Case Summary (G.R. No. 239746)
Nature of Dispute and Collective Bargaining Agreement Provisions
The dispute centers on the interpretation of Section 2, Article VIII of the CBA which provides that all regular employees are entitled to a profit sharing equivalent to eighteen percent (18%) of the net surplus. The petitioner contends that this provision applies exclusively to rank-and-file employees who are covered by the CBA, excluding supervisors, technical, confidential, and managerial employees. The respondent, however, argues that the provision encompasses all regular employees regardless of rank or position. The controversy arose during the 2014 wage reopening negotiations when petitioner learned respondent had entered into a separate agreement (“Kasunduan sa Voluntary Retire-Rehire Program” or K-VRR) with non-rank-and-file employees granting them the same profit sharing benefit.
Arbitration and Court of Appeals Proceedings
The parties submitted the profit sharing issue to voluntary arbitration wherein the VA ruled in favor of petitioner, declaring that the 18% profit sharing is due only to rank-and-file employees covered by the union. The VA's decision was upheld upon motion for reconsideration. The respondent then filed a petition for review with the CA under Rule 65, which reversed the VA, interpreting the CBA provision to cover all regular employees and allowing deductions from the profit sharing for certain benefits. Petitioner’s motion for reconsideration was denied, prompting the present petition for review on certiorari under Rule 45.
Jurisdictional and Procedural Considerations
The Supreme Court noted that the proper remedy for challenging a Voluntary Arbitrator’s decision is an appeal under Rule 43, not a petition for certiorari under Rule 45 or 65. Labor Code Articles 261 and 262 grant exclusive jurisdiction to voluntary arbitrators over grievance disputes arising from CBAs. The certiorari remedy may only be entertained in exceptional cases to prevent grave injustice, among other strict criteria. Despite the procedural impropriety, the Court opted to resolve the case on the merits under the principle of substantial justice and to avoid technicalities defeating labor rights.
Interpretation of the Collective Bargaining Agreement
Applying Civil Code Article 1370, the Court emphasized that clear contract terms must be interpreted according to their literal meaning unless contradictory to the parties’ evident intention. Section 2 of Article II of the CBA specifies coverage as “all covered rank and file employees/workers,” defining “employee” within the agreement accordingly. Contractual provisions must be read as a whole in harmony (Civil Code Article 1374). Consequently, the phrase “all regular employees” in the profit sharing provision is limited to “all regular rank-and-file employees” covered by the CBA, excluding supervisory, confidential, and managerial employees.
Prohibition Against Inclusion of Managers and Supervisors in Bargaining Unit
The Court reiterated that including supervisory and managerial employees in the rank-and-file collective bargaining unit would contravene Article 245 of the Labor Code, which expressly prohibits managers and supervisors from joining the union of rank-and-file employees to avoid conflicts of interest and potential collusion detrimental to the employer. Therefore, extending CBA-mandated profit sharing unilaterally to these excluded employees is improper.
Management Prerogative and Separate Agreements
The Court recognized that management retains the prerogative to grant benefits to non-rank-and-file employees through separate agreements and that respondent’s execution of the K-VRR Program with non-covered employees to provide similar profit sharing is lawful. However, such benefits granted outside the CBA cannot be deducted from or diminish the 18% profit sharing exclusively allocated to rank-and-file employees under the CBA. Thus, the profit sharing for rank-and-file employees must remain equivalent to eighteen percent of the net surplus as negotiated with their SEBA.
Ripened Practices and Corrective Actions on Benefit Grants
The Court addressed respondent’s argument that profit sharing had ripened into practice and could not be unilaterally altered. It applied the “n
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Background and Parties
- The petitioner, Limcoma Labor Organization (LLO)-PLAC, is a labor union duly registered with the Department of Labor and Employment (DOLE) and affiliated with the Philippine Labor Alliance Council (PLAC).
- Petitioner is recognized as the Sole and Exclusive Bargaining Agent (SEBA) for the regular rank-and-file employees of the respondent, Limcoma Multi-Purpose Cooperative (Limcoma).
- Excluded from the bargaining unit are supervisors, technical and confidential employees, managerial employees, and the respondent’s Board of Directors.
- In July 2005, Limcoma implemented a Voluntary Retire-Rehire (VRR) Program, initially opposed by petitioner but later settled through a Memorandum of Agreement (MOA) dated July 29, 2005.
Memorandum of Agreement (MOA) and Collective Bargaining Agreements
- MOA provided for:
- Retirement and severance pay for covered employees.
- Granting of Industrial Peace Bonus.
- Immediate rehiring of retired employees as new regular employees.
- Benefits under law, including sick leave and vacation leave.
- Increase of profit sharing from 15% to 18%.
- Continuation of petitioner as SEBA despite mutual termination of prevailing CBA.
- Negotiation of new CBA in October 2005.
- Following MOA, the first CBA was implemented on April 1, 2006, and renewed on July 4, 2011, effective April 1, 2011 to March 31, 2016.
- Both CBAs maintained profit sharing provisions:
- Section 2, Article VIII provided for an 18% profit sharing of net surplus to all regular employees, distribution based on basic salary.
Dispute over Profit Sharing Coverage
- During wage reopening negotiations in 2014, petitioner discovered that respondent entered into a separate “Kasunduan sa Voluntary Retire-Rehire Program (K-VRR)” with supervisors, confidential, and managerial employees, granting them also 18% profit sharing despite their exclusion from the bargaining unit.
- Petitioner contended that non-rank-and-file employees should not benefit from the 18% profit sharing under the CBA, which by its terms covers only regular rank-and-file employees.
- Petitioner alleged lack of details on how individual profit sharing for rank-and-file employees was determined.
- Failure to resolve wage reopening led to arbitration, including the profit sharing issue.
Voluntary Arbitrator’s Decision
- The DOLE Accredited Voluntary Arbitrator (VA), Atty. Cenon Wesley P. Gacutan, ruled that the 18% profit sharing was due solely to rank-and-file employees covered by the union, excluding supervisors, confidential, and managerial employees.
- The arbitrator’s decision clarified:
- All regular rank-and-file employees, including cooperative members, are entitled to the 18% profit sharing.
- Benefits such as hospitalization, rice subsidy, and 13th month pay are included for rank-and-file employees as well.
- Expenses for these benefits are borne by the cooperative and union.
- Respondent’s motion for reconsideration was denied by the VA.
Court of Appeals Decision
- Respondent filed a petition for review on certiorari under Rule 65 before the Court of Appeals (CA).
- On August 9, 2017, the CA reversed the VA decision, holding that:
- All regular employees regardless of rank or position are entitled to profit sharing under the 18% provision.
- Expenses advanced by the cooperative for hospitalization, rice subsidy, and excess 13th month pay are deductible from the 18% net surplus to be distributed.
- Petitioner’s motion for reconsideration to CA was denied on May 16, 2018.
Issues Presented
- Whether the CA seriously erred in ruling that supervisors, confidential, and managerial employees are entitled to benefit from the CBA's profit sharing provision inten