Power to Dismiss Not Absolute

The power to dismiss is the normal prerogative of the employer. An employer, generally, can dismiss or lay off an employee for just and authorized causes enumerated under Articles 282 and 283 of the Labor Code of the Philippines.

However, the right of an employer to freely discharge his employees is subject to regulation by the State, basically in the exercise of its paramount police power. This is so, because the preservation of the lives of the citizens is a basic duty of the State, more vital than the preservation of corporate profits. (Manila Electric Company vs. National Labor Relations Commission, G.R. No. 78763, July 12, 1989)

The employer is bound to exercise caution in terminating the services of his employees especially so when it is made upon the request of a labor union pursuant to the Collective Bargaining Agreement. Dismissals must not be arbitrary and capricious. Due process must be observed in dismissing an employee, because it affects not only his position, but also his means of livelihood. Employers should, therefore, respect and protect the rights of their employees, which include the right to labor. (Rance, et al. vs. National Labor Relations Commission, G.R. No. 68147, June 30, 1988)

Thus, where the employee's dismissal was not based on any of the grounds provided in the contract of employment, but because the employer's personnel manager resented the act of the respondent of writing memos calling the manager's attention to the problems in the camp site and furnishing copies of said memos to government agencies and the Office of the President of the Philippines, which act the employer perceived as detrimental to its interest, the dismissal was held unjustified. (Trans-Orient Overseas Contractors, Inc. vs. National Labor Relations Commission, G.R. No. 75602, Dec. 29, 1989)

Similarly, the dismissal of an employee without any investigation having been previously conducted by the employer to ascertain his participation in the fistfight within company premises, is illegal for non-compliance with the requirements of procedural due process. (Broadway Motors, Inc. vs. National Labor Relations Commission, G.R. No. 78382, Dec. 14, 1987)

As Mr. Justice Panganiban, in an en banc decision, states:

To constitute a completely valid and faultless dismissal, it is well-settled that the employer must show not only sufficient ground therefor, but it must also prove that it observed procedural due process by giving the employee two notices: one, of the intention to dismiss, indicating therein his acts or omissions complained against, and two, notice of the decision to dismiss; and an opportunity to answer and rebut the charges against him, in between such notices. (MGG Marine Services, Inc., et al. vs. NLRC and E.A. Molina, G.R. No. 114313, July 29, 1996)

Management's Right to Dismiss Employees

The law in protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer.

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights, which as such are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less privileges in life, the Supreme Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and applicable law and doctrine. (Mercury Drug Corporation vs. National Labor Relations Commission, G.R. No. 75662, Sept. 15, 1989)

No employer may rationally be expected to continue in employment a person whose lack of morals, respect and loyalty to his employer, regard for his employer's rules and appreciation of the dignity and responsibility of his office, has so plainly and completely been bared. (Makati Haberdashery, Inc. vs. National Labor Relations Commission, G.R. No. 83380-81, Nov. 15, 1989)

The right of the company to dismiss its employees is a measure of self-protection. (Reyes vs. Minister of Labor, G.R. No. 48705, Feb. 9, 1989)

Ferrer, et al. vs. NLRC, G.R. No. 100898, July 5, 1993

Hereunder is the case digest of Ferrer, et al. vs. NLRC, G.R. No. 100898, promulgated on July 5, 1993:

FACTS:

Petitioners Ferrer and others were regular and permanent employees of the Occidental Foundry Corporation (OFC). They had been in the employe of OFC for about ten years at the time of their dismissal in 1989.

On May 6, 1989, petitioner Ferrer and companions filed with the Department of Labor and Employment a complaint seeking the expulsion from SAMAHAN of its officers headed by president Capitle. The complaint was founded on the said officers' alleged lack of attention to the economic demands of the workers. However, on September 4, 1989, petitioners Diaz and Ferrer withdrew the petition.

On September 10, 1989, petitioners conducted a special election of officers of the SAMAHAN. FFW, to which SAMAHAN was affiliated, questioned the election. Nonetheless, the elected set of officers tried to dissuade the OFC from remitting union dues to the officers led by Capitle.

The intra-union squabble came to a head when, on September 11, 1989, the union officials headed by Capitle expelled Ferrer, et al. from the union.

Ferrer and his four companions turned to the Federation of Democratic Labor Unions (FEDLU). They volunteered to be admitted as members of the FEDLU and requested that they be represented ("katawanin") by said federation before the DOLE in the complaint which they intended to file against the union (SAMAHAN), the FFW and the company for illegal dismissal, reinstatement, and other benefits in accordance with law.

Thereafter, on various dates, petitioners sent individual letters to the Company professing innocence of the charges levelled against them by the SAMAHAN and the FFW and pleading that they be reinstated. Their letters elicited no response.

Thus, contending that their dismissal was without cause and in utter disregard of their right to due process of law, petitioners through the FEDLU, filed a complaint for illegal dismissal and unfair labor practice before the NLRC against Hui Kam Chang, OFC, M.S. Velasco (as representative of the FFW), the FFW, and the SAMAHAN officers headed by Capitle.

RULING:

In the first place, the union has a specific provision for the permanent or temporary "expulsion" of its erring members in its constitution and by-laws ("saligang batas at alituntunin"). Under the heading Membership and Removal ("pag-aanib at pagtitiwalag"), it states:

SEC. 4. Ang sinumang kasapi ay maaring itwalag (sic) ng Samahan pangsamantala o tuluyan sa pamamgitan (sic) ng tatlo't ikaapat (3/4) na bahagi ng dami ng bilang ng Pamunuang Tagapapaganap. Pagkaraan lamang sa pandinig sa kanyang kaso. Batay sa sumusunod:

(a) Sinumang gumawa ng mga bagay bagay na labag at lihis sa patakaran ng Samahan.

(b) Sinumang gumawa ng mga bagay na maaring ikabuwag ng Samahan.

