GUEVARRA
Limits of Management Prerogatives Special Steel’s Contentions: It has been the company’s long standing
practice that upon reaching one year of service, a wage adjustment is
SUPREME STEEL CORP. v. NAGKAKAISANG MANGGAGAWA granted. Once wages are adjusted, the increase provided in the CBA for that
NG SUPREME INDEPENDENT UNION year is no longer implemented. The Union did not object to this, as
G.R. No. 185556 | March 28, 2011 | Nachura evidenced by the employees’ pay slips.
Petitioners: SUPREME STEEL CORPORATION MOST RELEVANT - 2nd Violation: Contracting-out labor
Respondents: NAGKAKAISANG MANGGAGAWA NG SUPREME Union’s Contentions: Special Steel hired temporary workers for five
INDEPENDENT UNION (NMS-IND-APL months, based on uniformly worded employment contracts, renewable for
five months, and assigned them to almost all of the departments in the
Doctrine: The exercise of management prerogative is not unlimited. company. However, under the CBA, temporary workers are allowed only in
Managerial prerogatives are subject to limitations provided by law, the Warehouse and Packing Section. Moreover, Special Steel never
collective bargaining agreements, and general principles of fair play and regularized them, even if their position and their services were necessary
justice. The CBA is the norm of conduct between the parties, and and desirable to its business. They would be replaced with other workers
compliance therewith is mandated by the express policy of the law. with the same employment status. This scheme is a clear circumvention of
Management prerogative must take a backseat when faced with a CBA the laws on regular employment.
provision.
Furthermore, the right to self-organization goes beyond the maintenance of
FACTS union membership. The CBA maintains a union shop clause, which gives
the regular employees 30 days within which to join the Union as a condition
Nagkakaisang Manggagawa ng Supreme Independent Union (Union) filed a for their continued employment. Thus, Special Steel’s persistent refusal to
notice of strike with the National Conciliation and Mediation Board grant regular status to some of its employees violates the employees’ right
(NCMB), on the ground that Supreme Steel Corporation (Supreme Steel) to self-organization.
violated certain provisions of their CBA. The parties failed to settle their
dispute. Special Steel’s Contentions: Special Steel hired temporary workers in
order to cope with the seasonal increase of the job orders from abroad. The
Consequently, the Secretary of Labor certified the case to the NLRC for temporary workers helped the regular workers in the production of steel
compulsory arbitration. The Union alleged 11 CBA violations. pipes. Such temporary workers do not affect the Union’s membership.
Special Steel then agreed to terminate such temporary employees, on the
1st Violation: Denial to four employees of the CBA-provided wage increase condition that the regular employees would have to perform their work, but
the Union refused. This refusal proved that Special Steel was not
Union’s Contentions: Special Steel has repeatedly denied the annual CBA contracting out the services being performed by Union members.
increases to at least four employees. Special Steel gives an anniversary Moreover, the hiring of temporary workers is a management
increase to its employees when they reach their first year of employment. prerogative.
The said four employees received their respective anniversary increases, but
Special Steel used the fact that there is an anniversary increase to justify the 3rd Violation: Failure to provide shuttle service
denial of their CBA increase for the year. Special Steel failed to prove that
the anniversary increase took the place of the CBA increase.
Union’s Contentions: Special Steel reneged on its obligation to provide allowed only if the meeting’s venue is outside company premises and the
shuttle service for its employees. The company vehicle has not been meeting involves the implementation and interpretation of the CBA.
reconditioned by Special Steel since the signing of the CBA.
