More than two (2) decades ago, our Supreme Court applied a civil law concept in resolving a labor dispute, holding that the Civil Code has always recognized, and continues to recognize, the validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it species, goods or services, except the general admonition against stipulations contrary to law, morals, good customs, public order or public policy. Just four (4) months ago, the same tribunal employed a similar approach when, in another labor litigation, it laid down certain guidelines to determine the employer’s obligation to grant certain benefits. It declared that when the obligation is not sourced from law but from an existing collective bargaining agreement (CBA) between the employer and its employees, an examination of the latter’s provisions becomes necessary in order to ascertain the governing parameters for the said obligation. Consequently, the highest court of the land ruled that the employer is bound to grant its employees separation pay by reason of closure and cessation of business operations albeit Article 297 of the Labor Code exempts employers from granting the same on the ground of serious business losses.

This essay will examine the very recent case of Benson Industries Employees Union – ALU-TUCP, et al. v. Benson Industries, Inc., which is a petition for review on certiorari challenging the decision of the Court of Appeals (CA), that reversed and set aside the decision of the Voluntary Arbitrator and accordingly deleted the award to the petitioners of additional separation pay equivalent to four (4) days of work for every year of service. The facts are as follows: Respondent Benson Industries, Inc. (“respondent Benson”), manufacturer of green coils popularly known as “Lion-Tiger Mosquito Killer,” sent its employees, including individual petitioners, a notice informing them of their intended termination from employment to be effected on March 15, 2008 on the ground of closure and/or cessation of business operations. The petitioner union retaliated by filing a notice of strike with the regional office of the National Conciliation and Mediation Board (NCMB) in Cebu City, claiming that the respondent’s supposed closure was merely a ploy to replace the union members with lower paid workers and, as a result, increase its profit at their expense. Fortunately, the parties reached an amicable settlement pursuant to which petitioners accepted respondent’s payment of separation pay, computed at 15 days for every year of service.

Later on, petitioners demanded payment of additional separation pay at the rate of four (4) days for every year of service on the basis of the CBA stating that respondent shall pay to any employee who is terminated from the service “without any fault attributable to him, a ‘separation pay’ equivalent to not less than … 19 days for every year of service based upon the latest rate of pay of the employee/laborer concerned.” Respondent denied the claim, asserting that the separation pay extended to them was already more than what the law requires. Unable to resolve the matter, the parties proceeded to voluntary arbitration, wherein the validity of respondent’s closure was likewise an arbitrable issue.

In his decision, the Arbitrator ruled in favor of the petitioners and ordered respondent to pay each of them separation benefits “in an amount equivalent to four (4) days for every year of service based on the latest rate of pay of the (individual petitioner) concerned subject to whatever legally valid deductions chargeable against (said individual petitioner) whenever applicable.”

The Arbitrator reasoned that in computing the amount of separation benefits due to petitioners, the basis should be the provision of the existing CBA between the Company and the Union which explicitly states that if the employees are terminated through no fault of their own, they should be awarded separation benefits at the rate of 19 days for every year of service. Arbitrator Legaspi also resolved that the provision of the CBA should be given effect because it expresses the latest agreement of the Union and the Company, not to mention the fact that it gives more benefits to the employees. Significantly, while the Arbitrator did find adequate proof to support respondent’s position that it was indeed in a state of insolvency, thereby justifying its closure and/or cessation of business operations on the ground of serious business losses and/or financial reverses, he still decreed payment of the four (4) extra days. Hence, respondent elevated the case to the CA.

Reversing the Arbitrator’s ruling and deleting the award of additional separation benefits equivalent to four (4) days of work for every year of service, the CA held that despite the express provision of the CBA stating that respondent should pay its employees who were terminated without their fault separation benefits equivalent to at least 19 days pay for every year of service, respondent cannot be compelled to do so considering its current financial status.

Dissatisfied, petitioners went up to the Supreme Court following denial of their Motion for Reconsideration.

The Supreme Court found for the employees, holding that “[t]he petition is impressed with merit.” While acknowledging that a complete cessation of business operations and/or an actual locking-up of the doors of the establishment due to serious financial losses is an authorized cause for termination, aimed at preventing further financial drain upon an employer who cannot any more pay its employees since business has already stopped, the high tribunal proceeded to explain that when the obligation to pay separation benefits is not sourced from law (in this case, Article 297 of the Labor Code) but from contract, namely, the parties’ CBA, an examination of the provision of said document becomes necessary in order to determine the governing parameters for the obligation.

Thus, the Supreme Court reiterated the rule that an employer who closes shop due to serious business losses is exempt from paying separation benefits under Article 297 for the reason that the said provision explicitly requires the performance of said duty only when the closure is not due to serious business losses. Upon the other hand, the obligation subsists when the closure is not due to serious business losses. Therefore, when the parties agree to deviate from the legal provision and “unqualifiedly covenant” the payment of separation benefits irrespective of the employer’s financial position, then the obligatory force of the CBA prevails and the terms should be given full effect.

It is appropriate, at this juncture, to recall the Court’s constant references to the law and contracts as among the five (5) sources of obligations enumerated in Article 1157 of our Civil Code. It is likewise helpful that the Court applied Article 1158 of the same Code, stating that law is an independent source of obligations. Furthermore, it is enlightening that the Court in Benson applied the principle of autonomy of will as expressed in Article 1159 that “[o]bligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.” The terms of the contract should, therefore, not be contrary to law, morals, good customs, public policy or public order. If the contract does not violate any of these limitations, it should be given effect, notwithstanding the absence of any legal provision at the time it was entered into which governs it.

Hence, we find illuminating the following pronouncement in Benson:

The Court thereafter cited Honda Philippines, Inc. v. Samahan ng Malayang Manggagawa sa Honda where it was held that as in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law. Of late, in Wesleyan University-Philippines v. Wesleyan University Philippines Faculty and Staff Association, the Court reiterated that a CBA is a contract entered into by an employer and a legitimate labor organization concerning the terms and conditions of employment and like any other contract, it has the force of law between the parties and, thus, should be complied with in good faith. Unilateral changes or suspensions in the implementation of the provisions of the CBA, therefore, cannot be allowed without the consent of both parties.

In Benson, the Court took particular note of the fact that the respondent had been fully aware of its distressed financial condition even at the time of the previous CBA (effective from July 1, 2000 to June 30, 2005), and that the latter was already saddled with very heavy financial obligations as early as 1997, and yet “it still unqualifiedly and freely agreed to the separation pay provision in the July 1, 2005 to June 30, 2010 CBA, its distressed financial condition notwithstanding.”

