Labor Review 2020

SOME NOTES ON
COLLECTIVE BARGAINING

Atty. Paciano F. Fallar Jr.

SSCR-CoL

Concept

Collective bargaining is the process required by law of the management and the
certified bargaining agent to negotiate for the terms and conditions of employment
covering the members of the bargaining unit. While the law mandates the duty to
negotiate in good faith, such duty does not include the obligation to come to an
agreement or to make a concession (Kiok Luy v NLRC, GR No. L – 54334, 22 January 1986)

When there is a deadlock in the negotiations and arbitration is required, it should be

understood that bargaining is not equivalent to an adversarial litigation where
rights and obligations are delineated and remedies applied. (Caltex Refinery
Employees Association v Brillantes,GR No. 12378, 16 September 1991).This is particularly
true in the resolution of controversies in collective bargaining agreements where the
question is rarely one of legal right or wrong but one of wisdom, cogency and
compromise as to what is possible, fair and reasonable under the circumstances (e.g.,
what would be a reasonable wage increase is not a legal issue that can be determined
by reference to a statutory provision).

There are of course instances in which a CBA issue would involve strict legal
interpretation ( e.g., should employees be entitled to a separation benefits under the
Labor Code despite the existence of a Retirement Plan stipulated in the CBA). When
the parties fail to resolve their differences through negotiations, the law steps in and
provides for voluntary or compulsory arbitration.

Duty to Bargain

The duty to bargain collectively means the performance of a mutual obligation to meet
and convene promptly and expeditiously in good faith for the purpose of negotiating an
agreement 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 and executing a contract incorporating such agreements if requested
by either party but such duty does not compel any party to agree to a proposal or to
make any concession.(Art. 263 [252], Labor Code).

Note that it is a legal duty, and violation of this duty may constitute unfair labor
practice (ULP) both for the employer and the union ( Art. 259 [248], g & 260 [249], e,
Labor Code )

The purpose of collective bargaining is the reaching of an agreement between the

employer and the employee’s union resulting in a binding contract between the parties.
The law invites and contemplates a collective bargaining contract but do not compel
one. A CBA, like any contract is a product of mutual consent and not of compulsion.
The duty to bargain does not include the obligation to reach an agreement. A
company's unswerving position on the matter of annual lump sum payment in lieu of
wage increase did not, by itself, constitute bad faith even if such position caused a
stalemate in the negotiations (Tabangao Shell Refinery Employees Association vs.
Pilipinas Shell (G.R. No. 17007, 07 April 2014).

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It must be stressed though that the State , if the parties are unable to come to an
agreement, will insist on a CBA though an arbitral award either by a Voluntary
Arbitrator, the NLRC, or the Secretary of Labor and Employment.

A specific duty with regards to the duty to bargain is the one imposed not by the Labor
Code but by the implementing regulations. Book V, Rule XIII, Sec. 5 of the Rules
Implementing the Labor Code requires a party, at the request of the other, to make
available such up-to-date financial information on the economic situation of the
undertaking, which is normally submitted to relevant government agencies, as is
material and necessary for meaningful negotiations. This usually refers to the audited
financial statements submitted to the SEC every year as part of the company's General
Information Sheet (GIS).The usual complaint of management is why should the union
request the management for these financial information, when these are publicly
accessible and should have been studied by the union before they present their
proposals.

Jurisdictional Pre-Conditions

The duty to bargain on the part of the employer only kicks in when all the following
conditions are present (Kiok Loy vs. NLRC , G.R. No. L-54334, 22 January 1986):

a) employer-employee relationship
b) proof of majority status of the union ( certified bargaining agent)
c) demand to negotiate

An employer cannot be compelled to bargain with a union which previously had acted
as "cabo"or service provider for arrastre services. In that case, the union acted as an
independent contractor, and the stevedores are not employees of the company (Allied
Free Workers, vs Co. Maritima,GR No. L-22951-52, 31 January 1967).

Nor can an employer be compelled to bargain with a union which has not presented
proof that it has been certified by the DOLE as the collective bargaining agent ( Lakas
Manggagagawang Makabayan v Marcelo Enterprises, GR No. 38258, 12 November 1982;
BISCOM vs PAFLU, GR No. L-18782, 29 August 1963)

Direct certification by the employer has been disallowed as a mode of

establishing majority representation (Samahang Manggagawa sa Permex vs Sec. of
Labor,GR No. 107792, 02 March 1998) because of the inherent risk that the union may be
a company union recognized unilaterally for the purpose of preventing rival unions from
filing a petition for certification election.

When a party desires to negotiate an agreement, it shall serve a written notice upon
the other party with a statement of its proposals. The other party shall
make a reply thereto not later than ten (10) calendar days from receipt of such
notice (Art. 261[250), Labor Code)

May an employer initiate the demand to bargain? The law does not prohibit such
procedure, albeit it would be a curious case if the employer initiates the bargaining
process. It may be that the management may have other things in mind ( e.g. , secure a
quick CBA with a union it favors).

When there is an existing collective bargaining agreement, the duty to bargain

collectively shall also mean that neither party shall terminate nor modify such

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agreement during its lifetime. This is a legal restriction on the right of
contracting parties. In other kinds of contracts, the parties may stipulate that
either party may be allowed to unilaterally terminate the contract prior to its expiry
either for cause or for no cause at all. Not so with CBAs. Unilateral rescission of
the CBA is not allowed (Employees Union of Bayer Philippines v Bayer Philippines , G.R.
No. 162943, 06 December 2010). When one party is thought to be violating the CBA,
the other party is required to submit a grievance for the enforcement of its right
but not to rescind the CBA. Gross violations of a CBA ( defined as "flagrant
and/or ,malicious refusal to comply with the economic provisions of the CBA")
constitutes unfair labor practice (Art. 259 [ 248], in relation to Art. 274[ 261], Labor
Code). Violation of the duty to bargain is also a ULP.