Special Steel’s Contentions: It is difficult to implement the CBA provision
on shuttle service, and it simply denied that it has reneged on its obligation. 6th Violation: Visitors’ free access to company premises
4th Violation: Refusal to answer for the medical expenses incurred by three Union’s Contentions: Union members were not allowed during work hours
employees to enter the company premises to investigate grievances that have arisen, or
to interview Union members during reasonable hours, or to attend any
Union’s Contentions: Special Steel is liable for the medical expenses meeting called by the management or the Union.
incurred by three employees who were injured while in the company
premises. For Special Steel, the definition of “first aid service” is limited to 7th Violation: Failure to comply with reporting time-off provision
the bare minimum of treating injured employees while still within the
company premises and then referring the injured employee to the Chinese Union’s Contentions: The Union claims that a brownout is covered by the
General Hospital for treatment. However, the travel expense in going to the CBA provision on reporting time-off. Brownouts and power outages come
hospital is charged to the employee. There are employees who were charged within the term “emergencies” under the principle ejusdem generis. Special
with transportation expenses. There was another (Rodrigo Solitario) who Steel paid the employees’ salaries for one hour only out of the four-hour
was injured during the company sportsfest, and his medical expenses were brownout in July 2005. The intention of the CBA provision was to
not even shouldered by Special Steel; the amount was instead deducted compensate the employees for occurrences which are beyond their control,
from his salary. and power outage is one of those.
Special Steel’s Contentions: It provided medicine and first aid assistance Special Steel’s Contentions: Brownouts are not included in the list of
to Solitario. However, he cannot claim hospitalization benefits under the emergencies.
CBA because he was not confined in a hospital.
8th Violation: Dismissal of Diosdado Madayag
th
5 Violation: Failure to comply with the time-off with pay provision
Union’s Contentions: Diosdado Madayag was a welder of Special Steel.
Union’s Contentions: Under the CBA, Special Steel was obliged to grant a He was illegally dismissed because Special Steel failed to obtain a
paid time-off to the Union’s duly authorized representative or to any certification from a competent public authority that his disease is of such
employee who was on duty, when he is summoned by the Union to testify nature or at such stage that it cannot be cured within six months even after
or when his presence was necessary in grievance hearings, meetings, or proper medical treatment. It was also not proven that Madayag’s continued
investigations. employment was prejudicial to his health or his colleagues.
Special Steel’s Contentions: It did not honor the claim for wages of the Special Steel’s Contentions: Madayag was validly terminated, and his leg
Union officers who attended the grievance meetings because these meetings was amputated by reason of diabetes, which disease is not work-related.
were initiated by the Union itself. Thus, since the union officers were not Special Steel was willing to pay Madayag 13 days for every year of service,
performing as employees of the company, then Special Steel should not be but the Union was asking for additional benefits.
held liable. Also, they are not liable to pay the Union officers’ wages when
the meetings are beyond company time (3:00 PM). Time-off with pay is 9th Violation: Denial of paternity leave benefit to two employees
Special Steel’s Contentions: Special Steel denied paternity leave to the two Union’s Contentions: Any form of wage increase granted through the CBA
employees because of their failure to notify the employer of the pregnancy should not be treated as compliance with the wage increase given through
of their wives and the expected date of delivery (this was required under the the wage boards. The Union admitted that Special Steel complied with a
IRRs of the Paternity Leave Act of 1996). wage order which granted COLA (worth P15.00) to all its employees.
Union’s Contentions: Special Steel is relying on technicalities when it However, Special Steel stopped implementing this to non-minimum wage
denied the two employees of paternity leave benefit. On grounds of social earners. This violates Article 100 of the Labor Code, which prohibits the
justice, the oversight to notify the employer should not be dealt with diminution of benefits already enjoyed by the workers. This grant of
severely by denying such benefit. benefits had already ripened into a company practice.