Contesting the CA’s finding, the Supreme Court earnestly expostulated:

Significantly, the CA applied the ruling in North Davao Mining Corp v. National Labor Relations Commission to support reversal of the Arbitrator’s decision. In that case, a corporation had to close in 1992 because in the preceding five (5) years it had been incurring “mind-boggling” losses averaging three billion (P3,000,000,000.00) pesos per year. As of December 31, 1991 (five months before it closed), its total liabilities had exceeded its assets by over P20,000,000,000.00. Rejecting the demand for payment of separation pay “for obvious reasons,” the Court critically concluded that “Article 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses.” In the Court’s own words:

With the above ruling, a noted commentator expressed the view that any remaining doubt or confusion on entitlement to separation benefits has been dispelled by the en banc decision in North Davao.

But, as already seen, the Supreme Court disagreed, saying that North Davao and the other decisions invoked by the CA were inapplicable, to wit:

In other words, the Court found specious the application of the decisions in Galaxie Steel Workers Union (GSWU-NAFLU-KM) v. NLRC and Cama v. Joni’s Food Services, Inc. in that they were superficially plausible but actually wrong, there being no CBA involved at all in those cases. What is squarely in point, the Supreme Court expressly emphasized, are the cases of Lepanto Ceramics, Inc. v. Lepanto Ceramics Employees Association and Eastern Telecommunications Philippines, Inc. v. Eastern Telecoms Employees Union. In Lepanto, the employer was held liable for the payment of Christmas bonus benefits, considering that the grant thereof was voluntarily and unqualifiedly agreed upon by the parties under the CBA despite the employer’s full awareness of its distressed financial position. In like manner, the employer in Eastern was well aware of its deteriorating financial condition when it entered into the 2001-2004 CBA Side Agreement with the Union and obliged itself to pay bonuses to the union members. Since the employer had been continuously suffering huge loses from 2000 to 2002, its business losses in 2003 were not exactly unforeseen or unexpected. Consequently, it could not be said that the difficulty in complying with its obligation under the Side Agreement was “manifestly beyond the contemplation of the parties.” As in Benson, the Court concluded that because an obligation arising from a CBA is binding between the contracting parties, having the force of law and to be complied with in good faith, the employer in Eastern cannot back out from the obligation it had freely assumed when it signed the 2001-2004 CBA Side Agreement.

And so, therefore, we can make the following conclusions: first, the pertinent provisions of the Civil Code still predominate and will continue to predominate the contractual relationship of the parties in a CBA. This is evident from the Supreme Court’s unmistakable affirmation that when the obligation under the agreement is not sourced from law but from an existing CBA between the employer and the employees, there is need to scrutinize the provisions so that we can determine the governing parameters for the said obligation; secondly, the Court has been following precedents – an act that undeniably promotes judicial stability which, in turn, brings about predictability and rationality of decisions.

There is a well-known Latin maxim: Respice, Adspice, Prospice (Examine the past, examine the present, examine the future). Guided by this wise saying, the present article will briefly examine some selected cases and attempt to trace the inception and development of the doctrine that unfair labor practice (ULP) relates to the commission of acts that transgress the workers’ right to organize. In law school, we learned that a ULP is an unlawful act by the employer or labor union, defined as such under the Labor Code, which unduly interferes with one another’s rights and prerogatives. As specified in Articles 248 and 249 of the Labor Code, the prohibited acts must necessarily relate to the workers’ right to self-organization and to the observance of a collective bargaining agreement (CBA). Without the said vital element, “the acts, even if unfair, are not unfair labor practices.”

On February 26, 2014, our Supreme Court promulgated its decision in T&H Shopfitters Corp., et al. v. T&H Shopfitters Corp. Workers Union, et al., holding that the employer committed ULP upon a showing that the latter perpetrated the following acts during the pendency of a petition for certification election : (i) sponsoring a field trip to Zambales for its employees, to the exclusion of union members, before the scheduled certification election; (ii) the active campaign by the sales officer of the company against the union prevailing as a bargaining agent during the field trip; (iii) escorting its employees after the field trip to the polling center; (iv) the continuous hiring of subcontractors performing the functions of the employees; (v) assigning union members to the Cabangan site to work as grass cutters; and (vi) the assignment of work on a rotational basis for union members. The high tribunal found that these acts, taken together, reasonably support an inference that such were all orchestrated to restrict the employees’ free exercise of their right to self-organization. It stated that the employer’s actions prior and immediately before the scheduled certification election, while seemingly innocuous, unduly meddled in the affairs of its employees in selecting their exclusive bargaining representative. It likewise stressed that a certification election is the sole concern of the workers and, consequently, the employer had no business persuading and/or assisting its employees in this legally protected independent process of selecting their exclusive bargaining representative. In so deciding the T&H Shopfitters case, the Supreme Court relied on jurisprudence that it had established more than fifty (50) years ago when it declared, for the first time, that a complaint for ULP will prosper if, and only if, the act complained of is related to union activities and directed against the use of the right to employ or discharge as an instrument of discrimination, interference or oppression because of one’s labor or union activities.

In Royal Interocean Lines v. Court of Industrial Relations, the employee sent a letter to the company’s office in Hongkong, complaining against the latter’s manager in the Philippine for his “inconsiderate and untactful attitude” towards the employees under him and the clients of the company in the Philippines. The employee was terminated and she then charged the company and the manager with ULP under section 4(a) subsection 5 of Republic Act No. 875, otherwise known as the Industrial Peace Act (IPA). Construing the aforeqouted rule as including all cases where an employee is dismissed, discharged or otherwise prejudiced or discriminated against by reason of the filing by the employee with the court or elsewhere of any charge against her employer, the Court of Industrial Relations (CIR) found the company and its manager guilty of ULP and ordered the employee’s reinstatement, with backwages from the date of her dismissal.

The case was elevated to the Supreme Court and the issue squarely presented was whether or not the company committed ULP for having dismissed the employee because the latter had filed charges against the manager not connected with or necessarily arising from union activities.

Relying on American jurisprudence, the Supreme Court exonerated the company from the charge of ULP. Thus said the high tribunal:

Subsequently, in a related case, the company was ordered to pay the employee her salary for six (6) months considering that “the dismissal of the [employee] was without cause, because her inefficiency as the ground or reason for her dismissal as claimed by the [company] is belied by the successive increases of her compensation.”

About three (3) years following promulgation of Royal Interocean Lines and Mariano, the Supreme Court resolved the case of Sterling Products International, Inc. v. Sol and therein made this announcement:

In 1997, a pronouncement was made in one case that a complaint for ULP is not an ordinary dispute and, therefore, it requires a more thorough analysis, evaluation and appreciation of the factual and legal issues involved. This is so because by the very nature of a ULP, it is not only a violation of the civil rights of both labor and management but also a criminal offense against the State which is subject to prosecution and punishment.

