G.R. No.

96566

January 6, 1992

ATLAS LITHOGRAPHIC SERVICES, INC., petitioner,

vs.
UNDERSECRETARY BIENVENIDO E. LAGUESMA (Department of Labor and
Employment) and ATLAS LITHOGRAPHIC SERVICES, INC. SUPERVISORY,
ADMINISTRATIVE, PERSONNEL, PRODUCTION, ACCOUNTING AND
CONFIDENTIAL EMPLOYEES ASSOCIATION-KAISAHAN NG MANGGAWANG
PILIPINO (KAMPIL-KATIPUNAN), respondents.

Romero, Lagman, Valdecantos & Arreza Law Offices for petitioner.

Esteban M. Mendoza for private respondent.

GUTIERREZ, JR., J.:p

This is a petition for certiorari under Rule 65 of the Rules of Court seeking the
modification of the Order dated 14 December 1990 and the Resolution dated
21 November 1990 issued by the public respondents.

The antecedent facts of the case as gathered from the records are as follows:

On July 16, 1990, the supervisory, administrative personnel, production,

accounting and confidential employees of the petitioner Atlas Lithographic
Services, Inc. (ALSI) affiliated with private respondent Kaisahan ng
Manggagawang Pilipino, a national labor organization. The local union
adopted the name Atlas Lithographic Services, Inc. Supervisory,
Administrative, Personnel, Production, Accounting and Confidential
Employees Association or ALSI-SAPPACEA-KAMPIL in short and which we shall

hereafter refer to as the "supervisors" union.

Shortly thereafter, private respondent Kampil-Katipunan filed on behalf of the

"supervisors" union a petition for certification election so that it could be the
sole and exclusive bargaining agent of the supervisory employees.

The petitioners opposed the private respondent's petition claiming that under
Article 245 of the Labor bode the private respondent cannot represent the
supervisory employees for collective bargaining purposeless because the
private respondent also represents the rank-and-file employees' union.

On September 18, 1990, the Med-Arbiter issued an order in favor of the

private respondent, the dispositive portion of which provides:

WHEREFORE, premises considered, a certification election among the

supervisory employees belonging to the Administrative, Personnel,
Production, Accounting Departments as well as confidential employees
performing supervisory functions of Atlas Lithographic Services, Incorporated
is hereby ordered conducted within 20 days from receipt hereof, subject to
usual pre-election conference, with the following choices:

1.

KAMPIL (KATIPUNAN);

2.

No union.

SO ORDERED. (Rollo, pp. 39-40)

The petitioners, as expected, appealed for the reversal of the above order.
The public respondent, however, issued a resolution affirming the MedArbiter's order.

The petitioners, in turn, filed a motion for reconsideration but the same was
denied. Hence, this petition for certiorari.

The sole issue to be resolved in this case is whether or not, under Article 245
of the Labor Code, a local union of supervisory employees may be allowed to
affiliate with a national federation of labor organizations of rank-and-file
employees and which national federation actively represents its affiliates in
collective bargaining negotiations with the same employer of the supervisors
and in the implementation of resulting collective bargaining agreements.

The petitioner argues that KAMPIL-KATIPUNAN already represents its rankand-file employees and, therefore, to allow the supervisors of those
employees to affiliate with the private respondent is tantamount to allowing
the circumvention of the principle of the separation of unions under Article
245 of the Labor Code.

It further argues that the intent of the law is to prevent a single labor
organization from representing different classes of employees with conflicting
interests.

The public respondent, on the other hand, contends that despite affiliation
with a national federation, the local union does not lose its personality which
is separate, and distinct from the national federation. It cites as its legal basis
the case of Adamson & Adamson, Inc. v. CIR (127 SCRA 268 [1984]).

It maintains that Rep. Act No. 6715 contemplates the principle laid down by
this Court in the Adamson case interpreting Section 3 of Rep. Act No. 875 (the
Industrial Peace Act) on the right of a supervisor's union to affiliate. The
private respondent asserts that the legislature must have noted the Adamson
ruling then prevailing when it conceived the reinstatement in the present
Labor Code of a similar provision on the right of supervisors to organize.

Under the Industrial Peace Act of 1953, employees were classified into three
groups, namely: (1) managerial employees; (2) supervisors; and (3) rank-and
file employees. Supervisors, who were considered employees in relation to
their employer could join a union but not a union of rank-and-file employees.

With the enactment in 1974 of the Labor Code (Pres Decree No. 442),
employees were classified into managerial and rank-and-file employees.
Neither the category of supervisors nor their right to organize under the old
statute were recognized. So that, in Bulletin Publishing Corporation v.
Sanchez (144 SCRA 628 [1986]), the Court interpreted the superseding labor
law to have removed from supervisors the right to unionize among
themselves. The Court ruled:

In the light of the factual background of this case, We are constrained to hold
that the supervisory employees of petitioner firm may not, under the law,
form a supervisors union, separate and distinct from the existing bargaining
unit (BEU), composed of the rank-and-file employees of the Bulletin
Publishing Corporation. It is evident that most of the private respondents are
considered managerial employees. Also, it is distinctly stated in Section 11,
Rule II, of the Omnibus Rules Implementing the Labor Code, that supervisory
unions are presently no longer recognized nor allowed to exist and operate as
such. (pp. 633, 634)

In Section 11, Rule II, Book V of the Omnibus Rules implementing Pres.
Decree No. 442, the supervisory unions existing since the effectivity of the
New Code in January 1, 1975 ceased to operate as such and the members
who did not qualify as managerial employees under this definition in Article
212 (k) therein became eligible to form, to join or assist a rank-and-file union.

A revision of the Labor Code undertaken by the bicameral Congress brought

about the enactment of Rep. Act No. 6715 in March 1989 in which employees
were reclassified into three groups, namely: (1) the managerial employees;
(2) supervisors; and (3) the rank and file employees. Under the present law,
the category of supervisory employees is once again recognized. Hence, Art.
212 (m) states:

(m)
. . . Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the
use of independent judgment. . . .

The rationale for the amendment is the government's recognition of the right
of supervisors to organize with the qualification that they shall not join or
assist in the organization of rank-and-file employees. The reason behind the
Industrial Peace Act provision on the same subject matter has been adopted
in the present statute. The interests of supervisors on the one hand, and the
rank-and-file employees on the other, are separate and distinct. The functions
of supervisors, being recommendatory in nature, are more identified with the
interests of the employer. The performance of those functions may, thus, run
counter to the interests of the rank-and-file.

This intent of the law is made clear in the deliberations of the legislators on
then Senate Bill 530 now enacted as Rep. Act No. 6715.

The definition of managerial employees was limited to those having authority

to hire and fire while those who only recommend effectively the hiring or
firing or transfers of personnel would be considered as closer to rank-and-file
employees. The exclusion, therefore, of middle level executives from the
category of managers brought about a third classification, the supervisory
employees. These supervisory employees are allowed to form their own union
but they are not allowed to join the rank-and-file union because of conflict of
interest (Journal of the Senate, First Regular Session, 1987, 1988, Volume 3,
p. 2245).

In terms of classification, however, while they are more closely identified with
the rank-and-file they are still not allowed to join the union of rank-and-file
employees. To quote the Senate Journal:

In reply to Sen. Guingona's query whether "supervisors" are included in the

term "employee", Sen. Herrera stated that while they are considered as rankand-file employees, they cannot join the union and they would have to form
their own supervisors' union pursuant to Rep. Act 875. (supra, p. 2288)

The peculiar role of supervisors is such that while they are not managers,
when they recommend action implementing management policy or ask for
the discipline or dismissal of subordinates, they identify with the interests of
the employer and may act contrary to the interests of the rank-and-file.

We agree with the petitioner's contention that a conflict of interest may arise
in the areas of discipline, collective bargaining and strikes.

Members of the supervisory union might refuse to carry out disciplinary

measures against their co-member rank-and-file employees.

In the area of bargaining, their interests cannot be considered identical. The

needs of one are different from those of the other. Moreover, in the event of a
strike, the national federation might influence the supervisors' union to
conduct a sympathy strike on the sole basis of affiliation.

More important, the factual issues in the Adamson case are different from the
present case. First, the rank-and-file employees in the Adamson case are not
directly under the supervisors who comprise the supervisors' union. In the
case at bar, the rank-and file employees are directly under the supervisors
organized by one and the same federation.

The contemplation of the law in Sec. 3 of the Industrial Peace Act is to

prohibit supervisors from joining a labor organization of employees under
their supervision. Sec. 3 of the Industrial Peace Act provides:

Sec. 3 Employees' Right to Self Organization. Employees shall have the

right to self-organization and to form, join or assist labor organizations of
their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted activities
for the purpose of collective bargaining and other mutual aid or protection.
Individuals employed as supervisors shall not be eligible for membership in a
labor organization of employees under their supervision but may form
separate organizations of their own (Emphasis supplied).

This was not the consideration in the Adamson case because as mentioned
earlier, the rank-and-file employees in the Adamson case were not under the
supervision of the supervisors involved.

Meanwhile, Article 245 of the Labor Code as amended by Rep. Act No. 6715
provides:

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

The Court construes Article 245 to mean that, as in Section 3 of the Industrial
Peace Act, supervisors shall not be given an occasion to bargain together
with the rank-and-file against the interests of the employer regarding terms
and conditions of work

Second, the national union in the Adamson case did not actively represent its
local chapters. In the present case, the local union is actively represented by
the national federation. In fact, it was the national federation, the KAMPILKATIPUNAN, which initially filed a petition for certification in behalf of the
respondent union.

Thus, if the intent of the law is to avoid a situation where supervisors would
merge with the rank and-file or where the supervisors' labor organization
would represent conflicting interests, then a local supervisors' union should
not be allowed to affiliate with the national federation of union of rank-andfile employees where that federation actively participates in union activity in
the company.

The petitioner further contends that the term labor organization includes a
federation considering that Art. 212 (g) mentions "any union or association of
employees."

The respondent, however, argues that the phrase refers to a local union only
in which case, the prohibition in Art. 245 is inapplicable to the case at bar.

The prohibition against a supervisors' union joining a local union of rank-andfile is replete with jurisprudence. The Court emphasizes that the limitation is
not confined to a case of supervisors wanting to join a rank-and-file local
union. The prohibition extends to a supervisors' local union applying for
membership in a national federation the members of which include local
unions of rank-and-file employees. The intent of the law is clear especially
where, as in the case at bar, the supervisors will be co-mingling with those
employees whom they directly supervise in their own bargaining unit.

Technicalities should not be allowed to stand in the way of equitably and

completely resolving the rights and obligations of the parties. (Rapid
Manpower Consultants, Inc. v. NLRC, 190 SCRA 747 [1990]) What should be
paramount is the intent behind the law, not its literal construction. Where one
interpretation would result in mischievous consequences while another would
bring about equity, justice, and the promotion of labor peace, there can be no
doubt as to what interpretation shall prevail.

Finally, the respondent contends that the law prohibits the employer from
interfering with the employees' right to self-organization.

There is no question about this intendment of the law. There is, however, in
the present case, no violation of such a guarantee to the employee.
Supervisors are not prohibited from forming their own union. What the law
prohibits is their membership in a labor organization of rank-and-file
employees (Art. 245, Labor Code) or their joining a national federation of
rank-and-file employees that includes the very local union which they are not
allowed to directly join.

