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PHIL. AIRLI NES V NLRC (PALEA)225 SCRA 301MELO; August 13, 1993

NATUREPetition for certiorari

FACTS- On March 15, 1985, PAL completely revised its 1966 Code of Discipline. The Code was circulated among the employees and was immediately implemented,and some employees were subjected to the disciplinary measures.- The Philippine Airlines Employees Association (PALEA) filed a complaint before the NLRC contending that PAL, by i ts unilateral implementation of the Code,w as guilty of unfair labor practice, specifically Paragraphs E and G of Art 249 and Art 253 of the Labor Code. PALEA alleged that copies of the Code had beencirc ulated in limited numbers ; that being penal in nature the Code must conform with the requirements of sufficient publication, and that the Code was arbitrary,oppress ive, and prejudicial to the rights of the employ ees. It prayed that implementation of the Code be held in abey ance; that PAL should discuss the substanceof the Code with PALEA; that employ ees dismissed under the Code reinstated and their cases subjected to further hearing; and that PAL be declared guilty ofunfair labor practice and be ordered to pay damages.- PAL filed a MTD, asserting its prerogativ e as an employer to prescribe rules and regulations regarding employees' conduct in carrying out their duties andfunctions, and alleging that it had not vio lated the CBA or any provis ion of the Labor Code.

ISSUE1. WON the formulation of a Code of Discipline among employees is a shared responsibility of the employer and the employees

HELD1. YES.Ratio Employees have a right to participate in the deliberation of matters w hich may affect their rights and the formulation of policies relative thereto and onesuch matter is the formulation of a code of discipline.ReasoningIt was only on March 2, 1989, with the approval of RA 6715, amending Art 211 of the Labor Code, that the law ex plicitly considered it a State policy"to ensure the participation of w orkers in decis ion and policy-making processes affecting their rights, duties and welfare." However, even in the absence of saidclear prov ision of law, the exercise of management prerogatives was never considered boundless. Thus, in Cruz vs. Medina, it w as held that management'sprerogativ es must be without abuse of discretion.- In San Miguel Brew ery Sales Force Union vs. Ople, we upheld the company's right to implement a new system of distributing its products, but gave thefollow ing caveat: So long as a company's management prerogatives are exercised in good faith for the advancement the employer's interest and not for thepurpose of defeating or circ umventing the rights of the employ ee, under special laws or under valid agreements, this Court will uphold them.- All this points to the conc lusion that the exercise of managerial prerogatives is not unlimited. It is circumscribed by limitations found in law, a CBA, or thegeneral principles of fair play and justice. Moreover, it must be duly established that the prerogative being invoked is clearly a managerial one.- Verily , a line mus t be drawn between management prerogatives regarding business operations per se and those which affect the rights of the employ ees. Intreating the latter, management should see to it that its employ ees are at least properly informed of its decisions or modes of action. PAL asserts that all itsemploy ees have been furnished copies of the Code, the LA and the NLRC found to the contrary , which finding, is entitled to great respect.

- PALEA recognizes the right of the Company to determine matters of management policy and Company operations and to direct its manpower. Management ofthe Company includes the right to organize, p lan, direct and control operations , to hire, as sign employees to work, transfer employees from one department toanother, to promote, demote, discipline, suspend or discharge employees for just cause; to lay-off employees for v alid and legal causes, to introduce new orimprov ed methods or facilities or to change exis ting methods or facilities and the right to make and enforce Company rules and regulations to carry out thefunctions of managem ent. The exercise by management of its prerogativ e shall be done in a jus t, reasonable, humane and/or lawful manner.- Such prov ision in the CBA may not be interpreted as cession of employees' rights to participate in the deliberation of matters w hich may affect their rights andthe formulation of polic ies relativ e thereto. And one such matter is the formulation of a code of disc ipline. Indus trial peace cannot be achieved if the employeesare denied their just participation in the discussion of matters affecting their rights.Disposition Petition is DISMISSED.

Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISION

G.R. No. 85985 August 13, 1993PHILIPPINE AIRLINES, INC. (PAL), petitioner,vs.NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRAand PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents.Solon Garcia for petitioner.Adolpho M. Guerzon for respondent PALEA.

MELO, J.:In the instant petition for certiorari, the Court is presented the issue of whether or not the formulationof a Code of Discipline among employees is a shared responsibility of the employer and theemployees.On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of

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2. Reconsider the cases of employees meted with penalties under the New Code of Discipline andremand the same for further hearing; and3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the decision.All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.SO ORDERED. (p. 40, Rollo.)PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion,with Presiding Commissioner Bonto-Perez and Commissioner Maglaya concurring, found noevidence of unfair labor practice committed by PAL and affirmed the dismissal of PALEA's charge.Nonetheless, the NLRC made the following observations:Indeed, failure of management to discuss the provisions of a contemplated code of discipline whichshall govern the conduct of its employees would result in the erosion and deterioration of anotherwise harmonious and smooth relationship between them as did happen in the instant case.There is no dispute that adoption of rules of conduct or discipline is a prerogative of managementand is imperative and essential if an industry, has to survive in a competitive world. But labor climatehas progressed, too. In the Philippine scene, at no time in our contemporary history is the need for acooperative, supportive and smooth relationship between labor and management more keenly felt ifwe are to survive economically. Management can no longer exclude labor in the deliberation andadoption of rules and regulations that will affect them.The complainant union in this case has the right to feel isolated in the adoption of the New Code ofDiscipline. The Code of Discipline involves security of tenure and loss of employment a propertyright! It is time that management realizes that to attain effectiveness in its conduct rules, there shouldbe candidness and openness by Management and participation by the union, representing itsmembers. In fact, our Constitution has recognized the principle of "shared responsibility" between

employers and workers and has likewise recognized the right of workers to participate in "policy anddecision-making process affecting their rights . . ." The latter provision was interpreted by theConstitutional Commissioners to mean participation in "management"' (Record of the ConstitutionalCommission, Vol. II).In a sense, participation by the union in the adoption of the code if conduct could have acceleratedand enhanced their feelings of belonging and would have resulted in cooperation rather thanresistance to the Code. In fact, labor-management cooperation is now "the thing." (pp. 3-4, NLRCDecision ff. p. 149, Original Record.)Respondent Commission thereupon disposed:WHEREFORE, premises considered, we modify the appealed decision in the sense that the NewCode of Discipline should be reviewed and discussed with complainant union, particularly thedisputed provisions [.] (T)hereafter, respondent is directed to furnish each employee with a copy ofthe appealed Code of Discipline. The pending cases adverted to in the appealed decision if still in

the arbitral level, should be reconsidered by the respondent Philippine Air Lines. Other dispositionsof the Labor Arbiter are sustained.SO ORDERED. (p. 5, NLRC Decision.)PAL then filed the instant petition for certioraricharging public respondents with grave abuse ofdiscretion in: (a) directing PAL "to share its management prerogative of formulating a Code ofDiscipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogative withthe union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to reconsiderpending cases still in the arbitral level (p. 7, Petition; p. 8,Rollo.)As stated above, the Principal issue submitted for resolution in the instant petition is whethermanagement may be compelled to share with the union or its employees its prerogative offormulating a code of discipline.PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated thesharing of responsibility therefor between employer and employee.

Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure theparticipation of workers in decision and policy-making processes affecting the rights, duties andwelfare." However, even in the absence of said clear provision of law, the exercise of managementprerogatives was never considered boundless. Thus, in Cruz vs. Medina(177 SCRA 565 [1989]) itwas held that management's prerogatives must be without abuse of discretion.In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople(170 SCRA 25 [1989]), we upheld thecompany's right to implement a new system of distributing its products, but gave the followingcaveat:So long as a company's management prerogatives are exercised in good faith for the advancementof the employer's interest and not for the purpose of defeating or circumventing the rights of theemployees under special laws or under valid agreements, this Court will uphold them.(at p. 28.)



