Confederated Sons of Labor vs. Anakan Lumber Company, et al.

A collective bargaining stipulation does not establish a strict closed shop, and does not obligate the employer to dismiss employees for loss of union membership, unless it clearly and unequivocally requires that employees must continue to remain members in good standing to keep their jobs. Such an undertaking is harsh and must be strictly construed, with doubts resolved against the existence of a closed shop.

Anakan Lumber Company and United Workers' Union, a labor organization with more than 1,000 laborers and employees of the company, executed a contract entitled "Collective Bargaining and Closed Shop Agreement" on January 23, 1955. Article II of that agreement granted the union the exclusive right and privilege to supply the company with laborers, employees, and workers in specified departments and bound the company to employ or hire only persons who were members of the union. The Confederated Sons of Labor was a separate labor organization involved in the dispute. The proceeding was instituted under Republic Act No. 875 as an unfair labor practice case.

On January 23, 1955, Anakan Lumber Company and United Workers' Union, which had more than 1,000 laborers and employees of the company, entered into a contract entitled "Collective Bargaining and Closed Shop Agreement." Article II of the agreement provided that the union shall have the exclusive right and privilege to supply the company with such laborers, employees, and workers as were necessary in the logging, mechanical, sawmill, office, logponds, motor pools, security guards, and all departments in its many phases of operations, excepting positions highly technical and confidential in character or positions carrying the exercise of authority in the interest of the company not merely clerical or routinary; the company agreed to employ or hire in any of its departments only persons who were members of the union. Article III-A allowed the company to dismiss or remove any employee or laborer for gross inefficiency, misconduct, gross disrespect to the manager, misbehavior, or culpable negligence, or commission of any crime or misdemeanor in the course of employment, only upon a written report by the responsible supervisor or company official to the manager, with notice to the union president three days before the dismissal, and with the union president's consent or dissent in writing.

Subsequently, 46 employees of the company and members of respondent union joined petitioner Confederated Sons of Labor, another labor organization. As a consequence, the 46 employees were expelled from respondent union pursuant to its constitution and by-laws. Thereafter, respondent union demanded from the company the dismissal of these 46 employees upon the authority of Article II of the agreement. Claiming to act in pursuance of Article II and in compliance with the agreement, the company dismissed the 46 employees. Because they were members of petitioner, petitioner caused the unfair labor practice proceedings to be instituted.

On August 24, 1955, after the dismissal of all the employees mentioned except one who was dismissed on August 30, 1955, Article II was amended to read that the union shall have the exclusive right and privilege to supply the company with such skilled and/or unskilled laborers, employees, and workers as were necessary in the specified departments, whether on apprenticeship or temporary status, excepting technical and confidential positions and positions carrying authority not merely clerical or routinary, and that the company agrees to employ or hire in any department only persons who were members of the union and to retain in its employ only such employees or laborers who remain members of good standing of the union, subject to limitations on apprentices and temporary employees.

The record thus placed 45 of the 46 dismissed employees as having been dismissed before the August 24, 1955 amendment, while one was dismissed on August 30, 1955, after the amendment. The dismissals gave rise to the unfair labor practice complaint filed by petitioner against the company and respondent union.

• Union Domination (Dismissed): Petitioner originally charged the company with dominating, assisting, and interfering with the administration of respondent United Workers' Union and with contributing financial and other support to it; this charge was later dismissed on petitioner's motion with respondents' conformity.
• Discrimination in Hire or Tenure: Petitioner charged the company with discriminating in regard to hire or tenure of employment for the purpose of encouraging membership in respondent union and/or discouraging membership in petitioner, by dismissing without cause all workers affiliated with petitioner and replacing them with new ones.
• Union-Induced Discrimination: Petitioner charged respondent union with causing the company to discriminate against the workers by demanding their dismissal, or by expelling them on grounds other than the usual terms and conditions of membership made available to other members, in violation of Section 4(b), subparagraph 2 of Republic Act No. 875.