(c) Hindi paghuhulog ng butaw sa loob ng tatlong buwan na walang sakit o Doctor's Certificate.

(d) Hindi pagbibigay ng abuloy na itinadhana ng Samahan.

(e) Sinumang kasapi na natanggal sa kapisanan at gustong sumapi uli ay magpapanibago ng bilang, mula sa taon ng kanyang pagsapi uli sa Samahan.

No hearing ("pandinig") was ever conducted by the SAMAHAN to look into petitioners' explanation of their moves to oust the union leadership under Capitle, or their subsequent affiliation with FEDLU. While it is true that petititioners' actions might have precipitated divisiveness and, later, showed disloyalty to the union, still, the SAMAHAN should have observed its own constitution and by-laws by giving petitioners an opportunity to air their side and explain their moves. If, after an investigation the petitioners were found to have violated union rules, then and only then should they be subjected to proper disciplinary measures.

What aggravated the situation in this case is the fact that OFC itself took for granted that the SAMAHAN had actually conducted an inquiry and considered the CBA provision for the closed shop as self-operating that, upon receipt of a notice that some members of the SAMAHAN had failed to maintain their membership in good standing in accordance with the CBA, it summarily dismissed petitioners. To make matters worse, the labor arbiter and the NLRC shared the same view in holding that "(t)he matter or question, therefore, of determining why and how did complainants fail to retain membership in good standing is not for the company to inquire via formal investigation."

Petitioners' alleged act of sowing disunity among the members of the SAMAHAN could have been ventilated and threshed out through a grievance procedure within the union itself. But resort to such procedure was not pursued. What actually happened in this case was that some members, including petitioners, tried to unseat the SAMAHAN leadership headed by Capitle due to the latter's alleged inattention to petitioners' demands for the implementation of the P25-wage increase which took effect on July 1, 1989. The intra-union controversy was such that petitioners even requested the FFW to intervene to facilitate the enforcement of the said wage increase.

Petitioners sought the help of the FEDLU only after they had learned of the termination of their employment upon the recommendation of Capitle. Their alleged application with federations other than the FFW can hardly be considered as disloyalty to the SAMAHAN, nor may the filing of such applications denote that petitioners failed to maintain in good standing their membership in the SAMAHAN. The SAMAHAN is a different entity from FFW, the federation to which it belonged. Neither may it be inferred that petitioners sought disaffiliation from the FFW for petitioners had not formed a union distinct from that of the SAMAHAN. Parenthetically, the right of a local union to disaffiliate from a federation in the absence of any provision in the federation's constitution preventing disaffiliation of a local union is legal. (People's Industrial and Commercial Employees and Workers Org. [FFW] vs. People's Industrial and Commercial Corp., 112 SCRA 440 [1982]) Such right is consistent with the constitutional guarantee of freedom of association. (Tropical Hut Employees' Union-CGW vs. Tropical Hut Food Market, Inc., 181 SCRA 173 [1990])

Hence, while petitioner's act of holding a special election to oust Capitles, et al. may be considered as an act of sowing disunity among the SAMAHAN members, and, perhaps, disloyalty to the union officials, which could have been dealt with by the union as a disciplinary matter, it certainly cannot be considered as constituting disloyalty to the union. Faced with a SAMAHAN leadership which they had tried to remove as officials, it was but a natural act of self-preservation that petitioners fled to the arms of the FEDLU after the union and the OFC had tried to terminate their employment. Petitioners should not be made accountable for such an act.

Compromise of Money Claims Is Personal Right

Money claims due to laborers cannot be the object of settlement or compromise effected by a union or counsel without the specific individual consent of each laborer concerned. The beneficiaries are the individual complainants themselves. The union to which they belong can only assist them, but cannot decide for them. Awards in favor of laborers after long years of litigation must be attended to with mutual openness and in the best of faith. Only thus can we really give meaning to the constitutional mandate of giving laborers maximum protection and security.

The union officers' authority to compromise must be presented in evidence.

A judgment based on a compromise agreement authorized by the members does not bind the individual members or complainants who are not parties thereto nor signatories therein. (Kaisahan ng mga Manggagawa sa La Campana vs. Sarmiento, 133 SCRA 220 [1984])

Under the philosophy of collective responsibility, an employer who bargains in good faith should be entitled to rely upon the promises and agreements of the union representatives with whom he must deal under the compulsion of law and contract. The collective bargaining process should be carried on between parties who can mutually respect and rely upon the authority of each other. Where, however, collective bargaining process is not involved, and what is at stake are backwages already earned by the individual workers by way of overtime, premium and differential pay, and final judgment has been rendered in their favor, as in the present case, the real parties in interest with direct material interest, as against the union which has only served as a vehicle for collective action to enforce their just claims, are the individual workers themselves.

Authority of the union to waive or quit claim all or part of the judgment award in favor of the individual workers cannot be lightly presumed, but must be expressly granted, and the employer, as judgment debtor, must deal in all good faith with the union as the agent of the individual workers.

The court in turn should certainly verify and assure itself the fact and extent of the authority of the union leadership to execute any compromise or settlement of the judgment on behalf of the individual workers who are the real judgment creditors. (Heirs of Teodolo M. Cruz vs. Court of Industrial Relations, 30 SCRA 917 [1969])

In another case, the Court noted that the complainant union members had not ratified the Return-to-Work Agreement. It follows that they cannot be held bound by the Return-to-Work Agreement. The waiver of money claims, which in this case were accrued money claims, by workers and employees must be regarded as a personal right, that is, a right that must be personally exercised.

For a waiver thereof to be legally effective, the individual consent or ratification of the workers or employees involved must be shown. Neither the officers nor the majority of the union had any authority to waive the accrued rights pertaining to the dissenting minority members, even under a collective bargaining agreement which provided for a "union shop."

