Case Digest: Insular Hotel Employees Union-NFL vs. Waterfront Insular Hotel Davao, G.R. Nos. 174040-41, September 22, 2010

Labor Law | 

Art. 100 Prohibition against elimination or diminution of benefits

Facts:

Waterfront Insular Hotel Davao sent a Notice of Suspension of Operations to the Department of Labor and Employment, stating its intent to suspend operations for six months due to serious business losses.

The President of Davao Insular Hotel Free Employees Union (DIHFEU-NFL) sent letters expressing the Union's willingness to help the hotel by proposing various adjustments and concessions, including suspending the Collective Bargaining Agreement (CBA) renegotiations.

After negotiations, Waterfront Insular Hotel Davao and DIHFEU-NFL signed a Memorandum of Agreement (MOA) to reopen the hotel, downsizing the workforce to 100 employees and implementing new terms and conditions.

In 2002, individuals from the National Federation of Labor (NFL) filed a complaint against the hotel, alleging diminution of wages and benefits through the MOA. Waterfront Insular Hotel Davao contested the jurisdiction.

The case was referred to a voluntary arbitrator, AVA Olvida, who ruled in favor of the employees, stating that the MOA was invalid and ordered the hotel to reinstate previous wages and benefits.

Respondent filed a Motion for Reconsideration, challenging the authority of the complainants and the validity of the MOA.

AVA Olvida denied the motion but modified the party-complainant to "Insular Hotel Employees Union-NFL."

The case was then remanded to the NCMB for the selection of a new voluntary arbitrator, AVA Montejo who ruled in favor of the employees, declaring the MOA invalid and ordering the hotel to reinstate previous wages and benefits.

Both parties appealed.

Court of Appeals: Ruled in favor of Waterfront Insular Hotel Davao, declaring the MOA valid and enforceable, and directing both parties to comply with its terms and conditions.

Issue:

WoN the CA erred in concluding that Article 100 of the Labor Code applies only to benefits already enjoyed at the time of the promulgation of the Labor Code. NO

Held:

Article 100 of the Labor Code provides:

PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS- Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of the promulgation of this Code.

On this note, Apex Mining Company, Inc. v. NLRC is instructive, to wit:

Clearly, the prohibition against elimination or diminution of benefits set out in Article 100 of the Labor Code is specifically concerned with benefits already enjoyed at the time of the promulgation of the Labor Code. Article 100 does not, in other words, purport to apply to situations arising after the promulgation date of the Labor Code x x x.

Even assuming arguendo that Article 100 applies to the case at bar, this Court agrees with respondent that the same does not prohibit a union from offering and agreeing to reduce wages and benefits of the employees. In Rivera v. Espiritu, this Court ruled that the right to free collective bargaining, after all, includes the right to suspend it, thus:

A CBA is "a contract executed upon request of either the employer or the exclusive bargaining representative incorporating the agreement reached after negotiations with respect to wages, hours of work and all other terms and conditions of employment, including proposals for adjusting any grievances or questions arising under such agreement." The primary purpose of a CBA is the stabilization of labor-management relations in order to create a climate of a sound and stable industrial peace. In construing a CBA, the courts must be practical and realistic and give due consideration to the context in which it is negotiated and the purpose which it is intended to serve.

The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations undertaken in the light of the severe financial situation faced by the employer, with the peculiar and unique intention of not merely promoting industrial peace at PAL, but preventing the latter’s closure. We find no conflict between said agreement and Article 253-A of the Labor Code. Article 253-A has a two-fold purpose. One is to promote industrial stability and predictability. Inasmuch as the agreement sought to promote industrial peace at PAL during its rehabilitation, said agreement satisfies the first purpose of Article 253-A.The other is to assign specific timetables wherein negotiations become a matter of right and requirement. Nothing in Article 253-A, prohibits the parties from waiving or suspending the mandatory timetables and agreeing on the remedies to enforce the same.

In the instant case, it was PALEA, as the exclusive bargaining agent of PAL’s ground employees, that voluntarily entered into the CBA with PAL. It was also PALEA that voluntarily opted for the 10-year suspension of the CBA. Either case was the union’s exercise of its right to collective bargaining. The right to free collective bargaining, after all, includes the right to suspend it.