Two (2) years later, in Great Pacific Life Employees Union v. Great Pacific Life Assurance Corp., the Supreme Court acknowledged that “[w]hile an act or decision of an employer may be unfair, certainly not every act or decision constitutes unfair labor practice… as defined and enumerated under Article 248 of the Labor Code.”

In 2003, the Supreme Court stated that the act complained of as ULP must have a direct relationship to the exercise of the employees’ right to self-organization and collective bargaining. Without this connection, the unfair acts will not qualify as ULP. The Court likewise clarified that if the prohibited acts bear no relationship to self-organization and to the observance of a CBA, then the acts, no matter how unfair, are not unfair labor practices. This was followed by Bisig Manggagawa sa Tryco v. NLRC, where it was reiterated that to be considered as ULP, the act must have been motivated by an intention to interfere with the workers’ right to organize. Absent any showing that the prohibited acts are related to the workers’ right to self-organization and to the observance of a CBA, “the acts, no matter how unfair, are not unfair labor practices.” In General Santos Coca-Cola Plant Free Workers Union – Tupas v. Coca-Cola Bottlers Phils., Inc., the rule was reaffirmed that without the presence of a crucial consideration, namely, that the prohibited acts are related to the workers’ right to self-organization and to observance of a CBA, “the acts, even if unfair, are not unfair labor practices.”

The Court was even more forthright in Central Azucarera de Bais Employees Union – NFL v. Central Azucarera de Bais, where it acknowledged that “anti-unionism [is] the evil sought to be punished in cases of unfair labor practices.” A year later, in 2011, the high tribunal remarked in Prince Transport, Inc. v. Garcia, that an act sought to be declared as ULP must be designed “as a subterfuge to foil the [workers’] right to organize themselves into a union. Under Article 248 (a) and (e) of the Labor Code, an employer is guilty of unfair labor practice if it interferes with, restrains or coerces its employees in the exercise of their right to self-organization or if it discriminates in regard to wages, hours of work and other terms and conditions of employment in order to encourage or discourage membership in any labor organization.” Thereafter, the Court declared illegal in another case the unceremonious dismissal of the workers by reason of their intent to form and organize a union even as it quoted with approval the Labor Arbiter’s finding that the organizers were terminated “to cripple the union at sight, to frustrate attempts of employees [to join or support it], preventing them, at all cost and to frustrate the employees’ bid to exercise their right to self-organization.”

The later case of Baptista v. Villanueva, once more focused on the primary concept of ULP insofar as it relates to the commission of acts that transgress the workers’ right to organize. Affirming that the prohibited acts must necessarily relate to the worker’s right to self-organization and to the observance of a CBA, the Court concluded by saying that “[a]bsent the said vital elements, the acts complained, although seemingly unjust, would not constitute ULP.”

And so, too, in T&H Shopfitters, did the Supreme Court readily recall the rule that ULP relates to the commission of acts that transgress the workers’ right to form a union. As mentioned in Articles 248 and 249 of the Labor Code, the prohibited acts must necessarily relate to the workers’ right to self-organization. Reminding us of the test in determining whether or not the employer has interfered with, restrained, or coerced the workers in the exercise of their right to self-organization, the Court contended:

As already seen, because it was convinced that the acts committed by the employer against the workers “all reek of interference on the part of [the employer]”, the Court did not hesitate to affirm the lower court’s ruling that the employer in T&H Shopfitters committed ULP. In fact, the Supreme Court emphatically stated that the various acts committed by the employer were all intended to prevent the workers’ free exercise of their right to self-organization. In the Court’s own words:

By way of conclusion, there is a common thread that weaves through and ties the cases that we have just reviewed and it is this: the Supreme Court has consistently confirmed and applied the doctrine it had first articulated in the case of Royal Interocean that for an act to be considered as ULP, it must be inextricably linked to, or connected with, the workers’ right to self-organization and the observance of a CBA. Without this causality, there can be no ULP at all.

                                     Francis V. Sobreviñas**

November 22, 2013 marked the 100^th birth anniversary of Cecilia Muñoz Palma, the first woman associate justice of the Supreme Court of the Philippines, who is best remembered for questioning the imposition of martial law and denouncing human rights violations. Madam Justice Palma later on became President of the Constitutional Commission and, through her leadership and wise counsel, the Commission succeeded in drafting a constitution that is the embodiment of the ideals and aspirations of the sovereign Filipino people: pro-people, pro-country and pro-God. She also wrote the decision in People v. Mariano[1]  wherein the etymology of the term “jurisdiction” was discussed by the Supreme Court in the following manner:

This essay will endeavor to discuss the issue of jurisdiction in termination disputes particularly insofar as it concerns high ranking officers of a corporation, partnership or association. Furthermore, it will examine the distinction between an “ordinary” or “non-corporate” officer vis-à-vis a “corporate officer” that is crucial in determining whether the controversy is an intra-corporate dispute or one that arises from employer-employee relationship.

Presidential Decree No. 902-A (PD 902-A)
in relation to Republic Act No. 8799 (RA 8799)
and Article 217 of the Labor Code

Under Section 5 of PD 902-A, intra-corporate controversies are those that arise out of intra-corporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity. It also includes controversies in the election or appointment of directors, trustees, officers or managers of such corporations, partnerships or associations.

We reproduce below Section 5 of PD 902-A in extenso:

On July 19, 2000, the President of the Philippines approved RA 8799, otherwise known as the Securities Regulation Code, and this law transferred the SEC’s jurisdiction over all intra-corporate disputes to the Regional Trial Court (RTC). We find this in Section 5.2 of RA 8799, to wit:

Article 217 of the Labor Code

As a rule, the illegal termination of an officer or other employee of a private employer falls under the jurisdiction of the Labor Arbiter of the National Labor Relations Commission (NLRC). This is so provided in Article 217 (a) 2 and 4:

Who are considered
“corporate officers”?

The rule is that officers not named in the by-laws are not considered corporate officers. In Easycall Communications Phil., Inc. v. King,[3] the Supreme Court said that an “office” is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee occupies no office and generally is employed not by the action of the directors or stockholders but the managing officer of the corporation who also determines the compensation to be paid to such employee. The respondent in Easycall was appointed vice-president for nationwide expansion by petitioner’s general manager, not by the board of directors. It was also the general manager who determined the compensation package of respondent. Thus, respondent was declared to be an employee, not a corporate officer. For this reason, the jurisdiction of the NLRC over the dispute was upheld.