The same consideration of public policy which impelled the Court to reach the conclusion it did in Manggagawa sa La Campana vs. Sarmiento (133 SCRA 220) are equally compelling in the present case. The members of the union need the protective shield of this doctrine not only vis-a-vis their employer, but also, at times, vis-a-vis the management of their own union, and at other times even against their own imprudence or impecuniousness. (General Rubber and Footwear Corp. vs. Drilon, 169 SCRA 808 [1989])

Compromise Agreement Binds Minority Members of Union

A compromise agreement between the Union and the Company, pursuant to which the complaint in an unfair labor practice case had been withdrawn and dismissed, is binding upon the minority members of the union. The action taken by said minority members in disauthorizing the counsel of record and filing another unfair labor practice case against the company is contrary to the policy of the Magna Carta of Labor, which promotes the settlement of differences between management and labor by mutual agreement. If said action were tolerated, no employer would ever enter into any compromise agreement, for the minority members of the union will always dishonor the terms of the agreement and demand their better terms. (See Dionela vs. Court of Industrial Relations, 8 SCRA 832 [1963])

G.R. No. 174209

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 174209

August 25, 2009

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,

Petitioner,

- versus -

RIZALINA RAUT, LEILA EMNACE and GINA CAPISTRANO,

Respondents.

x-----------------------------------------------------------------------x

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Court of Appeals (CA) Decision[1] in CA-GR SP. No. 85829 which affirmed the National Labor Relations Commission’s (NLRC’s) dismissal[2] of petitioner Philippine Long Distance Telephone Company’s Memorandum of Appeal for failure to attach thereto the requisite Certificate of Non-Forum Shopping.

The facts, as summarized by the CA, are as follows:

This case was originally filed on December 17, 1996 by Rizalina Raut and [Leila] Emnace against Philippine Long Distance Telephone Company (PLDT for brevity) for illegal dismissal and non-payment of salaries, overtime pay, night shift differential, 13th month pay, service incentive leave, backwages with moral damages and attorney’s fees. Gina Capistrano followed suit by filing a similar case on January 18, 1997. These cases were consolidated by the Labor Arbiter on February 25, 1997 due to similarity of facts and issues involved.

In the complaint, signed and verified by the respondents, they alleged that they were illegally dismissed on November 30, 1996 and December 16, 1996 respectively.

In the decision of the Labor Arbiter promulgated on July 30, 1997, it reinstated the respondents x x x to their former position as telephone operators or if not feasible anymore to another equal position without loss of seniority rights and benefits and to pay the following backwages which are subject to recomputation up to the date of the finality of the decision as follows:

1. Rizalina Raut -	P32,505.00
2. [Leila] Emnace -	P32,505.00
3. Gina Capistrano -	P34,320.00
	P99,330.00

Soon after, the respondents were reinstated on December 16, 1998, but allegedly continued to be treated as temporary employees of the petitioner.

Petitioner appealed the decision, alleging grave abuse of discretion on the part of the Honorable Labor Arbiter, insisting that the respondents were never employees of the petitioner but that of independent contractor, Peerless Integrated Services, Inc.

In respondents’ Answer to the Appeal, respondents argued that their functions were no different from those performed by the regular employees. They aver that they were trained by petitioner to become Traffic Operator, a position that is categorized as technical. Now, if they were trained to be skilled workers, how come they were extended only contractual employment of ten (10) months? Aside from that, respondents maintained that the claim of the petitioner that their arrangement with Peerless to supply it with various types of workers “in order to augment its present workforce” is but a scheme to subvert their tenurial security. According to respondents, petitioner expressly admits that Peerless provides only the workers. Thus, its contract with the former is one of “labor only” contracting, which is specifically prohibited under Sec. 9 (b) Rule VIII of the Omnibus Rules in relation to Article 106 of the Labor Code of the Philippines.

Subsequently, on April 30, 1998, the NLRC rendered a Decision affirming with modification the Decision of the Honorable Labor Arbiter. In addition to those already granted, petitioner x x x is further ordered to pay respondents their overtime pay, nightshift differential pay, service incentive leave pay and 13th month pay.

Petitioner filed a motion for reconsideration but the same was denied in a Resolution promulgated by the NLRC dated September 25, 1998.

Consequently, petitioner filed a petition for certiorari before the Court of Appeals. However, the court rendered a Decision dated September 24, 1999, the dispositive portion of which reads as follows:

“Wherefore, with the modification that the 13th month pay for respondents Raut and Emnace for the period August 16, 1995 to June 15, 1996 and for respondent Capistrano for the period of August 1, 1995 to May 31, 1996 should be deducted from the computation of the awards to private respondents, the assailed Decision of the National Labor Relations Commission is AFFIRMED.”

Petitioner filed a Motion for Reconsideration, which was denied by the court. In effect, its aforesaid Decision became final and executory on March 26, 2000 per Entry of Judgment.

On April 24, 2002, respondents filed a Motion for Issuance of Writ of Execution which was granted by the Labor Arbiter in an Order dated June 21, 2002, the dispositive portion of which viz.:

“Wherefore, let a writ of execution be issued for the enforcement of the following awards:

1. Rizalina Raut - P354,535.36

2. [Leila] Emnace - P354,535.36

3. Gina Capistrano - P354,535.36

____________

P1,063,606.00”[3]

Aggrieved, petitioner appealed the order to the NLRC which, as previously adverted to, dismissed petitioner’s Memorandum of Appeal for failure to attach a Certificate of Non-Forum Shopping.

Undaunted, petitioner filed a petition for certiorari before the CA alleging grave abuse of discretion in the NLRC’s dismissal of its appeal. Once again, petitioner fared no better in the CA; its petition for certiorari was denied due course.