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All this points to the conclusion that the exercise of managerial prerogatives is notunlimited. It iscircumscribed by limitations found in law, a collective bargaining agreement, or the generalprinciples of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]).Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC(154 713 [1987]), it must be dulyestablished that the prerogative being invoked is clearly a managerial one.A close scrutiny of the objectionable provisions of the Code reveals that they are not purelybusiness-oriented nor do they concern the management aspect of the business of the company as inthe San Miguelcase. The provisions of the Code clearly have repercusions on the employee's rightto security of tenure. The implementation of the provisions may result in the deprivation of anemployee's means of livelihood which, as correctly pointed out by the NLRC, is a property right(Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the casewhich border on infringement of constitutional rights, we must uphold the constitutional requirementsfor the protection of labor and the promotion of social justice, for these factors, according to JusticeIsagani Cruz, tilt "the scales of justice when there is doubt, in favor of the worker" (EmployeesAssociation of the Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991]635).Verily, a line must be drawn between management prerogatives regarding business operations perseand those which affect the rights of the employees. In treating the latter, management should seeto it that its employees are at least properly informed of its decisions or modes action. PAL assertsthat all its employees have been furnished copies of the Code. Public respondents found to thecontrary, which finding, to say the least is entitled to great respect.PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27,1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce company rules and

regulations to carry out the functions of management withouthaving to discuss the same withPALEA and much less, obtain the latter'sconformity thereto" (pp. 11-12, Petitioner's Memorandum;pp 180-181, Rollo.) Petitioner's view is based on the following provision of the agreement:The Association recognizes the right of the Company to determine matters of management it policyand Company operations and to direct its manpower. Management of the Company includes theright to organize, plan, direct and control operations, to hire, assign employees to work, transferemployees from one department, to another, to promote, demote, discipline, suspend or dischargeemployees for just cause; to lay-off employees for valid and legal causes, to introduce new orimproved methods or facilities or to change existing methods or facilities and the right to make andenforce Company rules and regulations to carry out the functions of management.The exercise by management of its prerogative shall be done in a just reasonable, humane and/orlawful manner.Such provision in the collective bargaining agreement may not be interpreted as cession of

employees' rights to participate in the deliberation of matters which may affect their rights and theformulation of policies relative thereto. And one such mater is the formulation of a code of discipline.Indeed, industrial peace cannot be achieved if the employees are denied their just participation inthe discussion of matters affecting their rights. Thus, even before Article 211 of the labor Code (P.D.442) was amended by Republic Act No. 6715, it was already declared a policy of the State, "(d) Topromote the enlightenment of workers concerning their rights and obligations . . . as employees."This was, of course, amplified by Republic Act No 6715 when it decreed the "participation of workersin decision and policy making processes affecting their rights, duties and welfare." PAL's positionthat it cannot be saddled with the "obligation" of sharing management prerogatives as during theformulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner'sMemorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While such "obligation" was not yetfounded in law when the Code was formulated, the attainment of a harmonious labor-managementrelationship and the then already existing state policy of enlightening workers concerning their rights

as employees demand no less than the observance of transparency in managerial moves affectingemployees' rights.Petitioner's assertion that it needed the implementation of a new Code of Discipline considering thenature of its business cannot be overemphasized. In fact, its being a local monopoly in the businessdemands the most stringent of measures to attain safe travel for its patrons. Nonetheless, whateverdisciplinary measures are adopted cannot be properly implemented in the absence of fullcooperation of the employees. Such cooperation cannot be attained if the employees are restive onaccount, of their being left out in the determination of cardinal and fundamental matters affectingtheir employment.WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No specialpronouncement is made as to costs.SO ORDERED.Feliciano, Bidin, Romero and Vitug, JJ., concur.



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G.R. No. L-53515 February 8, 1989SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,vs.

HON. BLAS F. OPLE, as Ministe r of Labor and SAN MIGUEL CORPORATION, respondents.Lorenzo F. Miravite for petitioner.Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.Siguion Reyna, Montecillo & Ongsiako for private respondent.

GRI O-AQUINO, J.:This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in LaborCase No. AJML-069-79, approving the private respondent's marketing scheme, known as the"Complementary Distribution System" (CDS) and dismissing the petitioner labor union's complaintfor unfair labor practice.On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31,1981) was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and theprivate respondent, San Miguel Corporation, Section 1, of Article IV of which provided as follows:Art. IV, Section 1. Employees within the appropriate bargaining unit shall be entitled to a basicmonthly compensation plus commission based on their respective sales. (p. 6, Annex A; p. 113,Rollo.)In September 1979, the company introduced a marketing scheme known as the "ComplementaryDistribution System" (CDS) whereby its beer products were offered for sale directly to wholesalersthrough San Miguel's sales offices.The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor,with a notice of strike on the ground that the CDS was contrary to the existing marketing schemewhereby the Route Salesmen were assigned specific territories within which to sell their stocks ofbeer, and wholesalers had to buy beer products from them, not from the company. It was allegedthat the new marketing scheme violates Section 1, Article IV of the collective bargaining agreementbecause the introduction of the CDS would reduce the take-home pay of the salesmen and theirtruck helpers for the company would be unfairly competing with them.The complaint filed by the petitioner against the respondent company raised two issues: (1) whether

the CDS violates the collective bargaining agreement, and (2) whether it is an indirect way of bustingthe union.In its order of February 28, 1980, the Minister of Labor found:... We see nothing in the record as to suggest that the unilateral action of the employer ininaugurating the new sales scheme was designed to discourage union organization or diminish itsinfluence, but rather it is undisputable that the establishment of such scheme was part of its overallplan to improve efficiency and economy and at the same time gain profit to the highest. While it maybe admitted that the introduction of new sales plan somewhat disturbed the present set-up, thechange however was too insignificant as to convince this Office to interpret that the innovationinterferred with the worker's right to self-organization.Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is already aprejudgment of the plan's viability and effectiveness. It is like saying that the plan will not work out tothe workers' [benefit] and therefore management must adopt a new system of marketing. But what

the petitioner failed to consider is the fact that corollary to the adoption of the assailed marketingtechnique is the effort of the company to compensate whatever loss the workers may suffer becauseof the new plan over and above than what has been provided in the collective bargaining agreement.To us, this is one indication that the action of the management is devoid of any anti-union hues. (pp.24-25, Rollo.)The dispositive part of the Minister's Order reads:WHEREFORE, premises considered, the notice of strike filed by the petitioner, San Miguel BrewerySales Force Union-PTGWO is hereby dismissed. Management however is hereby ordered to pay anadditional three (3) months back adjustment commissions over and above the adjusted commissionunder the complementary distribution system. (p. 26, Rollo.)The petition has no merit.Public respondent was correct in holding that the CDS is a valid exercise of managementprerogatives:

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Except as limited by special laws, an employer is free to regulate, according to his own discretionand judgment, all aspects of employment, including hiring, work assignments, working methods,time, place and manner of work, tools to be used, processes to be followed, supervision of workers,working regulations, transfer of employees, work supervision, lay-off of workers and the discipline,dismissal and recall of work. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic SavingsBank vs. CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor Relations Law, 1985 Ed., p. 44.)(Emphasis ours.)Every business enterprise endeavors to increase its profits. In the process, it may adopt or devisemeans designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:... Even as the law is solicitous of the welfare of the employees, it must also protect the right of anemployer to exercise what are clearly management prerogatives. The free will of management toconduct its own business affairs to achieve its purpose cannot be denied.So long as a company's management prerogatives are exercised in good faith for the advancementof the employer's interest and not for the purpose of defeating or circumventing the rights of theemployees under special laws or under valid agreements, this Court will uphold them (LVN PicturesWorkers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and GarmentWorkers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offerto compensate the members of its sales force who will be adversely affected by the implementationof the CDS by paying them a so-called "back adjustment commission" to make up for thecommissions they might lose as a result of the CDS proves the company's good faith and lack ofintention to bust their union.WHEREFORE, the petition for certiorari is dismissed for lack of merit.SO ORDERED.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

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GTE Directories Corp. v. GTE Directories Corp. Employees Union (1991)

Minister Sanchez decided the dispute in the exercise of the jurisdiction assumed by his predecessor in accordance with

Article 263 (g) of the Labor Code.

Even that assumption s is open to question. The production and publication of telephone directories, which is theprincipal activity of GTE, can scarcely be described as an industry affecting the national interest. GTE is a publishing firm

chiefly dependent on the marketing and sale of advertising space for its not inconsiderable revenues.

Its services, while of value, cannot be deemed to be in the same category of such essential activities as "the generation

or distribution of energy" or those undertaken by "banks, hospitals, and export -oriented industries."

It cannot be regarded as playing as vital a role in communication as other mass media. The small number of

employees involved in the dispute, the employer's payment of "P10 million in income tax alone to the Philippine

government," and the fact that the "top officers of the union were dismissed during the conciliation process," obviously

do not suffice to make the dispute in the case at bar one "adversely affecting the national interest."

G.R. No. 76219 May 27, 1991GTE DIRECTORIES CORPORATION, petitioner,vs.HON. AUGUSTO S. SANCHEZ and GTE DIRECTORIES CORPORATION EMPLOYEES UNION, respondents.Siguion Reyna, Montecillo & Ongsiako for petitioner.Ignacio P. Lacsina for respondent Union.

