Benguet Electric Cooperative, Inc. vs. Ferrer-Calleja

Employees of a cooperative who are also members and co-owners thereof cannot form, assist, or join a labor organization for purposes of collective bargaining with the cooperative, because an owner cannot bargain with himself or his co-owners. The fact of ownership of the cooperative, not involvement in its management, is what disqualifies a member from joining any labor organization within the cooperative.

Benguet Electric Cooperative, Inc. (BENECO) is a non-profit electric cooperative engaged in providing electric services to its members and patron-consumers in the City of Baguio and Benguet Province. The case involves the application of Article 256 of the Labor Code (Presidential Decree 442), which requires that at least a majority of all eligible voters in a bargaining unit must cast their votes for a valid certification election, and that the labor union receiving the majority of valid votes cast shall be certified as the exclusive bargaining agent. The dispute concerns the eligibility of cooperative members who are also employees to participate in labor union activities, a question previously addressed by the Court in cases involving cooperatives' unique nature as compared to ordinary corporations.

Benguet Electric Cooperative, Inc. (BENECO) is a non-profit electric cooperative providing electric services to members and patron-consumers in Baguio City and Benguet Province. On June 21, 1985, Beneco Worker's Labor Union-Association of Democratic Labor Organizations (BWLU-ADLO) filed a petition for direct certification as the sole and exclusive bargaining representative of all rank and file employees of BENECO, alleging that BENECO had 214 rank and file employees, that 198 or 92.5% supported the petition, that no certification election had been conducted in the last 12 months, and that there was no existing collective bargaining representative or collective bargaining agreement. The Beneco Employees Labor Union (BELU) opposed the petition, contending that it had been certified as the sole and exclusive bargaining representative pursuant to a med-arbiter's order dated October 20, 1980, and that pending cases before the National Labor Relations Commission involving bargaining deadlock and unfair labor practice barred any representation question. BENECO moved to dismiss the petition, claiming that its employees were not eligible to form, join, or assist labor organizations because they were members and joint owners of the cooperative.

On September 2, 1985, the med-arbiter issued an order giving due course to the petition but limited the election to rank and file employees who are non-members of the cooperative and without any involvement in the actual ownership thereof, finding thirty-seven (37) such employees based on the evidence presented. The payroll for June 1985 was designated as the basis for determining qualified voters. BELU and BENECO appealed, but the appeals were dismissed for lack of merit on March 25, 1986. BENECO then filed a petition for certiorari with the Supreme Court, docketed as G.R. No. 74209, which was dismissed for lack of merit on April 28, 1986.

The certification election was held on October 1, 1986. Prior to its conduct, BENECO's counsel verbally protested that employees who are members-consumers were being allowed to vote when they are not eligible to be members of any labor union for purposes of collective bargaining. BENECO submitted a certification showing that only four (4) employees were not members of the cooperative and insisted that only these employees were eligible to vote. The canvass of votes showed that BELU garnered forty-nine (49) of the eighty-three (83) "valid" votes cast. BENECO formalized its verbal manifestation by filing a Protest. The med-arbiter dismissed the protest on February 17, 1987, finding that the issue of whether member-consumers who are employees could form, assist, or join a labor union had been answered in the affirmative by the Supreme Court in G.R. No. 74209. On June 23, 1987, Bureau of Labor Relations director Pura Ferrer-Calleja affirmed the med-arbiter's order and certified BELU as the sole and exclusive bargaining agent of all rank and file employees of BENECO.

The med-arbiter had made a specific finding that there were only thirty-seven (37) employees of petitioner who were not members of the cooperative and who were, therefore, the only employees eligible to form or join a labor union for purposes of collective bargaining. However, the minutes of the certification election showed that a total of eighty-three (83) employees were allowed to vote, and of these, forty-nine (49) voted for respondent union. Even if the thirty-seven employees who were originally non-members could still vote in the certification election since they were allegedly "forced and compelled to join the cooperative on pain of disciplinary action," the certification election was still null and void because even those who were already members of the cooperative at the time of the issuance of the med-arbiter's order, and therefore could not claim that they were forced to join the union, were allowed to vote in the election.

