Case Summary (G.R. No. 234446)
Petitioner and Respondent
Petitioner: Victoria Manufacturing Corporation Employees Union (VMCEU)
Respondent: Victoria Manufacturing Corporation (VMC)
Key Dates
• March 14, 2014 – VMC requests BIR opinion on tax treatment under the new collective bargaining agreement (CBA).
• May 8, 2015 – Grievance meeting before the National Conciliation and Mediation Board fails to resolve the dispute.
• August 7, 2015 – VMC and VMCEU execute Submission Agreement appointing VA Renato Q. Bello.
• May 26, 2016 – VA issues decision ordering VMC to reimburse withheld taxes.
• May 26, 2017 – Court of Appeals (CA) nullifies the VA’s decision for lack of jurisdiction.
• July 24, 2019 – Supreme Court renders final decision under the 1987 Constitution.
Applicable Law
• 1987 Philippine Constitution (jurisdictional framework)
• Labor Code, Arts. 261–262 (jurisdiction of Voluntary Arbitrators)
• Tax Code, Sec. 4 (CIR’s exclusive authority over tax interpretation and refunds)
• Republic Act No. 9504 (income tax exemption for minimum wage earners)
Factual Background
VMC’s CBA integrated the cost-of-living allowance into the basic wage, resulting in a single P466.00 rate. The BIR opined that because the total exceeded the P451.00 basic wage plus P15.00 COLA mandated by Wage Order No. NCR-18, VMCEU members were not exempt from income tax. VMC thereafter withheld the corresponding tax amounts.
Voluntary Arbitrator’s Decision
Upon submission, VA Bello ruled VMCEU members were exempt as statutory minimum wage earners under RA 9504. He ordered VMC to reimburse all withheld income taxes.
Court of Appeals Ruling
The CA granted VMC’s petition for certiorari, holding that the VA lacked jurisdiction to resolve tax matters, which fall under the Bureau of Internal Revenue and Commissioner of Internal Revenue (CIR), not labor arbitration.
Issue Presented
Did the CA correctly nullify the VA’s award on the ground that the VA lacked jurisdiction to decide on income-tax withholding?
Supreme Court’s Ruling on Jurisdiction
The Supreme Court affirmed the CA. It held that voluntary arbitrators derive jurisdiction solely from the Labor Code to decide labor disputes over CBA interpretation and implementation, not tax controversies governed by the Tax Code.
Jurisdictional Principles
Subject-matter jurisdiction is conferred by law and cannot be created or waived by the parties’ stipulation or participation. A tribunal acting without jurisdiction issues void judgments. This principle is enshrined in the 1987 Constitution, which entrusts Congress with defining judicial powers.
Quasi-Judicial Jurisdiction under the Labor Code
Articles 261–262 vest Voluntary Arbitrators with exclusive authority to hear grievances concerning CBA interpretation or company policies and, by agreement, other labor disputes, including unfair labor practices and bargaining deadlocks. They do not extend to tax law interpretation or refund claims.
Precedential Authority on Tax Matters
In Honda Cars Philippines, Inc. v. Honda Cars Technical Specialist and Supervisors Union, the Court held that tax issues—in that case, the taxability of a gasoline allowance—are within the CIR’s exclusive original jurisdiction under Tax Code Section 4, not within the scope of labor arbitration.
Effect of Submission Agreement and Participation
A party’s execution of a submission agreement or active participation in arbitration does not confer subject-matter jurisdiction. Jurisdiction cannot be vested by consent of the parties but only by statute.
Doctrine
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Facts of the Case
- Victoria Manufacturing Corporation (VMC) is a domestic textile company engaged in dyeing, finishing, and manufacturing lace, embroidered and knitted fabrics, and hooks and eyes.
- Victoria Manufacturing Corporation Employees Union (VMCEU) serves as the sole and exclusive bargaining agent of VMC’s permanent and regular rank-and-file employees within the agreed bargaining unit.
- On March 14, 2014, VMC requested a ruling from the Bureau of Internal Revenue (BIR) regarding the income tax implications of the wage structure stipulated in the collective bargaining agreement (CBA).
- Under Wage Order No. NCR-18, the statutory minimum wage was ₱466.00 (₱451.00 basic wage plus ₱15.00 cost-of-living allowance). VMC’s CBA wage structure integrated the COLA into the total wage, resulting in identical total wages but a different internal breakdown.
- The BIR opined that VMCEU members were not exempt from income tax, since their integrated wage exceeded the components specified in the Wage Order.
- Acting on the BIR opinion, VMC withheld income taxes from union members earning the statutory minimum wage.
- A grievance meeting on May 8, 2015, failed to resolve the dispute over tax withholding.
Submission to Voluntary Arbitrator
- After unsuccessful conciliation before the National Conciliation and Mediation Board, VMC and VMCEU executed a Submission Agreement on August 7, 2015, referring the grievance—among other issues—to Voluntary Arbitrator (VA) Renato Q. Bello.
- Both parties filed position papers and replies, and the case was submitted for decision on December 22, 2015.
Voluntary Arbitrator’s Decision
- On May 26, 2016, VA Bello ruled in favor of VMCEU, finding that:
- The union members were statutory minimum wage earners.
- Under Republic Act No. 9504, minimum wage earners are exempt from income tax.
- VMC had thus “erroneously withheld” income tax and was ordered to reimburse all affected rank-and-file employees.
Court of Appeals’ Decision
- VMCEU’s motion for reconsideration before the VA was denied, prompting VMC to file a petition for certiorari with the Court of Appeals (CA).
- On May 26, 2017, the CA:
- Acknowledged VMC’s mista