In a motion dated November 15, 1991 it appears that the petitioner has
knuckled under to the respondents' pressures and agreed to let the national
federation KAMPIL-KATIPUNAN represent its supervisors in negotiating a
collective bargaining agreement. Against the advise of its own counsel and on
the basis of alleged "industrial peace", the petitioner expressed a loss of
interest in pursuing this action. The petitioner is, of course, free to grant
whatever concessions it wishes to give to its employees unilaterally or
through negotiations but we cannot allow the resulting validation of an
erroneous ruling and policy of the Department of Labor and Employment

(DOLE) to remain on the basis of the petitioner's loss of interest. The

December 14, 1990 order and the November 21, 1990 resolution of DOLE are
contrary to law and must be declared as such.

WHEREFORE, the petition is hereby GRANTED. The private respondent is

disqualified from affiliating with a national federation of labor organizations
which includes the petitioner's rank-and-file employees.

SO ORDERED.

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

SECOND DIVISION
[G.R. No. 102084. August 12, 1998]

DE LA SALLE UNIVERSITY MEDICAL CENTER AND COLLEGE OF MEDICINE,

petitioner, vs. HON. BIENVENIDO E. LAGUESMA, Undersecretary of Labor and
Employment; ROLANDO S. DE LA CRUZ, Med-Arbiter Regional Office No. IV,
DE LA SALLE UNIVERSITY MEDICAL CENTER AND COLLEGE OF MEDICINE
SUPERVISORY UNION-FEDERATION OF FREE WORKERS, respondents.
DECISION
MENDOZA, J.:

Petitioner De La Salle University Medical Center and College of Medicine

(DLSUMCCM) is a hospital and medical school at Dasmarias, Cavite. Private
respondent Federation of Free WorkersDe La Salle University Medical Center
and College of Medicine Supervisory Union Chapter (FFW-DLSUMCCMSUC), on
the other hand, is a labor organization composed of the supervisory
employees of petitioner DLSUMCCM.

On April 17, 1991, the Federation of Free Workers (FFW), a national federation
of labor unions, issued a certificate to private respondent FFW-

DLSUMCCMSUC recognizing it as a local chapter. On the same day, it filed on

behalf of private respondent FFW-DLSUMCCMSUC a petition for certification
election among the supervisory employees of petitioner DLSUMCCM. Its
petition was opposed by petitioner DLSUMCCM on the grounds that several
employees who signed the petition for certification election were managerial
employees and that the FFW-DLSUMCCMSUC was composed of both
supervisory and rank-and-file employees in the company.[1]

In its reply dated May 22, 1991, private respondent FFW-DLSUMCCMSUC

denied petitioners allegations. It contended that

2. Herein petition seeks for the holding of a certification election among the
supervisory employees of herein respondent. It does not intend to include
managerial employees.

....

6. It is not true that supervisory employees are joining the rank-and-file

employees union. While it is true that both regular rank-and-file employees
and supervisory employees of herein respondent have affiliated with FFW, yet
there are two separate unions organized by FFW. The supervisory employees
have a separate charter certificate issued by FFW.[2]

On July 5, 1991, respondent Rolando S. de la Cruz, med-arbiter of the

Department of Labor and Employment Regional Office No. IV, issued an order
granting respondent unions petition for certification election. He said:

. . . . [petitioner] . . . claims that based on the job descriptions which will be

presented at the hearing, the covered employees who are considered
managers occupy the positions of purchasing officers, personnel officers,
property officers, cashiers, heads of various sections and the like.

[Petitioner] also argues that assuming that some of the employees concerned
are not managerial but mere supervisory employees, the Federation of Free

Workers (FFW) cannot extend a charter certificate to this group of employees

without violating the express provision of Article 245 which provides that
supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form
separate labor organizations of their own because the FFW had similarly
issued a charter certificate to its rank-and-file employees.

....

In its position paper, [petitioner] stated that most, if not all, of the employees
listed in . . . the petition are considered managerial employees, thereby
admitting that it has supervisory employees who are undoubtedly qualified to
join or form a labor organization of their own. The record likewise shows that
[petitioner] promised to present the job descriptions of the concerned
employees during the hearing but failed to do so. Thus, this office has no
basis in determining at this point in time who among them are considered
managerial or supervisory employees. At any rate, there is now no question
that [petitioner] has in its employ supervisory employees who are qualified to
join or form a labor union. Consequently, this office is left with no alternative
but to order the holding of certification election pursuant to Article 257 of the
Labor Code, as amended, which mandates the holding of certification election
if a petition is filed by a legitimate labor organization involving an
unorganized establishment, as in the case of herein respondent.

As to the allegation of [petitioner] that the act of the supervisory employees

in affiliating with FFW to whom the rank-and-file employees are also affiliated
is violative of Article 245 of the Labor Code, suffice it to state that the two
groups are considered separate bargaining units and local chapters of FFW.
They are, for all intents and purposes, separate with each other and their
affiliation with FFW would not make them members of the same labor union.
This must be the case because it is settled that the locals are considered the
basic unit or principal with the labor federation assuming the role of an agent.
The mere fact, therefore, that they are represented by or under the same
agent is of no moment. They are still considered separate with each other.[3]

On July 30, 1991, petitioner DLSUMCCM appealed to the Secretary of Labor

and Employment, citing substantially the same arguments it had raised
before the med-arbiter. However, its appeal was dismissed. In his

resolution, dated August 30, 1991, respondent Undersecretary of Labor and

Employment Bienvenido E. Laguesma found the evidence presented by
petitioner DLSUMCCM concerning the alleged managerial status of several
employees to be insufficient. He also held that, following the ruling of this
Court in Adamson & Adamson, Inc. v. CIR,[4] unions formed independently by
supervisory and rank-and-file employees of a company may legally affiliate
with the same national federation.

Petitioner moved for a reconsideration but its motion was denied. In his order
dated September 19, 1991, respondent Laguesma stated:

We reviewed the records once more, and find that the issues and arguments
adduced by movant have been squarely passed upon in the Resolution
sought to be reconsidered. Accordingly, we find no legal justification to alter,
much less set aside, the aforesaid resolution. Perforce, the motion for
reconsideration must fail.

WHEREFORE, the instant motion for reconsideration is hereby denied for lack
of merit and the resolution of this office dated 30 August 1991 STANDS.

No further motions of a similar nature shall hereinafter be entertained.[5]

Hence, this petition for certiorari.

Petitioner DLSUMCCM contends that respondent Laguesma gravely abused

his discretion. While it does not anymore insist that several of those who
joined the petition for certification election are holding managerial positions
in the company, petitioner nonetheless pursues the question whether unions
formed independently by supervisory and rank-and-file employees of a
company may validly affiliate with the same national federation. With
respect to this question, it argues:

THE PUBLIC RESPONDENT, HONORABLE BIENVENIDO E. LAGUESMA,

UNDERSECRETARY OF LABOR AND EMPLOYMENT, IN A CAPRICIOUS,

ARBITRARY AND WHIMSICAL EXERCISE OF POWER ERRED AND COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO ACTING WITHOUT OR IN
EXCESS OF JURISDICTION WHEN HE DENIED THE PETITIONERS APPEAL AND
ORDERED THE HOLDING OF A CERTIFICATION ELECTION AMONG THE
MEMBERS OF THE SUPERVISORY UNION EMPLOYED IN PETITIONERS
COMPANY DESPITE THE FACT THAT SAID SUPERVISORY UNION WAS
AFFILIATED WITH THE FEDERATION OF FREE WORKERS TO WHICH THE RANKAND-FILE EMPLOYEES OF THE SAME COMPANY ARE LIKEWISE AFFILIATED,
CONTRARY TO THE EXPRESS PROVISIONS OF ARTICLE 245 OF THE LABOR
CODE, AS AMENDED.[6]

The contention has no merit.

Supervisory employees have the right to self-organization as do other classes

of employees save only managerial ones. The Constitution states that the
right of the people, including those employed in the public and private
sectors, to form unions, associations or societies for purposes not contrary to
law, shall not be abridged.[7] As we recently held in UnitedPepsi-Cola
Supervisory Union v. Laguesma,[8] the framers of the Constitution intended,
by this provision, to restore the right of supervisory employees to selforganization which had been withdrawn from them during the period of
martial law. Thus:

Commissioner Lerum sought to amend the draft of what was later to become
Art. III, 8 of the present Constitution:

....

MR. LERUM. . . . Also, we have unions of supervisory employees and of

security guards. But what is tragic about this is that after the 1973
Constitution was approved and in spite of an express recognition of the right
to organize in P.D. No. 442, known as the Labor Code, the right of government
workers, supervisory employees and security guards to form unions was
abolished.

....

We are afraid that without any corresponding provision covering the private
sector, the security guards, the supervisory employees ... will still be
excluded and that is the purpose of this amendment.

....

In sum, Lerums proposal to amend Art. III, 8 of the draft Constitution by

including labor unions in the guarantee of organizational right should be
taken in the context of statements that his aim was the removal of the
statutory ban against security guards and supervisory employees joining
labor organizations. The approval by the Constitutional Commission of his
proposal can only mean, therefore, that the Commission intended the
absolute right to organize of government workers, supervisory employees,
and security guards to be constitutionally guaranteed.[9]

Conformably with the constitutional mandate, Art. 245 of the Labor Code now
provides for the right of supervisory employees to self-organization, subject
to the limitation that they cannot join an organization of rank-and-file
employees:

Supervisory employees shall not be eligible for membership in a labor

organization of the rank-and-file employees but may join, assist or form
separate labor organizations of their own.

The reason for the segregation of supervisory and rank-and-file employees of

a company with respect to the exercise of the right to self-organization is the
difference in their interests. Supervisory employees are more closely
identified with the employer than with the rank-and-file employees. If
supervisory and rank-and-file employees in a company are allowed to form a
single union, the conflicting interests of these groups impair their relationship
and adversely affect discipline, collective bargaining, and strikes.[10] These
consequences can obtain not only in cases where supervisory and rank-andfile employees in the same company belong to a single union but also where
unions formed independently by supervisory and rank-andfile employees of
a company are allowed to affiliate with the same national federation.

Consequently, this Court has held in Atlas Lithographic Services Inc. v.

Laguesma[11] that -

To avoid a situation where supervisors would merge with the rank-and-file or

where the supervisors labor organization would represent conflicting
interests, then a local supervisors union should not be allowed to affiliate
with a national federation of unions of rank-and-file employees where that
federation actively participates in union activities in the company.

As we explained in that case, however, such a situation would obtain only

where two conditions concur: First, the rank-and-file employees are directly
under the authority of supervisory employees.[12] Second, the national
federation is actively involved in union activities in the company.[13] Indeed,
it is the presence of these two conditions which distinguished Atlas
Lithographic Services, Inc. v. Laguesma from Adamson & Adamson, Inc. v.
CIR[14] where a different conclusion was reached.

The affiliation of two local unions in a company with the same national
federation is not by itself a negation of their independence since in relation to
the employer, the local unions are considered as the principals, while the
federation is deemed to be merely their agent. This conclusion is in accord
with the policy that any limitation on the exercise by employees of the right
to self-organization guaranteed in the Constitution must be construed strictly.
Workers should be allowed the practice of this freedom to the extent
recognized in the fundamental law. As held in Liberty Cotton Mills Workers
Union v. Liberty Cotton Mills, Inc.:[15]

The locals are separate and distinct units primarily designed to secure and
maintain an equality of bargaining power between the employer and their
employee members in the economic struggle for the fruits of the joint
productive effort of labor and capital; and the association of locals into the
national unionwas in furtherance of the same end. These associations are
consensual entities capable of entering into such legal relations with their
members. The essential purpose was the affiliation of the local unions into a
common enterprise to increase by collective action the common bargaining
power in respect of the terms and conditions of labor. Yet the locals remained
the basic units of association, free to serve their own and the common
interest of all, and free also to renounce the affiliation for mutual welfare

upon the terms laid down in the agreement which brought it to existence.[16]

The questions in this case, therefore, are whether the rank-and-file

employees of petitioner DLSUMCCM who compose a labor union are directly
under the supervisory employees whose own union is affiliated with the same
national federation (Federation of Free Workers) and whether such national
federation is actively involved in union activities in the company so as to
make the two unions in the same company, in reality, just one union.

