Coca-Cola Femsa Philippines, Inc. vs. Bacolod Sales Force Union-Congress of Independent Organization-ALU

A CBA stipulation making a voluntary arbitrator’s decision final and binding does not preclude judicial review; the proper remedy is a petition for review under Rule 43, and the CA may not refuse to look into the merits where there is a prima facie showing of grounds warranting review.

Petitioner Coca-Cola Femsa Philippines, Inc. is a corporation engaged in the manufacture of non-alcoholic beverages, while respondent Bacolod Sales Force Union-Congress of Independent Organization-ALU is the recognized collective bargaining agent of the rank-and-file sales personnel of petitioner’s Bacolod Plant. The parties are bound by a CBA whose Article 5 provides for voluntary arbitration and whose Article X governs the rice ration benefit. The Labor Code, as amended, supplies the statutory backdrop: Article 100 prohibits the elimination or diminution of employee benefits, and Article 262-A fixes the finality of voluntary arbitrator awards.

Petitioner Coca-Cola Femsa Philippines, Inc. is a corporation engaged in the manufacture of non-alcoholic beverages, while respondent Bacolod Sales Force Union-Congress of Independent Organization-ALU is the recognized collective bargaining agent of the rank-and-file sales personnel of petitioner’s Bacolod Plant. Sometime in 2001, Cosmos Bottling Corporation ceded its sales functions to petitioner, resulting in the integration of a number of Cosmos salesmen, including Fernando T. Oquiana, Norman F. Vinarta, and Santiago B. Espino, Jr. (Cosmos integrees), into petitioner’s workforce as route salesmen. The Cosmos integrees were given salary adjustments that would align with those of petitioner’s own route salesmen. At the time of integration, petitioner’s system of product distribution was by direct selling, but it subsequently adopted the route-to-market system, which led to the abolition of the route salesman position and its replacement by the account developer (AD) position. Through an internal selection process, the Cosmos integrees’ positions were eventually designated as ADs. Meanwhile, petitioner hired new ADs who were subject to a different set of qualifications from the Cosmos integrees. The newly-hired ADs received a higher basic monthly pay although, allegedly, occupying the same position, job description, and functions as the Cosmos integrees. Furthermore, upon union membership, the newly-hired ADs were given a monthly 45-kilogram rice provision with a corresponding monthly deduction of P550.00 from their salaries.

Aggrieved by the difference in treatment, respondent submitted its concerns to the grievance machinery in accordance with the CBA, demanding that (a) the salary rates of the Cosmos integrees be readjusted to equal those of the newly-hired ADs; (b) the conversion of the P550.00 monthly deduction from the salaries of the Bacolod Plant sales personnel into a 45-kg. rice provision be declared a violation of the non-diminution rule under Article 100 of the Labor Code, as amended; and (c) the employees concerned be reimbursed for the amounts illegally deducted. After the grievance process failed, the parties agreed to submit the unresolved matters to voluntary arbitration pursuant to Article 5 of the CBA and filed a preventive mediation case before the NCMB. Respondent claimed that the Cosmos integrees were being discriminated against the newly-hired ADs in light of the salary disparity and reiterated that the monthly P550.00 deduction from the basic salaries of the new union members constituted a violation of the non-diminution rule. Petitioner maintained that the fixing of hiring rates is a management prerogative and that the Cosmos integrees and newly-hired ADs were not similarly situated due to variance in the manner of appointment and hiring, qualifications, skills, and responsibilities. Petitioner also claimed that the Cosmos integrees failed to meet all basic qualifications for the AD position, such as age and educational attainment. As for the rice subsidy, petitioner contended that the P550.00 per month to non-union members was automatically converted into an actual 45-kg. sack of rice upon union membership, which was in reality valued more than the amount of the subsidy and thus not a diminution of benefits.