NARVASA, J.:pGTE Directories Corporation (hereafter, simply GTE) is a foreign corporation engaged in the Philippines in thebusiness of publishing the PLDT (Philippine Long Distance Telephone Company) telephone directories for MetroManila and several provinces.The record shows that initially, the practice was for its sales representatives to be given work assignments withinspecific territories by the so-called "draw method." These sales terr itories were so plotted or mapped out as to have"an equal number of advertisers as well as . . . revenue. . ." Within these territories, the sales representativestherein assigned were given quotas; i.e., they had to "achieve a certain amount of revenue or advertisements sold,decreased, increased or cancelled within a given period of time."A territory was not fully released to the salesperson for handling at one time, but assigned in increments or partialreleases of account. Now, increments were given by the so-called "Grid System," grids (divisions or sections)within each territory usually numbering five ( i.e., Grids I to V). Each grid was assigned a fixed closing dated. Atsuch closing date, a salesperson should have achieved a certain amount of the revenue target designated for hisgrid; otherwise, he loses the forthcoming grid or forfeits the remaining grids not yet received. The Grid System wasinstalled for the following reasons: (1) to give all salespersons an opportunity to contact advertisers within areasonable period; (2) to assure GTE that it will get its share of advertising budget from clients as early as possible;and (3) to ensure an even flow of work throughout the company.This practice was observed from 1980 until sometime in June, 1984 when GTE realized that competition amongmedia for a share of the advertising revenue had become so keen as to require quick reaction. GTE thereforelaunched an aggressive campaign to get what it considered to be its rightful share of the advertising budget of itsclientele before it could be allocated to other media (newspaper, television, radio, etc.) It adopted a new strategy bywhich:(1) all its sales representatives were required, as in the past, to achieve specified revenue targets (advertisementssold) within pre-determined periods;(2) in cases of cancelled revenue accounts or advertisements, it required all its salespersons to re-establishcontact and renew the same within a fixed period;(3) if the cancelled revenue accounts were not renewed within the assigned period, said accounts were declared,for a set period, OPEN TERRITORY to all sales representatives including the one who reported the cancellation;(4) if not renewed during said open territory period, said cancelled accounts were deemed no longer "openterritory," and the same could be referred for handling to contractual salespersons and/or outside agencies.A new "Sales Evaluation and Production Policy" was thereafter drawn up. GTE informed all its salesrepresentatives of the new policy in a Memorandum dated October 12, 1984. The new policy was regarded as animprovement over the previous Sales Production Policy, which solely considered quota attainment and handling inthe Sales Report for the purpose of evaluating performance.It appears that the new policy did not sit well with the union. It demanded that it be given 15 days "to raisequestions or objections to or to seek reconsideration of the sales and administrative practices issued by theCompany on June 14, 1984." This, GTE granted, and by letter dated October 26, 1984, the union submitted itsproposals for "revisions, corrections and deletions of some policies incorporated in the Sales AdministrativePractices issued on June 14, 1984 including the new policies recently promulgated by Management."GTE next formulated a new set of "Sales Administrative Practices," pursuant to which it issued on July 9, 1985, amemorandum requiring all Premise Sales Representatives (PSRs) to submit individual reports reflecting target

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revenues as of deadlines, set at August 2, 1985. This was superseded by another memorandum dated July 16,1985, revising the previous schedules on the basis of "the consensus reached after several discussions with yourDSMs, as well as, most of you," and pointing out that "the amount required on the 1st deadline (P30,000) . . . hasbeen reduced further (to P20,000) having taken into consideration that most of your accounts you have already onhand are with your respective "prep artists""On August 5, 1985, GTE's Sales Manager sent another Memorandum to "all premise sales personnel." Thatmemorandum observed that most of them had omitted to submit reports regarding "the target of P20,000.00revenue handled on . . . (the) first Grid deadline of August 2, 1985" notwithstanding that "severalconsultations/discussions . . . (had) been held with your DSMs, as well as yourselves in different and separateoccasions," and "these schedules/targets were drawn up by no less than you, collectively," and notwithstandingthat "this has been a practice of several years." It closed with the expressed expectation that the sales reports

would be submitted "no later than 2:00 P.M. reflecting P20,000.00 revenue handled, as per memo re: GridDeadlines dated July 16, 1985."But as before, the sales representatives did not submit the reports. Instead their union , GTE DirectoriesCorporation Employees Union (hereafter, simply the union), sent a letter to the Sales Manager dated August 5,1985. 1 The letter stated that in fact "only one out of nineteen sales representatives met the P20,000 revenuehandled on our first grid deadline of August 2;" that the schedule was not "drawn (up) as a result of an agreementof all concerned" since GTE had failed to get "affirmative responses" from "clustered groups of SRs;" that the unioncould not "Comprehend how cancelling non-cancelling accounts help production;" and that its members would fail"expectations of cancelling . . . non-cancelling accounts" since it "would result to further reduction of our pay which(they) believe is the purpose of your discriminate and whimsical memo."The following day, on August 6, 1985, the union filed in behalf of the sales representatives, a notice of strikegrounded on alleged unfair labor practices of GTE consisting of the following:1. Refusal to bargain on unjust sales policies particularly on the failure to meet the 75% of the average salesproduction for two consecutive years;2. Open territory of accounts;3. Illegal suspension of Brian Pineda, a union officer; and4. Non-payment of eight days' suspension pay increase.In due course, the Bureau of Labor Relations undertook to conciliate the dispute.On the same day, August 6, 1985, GTE sent still another memorandum to sixteen (16) of its premise salesrepresentatives, this time through its Director for Marketing & Sales, requiring submission of "individual reportsreflecting target revenues as of grid deadlines . . . not later than 4:00 P.M. . . ." 2 No compliance was made. GTEthereupon suspended its sales representatives "without pay effective August 12, 1985 for five (5) working days"and warned them that their failure to submit the requisite reports by August 19, 1985 would merit "more drasticdisciplinary actions." Still, no sales representative complied with the requirement to submit the reports ("list ofaccounts to be cancelled"). So, by memorandum of the Marketing Director dated August 19, 1985, all the salesrepresentatives concerned were suspended anew "effective August 20, 1985 until you submit the . . . (report)."Finally, GTE gave its sales representatives an ultimatum. By memorandum dated August 23, 1985, individuallyaddressed to its sales representatives, GTE required them, for the last time, to submit the required reports ("list ofaccounts to be cancelled") within twenty-four (24) hours from receipt of the memorandum; otherwise, they would beterminated "for cause." Again not one sales representatives submitted a report. Instead, on August 29, 1985, theUnion President sent an undated letter to GTE (addressed to its Director for Marketing & Sales) acknowledgingreceipt of the notice of their suspension on August 19, 1985 in view of their "continued refusal to submit the list ofaccounts to be cancelled," professing surprise at being "served with a contradictory notice, giving us this time 24hours to submit the required list, without the suspension letter, which we consider as still in force, being firstrecalled or withdrawn," asking that they be informed which of the two directives should be followed, and reservingtheir "right to take such action against you personally for your acts of harassment and intimidation which are clearlydesigned to discourage our legitimate union activities in protesting management's continious (sic) unfair laborpractices."Consequently, by separate letters dated August 29, 1985 individually received, GTE terminated the employment ofthe recalcitrant sales representatives, numbering fourteen, with the undertaking to give them "separation pay, uponproper clearance and submission of company documents, material etc., in . . . (their) possession." Among thosedismissed were the union's president and third vice president, and several members of its board of directors. OnSeptember 2, 1985, the union declared a strike in which about 60 employees participated.During all this time, conciliation efforts were being exerted by the Bureau of Labor Relations, including attempts to

prevent the imposition of sanctions by GTE on its employees, and the strike itself. When these proved futile, ActingLabor Minister Vicente Leogardo, Jr. issued an Order dated December 6, 1985 assuming jurisdiction over thedispute. The order made the following disposition, to wit:WHEREFORE, this Office hereby assumes jurisdiction over the labor dispute at G.T.E. Directories, pursuant toArticle 264 (g) of the Labor Code of the Philippines, as amended. Accordingly, all striking workers including thosewho were dismissed during the conciliation proceedings, except those who have already resigned, are herebydirected to return to work and the management of G.T.E. Directories to accept all returning employees under thesame terms and conditions prevailing previous to the strike notice and without prejudice to the determination of theobligation and rights of the parties or to the final outcome of this dispute. The Bureau of Labor Relations is herebydirected to hear the dispute and submit its recommendations within 15 days upon submission of the case forresolution.All concerned including the military and police authorities are hereby requested to assist in the implementation ofthis Order."The Acting Secretary opined that the dispute "adversely affects the national interest," because:



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1) GTE, a "100% foreign owned" company, had, as publisher of "PLDT's Metro Manila and provincialdirectories . . . earned a total of P127,038,463 contributing close to P10 million in income tax alone to the Philippinegovernment," and that "major contribution to the national economy . . . (was) being threatened because of thestrike;" and2) "top officers of the union were dismissed during the conciliation process thereby compounding the dispute,"Reconsideration of this Order was sought by GTE by motion filed on December 16, 1985, on the ground that 1) "the basis for assumption of jurisdiction is belied by the facts and records of the case and hence, unwarranted;"2) "national interest is not adversely affected to warrant assumption of jurisdiction by (the) Office of the Minister ofLabor and Employment;" and3) "assumption of jurisdiction by the . . . Minister . . . without prior consultation with the parties violates thecompany's right to due process of law."