However, either party can serve a written notice to terminate or modify the
agreement at least sixty (60) days prior to its expiration date. It shall be the duty of
both parties to keep the status quo and to continue in full force and effect the terms
and conditions of the existing agreement during the 60-day period and/or until a new
agreement is reached by the parties (Art. 264 [253], Labor Code).

The duty to bargain therefore does not end with the signing and ratification of
the CBA, but extends into its implementation until a new one agreement is
reached.

The temporary suspension of operations for not more than six (6) months ( which
means the employer-employee relationship is not terminated) does not suspend the
duty to bargain (San Pedro Hospital of Digos v Sec. of Labor,G.R. No. 104624, 11 October
1996)

Employees covered by CBA

In general, the existence of present employer-employee relationship is a

prerequisite for coverage under the CBA.

A dismissed employee who is contesting his dismissal is still covered by the CBA, and
may invoke its provisions. He may also insist in participating in the CBA ratification, just
as he is allowed to vote in a certification election.

Employees whose dismissal from the company is no longer an issue cannot claim
benefits under the CBA (Castro vsPLDT GR No. 191792, 22 August 2012).

The CBA covers all employees of the bargaining unit being represented, not just the
members of the majority union (PAL vs PALEA, GR No.142399, 12 March 2008). To
exclude non-members of the majority union would be a case of discrimination (Mactan
Workers' Union vs. Don Ramon Aboitiz ,G.R. No. L-30241, 30 June 1972).

Probationary employees are covered by the CBA, since they can vote in certification
lections ( National Union of Hotel Workers vs Secretary of Labor, G.R. No. 181531, 31 July
2009), albeit there are CBAs which exclude them from the scope of the bargaining unit.
Such exclusion is discriminatory, and legally dubious. The law provides that "any
employee, whether for a definite period or not shall, beginning on his first day of
employment, be considered as an employee for purposes of membership in any labor
organization (Art. 292 [ c], Labor Code as amended by RA 6715).

Retired and resigned employees may still sue for benefits under the CBA that have
become vested in them, like retirement or disability benefits ( Producers Bank v NLRC,
G.R. No. 118069, 16 November 1998). By parity of reasoning, a widow or a surviving
dependent of a deceased employee may also sue under the CBA for certain items like

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death benefits ( Estate of Nelson Dulay vs Aboitiz Jebsen Maritime Inc, GR No. 172642, 13
June 2012 ; Marcopper Mining Corporation v NLRC G.R Nos. 83207, 05 August 1991)

Representatives in collective bargaining negotiations

The representatives of the parties to the CBA negotiations must be authorized by the
board of directors, as evidenced by a board resolution or secretary's certificate.

The management team is usually led by the head of the human resources and
administration together with the head of finance. An in-house or an external lawyer
usually sits on the management team.

The union team is headed by the union president together with several other officers
( the management would usually bargain for a limit, since it is also customary for the
union officers to be given paid time off for attending CBA negotiations). The union also
has an external lawyer most of the time. If the union is affiliated with a federation, a
federation officer usually sits on the union contingent.

Contents of CBA and Negotiable items

A CBA has two (2) main components (SMC Employees Union vs. Confesor, G.R. 111262,
19 September 1996):

a) Representation aspect - This refers to the identity of the certified bargaining agent
of the bargaining unit being represented.

Technically, this is not subject to bargaining since the status is accorded though a
certification election.

b) Non-representation aspect - This refers to "all other provisions" of the CBA. It is

usually divided into two (2) main classifications:

i. Economic - This refers to all items with monetary value like salaries, allowances,
premium pay, bonuses, incentives, working hours, leaves, uniforms and equipment,
medical coverage and hospitalization, separation and retirement benefits, etc.

ii. Non-economic - This refers to items without direct monetary value including
management prerogatives, security of tenure, union security clause, grievance e
machinery , union leaves, family planning, labor-management council (LMC) , etc.

These sub-categories have no legal significance for purposes of the contents of the
CBA, since they all constitute "non-representation" items which must be re-negotiated
not later than the third (3rd) year of the CBA. The distinction is also quite arbitrary since
some items could posses both economic and non-economic features ( e.g., paid union
leaves involves salaries but they are also intrinsically connected to grievance
machinery; redundancy is an economic issue but the standards to be used in
determining who should be included in a redundancy program is not an economic
issue).

Indeed, the term “economic” has a different meaning in the law on grievance , ULP,
and strike. In one case, the union's demand for the company to stop the outsourcing
of functions discharged by regular workers, and the implementation of service
allowance to employees assigned outside the plant, were deemed violations of the
CBA that are subject to mandatory grievance. The union has the right to demand a
grievance meeting, and the management’s decision to reject grievance was a violation
of the CBA. While the end result of the demands may be economic in nature, the notice
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of strike was not based on economic demands as understood in the law on strikes
( which pertains to deadlock in collective bargaining negotiations) but on a violation of
the CBA. The strike staged was ULP strike, not an economic strike defined as one
which is to force wage or other concessions from the employer which it is not required
by law to grant and issues relating to demands for higher wages, higher pension or
overtime rates, pensions, profit sharing, shorter working hours, fewer work days for the
same pay, elimination of night work, lower retirement age, etc.(Master Iron Labor Union
v NLRC 219 SCRA 17 (1993) GR No. 92009, 17 February 1993).

I think the ULP here is not violation of the CBA under Art. 259 [i] of the Labor Code
((which pertains to gross violation of the economic provisions of the CBA) but rather a
violation of the duty to bargain (Art.259 [g], Labor Code ) since the duty to bargain
includes the duty to work on "adjusting any grievances" (Art. 263 [252], Labor Code;
Republic Savings Bank vs CIR, GR No. L-20303, 27 September 1967).