Although private respondent FFW-DLSUMCCMSUC and another union

composed of rank-and-file employees of petitioner DLSUMCCM are indeed
affiliated with the same national federation, the FFW, petitioner DLSUMCCM
has not presented any evidence showing that the rank-and-file employees
composing the other union are directly under the authority of the supervisory
employees. As held in Adamson & Adamson, Inc. v. CIR,[17] the fact that the
two groups of workers are employed by the same company and the fact that
they are affiliated with a common national federation are not sufficient to
justify the conclusion that their organizations are actually just one. Their
immediate professional relationship must be established. To borrow the
language of Adamson & Adamson, Inc. v. CIR:[18]

We find without merit the contention of petitioner that if affiliation will be

allowed, only one union will in fact represent both supervisors and rank-andfile employees of the petitioner; that there would be an indirect affiliation of
supervisors and rank-andfile employees with one labor organization; that
there would be a merging of the two bargaining units; and that the
respondent union will lose its independence because it becomes an alter ego
of the federation.[19]

Mention has already been made of the fact that the petition for certification
election in this case was filed by the FFW on behalf of the local union. This
circumstance, while showing active involvement by the FFW in union
activities at the company, is by itself insufficient to justify a finding of
violation of Art. 245 since there is no proof that the supervisors who compose
the local union have direct authority over the rank-and-file employees
composing the other local union which is also affiliated with the FFW. This
fact differentiates the case from Atlas Lithographic Services, Inc. v.
Laguesma,[20] in which, in addition to the fact that the petition for

certification election had been filed by the national federation, it was shown
that the rank-and-file employees were directly under the supervisors
organized by the same federation.

It follows that respondent labor officials did not gravely abuse their discretion.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Regalado (Chairman), Melo, and Martinez, JJ., concur.

Puno- no part.

G.R. No. 93468

December 29, 1994

NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC PLANTERS

BANK SUPERVISORS CHAPTER, petitioner,
vs.
HON. RUBEN D. TORRES, SECRETARY OF LABOR AND EMPLOYMENT and
REPUBLIC PLANTERS BANK, respondents.

Filemon G. Tercero for petitioner.

The Government Corporate Counsel for Republic Planters Bank.

BELLOSILLO, J.:

NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC PLANTERS

BANK SUPERVISORS CHAPTER seeks nullification of the decision of public
respondent Secretary of Labor dated 23 March 1990, which modified the
order of Med-Arbiter Manases T. Cruz dated 17 August 1989 as well as his
order dated 20 April 1990 denying reconsideration.

On 17 March 1989, NATU filed a petition for certification election to determine

the exclusive bargaining representative of respondent Bank's employees
occupying supervisory positions. On 24 April 1989, the Bank moved to
dismiss the petition on the ground that the supposed supervisory employees
were actually managerial and/or confidential employees thus ineligible to
join, assist or form a union, and that the petition lacked the 20% signatory
requirement under the Labor Code.

On 17 August 1989, Med-Arbiter Manases T. Cruz granted the petition thus

WHEREFORE, . . . let a certification election be ordered conducted among all

the regular employees of the Republic Planters Bank occupying supervisory
positions or the equivalent within 20 days from receipt of a copy of this Order.
The choice shall be: (1) National Association of Trade Unions (NATU)-Republic
Planters Bank Supervisors Chapter; and (2) No Union.

The payroll three months prior to the filing of this petition shall be utilized in
determining the list of eligible voters . . . . 1

Respondent Bank appealed the order to the Secretary of Labor on the main
ground that several of the employees sought to be included in the
certification election, particularly the Department Managers, Branch
Managers/OICs, Cashiers and Controllers were managerial and/or confidential
employees and thus ineligible to join, assist or form a union. It presented
annexes detailing the job description and duties of the positions in question
and affidavits of certain employees. It also invoked provisions of the General
Banking Act and the Central Bank Act to show the duties and responsibilities
of the bank and its branches.

On 23 March 1990, public respondent issued a decision partially granting the

appeal, which is now being challenged before us

WHEREFORE, . . . the appeal is hereby partially granted. Accordingly, the

Order dated 17 August 1989 is modified to the extent that Department
Managers, Assistant Managers, Branch Managers, Cashiers and Controllers
are declared managerial employees. Perforce, they cannot join the union of
supervisors such as Division Chiefs, Accounts Officers, Staff Assistants and
OIC's (sic) unless the latter are regular managerial employees . . . . 2

NATU filed a motion for reconsideration but the same was denied on 20 April
1990. 3 Hence this recourse assailing public respondent for rendering the
decision of 23 March 1990 and the order of 20 April 1990 both with grave
abuse of discretion.

The crucial issue presented for our resolution is whether the Department
Managers, Assistant Managers, Branch Managers/OICs, Cashiers and
Controllers of respondent Bank are managerial and/or confidential employees
hence ineligible to join or assist the union of petitioner.

NATU submits that an analysis of the decision of public respondent readily

yields certain flaws that result in erroneous conclusions. Firstly, a branch does
not enjoy relative autonomy precisely because it is treated as one unit with
the head office and has to comply with uniform policies and guidelines set by
the bank itself. It would be absurd if each branch of a particular bank would
be adopting and implementing different policies covering multifarious
banking transactions. Moreover, respondent Bank's own evidence clearly
shows that policies and guidelines covering the various branches are set by
the head office. Secondly, there is absolutely no evidence showing that bank
policies are laid down through the collective action of the Branch Manager,
the Cashier and the Controller. Thirdly, the organizational setup where the
Branch Manager exercises control over branch operations, the Controller
controls the Accounting Division, and the Cashier controls the Cash Division,
is nothing but a proper delineation of duties and responsibilities. This
delineation is a Central Bank prescribed internal control measure intended to
objectively establish responsibilities among the officers to easily pinpoint
culpability in case of error. The "dual control" and "joint custody" aspects
mentioned in the decision of public respondent are likewise internal control

measures prescribed by the Central Bank.

Neither is there evidence showing that subject employees are vested with
powers or prerogatives to hire, transfer, suspend, lay off, recall, discharge,
assign or discipline employees. The bare allegations in the affidavits of
respondent Bank's Executive Assistant to the President 4 and the Senior
Manager of the Human Resource Management Department 5 that those
powers and prerogatives are inherent in subject positions are self-serving.
Their claim cannot be made to prevail upon the actual duties and
responsibilities of subject employees.

The other evidence of respondent Bank which purports to show that subject
employees exercise managerial functions even belies such claim. Insofar as
Department Managers and Assistant Managers are concerned, there is
absolutely no reason mentioned in the decision why they are managerial
employees. Not even respondent Bank in its appeal questioned the inclusion
of Assistant Managers among the qualified petitioning employees. Public
respondent has deviated from the real issue in this case, which is, the
determination of whether subject employees are managerial employees
within the contemplation of the Labor Code, as amended by RA 6715;
instead, he merely concentrated on the nature, conduct and management of
banks conformably with the General Banking Act and the Central Bank Act.

Petitioner concludes that subject employees are not managerial employees

but supervisors. Even assuming that they are confidential employees, there is
no legal prohibition against confidential employees who are not performing
managerial functions to form and join a union.

On the other hand, respondent Bank maintains that the Department

Managers, Branch Managers, Cashiers and Controllers are inherently
possessed of the powers enumerated in Art. 212, par. (m), of the Labor Code.
It relies heavily on the affidavits of its Executive Assistant to the President
and Senior Manager of the Human Resource Department. The Branch
Managers, Cashiers and Controllers are vested not only with policy-making
powers necessary to run the affairs of the branch, given the independence
and relative autonomy which it enjoys in the pursuit of its goals and
objectives, but also with the concomitant disciplinary authority over the
employees.

The Solicitor General argues that NATU loses sight of the fact that by virtue of
the appeal of respondent Bank, the whole case is thrown open for
consideration by public respondent. Even errors not assigned in the appeal,
such as the exclusion by the Med-Arbiter of Assistant Managers from the
managerial employees category, is within his discretion to consider as it is
closely related to the errors properly assigned. The fact that Department
Managers are managerial employees is borne out by the evidence of
petitioner itself. Furthermore, while it assails public respondent's finding that
subject employees are managerial employees, petitioner never questioned
the fact that said officers also occupy confidential positions and thus remain
prohibited from forming or joining any labor organization.

Respondent Bank has no legal personality to move for the dismissal of the
petition for certification election on the ground that its supervisory employees
are in reality managerial employees. An employer has no standing to
question the process since this is the sole concern of the workers. The only
exception is where the employer itself has to file the petition pursuant to Art.
258 of the Labor Code because of a request to bargain collectively. 6

Public respondent, invoking RA 6715 and the inherent functions of

Department Managers, Assistant Managers, Branch Managers, Cashiers and
Controllers, held that these officers properly fall within the definition of
managerial employees. The ratiocination in his Decision of 23 March 1990 7
is that

Republic Act No. 6715, otherwise known as the Herrera-Veloso Law, restored
the right of supervisors to form their own unions while maintaining the
proscription on the right to self-organization of managerial employees.
Accordingly, the Labor Code, as amended, distinguishes managerial,
supervisory and rank-and-file employees thus:

Art. 212 (m) Managerial employee is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions, if the exercise of such
managerial authority is not routinary in nature but requires the use of

independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees (emphasis supplied).

At first glance, pursuant to the above-definitions and based on their job

descriptions as guideposts, there would seem to be no difficulty in
distinguishing a managerial employee from that of a supervisor, or from that
of a mere rank-and-file employee. Yet, this task takes on a different
dimension when applied to banks, particularly the branches thereof. This is so
because unlike ordinary corporations, a bank's organizational operation is
governed and regulated by the General Banking Act and the Central Bank
Act, both special laws . . . .

As pointed out by the respondent, in the banking industry, a branch is the

microcosm of a banking institution, uniquely autonomous and
self-governing.

This relative autonomy of a branch finds legal basis in Section 27 of the

General Banking Act, as amended, thus:

. . . . The bank shall be responsible for all business conducted in such

branches to the same extent and in the same manner as though such
business had all been conducted in the head office.

For the purpose of this Act, a bank and its branches shall be treated as a unit
(emphasis supplied).

Conformably with the above, bank policies are laid down and/or executed
through the collective action of the Branch Manager, Cashier and Controller
at the branch level. The Branch Manager exercises over-all control and
supervision over branch operation being on the top of the branch's pyramid
structure. However, both the controller and the cashier who are called in
banking parlance as "Financial Managers" due to their fiscal functions are
given such a share and sphere of responsibility in the operations of the bank.
The cashier controls and supervises the cash division while the controller that
of the Accounting Division. Likewise, their assigned task is of great

significance, without which a bank or branch for that matter cannot operate
or function.