Earlier, in Nacpil v. Intercontinental Broadcasting Corp.,[4] the petitioner argued that he was not a corporate officer of respondent IBC but an employee thereof since he had not been elected nor appointed as Comptroller and Assistant Manager by IBC’s Board of Directors. He pointed out that he had actually been appointed as such by the Company’s General Manager. In support of his argument, petitioner underscored the fact that IBC’s by-laws do not include the position of Comptroller in its roster of corporate officers. He, therefore, contended that his dismissal was a controversy falling within the jurisdiction of the NLRC.

In rejecting petitioner’s argument, the Supreme Court declared that even assuming that he was appointed by the General Manager, such appointment was subsequently approved by the Board of Directors of IBC. That the position of Controller is not expressly mentioned among the officers of IBC in its by-laws is of no moment because the Board of Directors of IBC is empowered under Section 25 of the Corporation Code and under the Corporation’s by-laws to appoint such other officers as it may deem necessary. Consequently, since petitioner’s appointment as Comptroller required the approval and formal action of IBC’s Board of Directors to become valid, it is clear that petitioner is a corporate officer whose dismissal may be the subject of a controversy cognizable by the SEC under Section 5 (c) of PD 902-A (now by the RTC under RA 8799) which includes and covers controversies involving both the election and appointment of corporate directors, trustees, officers, and managers. Had petitioner been an ordinary employee, such board action would not have been required.

In Nacpil, petitioner also argued that the nature of his functions is recommendatory thereby making him a mere managerial officer. But the Supreme Court disagreed even as it held that the relationship of a person to a corporation, whether as officer or agent or employee is not determined by the nature of the services rendered but by the incidents of the relationship as they actually exist.

Then came the case of Matling Industrial and Commercial Corp. v. Coros,[5] involving petitioner’s Vice President for Finance and Administration, who sued the petitioner for illegal dismissal  before the Labor Arbiter of the NLRC. Petitioner moved to dismiss the complaint, raising the ground that the action pertained to the jurisdiction of the SEC (at that time) as the respondent was a member of petitioner’s Board of Directors aside from being its Vice-President for Finance and Administration before his termination. The Labor Arbiter granted the petitioner’s motion to dismiss but the NLRC reversed, saying that the complaint for illegal dismissal was properly cognizable by the Labor Arbiter, not by the SEC, because he was not a corporate officer, even though high ranking, not being among the positions listed in petitioner’s Constitution and By-Laws. The Court of Appeals sustained the NLRC.

The case then reached the Supreme Court which was asked to  resolve whether or not the respondent was a corporate officer of petitioner Matling. The resolution of the issue would decide whether the Labor Arbiter or the RTC had jurisdiction over the complaint for illegal dismissal.

Before the High Tribunal, petitioner Matling asserted that the position of Vice President for Finance and Administration was a corporate office, having been created by Matling’s President pursuant to its by-laws. Petitioner further contended that the power to create corporate offices and to appoint the individuals to assume the offices was delegated by the Board of Directors to its President through a particular by-law and that any office the President created, like the position of respondent, was as valid and effective a creation as that made by the Board of Directors, making the office a corporate office. In justification, petitioner cited Tabang v. NLRC,[6] which held that “other offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional officers as may be necessary.”

Respondent countered, among others, that petitioner’s by-laws did not list his position, namely, Vice-President for Finance and Administration, as one of the corporate offices and that the corporate officers contemplated in the phrase “and such other officers as may be provided for in the by-laws” found in Section 25 of the Corporation Code should be clearly and expressly stated in the by-laws.

The Supreme Court ruled in favor of respondent and held that in the context of PD 902-A, corporate officers are those officers of a corporation who are given that character either by the Corporation Code or by the Corporation’s By-Laws. Section 25 of the Corporation Code clearly enumerates who these corporate officers are: (1) President; (2) Secretary; (3) Treasurer; and (4) such other officers as may be provided for by the by-laws.[7] The phrase “such other officers as may be provided for in the by-laws “was clarified by the Court in Matling.[8] Speaking through Mr. Justice Lucas P. Bersamin, the Court declared:

The Court, in Matling, likewise abandoned its earlier rulings in Tabang[11] and Nacpil[12], saying:

Subsequently, in Marc II Marketing v. Joson,[15] which involved the termination of a General Manager,  the Court confirmed and reiterated that the interpretation of Section 25 of the Corporation Code laid down in Matling safeguards the constitutionally enshrined right of every employee to security of tenure. To allow the creation of a corporate officer position by a simple inclusion in the corporate by-laws of an enabling clause empowering the board of directors to do so can result in the circumvention of that constitutionally well-protected right. Hence, it restated the ruling in Matling that the Board of Directors has no power to create other corporate offices without first amending the corporate by-laws so as to include therein the newly created corporate office. Though the Board of Directors may create appointive positions other than the positions of corporate officers, the persons occupying such positions cannot be viewed as corporate officers under Section 25 of the Corporation Code. In other words, unless and until the petitioner’s by-laws are amended for the inclusion of General Manager in the list of its corporate officers, such position cannot be considered as a corporate office within the realm of Section 25 of the Corporation Code.[16]

By way of conclusion, while a corporate officer may be ousted from office at will, i.e., for a good reason, a poor reason, or no reason at all, an ordinary or non-corporate employee, however, may be terminated solely for just or authorized cause. Only last month, in  an en banc ruling in SME Bank, Inc. v. de Guzman[17] our Supreme Court reminded everyone that security of tenure is a constitutionally guaranteed right and that employees may not be terminated from their employment except for just or authorized causes under the Labor Code and other pertinent laws. Indeed, in termination cases, the burden of proving just and valid cause for dismissing an employee from his employment rests upon the employer. The latter’s failure to discharge that burden would necessarily result in a finding that the dismissal is unjustified.[18] But, as already seen, any question relating to an intra-corporate dispute can be resolved only by the regular court. E contra, a case arising out of or in the course of employer-employee relationship should be decided only by the appropriate labor agency. To determine, therefore, the issue of jurisdiction, i.e., whether the case belongs to the RTC or the NLRC, the status or relationship of the parties and the nature of the question that is the subject of the controversy must be closely examined.

The piano is a musical instrument having wire strings that sound when struck by felt-covered hammers operated from a keyboard. The modern standard piano contains 88 black and white keys.[1] The word piano is a shortened form of pianoforte, the Italian word for the instrument. The musical terms “piano” and “forte” mean “quiet” and “loud”, and in  this  context refers to the variations in volume of sound the instrument produces in response to a pianist’s touch on the keys: the greater a key press’s velocity, the greater the force of the hammer hitting the strings, and the louder the note produced.[2]

Only about three (3) months ago, our Supreme Court decided a case involving a pianist who filed a complaint for illegal dismissal and other money claims against a well-known hotel in Manila.[3] That case presented an opportunity for the court to reiterate the settled and established rule in determining the existence of an employer-employee relationship.