In a Decision dated February 3, 2012, the VA declared that the disparity in the wages of the Cosmos integrees and the newly-hired ADs was discriminatory for lack of substantial basis or valid criteria; directed petitioner to realign or readjust the Cosmos integrees’ basic salaries at par with those of the newly-hired ADs; declared that the P550.00 deduction from the union members’ basic salary in lieu of one 45-kg. sack of rice every month was a violation of Article X of the CBA and Article 100 of the Labor Code, as amended; and directed petitioner to comply with Article X of the CBA by giving rice ration free of charge and to cease and desist from deducting P550.00 from the monthly salaries of the concerned employees, effective February 2012. The VA held that the lower salary rate given to the Cosmos integrees smacked of discrimination given that they held the same position, performed the same work, shared the same functions, and had the same job description as the newly-hired ADs. Under the principle of equal pay for equal work, the Cosmos integrees’ failure to meet the new set of qualifications for ADs in view of their over-age and lack of educational attainment did not justify their lower salary rates. The VA also found that the P550.00 deduction and its conversion into a 45-kg. sack of rice ration constituted non-compliance with Article X of the CBA, which provides that the grant of rice ration shall be free of charge, and a violation of the non-diminution rule under Article 100 of the Labor Code, as amended, because the benefit had become part of the employment contract.

Petitioner moved for reconsideration, which was denied in a Resolution dated April 25, 2012. Petitioner received notice of the VA Resolution on May 21, 2012, and filed its petition for review under Rule 43 of the Rules of Court before the CA on June 5, 2012. Respondent countered, among others, that the VA Decision had become final and executory after ten calendar days from receipt pursuant to Article 262-A of the Labor Code, as amended, and that the CA petition must therefore fail. Subsequently, a writ of execution dated July 26, 2013 was issued by the VA and served upon petitioner. Thereafter, petitioner aligned the salaries of the Cosmos integrees with the newly-hired ADs, paid the corresponding wage differentials, refunded the amounts deducted from the union members’ salaries, and stopped the P550.00 monthly deductions from their salaries.

In a Decision dated December 22, 2014, the CA denied the petition on the ground that the VA Decision had attained finality pursuant to Section 5, Article 5 of the CBA, which provides that the decision of the Arbitration Committee shall be final and binding upon the company and the union and the employees and may be enforced in any court of competent jurisdiction. Petitioner’s motion for reconsideration was denied in a Resolution dated September 8, 2015, prompting the present petition for review on certiorari.

• Management Prerogative: Petitioner maintained that the fixing of hiring rates is a management prerogative, and that it may offer newly-hired ADs a more competitive compensation scheme to attract qualified candidates.
• Equal Pay for Equal Work Inapplicable: Petitioner argued that the Cosmos integrees and newly-hired ADs were not similarly situated because of differences in appointment, hiring process, qualifications, skills, and responsibilities; the Cosmos integrees failed basic qualifications such as age and educational attainment, while newly-hired ADs already possessed the minimum requirements and were not required to undergo the same selection process.
• Valid Business Judgment: Petitioner postulated that the unilateral adoption of an upgraded salary scale increasing hiring rates of newly-hired employees without increasing old employees’ rates should be treated as a valid exercise of business judgment based on high productivity and the need to increase the company’s hiring rate; otherwise the employer’s hands would be tied and it would be discouraged from adjusting rates.
• Rice Subsidy Not Diminution: Petitioner contended that the P550.00 monthly rice subsidy to non-union members was automatically converted into an actual 45-kg. sack of rice upon union membership, which is valued more than the amount, and thus not a diminution of benefits.
• Judicial Review Warranted: Petitioner argued that the CA should review the VA rulings on the merits, including the impact of differences in selection processes and qualifications and the proper application of equal pay for equal work vis-a-vis the employer’s business decision.

• Finality of VA Decision: Respondent countered that the VA Decision had become final and executory after ten calendar days from receipt pursuant to Article 262-A of the Labor Code, so the CA petition must fail.
• Timeliness of CA Petition: Respondent raised that the petition for review before the CA was filed out of time.
• Discrimination: Respondent claimed that the Cosmos integrees were being discriminated against the newly-hired ADs in light of the salary disparity.
• Non-Diminution Violation: Respondent reiterated that the monthly P550.00 deduction from the basic salaries of new union members constitutes a violation of the non-diminution rule under Article 100 of the Labor Code and Article X of the CBA.

• Finality of the VA Decision: Whether the CA correctly held that the VA Decision can no longer be the subject of review for having attained finality pursuant to Section 5, Article 5 of the CBA.
• Rice Subsidy Conversion: Whether the conversion of the monthly P550.00 rice subsidy into one 45-kg. sack of rice upon union membership violates Article 100 of the Labor Code and Article X of the CBA.
• Timeliness of the CA Petition: Whether the petition for review before the CA was filed out of time.

