CASE BRIEF NO. 2019-0066


“While not explicitly mentioned in the Labor Code, case law recognizes that dismissal from employment due to the enforcement of the union security clause in the CBA is another just cause for termination of employment.”


CASE: Slord Development Corporation vs. Benerando M. Noya [G.R. No. 232687, February 04, 2019]

PONENTE: Justice Estela Perlas-Bernabe

SUBJECT:
A.       LABOR LAW:
          i.        Collective Bargaining Agreement (CBA)
          ii.       Union Security Clause – Kinds/types
          iii.      Termination of employment –Just and authorized causes
          iv.      Requisites of valid termination
          v.       Article 259 (formerly 248), paragraph (e) of the Labor Code

B.       REMEDIAL LAW:
          i.        Rule 45 of the Rules of Civil Procedure – Questions of law

FACTS:        Benerando M. Noya (Noya) was employed as a welder by SLORD Development Corporation (SLORD), a domestic corporation. Noya’s employment was covered by a CBAbetween SLORD and Nagkakaisang Lakas ng Manggagawa-Katipunan (NLM-Katipunan), the company’s sole and exclusive bargaining agent for all the regular rank-and-file employees. The CBA contains a union security clause which provides that SLORD’s employees must join NLM-Katipunan and remain to be a member in good standing; otherwise, through a written demand, NLM-Katipunan can insist the dismissal of an employee.

It was alleged that sometime in 2013, Noya asked several employees to affix their signatures on a blank sheet of yellow paper for the purpose of forming a new union, prompting the president of NLM-Katipunan to file expulsion proceedings against him for disloyalty. Subsequently, Noya organized a new union named the Bantay Manggagawa sa SLORD Development Corporation (BMSDC), which he registered with the DOLE on February 20, 2014.

After its investigation, NLM-Katipunan resolved, with the ratification of its members, to expel Noya on the ground of disloyalty. Subsequently, a letterwas sent by NLM-Katipunan to SLORD, demanding Noya’s termination from employment pursuant to the union security clause of the CBA. After notifying Noya of the union’s decision to expel him, Noya’s employment was terminated on March 19, 2014.

Consequently, Noya filed a complaintfor illegal dismissal against SLORD before the National Labor Relations Commission (NLRC).

The Labor Arbiter (LA) dismissed the case for lack of merit. The LA held that SLORD was duty-bound to terminate Noya’s employment after having been expelled by NLM-Katipunan for organizing a rival union. NLM-Katipunan has a valid closed shop agreement in the CBA that required the members to remain with the union as a condition for continued employment.

Aggrieved, Noya appealed to the NLRC. However, itaffirmed the LA Decision with modification, ordering SLORD to pay Noya P10,000.00 as nominal damages due to SLORD’s failure to provide Noya ample opportunity to defend himself through written notices and subsequent hearing.

After the denial of his motion for reconsideration, Noya elevated the matter to the CA via a petition for certiorari.

The CA granted Noya’s petition, finding his dismissal to be illegal. It found no just cause in terminating Noya’s employment for lack of sufficient evidence to support the union’s decision to expel him, explaining that the act of soliciting signatures on a blank yellow paper was not prohibited under the Labor Code nor could it be automatically considered as an act of disloyalty.

SLORD moved for reconsiderationbut the same was denied. Hence, SLORD filed a petition for review on certiorari (under Rule 45) before the Supreme Court (this Court).


ISSUES:
A.       Whether the NLRC gravely abuse its discretion in ruling that there existed just cause to validly terminate Noya’s employment.
          a.       Whether an employee may be terminated on the ground of violation of union security clause in the CBA?
          b.       What must be observed by the employer to effect a valid termination of its employee?
          c.       What is meant by ‘closed shop,’ ‘union shop,’ ‘maintenance of membership’?
         d.       What are the requisites to validly terminate the employment of an employee through the enforcement of the union security clause?

B.       Whether SLORD observed the proper procedure in terminating Noya’s employment.


RULING:
Preliminaries
At the outset, it bears stressing that only questions of law may be raised in and resolved by this Court on petitions brought under Rule 45 of the Rules of Civil Procedure. However, when the CA’s factual findings are contrary to those of the administrative body exercising quasi-judicial functions from which the action originated, the Court may examine the facts only for the purpose of resolving allegations and determining the existence of grave abuse of discretion. This is consistent with the ruling that in a Rule 45 review in labor cases, the Court examines the CA’s Decision from the prism of whether the latter had correctly determined the presence or absence of grave abuse of discretion in the NLRC’s Decision.