Almost all employment items could be subject to collective bargaining including those
items which are traditionally designated as part of management prerogatives like a
retirement plan which is not mandatory under the law (Nestle vs NLRC, GR No. 91231, 04
February 1991), the formulation of a Code of Discipline ( PAL vs NLRC, GR No. 85985,
13 August 1993), or health benefits ( Mitsubishi Motors, GR No. 175733, 17 June 2013).

It is standard in CBAs to include a section on “management prerogatives” in which the

right to contract out is explicitly reserved by the employer. Thus, it is not ULP to
contact out a particular service or department even if the result would be the decrease
in the number of positions within the bargaining unit (Bankard Inc. v. NLRC (G.R. No.
171664, 6 March 2013). It is only ULP if the CBA explicitly prohibits the contracting out
of a particular section or division (Shell Oil Worker Union vs Shell Philippines, GR No. L-
28607, 31 May 1971).]

A CBA may not provide for benefits that are less than the legal minimum (e.g. , below
minimum wage rates or paid leaves lower than that provided under the Labor Code and
special laws). However, the Supreme Court has ruled that parties to a CBA may agree
to a different length of the CBA than those provided under the Labor Code (Rivera vs
Espiritu, GR No. 135547, 23 January 2002). This ruling needs some re-thinking, because
it puts undue emphasis on the freedom to contract and ignores the rights of minority
unions.

Refusal to Bargain/Bargaining in Bad Faith

The duty to bargain collectively means the performance of a mutual obligation

to meet and convene promptly and expeditiously in good faith for the purpose
of negotiating an agreement 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 and executing a contract
incorporating such agreements if requested by either party but such duty does not
compel any party to agree to a proposal or to make any concession (Art. 263 [252],
Labor Code)

For a charge of unfair labor practice to prosper, it must be shown that the employer
was motivated by ill-will, bad faith or fraud, or was oppressive to labor. The
employer must have acted in a manner contrary to morals, good customs, or public
policy causing social humiliation, wounded feelings or grave anxiety. While the law
makes it an obligation for the employer and the employees to bargain collectively with

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each other, such compulsion does not include the commitment to precipitately accept or
agree to the proposals of the other. All it contemplates is that both parties should
approach the negotiation with an open mind and make reasonable effort to reach
a common ground of agreement. (Manila Mining Corp. Employees Assn.-FFW vs Manila
Mining Corp. , G.R. No. 178222-23, 29 September 2010)

It has been held that failure or refusal to submit counter proposals is a violation of a
duty to bargain, hence ULP on the part of the employer (Kiok Luy v NLRC, GR No. L –
54334, 22 January 1986; General Milling Corporation v CA, G.R No. 146728, 11 February 2004).

An employer was also held guilty of ULP when it was shown that it exerted no
reasonable efforts to bargain (Divine Word of Tacloban v Sec. of Labor G.R No. 91915,
11 September 1992; Colegio de San Juan de Letran v Association of Employees, GR No.
141471, 18 September 2000).

The refusal of the company to negotiate with the union, , on the pretext that it
temporarily closed its operations ( albeit the employer-employee relationship was not
terminated but merely suspended), was deemed an unlawful refusal to bargain (San
Pedro Hospital of Digos v Sec. of Labor , G.R. No. 104624, 11 October 1996).

An employer however was absolved of the charge of ULP when it broke off negotiations
with the incumbent union after the union president lost his employment status and
claimed that the incumbent union has lost majority status when 90% of the members of
the union have disaffiliated to join a new union which has been certified as the new
bargaining agent. The Supreme Court nonetheless ruled that the employer acted in
good faith (Central Azucarera de Bais Employees Union v Central de Azucareza, G.R No.
186605, 17 November 2010).
This ruling is unsatisfactory, because the NLRC made the finding of fact that the new
union has not been certified as bargaining agent and therefore the employer has no
duty to negotiate with it much less conclude a CBA. Besides, the Supreme Court made
the statement that "the filing of the complaint for unfair labor practice was premature
inasmuch as the issue of collective bargaining is still pending before the NCMB." How
could it be premature when the company broke off negotiations with the incumbent
union, and concluded a CBA with the new union?
Mere request for suspension of CBA negotiations is not ULP (Manila Mining Corp.
Employees Assn.-FFW vs Manila Mining Corp. , G.R. No. 178222-23, 29 September 2010) .
In this case, the company sought suspension of the CBA negotiations because it had to
shut down its mining operations after its mining permit was cancelled and the renewal
was not guaranteed.
But it is ULP when the company immediately granted recognition to a new union as
bargaining agent and hastily signed an alleged CBA with that union despite the
pendency of a PCE filed by another union . The company then committed various acts
designed to bust the union, including requiring employees as condition for continued
employment that they give an assurance that they would not join a union It also closed
its operations on feigned business losses. Under these circumstances, the "No union"
won in the CE. The Supreme Court affirmed the NLRC's finding of ULP on the part
of the employer and the illegality of the closure. It also refused to accord legality
to the result of the CE (Me-Shurn Corp vs Me-shurn Workers Union-FSM,(G.R. No.
156292, 11 January 2005).

Consequences of Refusal to Bargain/

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Bargaining in Bad faith

A company's refusal to make counter proposal , when shown to be made in bad

faith, will be considered ULP. It is not obligatory upon either side of a CBA negotiations
to accept or agree to the proposals of the other. But an erring party cannot allowed to
resort to schemes feigning negotiations by going through empty gestures. Under these
circumstances , the company's lack of consent to a CBA imposed by the NLRC or the
Secretary of Labor in its arbitral award (which necessarily considers only the union's
proposal) will not render the same void ( Kiok Luy v NLRC, GR No. L – 54334, 22 January
1986; Divine Word of Tacloban v Sec. of Labor G.R No. 91915, 11 September 1992).