Lastly, this Court is not unmindful of the fact that DIHFEU-NFL's Constitution and By-Laws specifically provides that "the results of the collective bargaining negotiations shall be subject to ratification and approval by majority vote of the Union members at a meeting convened, or by plebiscite held for such special purpose."

Accordingly, it is undisputed that the MOA was not subject to ratification by the general membership of the Union. The question to be resolved then is, does the non-ratification of the MOA in accordance with the Union's constitution prove fatal to the validity thereof?

It must be remembered that after the MOA was signed, the members of the Union individually signed contracts denominated as "Reconfirmation of Employment." Cullo did not dispute the fact that of the 87 members of the Union, who signed and accepted the "Reconfirmation of Employment," 71 are the respondent employees in the case at bar. Moreover, it bears to stress that all the employees were assisted by Rojas, DIHFEU-NFL's president, who even co-signed each contract.

Stipulated in each Reconfirmation of Employment were the new salary and benefits scheme. In addition, it bears to stress that specific provisions of the new contract also made reference to the MOA. Thus, the individual members of the union cannot feign knowledge of the execution of the MOA. Each contract was freely entered into and there is no indication that the same was attended by fraud, misrepresentation or duress. To this Court's mind, the signing of the individual "Reconfirmation of Employment" should, therefore, be deemed an implied ratification by the Union members of the MOA.

In Planters Products, Inc. v. NLRC, this Court refrained from declaring a CBA invalid notwithstanding that the same was not ratified in view of the fact that the employees had enjoyed benefits under it, thus:

Under Article 231 of the Labor Code and Sec. 1, Rule IX, Book V of the Implementing Rules, the parties to a collective [bargaining] agreement are required to furnish copies of the appropriate Regional Office with accompanying proof of ratification by the majority of all the workers in a bargaining unit. This was not done in the case at bar. But we do not declare the 1984-1987 CBA invalid or void considering that the employees have enjoyed benefits from it. They cannot receive benefits under provisions favorable to them and later insist that the CBA is void simply because other provisions turn out not to the liking of certain employees. x x x. Moreover, the two CBAs prior to the 1984-1987 CBA were not also formally ratified, yet the employees are basing their present claims on these CBAs. It is iniquitous to receive benefits from a CBA and later on disclaim its validity.

Applied to the case at bar, while the terms of the MOA undoubtedly reduced the salaries and certain benefits previously enjoyed by the members of the Union, it cannot escape this Court's attention that it was the execution of the MOA which paved the way for the re-opening of the hotel, notwithstanding its financial distress. More importantly, the execution of the MOA allowed respondents to keep their jobs. It would certainly be iniquitous for the members of the Union to sign new contracts prompting the re-opening of the hotel only to later on renege on their agreement on the fact of the non-ratification of the MOA.

In addition, it bears to point out that Rojas did not act unilaterally when he negotiated with respondent's management. The Constitution and By-Laws of DIHFEU-NFL clearly provide that the president is authorized to represent the union on all occasions and in all matters in which representation of the union may be agreed or required. Furthermore, Rojas was properly authorized under a Board of Directors Resolution to negotiate with respondent, the pertinent portions of which read:

SECRETARY's CERTIFICATE

I, MA. SOCORRO LISETTE B. IBARRA, x x x, do hereby certify that, at a meeting of the Board of Directors of the DIHFEU-NFL, on 28 Feb. 2001 with a quorum duly constituted, the following resolutions were unanimously approved:

RESOLVED, as it is hereby resolved that the Manifesto dated 25 Feb. 2001 be approved ratified and adopted;

RESOLVED, FURTHER, that Mr. Domy R. Rojas, the president of the DIHFEU-NFL, be hereby authorized to negotiate with Waterfront Insular Hotel Davao and to work for the latter's acceptance of the proposals contained in DIHFEU-NFL Manifesto; and

RESOLVED, FINALLY, that Mr. Domy R. Rojas is hereby authorized to sign any and all documents to implement, and carry into effect, his foregoing authority.

Withal, while the scales of justice usually tilt in favor of labor, the peculiar circumstances herein prevent this Court from applying the same in the instant petition. Even if our laws endeavor to give life to the constitutional policy on social justice and on the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play.