• Finality of the VA Decision: No. The CBA’s finality stipulation does not preclude judicial review; voluntary arbitrators act in a quasi-judicial capacity, and Rule 43 is the proper remedy. The CA erred in refusing review.
• Rice Subsidy Conversion: Remanded. The Supreme Court did not resolve the merits; it ordered the CA to resolve this issue on remand.
• Timeliness of the CA Petition: Remanded. The Supreme Court did not resolve the merits; it ordered the CA to resolve this issue on remand.

• Finality of the VA Decision: Arbitration in labor law is the reference of a labor dispute to an impartial third person for determination based on evidence and arguments, with the parties bound to accept the decision as final and binding. However, voluntary arbitrators act in a quasi-judicial capacity; their judgments or final orders declared final by law are not exempt from judicial review when warranted. Any agreement stipulating that the arbitrator’s decision shall be final and unappealable cannot preclude in proper cases the power of judicial review inherent in courts. Case law holds that the proper remedy to reverse or modify a VA decision or award is an appeal before the CA under Rule 43 on questions of fact, law, mixed questions of fact and law, or a mistake of judgment; in several cases, certiorari under Rule 65 has been allowed where the VA acted without or in excess of jurisdiction or with grave abuse of discretion. Petitioner availed of the correct mode by filing a Rule 43 petition. The petition assailed the VA award on the ground that the disparity in wages was not discriminatory because the Cosmos integrees and newly-hired ADs were not similarly situated due to differences in selection processes and qualifications, and that the higher salary rates were a management prerogative and valid business judgment. The Court saw the prima facie reasonableness of these asseverations and found that the merits warranted judicial review. The CA should have looked into the soundness of the VA rulings, particularly the impact of the differences in selection processes and qualifications and the proper application of the equal pay for equal work principle vis-a-vis the employer’s business decision to adopt a more competitive compensation scheme. Borrowing from Chung Fu Industries (Phils.), Inc. vs. CA, the CA erred in refusing to look into the merits despite a prima facie showing of grounds warranting judicial review, effectively depriving petitioner of the opportunity to prove or substantiate its allegations. The separate issues left untouched—the rice subsidy conversion and the timeliness of the CA petition—reinforced the conclusion that the CA should not have refused judicial review notwithstanding the CBA stipulation. A remand was therefore in order.
• Rice Subsidy Conversion: The CA left untouched the issue of whether the conversion of the monthly P550.00 rice subsidy into one 45-kg. sack of rice upon union membership violates Article 100 of the Labor Code and Article X of the CBA. The Court found the materiality of this issue reinforced the conclusion that the CA should not have refused to exercise judicial review notwithstanding the CBA finality stipulation. It did not resolve the merits and instead ordered remand for prompt resolution.
• Timeliness of the CA Petition: The CA also left untouched respondent’s issue of whether the petition for review was filed out of time. The Court found this issue material and included it among those to be resolved on remand. It did not resolve the merits.

• Quasi-Judicial Nature of Voluntary Arbitrators and Judicial Review — Voluntary arbitrators, though chosen by the parties, act in a quasi-judicial capacity. Their judgments or final orders declared final by law are not exempt from judicial review when warranted. The Court applied this to hold that the CBA’s finality stipulation did not bar review.
• Finality Stipulations Cannot Oust Judicial Review — Any agreement stipulating that the arbitrator’s decision shall be final and unappealable, and that no further judicial recourse may be availed of, cannot preclude in proper cases the power of judicial review inherent in courts. The Court relied on this to set aside the CA’s refusal to review.
• Proper Remedy from a Voluntary Arbitrator’s Award — The proper remedy to reverse or modify a VA decision or award is an appeal before the CA under Rule 43 on questions of fact, law, mixed questions of fact and law, or a mistake of judgment. In certain cases, certiorari under Rule 65 may be filed where the VA acted without or in excess of jurisdiction or with grave abuse of discretion. The Court found petitioner availed of the correct mode under Rule 43.
• Remand Where CA Refuses Review Despite Prima Facie Showing — Where there is a prima facie showing of grounds warranting judicial review, the CA should not refuse to look into the merits; doing so effectively deprives a party of the opportunity to prove or substantiate allegations. The Court remanded for resolution of all issues, including those left untouched.
• Equal Pay for Equal Work (Scope on Remand) — The Court did not adopt or reject the VA’s application of the equal pay for equal work principle. It held that the CA should determine the proper application of that principle vis-a-vis the employer’s business decision to adopt a more competitive compensation scheme in light of human resource demands.