The Supreme Court has upheld the authority of the Secretary of Labor to impose
wage increases and union shop provision on a company which evaded its duty to
bargain by pleading temporary closure of operations as an excuse ( San Pedro Hospital
of Digos v Sec. of Labor,G.R. No. 104624, 11 October 1996).

The nature of an arbitral award has been characterized thus:" While an arbitral award
cannot per se be categorized as an agreement voluntarily entered into by the parties
because it requires the intervention and imposing power of the State thru the Secretary
of Labor when he assumes jurisdiction, the arbitral award can be considered an
approximation of a collective bargaining agreement which would otherwise have
been entered into by the parties, hence, it has the force and effect of a valid contract
obligation(Cirtek Employees Labor Union vs.Cirtek G.R No. 190515, 06 June 2011).

By its nature as an imposition by the State, an arbitral award need neither the
consent of the employer and the union or the ratification of the members of the
bargaining unit.

Duration of CBA

There are two periods mentioned in At. 259 (253-A): "not later than 3 years" and "term
of five (5) years".

A literal reading of the provisions suggest the periods are mandatory with the use of the
word "shall" and the only thing the parties may agree is the "duration of retroactivity"
when the agreement on the non-representation aspect is entered into beyond six(6)
months from the expiry of the original term.

Art. 259 [253-A]).Terms of a collective bargaining agreement. Any Collective

Bargaining Agreement that the parties may enter into shall, insofar as the
representation aspect is concerned, be for a term of five (5) years. No petition
questioning the majority status of the incumbent bargaining agent shall be
entertained and no certification election shall be conducted by the Department of
Labor and Employment outside of the sixty (60) -day period immediately before the
date of expiry of such five-year term of the Collective Bargaining Agreement. All
other provisions of the Collective Bargaining Agreement shall be renegotiated not
later than three (3) years after its execution. Any agreement on such other
provisions of the Collective Bargaining Agreement entered into within six (6) months
from the date of expiry of the term of such other provisions as fixed in such
Collective Bargaining Agreement, shall retroact to the day immediately following
such date. If any such agreement is entered into beyond six months, the parties
shall agree on the duration of retroactivity thereof. In case of a deadlock in the
renegotiation of the Collective Bargaining Agreement, the parties may exercise their
rights under this Code. (As amended by Section 21, Republic Act No. 6715, March
21, 1989)

The meaning and rationale of the three (3) and five (5) year periods have been are
explained thus:

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 [T]he legislators (framers of the Labor Code) were more inclined to have the period
of effectivity for three (3) years insofar as the economic as well as non-economic
provisions are concerned, except representation.

Obviously, the framers of the law wanted to maintain industrial peace and
stability by having both management and labor work harmoniously together
without any disturbance. Thus, no outside union can enter the establishment
within five (5) years and challenge the status of the incumbent union as the
exclusive bargaining agent. Likewise, the terms and conditions of employment
(economic and non-economic) can not be questioned by the employers or
employees during the period of effectivity of the CBA. The CBA is a contract
between the parties and the parties must respect the terms and conditions of the
agreement. Notably, the framers of the law did not give a fixed term as to the
effectivity of the terms and conditions of employment. It can be gleaned from their
discussions that it was left to the parties to fix the period. (SMC Employees Union vs.
Confesor (G.R. 111262, 19 September 1996).

The phrase "not later than three (3) years" itself is quite vague since all the period
from the first day of the CBA is theoretically part of "not later than three(3) years". In
practice, an 'original CBA' would set three (3) years as the initial period for the economic
items. This could be seen in the provision on salary increases which would mention
three(3) dates one (1) year apart with corresponding salary increases. For example:

ARTICLE XV
WAGE INCREASES

Section 1. Wage / Salary Increases – The Company shall an across the-

board increase to each covered employee as follows:

Effective January 01, 2009 15% of the present basic pay

Effective January 01, 2010 15% of the present basic pay
Effective January o1, 2011 15% of the present basic pay

With respect to the representation aspect, the incumbent union's status as bargaining
agent is guaranteed for five (5) years and could only be challenged by another union
within the last 60 days of the 5-year term of the CBA ("freedom period"). This is the
contract bar rule that is one of the grounds for dismissal of a petition for certification
election. The incumbent status however could not go beyond the statutory five (5) years
even if the CBA could be extended or re-negotiated (FVC Labor Union – PTGWO vs.
SANAMA- FVC- SIGLO (G.R No. 176249, 27 November 2009).

FVCLU-PTGWO has taken the view that its exclusive representation

status should fully be in step with the term of the CBA and that this
status can be challenged only within 60 days before the expiration of
this term. Thus, when the term of the CBA was extended, its
exclusive bargaining status was similarly extended so that the
freedom period for the filing of a petition for certification election
should be counted back from the expiration of the amended CBA
term.
 
We hold this FVCLU-PTGWO position to be correct, but only with
respect to the original five-year term of the CBA which, by law, is also
the effective period of the unions exclusive bargaining representation
status. While the parties may agree to extend the CBAs original five-
year term together with all other CBA provisions, any such
amendment or term in excess of five years will not carry with it a
change in the union's exclusive collective bargaining status. By
express provision of the above-quoted Article 253-A, the exclusive
bargaining status cannot go beyond five years and the representation

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 status is a legal matter not for the workplace parties to agree upon. In
other words, despite an agreement for a CBA with a life of more than
five years, either as an original provision or by amendment, the
bargaining unions exclusive bargaining status is effective only for five
years and can be challenged within sixty (60) days prior to the
expiration of the CBAs first five years. 