This paper will examine the aforementioned topic with particular emphasis on some cases involving musicians in our entertainment industry.  To be sure, the test to determine the existence of employer-employee relationship presents a complicated process. There is no uniform test prescribed by law. Neither is there any particular form of proof required to prove its existence. There are, however, certain elements which may be used to determine the existence of employer-employee relationship and these were laid down for the first time by our Supreme Court in the precedent-setting case of Viaña v. Al-lagadan^[4] in this manner:

The so-called four-fold test to determine the existence of an employer-employee relationship has since been adopted in subsequent jurisprudence.^[5]

The most common standards to determine the existence of the employment relationship are the first three (3) tests: (1) the selection and engagement of the employee; (2) the payment of wages; and (3) the exercise of the power of dismissal over the employee. But it is the fourth test, i.e., the “control test,” which constitutes the most important index of the existence of the employer-employee relationship. This particular test will tell us whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished. In fact, our Supreme Court has relied on this particular element as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship.^[6] In other words, an employer-employee relationship is present where the person for whom the services are performed reserved the right to control not only the end to be achieved but also the means to be used in reaching such end.^[7]  Conversely, absent the power to control the employee with respect to the means and methods by which his work was to be accomplished, there is no employer-employee relationship between the parties.^[8]

Having briefly reviewed the four-fold test, let us now take a look at some early cases on the subject that originated from the world of Philippine entertainment.

In the case of Josefa Vda. de Cruz v. The Manila Hotel,^[9]  it was held that one who is engaged to furnish music, according to his own manner and method, free from the control and direction of his employer in all matters connected with the performance of the service, except as to the result of the work, and for a certain price daily, is an independent contractor.  In that case, the popular bandleader, Tirso Cruz, had a contract with the Manila Hotel whereby the former agreed to furnish the latter the services of his orchestra, consisting of 15 musicians “from 7:30 p.m. to closing time daily.”  Mr. Cruz, who was later on substituted by his widow after his death, sought to recover separation gratuity from the Manila Hotel upon management’s advice that the hotel would be leased to Bay View Hotel.  Cruz and his musicians claimed the gratuity but the Manila Hotel management denied their claim saying they were not its employees.  Consequently, they filed a case with the trial court.  The Manila Court of First Instance dismissed the case and the Supreme Court upheld its ruling for the reason that no employer-employee relationship existed between the hotel and Mr. Cruz.

The following findings of the Supreme Court are most instructive:

A different decision, however, was arrived at in the case of LVN Pictures, Inc. v. Philippine Musicians Guild^[11] involving a group of musicians hired by a motion picture company for the purpose of making music recordings for title music, background music, musical numbers, finale music and other incidental music. The musicians claimed that they are employees who formed a union that sought to be recognized as the exclusive bargaining agent of all musicians working with the said company. On the other hand, LVN Pictures denied that they have any musicians as employees and alleged that the musical numbers in the films of the company are furnished by independent contractors. The lower court rejected this pretense and sustained the theory of the union that the company exercised control over the musicians and that without the music, the motion picture would be incomplete.

In support of its position that there was no employer-employee relationship, LVN invoked the case of Vda de Cruz v. The Manila Hotel.^[12]  This was, however, rejected by the Supreme Court which found the Cruz case inapplicable.

According to the High Tribunal:

The next case of Torillo v. Leogardo[14] centers on Valentino Torillo, alias “Lady Valerie”, who was an entertainer in the 1970’s and 1980’s. Petitioner Torillo was employed as an organist by the private respondent Aberdeen Court with a daily compensation of P115.00 for five hour work a day. On July 2, 1978, he invited his co-employees for a night out in his hometown in Rosario, Cavite in celebration of his birthday. Private respondent objected to such activity, requesting its employees, if possible, to refrain from attending the affair because the following day was a working day. Despite private respondent’s objections, petitioner pushed through with his birthday party.

Petitioner reported for work the next day, July 3. On July 4, 1978, private respondent, through its Floor Manager, informed petitioner that he was being dismissed from his employment effective that same day for having defied private respondent’s order. Petitioner thereafter filed a complaint for illegal dismissal that, after 13 years, was resolved in favor of Lady Valerie by the Court which ordered the payment of separation pay, backwages and other monetary benefits. Unlike the bandleader Tirso Cruz, Lady Valerie was found to be an employee of Aberdeen Court primarily because the evidence adduced met the requirements of the four-fold test, most specially in respect of the power of dismissal.

The respondent in Legend Hotel, Hernani Realuyo, also known as Joey Roa, averred that he had worked as a pianist at the Legend Hotel’s Tanglaw Restaurant from September 1992 with an initial rate of P400.00/night that was given to him after each night’s performance; that his rate had increased to P750.00/night; and that during his employment, he could not choose the time of performance, which had been fixed from 7:00 pm to 10:00 pm for three to six times a week. He added that the Legend Hotel’s restaurant manager had required him to conform with the venue’s motif; that he had been subjected to the rules on employees’ representation checks and chits, a privilege granted to other employees; that on July 9, 1999, the management had notified him that as a cost-cutting measure his services as a pianist would no longer be required effective July 30, 1999; that he disputed the excuse, insisting that Legend Hotel had been lucratively operating as of the filing of his complaint; and that the loss of his employment made him bring his complaint.

In its defense, petitioner hotel denied the existence of an employer- employee relationship with respondent, insisting that he had been only a talent engaged to provide live music at Legend Hotel’s Madison Coffee Shop for three hours a day on two days each week; and stated that the economic crisis that had hit the country constrained management to dispense with his services.

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties had no employer-employee relationship. The LA explained:

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31, 2001.

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.
On February 11, 2002, the CA set aside the decision of the NLRC. According to the second highest court of the land:

Before the Supreme Court, one of the issues raised was whether or not respondent was an employee of petitioner. And anterior to announcing its adjudication, the Court had this to say:

“The issue of whether or not an employer-employee relationship existed between petitioner and respondent is essentially a question of fact. The factors that determine the issue include who has the power to select the employee, who pays the employee’s wages, who has the power to dismiss the employee, and who exercises control of the methods and results by which the work of the employee is accomplished. Although no particular form of evidence is required to prove the existence of the relationship, and any competent and relevant evidence to prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest on substantial evidence, which is that amount of relevant evidence that a reasonable mind might accept as adequate to justify a conclusion.”