Indefatigably, petitioner comes before us on appeal by certiorari raising the following issues for our resolution:

1. WHETHER x x x THE DECISION DATED APRIL 18, 2006 OF THE COURT OF APPEALS, WHICH AFFIRMED RESOLUTION DATED JANUARY 15, 2004 AND RESOLUTION DATED JULY 26, 2004, BOTH ISSUED BY THE NLRC, IS IN ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT.

2. WHETHER x x x THE OMISSION OF THE CERTIFICATION OF NON-FORUM SHOPPING IN THE APPEAL MEMORANDUM WARRANTS THE DISMISSAL OF THE PETITIONER’S APPEAL FROM THE ORDER DATED JUNE 21, 2002 OF THE LABOR ARBITER TO THE NLRC.

3. WHETHER x x x THE ORDER DATED JUNE 21, 2002 OF LABOR ARBITER ERNESTO F. CARREON DIRECTING THE ISSUANCE OF A WRIT OF EXECUTION FOR THE ENFORCEMENT OF THE AWARD OF [P]354,535.36 TO EACH OF THE RESPONDENTS, WHICH WAS AFFIRMED IN TOTO BY THE NLRC’S DECISION DATED JANUARY 15, 2004[,] AND WHICH[,] IN TURN[,] WAS AFFIRMED BY THE COURT OF APPEALS DECISION DATED APRIL 18, 2006, IS NULL AND VOID.[4]

The definitive issue boils down to whether the CA erred in affirming the NLRC’s dismissal of petitioner’s appeal for failing to attach a Certificate of Non-Forum Shopping.

We find the petition bereft of merit. We note that petitioner deftly brought to the fore the validity of the Labor Arbiter’s order of execution. However, even on this issue, the appeal lacks merit.

The decision of the CA is consistent with both law and jurisprudence. Petitioner’s contention – that the only jurisdictional requirements of appeal are: (1) the perfection of the appeal within the reglementary period of ten (10) days from receipt of the decision, award, or order; and (2) the posting of a cash or surety bond in appeals involving monetary awards, as specified under Article 223 of the Labor Code – is wrong. Petitioner is mistaken in confining the perfection of an appeal to compliance with just those requisites.

The perfection of an appeal necessarily includes the filing of a complete (not a defective) memorandum of appeal within the ten (10) day reglementary period. Petitioner conveniently disregards that the NLRC Rules of Procedure requires the appeal to be accompanied by a Certificate of Non-Forum Shopping.[5] Thus, petitioner’s filing of a memorandum of appeal without the requisite certificate did not stop the running of the period to perfect an appeal. In short, the Order of Execution of the Labor Arbiter became final and executory.

Our ruling in Accessories Specialist, Inc. v. Alabanza[6] emphasizes the nature of an appeal:

Furthermore, we would like to reiterate that appeal is not a constitutional right, but a mere statutory privilege. Thus, parties who seek to avail themselves of it must comply with the statutes or rules allowing it. Perfection of an appeal in the manner and within the period permitted by law is mandatory and jurisdictional. The requirements for perfecting an appeal must, as a rule, be strictly followed. Such requirements are considered indispensable interdictions against needless delays and are necessary for the orderly discharge of the judicial business. Failure to perfect the appeal renders the judgment of the court final and executory. Just as a losing party has the privilege to file an appeal within the prescribed period, so does the winner also have the correlative right to enjoy the finality of the decision.

In the case at bar, the judgment against petitioner became final and executory on March 26, 2000. However, to this day, respondents are prevented from enjoying fruits of the final judgment in their favor because of petitioner’s frivolous appeal against an order of execution.

To lend some semblance of merit to its appeal and to further delay the execution of judgment against it, petitioner insists that the Labor Arbiter’s order of execution is null and void for increasing the judgment award in the original decision. Petitioner likewise avers that nothing appears in the dispositive portion of the Labor Arbiter’s decision that respondents ought to be reinstated as regular employees.

Petitioner’s contention splits hairs. Indeed, an order of execution must conform to the decision sought to be enforced.[7] The Labor Arbiter’s order of execution does ostensibly appear to increase the original judgment award if, as what petitioner has done, only the dispositive portions of the lower tribunals’ decisions are laid out. However, we point out that the Labor Arbiter’s decision specifically declared “that the [respondents] were never the employees of Peerless Integrated Services, Inc., as they were all the time employees of [petitioner].”

We need not belabor the point. It is quite apparent from the respective decisions of the Labor Arbiter, the NLRC, and the CA that respondents were found to be regular employees of petitioner. Article 279, in relation to Article 280 of the Labor Code, confirms the nature of employment of respondents regardless of petitioner’s unschooled opinion. The articles read:

ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

ART. 280. Regular and Casual Employment. – The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

Thus, the lower tribunals all affirmed the order of reinstatement of respondents and their corresponding entitlement to the payment of salaries and other benefits received by petitioner’s regular employees.

Finally, on the increase in the computation of the monetary award to respondents, the decision of the Labor Arbiter specified that for purposes of putting up a bond should petitioner appeal, the backwages were computed only for a certain period. Otherwise, the actual backwages to be paid to respondents are computed from the date of dismissal until the finality of the decision. In addition, because petitioner continues to refuse and accord regular status to respondents and to pay them their corresponding wages even after the lapse of two (2) years from the finality of the Labor Arbiter’s decision, the Labor Arbiter correctly included that in its order of execution. Thus, the Labor Arbiter’s order of execution simply covered the correct computation of wages and other payments enjoyed by petitioner’s regular employees.

WHEREFORE, premises considered, the petition is hereby DENIED. The decision of the Court of Appeals in CA-G.R. SP. No. 85829 is AFFIRMED. Costs against petitioner.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

Acting Chairperson

PRESBITERO J. VELASCO, JR.

Associate Justice

DIOSDADO M. PERALTA

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

MINITA V. CHICO-NAZARIO

Associate Justice

Acting Chairperson, Third Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Chief Justice

* Additional member in lieu of Associate Justice Consuelo Ynares-Santiago per Special Order No. 679 dated August 3, 2009.