A.
While not explicitly mentioned in the Labor Code, case law recognizes that dismissal from employment due to the enforcement of the union security clause in the CBA is another just cause for termination of employment.  Similar to the enumerated just causes in the Labor Code, the violation of a union security clause amounts to a commission of a wrongful act or omission out of one’s own volition; hence, it can be said that the dismissal process was initiated not by the employer but by the employee’s indiscretion. Further, a stipulation in the CBA authorizing the dismissal of employees is of equal import as the statutory provisions on dismissal under the Labor Code, since a CBA is the law between the company and the union and compliance therewith is mandated by the express policy to give protection to labor; thus, there is parallel treatment between just causes and violation of the union security clause.

Pertinent is Article 259 (formerly 248), paragraph (e) of the Labor Code, which states that “[n]othing in this Code or in any other law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition for employment, except those employees who are already members of another union at the time of the signing of the collective bargaining agreement. x x x” The stipulation in a CBA based on this provision of the Labor Code is commonly known as the “union security clause.”

“Union security is a generic term which is applied to and comprehends ‘closed shop,’ ‘union shop,’ ‘maintenance of membership’ or any other form of agreement which imposes upon employees the obligation to acquire or retain union membership as a condition affecting employment. There is union shop when all new regular employees are required to join the union within a certain period for their continued employment. There is maintenance of membership shop when employees, who are union members as of the effective date of the agreement, or who thereafter become members, must maintain union membership as a condition for continued employment until they are promoted or transferred out of the bargaining unit, or the agreement is terminated. A closed shop, on the other hand, may be defined as an enterprise in which, by agreement between the employer and his employees or their representatives, no person may be employed in any or certain agreed departments of the enterprise unless he or she is, becomes, and, for the duration of the agreement, remains a member in good standing of a union entirely comprised of or of which the employees in interest are a part.”

To validly terminate the employment of an employee through the enforcement of the union security clause, the following requisites must concur: (1) the union security clause is applicable; (2) the union is requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient evidence to support the decision of the union to expel the employee from the union.

In this case, the Court finds the confluence of the foregoing requisites, warranting the termination of Noya’s employment.

It is undisputed that the CBA contains a closed shop agreement stipulating that SLORD’s employees must join NLM-Katipunan and remain to be a member in good standing; otherwise, through a written demand, NLM-Katipunan can insist the dismissal of an employee. Notably, the Court has consistently upheld the validity of a closed shop agreement as a form of union security clause. In BPI v. BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank [642 Phil. 47 (2010)],  the Court has explained that:

When certain employees are obliged to join a particular union as a requisite for continued employment, as in the case of Union Security Clauses, this condition is a valid restriction of the freedom or right not to join any labor organization because it is in favor of unionism.

Further, records show that NLM-Katipunan requested the enforcement of the union security clause by demanding the dismissal of Noya from employment for having committed an act of disloyalty in violation of the CBA’s union security clause.

Finally, there is sufficient evidence to support the union’s decision to expel Noya.

Notably, Noya, did not only solicit support in the formation of a new union but actually formed and organized a rival union, BMSDC, outside the freedom period. Similarly, in Tanduay Distillery Labor Union v. NLRC [233 Phil. 488 (1987)], the Court ruled that the organization by union members of a rival union outside the freedom period, without first terminating their membership in the union and without the knowledge of the officers of the latter union, is considered an act of disloyalty, for which the union members may be sanctioned. As an act of loyalty, a union may require its members not to affiliate with any other labor union and to consider its infringement as a reasonable cause for separation, pursuant to the union security clause in its CBA. Having ratified the CBA and being members of the union, union members owe fealty and are required under the union security clause to maintain their membership in good standing during the term thereof. This requirement ceases to be binding only during the sixty (60)-day freedom period immediately preceding the expiration of the CBA, which enjoys the principle of sanctity or inviolability of contracts guaranteed by the Constitution.

Thus, based on the above-discussed circumstances, the NLRC did not gravely abuse its discretion in ruling that there existed just cause to validly terminate Noya’s employment.