Thereafter, it declared that respondent was undeniably employed as a pianist in petitioner’s coffee shop/restaurant from September 1992 until his services were terminated on July 9, 1999. This ruling was based on a review of the following facts and circumstances: first of all, petitioner actually wielded the power of selection at the time it entered into the service contract dated September 1, 1992 with respondent. This is true, notwithstanding petitioner’s insistence that respondent had only offered his services to provide live music at petitioner’s Tanglaw Restaurant, and despite petitioner’s position that what had really transpired was a negotiation of his rate and time of availability. The power of selection was firmly evidenced by, among others, the express written recommendation dated January 12, 1998 by petitioner’s restaurant manager for the increase of his remuneration.

The Court stated further that petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that defines and governs an employment relationship, whose terms are not restricted to those fixed in the written contract, for other factors, like the nature of the work the employee has been called upon to perform, are also considered. The law affords protection to an employee, and does not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be ignored when the employer utilizes the stipulation to deprive the employee of his security of tenure. The inequality that characterizes employer-employee relations generally tips the scales in favor of the employer, such that the employee is often scarcely provided real and better options.

The Tribunal likewise disregarded petitioner’s claim that because respondent received talent fees—and not wages—for his services, the latter was not an employee. Making short shrift of this argument, the Court declared that the remuneration denominated as talent fees was fixed on the basis of his talent and skill and the quality of the music he played during the hours of performance each night, taking into account the prevailing rate for similar talents in the entertainment industry. Citing Article 97 (f) of the Labor Code[15], it clarified that respondent’s remuneration, even though denominated as talent fees, “was still considered as included in the term wage in the sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration.”

The Court then proceeded to analyze the following factors relied upon by petitioner to prove that it did not exercise the power of control over respondent:

(a) respondent could beg off from his nightly performances in the restaurant for other engagements; (b) he had the sole prerogative to play and perform any musical arrangements that he wished; (c) although petitioner, through its manager, required him to play at certain times a particular music or song, the music, songs, or arrangements, including the beat or tempo, were under his discretion, control and direction;  (d) the requirement for him to wear barong Tagalog to conform with the Filipiniana motif of the venue whenever he performed was by no means evidence of control; (e) petitioner could not require him to do any other work in the restaurant or to play the piano in any other places, areas, or establishments, whether or not owned or operated by petitioner, during the three hour period from 7:00 pm to 10:00 pm, three to six times a week; and (f) respondent could not be required to sing, dance or play another musical instrument.

But the Court was not persuaded as a review of the records indicated that respondent did perform his work as a pianist under petitioner’s supervision and control. Specifically, petitioner’s control of both the end achieved and the manner and means used to achieve that end was demonstrated by the following:

a.         He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00 pm, three to six times a week;

b.         He could not choose the place of his performance;

c.         The restaurant’s manager required him at certain times to perform only Tagalog songs or music, or to wear barong Tagalog to conform to the Filipiniana motif; and

d.         He was subjected to the rules on employees’ representation check and chits, a privilege granted to other employees.

Our Supreme Court has taken judicial notice of the fact that the question as to whether an employer-employee relationship exists in a certain situation continues to bedevil the courts.[16] Happily, there is a useful set of criteria, namely, the four-fold test on which we can rely. This paper has attempted to discuss the fascinating subject of employer-employee relationship with particular emphasis on cases involving musicians in our entertainment industry. The ruling in Legend Hotel, insofar as it reiterates and reaffirms the four-fold test that was applied in the earlier cases of Vda. de Cruz,[17] LVN Pictures, Inc.[18] and Torillo,[19] indicates that the Supreme Court has consistently adhered to what it had stated with clarity as far back as 56 years ago in the case of Viaña v. Al-lagadan.[20] The later decisions have been more emphatic, demonstrating fealty and fidelity to the four-fold test that has been so unequivocally set forth.

Oliver Wendell Holmes, Jr. once defined “law” as a prediction of what the court will do. The prediction is based on precedents. The governing principle, which has given consistency and stability to the law, is the principle of stare decisis (following precedents and not disturbing what has been settled). In this connection, it is very propitious and encouraging that in her keynote speech at a testimonial dinner tendered in her honor by the University of the Philippines Law Alumni Association last September 14, 2012, Madam Chief Justice Maria Lourdes A. Sereno assured our countrymen that she would strive to promote judicial stability for the next 18 years. She also said that another top priority will be to improve the quality of judicial actions, particularly regarding speed, predictability and rationality of decisions. This certainly augurs well for us and  we have reason to anticipate jurisprudential tranquility.

Francis V. Sobreviñas**

It has been said that the test of a good voluntary arbitration award is its unqualified acceptance by the parties to the case. Acceptance can be inferred when no appeal is taken by either party during the prescribed period of ten (10) calendar days from the release of the decision of the Voluntary Arbitrator (VA).This also means that both the complainant and respondent agree to comply with the terms of the award without waiting for the coercive persuasion of a writ of execution. Unfortunately, not all the parties abide by the VA’s decision even if they have so stipulated in the Submission Agreement[1] and notwithstanding that Article 262-A of the Labor Code appears to place the decision of the VA beyond the reach of judicial authority when it states that the decision or award of a VA shall be final and executory after 10 days from receipt thereof by the parties. In several landmark cases like Oceanic Bic Division (FFW) v. Romero[2] and Mantrade/FMMC Division Employees & Workers Union v. Bacungan,[3] however, the Supreme Court held that –

Prior to 1995, the mode of appeal from the decision of the VA was generally through a petition for certiorari under Rule 65 of the Rules of Court. But by virtue of the ruling in Luzon Development Bank v. Association of Luzon Development Bank Employees,[5] the Court ordained that the Court of Appeals (CA) had concurrent jurisdiction over an appeal from such decision. Hence, a petition questioning the decision or award of a VA was remanded to the CA for proper disposition. Pursuant to the 1997 Rules of Civil Procedure, the award, judgment, final order or resolution of a VA is appealable to the CA through a petition for review under Rule 43.

With the great advancements made in the field of communications and information technology, today’s VA realizes the urgency to keep abreast of recent developments in labor relations law and jurisprudence. Indeed, one of his responsibilities is to maintain and upgrade the professional standards of the profession by being up to date with principles, practices and developments that are relevant to the field of arbitration practice. To inform and aid our colleagues in the performance of their duties as practitioners and advocates of voluntary arbitration, this paper will examine a case decided only last November 17, 2010 that tackled the issue of procedure in voluntary arbitration.