Through the collective action of these three branch officers operational

transactions are carried out like: The two (2)-signature requirement of the
manager, on one hand, and that of the controller or cashier on the other hand
as required in bank's issuances and releases. This is the so-called "dual
control" through check-and-balance as prescribed by the Central Bank, per
Section 1166.6, Book I, Manual of Regulations for Banks and Financial
Intermediaries. Another is in the joint custody of the branch's cash in vault,
accountable forms, collaterals, documents of title, deposit, ledgers and
others, among the branch manager and at least two (2) officers of the branch
as required under Section 1166.6 of the Manual of Regulations for Banks and
Other Financial Intermediaries.

This structural set-up creates a triad of managerial authority among the

branch manager, cashier and controller. Hence, no officer of the bank ". . .
have (sic) complete authority and responsibility for handling all phases of any
transaction from beginning to end without some control or balance from
some other part of the organization" (Section 1166.3, Division of Duties and
Responsibilities, Ibid). This aspect in the banking system which calls for the
division of duties and responsibilities is a clear manifestation of managerial
power and authority. No operational transaction at branch level is carried out
by the singular act of the Branch Manager but rather through the collective
act of the Branch Manager, Cashier/Controller (emphasis supplied).

Noteworthy is the "on call client" set up in banks. Under this scheme, the
branch manager is tasked with the responsibility of business development
and marketing of the bank's services which place him on client call. During
such usual physical absences from the branch, the cashier assumes the reins
of branch control and administration. On those occasions, the "dual control
system" is clearly manifest in the transactions and operations of the branch
bank as it will then require the necessary joint action of the controller and the
cashier.

The grave abuse of discretion committed by public respondent is at once

apparent. Art. 212, par. (m), of the Labor Code is explicit. A managerial
employee is (a) one who is vested with powers or prerogatives to lay down

and execute management policies, or to hire, transfer, suspend, lay off,

recall, discharge, assign or discipline employees; or (b) one who is vested
with both powers or prerogatives. A supervisory employee is different from a
managerial employee in the sense that the supervisory employee, in the
interest of the employer, effectively recommends such managerial actions, if
the exercise of such managerial authority is not routinary in nature but
requires the use of independent judgment.

Ranged against these definitions and after a thorough examination of the

evidence submitted by both parties, we arrive at a contrary conclusion.
Branch Managers, Cashiers and Controllers of respondent Bank are not
managerial employees but supervisory employees. The finding of public
respondent that bank policies are laid down and/or executed through the
collective action of these employees is simply erroneous. His discussion on
the division of their duties and responsibilities does not logically lead to the
conclusion that they are managerial employees, as the term is defined in Art.
212, par. (m).

Among the general duties and responsibilities of a Branch Manager is "[t]o

discharge his duties and authority with a high sense of responsibility and
integrity and shall at all times be guided by prudence like a good father of the
family, and sound judgment in accordance with and within the limitations of
the policy/policies promulgated by the Board of Directors and implemented
by the Management until suspended, superseded, revoked or modified" (par.
5, emphasis supplied). 8 Similarly, the job summary of a Controller states:
"Supervises the Accounting Unit of the branch; sees to the compliance by the
Branch with established procedures, policies, rules and regulations of the
Bank and external supervising authorities; sees to the strict implementation
of control procedures (emphasis supplied). 9 The job description of a Cashier
does not mention any authority on his part to lay down policies, either. 10 On
the basis of the foregoing evidence, it is clear that subject employees do not
participate in policy-making but are given approved and established policies
to execute and standard practices to observe, 11 leaving little or no
discretion at all whether to implement said policies or not. 12 It is the nature
of the employee's functions, and not the nomenclature or title given to his
job, which determines whether he has rank-and-file, supervisory or
managerial status. 13

Moreover, the bare statement in the affidavit of the Executive Assistant to the
President of respondent Bank that the Branch Managers, Cashiers and

Controllers "formulate and implement the plans, policies and marketing

strategies of the branch towards the successful accomplishment of its profit
targets and objectives," 14 is contradicted by the following evidence
submitted by respondent Bank itself:

(a)
Memorandum issued by respondent Bank's Assistant Vice President to
all Regional Managers and Branch Managers giving them temporary
discretionary authority to grant additional interest over the prescribed board
rates for both short-term and long-term CTDs subject, however, to specific
limitations and guidelines set forth in the same memorandum; 15

(b)
Memorandum issued by respondent Bank's Executive Vice President to
all Regional Managers and Branch Officers regarding the policy and guidelines
on drawing against uncollected deposits (DAUD); 16

(c)
Memorandum issued by respondent Bank's President to all Field Offices
regarding the guidelines on domestic bills purchased
(DBP); 17 and

(d)
Memorandum issued by the same officer to all Branch Managers
regarding lending authority at the branch level and the terms and conditions
thereof. 18

As a consequence, the affidavit of the Executive Assistant cannot be given

any weight at all.

Neither do the Branch Managers, Cashiers and Controllers have the power to
hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees. The Senior Manager of the Human Resource Management
Department of respondent Bank, in her affidavit, stated that "the power to
hire, fire, suspend, transfer, assign or otherwise impose discipline among
subordinates within their respective jurisdictions is lodged with the heads of
the various departments, the branch managers and officers-in-charge, the
branch cashiers and the branch controllers. Inherent as it is in the
aforementioned positions, the authority to hire, fire, suspend, transfer, assign

or otherwise discipline employees within their respective domains was

deemed unnecessary to be incorporated in their individual job descriptions;
By way of illustration, on August 24, 1989, Mr. Renato A. Tuates, the Officerin-Charge/Branch Cashier of the Bank's Dumaguete Branch, placed under
preventive suspension and thereafter terminated the teller of the same
branch . . . . Likewise, on February 22, 1989, Mr. Francis D. Robite, Sr., the
Officer-in-Charge of International Department, assigned the cable assistant of
the International Department as the concurrent FCDU Accountable Forms
Custodian." 19

However, a close scrutiny of the memorandum of Mr. Tuates reveals that he

does not have said managerial power because as plainly stated therein, it
was issued "upon instruction from Head Office." 20 With regard to the
memorandum of Mr. Robite, Sr., it appears that the power he exercised was
merely in an isolated instance, taking into account the other evidence
submitted by respondent Bank itself showing lack of said power by other
Branch Managers/OICs:

(a)

Memorandum from the Branch Manager for the

AVP-Manpower Management Department expressing the opinion that a

certain employee, due to habitual absenteeism and tardiness, must be
penalized in accordance with respondent Bank's Code of Discipline; and

(b)
Memorandum from a Branch OIC for the Assistant Vice President
recommending a certain employee's promotional adjustment to the present
position he occupies.

Clearly, those officials or employees possess only recommendatory powers

subject to evaluation, review and final action by higher officials. Therefore,
the foregoing affidavit cannot bolster the stand of respondent Bank.

The positions of Department Managers and Assistant Managers were also

declared by public respondent as managerial, without providing any basis
therefor. Petitioner asserts that the position of Assistant Manager was not
even included in the appeal filed by respondent Bank. While we agree with
the Office of the Solicitor General that it is within the discretion of public

respondent to consider an unassigned issue that is closely related to an issue

properly assigned, still, public respondent's error lies in the fact that his
finding has no leg to stand on. Anyway, inasmuch as the entire records are
before us, now is the opportunity to discuss this issue.

We analyzed the evidence submitted by respondent Bank in support of its

claim that Department Managers are managerial employees 21 and
concluded that they are not. Like Branch Managers, Cashiers and Controllers,
Department Managers do not possess the power to lay down policies nor to
hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees. They occupy supervisory positions, charged with the duty among
others to "recommend proposals to improve and streamline operations." 22
With respect to Assistant Managers, there is absolutely no evidence
submitted to substantiate public respondent's finding that they are
managerial employees; understandably so, because this position is not
included in the appeal of respondent Bank.

As regards the other claim of respondent Bank that Branch Managers/OICs,

Cashiers and Controllers are confidential employees, having control, custody
and/or access to confidential matters, e.g., the branch's cash position,
statements of financial condition, vault combination, cash codes for
telegraphic transfers, demand drafts and other negotiable instruments, 23
pursuant to Sec. 1166.4 of the Central Bank Manual regarding joint custody,
24 this claim is not even disputed by petitioner. A confidential employee is
one entrusted with confidence on delicate matters, or with the custody,
handling, or care and protection of the employer's property. 25 While Art. 245
of the Labor Code singles out managerial employees as ineligible to join,
assist or form any labor organization, under the doctrine of necessary
implication, confidential employees are similarly disqualified. This doctrine
states that what is implied in a statute is as much a part thereof as that
which is expressed, as elucidated in several cases 26 the latest of which is
Chua v. Civil Service Commission 27 where we said:

No statute can be enacted that can provide all the details involved in its
application. There is always an omission that may not meet a particular
situation. What is thought, at the time of enactment, to be an all-embracing
legislation may be inadequate to provide for the unfolding events of the
future. So-called gaps in the law develop as the law is enforced. One of the
rules of statutory construction used to fill in the gap is the doctrine of
necessary implication . . . . Every statute is understood, by implication, to

contain all such provisions as may be necessary to effectuate its object and
purpose, or to make effective rights, powers, privileges or jurisdiction which it
grants, including all such collateral and subsidiary consequences as may be
fairly and logically inferred from its terms. Ex necessitate
legis . . . .

In applying the doctrine of necessary implication, we took into consideration

the rationale behind the disqualification of managerial employees expressed
in Bulletin Publishing Corporation v. Sanchez, 28 thus: ". . . if these
managerial employees would belong to or be affiliated with a Union, the
latter might not be assured of their loyalty to the Union in view of evident
conflict of interests. The Union can also become company-dominated with the
presence of managerial employees in Union membership." Stated differently,
in the collective bargaining process, managerial employees are supposed to
be on the side of the employer, to act as its representatives, and to see to it
that its interests are well protected. The employer is not assured of such
protection if these employees themselves are union members. Collective
bargaining in such a situation can become one-sided. 29 It is the same reason
that impelled this Court to consider the position of confidential employees as
included in the disqualification found in Art. 245 as if the disqualification of
confidential employees were written in the provision. If confidential
employees could unionize in order to bargain for advantages for themselves,
then they could be governed by their own motives rather than the interest of
the employers. Moreover, unionization of confidential employees for the
purpose of collective bargaining would mean the extension of the law to
persons or individuals who are supposed to act "in the interest of" the
employers. 30 It is not farfetched that in the course of collective bargaining,
they might jeopardize that interest which they are duty-bound to protect.
Along the same line of reasoning we held in Golden Farms, Inc. v. FerrerCalleja 31 reiterated in Philips Industrial Development, Inc. v. NLRC, 32 that
"confidential employees such as accounting personnel, radio and telegraph
operators who, having access to confidential information, may become the
source of undue advantage. Said employee(s) may act as spy or spies of
either party to a collective bargaining agreement."

In fine, only the Branch Managers/OICs, Cashiers and Controllers of

respondent Bank, being confidential employees, are disqualified from joining
or assisting petitioner Union, or joining, assisting or forming any other labor
organization. But this ruling should be understood to apply only to the
present case based on the evidence of the parties, as well as to those

similarly situated. It should not be understood in any way to apply to banks in

general.

WHEREFORE, the petition is partially GRANTED. The decision of public

respondent Secretary of Labor dated 23 March 1990 and his order dated 20
April 1990 are MODIFIED, hereby declaring that only the Branch
Managers/OICs, Cashiers and Controllers of respondent Republic Planters
Bank are ineligible to join or assist petitioner National Association of Trade
Unions (NATU)-Republic Planters Bank Supervisors Chapter, or join, assist or
form any other labor organization.

SO ORDERED.

