Case Summary (G.R. No. 85985)
Factual Background
PAL enacted a completely revised Code of Discipline on March 15, 1985, circulated it in limited numbers, and immediately implemented its provisions, with some employees disciplined under the new Code. PALEA charged PAL with unfair labor practice, alleging arbitrary unilateral implementation without adequate notice or prior discussion with the union and contending that the Code (being penal in nature) required sufficient publication and was arbitrary, oppressive, and prejudicial to employees’ rights. PALEA identified particular provisions as defective, notably: Section 2 (Non‑exclusivity) making compliance with all company rules and regulations subject to unspecified penalties, and Section 7 (Cumulative Record) allowing past offenses to be aggregated so that an employee could be dismissed for a cumulative record even if each individual act would not warrant dismissal.
Procedural Posture Prior to Supreme Court Review
PAL moved to dismiss PALEA’s complaint, asserting its managerial prerogative to prescribe workplace rules and that no Labor Code provision or collective bargaining agreement (CBA) had been violated. The parties failed to appear at a scheduled conference before Labor Arbiter Ortiguerra; the arbiter deemed the case submitted and rendered a decision on November 7, 1986. The arbiter found no bad faith in PAL’s adoption of the Code but held parts of the Code objectionable for lack of reasonableness and fairness (specifically describing provisions as overly broad, potentially violative of the rule against double jeopardy, and improperly circulated). The arbiter ordered PAL to furnish all employees copies of the Code, to reconsider penalties imposed under the new Code and remand those cases for further hearing, and to discuss disputed provisions with PALEA. PAL appealed to the NLRC.
NLRC Ruling and Observations
On August 19, 1988, the NLRC affirmed the dismissal of PALEA’s unjust labor practice charge but modified the labor arbiter’s reliefs by directing PAL to review and discuss the New Code with the union (PALEA), to furnish each employee with a copy of the Code, and to reconsider pending arbitral cases if they remained at that level. The NLRC emphasized that, although the adoption of rules is a management prerogative, modern labor relations and constitutional policy recognize a principle of “shared responsibility” and worker participation in decision‑making processes affecting their rights; exclusion of labor from deliberation on rules that affect security of tenure and employment may erode industrial harmony.
Issues Presented to the Supreme Court
PAL sought certiorari, alleging grave abuse of discretion by public respondents in: (a) directing PAL to “share” its managerial prerogative in formulating a Code of Discipline; (b) effectively engaging in quasi‑legislative action by ordering PAL to share that prerogative; (c) deciding matters beyond the scope of PALEA’s ULP allegation; and (d) requiring PAL to reconsider pending cases still at the arbitral level.
Legal Framework and Precedents Considered
Because the decision was rendered after 1990, the Court applied the 1987 Constitution. The Court acknowledged the later statutory amendment by Republic Act No. 6715 (March 2, 1989), which explicitly recognized worker participation in decision and policy‑making processes affecting their rights, duties and welfare. The Court reviewed prior jurisprudence cited in the record recognizing limits on managerial prerogatives: managerial rights are protected but must be exercised without abuse; they must be in good faith, for legitimate business ends, and not to defeat employees’ statutory or contractual rights. The decision referenced cases (as included in the record) establishing that managerial prerogatives are circumscribed by law, the CBA, and general principles of fairness and justice, and that issues affecting security of tenure and property rights warrant particular scrutiny.
Court’s Analysis of the Code’s Nature and Effects
The Court distinguished between managerial prerogatives that purely concern business operations and those that directly affect employees’ rights—particularly security of tenure and means of livelihood. The Court found that several provisions of the revised Code were not purely managerial in the narrow sense b
...continue readingCase Syllabus (G.R. No. 85985)
Procedural and Citation Details
- Reported at 296-A Phil. 299, Third Division; G.R. No. 85985; decision date August 13, 1993; authored by Justice Melo.
- Case subject: petition for certiorari questioning NLRC and Labor Arbiter actions regarding implementation of a revised Code of Discipline by Philippine Airlines, Inc. (PAL).
- Prior proceedings: PALEA filed complaint with the NLRC (Case No. NCR-7-2051-85); Labor Arbiter Isabel P. Ortiguerra rendered decision on November 7, 1986; NLRC rendered its decision on August 19, 1988, which was the subject of the Supreme Court petition.
Factual Background
- On March 15, 1985, Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of Discipline.