** In lieu of Associate Justice Consuelo Ynares-Santiago per Special Order No. 678 dated August 3, 2009.

[1] Penned by Associate Justice Pampio A. Abarintos, with Justices Enrico Lanzanas and Apolinario D. Bruselas, Jr., concurring; rollo, pp. 37-45.

[2] Rollo, pp. 67-69.

[3] Id. at 38-40.

[4] Id. at 260.

[5] See Rule VI, Section 4 of the NLRC Rules of Procedure.

[6] G.R. No. 168985, July 23, 2008, 559 SCRA 550, 562-563, citing Cuevas v. Bais Steel Corporation, 439 Phil. 793, 805 (2002).

[7] Banquerigo v. Court of Appeals, G.R. No. 164633, August 7, 2006, 498 SCRA 169.

Right of the Labor Union to Represent Its Members

It is the function precisely of a labor union such as petitioner to carry the representation of its members particularly against the employer's labor practices against it and its members. It can file an action for their benefit and behalf without joining them and to avoid the cumbersome procedure of joining each and every member as a separate party under Rule 3, Section 3 of the Rules of Court. (Davao Free Workers Front vs. CIR, 60 SCRA 408 [1974])

In Liberty Manufacturing Workers Union vs. Court of First Instance, the Court reiterated the view that a labor union has the requisite personality to sue on behalf of its members for their individual money claims. It would be an unwarranted impairment of the right to self-organization through formation of labor organizations if thereafter such collective entities would be barred from instituting action in their representative capacity. (La Carlota Sugar Central vs. Court of Industrial Relations, 64 SCRA 78 [1975])

Compromise agreements between employer and employees are valid only when made in good faith. The Union and its attorney should be allowed to participate in the making of compromise settlements with employees. In one case, petitioner Company was adjudged to have acted with evident bad faith and malice when it secured the 53 quitclaim agreements individually with the 53 sugar workers without the intervention of court. This subterfuge is tantamount to a sabotage of the interest of respondent association. Needless to say, the means employed by petitioner in dealing with the workers individually, instead of collectively through respondent and its counsel, violates good morale as they undermine the unity of respondent union and fuels industrial disputes, contrary to the declared policy in the Industrial Peace Act. (Pampanga Sugar Development Co., Inc. vs. CIR, 114 SCRA 725 [1982])

G.R. No. 100898

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 100898 July 5, 1993

ALEX FERRER, RAFAEL FERRER HENRY DIAZ, DOMINGO BANCOLITA, GIL DE GUZMAN, and FEDERATION OF DEMOCRATIC LABOR UNIONS, (FEDLU), petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), HUI KAM CHANG (In his capacity as General Manager of Occidental Foundry Corporation), OCCIDENTAL FOUNDRY CORPORATION, MACEDONIO S. VELASCO (In his capacity as representative of the Federation of Free Workers), GENARO CAPITLE, JESUS TUMAGAN, ERNESTO BARROGA, PEDRO LLENA, GODOFREDO PACHECO, MARCELINO CASTILLO, GEORGE IGNAS, PIO DOMINGO, and JAIME BAYNADO, respondents.

Genrosa P. Jacinto and Raymundo D. Mallilin for private respondents.

MELO, J.:

The petition for certiorari before us seeks to annul and set aside: (a) the decision dated June 20, 1991 of the Second Division of the National Labor Relations Commission (NLRC) (Penned by Commissioner Rustico L. Diokno and concurred in by Presiding Commissioner Edna Bonto-Perez and Commissioner Domingo H. Zapanta) which affirmed in toto the decision of April 5, 1990 of Labor Arbiter Eduardo J. Carpio dismissing the complaint for illegal dismissal and unfair labor practice on the ground that both the company and the union merely complied with the collective bargaining agreement provision sanctioning the termination of any employee who fails to retain membership in good standing with the union; and (b) the NLRC resolution denying the motion for the reconsideration of said decision (NLRC NCR Case No. 00-10-04855-89).

Petitioners were regular and permanent employees of the Occidental Foundry Corporation (OFC) in Malanday, Valenzuela, Metro Manila which was under the management of Hui Kam Chang. As piece workers, petitioners' earnings ranged from P110 to P140 a day. They had been in the employ of OFC for about ten years at the time of their dismissal in 1989 (p. 38, Rollo).

On January 5, 1989, the Samahang Manggagawa ng Occidental Foundry Corporation-FFW (SAMAHAN) and the OFC entered into a collective bargaining agreement (CBA) which would be effective for the three-year period between October 1, 1988 and September 30, 1991 (Memorandum for OFC and Hui Kam Chang, p. 6, Rollo; p. 551). Article II thereof provides for a union security clause thus:

Sec. 1 — The company agrees that all permanent and regular factory workers in the company who are members in good standing of the union or who thereafter may become members, shall as a condition of continued employment, maintain their membership in the union in good standing for the duration of the agreement.

xxx xxx xxx

Sec. 3 — The parties agree that failure to retain membership in good standing with the UNION shall be ground for the operation of paragraph 1 hereof and the dismissal by the company of the aforesaid employee upon written request by the union. The aforesaid request shall be accompanied by a verified carbon original of the Board of (sic) Resolution by the UNION signed by at least a majority of its officers/directors. (p. 562, Rollo.)

On May 6, 1989, petitioner Alex Ferrer and the SAMAHAN, filed in the Department of Labor and Employment (DOLE), a complaint for the expulsion from SAMAHAN of the following officers: Genaro Capitle (president), Jesus Tumagan (vice-president), Godofredo Pacheco (auditor), and Marcelino Pacheco (board member) (Case No. NCR-00-M-89-11-01). The complaint was founded on said officers' alleged inattentiveness to the economic demands of the workers. However, on September 4, 1989, petitioners Diaz and Alex Ferrer withdrew the petition (p. 590, Rollo).