GTE however reiterated its previously declared "position that with or without the order now being questioned, it willaccept all striking employees back to work except the fourteen (14) premise sales representatives who weredismissed for cause pr ior to the strike."By Resolution of then Labor Minister Blas Ople dated January 20, 1986, GTE's motion for reconsideration wasdenied. The order noted inter aliathat GTE had "accepted back to work all the returning workers except four teen(14) whom it previously dismissed insisting that they were legally dismissed for violation of company rules and,therefore, are not included and may not be reinstated on the basis of a return -to-work order," and that "they weredismissed for their alleged failure to comply with the reportorial requirement under the Sales and AdministrativePractices in effect since 1981 but which for the present is the subject of negotiations between the parties." TheOrder then 1) adverted to the "general rule (that) promulgations of company policies and regulations are basic managementprerogatives although the principle of collective bargaining encompasses almost all relations between the employerand its employees which are best threshed out through negotiations, . . . (and that) it is recognized that companypolicies and regulations are, unless shown to be grossly oppressive or contrary to law, generally binding and validon the parties until finally revised or amended unilaterally or preferably through negotiations or by competent

authorities;"2) affirmed the "recognized principle of law that company policies and regulations are, unless shown to be grosslyoppressive or contrary to law, generally binding (and) valid on the parties and must be complied with until finallyrevised or amended unilaterally or preferably through negotiations or by competent authorities;" and3) closed by pointing out that "as a basic principle, the matter of the acceptability of company policies and rules is aproper subject of collective negotiations between the parties or arbitration if necessary."In a clarificatory Order dated January 21, 1986, Minister Ople reiterated the proposition that "promulgations ofcompany policies and regulations are basic management prerogatives," and that "unless shown to be grosslyoppressive or contrary to law," they are "generally binding and valid on the parties and must be complied with untilfinally revised or amended unilaterally or preferably, through negotiations or by competent authorities."Adjudication of the dispute on the merits was made on March 31, 1986 by Order of Minister Ople's successor,Augusto Sanchez. The Order 1) pointed out "that the issue central to the labor dispute revolves around compliance with existing companypolicies, rules and regulations specifically the sales evaluation and production policy which was amended by theOctober 12, 1984 memorandum and the grid schedule;"2) declared that because fourteen (14) sales representatives who after reinstatement pursuant to the order ofJanuary 20, 1986 had been placed "on forced leave with pay "were actually dismissed for failure to comply withthe reporting requirements under the "Sales Administration Practices" which was (sic) then the subject ofnegotiations between the parties at the Bureau of Labor Relations," it was only fair that they 'be reinstated . . .withback wages since they were terminated from employment based on a policy . . . still being negotiated to avoidprecisely a labor-management dispute from arising" therefrom;"3) pronounced the union's action relative to the allegedly illegal dismissal of one Brian Pineda to be "barred byextinctive prescription" in accordance with the CBA then in force; and4) on the foregoing premises adjudicated the dispute as follows:1. The union and management of G.T.E. Directories Corporation are directed to negotiate and effect a voluntarysettlement on the questioned Grid schedule, the Sales Evaluation and Production Policy;2. Management is ordered to reinstate the fourteen (14) employees with full back wages from the time they weredismissed up to the time that they were on forced leave with pay."Both the Union and GTE moved for reconsideration of the Order.

The Union contended that:1) GTE should have been adjudged guilty of unfair labor practice and other unlawful acts;2) its strike should have been declared lawful;3) GTE's so-called "bottom-third" policy, as well as all sales and administrative practices related thereto, shouldhave been held illegal; and4) GTE should have been commanded: (a) to pay all striking employees their usual salaries, allowances,commission and other emoluments corresponding to the period of their strike; (b) to release to its employees the 8 -days pay increase unlawfully withheld from them; (c) to lift the suspension imposed on Brian Pineda and restore tohim the pay withheld corresponding to the suspension period; (d) to pay the sales representatives all their lostincome corresponding to the period of their suspensions, and dismissal, including commissions that they mighthave earned corresponding to their one-week forced leave.GTE for its part, argued that the termination of the employment of its fourteen (14) premise sales representativesprior to the strike should have been upheld. It also filed an opposition to the union's motion for reconsideration.The motions were resolved in a "Decision" handed down by Minister Sanchez on June 6, 1986. The Minister stated



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that he saw no need to change his rulings as regards Pineda's suspension, the question on GTE's sales andadministrative policies, and the matter of back wages. However, as regards "the other issues raised by the union,"the Minister agreed "with the company that these were not adequately threshed out in the earlier proceedings . . .(for) (w)hile it is true that the union had already presented evidence to support its contention, the company shouldbe given the opportunity to present its own evidence." Accordingly, he directed the Bureau of Labor Relations tohear said "other issues raised by the union and to submit its findings and recommendations thereon within 20 daysfrom submission of the case for decision."Again GTE moved for reconsideration; again it was rebuffed. The Labor Minister denied its motion by Order datedOctober 1, 1986. In that order, the Minister, among other things1) invoked Section 6, Rule XIII of the Rules and Regulations Implementing the Labor Code, pertinently reading asfollows:

During the proceedings, the parties shall not do any act which may disrupt or impede the early settlement of thedispute. They are obliged, as part of their duty to bargain collectively in good faith, to participate fully and promptlyin the conciliation proceedings called by the Bureau or the Regional Office.and pointed out that "in dismissing 14 salesmen . . . for alleged violations of the reportorial requirements of its salespolicies which was then the subject of conciliation proceedings between them, (GTE) acted evidently in bad faith;hence the status quoprior to their dismissal must be restored . . . (and) their reinstatement with backwages is inorder up to the time they were on forced leave. . . ;"2) declared that because he had "ordered the parties to negotiate and effect a voluntary settlement of thequestioned Grid Schedule, the Sales Evaluation and Productions Policy, it would be unripe and premature for us torule on the legality or illegality on the company's sales policies at this instance;"3) opted, however, to himself resolve "the so-called 'other issues"' which he had earlier directed the Bureau ofLabor Relations to first hear and resolve (in the Decision of June 6, 1986, supra), i.e., GTE's liability for unfair laborpractice, the legality of the strike and the strikers' right to be paid their wages while on strike, his ruling thereonbeing as follows:While the company, in merely implementing its challenged sales policies did not ipso factocommit an unfair laborpractice, it did so when it in mala fidedismissed the fourteen salesmen, all union members, while conciliationproceedings were being conducted on disputes on its very same policies, especially at that time when a strikenotice was filed on the complaint of the union alleging that said sales policies are being used to bust the union;thus precipitating a lawful strike on the part of the latter. A strike is legal if it was provoked by the employer's failureto abide by the terms and conditions of its collective bargaining agreement with the union, by the discriminationemployed by it with regard to the hire and tenure of employment, and the dismissal of employees due to unionactivities as well as the company's refusal to bargain collectively in good faith (Cromwell Commercial Co., Inc. vs.Cromwell Employees and Laborers Union, 19 SCRA 398). The same rule applies if employer was guilty of bad faithdelay in reinstating them to their position (RCPI vs. Phil. Communications Electronics & Electricity WorkersFederation, 58 SCRA 762).While as a rule strikers are not entitled to backpay for the strike period (J.P. Heilbronn Co. vs. NLU, 92 Phil. 575)strikers may be properly awarded backwages where the strike was precipitated by union busting activities of theemployer (Davao Free Workers, Front, et al. vs, CIR, 60 SCRA 408), as in the case at bar. . . .The Minister accordingly annulled and set aside his order for the Bureau of Labor Relations to conduct hearings onsaid issues since he had already resolved them, and affirmed his Order of March 31, 1986 "directing Union andManagement to negotiate a voluntary settlement on the company sales policies and reinstating the fourteenemployees with full backwages from the time they were dismissed up to the time they were on forced leave withpay" "but with the modification that management . . . (was) directed to give the striking workers strike durationpay for the whole period of the strike less earnings."GTE thereupon instituted the special civil action of certiorariat bar praying for invalidation, because rendered withgrave abuse of discretion, of the Labor Minister's orders1) commanding "reinstatement of the fourteen dismissed employees, and2) "finding . . . (it) guilty of unfair labor practice and directing (it) to pay strike duration pay to striking workers."It seems to the Court that upon the undisputed facts on record, GTE had cause to dismiss the fourteen (14)premise sales representatives who had repeatedly and deliberately, not to say defiantly, refused to comply with itsdirective for submission of individual reports on specified matters. The record shows that GTE addressed no lessthan (six) written official communications to said premise sales representatives embodying this requirement, to wit:1) Memorandum of July 9, 1985 pursuant to GTE's "Sales Administrative Practices" superseded by amemorandum dated July 16, 198 requiring submission of individual reports by August 2, 1985;

