistance
of counsel, if he desires, and (2) a subsequent notice informing the employee of the employer's decision to dismiss him.
This procedure is mandatory and its absence taints the dismissal with illegality.

Irrefragably, GMC cannot dispense with the requirements of notice and hearing before dismissing Casio, et al.
even when said dismissal is pursuant to the closed shop provision in the CBA. The rights of an employee to be informed
of the charges against him and to reasonable opportunity to present his side in a controversy with either the company or
his own union are not wiped away by a union security clause or a union shop clause in a collective bargaining agreement.
x x x26 (Emphases supplied.)

In light of the foregoing, we find it appropriate to state that, apart from the fresh thirty (30)-day period from
notice of finality of the Decision given to the affected FEBTC employees to join the Union before the latter can request
petitioner to terminate the formers employment, petitioner must still accord said employees the twin requirements of
notice and hearing on the possibility that they may have other justifications for not joining the Union. Similar to our
August 10, 2010 Decision, we reiterate that our ruling presupposes there has been no material change in the situation of
the parties in the interim.

WHEREFORE, the Motion for Reconsideration is DENIED. The Decision dated August 10, 2010 is AFFIRMED, subject to
the qualifications that:
a) Petitioner is deemed to have assumed the employment contracts of the Far East Bank and Trust Company
(FEBTC) employees upon effectivity of the merger without break in the continuity of their employment, even
without express stipulation in the Articles of Merger; and
b) Aside from the thirty (30) days, counted from notice of finality of the August 10, 2010 Decision, given to former
FEBTC employees to join the respondent, said employees shall be accorded full procedural due process before
their employment may be terminated.