Case Summary (G.R. No. 198745)
Petitioner
Insular Hotel Employees Union–NFL (IHEU-NFL), represented by local officers Darius Joves and Debbie Planas, through Atty. Danilo Cullo, claiming unlawful diminution of wages and benefits under a Memorandum of Agreement (MOA).
Respondent
Waterfront Insular Hotel Davao (Davao Insular Hotel Co., Inc.), which suspended operations in November 2000 due to severe losses, then reopened in June 2001 upon labor concessions under a negotiated MOA.
Key Dates
• November 6, 2000 – Notice of suspension of operations filed with DOLE Region XI
• May 8, 2001 – Parties sign MOA restoring operations subject to union-offered concessions
• June 15, 2001 – Hotel resumes business
• August 22, 2002 – Notice of mediation filed before NCMB Region XI by Joves, Planas et al.
• April 5, 2004 – AVA Montejo Decision declaring the MOA invalid and ordering reinstatement of pre-MOA wages and benefits
• October 11, 2005 – CA Decision reversing AVA Montejo and upholding the MOA as valid and enforceable
• July 13, 2006 – CA Resolution denying motion for reconsideration
• September 22, 2010 – SC Decision affirming CA
Applicable Law
• 1987 Philippine Constitution (decision after 1990)
• Labor Code of the Philippines (Articles on collective bargaining, prohibition against diminution of benefits – Art. 100; jurisdiction of NCMB)
• NCMB Manual of Procedure (Rule IV, Section 3 – who may file mediation)
• Collective Bargaining Agreement (CBA) and union by-laws governing ratification
Factual Background
Faced with heavy losses, the hotel notified DOLE of a six-month suspension of operations, promising payment of benefits if operations did not resume. DIHFEU-NFL, led by Rojas, proposed extensive wage-and-benefit concessions and signed an MOA on May 8, 2001, to reopen the hotel with only 100 rank-and-file employees, revised pay scales, reduced leaves and allowances, and a ten-year suspension of the CBA’s economic provisions. Reopened on June 15, 2001, affected employees individually signed Reconfirmation of Employment documents reflecting the MOA terms.
Proceedings Before AVA Montejo
In August 2002 Joves and Planas filed a mediation notice before NCMB Region XI under “National Federation of Labor and et al.,” alleging unlawful diminution under the MOA. Respondent challenged jurisdiction and the standing of individual employees and the NFL, moving to withdraw its submission to voluntary arbitration. AVA Olvida denied withdrawal, clarified that the proper complainant was IHEU-NFL per the submission agreement, and directed continuance. Following a successful motion for inhibition against AVA Olvida, AVA Montejo was appointed. On April 5, 2004, AVA Montejo declared the MOA invalid as contrary to law and public policy, ordered reinstatement of pre-MOA benefits, and awarded attorney’s fees.
Court of Appeals Decision
On consolidated appeals, the CA ruled on October 11, 2005, that the MOA was valid and enforceable. It held that respondent’s financial distress justified the union’s concessions, the MOA complied with management prerogatives, and NCMB jurisdiction was not in question once submission was perfected. The CA directed parties to comply with the MOA and denied relief for petitioner.
Issues on Supreme Court Appeal
- Jurisdictional competence of NCMB and arbitrators given discrepancies in naming the complainant (NFL vs. IHEU-NFL)
- Validity of the MOA in light of alleged unproven financial crisis
- Applicability of Labor Code Article 100’s prohibition against diminution of benefits
Supreme Court Ruling on Jurisdiction
The SC held that only a certified or duly recognized bargaining representative may file for preventive mediation under NCMB rules. The notice was filed by individual employees and the NFL, neither of which had authority to represent the local union. Respondent promptly objected and sought withdrawal. Jurisdictional defects may be raised at any stage and are not waived by participation. The NFL, as an agent of the local union, lacked authority to file in its own name absent a specific authorization. Thus, NCMB and the voluntary arbitrators lacked jurisdiction from the outset.
Supreme Court Ruling on Financial Distress
Relying on audited financial statements showing cumulative operating losses from 1998 through 2005, the SC found the hotel’s financial distress genuine. The CA’s acceptance of impending financial crisis to justify the MOA concess
...continue readingCase Syllabus (G.R. No. 198745)
Procedural Posture
- Petition for review on certiorari under Rule 45 filed before the Supreme Court.
- Seeks to set aside:
• Decision dated October 11, 2005 of the Court of Appeals (CA) in CA-G.R. SP Nos. 83657 and 83831.
• Resolution dated July 13, 2006 of the CA denying motion for reconsideration. - CA Decision reversed the April 5, 2004 Decision of AVA Rosalina L. Montejo (Voluntary Arbitrator).
- Issues raised: jurisdiction of NCMB and voluntary arbitrator; validity and enforceability of the Memorandum of Agreement (MOA); application of Article 100 of the Labor Code; effect of non-ratification.
Factual Background
- November 6, 2000: Waterfront Insular Hotel Davao (the Hotel) notifies DOLE of six-month suspension of operations due to severe losses; promises benefits if no reopening.
- During suspension, DIHFEU-NFL, via its President Domy R. Rojas, sends multiple letters (Nov 8, 10, 20 & 25, 2000) offering wage-and-benefit concessions and suspension of CBA.
- January 2001: Union submits a Manifesto concretizing proposed concessions.
- Negotiations result in a Memorandum of Agreement dated May 8, 2001, providing for:
• Reduction of workforce to 100 rank-and-file employees.
• New salary scale and amended benefits. - Reopening on June 15, 2001; retained employees sign individual “Reconfirmation of Employment” documents reflecting MOA terms.
Union Proposals and Manifesto
- Union’s letters propose:
• Age-based retirement with zeroed service length but job retention.
• Suspension of CBA renegotiation; possible reduction of economic benefits.
• Detailed package of concessions: reduced leaves, meal allowances, insurance shares, fixed manning of 145 (later 100) members, multi-tasking. - Manifesto (Feb 25, 2001) reiterates proposals:
• Retirement benefits and retrenchment for non-qualifiers.
• Caps on leaves, meal allowance at P30, single-person health coverage at P1,500/yr.
• Gradual rehiring based on profitability; new salary scheme devised by Hotel.
• Ten-year no-strike pledge; disciplinary committee; multi-tasking.
Memorandum of Agreement and Reconfirmation of Employment
- MOA (May 8, 2001) amends CBA:
• Retains 100 regular rank-and-file employees; others retire.
• Ten-year suspension of CBA economic provisions; no-strike agreement.
• Revised compensation, leaves, meal allowance, health benefits, uniform laundry, multi-tasking, disciplinary committee. - Individual “Reconfirmation of Employment” signed by 87 of 100 retained employees, assisted by Rojas, embodying new terms.
Initiation of Arbitration Proceedings and Standing Issues
- August 22, 2002: Notice of Mediation filed with NCMB Region XI by Darius Joves and Debbie Planas, invoking “National Federation of Labor” (NFL) on behalf of “DARIUS JOVES/DEBBIE PLANAS ET AL.”
- Issue: “Diminution of wages and