Case Digest: MERALCO v. Quisumbing, G.R. No. 127598, February 22, 2000

  • In 1999, the Supreme Court directed the parties to execute a Collective Bargaining Agreement (CBA) incorporating the terms and conditions from the Secretary of Labor's orders, along with modifications including changes in wages and retroactivity of the CBA, among others.
  • The Secretary required consultation for contracting out services for six months or more.

WoN the added requirement of consultation imposed by the Secretary in cases of contracting out for six (6) months or more is valid.  NO.

The Court held that hiring of workers is within the employer's inherent freedom to regulate and is a valid exercise of its management prerogative subject only to special laws and agreements on the matter and the fair standards of justice.

The management cannot be denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. It has the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies. While there should be mutual consultation, eventually deference is to be paid to what management decides. Contracting out of services is an exercise of business judgment or management prerogative. Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.

The law already sufficiently regulates this matter. Jurisprudence also provides adequate limitations, such that the employer must be motivated by good faith and the contracting out should not be resorted to circumvent the law or must not have been the result of malicious or arbitrary actions.


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