Case Summary (G.R. No. 207511)
Origin of the Labor Dispute
The controversy arose from alleged "wage distortions" caused by Republic Act No. 6727, which became effective on June 5, 1989. The IBM union demanded correction of these distortions in wages, explicitly invoking Section 4(d) of RA 6727, which mandates voluntary settlement and compulsory arbitration in case of deadlock arising from wage distortions within an establishment. The union contended that SMC ignored this demand and instead offered a minimal across-the-board wage increase, which was rejected by the union after attempts at amicable settlement.
Workers’ Response and Change in Work Schedule
Starting October 16, 1989, around 800 daily-paid workers at SMC’s Polo Brewery plant, members of IBM, refused to render overtime services by observing a temporary eight-hour work shift, deviating from the long-standing schedule involving ten to fourteen-hour shifts with automatic overtime. The union justified this as a legitimate protest to compel correction of wage distortions caused by RA 6727’s implementation, asserting that SMC failed to implement proper wage adjustments for newly-hired employees.
Alleged Impact on SMC’s Production and Revenue
SMC claimed the change in work schedules caused significant work disruption and a substantial decline in production efficiency, resulting in losses of over 2 million cases of beer, amounting to about P174 million in sales, P48 million in revenue, and corresponding government excise tax revenue loss. Despite measures such as instituting a third shift and engaging with the union, the work slowdown persisted.
Legal Proceedings Before the NLRC
SMC filed complaints before the NLRC Arbitrations Branch to declare the slowdown illegal and to terminate employment of union officers and shop stewards, followed by a request to enjoin the slowdown and for damages. The NLRC, after receiving ex parte evidence from SMC, issued a temporary restraining order (TRO) for twenty days, directing the union members to cease refusal to comply with the established work schedule.
Union's Petition and Legal Arguments
The union contested the restraining order, arguing that:
- The central issue was the application of the Eight-Hour Labor Law and whether the employer could force employees to work beyond eight hours daily.
- The NLRC issued the TRO hastily and based on ex parte evidence.
- The NLRC commissioners lacked proper appointments confirmed by the Commission on Appointments, questioning their authority.
- The NLRC, as an appellate body, lacked jurisdiction to issue injunctions initially.
The union sought annulment of the NLRC resolution, recognition of the necessity of commissioners’ confirmation, removal of disciplinary records against workers for refusing overtime, and a restraining order against the NLRC and related parties from acting on the matter.
SMC's Counter Arguments
SMC described the workers’ act as a slowdown—a deliberate reduction in output and refusal to observe the agreed work schedule—constituting an illegal and unprotected concerted activity under both law and the collective bargaining agreement (CBA). SMC maintained that:
- The NLRC had jurisdiction to issue injunctive relief to enforce peace and compel arbitration.
- It had a statutory obligation to enjoin the illegal acts to prevent grave damages to production and financial losses.
- The failure to timely resolve the injunction application was an abuse of discretion.
Legal Analysis on the Rights to Concerted Activities
Under Article 263 of the Labor Code, workers have the right to engage in concerted activities, including strikes and picketing, while management has the right to lockout, all subject to legality depending on purpose and means. However, RA 6727 explicitly prescribes detailed procedures for resolving wage distortion disputes, emphasizing voluntary negotiation and arbitration while expressly prohibiting strikes or lockouts on such issues.
Compliance with RA 6727 and Implementing Rules
Section 3 of RA 6727 outlines the required grievance and arbitration procedures for resolving wage distortion disputes, excluding strikes or other concerted acts as methods of settlement. The Secretary of Labor and Employment’s rules implementing RA 6727 reinforce that wage distortion issues cannot justify strikes or lockouts.
Collective Bargaining Agreement Provisions
The CBA between SMC and IBM explicitly disallows strikes, walkouts, stoppages, slowdowns, boycotts, or any interference with company operations during its term. It mandates settlement of disputes involving wages, hours, conditions, or employer-employee relations exclusively through the grievance procedure and arbitration, affirming that the union's concerted refusal to work overtime was unlawful and contractual breach.
Illegality of the Workers' Concerted Actions
The union’s tactic of reverting to an eight-hour shift was effectively a partial strike or slowdown, prohibited by law, RA 6727, and the CBA. The union’s attempt to recast the dispute as a matter of eight-hour workdays was a stratagem to circumvent the legal ban on striking over wage distortion issues. The long-accepted work schedule with automatic overtime was mutually beneficial and not disputed before the slowdown, confirming the actual dispute was on wage distortions.
Characterization of the Concerted Act as a Slowdow
...continue readingCase Syllabus (G.R. No. 207511)
Case Background and Origin of Dispute
- The case arose from wage distortions allegedly caused by Republic Act No. 6727, the Wage Rationalization Act, affecting employees of respondent San Miguel Corporation (SMC).
- The union Ilaw at Buklod ng Manggagawa (IBM), representing approximately 4,500 employees at SMC’s plants, offices, and warehouses in the National Capital Region, presented a demand for correction of significant wage distortions.
- Section 4(d) of RA 6727 was explicitly invoked, which mandates voluntary settlement of disputes caused by wage distortions and, failing that, compulsory arbitration by the National Labor Relations Commission (NLRC).
- The Union’s demand was ignored or inadequately addressed by SMC, which offered only a P7.00 daily wage increase against the union’s initial demand of P25.00, later reduced to P15.00 per day.
- After rejecting the reduced proposal, the union members refused to render overtime services, especially in the Polo Beer Bottling Plant starting October 16, 1989.
Union’s Conduct and the Nature of the Workshift Alteration
- The union and the daily-paid workers at the Polo Plant adopted and implemented an eight-hour work shift limiting their daily working hours, despite the existing ten- to fourteen-hour shifts established and observed for about five years.
- Workers involved numbered some 800 in the production line, plus others in quality control and warehouse areas.
- The existing schedule, including automatic overtime, gave workers continuous access to extra income and was accepted and encouraged by SMC prior to the dispute.
- The reversion to the strict eight-hour shift caused significant disruption to SMC’s operations, decreasing productivity and efficiency.
Impact and Losses Suffered by San Miguel Corporation
- The adoption of the eight-hour work shift led to a slowdown in operations, causing losses from October 16 to November 30, 1989.
- Specifically, SMC lost production of 2,004,105 cases of beer, resulting in P174,657,598 lost sales and P48,904,311 lost revenues.
- The government was also said to have lost excise tax revenue amounting to P42 million.
- SMC’s efforts to mitigate disruption included organizing a third shift and appeals to union members through dialogues and correspondence to return to the previous schedule.
Legal Proceedings Before the NLRC and Labor Arbiter
- On October 18, 1989, SMC filed a complaint at the NLRC Arbitration Branch seeking to declare the strike/slowdown illegal and to terminate union officials.
- On December 8, 1989, SMC filed another complaint for injunction to stop the illegal slowdown and for damages.
- The NLRC First Division, acting on ex parte evidence, issued a temporary restraining order (TRO) on December 19, 1989, directing the union members to cease their refusal to comply with the longstanding work schedule.
- The TRO was issued for twenty (20) days subject to a P50,000 bond, with a hearing before Labor Arbiter Carmen Talusan set thereafter.
- Multiple hearing dates were set but either cancelled or postponed due to the union's refusal to recognize the jurisdiction of the NLRC.
Union’s Petition to the Supreme Court and Contentions
- The Union filed a petition asserting:
- The