• Closed Shop Interpretation: Respondents maintained that since Article II gave respondent union the exclusive right and privilege to supply the company with laborers, employees, and workers and bound the company to employ or hire only union members, laborers, employees, and workers who ceased to be members of respondent union must be expelled from the company.
• Compliance with Agreement: Respondents claimed that the company dismissed the 46 employees pursuant to Article II and in compliance with the collective bargaining agreement.
• Good Faith: The company claimed it acted under the honest belief that it was bound to dismiss the employees pursuant to the agreement.

• Closed Shop Under Article II: Whether Article II of the collective bargaining agreement bound the company to dismiss the 46 employees who ceased to be members of respondent union.
• Effect of Amendment: Whether the August 24, 1955 amendment to Article II affected the legality of the dismissals that occurred before it.
• Reinstatement: Whether the 45 employees dismissed before the amendment should be reinstated.
• Good Faith: Whether the company was entitled to the benefit of doubt for acting under an honest belief that the agreement required dismissal.

• Closed Shop Under Article II: No. Article II did not establish a strict closed shop; it only required that laborers, employees, and workers hired or employed be members of respondent union at the commencement of the employment relation, not that they remain members in good standing to keep their jobs.
• Effect of Amendment: The August 24, 1955 amendment adding a retention requirement confirmed that no such requirement existed before; the dismissal of 45 employees before the amendment was illegal.
• Reinstatement: Yes. The 45 laborers and employees dismissed before the amendment should be reinstated, with costs against respondents.
• Good Faith: The company was given the benefit of doubt as to its claim of honest belief because the agreement was entitled "Closed Shop" and there was no local decision squarely in point.

• Closed Shop Under Article II: The Court defined a closed shop as an agreement whereby an employer binds himself to hire only members of the contracting union who must continue to remain members in good standing to keep their job. It cited National Labor Union vs. Aguinaldo's Echague, Inc. and Rothenberg on Labor Relations. Article II did not provide that employees must continue to remain members in good standing of respondent union to keep their jobs. Therefore, the agreement did not establish a closed shop except in a very limited sense: laborers, employees, and workers engaged by the company after the signing of the agreement on January 23, 1955, must be members of respondent union. It did not affect the company's right to retain those already working on or before that date, or those hired or employed subsequently while they were members of respondent union but who thereafter resigned or were expelled. The Court emphasized that to bind an employer under a collective bargaining agreement to dismiss employees for non-union membership, the stipulation must be clear and unequivocal, leaving no room for doubt; such an undertaking is harsh and must be strictly construed, with doubts resolved against the existence of a closed shop. Article II established the exclusive right of respondent union to supply laborers and limited the company's authority to employ or hire them, requiring only that they be members at the commencement of the employer-employee relation. Membership was not a condition for continuation of the relation or retention of a laborer or employee engaged either before the agreement or while he was a member of the union. Article III-A, which enumerated grounds for dismissal by the company, did not include discontinuance of membership in respondent union; had the parties intended a strict closed shop, they would have inserted that ground. Their failure to do so strongly indicated that discontinuance of membership was not understood to be a ground for dismissal.
• Effect of Amendment: The August 24, 1955 amendment added the clause that the company agrees "to retain in its employ only such employees or laborers who remain members of good standing of the union." Because this amendment came after the dismissal of all the employees except one dismissed on August 30, 1955, the addition of the retention clause indicated that the company was not prohibited prior thereto from retaining in its employ laborers who did not remain members in good standing of respondent union. Thus, the dismissal of 45 of the 46 laborers before the amendment was illegal.
• Reinstatement: Since the dismissal of the 45 laborers before the amendment was illegal, they should be reinstated. The dispositive portion ordered the reinstatement of said 45 laborers and employees, with costs against respondents.
• Good Faith: Considering that the agreement was entitled "Closed Shop" and that there was no local decision squarely in point, the company was given the benefit of doubt as regards its claim that it acted under the honest belief that it was bound to dismiss the employees pursuant to the agreement. This consideration did not alter the illegality of the pre-amendment dismissals or the order of reinstatement for the 45 employees.