2) Memorandum of August 5, 1985, requir ing submission of the reports by 2:00 P.M.;3) Memorandum of August 6, 1985, for submission of requisite reports not later than 4:00 P.M. of that day, with awarning of "appropriate disciplinary action;"4) Letter of August 9, 1985 imposing suspension without pay for five (5) working days and extending the period forsubmission of reports to August 19, 1985;5) Letter of August 19, 1985 suspending the sales representatives until their submission of the required reports;6) Letter dated August 28, 1985 giving the sales representatives "a last chance to comply with . . . (the) directivewithin 24 hours from receipt . . .;" with warning that failure to comply would result in termination of employment.The only response of the sales representatives to these formal directives were:1) a letter by their Union to GTE's Sales Manager dated August 5, 1985 in which the requirement was criticized asnot being the "result of an agreement of all concerned," and as incomprehensible, "discriminate and whimsical;"2) a strike notice filed with the Ministry of Labor on August 6, 1985; and3) an undated letter sent to GTE's Director for Marketing & Sales on August 29, 1985, drawing attention to what itdeemed contradictory directives, and reserving the right to take action against the manager for "acts of harassment



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and intimidation . . . clearly designed to discourage our legitimate union activities in protesting management'scontinuous unfair labor practices."The basic question then is whether or not the effectivity of an employer's regulations and policies is dependentupon the acceptance and consent of the employees thereby sought to be bound; or otherwise stated, whether ornot the union's objections to, or request for reconsideration of those regulations or policies automatically suspendenforcement thereof and excuse the employees' refusal to comply with the same.This Court has already had occasion to rule upon a similar issue. The issue was raised in a 1989 case, G.R. No.53515, San Miguel Brewery Sales Force Union (PTGWO) v. Ople. 3 In that case, the facts were briefly as follows:In September 1979, the company introduced a marketing scheme known as the "Complementary distributionsystem" (CDS) whereby its beer products were offered for sale directly to wholesalers through San Miguel's salesoffices.

The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor, with a notice ofstrike on the ground that the CDS was contrary to the existing marketing scheme whereby the Route Salesmenwere assigned specific territories within which to sell their stocks of beer, and wholesalers had to buy beer productsfrom them, not from the company. It was alleged that the new marketing scheme violates . . . (a provision) of thecollective bargaining agreement because the introduction of the CDS would reduce the take -home pay of thesalesmen and their truck helpers for the company would be unfairly competing with them."The Labor Minister found nothing to suggest that the employer's unilateral action of inaugurating a new salesscheme "was designed to discourage union organization or diminish its influence;" that on the contrary, it was "partof its overall plan to improve efficiency and economy and at the same time gain profit to the highest;" that theunion's "conjecture that the new plan will sow dissatisfaction from its rank is already a prejudgment of the plan'sviability and effectiveness, . . . like saying that the plan will not work out to the workers' (benefit) and thereforemanagement must adopt a new system of marketing." The Minister accordingly dismissed the strike notice,although he ordered a slight revision of the CDS which the employer evidently found acceptable.This Court approved of the Minister's findings, and declared correct his holding that the CDS was "a valid exerciseof management prerogatives," 4 viz.:Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, allaspects of employment, including hir ing, work assignments, working methods, time, place and manner of work,tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees,work supervision, lay-off of workers and the discipline, dismissal and recall of work. . . . (NLU vs. Insular La YebanaCo., 2 SCRA 924; Republic Savings Bank vs. CIR, 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor RelationsLaw, 1985 ed., p. 44.) (Emphasis ours.)The Court then closed its decision with the following pronouncements: 5

Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designedtowards that goal. In Abbott Laborator ies vs. NLRC, 154 SCRA 713, We ruled:. . . Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer toexercise what are clearly management prerogatives. The free will of management to conduct its own businessaffairs to achieve its purpose cannot be denied.So long as a company's management prerogatives are exercised in good faith for the advancement of theemployer's interest and not for the purpose of defeating or circumventing the rights of the employees under speciallaws or under valid agreements, this Court will uphold them (LVN, Pictures Workers vs. LVN, 35 SCRA 147; Phil.American Embroideries vs. Embroidery and Garments Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18SCRA 110). . . .In the case at bar, it must thus be conceded that its adoption of a new "Sales Evaluation and Production Policy"was within its management prerogative to regulate, according to its own discretion and judgment, all aspects ofemployment, including the manner, procedure and processes by which particular work activities should be done.There were, to be sure, objections presented by the union, i.e., that the schedule had not been "drawn (up) as aresult of an agreement of all concerned," that the new policy was incomprehensible, discriminatory and whimsical,and "would result to further reduction" of the sales representatives' compensation. There was, too, the union'saccusation that GTE had committed unfair labor practices, such as1. Refusal to bargain on unjust sales policies particularly on the failure to meet the 75% of the average salesproduction for two consecutive years;2. Open territory of accounts;3. Illegal suspension of Brian Pineda, a union officer; and4. Non-payment of eight days' suspension pay increase.

This Court fails to see, however, how these objections and accusations justify the deliberate and obdurate refusalof the sales representatives to obey the management's simple requirement for submission by all Premise SalesRepresentatives (PSRs) of individual reports or memoranda requiring reflecting target revenues which is all thatGTE basically required and which it addressed to the employees concerned no less than six (6) times. TheCourt fails to see how the existence of objections made by the union justify the studied disregard, or wilfuldisobedience by the sales representatives of direct orders of their superior officers to submit reports. Surely,compliance with their superiors' directives could not have foreclosed their demands for the revocation or revision ofthe new sales policies or rules; there was nothing to prevent them from submitting the requisite reports with thereservation to seek such revocation or revision.To sanction disregard or disobedience by employees of a rule or order laid down by management, on the pleadedtheory that the rule or order is unreasonable, illegal, or otherwise irregular for one reason or another, would bedisastrous to the discipline and order that it is in the interest of both the employer and his employees to preserveand maintain in the working establishment and without which no meaningful operation and progress is possible.Deliberate disregard or disobedience of rules, defiance of management authority cannot be countenanced. This is



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not to say that the employees have no remedy against rules or orders they regard as unjust or illegal. They mayobject thereto, ask to negotiate thereon, bring proceedings for redress against the employer before the Ministry ofLabor. But until and Unless the rules or orders are declared to be illegal or improper by competent authority, theemployees ignore or disobey them at their peril. It is impermissible to reverse the process: suspend enforcement ofthe orders or rules until their legality or propr iety shall have been subject of negotiation, conciliation, or arbitration.These propositions were in fact adverted to in relation to the dispute in question by then Minister Blas Ople in hisOrder dated January 21, 1986, to the effect among others, that "promulgations of company policies and regulationsare basic management prerogatives" and that it is a "recognized principle of law that company policies andregulations are, unless shown to be grossly oppressive or contrary to law, generally binding (and) valid on theparties and must be complied with until finally revised or amended unilaterally or preferably through negotiations orby competent authorities."

