Title
Temic Automotive Phil., Inc. vs. Temic Automotive Phil., Inc. Employees Union-FFW
Case
G.R. No. 186965
Decision Date
Dec 23, 2009
Temic outsourced warehouse tasks to forwarders; Union claimed their employees should be absorbed. SC upheld outsourcing as valid management prerogative, ruling forwarders' employees distinct and not regular Temic staff.

Case Digest (G.R. No. 186965)
Expanded Legal Reasoning Model

Facts:

  • Parties and Background
    • The petitioner, Temic Automotive Philippines, Inc., is a corporation engaged in manufacturing electronic brake systems and comfort body electronics for automotive vehicles.
    • The respondent, Temic Automotive Philippines, Inc. Employees Union-FFW, is the exclusive collective bargaining agent representing the company’s regular rank-and-file employees.
  • Collective Bargaining Agreement and Warehouse Operations
    • On May 6, 2005, the petitioner and the union executed a Collective Bargaining Agreement (CBA) covering the period from January 1, 2005, to December 31, 2009.
    • The petitioner’s operations include various departments; among these is the warehouse department, which is subdivided into four sections: receiving, raw materials, indirect, and finished goods.
    • Union members perform functions as clerks, material handlers, system encoders, and general clerks in these sections.
  • Contracting Out and the Outsourcing Arrangement
    • Since 1998, the petitioner has contracted out some of the warehouse work—specifically in the receiving and finished goods sections—to three independent forwarders: Diversified Cargo Services, Inc.; Airfreight 2100; and Kuehne & Nagel, Inc.
    • The forwarders’ employees, who also hold positions as clerks, material handlers, and system encoders, share the same work area, use the same company equipment, and are involved in interrelated processes such as receiving deliveries, recording inventories, generating bar codes, and issuing spare parts.
  • Dispute and Grievance Arising from the Outsourcing
    • A grievance surfaced when the union questioned whether the functions carried out by the forwarders’ employees were the same as those performed by the regular rank-and-file company employees covered by the CBA.
    • The union demanded that these forwarders’ employees be absorbed into the petitioner’s regular workforce and included within the collective bargaining unit.
    • The petitioner, invoking its management prerogative, maintained that the outsourcing arrangement was a legitimate business decision aimed at achieving greater efficiency and that the functions performed by the forwarders’ employees were distinct from those of its regular employees.
  • Voluntary Arbitration Proceedings and Submission of Evidence
    • Unable to resolve the dispute through internal grievance machinery, the parties submitted the matter to voluntary arbitration, choosing Atty. Roberto A. Padilla as the arbitrator.
    • The parties delineated the issues for arbitration:
1) Whether the petitioner validly contracted out the forwarding, packing, loading, and ancillary clerical activities; and 2) Whether the functions performed by the forwarders’ employees are identical to those performed by the regular employees covered by the bargaining unit.
  • The union submitted evidence including a manpower complement of the warehouse department and several affidavits from both regular company employees and forwarders’ employees supporting the claim that the functions are similar.
  • In contrast, the petitioner provided affidavits from its warehouse manager and section head, emphasizing the differences in functions and stressing management’s prerogative.
  • The Voluntary Arbitration Decision and Court of Appeals Resolution
    • On May 1, 2007, the voluntary arbitrator ruled that:
1) Forwarding, defined as the arrangement of transport and handling of shipping documentation for export, was a legitimate, universally accepted business practice; and 2) However, the petitioner exceeded allowable limits by having forwarders’ employees perform functions (clerical, material handling, and encoding) that were identical to those of regular company employees, thus blurring the lines between outsourced services and company operations.
  • Consequently, the arbitrator declared that such forwarders’ employees should be treated as regular company employees, entitled to all corresponding benefits and security of tenure.
  • The Court of Appeals (CA), in its October 28, 2008 decision, affirmed the arbitration decision and dismissed the petitioner’s petition for review, holding that:
1) Decisions of voluntary arbitrators on facts and law, acting within their authority, are binding on the parties; and 2) The failure to clearly delineate the functions between the company’s employees and the forwarders’ employees necessitated treating the latter as regular employees.
  • Petition Before the Supreme Court
    • The petitioner filed a petition for review under Rule 43, challenging the CA ruling and the voluntary arbitrator’s decision.
    • The petitioner argued that:
1) The arbitration decision improperly extended its jurisdiction by addressing issues not expressly submitted by the parties, particularly affecting the forwarders—third parties not originally part of the arbitration; and 2) The purported similarities between the functions of forwarders’ employees and regular employees did not warrant their absorption into the bargaining unit, as the jobs were performed under separate contractual arrangements.

Issues:

  • Validity of Contracting Out and Management Prerogative
    • Whether the petitioner’s decision to contract out the services involving forwarding, packing, loading, and clerical activities is a valid exercise of management prerogative for greater efficiency and economy.
  • Equivalence of Functions
    • Whether the functions performed by the forwarders’ employees are essentially the same as those performed by the regular rank-and-file employees covered by the bargaining unit under the existing CBA.
  • Jurisdiction of the Voluntary Arbitration
    • Whether the voluntary arbitrator had the authority to decide on employment status matters affecting the forwarders’ employees who were not parties to the arbitration process.
    • Whether the arbitration’s ruling can bind third-party employees and affect the scope of the collective bargaining unit.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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