On September 10, 1989, petitioners conducted a special election of officers of the SAMAHAN (pp. 205 & 583, Rollo). Said election was, however, later questioned by the FFW. Nonetheless, the elected set of officers tried to dissuade the OFC from remitting union dues to the officers led by Capitle who were allied with the FFW. Later, however, Romulo Erlano, one of the officers elected at the special election, manifested to the DOLE that he was no longer objecting to the remittance of union dues to the officers led by Capitle. Petitioners' move to stage a strike based on economic demands was also later disowned by members of the SAMAHAN.

The intraunion squabble came to a head when, on September 11, 1989, a resolution expelling petitioners from the SAMAHAN was issued by the aforesaid union officials headed by Capitle, together with board members George Ignas, Pio Domingo, and Jaime Baynado (pp. 286 & 599, Rollo). The following day, Capitle sent OFC the following letter:

12 September 1989

Mr. Hui Kam Chang

General Manager

Malanday, Valenzuela

Metro Manila

Dear Mr. Chang:

In compliance with Article II, Sec. 3 of the Union Security Clause as enunciated in our Collective Bargaining Agreement, I would like you to dismiss the following employees on the ground of failure to retain membership in good standing:

1. Alex Ferrer

2. Gil de Guzman

3. Henry Diaz

4. Domingo Bancolita

5. Rafael Ferrer, Jr.

Attached herewith is the verified carbon original of the Board Resolution of the union signed by the majority of its officers/directors.

Thank you very much.

Very truly yours,

(Sgd.)

GENARO CAPITLE

President

(p. 66, Rollo.)

Although petitioners received this letter weeks after its date, it appears that on that same date, they had learned about their dismissal from employment as shown by the letter also dated September 13, 1989 which they sent the Federation of Democratic Labor Unions (FEDLU). They volunteered therein to be admitted as members of the FEDLU and requested that they be represented ("katawanin") by said federation before the DOLE in the complaint which they intended to file against the union (SAMAHAN), the FFW and the company for illegal dismissal, reinstatement, and other benefits in accordance with law (p. 74, Rollo).

Thereafter, on various dates, petitioners sent individual letters to Hui Kam Chang professing innocence of the charges levelled against them by the SAMAHAN and the FFW and pleading that they be reinstated (pp. 69-73, Rollo). Their letters appear to have elicited no response.

Thus, contending that their dismissal was without cause and in utter disregard of their right to due process of law, petitioners, through the FEDLU, filed a complaint for illegal dismissal and unfair labor practice before the NLRC against Hui Kam Chang, OFC, Macedonio S. Velasco (as representative of the FFW) the FFW, and the SAMAHAN officers headed by Capitle (p. 75, Rollo).

In due course, after the case was ventilated through position papers and other documents, the labor arbiter rendered a decision dismissing petitioners' complaint (pp. 79-89, Rollo). He found that in dismissing petitioners, OFC was "merely complying with the mandatory provisions of the CBA — the law between it and the union." He added:

To register compliance with the said covenant, all that is necessary is a written request of the union requesting dismissal of the employees who have failed to retain membership in good standing with the union. The matter or question, therefore of determining why and how did complainants fail to retain membership in good standing is not for the company to inquire via formal investigation. By having the request of the union, a legal presumption that the request was born out of a formal inquiry by the union that subject employees failed to exist. This means generally that where a valid closed shop or similar agreement is in force with respect to a particular bargaining unit as in the case a quo, the employer shall refuse to employ any person unless he is a member of the majority union and the employer shall dismiss employees who fail to retain their membership in the majority union. This must be deemed a just cause recognized by law and jurisprudence. The effect is discrimination to encourage membership in other unions. (pp. 86-87, Rollo.)

Hence, the labor arbiter concluded, the dismissal of petitioners was an exercise of legitimate management prerogative which cannot be considered as an unfair labor practice. On whether the SAMAHAN and the FFW could be held liable for illegal dismissal and unfair labor practice, the arbiter opined that since there was no employer-employee relationship between petitioners and respondent unions, the complaint against the latter has no factual and legal bases, because petitioners "should not have confused expulsion from membership in the union as one and the same incident to their subsequent employment termination."

Consequently, petitioners appealed to the NLRC on the grounds that there was prima facie evidence of abuse of discretion on the part of the labor arbiter and that he committed serious errors in his findings of facts.

On June 20, 1991, the NLRC rendered the herein questioned decision affirming in toto the decision of the arbiter. Petitioners motion for the reconsideration of the NLRC decision having been denied, they resorted to the instant petition for certiorari which presents the issue of wether or not respondent Commision gravely abused its discretion in affirming the decision of the labor arbiter which is allegedly in defiance of the elementary principles of procedural due process as the petitioners were summarily dismissed from employment without an investigation having been conducted by the OFC on the veracity of the allegation of the SAMAHAN-FFW that they violated the CBA.

A CBA is the law between the company and the union and compliance therewith is mandated by the express policy to give protection to labor. Said policy should be given paramount consideration unless otherwise provided for by law (Meycauayan College vs. Drilon, 185 SCRA 50 [1990]. A CBA provision for a closed shop is a valid form of union security and it is not a restriction on the right or freedom of association guaranteed by the Constitution (Lirag Textile Mill, Inc. vs. Blanco, 109 SCRA 87 [1981]. However, in the implementation of the provisions of the CBA, both parties thereto should see to it that no right is violated or impaired. In the case at bar, while it is true that the CBA between OFC and the SAMAHAN provided for the dismissal of employees who have not maintained their membership in the union, the manner in which the dismissal was enforced left much to be desired in terms of respect for the right of petitioners to procedural due process.