B.      
SLORD, however, failed to observe the proper procedure in terminating Noya’s employment, warranting the payment of nominal damages.

Case law states that in order to effect a valid dismissal of an employee, both substantial and procedural due process must be observed by the employer. An employee’s right not to be dismissed without just or authorized cause, as provided by law, is covered by his right to substantial due process. On the other hand, compliance with procedure provided in the Labor Code constitutes the procedural due process right of an employee.

In Distribution & Control Products, Inc. v. Santos (G.R. No. 212616, July 10, 2017), the Court has explained that procedural due process consists of the twin requirements of notice and hearing. The employer must furnish the employee with two (2) written notices before the termination of employment can be effected: (1) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the employee of the employer’s decision to dismiss him. The requirement of a hearing is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted.

Here, records fail to show that SLORD accorded Noya ample opportunity to defend himself through written notices and subsequent hearing. Thus, Noya’s right to procedural due process was violated, entitling him to the payment of nominal damages, which the Court deems proper to increase from P10,000.00 to P30,000.00 in line with existing jurisprudence. It is settled that in cases involving dismissals for just cause but without observance of the twin requirements of notice and hearing, the validity of the dismissal shall be upheld, but the employer shall be ordered to pay nominal damages in the amount of P30,000.00.

Related Case Briefs:
a.       PICOP Resources, Inc. v. Tañeca, 641 Phil. 175 (2010)
b.       Maricalum Mining Corp. v. Florentino, G.R. Nos. 221813 & 222723, July 23, 2018
c.       Celebes Japan Foods Corporation v. Yermo, 617 Phil. 626 (2009)
d.       General Milling Corporation v. Casio, 629 Phil. 12, 30 (2010)
e.       Ergonomic Systems Phils., Inc. v. Enaje, G.R. No. 195163, December 13, 2017
f.        Ortiz v. DHL Philippines Corporation, G.R. No. 183399, March 20, 2017
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THINGS DECIDED:

A.       While not explicitly mentioned in the Labor Code, case law recognizes that dismissal from employment due to the enforcement of the union security clause in the CBA is another just cause for termination of employment. 

B.       A stipulation in the CBA authorizing the dismissal of employees is of equal import as the statutory provisions on dismissal under the Labor Code, since a CBA is the law between the company and the union and compliance therewith is mandated by the express policy to give protection to labor; thus, there is parallel treatment between just causes and violation of the union security clause.

C.       Only questions of law may be raised in and resolved by this Court on petitions brought under Rule 45 of the Rules of Civil Procedure. However, when the CA’s factual findings are contrary to those of the administrative body exercising quasi-judicial functions from which the action originated, the Court may examine the facts only for the purpose of resolving allegations and determining the existence of grave abuse of discretion. This is consistent with the ruling that in a Rule 45 review in labor cases, the Court examines the CA’s Decision from the prism of whether the latter had correctly determined the presence or absence of grave abuse of discretion in the NLRC’s Decision.

D.      “Union security is a generic term which is applied to and comprehends ‘closed shop,’ ‘union shop,’ ‘maintenance of membership’ or any other form of agreement which imposes upon employees the obligation to acquire or retain union membership as a condition affecting employment. There is union shop when all new regular employees are required to join the union within a certain period for their continued employment. There is maintenance of membership shop when employees, who are union members as of the effective date of the agreement, or who thereafter become members, must maintain union membership as a condition for continued employment until they are promoted or transferred out of the bargaining unit, or the agreement is terminated. A closed shop, on the other hand, may be defined as an enterprise in which, by agreement between the employer and his employees or their representatives, no person may be employed in any or certain agreed departments of the enterprise unless he or she is, becomes, and, for the duration of the agreement, remains a member in good standing of a union entirely comprised of or of which the employees in interest are a part.”

E.       To validly terminate the employment of an employee through the enforcement of the union security clause, the following requisites must concur: (1) the union security clause is applicable; (2) the union is requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient evidence to support the decision of the union to expel the employee from the union.

F.       Case law states that in order to effect a valid dismissal of an employee, both substantial and procedural due process must be observed by the employer. An employee’s right not to be dismissed without just or authorized cause, as provided by law, is covered by his right to substantial due process. On the other hand, compliance with procedure provided in the Labor Code constitutes the procedural due process right of an employee.

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