10th Violation: Discrimination and harassment Special Steel’s Contentions: The COLA provided under the said wage
order applies to minimum wage earners only. However, Special Steel made
Union’s Contentions: Special Steel was contemptuous over Union officers a mistake and implemented it across the board or to all its employees.
for protecting the rights of union members. Alfred Navarro (Officer-in-
Charge of the Packing Department) had been harsh in dealing with his NLRC Ruling: Out of the 11 issues, 8 were ruled in favor of the Union. 2
fellow employees and would even challenge some workers to a fight. issues (denial of paternity leave benefit, and discrimination of union
Navarro had an overbearing attitude during work and grievance meetings. members) were decided in favor of Special Steel. Lastly, the issue on
Navarro even removed a foreman from his position and installed another visitor’s free access to company premises was deemed settled during the
foreman from another section. mandatory conference.
Ariel Marigondon, Union President, was also penalized for working for his CA Ruling: Special Steel’s appeal to the CA was denied.
fellow employees. Marigondon inquired from the management about
matters concerning tax discrepancies, then after that, he was transferred ISSUE: W/N Special Steel violated the 8 provisions of the CBA with the
from one area of operation to another. He was then forced to accept menial Union, PARTICULARLY the hiring of temporary workers under the
jobs such as putting control tags on steel pipes, when he had 16 years of circumstances, as it was tantamount to contracting-out labor
expertise in examining steel pipes.
RULING: Yes, Supreme Steel violated the CBA by the hiring of
There were also instances when Special Steel withheld the salary of some temporary workers under the circumstances.
employees.
In labor law, the CBA is the law between the parties, and compliance
Special Steel’s Contentions: The transfer of the employee from one therewith is mandated by the express policy of the law. If the terms of a
department to another was the result of downsizing the Warehouse CBA are clear and there is no doubt as to the intention of the contracting
Department, which is a valid exercise of management prerogative. parties, the literal meaning of its stipulation shall prevail. Moreover, the
Special Steel denied that some of the superior officers harassed or harshly CBA must be construed liberally, rather than narrowly and technically,
treated some employees. Rather, they merely did precautionary measures and the court must place a practical and realistic construction upon it.
and stressed some points to the employees. Moreover, other workers were Any doubt in the interpretation of any law or provision affecting labor
also transferred to other areas of operation. should be resolved in favor of labor.
11th Violation: Non-implementation of cost of living allowance (COLA) in MOST RELEVANT - As to contracting-out labor: VIOLATED
Wage Order Nos. RBIII-10 and 11
Special Steel admits that it hired “temporary” employees, but it maintains even indispensability to the business of the employer. Hence, the
that it was an exercise of management prerogative, necessitated by the employment is also considered regular, but only with respect to such
increase in demand for its product. activity and while such activity exists.
Jurisprudence recognizes the right to exercise management prerogative. OTHER NOTES
Labor laws also discourage interference with an employer’s judgment in
the conduct of its business. Thus, the court often declines to interfere in As to the general wage increase: VIOLATED
legitimate business decisions of employers. The law must protect not only
the welfare of employees, but also the right of employers. The wording of the CBA on general wage increase cannot be interpreted
any other way: The CBA increase should be given to all employees “over
However, the exercise of management prerogative is not unlimited. and above” the amount they are receiving, even if that amount already
Managerial prerogatives are subject to limitations provided by law, includes an anniversary increase.
collective bargaining agreements, and general principles of fair play
and justice. The CBA is the norm of conduct between the parties, and Stipulations in a contract must be read together, not in isolation from one
compliance therewith is mandated by the express policy of the law. another. Another provision in the CBA (the non-crediting provision)
bolsters this, stating that “all salary increase granted by the company shall
In this case, the CBA is clear in providing that temporary employees will not be credited to any future contractual or legislated wage increases.”
no longer be allowed in the company except in the Warehouse and
Packing Section. Special Steel cannot exempt itself from complying with Thus, even if Special Steel had already awarded an anniversary increase to
this provision by invoking management prerogative. Management its employees, such anniversary increase cannot be credited to the
prerogative must take a backseat when faced with a CBA provision. If “contractual” increase under the CBA. The CBA increase is considered as
Special Steel needed additional personnel to meet the increase in demand, it “separate and distinct.”
could have taken measures without violating the CBA.