On February 17, 2003, the Secretary of Labor and Employment signed Department Order No. 40-03 (DO 40-03), Series of 2003. Published in the March 1, 2003 issue of Today, this particular issuance, which amends the Implementing Rules of Book V of the Labor Code of the Philippines, took effect on March 15, 2003.[6] Section 7, Rule XIX of DO 40-03 provides for the finality of the award or decision of the VA, to wit:

On March 7, 2005, the Secretary approved the Revised Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings. Published on July 4, 2005 in the National Administrative Register, said guidelines took effect on July 19, 2005.[7]

We find the following provisions in Rule VII of the Revised Guideline:

From the time that DO 40-03 and the Revised Guidelines took effect, the procedure invariably followed by a party aggrieved by the decision of a VA was to forego the filing of a motion for reconsideration and proceed, instead, to the CA on a Petition for Review on Certiorari under Rule 43 of the Rules of Court.

In one case[8] decided following the issuance of DO 40-03 and the Revised Guidelines, the CA acknowledged that “Section 7, Rule XIX of Department Order No. 40-03, Series of 2003 is explicit that the decision of a voluntary arbitrator cannot be the subject of a motion for reconsideration.”  Much later, the appellate court, in Malayan Insurance Company, Inc. v. Malayan Employees Association-Federation of Free Workers (FFW),[9] was called upon to make a distinction between a motion for clarification and a motion for reconsideration filed with the VA and, in the process, ruled that while the former pleading is permissible the latter is proscribed for being a prohibited pleading. Thus said the second highest court of the land:

In the very recent case of Teng v. Pahagac,[11]  the VA rendered a decision declaring that no employer-employee relationship existed between the petitioner and the respondents. The respondents received the VA’s decision on June 12, 2003. They filed a motion for reconsideration, which was denied on July 8, 2003. The VA reasoned out that Section 6, Rule VII of the 1989 Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings (1989 Procedural Guidelines) does not provide the remedy of a motion for reconsideration to the party adversely affected by the Voluntary Arbitrator’s order or decision. According to the VA, an award or decision of the VA becomes final and executory after ten (10) calendar days from receipt of copies of the award or decision by the parties.[12]

On July 21, 2003, the respondents elevated the case to the CA.[13] In its decision of September 21, 2004, the CA reversed the VA’s decision after finding sufficient evidence showing the existence of employer-employee relationship.

The petitioner moved to reconsider the CA’s decision, but the latter denied the motion. He, thereafter, filed a Petition for Review on Certiorari[14] with the Supreme Court alleging, inter alia, that the VA’s decision is not subject to a motion for reconsideration. Before the highest court of the land, Teng contended that the VA’s decision is not subject to a motion for reconsideration in the absence of any specific provision allowing this recourse under Article 262-A of the Labor Code. He cited the 1989 Procedural Guidelines which, as the VA declared, do not provide the remedy of a motion for reconsideration. Petitioner claimed that after the lapse of 10 days from his receipt, the VA’s decision becomes final and executory unless an appeal is taken. He likewise argued that when the respondents received the VA’s decision on June 12, 2003, they had only 10 days, or until June 22, 2003, to file an appeal. Therefore, as respondents opted instead to move for reconsideration, the 10-day period to appeal continued to run. Hence, the VA’s decision had already become final and executory by the time respondents assailed it before the CA on July 21, 2003.

Our Supreme Court[15] denied the petition for lack of merit, deciding that petitioner’s allegation that the VA’s decision had become final and executory by the time the respondents filed an appeal with the CA was erroneous. Consequently, it held that the respondents seasonably filed a motion for reconsideration of the VA’s decision and the VA erred in denying the said motion on the ground that no motion for reconsideration is allowed. In finding for the respondents, the Court emphasized that Article 262-A does not preclude the filing of a motion for reconsideration of the VA’s decision.[16]  Initially expressing surprise that neither the VA nor petitioner cited DO 40-03 and the 2005 Procedural Guidelines as authorities for their cause “considering that these were the governing rules while the case was pending and these directly and fully supported their theory”, the Court thereafter quickly affirmed that “(h)ad they done so, their reliance on the provisions would have nevertheless been unavailing for reasons we shall now discuss.”

And discuss the Supreme Court did the importance of filing a motion for reconsideration as “the more appropriate remedy in line with the doctrine of exhaustion of administrative remedies.”

Significantly, the Court announced that Article 262-A of the Labor Code does not prohibit the filing of a motion for reconsideration. As a matter of fact, it asserted that in a number of decisions promulgated earlier, the filing of such a motion was allowed. In the Court’s own words:

Then the Court continued to analyze the motion for reconsideration as an essential element of the doctrine of exhaustion of administrative remedies, thus:

The Tribunal likewise emphasized that in the exercise of its power to promulgate implementing rules and regulations, an implementing agency, such as the Department of Labor and Employment, is restricted from going beyond the terms of the law it seeks to implement; it should neither modify nor improve the law. The agency formulating the rules and guidelines cannot exceed the statutory authority granted to it by the legislature. For this reason:

As already seen, the petitioner in Teng[21] boldly and forcefully maintained that the VA’s decision is not subject to a motion for reconsideration in the absence of any specific provision allowing this recourse under Article 262-A of the Labor Code. And even more critically, the Court itself conceded that DO 40-03 and the Revised Procedural Guidelines are the authorities for petitioner’s cause in the legal dispute. In other words, an actual controversy calling for the exercise of judicial power was brought up in this case. Now then, while a pronouncement was made that the agency formulating the rules and guidelines cannot exceed the statutory authority granted to it by the legislature and that the filing of a motion for reconsideration of the VA’s decision is a “condition precedent” to the institution of a petition for certiorari with the CA via Rule 43 to challenge the VA’s ruling, the Court did not declare the said rules unlawful or illegal albeit a question concerning the validity thereof was squarely  raised before it.