Minister Sanchez however found GTE to have "acted evidently in bad faith" in firing its 14 salespersons "for allegedviolations of the reportorial requirements of its sales policies which was then the subject of conciliation proceedingsbetween them;" 6 and that "(w)hile the company, in merely implementing its challenged sales policies did not ipsofactocommit an unfair labor practice, it did so when it in mala fidedismissed the fourteen salesmen, all unionmembers, while conciliation proceedings were being conducted on disputes on its very same policies, especially atthat time when a strike notice was filed on the complaint of the union alleging that said sales policies are beingused to bust the union; thus precipitating a lawful strike on the part of the latter." No other facts appear on recordrelevant to the issue of GTE's dismissal of the 14 sales representatives. There is no proof on record to demonstrateany underhanded motive on the part of GTE in formulating and imposing the sales policies in question, or requiringthe submission of reports in line therewith. What, in fine, appears to be the Minister's thesis is that an employer hasthe prerogative to lay down basic policies and rules applicable to its employees, but may not exact compliancetherewith, much less impose sanctions on employees shown to have violated them, the moment the propriety orfeasibility of those policies and rules, or their motivation, is challenged by the employees and the latter file a strikenotice with the Labor Department which is the situation in the case at bar.When the strike notice was filed by the union, the chain of events which culminated in the termination of the 14sales persons' employment was already taking place, the series of defiant refusals by said sales representatives tocomply with GTE's requirement to submit individual reports was already in progress. At that time, no less thanthree (3) of the ultimate six (6) direct orders of the employer for the submission of the reports had already beendisobeyed. The filing of the strike notice, and the commencement of conciliation activities by the Bureau of LaborRelations did not operate to make GTE's orders illegal or unenforceable so as to excuse continued non-compliancetherewith. It does not follow that just because the employees or their union are unable to realize or appreciate thedesirability of their employers' policies or rules, the latter were laid down to oppress the former and subvertlegitimate union activities. Indeed, the overt, direct, deliberate and continued defiance and disregard by theemployees of the authority of their employer left the latter with no alternative except to impose sanctions. Thesanction of suspension having proved futile, termination of employment was the only option left to the employer.To repeat, it would be dangerous doctrine indeed to allow employees to refuse to comply with rules andregulations, policies and procedures laid down by their employer by the simple expedient of formally challengingtheir reasonableness or the motives which inspired them, or filing a strike notice with the Department of Labor andEmployment, or, what amounts to the same thing, to give the employees the power to suspend compliance withcompany rules or policies by requesting that they be first subject of collective bargaining, It would be well nighimpossible under these circumstances for any employer to maintain discipline in its establishment. This is, ofcourse, intolerable. For common sense teaches, as Mr. Justice Gregorio Perfecto once had occasion tostress 7that:Success of industries and public services is the foundation upon which just wages may be paid. There cannot besuccess without efficiency. There cannot be efficiency without discipline. Consequently, when employees andlaborers violate the rules of discipline they jeopardize not only the interest of the employer but also their own. Inviolating the rules of discipline they aim at killing the hen that lays the golden eggs. Laborers who trample down therules set for an efficient service are, in effect, parties to a conspiracy, not only against capital but also against labor.The high interest of society and of the individuals demand that we should require everybody to do his duty. Thatdemand is addressed not only to employer but also to employees.Minister Sanchez decided the dispute in the exercise of the jurisdiction assumed by his predecessor in accordancewith Article 263 (g) of the Labor Code, 8 providing in part as follows:(g) When in his opinion there exists a labor dispute causing or likely to cause str ikes or lockouts adversely affectingthe national interest, such as may occur in but not limited to public utilities, companies engaged in the generation

or distribution of energy, banks, hospitals, and export-oriented industries, including those within export processingzones, the Minister of Labor and Employment shall assume jurisdiction over the dispute and decide it or certify thesame to the Commission for compulsory arbitration. . . .Even that assumption of jurisdiction is open to question.The production and publication of telephone directories, which is the principal activity of GTE, can scarcely bedescribed as an industry affecting the national interest. GTE is a publishing firm chiefly dependent on the marketingand sale of advertising space for its not inconsiderable revenues. Its services, while of value, cannot be deemed tobe in the same category of such essential activities as "the generation or distribution of energy" or thoseundertaken by "banks, hospitals, and export-oriented industr ies." It cannot be regarded as playing as vital a role incommunication as other mass media. The small number of employees involved in the dispute, the employer'spayment of "P10 million in income tax alone to the Philippine government," and the fact that the "top officers of theunion were dismissed during the conciliation process," obviously do not suffice to make the dispute in the case atbar one "adversely affecting the national interest."WHEREFORE, the petition is GRANTED, and as prayed for, the Order dated October 1, 1986 of the public



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respondent is NULLIFIED and SET ASIDE.SO ORDERED.Gancayco, Grio-Aquino and Medialdea, JJ., concur.Cruz, J., took no part.

Footnotes1 The original was attached as Annex B of the Compliance dated Sept. 10, 1990 submitted by GTE throughcounsel (rollo, pp. 270, 273).2 Copies were attached as Annexes C, C-1 to C-15 of the Compliance dated Sept. 10, 1990, supra(rollo, pp.276-291).3 170 SCRA 25-28.

4 At pp. 27-28.5 At p. 28.6 SEEpage 7, supra.7 Batangas Transportation Co. v. Bagong Pagkakaisa of the Employees and Laborers of the Batangas Trans. Co.,7 Phil. 108, 112 (1949).8 Order dated Dec. 6, 1985 by Acting Labor Minister Vicente Leogardo, Jr.: SEEp. 4, supra.

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Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. 127598 January 27, 1999MANILA ELECTRIC COMPANY, petitioner,vs.THE HONORABLE SECRETARY OF LABOR LEONARDO QUISUMBING ANDMERALCO EMPLOYEES AND WORKERS ASSOCIATION (MEWA), respondents.

MARTINEZ, J.:In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to annulthe orders of the Secretary of Labor dated August 19, 1996 and December 28, 1996,wherein the Secretary required MERALCO and its rank and file union the MeralcoWorkers Association (MEWA) to execute a collective bargaining agreement (CBA) for

the remainder of the parties' 1992-1997 CBA cycle, and to incorporate in this new CBAthe Secretary's dispositions on the disputed economic and non-economic issues.MEWA is the duly recognized labor organization of the rank-and-file employees ofMERALCO.On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate theterms and conditions of their existing 1992-1997 Collective Bargaining Agreement(CBA) covering the remaining period of two years starting from December 1, 1995 toNovember 30, 1997. 1 MERALCO signified its willingness to re-negotiate through itsletter dated October 17, 1995 2 and formed a CBA negotiating panel for the purpose. OnNovember 10, 1995, MEWA submitted its proposal 3 to MERALCO, which, in turn,presented a counter-proposal. Thereafter, collective bargaining negotiations proceeded.However, despite the series of meetings between the negotiating panels of MERALCOand MEWA, the parties failed to arrive at "terms and conditions acceptable to both of

them."On April 23, 1996, MEWA filed a Notice of Strike with the National Capital RegionBranch of the National Conciliation and Mediation Board (NCMB) of the Department ofLabor and Employment (DOLE) which was docketed as NCMB-NCR-NS-04-152-96, onthe grounds of bargaining deadlock and unfair labor practices. The NCMB thenconducted a series of conciliation meetings but the parties failed to reach an amicablesettlement. Faced with the imminence of a strike, MERALCO on May 2, 1996, filed anUrgent Petition 4 with the Department of Labor and Employment which was docketed asOS-AJ No. 0503[1]96 praying that the Secretary assume jurisdiction over the labordispute and to enjoin the striking employees to go back to work.The Labor Secretary granted the petition through its Order 5 of May 8, 1996, thedispositive portion of which reads:WHEREFORE, premises considered, this Office now assumes jurisdiction over the labor

dispute obtaining between the parties pursuant to Article 263(g) of the Labor Code.Accordingly, the parties are here enjoined from committing any act that may exacerbatethe situation. To speed up the resolution of the dispute, the parties are also directed tosubmit their respective Position Papers within ten (10) days from receipt.Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferencesbetween the parties to bridge their differences and eventually hammer out a solutionthat is mutually acceptable. He shall be assisted by the Legal Service.SO ORDERED.Thereafter, the parties submitted their respective memoranda and on August 19, 1996,the Secretary resolved the labor dispute through an Order, 6 containing the followingawards:ECONOMIC DEMANDS