The reason was pronounced in a prior case (San Miguel Corp. Employees Union PTGWO,
et al. v. Confesor, San Miguel Corp., Magnolia Corp. and San Miguel Foods, Inc., G.R. No
111262, 19 September 1996) where the SC cited the Memorandum of the Secretary of
Labor and Employment dated February 24, 1994:
 
In the event however, that the parties, by mutual agreement, enter
into a renegotiated contract with a term of three (3) years or one
which does not coincide with the said five-year term and said
agreement is ratified by majority of the members in the bargaining
unit, the subject contract is valid and legal and therefore, binds the
contracting parties. The same will however not adversely affect
the right of another union to challenge the majority status of the
incumbent bargaining agent within sixty (60) days before
the lapse of the original five (5) year term of the CBA.
 
In the present case, the CBA was originally signed for a period of five
years, i.e., from February 1, 1998 to January 30, 2003, with a
provision for the renegotiation of the CBAs other provisions at the
end of the 3rd year of the five-year CBA term. Thus, prior to January
30, 2001 the workplace parties sat down for renegotiation but instead
of confining themselves to the economic and non-economic CBA
provisions, also extended the life of the CBA for another four months,
i.e., from the original expiry date on January 30, 2003 to May 30,
2003.
 
As discussed above, this negotiated extension of the CBA term has
no legal effect on the FVCLU-PTGWOs exclusive bargaining
representation status which remained effective only for five years
ending on the original expiry date of January 30, 2003. Thus, sixty
days prior to this date, or starting December 2, 2002, SANAMA-
SIGLO could properly file a petition for certification election. Its
petition, filed on January 21, 2003 or nine (9) days before the
expiration of the CBA and of FVCLU-PTGWOs exclusive bargaining
status, was seasonably filed.

But surprisingly the Supreme Court has allowed a 10-year CBA (Rivera vs Espiritu,
GR No. 135547, 23 January 2002). It reasoned out that "nothing in Article 253-A, prohibits
the parties from waiving or suspending the mandatory timetables and agreeing on the
remedies to enforce the same".
Petitioners further allege that the 10-year suspension of the CBA
under the PAL-PALEA agreement virtually installed PALEA as a
company union for said period, amounting to unfair labor practice, in
violation of Article 253-A of the Labor Code mandating that an
exclusive bargaining agent serves for five years only.
The questioned proviso of the agreement reads:

a. PAL shall continue recognizing PALEA as the duly

certified-agent of the regular rank-and-file ground
employees of the Company;

Said proviso cannot be construed alone. In construing an instrument

with several provisions, a construction must be adopted as will give

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 effect to all. Under Article 1374 of the Civil Code, contracts cannot be
construed by parts, but clauses must be interpreted in relation to one
another to give effect to the whole. The legal effect of a contract is not
determined alone by any particular provision disconnected from all
others, but from the whole read together. The aforesaid provision
must be read within the context of the next clause, which provides:

b. The union shop/maintenance of membership provision under

the PAL-PALEA CBA shall be respected.

The aforesaid provisions, taken together, clearly show the intent of

the parties to maintain union security during the period of the
suspension of the CBA. Its objective is to assure the continued
existence of PALEA during the said period. We are unable to declare
the objective of union security an unfair labor practice. It is State
policy to promote unionism to enable workers to negotiate with
management on an even playing field and with more persuasiveness
than if they were to individually and separately bargain with the
employer. For this reason, the law has allowed stipulations for union
shop and closed shop as means of encouraging workers to join and
support the union of their choice in the protection of their rights and
interests vis--vis the employer.

Petitioners contention that the agreement installs PALEA as a virtual

company union is also untenable. Under Article 248 (d) of the Labor
Code, a company union exists when the employer acts [t]o initiate,
dominate, assist or otherwise interfere with the formation or
administration of any labor organization, including the giving of
financial or other support to it or its organizers or supporters. The
case records are bare of any showing of such acts by PAL.
We also do not agree that the agreement violates the five-year
representation limit mandated by Article 253-A. Under said
article, the representation limit for the exclusive bargaining
agent applies only when there is an extant CBA in full force and
effect. In the instant case, the parties agreed to suspend the
CBA and put in abeyance the limit on the representation period.
In sum, we are of the view that the PAL-PALEA agreement
dated September 27, 1998, is a valid exercise of the freedom to
contract. Under the principle of inviolability of contracts guaranteed
by the Constitution, the contract must be upheld.

This ruling is unsatisfactory because it totally ignored the rights of minority

unions. That the incumbent union is not a company union is irrelevant to the issue of
the right of minority unions. The right to challenge the majority union is not dependent
on any finding of ULP. What more, the Supreme Court virtually engaged itself in judicial
legislation when it substituted its judgment for that of Congress when it set the limits of
the period of the CBA that the parties may agree which it had already acknowledged
(see SMC Employees Union vs. Confesor , G.R. No 111262, 19 September 1996). The
question now is what would the limit that the parties may set with respect to the
representation aspect? If 10 years is allowable, would 15, 20, or 25 year be likewise
allowable? The Supreme Court did not set the parameters which the Secretary of
DOLE may take into consideration if confronted with a similar case.

Administration of CBA

The faithful observance of the terms of the CBA is part of the duty to bargain.

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A CBA is the law between the parties, and compliance therewith is mandated by the
express policy of the law (Benson Industries Employees Union v Benson, G.R. 200246, 06
August 2014). Unilateral changes or suspensions in the implementation of the provisions
of the CBA, cannot be allowed. The consent of the other party must be secured for
proposed changes in the terms of the CBA; unilateral changes is breach of the CBA and
the duty to bargain(Faculty Association of Mapua Institute of Technology vs Mapua , GR No.
164060, 15 June 2007;Wesleyan Univ vs Wesleyan Univ Faculty & Staff Assn, G.R. No.
181806, 12 March 2014).

A company, which agree to grant separation benefits of 19 days for very year of service
irrespective of its financial position, was held bound by the CBA when it closed shop
due to serious business losses (Benson Industries Employees Union v Benson, G.R.
200246, 06 August 2014). Could the theory of rebus sic stantibus, and Art. 1267 of the
Civil Code ("when the service has become so difficult as to be manifestly beyond the
contemplation of the parties") be successfully invoked in such extreme situation?