In the first place, the union has a specific provision for the permanent or temporary "expulsion" of its erring members in its constitution and by-laws ("saligang batas at alituntunin"). Under the heading membership and removal ("pag-aanib at pagtitiwalag"), it states:

Sec. 4. Ang sinumang kasapi ay maaring itwalag (sic) ng Samahan pangsamantala o tuluyan sa pamamagitan (sic) ng tatlo't ikaapat (¾) na bahagi ng dami ng bilang ng Pamunuang Tagapagpaganap. Pagkaraan lamang sa pandinig sa kanyang kaso. Batay sa sumusunod:

(a) Sinumang gumawa ng mga bagay bagay na labag at lihis sa patakaran ng Samahan.

(b) Sinumang gumawa ng mga bagay na maaaring ikabuwag ng Samahan.

(c) Hindi paghuhulog ng butaw sa loob ng tatlong buwan na walang sakit o Doctor's Certificate.

(d) Hindi pagbibigay ng abuloy na itinatadhana ng Samahan.

(e) Sinumang kasapi na natanggal sa kapisanan at gustong, sumapi uli ay magpapanibago ng bilang, mula sa taon ng kanyang pagsapi uli sa Samahan. (Emphasis supplied; Ibid., p. 177).

No hearing ("pandinig") was ever conducted by the SAMAHAN to look into petitioners' explanation of their moves to oust the union leadership under Capitle, or their subsequent affiliation with FEDLU. While it is true that petitioners' actions might have precipitated divisiveness and, later, showed disloyalty to the union, still, the SAMAHAN should have observed its own constitution and by-laws by giving petitioners an opportunity to air their side and explain their moves. If, after an investigation the petitioners were found to have violated union rules, then and only then should they be subjected to proper disciplinary measures.

Here lies the distinction between the facts of this case and that of Cariño vs. NLRC (185 SCRA 177 [1990]) upon which the Solicitor General heavily relies in supporting the stand of petitioners. In Cariño, the erring union official was given the chance to answer the complaints against him before an investigating committee created for that purpose. On the other, hand, herein petitioners were not given even one opportunity to explain their side in the controversy. This procedural lapse should not have been overlooked considering the union security provision of the CBA.

What aggravated the situation in this case is the fact that OFC itself took for granted that the SAMAHAN had actually conducted an inquiry and considered the CBA provision for the closed shop as self-operating that, upon receipt of a notice that some members of the SAMAHAN had failed to maintain their membership in good standing in accordance with the CBA, it summarily dismissed petitioners. To make matters worse, the labor arbiter and the NLRC shared the same view in holding that "(t)he matter or question, therefore, of determining why and how did complainants fail to retain membership in good standing is not for the company to inquire via formal investigation" (pp. 87 & 135, Rollo). In this regard, the following words of my learned brother, Mr. Justice Feliciano, in the Resolution in Cariño are apt:

4. Turning now to the involvement of the Company in the dismissal of petitioner Cariño, we note that the Company upon being formally advised in writing of the expulsion of petitioner Cariño from the Union, in turn simply issued a termination letter to Cariño, the termination being made effective the very next day. We believe that the Company should have given petitioner Cariño an opportunity to explain his side of the controversy with the Union. Notwithstanding the Union's Security Clause in the CBA, the Company should have reasonably satisfied itself by its own inquiry that the Union had not been merely acting arbitrarily and capriciously in impeaching and expelling petitioner Cariño . . .

xxx xxx xxx

5. We conclude that the Company had failed to accord to petitioner Cariño the latter's right to procedural due process. The right 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, is not wiped away by a Union Security Clause or a Union Shop Clause in a CBA. An employee is entitled to be protected not only from a company which disregards his rights but also from his own Union the leadership of which could yield to the temptation of swift and arbitrary expulsion from membership and hence dismissal from his job. (pp. 186 & 189.)

The need for a company investigation is founded on the consistent ruling of this Court that the twin requirements of notice and hearing which are essential elements of due process must be met in employment-termination cases. The employee concerned must be notified of the employer's intent to dismiss him and of the reason or reasons for the proposed dismissal. The hearing affords the employee an opportunity to answer the charge or charges against him and to defend himself therefrom before dismissal is effected (Kwikway Engineering Works vs. NLRC, 195 SCRA 526 [1991]; Salaw vs. NLRC, 202 SCRA 7 [1991]). Observance to the letter of company rules on investigation of an employee about to be dismissed is not mandatory. It is enough that there is due notice and hearing before a decision to dismiss is made (Mendoza vs. NLRC, 195 SCRA 606 (1991]). But even if no hearing is conducted, the requirement of due process would have been met where a chance to explain a party's side of the controversy had been accorded him (Philippine Airlines, Inc. vs. NLRC, 198 SCRA 748 [1991]).

If an employee may be considered illegally dismissed because he was not accorded fair investigation (Hellenic Philippine Shipping vs. Siete, 195 SCRA 179 (1991]), the more reason there is to strike down as an inexcusable and disdainful rejection of due process a situation where there is no investigation at all (See: Colegio del Sto. Niño vs. NLRC, 197 SCRA 611 [1991]; Artex Development Co., Inc. vs. NLRC, 187 SCRA 611 [1990]). The need for the observance of an employee's right to procedural due process in termination cases cannot be overemphasized. After all, one's employment, profession, trade, or calling is a "property right" and the wrongful interference therewith gives rise to an actionable wrong (Callanta vs. Carnation Philippines, Inc., 145 SCRA 268 (1986]). Verily, a man's right to his labor is property within the meaning of constitutional guarantees which he cannot be deprived of without due process (Batangas Laguna Tayabas Bus Co. vs. Court of Appeals, 71 SCRA 470 [1976]).