- The revised Code was circulated among employees and immediately implemented; some employees were subjected to disciplinary measures under the new Code.
- On August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint before the National Labor Relations Commission alleging unfair labor practice, captioned as ULP with arbitrary implementation of PAL's Code of Discipline without notice and prior discussion with Union by Management (Record reference: Rollo, p. 41).
- PALEA alleged limited circulation of the Code, its penal nature requiring sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial to employee rights.
PALEA’s Specific Allegations and Relief Sought
- Alleged violations: Paragraphs E and G of Article 249 and Article 253 of the Labor Code (as stated in PALEA’s position paper).
- Specific contentions:
- Copies of the new Code had been circulated only in limited numbers.
- Because the Code is penal in nature, it must conform with requirements of sufficient publication.
- Certain provisions of the Code (Articles IV and I of Chapter II) were defective: (a) contravening construction of penal laws; and (b) making punishable any offense within PAL’s contemplation.
- Requested relief:
- Hold implementation of the new Code in abeyance.
- Require PAL to discuss the substance of the Code with PALEA.
- Reinstatement and further hearing for employees dismissed under the new Code.
- Declare PAL guilty of unfair labor practice and order payment of damages.
- Record reference: PALEA’s prayers and contentions appear in pp. 7-14, Record.
PAL’s Position and Defense
- PAL filed a motion to dismiss and maintained its managerial prerogative to prescribe rules and regulations regarding employee conduct.
- PAL argued that implementation of the Code did not violate the collective bargaining agreement (CBA) or any provision of the Labor Code.
- PAL contended that Article 253 of the Labor Code cited by PALEA referred to requirements for negotiating a CBA and was inapplicable because the current CBA had been negotiated.
- PAL asserted that all employees had been furnished copies of the Code, although this assertion lacked documentary support in the record as found by the labor arbiter.
Provisions of the Revised Code Quoted and Criticized
- Section 2. Non-exclusivity:
- "This Code does not contain the entirety of the rules and regulations of the company. Every employee is bound to comply with all applicable rules, regulations, policies, procedures and standards, including standards of quality, productivity, and behaviour, as issued and promulgated by the company through its duly authorized officials. Any violations thereof shall be punishable with a penalty to be determined by the gravity and/or frequency of the offense."
- Section 7. Cumulative Record:
- "An employee’s record of offenses shall be cumulative. The penalty for an offense shall be determined on the basis of his past record of offenses of any nature or the absence thereof. The more habitual an offender has been, the greater shall be the penalty for the latest offense. Thus, an employee may be dismissed if the number of his past offenses warrants such penalty in the judgment of management even if each offense considered separately may not warrant dismissal. Habitual offenders or recidivists have no place in PAL. On the other hand, due regard shall be given to the length of time between commission of individual offenses to determine whether the employee’s conduct may indicate occasional lapses (which may nevertheless require sterner disciplinary action) or a pattern of incorrigibility."
- Section 1 of the Code (as described by the labor arbiter):
- Described by the labor arbiter as "an all embracing and all encompassing provision that makes punishable any offense one can think of in the company" (exact text of Section 1 not reproduced in the source).
Labor Arbiter’s Proceedings and Findings
- Labor Arbiter Isabel P. Ortiguerra called the parties to conference; parties failed to appear on the scheduled date.
- Arbiter interpreted the parties' failure to appear as a waiver of the right to present evidence and considered the case submitted for decision.
- Decision dated November 7, 1986:
- Found no bad faith on PAL's part in adopting the Code; ruled that no unfair labor practice had been committed.
- Held PAL not "totally fault free": issuance of rules is a legitimate management prerogative, but rules must meet tests of "reasonableness, propriety and fairness."
- Criticized Section 1 as overly broad and Section 7 as objectionable for violating the rule against double jeopardy by potentially imposing two or more punishments for the same misdemeanor.
- Found PAL failed to prove that the new Code was amply circulated; PAL’s assertion of distribution lacked documentary evidence.
- Stated the maxim "ignorance of the law excuses no one from compliance" applies only after conclusive proof of circulation and efforts at dissemination have been shown.
- Arbiter’s disposition ordered:
- Respondent PAL to furnish all employees with the new Code of Discipline.
- Reconsider cases of employees meted with penalties under the new Code and remand the same for further hearing.
- Discuss with PALEA the objectionable provisions specifically tackled in the decision.
- All other claims of the complainant union dismissed for lack of merit.