Should such changes, if made by agreement of the parties, be subject to

ratification by the members of the bargaining unit? What if the changes are only
made impliedly, by practice, instead of explicitly in a written document (e.g. change in
work schedule)?. It seems such changes are binding on the employees (see Interphil
Laboratories Employees Union-FFW v Interphil Laboratories m GR No. 142824, 19
December 2001).Even the elimination and reduction of employment benefits amidst a
financial crisis was upheld, despite lack of formal CBA ratification, when the employees
voluntarily signed individual employment contacts containing the agreed terms of
employment (Insular Hotel Employees Union v Waterfront Insular Hotel Davao,G.R Nos.
17404041, 22 September 2010).Implied ratification, not necessarily formal ratification, is
sufficient to bind the parties to a CBA.

It is not ULP to proposed changes in the CBA, even outside the period for re-
negotiation. But since there is no duty on the other party to respond to the request,
such party would not be committing ULP in rejecting the request.

It may happen that the members of the bargaining unit, while the CBA is subsisting,
may have changed their bargaining agent ( e.g., the local union may have legally
disaffiliated from the federation and registered itself as an independent union or else
affiliate with another federation). In that case, the "substitutionary" doctrine applies. The
employees cannot revoke the CBA by the simple expedient of changing their bargaining
agent. The new agent is just as bound by the CBA as the old agent except for purely
personal undertakings like the "no strike no lock out clause" (Benguet Consolidated
Mining vs. BCM Employees Union (G.R. No. L-24711, 30 April 1968).

Unilateral rescission of a CBA , and thereafter bargaining with a new union

composed of members who disaffiliated from the incumbent union, is ULP (Employees
Union of Bayer Philippines v Bayer Philippines (G.R. No. 162943, 06 December 2010). If
the employer grossly violates its CBA with the duly recognized union, the former may be
held administratively and criminally liable for unfair labor practice.

The parties to a CBA may agree to the elimination or reduction of benefits, without
violating the non-diminution principle since the diminution is the product of an
agreement and not done unilaterally by the employer(Insular Hotel Employees Union v
Waterfront Insular Hotel Davao,G.R Nos. 17404041, 22 September 2010). The premise is that
the diminution would not be below the legal minimum. The remedy of the dissenting
employees would be to vote against the CBA's ratification.

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It was also held in Rivera vs Espiritu ( GR No. 135547, 23 January 2002) that "nothing in
Article 253-A, prohibits the parties from waiving or suspending the mandatory timetables
and agreeing on the remedies to enforce the same" and that "the right to free collective
bargaining, after all, includes the right to suspend it". What was not stressed in this case
however is that the waiver of said right does not probably cover the right the minority
unions to seek challenge within the freedom period.

Interpreting the CBA

Must a CBA be in writing? The law says that the duty to bargain includes “ “executing a
contract incorporating such agreements if requested by either party ", thus suggesting
the CBA need not be in writing (Art. 252, Labor Code). . This is an academic question,
since in practice all CBAs are reduced into writing and it could not be ratified if it is not
posted as required by law.

Like in all contracts, the provisions of law are deemed written into the CBA. And any
stipulation which is contrary to law and public policy will not be valid.

But a CBA is treated not as an ordinary contract, but one imbued with public interest.
CBA provisions should be construed liberally rather than narrowly and technically, and
the courts must place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and purpose which it is intended to
serve.(Samahang Manggagawa sa Top Form v NLRC, G.R No. 113856, 07 September 1998).
And being a labor contract, any doubt  must be resolved in favor of labor even though it
is a product of negotiation and , unlike an employment contract, there is no presumption
that it is a contract of adhesion. Thus, the heirs of a worker who had served for 10 years
and died while in the employ of the company was granted benefits equivalent to the
CBA-mandated separation pay of resigned employees who render the same length of
service. The NLRC applied not only Art. 4 of the Labor Code but also Art.1702 of the
Civil Code which provides that labor contracts shall be construed in favor of the safety
and decent living of the laborer (Marcopper Mining Corporation v NLRC G.R Nos. 83207, 05
August 1991)

Only provisions embodied in the CBA should be so interpreted and complied

with. Where a proposal raised by a contracting party does not find print in the CBA, it is
not a part thereof and the proponent has no claim whatsoever to its implementation.
Hence, the union's contention that the Minutes of the collective bargaining negotiation
meeting forms part of the entire agreement is pointless. The Minutes reflects the
proceedings and discussions undertaken in the process of bargaining for worker
benefits in the same way that the minutes of court proceedings show what transpired
therein. At the negotiations, it is but natural for both management and labor to adopt
positions or make demands and offer proposals and counter-proposals. However,
nothing is considered final until the parties have reached an agreement. (Samahang
Manggagawa sa TopForm v NLRC, G.R No. 113856, 07 September 1998).

Effect on Excluded Employees

It was previously stated that the CBA covers all employees of the bargaining unit
being represented, not just the members of the majority union(PAL vs PALEA, GR
No.142399, 12 March 2008). To exclude non-members of the majority union would be a
case of discrimination (Mactan Workers' Union vs. Don Ramon Aboitiz ,G.R. No. L-30241,
June 30, 1972). It must be stressed that CBA benefits pertain not only to salaries but
also to other items like working hours from which non-union members also benefit To
prevent non-union members from being 'free riders', the law allows the automatic

6
deduction from their salaries of agency fee equivalent to the monthly union dues which
will then be remitted to the union.( Art.260 [e] 2nd sentence).

What about the difference in treatment of members of the bargaining unit and those who
are not members of the bargaining unit? Given that there is a presumed valid distinction
( which accounts for their being not grouped within the same bargaining unit) any issue
of unlawful discrimination should not arise.

