Title
Limcoma Labor Organization -PLAC vs. Limcoma Multi-Purpose Coop.
Case
G.R. No. 239746
Decision Date
Nov 29, 2021
A labor union challenged a cooperative's extension of 18% profit sharing to non-rank-and-file employees, violating the CBA. The Supreme Court ruled the benefit applies exclusively to rank-and-file workers.
labor union
profit sharing benefits
motion for reconsideration
A

Case Summary (G.R. No. 239746)

Factual Background

The parties negotiated a Voluntary Retire-Rehire (VRR) Program in 2005 which the union initially opposed but ultimately memorialized in a July 29, 2005 Memorandum of Agreement providing, among other things, severance pay, rehiring as new regular employees, continuation of union status as SEBA, and a reopening for a new CBA in October 2005. The first CBA took effect on April 1, 2006 and was renewed on July 4, 2011 for the period April 1, 2011 to March 31, 2016. Both CBAs contained an identical profit-sharing clause in Section 2, Article VIII: “The COOPERATIVE agrees to grant to all regular employees a profit-sharing equivalent to Eighteen Percent (18%) of the net surplus less x x x distribution of which shall be based on the basic salary.” In 2014, during wage reopening negotiations, petitioner discovered that respondent had a separate Kasunduan sa Voluntary Retire-Rehire Program (K-VRR) for supervisors, technical and confidential employees, and managers, which provided an eighteen percent profit sharing to those non-rank-and-file signatories.

Voluntary Arbitration Decision

Petitioner submitted a grievance and the matter proceeded to voluntary arbitration before an accredited Voluntary Arbitrator. The VA construed the CBA profit-sharing clause to mean that the eighteen percent profit sharing was due only to regular rank-and-file employees covered by the union, to the exclusion of supervisory, confidential, and managerial employees, and ordered equitable distribution to rank-and-file employees irrespective of salary. The VA also ordered that the cooperative grant hospitalization benefits, rice subsidy, and thirteenth-month pay to rank-and-file employees as provided by law.

Court of Appeals Proceedings and Ruling

Respondent filed a petition for review under Rule 65 before the Court of Appeals seeking to reverse the VA award. The CA granted respondent’s petition and reversed the VA. The CA held that Article VIII, Section 2 of the CBA entitled “ALL regular employees of the cooperative, regardless of their rank or position,” to the eighteen percent profit sharing, and further held that certain cooperative advances for hospitalization, rice subsidy, and excess thirteenth-month pay were deductible from the 18% net surplus to be distributed as profit sharing.

Present Petition and Issues Raised

Petitioner challenged the CA decision by filing a petition for certiorari under Rule 45, limited to the interpretation of the CBA’s coverage of the profit-sharing provision and the claim for shares in the net surplus for years 2011, 2012, and 2013. Petitioner framed two principal issues: whether the CA erred in ruling that supervisors, confidential and managerial employees were entitled to the CBA benefit, and whether the CA misapprehended that the 18% net surplus allocation was a management prerogative or separate grant to non-covered employees rather than part of the CBA obligation.

Parties’ Contentions

Petitioner conceded that respondent could voluntarily grant the same benefits to non-rank-and-file employees but insisted that the negotiated eighteen percent in the CBA was exclusively for employees within the collective bargaining unit and that any grant to excluded employees must come from a separate allocation and not dilute the CBA entitlement. Petitioner argued the CA disregarded the CBA’s clear coverage clause and improperly treated profit sharing as a unilateral, ripened practice rather than the subject of contractual interpretation. Respondent countered that the provision’s language clearly granted the benefit to “all regular employees” and that longstanding cooperative practice demonstrated distribution of annual profit sharing to all regular employees from a fixed portion of net surplus.

Jurisdictional and Procedural Observations

The Court observed that the proper remedy to challenge a VA decision is an appeal under Rule 43 to the Court of Appeals, as provided in that rule and by ART. 261 and ART. 262 of the Labor Code, and that certiorari under Rule 45 was ordinarily not the appropriate remedy. The Court acknowledged, however, established exceptions permitting certiorari when appeal was inadequate or when exceptional circumstances such as urgency, pure question of law, or prevention of irreparable injury existed. The Court noted precedent allowing relaxation of procedural strictures in labor cases to secure substantial justice and accordingly addressed the petition on the merits.

Legal Reasoning on Contract Interpretation and Coverage

The Court found that the CA erred in its interpretation of the CBA. It reiterated that a CBA is a contract and that the literal meaning of clear contractual terms controls under Article 1370 of the Civil Code. The Court emphasized that the entire CBA must be read together under Article 1374 and observed that Section 2, Article II (Scope and Coverage) explicitly defined the collective bargaining unit as “All covered rank and file employees/workers of the COOPERATIVE” and stated that the term “EMPLOYEE” would, unless otherwise indicated, refer to employees within the collective bargaining unit. The Court concluded that the phrase “all regular employee” in Section 2, Article VIII must be read in light of the coverage provision and thus meant all regular rank-and-file employees only. The Court reasoned that any contrary reading would infringe Article 245 of the Labor Code which bars managerial employees from joining the collective bargaining unit of rank-and-file employees and would allow dilution of the bargained equivalent of 18% to the detriment of union members.

Management Prerogative, Ripened Practices, and Non-Diminution

The Court acknowledged management’s prerogative to grant bonuses and benefits to non-covered employees and accepted that respondent could make separate agreements, such as the K-VRR, granting profit sharing to managerial and supervisory employees. The Court clarified that such grants, however, could not be taken to have altered or diluted the CBA entitlement unless the cooperative established a separate allocation for non-covered employees that did not reduce the bargained equivalent for rank-and-file employees. The Court c

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