• Ineligibility of Member-Employees: Petitioner BENECO asserted that the certification election held on October 1, 1986 was null and void since members-employees of the petitioner cooperative who are not eligible to form and join a labor union for purposes of collective bargaining were allowed to vote therein.
• Grave Abuse of Discretion: Petitioner alleged that the BLR director committed grave abuse of discretion amounting to lack or excess of jurisdiction in certifying respondent BELU as the sole and exclusive bargaining representative of the rank and file employees of BENECO.

• Right to Self-Organization: Respondent director argued that to deny the members of petitioner cooperative the right to form, assist, or join a labor union of their own choice for purposes of collective bargaining would amount to a patent violation of their right to self-organization, since a person assumes a dual capacity as rank and file employee and as member of the cooperative, and while exercising the right to self-organization, he or she is acting in his or her capacity as rank and file employee.
• Non-Participation in Management: Respondent director contended that employees who became members of the cooperative did not actually participate in its management, as that function is entrusted to the Board of Directors and elected or appointed officers, and they are not vested with powers to lay down and execute managerial policies.
• Nominal Membership: Private respondent BELU claimed that since membership in petitioner cooperative is only nominal, the rank and file employees who are members thereof should not be deprived of their right to self-organization.
• Comparison to Stockholders: Respondent union argued that if nominal ownership in a cooperative is enough to take away constitutional protections afforded to labor, then employers could grant stock bonuses to employees and thereafter claim that since their employees are now co-owners, they are disqualified to form unions, which would open the floodgates of destruction upon the rights of labor.

• Eligibility of Cooperative Member-Employees: Whether employees of a cooperative who are also members and co-owners thereof are eligible to form, assist, or join a labor organization for purposes of collective bargaining with the cooperative.
• Validity of the Certification Election: Whether respondent director committed grave abuse of discretion in certifying respondent BELU as the sole and exclusive bargaining representative of the rank and file employees of BENECO when the certification election included votes of employees who were ineligible to join a labor union within the cooperative.

• Eligibility of Cooperative Member-Employees: No. Employees of a cooperative who are also members and co-owners thereof cannot form, assist, or join a labor organization for purposes of collective bargaining with the cooperative, because an owner cannot bargain with himself or his co-owners.
• Validity of the Certification Election: Yes. Respondent director committed grave abuse of discretion in certifying respondent union as the sole and exclusive bargaining representative of petitioner cooperative's rank and file employees, because it cannot be determined whether respondent union was duly elected by the eligible voters of the bargaining unit since even employees who are ineligible to join a labor union within the cooperative because of their membership therein were allowed to vote in the certification election.

• Eligibility of Cooperative Member-Employees: The Court applied the doctrine established in Cooperative Rural Bank of Davao City, Inc. vs. Ferrer-Calleja, et al. (G.R. No. 7795, September 26, 1988) and reiterated in Batangas Electric Cooperative Labor Union vs. Young, et al. (G.R. Nos. 62386, 70880 and 74560, November 9, 1988) and San Jose City Electric Service Cooperative, Inc. vs. Ministry of Labor and Employment, et al. (G.R. No. 77231, May 31, 1989), that the right to collective bargaining is not available to an employee of a cooperative who at the same time is a member and co-owner thereof. The Court rejected the respondents' contention that the fact that members-employees do not participate in the actual management of the cooperative makes them eligible to form, assist, or join a labor organization. The ruling in the Davao City case was based on the fact that as members of the cooperative, they are co-owners thereof, and "certainly an owner cannot bargain with himself or his co-owners." It is the fact of ownership of the cooperative, and not involvement in the management thereof, which disqualifies a member from joining any labor organization within the cooperative. The Court also rejected BELU's argument comparing cooperative membership to stock ownership in ordinary corporations, noting that cooperatives enjoy special privileges not granted to ordinary corporations, including exemption from income tax and sales taxes, preferential right to supply products to State agencies, and exemption from minimum wage laws, and that members of cooperatives have rights and obligations different from those of stockholders of ordinary corporations. With respect to employees who are neither members nor co-owners of the cooperative, they are entitled to exercise the rights to self-organization, collective bargaining, and negotiation as mandated by the 1987 Constitution and applicable statutes.