MERALCO v. QUISUMBINGThursday, July 01, 2004

12:17 AM



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Wage increase P2,300.00 for the first year covering the period from December 1,1995 to November 30, 1996 P2,200.00 for the second year covering the period December 1, 1996 to November30, 1997.Red Circle Rate (RCR) Allowance all RCR allowances (promotional increases that gobeyond the maximum range of a job classification salary) shall be integrated into thebasic salary of employees effective December 1, 1995.Longevity Allowance the integration of the longevity allowance into the basic wage isdenied; the present policy is maintained.Longevity Increase the present longevity bonus is maintained but the bonus shall beincorporated into the new CBA.Sick Leave MEWA's demand for upgrading is denied; the company's present policy ismaintained. However, those who have not used the sick leave benefit during a particularyear shall be entitled to a one-day sick leave incentive.Sick leave reserve the present reserve of 25 days shall be reduced to 15 days; theemployee has the option either to convert the excess of 10 days to cash or let it remainas long as he wants. In case he opts to let it remain, he may later on convert it into cashat his retirement or separation.Vacation Leave MEWA's demand for upgrading denied & the company's presentpolicy is maintained which must be incorporated into the new CBA but scheduledvacation leave may be rounded off to one full day at a time in case of a benefit involvinga fraction of a day;Union Leave of MEWA's officers, directors or stewards assigned to perform unionduties or legitimate union activity is increased from 30 to 40 Mondays per month.Maternity, Paternity and Funeral leaves the existing policy is to be maintained andmust be incorporated in the new CBA unless a new law granting paternity leave benefitis enacted which is superior to what the company has already granted.Birthday Leave union's demand is granted. If birthday falls on the employee's restday or on a non-working holiday, the worker shall be entitled to go on leave with pay onthe next working day.Group Hospitalization & Surgical Insurance Plan (GHSIP) and Health Maintenance Plan(HMP) present policy is maintained insofar as the cost sharing is concerned 70%for the Company and 30% for MEWA.Health Maintenance Plan (HMP) for dependents subsidized dependents increasedfrom three to five dependents.Longevity Bonus is increased from P140.00 to P200.00 for even year of service to bereceived by the employee after serving the Company for 5 years.Christmas Bonus and Special Christmas Grant MEWA's demand of one month salaryas Christmas Bonus two month's salary as Special Christmas Grant is granted and to beincorporated in the new CBA.Midyear Bonus one month's pay to be included in the CBA.Anniversary Bonus union's demand is denied.Christmas Gift Certificate company has the discretion as to whether it will give it to itsemployees.Retirement Benefits:a. Full retirement-present policy is maintained;b. one cavan of rice per month is granted to retirees;c. special retirement leave and allowance-present policy is maintained;d. HMP coverage for retirees HMP coverage is granted to retirees who have notreached the age of 70, with MERALCO subsidizing 100% of the monthly premium; thoseover 70 are entitled to not more than 30 days of hospitalization at the J.F. CottonHospital with the company shouldering the entire cost.e. HMP coverage for retiree's dependents is denied.f. Monthly pension of P3,000.00 for each retiree is denied.g. Death benefit for retiree's beneficiaries is denied.Optional retirement union's demand is denied; present policy is maintained;employee is eligible for optional retirement if he has rendered at least 18 years ofservice.Dental, Medical and Hospitalization Benefits grant of all the allowable medical,surgical, dental and annual physical examination benefits, including free medicinewhenever the same is not available at the JFCH.



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Resignation benefits union's demand is denied.Night work union demand is denied but present policy must be incorporated in CBA.Shortswing work in another shift within the same day shall be considered as theemployee's work for the following day and the employee shall be given additional four(4) hours straight time and the applicable excess time premium if he works beyond 8hours in the other shift.High Voltage allowance is increased from P45.00 to P55.00 to be given to anyemployee authorized by the Safety Division to perform work on or near energized barelines & bus including stockman drivers & crane operators and other crew members on

ground.High Pole Allowance is increased from P30.00 to P40.00 to be given to thoseauthorized to climb poles up to at least 60 ft. from the ground. Members of the teamincluding stockman drivers, crane operators and other crew members on the ground,are entitled to this benefit.Towing Allowance where stockmen drive tow trailers with long poles and equipmenton board, they shall be entitled to a towing allowance of P20.00 whether they performthe job on regular shift or on overtime.Employee's Cooperative a loan of P3 M seed money is granted to the proposedestablishment of a cooperative, payable in twenty (20) years starting one year from thestart of operations.Holdup Allowance the union demand is denied; the present policy shall bemaintained.Meal and Lodging Allowance shall be increased effective December 1, 1995 asfollows:Breakfast from P25.00 to P35.00Lunch from P35.00 to P45.00Dinner from P35.00 to P45.00Lodging from P135.00 to P180.00 a night in all MERALCO franchise areas.Payroll Treatment for Accident while on Duty an employee shall be paid his salaryand allowance if any is due plus average excess time for the past 12 months from thetime of the accident up to the time of full recovery and placing of the employee back tonormal duty or an allowance of P2,000.00, whichever is higher.Housing and Equity Assistance Loan is increased to P60,000.00; those who havealready availed of the privilege shall be allowed to get the difference.Benefits for Collectors:a. Company shall reduce proportionately the quota and monthly average product level(MAPL) in terms of equivalent bill assignment when an employee is on sick leave andpaid vacation leave.b. When required to work on Saturdays, Sundays and holidays, an employee shallreceive P60.00 lunch allowance and applicable transportation allowance as determinedby the Company and shall also receive an additional compensation to one day fixedportion in addition to lunch and transportation allowance.c. The collector shall be entitled to an incentive pay of P25.00 for every delinquentaccount disconnected.d. When a collector voluntarily performs other work on regular shift or overtime, he shallbe entitled to remuneration based on his computed hourly compensation and thereimbursement of actually incurred transportation expenses.e. Collectors shall be provided with bobcat belt bags every year.f. Collector's cash bond shall be deposited under his capital contribution to MESALA.g. Collectors quota and MAPL shall be proportionately reduced during typhoons, floods,earthquakes and other similar force majeure events when it is impossible for a collectorto perform collection work.Political Demands:a. Scope of the collective bargaining unit the collective bargaining unit shall becomposed of all regular rank-and-file employees hired by the company in all its officesand operative centers throughout its franchise area and those it may employ by reasonof expansion, reorganization or as a result of operational exigencies.b. Union recognition and security i. The union shall be recognized by the Company as sole and exclusive bargainingrepresentative of the rank-and-file employees included in the bargaining unit. TheCompany shall agree to meet only with Union officers and its authorized representatives



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on all matters involving the Union and all issues arising from the implementation andinterpretation of the new CBA.ii. The union shall meet with the newly regularized employees for a period not to exceedfour (4) hours, on company time, to acquaint the new regular employees of the rights,duties and benefits of Union membership.iii. The right of all rank-and-file employees to join the union shall be recognized inaccordance with the maintenance of membership principle as a form of union security.c. Transfer of assignment and job security i. No transfer of an employee from one position to another shall be made if motivated byconsiderations of sex, race, creed, political and religious belief, seniority or unionactivity.ii. If the transfer is due to the reorganization or decentralization, the distance from theemployee's residence shall be considered unless the transfer is accepted by theemployee. If the transfer is extremely necessary, the transfer shall be made within theoffices in the same district.iii. Personnel hired through agencies or contractors to perform the work done bycovered employees shall not exceed one month. If extension is necessary the unionshall be informed. But the Company shall not permanently contract out regular orpermanent positions that are necessary in the normal operation of the Company.d. Check off Union Dues where the union increases its dues as approved by theBoard of Directors, the Company shall check off such increase from the salaries ofunion members after the union submits check off authorizations signed by the majorityof the members. The Company shall honor only those individual authorizations signedby the majority of the union members and collectively submitted by the union to theCompany's Salary Administration.e. Payroll Reinstatement shall be in accordance with Article 223, p. 3 of the LaborCode.f. Union Representation in Committees the union is allowed to participate in policyformulation and in the decision-making process on matters affecting their rights andwelfare, particularly in the Uniform Committee, the Safety Committee and othercommittees that may be formed in the future.Signing Bonus P4,000.00 per member of the bargaining unit for the conclusion of theCBA.Existing benefits already granted by the Company but which are not expressly orimpliedly repealed in the new agreement shall remain subsisting and shall be included inthe new agreement to be signed by the parties effective December 1, 1995.On August 30, 1996, MERALCO filed a motion for reconsideration 7 alleging that theSecretary of Labor committed grave abuse of discretion amounting to lack or excess of

jurisdiction:1. in awarding to MEWA a package that would cost at least P1.142 billion, a packagethat is grossly excessive and exorbitant, would not be affordable to MERALCO andwould imperil its viability as a public utility affected with national interest.2. in ordering the grant of a P4,500.00 wage increase, as well as a new and improvedfringe benefits, under the remaining two (2) years of the CBA for the-rank-and-fileemployees.3. in ordering the "incorporation into the CBA of all existing employee benefits, on theone hand, and those that MERALCO has unilaterally granted to its employees by virtueof voluntary company policy or practice, on the other hand."4. in granting certain "political demands" presented by the union.5. in ordering the CBA to be "effective December 1995" instead of August 19, 1996when he resolved the dispute.MERALCO filed a supplement to the motion for reconsideration on September 18, 1995,alleging that the Secretary of Labor did not properly appreciate the effect of the awardedwages and benefits on MERALCO's financial viability.MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order onthe wage increase, leaves, decentralized filing of paternity and maternity leaves,bonuses, retirement benefits, optional retirement, medical, dental and hospitalizationbenefits, short swing and payroll treatment. On its political demands, MEWA asked theSecretary to rule on its proposal to institute a Code of Discipline for its members and theunion's representation in the administration of the Pension Fund.On December 28, 1996, the Secretary issued an Order 8 resolving the parties' separate