• "Any agreement stipulating that 'the decision of the arbitrator shall be final and unappealable' and 'that no further judicial recourse if either party disagrees with the whole or any part of the arbitrator's award may be availed of' cannot be held to preclude in proper cases the power of judicial review which is inherent in courts." — This is the Court’s core formulation of why the CBA’s finality stipulation did not bar review.
• "Case law holds that the proper remedy to reverse or modify a Voluntary Arbitrator's or a Panel of Voluntary Arbitrators' decision or award is to appeal the award or decision before the CA under Rule 43 of the Rules on questions of fact, of law, mixed questions of fact and law, or a mistake of judgment." — This identifies the correct mode of review from a VA award.
• "In this case, petitioner availed of the correct mode of review of the VA Decision by filing a petition for review with the CA under Rule 43 of the Rules, and in conformity with prevailing jurisprudence." — This applies the remedy to petitioner and supports the finding that the CA erred in dismissing the petition on finality grounds.
• "In fine, a remand to the CA for the prompt resolution of all these issues, including any other ancillary issues which the parties may have raised before it, is, therefore, in order." — This states the dispositive directive and the scope of remand.

• Luzon Dev. Bank vs. Association of Luzon Dev. Bank Employees, 319 Phil. 262, 266 (1995) — Cited for the definition of arbitration in labor law and for the quasi-judicial capacity of voluntary arbitrators.
• Chung Fu Industries (Phils.), Inc. vs. CA, G.R. No. 96283, February 25, 1992, 206 SCRA 545, 556, 558 — The Court borrowed its language; it similarly involved a restrictive stipulation on appeal from an arbitral award and held that the CA erred in refusing to look into the merits despite a prima facie showing of grounds warranting judicial review.
• ABS-CBN Broadcasting Corp. vs. World Interactive Network Systems (WINS) Japan Co., LTD., 568 Phil. 282, 293 (2008) — Cited for the rule that an agreement making the arbitrator’s decision final and unappealable cannot preclude judicial review, and for the availability of certiorari in proper cases.
• Philippine Electric Corporation vs. CA, G.R. No. 168612, December 10, 2014, 744 SCRA 361, 377-378 — Cited among cases holding that the proper remedy from a VA award is a Rule 43 petition for review before the CA.
• Leyte IV Electric Cooperative, Inc. vs. LEYECO IV Employees Union-ALU, 562 Phil. 743, 754 (2007) — Cited for the Rule 43 remedy and for the exceptional allowance of Rule 65 certiorari from VA judgments.
• Mora vs. Avesco Marketing Corporation, 591 Phil. 827, 834-836 (2008) — Cited as an example where the Court allowed a petition for certiorari from the VA’s judgment to the CA under Rule 65.

• Article 100, Labor Code — Prohibits the elimination or diminution of supplements or other employee benefits. The VA declared the P550.00 deduction in lieu of rice ration a violation; the Supreme Court left the issue for remand.
• Article 262-A, Labor Code — Provides that the VA award or decision shall be final and executory after ten calendar days from receipt. Respondent invoked it to argue the CA petition was late; the Supreme Court noted the timeliness issue was left untouched and remanded.
• Article X, CBA — Requires the company to continue granting rice ration free of charge, one 45-kg. sack per month. The VA found the P550.00 deduction non-compliant; the Supreme Court remanded the issue.
• Article 5, Section 5, CBA — States that the Arbitration Committee’s decision shall be final and binding and may be enforced in any court. The CA relied on it; the Supreme Court held it does not preclude judicial review.
• Rule 43, Rules of Court — The proper mode of appeal from a VA decision to the CA on questions of fact, law, mixed questions, or mistake of judgment. Petitioner used it; the Court found it correct.
• Rule 65, Rules of Court — Certiorari may be filed from the VA’s judgment to the CA where the VA acted without or in excess of jurisdiction or with grave abuse of discretion. Cited as an alternative remedy in proper cases.

Sereno, C.J., Leonardo-De Castro, Bersamin, and Caguioa, JJ., concur.