Davide, Jr., Quiason and Kapunan, JJ., concur.

IRST DIVISION
[G.R. No. 108855. February 28, 1996]

METROLAB INDUSTRIES, INC., petitioner, vs. HONORABLE MA. NIEVES

ROLDAN-CONFESOR, in her capacity as Secretary of the Department of Labor
and Employment and METRO DRUG CORPORATION EMPLOYEES ASSOCIATIONFEDERATION OF FREE WORKERS, respondents.
SYLLABUS

1.
REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF ADMINISTRATIVE
AGENCIES; RULE; CASE AT BAR. - We reaffirm the doctrine that considering
their expertise in their respective fields, factual findings of administrative
agencies supported by substantial evidence are accorded great respect and
binds this Court. The Secretary of Labor ruled, thus: x x x Any act committed
during the pendency of the dispute that tends to give rise to further
contentious issues or increase the tensions between the parties should be
considered an act of exacerbation. One must look at the act itself, not on
speculative reactions. A misplaced recourse is not needed to prove that a
dispute has been exacerbated. For instance, the Union could not be expected
to file another notice of strike. For this would depart from its theory of the
case that the layoff is subsumed under the instant dispute, for which a notice

of strike had already been filed. On the other hand, to expect violent
reactions, unruly behavior, and any other chaotic or drastic action from the
Union is to expect it to commit acts disruptive of public order or acts that
may be illegal. Under a regime of laws, legal remedies take the place of
violent ones. x xx Protest against the subject layoffs need not be in the form
of violent action or any other drastic measure. In the instant case the Union
registered their dissent by swiftly filing a motion for a cease and desist order.
Contrary to petitioners allegations, the Union strongly condemned the layoffs
and threatened mass action if the Secretary of Labor fails to timely intervene:
x x x 3. This unilateral action of management is a blatant violation of the
injunction of this Office against committing acts which would exacerbate the
dispute. Unless such act is enjoined the Union will be compelled to resort to
its legal right to mass actions and concerted activities to protest and stop the
said management action. This mass layoff is clearly one which would result
in a very serious dispute unless this Office swiftly intervenes. x x x Metrolab
and the Union were still in the process of resolving their CBA deadlock when
petitioner implemented the subject layoffs. As a result, motions and
oppositions were filed diverting the parties attention, delaying resolution of
the bargaining deadlock and postponing the signing of their new CBA,
thereby aggravating the whole conflict.

2.
LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT;
EXERCISE OF MANAGEMENT PREROGATIVES; NOT ABSOLUTE; SUBJECT TO
EXCEPTIONS IMPOSED BY LAW. - This Court recognizes the exercise of
management prerogatives and often declines to interfere with the legitimate
business decisions of the employer. However, this privilege is not absolute
but subject to limitations imposed by law. In PAL vs. NLRC, (225 SCRA 301
[1993]), we issued this reminder: ... the exercise of management prerogatives
was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565
[1989]), it was held that managements prerogatives must be without abuse
of discretion ...All this points to the conclusion that the exercise of managerial
prerogatives is not unlimited. It is circumscribed by limi(ations found in law,
a collective bargaining agreement, or the general principles of fair play and
justice (University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]).

3.
ID.; ID.; ID.; ID.; ID.; CASE AT BAR AN EXCEPTION. - The case at bench
constitutes one of the exceptions. The Secretary of Labor is expressly given
the power under the Labor Code to assume jurisdiction and resolve labor
disputes involving industries indispensable to national interest. The disputed
injunction is subsumed under this special grant of authority. Art. 263 (g) of
the Labor Code specifically provides that: x x x (g) When, in his opinion, there

exists a labor dispute causing or likely to cause a strike or lockout in an

industry indispensable to the national interest, the Secretary of Labor and
Employment may assume jurisdiction over the dispute and decide it or certify
the same to the Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the intended or
impending strike or lockout as specified in the assumption or certification
order. If one has already taken place at the time of assumption or
certification, all striking or locked out employees shall immediately return to
work and the employer shall immediately resume operations and readmit all
workers under the same terms and conditions prevailing before the strike or
lockout. The Secretary of Labor and Employment or the Commission may
seek the assistance of law enforcement agencies to ensure compliance with
this provision as well as with such orders as he may issue to enforce the
same. . . . That Metrolabs business is of national interest is not disputed.
Metrolab is one of the leading manufacturers and suppliers of medical and
pharmaceutical products to the country. Metrolabs management
prerogatives, therefore, are not being unjustly curtailed but duly balanced
with and tempered by the limitations set by law, taking into account its
special character and the particular circumstances in the case at bench.

4.
ID.; LABOR RELATIONS; INELIGIBILITY OF MANAGERIAL EMPLOYEES TO
JOIN, FORM AND ASSIST ANY LABOR ORGANIZATION; PROHIBITION EXTENDED
TO CONFIDENTIAL EMPLOYEES. - Although Article 245 of the Labor Code limits
the ineligibility to join, form and assist any labor organization to managerial
employees, jurisprudence has extended this prohibition to confidential
employees or those who by reason of their positions or nature of work are
required to assist or act in a fiduciary manner to managerial employees and
hence, are likewise privy to sensitive and highly confidential records.

5.
ID.; ID.; EXCLUSION OF CONFIDENTIAL EMPLOYEES FROM THE RANK AND
FILE BARGAINING UNIT; NOT TANTAMOUNT TO DISCRIMINATION. - Confidential
employees cannot be classified as rank and file. As previously discussed, the
nature of employment of confidential employees is quite distinct from the
rank and file, thus, warranting a separate category. Excluding confidential
employees from the rank and file bargaining unit, therefore, is not
tantamount to discrimination.

APPEARANCES OF COUNSEL

Bautista Picazo Buyco Tan & Fider for petitioner.

The Solicitor General for public respondent.
Perfecto V. Fernandez, Jose P. Fernandez & Cristobal P. Fernandez for Metro
Drug Corporation.
DECISION
KAPUNAN, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court
seeking the annulment of the Resolution and Omnibus Resolution of the
Secretary of Labor and Employment dated 14 April 1992 and 25 January
1993, respectively, in OS-AJ-04491-11 (NCMB-NCR-NS-08-595-9 1; NCMB-NCRNS-09-678-91) on grounds that these were issued with grave abuse of
discretion and in excess of jurisdiction.

Private respondent Metro Drug Corporation Employees Association-Federation

of Free Workers (hereinafter referred to as the Union) is a labor organization
representing the rank and file employees of petitioner Metrolab Industries,
Inc. (hereinafter referred to as Metrolab/MII) and also of Metro Drug, Inc.

On 31 December 1990, the Collective Bargaining Agreement (CBA) between

Metrolab and the Union expired. The negotiations for a new CBA, however,
ended in a deadlock.

Consequently, on 23 August 1991, the Union filed a notice of strike against

Metrolab and Metro Drug Inc. The parties failed to settle their dispute despite
the conciliation efforts of the National Conciliation and Mediation Board.

To contain the escalating dispute, the then Secretary of Labor and

Employment, Ruben D. Torres, issued an assumption order dated 20
September 1991, the dispositive portion of which reads, thus:

WHEREFORE, PREMISES CONSIDERED, and pursuant to Article 263 (g) of the

Labor Code, as amended, this Office hereby assumes jurisdiction over the

entire labor dispute at Metro Drug, Inc. - Metro Drug Distribution Division and
Metrolab Industries Inc.

Accordingly, any strike or lockout is hereby strictly enjoined. The Companies

and the Metro Drug Corp. Employees Association - FFW are likewise directed
to cease and desist from committing any and all acts that might exacerbate
the situation.

Finally, the parties are directed to submit their position papers and evidence
on the aforequoted deadlocked issues to this office within twenty (20) days
from receipt hereof.

SO ORDERED.[1] (Italics ours.)

On 27 December 1991, then Labor Secretary Torres issued an order resolving

all the disputed items in the CBA and ordered the parties involved to execute
a new CBA.

Thereafter, the Union filed a motion for reconsideration.

On 27 January 1992, during the pendency of the abovementioned motion for

reconsideration, Metrolab laid off 94 of its rank and file employees.

On the same date, the Union filed a motion for a cease and desist order to
enjoin Metrolab from implementing the mass layoff, alleging that such act
violated the prohibition against committing acts that would exacerbate the
dispute as specifically directed in the assumption order.[2]

On the other hand, Metrolab contended that the layoff was temporary and in
the exercise of its management prerogative. It maintained that the company
would suffer a yearly gross revenue loss of approximately sixty-six (66)
million pesos due to the withdrawal of its principals in the Toll and Contract
Manufacturing Department. Metrolab further asserted that with the

automation of the manufacture of its product Eskinol, the number of

workers required its production is significantly reduced.[3]

Thereafter, on various dates, Metrolab recalled some of the laid off workers
on a temporary basis due to availability of work in the production lines.

On 14 April 1992, Acting Labor Secretary Nieves Confesor issued a resolution

declaring the layoff of Metrolabs 94 rank and file workers illegal and ordered
their reinstatement with full backwages. The dispositive portion reads as
follows:

WHEREFORE, the Unions motion for reconsideration is granted in part, and

our order of 28 December 1991 is affirmed subject to the modifications in
allowances and in the close shop provision. The layoff of the 94 employees at
MII is hereby declared illegal for the failure of the latter to comply with our
injunction against committing any act which may exacerbate the dispute and
with the 30-day notice requirement. Accordingly, MII is hereby ordered to
reinstate the 94 employees, except those who have already been recalled, to
their former positions or substantially equivalent, positions with full
backwages from the date they were illegally laid off on 27 January 1992 until
actually reinstated without loss of seniority rights and other benefits. Issues
relative to the CBA agreed upon by the parties and not embodied in our
earlier order are hereby ordered adopted for incorporation in the CBA.
Further, the dispositions and directives contained in all previous orders and
resolutions relative to the instant dispute, insofar as not inconsistent herein,
are reiterated. Finally, the parties are enjoined to cease and desist from
committing any act which may tend to circumvent this resolution.

SO RESOLVED.[4]

On 6 March 1992, Metrolab filed a Partial Motion for Reconsideration alleging

that the layoff did not aggravate the dispute since no untoward incident
occurred as a result thereof. It, likewise, filed a motion for clarification
regarding the constitution of the bargaining unit covered by the CBA.

On 29 June 1992, after exhaustive negotiations, the parties entered into a

new CBA. The execution, however, was without prejudice to the outcome of
the issues raised in the reconsideration and clarification motions submitted
for decision to the Secretary of Labor.[5]

Pending the resolution of the aforestated motions, on 2 October 1992,

Metrolab laid off 73 of its employees on grounds of redundancy due to lack of
work which the Union again promptly opposed on 5 October 1992.

On 15 October 1992, Labor Secretary Confesor again issued a cease and

desist order. Metrolab moved for a reconsideration.[6]

On 25 January 1993, Labor Secretary Confesor issued the assailed Omnibus

Resolution containing the following orders:

xxx

xxx

xxx.

1. MIIs motion for partial reconsideration of our 14 April 1992 resolution

specifically that portion thereof assailing our ruling that the layoff of the 94
employees is illegal, is hereby denied. MII is hereby ordered to pay such
employees their full backwages computed from the time of actual layoff to
the time of actual recall;

2. For the parties to incorporate in their respective collective bargaining

agreements the clarifications herein contained; and

3. MIIs motion for reconsideration with respect to the consequences of the

second wave of layoff affecting 73 employees, to the extent of assailing our
ruling that such layoff tended to exacerbate the dispute, is hereby denied.
But inasmuch as the legality of the layoff was not submitted for our resolution
and no evidence had been adduced upon which a categorical finding thereon
can be based, the same is hereby referred to the NLRC for its appropriate
action.