While the law recognizes the right of an employer to dismiss employees in warranted cases, it frowns upon arbitrariness as when employees are not accorded due process (Tan, Jr. vs. NLRC, 183 SCRA 651 [1990]). Thus, the prerogatives of the OFC to dismiss petitioners should not have been whimsically done for it unduly exposed itself to a charge of unfair labor practice for dismissing petitioners in line with the closed shop provision of the CBA, without a proper hearing (Tropical Hut Employees' Union-CGW vs. Tropical Hut Food Market, Inc., 181 SCRA 173 [1990]; citing Binalbagan-Isabela Sugar Co., Inc. (BISCOM) vs. Philippine Association of Free Labor Unions (PAFLU), 8 SCRA 700 [1983]). Neither can the manner of dismissal be considered within the ambit of managerial prerogatives, for while termination of employment is traditionally considered a management prerogative, it is not an absolute prerogative subject as it is to limitations founded in law, the CBA, or general principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]).

Under Rule XIV, Sections 2, 5, and 6 of the rules implementing Batas Pambansa Blg. 130, the OFC and the SAMAHAN should solidarity indemnify petitioners for the violation of their right to procedural due process (Great Pacific Life Assurance Corporation vs. NLRC, 187 SCRA 694[1990], citing Wenphil vs. NLRC, 170 SCRA 69 [1989], Cariño vs. NLRC, supra). However, such penalty may be imposed only where the termination of employment is justified and not when the dismissal is illegal as in this case where the damages are in the form of back wages.

As earlier discussed, petitioners' alleged act of sowing disunity among the members of the SAMAHAN could have been ventilated and threshed out through a grievance procedure within the union itself. But resort to such procedure was not pursued. What actually happened in this case was that some members, including petitioners, tried to unseat the SAMAHAN leadership headed by Capitle due to the latter's alleged inattention to petitioners' demands for the implementation of the P25-wage increase which took effect on July 1, 1989. The intraunion controversy was such that petitioners even requested the FFW to intervene to facilitate the enforcement of the said wage increase (Petition, p. 54; p. 55, Rollo).

Petitioners sought the help of the FEDLU only after they had learned of the termination of their employment upon the recommendation of Capitle. Their alleged application with federations other than the FFW (Labor Arbiter's Decision, pp. 4-5; pp. 82-83, Rollo) can hardly be considered as disloyalty to the SAMAHAN, nor may the filing of such applications denote that petitioners failed to maintain in good standing their membership in the SAMAHAN. The SAMAHAN is a different entity from FFW, the federation to which it belonged. Neither may it, be inferred that petitioners sought disaffiliation from the FFW for petitioners had not formed a union distinct from that of the SAMAHAN. Parenthetically, the right of a local union to disaffiliate from a federation in the absence of any provision in the federation's constitution preventing disaffiliation of a local union is legal (People's Industrial and Commercial Employees and Worker's Org. (FFW) vs. People's Industrial and Commercial Corp., 112 SCRA 440 (1982]). Such right is consistent with the constitutional guarantee of freedom of association (Tropical Hut Employees Union-CGW vs. Tropical Hut Food Market, Inc., 181 SCRA 173 [1990]).

Hence, while petitioners' act of holding a special election to oust Capitle, et al. may be considered as an act of sowing disunity among the SAMAHAN members, and, perhaps, disloyalty to the union officials, which could have been dealt with by the union as a disciplinary matter, it certainly cannot be considered as constituting disloyalty to the union. Faced with a SAMAHAN leadership which they had tried to remove as officials, it was but a natural act of self-preservation that petitioners fled to the arms of the FEDLU after the union and the OFC had tried to terminate their employment. Petitioners should not be made accountable for such an act.

With the passage of Republic Act No. 6715 which took effect on March 21, 1989, Article 279 of the Labor Code was amended to read as follows:

Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

and as implemented by Section 3, Rule 8 of the 1990 New Rules of Procedure of the National Labor Relations Commission, it would seem that the Mercury Drug Rule (Mercury Drug Co., Inc. vs. Court of Industrial Relations, 56 SCRA 694 [1974]) which limited the award of back wages of illegally dismissed workers to three (3) years "without deduction or qualification" to obviate the need for further proceedings in the course of execution, is no longer applicable.

A legally dismissed employee may now be paid his back wages, allowances, and other benefits for the entire period he was out of work subject to the rule enunciated before the Mercury Drug Rule, which is that the employer may, however, deduct any amount which the employee may have earned during the period of his illegal termination (East Asiatic Company, Ltd. vs. Court of Industrial Relations, 40 SCRA 521 [1971]). Computation of full back wages and presentation of proof as to income earned elsewhere by the illegally dismissed employee after his termination and before actual reinstatement should be ventilated in the execution proceedings before the Labor Arbiter concordant with Section 3, Rule 8 of the 1990 new Rules of Procedure of the National Labor Relations Commission.

Inasmuch as we have ascertained in the text of this discourse that the OFC whimsically dismissed petitioners without proper hearing and has thus opened OFC to a charge of unfair labor practice, it ineluctably follows that petitioners can receive their back wages computed from the moment their compensation was withheld after their dismissal in 1989 up to the date of actual reinstatement. In such a scenario, the award of back wages can extend beyond the 3-year period fixed by the Mercury Drug Rule depending, of course, on when the employer will reinstate the employees.

It may appear that Article 279 of the Labor Code, as amended by Republic Act No. 6715, has made the employer bear a heavier burden than that pronounced in the Mercury Drug Rule, but perhaps Republic Act No. 6715 was enacted precisely for the employer to realize that the employee must be immediately restored to his former position, and to impress the idea that immediate reinstatement is tantamount to a cost-saving measure in terms of overhead expense plus incremental productivity to the company which lies in the hands of the employer.

WHEREFORE, the decision appealed from is hereby SET ASIDE and private respondents are hereby ordered to reinstate petitioners to their former or equivalent positions without loss of seniority rights and with full back wages, inclusive of allowances and other benefits or their monetary equivalent, pursuant to Article 279 of the Labor Code, as amended by Republic Act No. 6715.

SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.