Thus, the Supreme Court upheld as a valid exercise of management prerogative

the company's grant of profit-sharing scheme to managers, supervisors, and
subsequently to rank-and-file employees who are not members of the union The
justification offered is that these non-union employees are not covered by the CBA and
do not derive and enjoy the benefits under the CBA. Only the members of the union,
under the circumstances of the case, derived benefit under the CBA, thus making their
situation different as to allow permissible discrimination in treatment. There can be no
discrimination committed by the company thereby as the situation of the union
employees are different and distinct from the non-union employees. Indeed,
discrimination per se is not unlawful. There can be no discrimination where the
employees concerned are not similarly situated (Wise & Co vs Wise & Co. , GR L-87672,
13 October 1989).

But the Supreme Court is not consistent in its rulings.

The Supreme Court nullified the school's policy of giving higher wage rates to
"foreign-hires" compared to "local hires". It ruled that there is no reasonable
distinction between the services rendered by foreign-hires and local-hires and the
school's contravenes public policy. Yet, at the same time, the Supreme Court held that
that "foreign-hires" do not belong to the same bargaining unit as the "local-hires". If so,
the school should be allowed to treat them differently (International School Alliance of
Educators" vs Quisumbing , GR No. 128845, 01 June 2000).

The Supreme Court has also held that " "there is no rational basis for withholding from
the members of ALPAP [ pilots union] the benefit of a year-end bonus in addition to the
13th month pay, while the same is being granted to the other rank and file employees of
PAL. PAL's failure to extend the same benefits to its pilots is a blatant act of
discrimination and is grossly unfair to the latter considering the heavy and delicate
responsibilities that they bear in the airline business, particularly in ensuring the safety
and comfort of thousands of passengers" (PAL vs NLRC ,GR No. 114280/115224, 26 July
1996). Again, the Supreme Court seemed to have disregarded the circumstance that
the pilots constitute a separate bargaining unit and therefore could be treated
differently from employees belonging to different bargaining units. The pilots are not
rank-and-file employees and, if treated as managerial employees, are not covered by
the 13th month pay law. Besides, the issue could be the subject of collective bargaining
and the Supreme Court should not unduly intrude into the negotiations.

The pattern is for the Supreme Court to view discrimination across bargaining units. In it
has further held that the company's grant of wage increase to its supervisory
employees is "actually a discrimination against respondent [ rank-and-file] union
members. If it could grant a wage increase to its supervisors, there is no valid reason
why it should deny the same to respondent union members" (LMG Chemical Corporation
vs Secretary of Labor , GR No. 127422, 17 April 2001).

Managers and other employees who are not part of any bargaining unit eventually
benefit from a CBA which grants salary increases and other benefits. It is not
6
uncommon for companies to adjust the set of benefits of supervisors (if unorganized)
and managers after a CBA has been concluded. This is partly due to maintain
meaningful difference in benefits (e.g. salary rates, health plan coverage) and also to
set uniform standards in certain benefits like retirement plan (e.g. the multiplier must be
the same for all similarly-situated employees and the difference would be in salary rates
and length of service)

In one case, the Supreme Court found that "for over a decade, Metrobank
has consistently, deliberately and voluntarily granted improved benefits to its
officers, after the signing of each CBA with its rank and file employees, retroactive to
January 1st of the same year as the grant of improved benefits[that were commensurate
or superior to those provided for in Metrobanks CBA with its rank and file employees
and without the condition that the officers should remain employees as of a certain
date". The Supreme Court thus ruled that the managers have attained a vested right to
these benefits which are on top of what is in the Retirement Plan (Metrobank vs NLRC ,
GR No. 1529281, 18 June 2009).

Ratification & Registration

Within 30 days from the execution of a CBA, the parties shall submit copies of the
same to the BLR or the Regional Office for registration, accompanied with verified
proofs of its posting in two (2) conspicuous places in the place of work and ratification
by the majority of all the workers in the bargaining unit. The BLR or Regional
Office shall act upon the application for registration of such CBA within five (5) calendar
days from receipt thereof. (Art. 237[231], 2nd par). Should a CBA be also formally
approved by the employer’s board of directors?

The posting and ratification requirement has been held mandatory (Associated Trade
Union vs Ferrer-Calleja , GR No. 77282, 05 May 1989 ).But notwithstanding this defect
(and the fact that it was concluded when a petition for certification election has been
filed within the freedom period, the Supreme Court in this case upheld the temporary
validity of the premature CBA insofar as the provisions favorable to labor were
concerned and until the CE is decided. Should the challenger union win the certification
elections , CBA negotiations may again commence.

When should a CBA deemed to take effect? Upon its signing, or upon ratification?
Upon registration with the BLR, or upon the BLR’s approval? The question is important
not only for the reckoning of the start of the grant of economic benefits but also in
determining when the union security clause would become effective and binding on the
members of the bargaining unit (see Liberty Flour Mills Employees vs Liberty Flour Mills,
GR No. 58768-70. 29 December 1989). My opinion is that it should be upon
ratification A ratified CBA is valid even without registration, the major consequence
only being that the contract bar rule does not apply.

Ratification need not always be in the formal manner prescribed by law. A CAB could be
deemed ratified when the employees enjoyed benefits under it. It is inequitable to
receive benefits from a CBA and later on disclaim its validity.(Planters Product vs NLRC,
GR No. 78524, 20 January 1989;see also: Insular Hotel Employees Union vs Watefront
Insular Hotel , GR No. 174040-41, 22 September 2010).

But that is insofar as benefits are concerned. The employee would know they received
wage increases, since their pay slips would disclose the adjustment. But what if the
disputed provision is the union security clause? How could the same bind employees
when that provision is not posted and not formally ratified?