Also, Special Steel failed to prove that offsetting the anniversary increase
Here, the temporary employees were hired on five-month contracts, and the CBA increase has been a company practice. Company practice,
renewable for another five months. Then after the expiration of the just like any other fact, habits, customs, usage or patterns of conduct must
contracts, Special Steel would hire other persons for the same work, with be proven. The offering party must allege and prove specific, repetitive
the same employment status. Plainly, this scheme seeks to prevent conduct that might constitute evidence of habit or company practice. In this
employees from acquiring the status of regular employees. Where, from case, the pay slips of the four employees do not serve as sufficient proof.
the circumstances, it is apparent that the periods of employment have been
imposed to preclude acquisition of security of tenure by the employee, As to providing shuttle service: VIOLATED
they should be struck down as contrary to public policy and morals.
Here, Special Steel simply says that it is difficult to implement the
The primary standard to determine a regular employment is the provision. It relies on the fact that “no time element is explicitly stated in
reasonable connection between the particular activity performed by the the CBA within which to fulfill the undertaking.” This is hardly an excuse.
employee, in relation to the business or trade of the employer. The test is Special Steel must not be allowed to dillydally in complying with its
whether such activity is usually necessary or desirable in the usual business obligation, and take undue advantage of the fact that there is no period
or trade of the employer. If the employee has been performing the job for at under the CBA. Special Steel should recondition the company vehicle at
least one year, even if the performance is not continuous or merely once, otherwise, it is guilty of unfair labor practice.
intermittent, then such performance is sufficient evidence of the necessity or
As to answering for the medical expenses incurred by employees and ripened into a practice over a long period of time; 2) The practice is
complying with the time-off with pay provision: VIOLATED consistent and deliberate; 3) The practice is not due to error in the
construction or application of a doubtful or difficult question of law; and 4)
Special Steel made a narrow construction to the wording of the CBA The diminution or discontinuance is done unilaterally by the employer.
when it: 1) Denied reimbursement for the medical expenses of its
employees; 2) Refused to pay wages of certain employees during time spent For the grant of the benefit to be considered voluntary, it should have been
at grievance meetings; and 3) Paying only salaries for one out of four hours practiced over a long period of time, and must be shown to have been
during the brownout in July 2005. consistent and deliberate. In this case, the implementation of the COLA
across the board under the wage orders only lasted for less than a year.
Again, the CBA must be construed liberally, rather than narrowly and This is not considered “over a long period of time.” Hence, the withdrawal
technically. It is the duty of the courts to place a practical and realistic of the COLA from the salaries of non-minimum wage earners did not
construction upon the CBA, giving due consideration to the context in amount to a diminution of benefits.
which it is negotiated and the purpose which it is intended to serve.
Absurd and illogical interpretations should be avoided. A CBA, like any No proof was presented showing that the implementation of wage orders
other contract, must be interpreted according to the intention of the across the board has ripened into a company practice. The isolated act of
parties. implementing a wage order across the board can hardly be considered a
company practice, more so when such implementation was erroneously
As to Madayag’s dismissal: VIOLATED made.
The burden to prove the validity of the dismissal rests upon the employer.
The employer, before it can legally dismiss its employee on the ground of
disease, must adduce a certification from a competent public authority
that the employee’s disease is of such nature or at such a stage that it
cannot be cured within a period of six months even with proper
treatment.
This requirement for a medical certificate cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination
by the employer of the gravity or extent of the employee’s illness, and thus,
defeat public policy on the protection of labor.
As to the non-implementation of COLA: NOT VIOLATED
No diminution of benefits would result if the wage orders are not
implemented across the board, as no such company practice has been
established.
Diminution of benefits is the unilateral withdrawal by the employer of
benefits already enjoyed by the employees. There is diminution of benefits
when it is shown that: 1) The grant or benefit is founded on a policy or has