Finally, all prohibitory injunctions issued as a result of our assumption of

jurisdiction over this dispute are hereby lifted.

SO RESOLVED.[7]

Labor Secretary Confesor also ruled that executive secretaries are excluded
from the closed-shop provision of the CBA, not from the bargaining unit.

On 4 February 1993, the Union filed a motion for execution. Metrolab

opposed. Hence, the present petition for certiorari with application for
issuance of a Temporary Restraining Order.

On 4 March 1993, we issued a Temporary Restraining Order enjoining the

Secretary of Labor from enforcing and implementing the assailed Resolution
and Omnibus Resolution dated 14 April 1992 and 25 January 1993,
respectively.

In its petition, Metrolab assigns the following errors:

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT

COMMITTED GRAVE ABUSE OF DISCRETION AND EXCEEDED HER
JURISDICTION IN DECLARING THE TEMPORARY LAYOFF ILLEGAL AND
ORDERING THE REINSTATEMENT AND PAYMENT OF BACKWAGES TO THE
AFFECTED EMPLOYEES.*

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT

GRAVELY ABUSED HER DISCRETION IN INCLUDING EXECUTIVE SECRETARIES

AS PART OF THE BARGAINING UNIT OF RANK AND FILE EMPLOYEES.[8]

Anent the first issue, we are asked to determine whether or not public
respondent Labor Secretary committed grave abuse of discretion and
exceeded her jurisdiction in declaring the subject layoffs instituted by
Metrolab illegal on grounds that these unilateral actions aggravated the
conflict between Metrolab and the Union who were, then, locked in a
stalemate in CBA negotiations.

Metrolab argues that the Labor Secretarys order enjoining the parties from
committing any act that might exacerbate the dispute is overly broad,
sweeping and vague and should not be used to curtail the employers right to
manage his business and ensure its viability.

We cannot give credence to Metrolabs contention.

This Court recognizes the exercise of management prerogatives and often

declines to interfere with the legitimate business decisions of the employer.
However, this privilege is not absolute but subject to limitations imposed by
law.[9]

In PAL v. NLRC,[10] we issued this reminder:

xxx

xxx

xxx

. . .the exercise of management prerogatives was never considered

boundless. Thus, in Cruz vs. Medina ( 177 SCRA 565 [1989]), it was held that
managements prerogatives must be without abuse of discretion....

xxx

xxx

xxx

All this points to the conclusion that the exercise of managerial prerogatives
is not unlimited. It is circumscribed by limitations found in law, a collective
bargaining agreement, or the general principles of fair play and justice
(University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]). . . . (Italics ours.)

xxx

xxx

xxx.

The case at bench constitutes one of the exceptions. The Secretary of Labor
is expressly given the power under the Labor Code to assume jurisdiction and
resolve labor disputes involving industries indispensable to national interest.
The disputed injunction is subsumed under this special grant of authority.
Art. 263 (g) of the Labor Code specifically provides that:

xxx

xxx

xxx

(g) When, in his opinion, there exists a labor dispute causing or likely to cause
a strike or lockout in an industry indispensable to the national interest, the
Secretary of Labor and Employment may assume jurisdiction over the dispute
and decide it or certify the same to the Commission for compulsory
arbitration. Such assumption or certification shall have the effect of
automatically enjoining the intended or impending strike or lockout as
specified in the assumption or certification order. If one has already taken
place at the time of assumption or certification, all striking or locked out
employees shall immediately return to work and the employer shall
immediately resume operations and readmit all workers under the same
terms and conditions prevailing before the strike or lockout. The Secretary of
Labor and Employment or the Commission may seek the assistance of law
enforcement agencies to ensure compliance with this provision as well as
with such orders as he may issue to enforce the same. . . (Italics ours.)

xxx

xxx

xxx.

That Metrolabs business is of national interest is not disputed. Metrolab is

one of the leading manufacturers and suppliers of medical and
pharmaceutical products to the country.

Metro labs management prerogatives, therefore, are not being unjustly

curtailed but duly balanced with and tempered by the limitations set by law,
taking into account its special character and the particular circumstances in
the case at bench.

As aptly declared by public respondent Secretary of Labor in its assailed

resolution:

xxx

xxx

xxx.

MII is right to the extent that as a rule, we may not interfere with the
legitimate exercise of management prerogatives such as layoffs. But it may
nevertheless be appropriate to mention here that one of the substantive evils
which Article 263 (g) of the Labor Code seeks to curb is the exacerbation of a
labor dispute to the further detriment of the national interest. When a labor
dispute has in fact occurred and a general injunction has been issued
restraining the commission of disruptive acts, management prerogatives
must always be exercised consistently with the statutory objective.[11]

xxx

xxx

xxx.

Metrolab insists that the subject layoffs did not exacerbate their dispute with
the Union since no untoward incident occurred after the layoffs were
implemented. There were no work disruptions or stoppages and no mass
actions were threatened or undertaken. Instead, petitioner asserts, the
affected employees calmly accepted their fate as this was a matter which
they had been previously advised would be inevitable.[12]

After a judicious review of the record, we find no compelling reason to

overturn the findings of the Secretary of Labor.

We reaffirm the doctrine that considering their expertise in their respective

fields, factual findings of administrative agencies supported by substantial

evidence are accorded great respect and binds this Court.[13]

The Secretary of Labor ruled, thus:

xxx

xxx

xxx.

Any act committed during the pendency of the dispute that tends to give rise
to further contentious issues or increase the tensions between the parties
should be considered an act of exacerbation. One must look at the act itself,
not on speculative reactions. A misplaced recourse is not needed to prove
that a dispute has been exacerbated. For instance, the Union could not be
expected to file another notice of strike. For this would depart from its theory
of the case that the layoff is subsumed under the instant dispute, for which a
notice of strike had already been filed. On the other hand, to expect violent
reactions, unruly behavior, and any other chaotic or drastic action from the
Union is to expect it to commit acts disruptive of public order or acts that
may be illegal. Under a regime of laws, legal remedies take the place of
violent ones.[14]

xxx

xxx

xxx.

Protest against the subject layoffs need not be in the form of violent action or
any other drastic measure. In the instant case the Union registered their
dissent by swiftly filing a motion for a cease and desist order. Contrary to
petitioners allegations, the Union strongly condemned the layoffs and
threatened mass action if the Secretary of Labor fails to timely intervene:

xxx

xxx

xxx.

3. This unilateral action of management is a blatant violation of the injunction

of this Office against committing acts which would exacerbate the dispute.
Unless such act is enjoined the Union will be compelled to resort to its legal
right to mass actions and concerted activities to protest and stop the said
management action. This mass layoff is clearly one which would result in a

very serious labor dispute unless this Office swiftly intervenes.[15]

xxx

xxx

xxx.

Metrolab and the Union were still in the process of resolving their CBA
deadlock when petitioner implemented the subject layoffs. As a result,
motions and oppositions were filed diverting the parties attention, delaying
resolution of the bargaining deadlock and postponing the signing of their new
CBA, thereby aggravating the whole conflict.

We, likewise, find untenable Metrolabs contention that the layoff of the 94
rank-and-file employees was temporary, despite the recall of some of the laid
off workers.

If Metrolab intended the layoff of the 94 workers to be temporary, it should

have plainly stated so in the notices it sent to the affected employees and the
Department of Labor and Employment. Consider the tenor of the pertinent
portions of the layoff notice to the affected employees:

xxx

xxx

xxx.

Dahil sa mga bagay na ito, napilitan ang ating kumpanya na magsagawa ng

lay-off ng mga empleyado sa Rank & File dahil nabawasan ang trabaho at
puwesto para sa kanila. Marami sa atin ang kasama sa lay-off dahil wala
nang trabaho para sa kanila. Mahirap tanggapin ang mga bagay na ito
subalit kailangan nating gawin dahil hindi kaya ng kumpanya ang magbayad
ng suweldo kung ang empleyado ay walang trabaho. Kung tayo ay patuloy
na magbabayad ng suweldo, mas hihina ang ating kumpanya at mas marami
ang maaring maapektuhan.

Sa pagpapatupad ng lay-off susundin natin ang LAST IN-FIRST OUT policy.

Ang mga empleyadong may pinakamaikling serbisyo sa kumpanya ang unang
maaapektuhan. Ito ay batay na rin sa nakasaad sa ating CBA na ang mga
huling pumasok sa kumpanya ang unang masasama sa lay-off kapag

nagkaroon ng ganitong mga kalagayan.

Ang mga empleyado na kasama sa lay-off ay nakalista sa sulat na ito. Ang

umpisa ng lay-off ay sa Lunes, Enero 27. Hindi na muna sila papasok sa
kumpanya. Makukuha nila ang suweldo nila sa Enero 30, 1992.

Hindi po natin matitiyak kung gaano katagal ang lay-off ngunit ang aming
tingin ay matatagalan bago magkaroon ng dagdag na trabaho. Dahil dito,
sinimulan na namin ang isang Redundancy Program sa mga supervisors.
Nabawasan ang mga puwesto para sa kanila, kaya sila ay mawawalan ng
trabaho at bibigyan na ng redundancy pay.[16] (Italics ours.)

xxx

xxx

xxx.

We agree with the ruling of the Secretary of Labor, thus:

xxx

xxx

xxx.

. . .MII insists that the layoff in question is temporary not permanent. It then
cites International Hardware, Inc. vs. NLRC, 176 SCRA 256, in which the
Supreme Court held that the 30-day notice required under Article 283 of the
Labor Code need not be complied with if the employer has no intention to
permanently severe (sic) the employment relationship.

We are not convinced by this argument. International Hardware involves a

case where there had been a reduction of workload. Precisely to avoid laying
off the employees, the employer therein opted to give them work on a
rotating basis. Though on a limited scale, work was available. This was the
Supreme Courts basis for holding that there was no intention to permanently
severe (sic) the employment relationship.

Here, there is no circumstance at all from which we can infer an intention

from MII not to sever the employment relationship permanently. If there was

such an intention, MII could have made it very clear in the notices of layoff.
But as it were, the notices are couched in a language so uncertain that the
only conclusion possible is the permanent termination, not the continuation,
of the employment relationship.

MII also seeks to excuse itself from compliance with the 30-day notice with a
tautology. While insisting that there is really no best time to announce a bad
news, (sic) it also claims that it broke the bad news only on 27 January 1992
because had it complied with the 30-day notice, it could have broken the bad
news on 02 January 1992, the first working day of the year. If there is really
no best time to announce a bad news (sic), it wouldnt have mattered if the
same was announced at the first working day of the year. That way, MII could
have at least complied with the requirement of the law.[17]

The second issue raised by petitioner merits our consideration.

In the assailed Omnibus Resolution, Labor Secretary Confesor clarified the

CBA provisions on closed-shop and the scope of the bargaining unit in this
wise:

xxx

xxx

xxx.

Appropriateness of the bargaining unit.

xxx

xxx

xxx.

Exclusions. In our 14 April 1992 resolution, we ruled on the issue of exclusion

as follows:

These aside, we reconsider our denial of the modifications which the Union
proposes to introduce on the close shop provision. While we note that the
provision as presently worded has served the relationship of the parties well
under previous CBAs, the shift in constitutional policy toward expanding the

right of all workers to self-organization should now be formally recognized by

the parties, subject to the following exclusions only:

1.