• Closed Shop Agreement — A closed shop is an agreement whereby an employer binds himself to hire only members of the contracting union who must continue to remain members in good standing to keep their job. The Court applied this definition and found that Article II of the collective bargaining agreement did not contain the continued-membership requirement, so it did not establish a strict closed shop.
• Strict Construction of Closed Shop Stipulations — In order that an employer may be deemed bound under a collective bargaining agreement to dismiss employees for non-union membership, the stipulation to this effect must be so clear and unequivocal as to leave no room for doubt. Such an undertaking is harsh and must be strictly construed, and doubts must be resolved against the existence of a closed shop. The Court applied this rule because Article II did not clearly require continued union membership as a condition for retention.
• Limited Closed Shop / Union Security Clause — Article II gave respondent union the exclusive right to supply laborers and limited the company's authority to employ or hire them, requiring only that they be union members at the commencement of the employment relation. Membership was not a condition for continuation of the relation or retention of a laborer or employee engaged either before the agreement or while he was a member of the union.
• Subsequent Amendment as Confirmation of Prior Absence — The addition, after the disputed dismissals, of a clause requiring the company to retain only employees who remain members in good standing indicated that the company was not previously prohibited from retaining laborers who did not remain members in good standing. The Court used this to confirm that the pre-amendment dismissals of 45 employees were illegal.

• "Closed-Shop agreement is an agreement whereby an employer binds himself to hire only members of the contracting union who must continue to remain members in good standing to keep their job." — This is the Court's canonical definition of a closed shop, which it used to measure whether Article II created the obligation to dismiss employees who lost union membership.
• "In order that an employer may be deemed bound, under a collective bargaining agreement, to dismiss employees for non-union membership, the stipulation to this effect must be so clear and unequivocal as to leave no room for doubt thereon. An undertaking of this nature is so harsh that it must be strictly construed, and doubts must be resolved against the existence of 'closed shop'." — This passage states the strict-construction rule applied to closed-shop stipulations and is central to the Court's ratio decidendi.
• "In short, the dismissal of 45 out of the 46 laborers in question, prior to said amendment of Article II, was illegal, and, hence, said 45 laborers should be reinstated." — This is the Court's direct holding on the legality of the pre-amendment dismissals and the corresponding relief of reinstatement.
• "The addition, to the last part of the original Article II, of the clause 'and to retain in its employ only such employees or laborers who remain members of good standing of the union,' indicates that the company was not prohibited prior thereto from retaining in its employ such laborers as do not remain members of good standing of respondent union." — This explains why the subsequent amendment confirmed that the original Article II did not require continued union membership for retention.

• National Labor Union vs. Aguinaldo's Echague, Inc., 51 Off. Gaz. No. 6, p. 2899 — Cited for the definition of a closed-shop agreement: an employer binds himself to hire only members of the contracting union who must continue to remain members in good standing to keep their job.
• Bacolod-Murcia Milling Co., Inc. and Alfredo T. Garcia vs. National Employees-Workers Security Union, 53 Off. Gaz., 615 — Cited as a source quoting the closed-shop definition relied upon by the Court in interpreting Article II.

• Section 4(a), subparagraph 4, Republic Act No. 875 — Defines an unfair labor practice by an employer, including discrimination in regard to hire or tenure of employment to encourage or discourage membership in any labor organization; this was charged against Anakan Lumber Company.
• Section 4(b), subparagraph 2, Republic Act No. 875 — Defines an unfair labor practice by a labor organization, including causing or attempting to cause an employer to discriminate against an employee in violation of Section 4(a), subparagraph 4; this was charged against United Workers' Union.
• Article II, Collective Bargaining and Closed Shop Agreement (January 23, 1955) — Granted the union the exclusive right and privilege to supply the company with laborers, employees, and workers in specified departments and bound the company to employ or hire only union members. The Court held this did not establish a strict closed shop because it did not require continued membership for retention.
• Article III-A, Collective Bargaining and Closed Shop Agreement — Enumerated the grounds for dismissal by the company. The absence of discontinuance of union membership as a ground indicated that the parties did not intend a strict closed shop.
• August 24, 1955 Amendment to Article II — Added the clause requiring the company to retain in its employ only employees or laborers who remain members in good standing of the union. The Court held this confirmed that the original Article II did not contain such a requirement.

Paras, C.J., Bengzon, Montemayor, Bautista Angelo, Labrador, Reyes, J.B.L., Endencia and Gutierrez David, JJ., concur.