The writer submits that a clear and categorical statement should have been made by the Court that the rules in question are invalid. This is so because it recognized at once that petitioner invoked said rules and sought the determination of their legality. Had it done so, the Court, by tradition and in our system of judicial administration, would doubtless have provided guidance and enlightenment to everyone, nay, stability in the law which is eminently to be desired. The view that definitive action ought to have been taken because it is indispensable for an effective and expeditious administration of justice can better be appreciated if we note that under DO 40-03, there is an analogous rule in respect of certification election cases, stating  that  the decision of the Secretary of Labor and Employment shall be final and executory after ten (10) days from receipt thereof by the parties and that it shall not be subject of a motion for reconsideration. The parallel provision reads as follows:

In the case of Chris Garments Corporation v. Sto. Tomas,[23] the Supreme Court recognized the validity of the aforequoted rule contained in DO 40-03, which prohibits the filing of a motion for reconsideration. The Court stated:

In this case, the Decision dated January 18, 2005 of the Secretary of Labor and Employment was received by petitioner on January 25, 2005. It would have become final and executory on February 4, 2005, the tenth day from petitioner’s receipt of the decision. However, petitioner   filed a petition for certiorari with  the  Court of Appeals on even date. Clearly, petitioner availed [itself] of the   proper  remedy  since  Department  Order  No. 40-03 explicitly prohibits the filing of a motion for reconsideration. Such motion becomes dispensable and not at all necessary.”[24]

Based on the foregoing, the first question that comes to mind is what effect will the Teng doctrine, prohibiting the filing of a motion for reconsideration, have on the extant Section 21, Rule VIII, of DO 40-03 which was upheld in Chris Garments Corporation?  How should a VA react when, upon receipt of his decision, the aggrieved party submits a motion for reconsideration? What stance will he assume when the prevailing party, in opposition to the motion for reconsideration, interposes the argument that in both the cases of Imperial Textile Mills[25] and Coca-Cola Bottlers Phil., Inc. Sales Force Union-PTGWO-Balais[26], the Court simply stated that the VA’s decision “MAY” still be reconsidered on the basis of a motion for reconsideration filed within ten (10) days from receipt thereof? What is he to make of the assertion that Article 262-A does not authorize the filing of any motion for reconsideration of the VA’s decision and that even the Court itself admitted in Teng  “the absence of a categorical language in Article 262-A” providing for the filing of such a motion?

By way of conclusion, it is of paramount importance not only to VAs and advocates of voluntary arbitration, in particular, but also the public, in general, that the rule on the filing of a motion for reconsideration before going to the CA be settled absolutely and completely as all laws and regulations “relate to the people in general albeit there are some that do not apply to them directly”[27]. As a matter of public policy and sound practice, this rule should be decisively determined to avoid confusion between and among the parties to a labor controversy. For this reason, it is recommended, therefore, that Congress take the appropriate legislative action by enacting a law that would make the language of Article 262-A of the Labor Code more clear and precise in relation to the filing of a motion for reconsideration of the VA’s decision. For its part, the Department of Labor and Employment may take a closer look at DO 40-03 and the Revised Guidelines to make them hew closely to current statutes, decisional laws or jurisprudential policies.  Finally, we can hope that the Supreme Court, as the final arbiter of all legal disputes, will reconcile conflicting judicial decisions or abrogate outdated ones by a contrary but specific and unambiguous ruling depending on the facts and circumstances involved.[28]

Finding for the PBA, the Supreme Court stated that the element of control is missing in this case, making the referee an independent contractor and not an employee of PBA. According to the Tribunal, the aforementioned stipulations hardly demonstrate control over the means and methods by which Mr. Bernarte performs his work as a referee officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when he will blow the whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the professional basketball league. As correctly observed by the Court of Appeals, “how could a skilled referee perform his job without blowing a whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?”

In ruling for the PBA, the Supreme Court further called attention to other circumstances that point to petitioner’s being an independent contractor:

In the 2007 Bar Examinations in Labor Law, the following questions were asked:

“How sacrosanct are statements/data made at conciliation proceedings in the Department of Labor and Employment? What is the philosophy behind your answer?”

The foregoing questions were answered by our Supreme Court, initially, in the twin cases of Nissan Motors Philippines, Inc. v. Secretary of Labor and Employment and Bagong Nagkakaisang Lakas sa Nissan Motors NMPI-OLALIA-KMU v. Court of Appeals[1] and, subsequently, in the very recent case of Pentagon Steel Corp. v. Court of Appeals decided only last June 26, 2009.[2]

In those two labor cases, the highest court of the land had occasion to apply and interpret Article 233 of the Labor Code which prohibits the use in evidence of confidential information given during conciliation proceedings. The said statutory provision reads as follows:

The petitioner in Nissan Motors assailed the ruling of the Court of Appeals insofar as it affirmed, among others, the award by the Secretary of Labor and Employment of certain economic benefits to the Company’s rank-and-file workers. While the Supreme Court found to be proper the grant of such benefits as transportation allowance, 14^th month pay, seniority pay, separation pay and the effectivity of the new collective bargaining agreement (CBA), it modified the annual salary increases for the reason that the award was based on confidential information given in the course of conciliation proceedings.

According to the Court:

The doctrine enunciated in Nissan Motors was further distilled in Pentagon Steel Corp.[5], another labor case, where the petitioner imputed grave abuse of discretion against the Court of Appeals in basing its decision on the proceedings that transpired when the parties were negotiating for a compromise agreement during the preliminary conference of the case. More particularly, the petitioner contended that the Court of Appeals cannot use the parties’ actions and/or agreements during the negotiations for a compromise agreement as basis for the conclusion that the respondent was illegally dismissed because an offer of compromise is not admissible in evidence under Section 27, Rule 130 of the Rules of Court.

The High Court agreed with the petitioner but for a different reason. Speaking through Mr. Justice Arturo D. Brion, the Tribunal held that the appellate court erred not so much because it admitted an offer of compromise in violation of Section 27, Rule 130 of the Rules of Court but because it ignored the clear mandate of Article 233 of the Labor Code.[6]

Thus said the Court:

It then continued to mention the two-fold justification for the exclusionary rule, thus:

It is noteworthy that under the Revised Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings, the voluntary arbitrator must treat all significant aspects of the conciliation proceedings as confidential in nature unless confidentiality is waived by the parties.[8]And pursuant to the Code of Professional Responsibility for Accredited Voluntary Arbitrators of Labor Management Disputes, the voluntary arbitrator may conciliate or mediate to aid the parties in reaching a voluntary settlement of the dispute but he shall treat all significant aspects of an arbitration proceeding with absolute confidentiality, unless this requirement is waived by both parties.[9]

It is submitted that the two recent cases of Nissan Motors and Pentagon Steel are of sufficient significance as they throw light upon a very important aspect in the realm of labor law, particularly the treatment of privileged communication in conciliation, mediation and voluntary arbitration. Indeed, it cannot be gainsaid that voluntary arbitrators, while in the exercise of the creative role that their function demands, will find guidance in the aforementioned rulings.

To be accepted by the parties, the decision of the voluntary arbitrator must be in accordance with law. This means that the quasi-judicial officer who obtains statements/data from the parties in the course of conducting conciliation and/or mediation conferences should treat them as confidential information.[10] When the parties accept the decision, not resentfully, but cordially and willingly, the process of voluntary arbitration as a distinct, effective and superior alternative to other means of resolving labor disputes will be boosted all the more.