Managerial employees; and

2. The executive secretaries of the President, Executive Vice-President, VicePresident, Vice President for Sales, Personnel Manager, and Director for
Corporate Planning who may have access to vital labor relations information
or who may otherwise act in a confidential capacity to persons who
determine or formulate management policies.

The provisions of Article I (b) and Attachment I of the 1988-1990 CBA shall
thus be modified consistently with the foregoing.

Article I (b) of the 1988-1990 CBA provides:

b)Close Shop. - All Qualified Employees must join the Association immediately
upon regularization as a condition for continued employment. This provision
shall not apply to: (i) managerial employees who are excluded from the scope
of the bargaining unit; (ii) the auditors and executive secretaries of senior
executive officers, such as, the President, Executive Vice-President, VicePresident for Finance, Head of Legal, Vice-President for Sales, who are
excluded from membership in the Association; and (iii) those employees who
are referred to in Attachment I hereof, subject, however, to the application of
the provision of Article II, par. (b) hereof. Consequently, the above-specified
employees are not required to join the Association as a condition for their
continued employment.

On the other hand, Attachment I provides:

Exclusion from the Scope of the Close Shop Provision

The following positions in the Bargaining Unit are not covered by the Close

Shop provision of the CBA (Article I, par. b):

1. Executive Secretaries of Vice-Presidents, or equivalent positions.

2. Executive Secretary of the Personnel Manager, or equivalent positions.

3. Executive Secretary of the Director for Corporate Planning, or equivalent

positions.

4. Some personnel in the Personnel Department, EDP Staff at Head Office,

Payroll Staff at Head Office, Accounting Department at Head Office, and
Budget Staff, who because of the nature of their duties and responsibilities
need not join the Association as a condition for their employment.

5. Newly-hired secretaries of Branch Managers and Regional Managers.

Both MDD and MII read the exclusion of managerial employees and executive
secretaries in our 14 April 1992 resolution as exclusion from the bargaining
unit. They point out that managerial employees are lumped under one
classification with executive secretaries, so that since the former are
excluded from the bargaining unit, so must the latter be likewise excluded.

This reading is obviously contrary to the intent of our 14 April 1992

resolution. By recognizing the expanded scope of the right to selforganization, our intent was to delimit the types of employees excluded from
the close shop provision, not from the bargaining unit, to executive
secretaries only. Otherwise, the conversion of the exclusionary provision to
one that refers to the bargaining unit from one that merely refers to the close
shop provision would effectively curtail all the organizational rights of
executive secretaries.

The exclusion of managerial employees, in accordance with law, must

therefore still carry the qualifying phrase from the bargaining unit in Article

I (b)(i) of the 1988-1990 CBA. In the same manner, the exclusion of executive
secretaries should be read together with the qualifying phrase are excluded
from membership in the Association of the same Article and with the
heading of Attachment I. The latter refers to Exclusions from Scope of Close
Shop Provision and provides that [t]he following positions in Bargaining Unit
are not covered by the close shop provision of the CBA.

The issue of exclusion has different dimension in the case of MII. In an earlier
motion for clarification, MII points out that it has done away with the positions
of Executive Vice-President, Vice-President for Sales, and Director for
Corporate Planning. Thus, the foregoing group of exclusions is no longer
appropriate in its present organizational structure. Nevertheless, there
remain MII officer positions for which there may be executive secretaries.
These include the General Manager and members of the Management
Committee, specifically i) the Quality Assurance Manager; ii) the Product
Development Manager; iii) the Finance Director; iv) the Management System
Manager; v) the Human Resources Manager; vi) the Marketing Director; vii)
the Engineering Manager; viii) the Materials Manager; and ix) the Production
Manager.

xxx

xxx

xxx

The basis for the questioned exclusions, it should be noted, is no other than
the previous CBA between MII and the Union. If MII had undergone an
organizational restructuring since then, this is a fact to which we have never
been made privy. In any event, had this been otherwise the result would have
been the same. To repeat, we limited the exclusions to recognize the
expanded scope of the right to self-organization as embodied in the
Constitution.[18]

Metrolab, however, maintains that executive secretaries of the General

Manager and the executive secretaries of the Quality Assurance Manager,
Product Development Manager, Finance Director, Management System
Manager, Human Resources Manager, Marketing Director, Engineering
Manager, Materials Manager and Production Manager, who are all members
of the companys Management Committee should not only be exempted from
the closed-shop provision but should be excluded from membership in the
bargaining unit of the rank and file employees as well on grounds that their

executive secretaries are confidential employees, having access to vital

labor information.[19]

We concur with Metrolab.

Although Article 245 of the Labor Code[20] limits the ineligibility to join, form
and assist any labor organization to managerial employees, jurisprudence has
extended this prohibition to confidential employees or those who by reason of
their positions or nature of work are required to assist or act in a fiduciary
manner to managerial employees and hence, are likewise privy to sensitive
and highly confidential records.

The rationale behind the exclusion of confidential employees from the

bargaining unit of the rank and file employees and their disqualification to
join any labor organization was succinctly discussed in Philips Industrial
Development v. NLRC:[21]

xxx

xxx

xxx.

On the main issue raised before Us, it is quite obvious that respondent NLRC
committed grave abuse of discretion in reversing the decision of the
Executive Labor Arbiter and in decreeing that PIDIs Service Engineers, Sales
Force, division secretaries, all Staff of General Management, Personnel and
Industrial Relations Department, Secretaries of Audit, EDP and Financial
Systems are included within the rank and file bargaining unit.

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

In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, this Court
elaborated on this rationale, thus:

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

In Golden Farms, Inc. vs. Ferrer-Calleja, this Court explicitly made this
rationale applicable to confidential employees:

This rationale holds true also for confidential employees such as accounting
personnel, radio and telegraph operators, who having access to confidential
information, may become the source of undue advantage. Said employee(s)
may act as a spy or spies of either party to a collective bargaining
agreement. This is specially true in the present case where the petitioning
Union is already the bargaining agent of the rank-and-file employees in the
establishment. To allow the confidential employees to join the existing Union
of the rank-and-file would be in violation of the terms of the Collective
Bargaining Agreement wherein this kind of employees by the nature of their
functions/positions are expressly excluded.

xxx

xxx

xxx.

Similarly, in National Association of Trade Union - Republic Planters Bank

Supervisors Chapter v. Torres[22] we declared:

xxx

xxx

xxx.

. . . As regards the other claim of respondent Bank that Branch

Managers/OICs, Cashiers and Controllers are confidential employees, having
control, custody and/ or access to confidential matters, e.g., the branchs

cash position, statements of financial condition, vault combination, cash

codes for telegraphic transfers, demand drafts and other negotiable
instruments, pursuant to Sec. 1166.4 of the Central Bank Manual regarding
joint custody, this claim is not even disputed by petitioner. A confidential
employee is one entrusted with confidence on delicate matters, or with the
custody, handling, or care and protection of the employers property. While
Art. 245 of the Labor Code singles out managerial employees as ineligible to
join, assist or form any labor organization, under the doctrine of necessary,
implication, confidential employees are similarly disqualified. . . .

xxx

xxx

xxx.

. . .(I)n the collective bargaining process, managerial employees are

supposed to be on the side of the employer, to act as its representatives, and
to see to it that its interest are well protected. The employer is not assured of
such protection if these employees themselves are union members.
Collective bargaining in such a situation can become one-sided. It is the
same reason that impelled this Court to consider the position of confidential
employees as included in the disqualification found in Art. 245 as if the
disqualification of confidential employees were written in the provision. If
confidential employees could unionize in order to bargain for advantages for
themselves, then they could be governed by their own motives rather than
the interest of the employers. Moreover, unionization of confidential
employees for the purpose of collective bargaining would mean the extension
of the law to persons or individuals who are supposed to act in the interest
of the employers. It is not farfetched that in the course of collective
bargaining, they might jeopardize that interest which they are duty-bound to
protect. . . .

xxx

xxx

xxx.

And in the latest case of Pier 8 Arrastre & Stevedoring Services, Inc. vs.
Roldan-Confesor,[23] we ruled that:

xxx

xxx

xxx.

Upon the other hand, legal secretaries are neither managers nor supervisors.
Their work is basically routinary and clerical. However, they should be
differentiated from rank-and-file employees because they are tasked with,
among others, the typing of legal documents, memoranda and
correspondence, the keeping of records and files, the giving of and receiving
notices, and such other duties as required by the legal personnel of the
corporation. Legal secretaries therefore fall under the category of
confidential employees. . . .

xxx

xxx

xxx.

We thus hold that public respondent acted with grave abuse of discretion in
not excluding the four foremen and legal secretary from the bargaining unit
composed of rank-and-file employees.

xxx

xxx

xxx.

In the case at bench, the Union does not disagree with petitioner that the
executive secretaries are confidential employees. It however, makes the
following contentions:

xxx

xxx

xxx.

There would be no danger of company domination of the Union since the

confidential employees would not be members of and would not participate in
the decision making processes of the Union.

Neither would there be a danger of espionage since the confidential

employees would not have any conflict of interest, not being members of the
Union. In any case, there is always the danger that any employee would leak
management secrets to the Union out of sympathy for his fellow rank and
filer even if he were not a member of the union nor the bargaining unit.

Confidential employees are rank and file employees and they, like all the
other rank and file employees, should be granted the benefits of the
Collective Bargaining Agreement. There is no valid basis for discriminating
against them. The mandate of the Constitution and the Labor Code, primarily
of protection to Labor, compels such conclusion.[24]

xxx

xxx

xxx.

The Unions assurances fail to convince. The dangers sought to be

prevented, particularly the threat of conflict of interest and espionage, are
not eliminated by non-membership of Metrolabs executive secretaries or
confidential employees in the Union. Forming part of the bargaining unit, the
executive secretaries stand to benefit from any agreement executed between
the Union and Metrolab. Such a scenario, thus, gives rise to a potential
conflict between personal interests and their duty as confidential employees
to act for and in behalf of Metrolab. They do not have to be union members
to affect or influence either side.

Finally, confidential employees cannot be classified as rank and file. As

previously discussed, the nature of employment of confidential employees is
quite distinct from the rank and file, thus, warranting a separate category.
Excluding confidential employees from the rank and file bargaining unit,
therefore, is not tantamount to discrimination.

WHEREFORE, premises considered, the petition is partially GRANTED. The

resolutions of public respondent Secretary of Labor dated 14 April 1992 and
25 January 1993 are hereby MODIFIED to the extent that executive
secretaries of petitioner Metrolabs General Manager and the executive
secretaries of the members of its Management Committee are excluded from
the bargaining unit of petitioners rank and file employees.

SO ORDERED.

Padilla, Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.

[G.R. No. 110399. August 15, 1997]

SAN MIGUEL CORPORATION SUPERVISORS AND EXEMPT UNION AND ERNESTO

L. PONCE, President, petitioners, vs. HONARABLE BIENVENIDO E. LAGUESMA
IN HIS CAPACITY AS UNDERSECRETARY OF LABOR AND EMPLOYMENT,
HONORABLE DANILO L. REYNANTE IN HIS CAPACITY AS MED-ARBITER AND
SAN MIGUEL CORPORATION, respondents.
DECISION
ROMERO, J.:

This is a Petition for Certiorari with Prayer for the Issuance of Preliminary
Injunction seeking to reverse and set aside the Order of public respondent,
Undersecretary of the Department of Labor and Employment, Bienvenido E.
Laguesma, dated March 11, 1993, in Case No. OS MA A-2-70-91[1] entitled
In Re: Petition for Certification Election Among the Supervisory and Exempt
Employees of the San Miguel Corporation Magnolia Poultry Plants of Cabuyao,
San Fernando and Otis, San Miguel Corporation Supervisors and Exempt
Union, Petitioner. The Order excluded the employees under supervisory
levels 3 and 4 and the so-called exempt employees from the proposed
bargaining unit and ruled out their participation in the certification election.