• Validity of the Certification Election: The med-arbiter made a specific finding that there were only thirty-seven (37) employees of petitioner who were not members of the cooperative and who were, therefore, the only employees eligible to form or join a labor union for purposes of collective bargaining. However, the minutes of the certification election showed that a total of eighty-three (83) employees were allowed to vote, and of these, forty-nine (49) voted for respondent union. Even if the thirty-seven employees who were originally non-members could still vote in the certification election since they were allegedly "forced and compelled to join the cooperative on pain of disciplinary action," the certification election was still null and void because even those who were already members of the cooperative at the time of the issuance of the med-arbiter's order, and therefore could not claim that they were forced to join the union, were allowed to vote in the election. Under Article 256 of the Labor Code, to have a valid election, at least a majority of all eligible voters in the unit must have cast their votes, and the labor union receiving the majority of the valid votes cast shall be certified as the exclusive bargaining agent of all workers in the unit. Since it cannot be determined whether or not respondent union was duly elected by the eligible voters of the bargaining unit because even employees who are ineligible to join a labor union within the cooperative because of their membership therein were allowed to vote, respondent director committed grave abuse of discretion in certifying respondent union as the sole and exclusive bargaining representative of petitioner cooperative's rank and file employees.

• Doctrine of Owner Cannot Bargain with Himself — An employee of a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining because an owner cannot bargain with himself or his co-owners. The Court applied this doctrine to hold that all members of a cooperative, irrespective of the degree of their participation in the actual management thereof, cannot form, assist, or join a labor organization for the purpose of collective bargaining with the cooperative.
• Distinction Between Cooperatives and Ordinary Corporations — Cooperatives are by their nature different from ordinary business concerns; their owners and/or members are the ones who run and operate the business while others are employees, and members are entitled to cast one vote each in deciding upon the affairs of the cooperative regardless of the number of shares owned. Cooperatives enjoy special privileges such as exemption from income tax and sales taxes, preferential right to supply their products to State agencies, and exemption from minimum wage laws. The Court applied this distinction to reject the argument that cooperative membership is the same as ownership of stocks in ordinary corporations.

• "An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners." — This passage states the ratio decidendi of the case, articulating the core principle that disqualifies cooperative member-employees from union membership for collective bargaining purposes.
• "It is the fact of ownership of the cooperative, and not involvement in the management thereof, which disqualifies a member from joining any labor organization within the cooperative." — This passage clarifies the controlling test for eligibility, emphasizing that ownership status, not managerial participation, determines disqualification.
• "To have a valid election, at least a majority of all eligible voters in the unit must have cast their votes. The labor union receiving the majority of the valid votes cast shall be certified as the exclusive bargaining agent of all workers in the unit." — This passage quotes Article 256 of the Labor Code, the statutory basis for invalidating the certification election because ineligible voters participated.

• Cooperative Rural Bank of Davao City, Inc. vs. Ferrer-Calleja, et al., G.R. No. 7795, September 26, 1988 — Controlling precedent establishing that the right to collective bargaining is not available to an employee of a cooperative who is also a member and co-owner thereof; the Court relied on this case as the primary authority for its ruling.
• Batangas Electric Cooperative Labor Union vs. Young, et al., G.R. Nos. 62386, 70880 and 74560, November 9, 1988 — Followed precedent reiterating the doctrine that cooperative member-employees cannot join labor unions for collective bargaining purposes.
• San Jose City Electric Service Cooperative, Inc. vs. Ministry of Labor and Employment, et al., G.R. No. 77231, May 31, 1989 — Followed precedent reiterating the same doctrine regarding cooperative member-employees' ineligibility to join labor unions.

• Article 256, Labor Code (Presidential Decree 442) — Provides that to have a valid certification election, at least a majority of all eligible voters in the unit must have cast their votes, and the labor union receiving the majority of the valid votes cast shall be certified as the exclusive bargaining agent of all workers in the unit. The Court applied this provision to invalidate the certification election because ineligible voters participated, making it impossible to determine whether respondent union was duly elected by the eligible voters.
• 1987 Constitution — Mandates the rights to self-organization, collective bargaining, and negotiation for employees who are neither members nor co-owners of a cooperative; the Court noted that such employees are entitled to exercise these rights as mandated by the Constitution and applicable statutes.
• Sections 4, 5, 6, and 8, Presidential Decree No. 175 — Cited to demonstrate that cooperatives enjoy special privileges not granted to ordinary corporations, supporting the distinction between cooperative membership and stock ownership in ordinary corporations.

Fernan, C.J., Gutierrez, Jr., and Bidin, JJ., concurred. Feliciano, J., was on leave.