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motions, the modifications of the August 19, 1996 Order being highlighted hereunder:1) Effectivity of Agreement December 1, 1995 to November 30, 1997.Economic Demands2) Wage Increase:First year P2,200.00 per month;Second year P2,200.00 per month.3) Integration of Red Circle Rate (RCR) and Longevity Allowance into Basic Salary the RCR allowance shall be integrated into the basic salary of employees as of August19, 1996 (the date of the disputed Order).4) Longevity Bonus P170 per year of service starting from 10 years of continuousservice.5) Vacation Leave The status quoshall be maintained as to the number of vacationleave but employees' scheduled vacation may be taken one day at a time in the mannerthat this has been provided in the supervisory CBA.6) Sick Leave Reserve is reduced to 15 days, with any excess payable at the end ofthe year. The employee has the option to avail of this cash conversion or to accumulatehis sick leave credits up to 25 days for conversion to cash at retirement or separationfrom the service.7) Birthday Leave the grant of a day off when an employee's birthday falls on a non-working day is deleted.8) Retirement Benefits for Retirees The benefits granted shall be effective on August19, 1996, the date of the disputed order up to November 30, 1997, which is the date theCBA expires and shall apply to those who are members of the bargaining unit at thetime the award is made.One sack of rice per quarter of the year shall be given to those retiring between August19, 1996 and November 30, 1997.On HMP Coverage for Retirees The parties "maintain the status quo, that is, with theCompany complying with the present arrangement and the obligations to retirees as is."9) Medical, Dental and Hospitalization Benefits The cost of medicine unavailable atthe J.F. Cotton Hospital shall be in accordance with MERALCO's Memorandum datedSeptember 14, 1976.10) GHSIP and HMP for Dependents The number of dependents to be subsidizedshall be reduced from 5 to 4 provided that their premiums are proportionately increased.11) Employees' Cooperative The original award of P3 million pesos as seed moneyfor the proposed Cooperative is reduced to P1.5 million pesos.12) Shortswing the original award is deleted.13) Payroll Treatment for Accident on Duty Company ordered to continue its presentpractice on payroll treatment for accident on duty without need to pay the excess timethe Union demanded.Political Demands:14) Scope of the collective bargaining unit The bargaining unit shall be composed ofall rank and file employees hired by the Company in accordance with the original Order.15) Union recognition and security The incorporation of a closed shop form of unionsecurity in the CBA; the Company is prohibited from entertaining individuals or groups ofindividuals only on matters that are exclusively within the domain of the union; theCompany shall furnish the Union with a complete list of newly regularized employeeswithin a week from regularization so that the Union can meet these employees on theUnion's and the employee's own time.16) Transfer of assignment and job security Transfer is a prerogative of the Companybut the transfer must be for a valid business reason, made in good faith and must bereasonably exercised. The CBA shall provide that "No transfer of an employee from oneposition to another, without the employee's written consent, shall be made if motivatedby considerations of sea, race, creed, political and religious belief, age or union activity.17) Contracting Out The Company has the prerogative to contract out servicesprovided that this move is based on valid business reasons in accordance with law, ismade in good faith, is reasonably exercised and, provided furtherthat if the contractingout involves more than six months, the Union must be consulted before itsimplementation.18) Check off of union duesIn any increase of union dues or contributions for mandatory activities, the union mustsubmit to the Company a copy of its board resolution increasing the union dues or



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authorizing such contributions;If a board resolution is submitted, the Company shall deduct union dues from all unionmembers after a majority of the union members have submitted their individual writtenauthorizations. Only those check-off authorization submitted by the union shall behonored by the Company.With respect to special assessments, attorney's fees, negotiation fees or any otherextraordinary fees individual authorization shall be necessary before the company mayso deduct the same.19) Union Representation in Committees The union is granted representation in theSafety Committee, the Uniform Committee and other committees of a similar nature andpurpose involving personnel welfare, rights and benefits as well as duties.Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravelyabused his discretion:1) . . . in awarding wage increases of P2,200.00 for 1996 and P2,200 for 1997.2) . . . in awarding the following economic benefits:a. Two months Christmas bonus;b. Rice Subsidy and retirement benefits for retirees;c. Loan for the employees' cooperative;d. Social benefits such as GHSIP and HMP for dependents, employees' cooperativeand housing equity assistance loan;e. Signing bonus;f. Integration of the Red Circle Rate Allowance.g. Sick leave reserve of 15 daysh. The 40-day union leave;i. High pole/high voltage and towing allowance; and

j. Benefits for collectors3) . . . in expanding the scope of the bargaining unit to all regular rank and fileemployees hired by the company in all its offices and operating centers and those it mayemploy by reason of expansion, reorganization or as a result of operational exigencies;4) . . . in ordering for a closed shop when his original order for a maintenance ofmembership arrangement was not questioned by the parties;5) . . . in ordering that Meralco should consult the union before any contracting out formore than six months;6) . . . in decreeing that the union be allowed to have representation in policy anddecision making into matters affecting "personnel welfare, rights and benefits as well asduties;"7) . . . in ruling for the inclusion of all terms and conditions of employment in thecollective bargaining agreement;8) . . . in exercising discretion in determining the retroactivity of the CBA;Both MEWA and the Solicitor General, on behalf of the Secretary of Labor, filed theircomments to the petition. While the case was also set for oral argument on Feb. 10,1997, this hearing was cancelled due to MERALCO not having received the comment ofthe opposing parties. The parties were instead required to submit written memoranda,which they did. Subsequently, both petitioner and private respondent MEWA also filedreplies to the opposing parties' Memoranda, all of which We took into account in theresolution of this case.The union disputes the allegation of MERALCO that the Secretary abused his discretionin issuing the assailed orders arguing that he acted within the scope of the powersgranted him by law and by the Constitution. The union contends that any judicial reviewis limited to an examination of the Secretary's decision-making/discretion exercisingprocess to determine if this process was attended by some capricious or whimsical actthat constitutes "grave abuse"; in the absence of such abuse, his findings consideringthat he has both jurisdiction and expertise to make them are valid.The union's position is anchored on two premises:First, no reviewable abuse of discretion could have attended the Secretary's arbitralaward because the Secretary complied with constitutional norms in rendering thedisputed award. The union posits that the yardstick for comparison and for thedetermination of the validity of the Secretary's actions should be the specific standardslaid down by the Constitution itself. To the union, these standards include the Statepolicy on the promotion of workers' welfare, 9 the principle of distributive justice, 10 theright of the State to regulate the use of property, 11the obligation of the State to protect



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workers, both organized and unorganized, and insure their enjoyment of "humaneconditions of work" and a "living wage," and the right of labor to a just share in the fruitsof production. 12

Second, no reversible abuse of discretion attended the Secretary's decision becausethe Secretary took all the relevant evidence into account, judiciously weighed them, andrendered a decision based on the facts and law. Also, the arbitral award should not bereversed given the Secretary's expertise in his field and the general rule that findings offact based on such expertise is generally binding on this Court.To put matters in proper perspective, we go back to basic principles. The Secretary ofLabor's statutory power under Art. 263 (g) of the Labor Code to assume jurisdiction overa labor dispute in an industry indispensable to the national interest, and, to render anaward on compulsory arbitration, does not exempt the exercise of this power from the

judicial review that Sec. 1, Art. 8 of the Constitution mandates. This constitutionalprovision states:Judicial power includes the duty of the courts of justice to settle actual controversiesinvolving ri

labor arbitration_june 23 meeting

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