The antecedent facts are undisputed:

On October 5, 1990, petitioner union filed before the Department of Labor

and Employment (DOLE) a Petition for District Certification or Certification
Election among the supervisors and exempt employees of the SMC Magnolia
Poultry Products Plants of Cabuyao, San Fernando and Otis.

On December 19, 1990, Med-Arbiter Danilo L. Reynante issued an Order

ordering the conduct of certification among the supervisors and exempt
employees of the SMC Magnolia Poultry Products Plants of Cabuyao, San
Fernando and Otis as one bargaining unit.

On January 18, 1991, respondent San Miguel Corporation filed a Notice of

Appeal with Memorandum on Appeal, pointing out, among others, the MedArbiters error in grouping together all three (3) separate plants, Otis,
Cabuyao and San Fernando, into one bargaining unit, and in including
supervisory levels 3 and above whose positions are confidential in nature.

On July 23, 1991, the public respondent, Undersecretary Laguesma, granted

respondent companys Appeal and ordered the remand of the case to the
Med-Arbiter of origin for determination of the true classification of each of the
employees sought to be included in the appropriate bargaining unit.

Upon petitioner-unions motion dated August 7, 1991, Undersecretary

Laguesma granted the reconsideration prayed for on September 3, 1991 and
directed the conduct of separate certification elections among the
supervisors ranked as supervisory levels 1 to 4 (S1 to S4) and the exempt
employees in each of the three plants at Cabuyao, San Fernando and Otis.

On September 21, 1991, respondent company, San Miguel Corporation filed a

Motion for Reconsideration with Motion to suspend proceedings.

On March 11, 1993, an Order was issued by the public respondent granting
the Motion, citing the doctrine enunciated in Philips Industrial Development,
Inc. v. NLRC[2] case. Said Order reads in part:

x x x Confidential employees, like managerial employees, are not allowed to

form, join or assist a labor union for purposes of collective bargaining.

In this case, S3 and S4 and the so-called exempt employees are admittedly
confidential employees and therefore, they are not allowed to form, join or
assist a labor union for purposes of collective bargaining following the above
courts ruling. Consequently, they are not allowed to participate in the
certification election.

WHEREFORE, the motion is hereby granted and the Decision of this Office
dated 03 September 1991 is hereby modified to the extent that employees

under supervisory levels 3 and 4 (S3 and S4) and the so-called exempt
employees are not allowed to join the proposed bargaining unit and are
therefore excluded from those who could participate in the certification
election.[3]

Hence this petition.

For resolution in this case are the following issues:

1. Whether Supervisory employees 3 and 4 and the exempt employees of

the company are considered confidential employees, hence ineligible from
joining a union.

2. If they are not confidential employees, do the employees of the three

plants constitute an appropriate single bargaining unit.

On the first issue, this Court rules that said employees do not fall within the
term confidential employees who may be prohibited from joining a union.

There is no question that the said employees, supervisors and the exempt
employees, are not vested with the powers and prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, layoff, recall,
discharge or dismiss employees. They are, therefore, not qualified to be
classified as managerial employees who, under Article 245[4] of the Labor
Code, are not eligible to join, assist or form any labor organization. In the
very same provision, they are not allowed membership in a labor organization
of the rank-and-file employees but may join, assist or form separate labor
organizations of their own. The only question that need be addressed is
whether these employees are properly classified as confidential employees or
not.

Confidential employees are those who (1) assist or act in a confidential

capacity, (2) to persons who formulate, determine, and effectuate
management policies in the field of labor relations.[5] The two criteria are

cumulative, and both must be met if an employee is to be considered a

confidential employee that is, the confidential relationship must exist
between the employees and his supervisor, and the supervisor must handle
the prescribed responsibilities relating to labor relations.[6]

The exclusion from bargaining units of employees who, in the normal course
of their duties, become aware of management policies relating to labor
relations is a principal objective sought to be accomplished by the
confidential employee rule. The broad rationale behind this rule is that
employees should not be placed in a position involving a potential conflict of
interests.[7] Management should not be required to handle labor relations
matters through employees who are represented by the union with the
company is required to deal and who in the normal performance of their
duties may obtain advance information of the companys position with regard
to contract negotiations, the disposition of grievances, or other labor relations
matters.[8]

There have been ample precedents in this regard, thus in Bulletin Publishing
Company v. Hon. Augusto Sanchez,[9] the Court held that if these
managerial employees would belong to or be affiliated with a Union, the
latter might not be assured of their loyalty to the Union in view of evident
conflict of interest. The Union can also become company-dominated with the
presence of managerial employees in Union membership. The same
rationale was applied to confidential employees in Golden Farms, Inc. v.
Ferrer-Calleja[10] and in the more recent case of Philips Industrial
Development, Inc. v. NLRC[11] which held that confidential employees, by
the very nature of their functions, assist and act in a confidential capacity to,
or have access to confidential matters of, persons who exercise managerial
functions in the field of labor relations. Therefore, the rationale behind the
ineligibility of managerial employees to form, assist or join a labor union was
held equally applicable to them.[12]

An important element of the confidential employee rule is the employees

need to use labor relations information. Thus, in determining the
confidentiality of certain employees, a key questions frequently considered is
the employees necessary access to confidential labor relations information.
[13]

It is the contention of respondent corporation that Supervisory employees 3

and 4 and the exempt employees come within the meaning of the term
confidential employees primarily because they answered in the affirmative
when asked Do you handle confidential data or documents? in the Position
Questionnaires submitted by the Union.[14] In the same questionnaire,
however, it was also stated that the confidential information handled by
questioned employees relate to product formulation, product standards and
product specification which by no means relate to labor relations.[15]

Granting arguendo that an employee has access to confidential labor

relations information but such is merely incidental to his duties and
knowledge thereof is not necessary in the performance of such duties, said
access does not render the employee a confidential employee.[16] If access
to confidential labor relations information is to be a factor in the
determination of an employees confidential status, such information must
relate to the employers labor relations policies. Thus, an employee of a labor
union, or of a management association, must have access to confidential
labor information with respect to his employer, the union, or the association,
to be regarded a confidential employee, and knowledge of labor relations
information pertaining to the companies with which the union deals, or which
the association represents, will not clause an employee to be excluded from
the bargaining unit representing employees of the union or association.[17]
Access to information which is regarded by the employer to be confidential
from the business standpoint, such as financial information[18] or technical
trade secrets, will not render an employee a confidential employee.[19]

Herein listed are the functions of supervisors 3 and higher:

1. To undertake decisions to discontinue/temporarily stop shift operations

when situations require.

2. To effectively oversee the quality control function at the processing lines in

the storage of chicken and other products.

3. To administer efficient system of evaluation of products in the outlets.

4. To be directly responsible for the recall, holding and rejection of direct

manufacturing materials.

5. To recommend and initiate actions in the maintenance of sanitation and

hygiene throughout the plant.[20]

It is evident that whatever confidential data the questioned employees may

handle will have to relate to their functions. From the foregoing functions, it
can be gleaned that the confidential information said employees have access
to concern the employers internal business operations. As held in
Westinghouse Electric Corporation v. National Labor Relations Board,[21] an
employee may not be excluded from appropriate bargaining unit merely
because he has access to confidential information concerning employers
internal business operations and which is not related to the field of labor
relations.

It must be borne in mind that Section 3 of Article XIII of the 1987 Constitution
mandates the State to guarantee to all workers the right to selforganization. Hence, confidential employees who may be excluded from
bargaining unit must be strictly defined so as not to needlessly deprive many
employees of their right bargain collectively through representatives of their
choosing.[22]

In the case at bar, supervisors 3 and above may not be considered

confidential employees merely because they handle confidential data as
such must first be strictly classified as pertaining to labor relations for them
to fall under said restrictions. The information they handle are properly
classifiable as technical and internal business operations data which, to our
mind, has no relevance to negotiations and settlement of grievances wherein
the interests of a union and the management are invariably adversarial.
Since the employees are not classifiable under the confidential type, this
Court rules that they may appropriately form a bargaining unit for purposes
of collective bargaining. Furthermore, even assuming that they are
confidential employees, jurisprudence has established that there is no legal
prohibition against confidential employees who are not performing
managerial functions to form and join a union.[23]

In this connection, the issue of whether the employees of San Miguel

Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando, and
Otis constitute a single bargaining unit needs to be threshed out.

It is the contention of the petitioner union that the creation of three (3)
separate bargaining units, one each for Cabuyao Otis and San Fernando as
ruled by the respondent Undersecretary, is contrary to the one-company,
one-union policy. It adds that Supervisors level 1 to 4 and exempt employees
of the three plants have a similarity or a community of interests.

This Court finds the contention of the petitioner meritorious.

An appropriate bargaining unit may be defined as a group of employees of a

given employer, comprised of all or less than all of the entire body of
employees, which the collective interest of all the employees, consistent with
equity to the employer, indicate to be best suited to serve the reciprocal
rights and duties of the parties under the collective bargaining provisions of
the law.[24]

A unit to be appropriate must effect a grouping of employees who have

substantial, mutual interests in wages, hours, working conditions and other
subjects of collective bargaining.[25]

It is readily seen that the employees in the instant case have community or
mutuality of interest, which is the standard in determining the proper
constituency of a collective bargaining unit.[26] It is undisputed that they all
belong to the Magnolia Poultry Division of San Miguel Corporation. This
means that, although they belong to three different plants, they perform work
of the same nature, receive the same wages and compensation, and most
importantly, share a common stake in concerted activities.

In light of these considerations, the Solicitor General has opined that separate
bargaining units in the three different plants of the division will fragmentize
the employees of the said division, thus greatly diminishing their bargaining
leverage. Any concerted activity held against the private respondent for a
labor grievance in one bargaining unit will, in all probability, not create much

impact on the operations of the private respondent. The two other plants still
in operation can well step up their production and make up for the slack
caused by the bargaining unit engaged in the concerted activity. This
situation will clearly frustrate the provisions of the Labor Code and the
Mandate of the Constitution.[27]

The fact that the three plants are located in three different places, namely, in
Cabuyao, Laguna, in Otis, Pandacan, Metro Manila, and in San Fernando,
Pampanga is immaterial. Geographical location can be completely
disregarded if the communal or mutual interests of the employees are not
sacrificed as demonstrated in UP v. Calleja-Ferrer where all non-academic
rank and file employees of the University of the Philippines inDiliman, Quezon
City, Padre Faura, Manila, Los Baos, Laguna and the Visayas were allowed to
participate in a certification election. We rule that the distance among the
three plants is not productive of insurmountable difficulties in the
administration of union affairs. Neither are there regional differences that are
likely to impede the operations of a single bargaining representative.

WHEREFORE, the assailed Order of March 11, 1993 is hereby SET ASIDE and
the Order of the Med-Arbiter on December 19, 1990 is REINSTATED under
which a certification election among the supervisors (level 1 to 4) and exempt
employees of the San Miguel Corporation Magnolia Poultry Products Plants of
Cabuyao, San Fernando, and Otis as one bargaining unit is ordered
conducted.

SO ORDERED.

Regalado, (Chairman), Puno, Mendoza, and Torres, Jr., JJ., concur.