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The purpose of registration is for the BLR to check if the provisions comply with the
minimum standards of the law (e.g. salary rates) and if the same contains the
mandatory provisions (e.g. grievance machinery). Registration also adds to the DOLE’s
data base, which it may use for officials statistics necessary for the formulation of
government policies and programs. The more important reason, for our study, is that
registration with the DOLE serves as constructive notice to the world of the execution
of the CBA. Without DOLE registration, the contract bar rule does not apply.

Expiration, Extension, Deadlock,

Re-negotiation, & Rescission

A CBA expires on the date stated therein. Ideally, a new CBA is concluded prior its
expiry so that there would be no gap in the coverage of the CBA and the new CBA
takes upon the expiry of the old CBA. The normal approach in CBAs is to set the
validity of the re-negotiated items to coincide with the end of the 5 th year. Thereafter, the
parties would agree on a new 5-year CBA.

If no new CBA is executed prior to the expiry of the old CBA, the law mandates the
continuing validity of the old CBA until a new agreement is entered into ( Lopez Sugar
Corporation vs FFW, GR Nos. 75700-01, 30 August 1990).In this decided case, the
employees continued to avail of benefits under the CBA (e.g. leaves) while the
employer was also able to invoke the right to retire employees. This automatic
extension clause is intended to prevent a gap in the terms governing the relationship
of the company and the bargaining unit (Villar vs Inciong, GR No. L-50283-84, 20 April
1983).The law mandates the parties to observe the status quo.

Nonetheless, It is my opinion that some provisions of the old CBA would no longer be
applicable . For example, union security clause would no longer apply since the
‘freedom period’ had set in (see Tanduay Distillery Labor Union vsTanduay Distillery, GR
No. 75037, 30 April 1987). The right to challenge the majority union would be negated if
the employees are not allowed to resign from the majority union and support the PCE
of a rival union (see PICOP Resources vsDequilla, GR No. 172666, 07 December 2011.)The
right to self-organize, which is restricted by the union security clause, should be given
preference during the freedom period.

The automatic extension poses no problem if the CBA does not provide for periodic or
annual adjustments of the particular benefit (e.g., the number of leave credits would be
the same regardless of the year the CBA has been in force). The situation raises
question if the CBA provides for annual adjustment of the economic benefit (e.g. 10%
salary increase on the 1st year, 7.5% increase on the 2nd year, and 5% increase on the
3rd year). The status quo would certainly be changed with any wage adjustment.

In one case , the expired CBA provided for wage increases from 1981 to 1984. A CBA
was not however concluded prior to its expiry. The Supreme Court held that “the law
does not provide for any exception nor qualification as to which of the economic
provisions of the existing agreement are to retain force and effect; therefore, it
must be understood as encompassing all the terms and conditions in the said
agreement ” because “to rule otherwise, i.e., that the economic provisions of the
existing CBA in the instant case ceased to have force and effect in the year 1984, would
be to create a gap during which no agreement would govern, from the time the old
contract expired to the time a new agreement shall have been entered into”.
Furthermore: For if, as contended by the petitioner [company] , the economic provisions
of the existing CBA were to have no legal effect, what agreement as to wage increases
and other monetary benefits would govern at all? None, it would seem, if we are to

6
follow the logic of petitioner Company. Consequently, the employees from the year
1985 onwards would be deprived of a substantial amount of monetary benefits which
they could have enjoyed had the terms and conditions of the CBA remained in force and
effect. Such a situation runs contrary to the very intent and purpose of Articles 253 and
253-A.” ( New Pacific Timber Supply Corp. vs NLRC,GR No. 124224, 17 March 2000).

But why should it be an issue if in the meantime the employees would not enjoy
adjustment in benefits? If a subsequent CBA could provide for reduction in benefits,
there is no compelling reason to mandate adjustment in benefits during the automatic
extension period. Indeed, mandating automatic adjustment based on the old CBA
preempts the management from bargaining for non-adjustment or reduction of benefits
which are well within its rights as a contracting party. The more equitable thing is to
maintain the status quo on benefits through the principle of non-diminution,
which is what is mandated by the law in the first place. Ordering mandatory
adjustments in benefits disturbs the status quo, contrary to the policy of the law.

Re-negotiations do not necessarily mean upward adjustment in benefits. The law

recognizes a CBA or similar agreements which mandate reduction of benefits when
such is necessary to attain maintain or resume business operations ( see Insular Hotel
Employees Union-NFL vs Waterfront Hotel Davao GR Nos. 174040-41, 22 September
2010)

If the new CBA is signed within six (6) months from expiry of the old CBA, the law
provides that the new CBA automatically retroacts to the date immediately after the
expiry date of the old CBA. If the new CBA is signed more than six( 6) months after the
old CBA’s expiry, the parties could agree on the date of retroactivity. The problem arises
if there is a deadlock, and the parties could not agree to a CBA. The case would go to
arbitration, and the voluntary arbitrator (or the NLRC or the Secretary of Labor, as the
case may be) has the authority to fix the effective date including making the CBA apply
prospectively only (Pier 8 Arrastre and Stevedoring Services Inc. vs Confessor, GR No.
110854, 13 February 1995).

In case of deadlock in the negotiations or re-negotiations, the parties may

exercise their rights under the Labor Code. These rights include submission of the
deadlock to the NCMB for conciliation and mediation ( Art. 261 [ b - c ]), declaration of
deadlock and filing of notice of strike or lock out (Art. 278[c]) referral of the case to
voluntary arbitration (Art. 261[c]) and Art. 275) or file a petition for assumption of
jurisdiction (Art.278[g]).

A party is not allowed to unilaterally rescind a valid CBA. Such act would be ULP. This
is the case when a company negotiates with a splinter union despite the existence of a
CBA and thereafter concludes another CBA with such splinter group ( Employees Union
of Bayer Philippines-FFW vs Bayer Philippines, GR No. 162943, 06 December 2010).
PFFALLARJRNOV2020

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