Dinglasan vs. National Labor Union

Back wages are not warranted in an unfair labor practice case where the employer acted in good faith under an honest belief that no employer-employee relationship existed, and where the cessation of work resulted from the employees' voluntary refusal to return rather than from the employer's willful or discriminatory act. Reinstatement may still be ordered, but the affirmative relief of back pay is discretionary under Section 5 of Republic Act No. 875 and must be withheld where no willful violation is shown.

Benedicto Dinglasan operated jeepneys under the so-called "boundary system," under which drivers paid him a fixed daily rental ("boundary") for the use of his vehicles and kept the remainder of their earnings. The National Labor Union, an affiliate of a local drivers' association organized among Dinglasan's drivers, filed an unfair labor practice complaint before the Court of Industrial Relations. The threshold question of whether the boundary system created an employer-employee relationship had already been litigated: the CIR initially held no such relationship existed, but the Supreme Court reversed that ruling in a prior decision (G.R. No. L-7945, March 23, 1956), which became final on May 29, 1956. The present petition concerns the subsequent proceedings on the merits of the unfair labor practice charge.

Benedicto Dinglasan was the owner and operator of jeepneys driven by members of the respondent National Labor Union under the "boundary system," a rental arrangement under which drivers paid him a fixed daily amount for the use of each vehicle. On June 24, 1953, a local drivers' association was organized among Dinglasan's drivers, and on June 26, 1953, this association affiliated with the respondent union. Dinglasan learned of the union's formation on the same day.

According to the respondent union, upon learning of the unionization, Dinglasan decided on June 27, 1953, to dismiss all the driver members by refusing them the use of the jeepneys regularly assigned to them, constituting an unlawful lockout. Dinglasan presented a different account. He testified that, honestly believing no employer-employee relationship existed between him and the drivers under the boundary system, and fearing that the drivers intended to declare a strike and might abandon his jeepneys in the streets, he decided as a precautionary measure to suspend operations temporarily and consult his attorney. The following morning, June 28, he announced to the drivers that they could take out the jeepneys. Some four or five drivers accepted the offer, but the others refused to return. Those who had taken out the jeepneys were admonished by the striking drivers to return the vehicles and join the strike, forcing them to come back after a few hours. This standoff continued for several days. By October 8, 1953, when the case was first submitted for decision, thirty-four of the forty-six drivers had already returned to work under the same conditions as before June 27, 1953.

The Supreme Court found Dinglasan's version more credible, relying on the testimony of Dinglasan and his witnesses—three of whom were among his drivers, two of whom were disinterested persons, two were patrolmen, and two were his employees—as against the sole testimony of Juanito Cruz, president of the local union group, and the hearsay declarations of Zosimo Yjares. The Court agreed with the CIR that the suspension of operations on June 27 was technically a lockout under the Industrial Peace Act, but found significant mitigating circumstances: Dinglasan's good-faith belief that he was not the drivers' employer—a belief the Supreme Court itself had initially shared—and his prompt effort to recall the drivers the very next day, which was met with their voluntary refusal and active interference with those who attempted to return.

• No Lockout: Petitioner claimed he did not lock out his drivers on June 27, 1953, as contended by the respondent union. He maintained that he merely suspended operations temporarily as a precautionary measure, fearing the drivers would declare a strike and abandon his jeepneys in the streets.
• Good Faith: Petitioner argued that he honestly believed no employer-employee relationship existed between him and the drivers under the boundary system, and that he acted under that belief in suspending operations—a belief the Supreme Court itself had initially and unanimously shared.
• Prompt Recall: Petitioner asserted that he immediately urged the drivers to return to work the following morning, June 28, and that the continued stoppage was caused by the drivers' own voluntary refusal to resume work and their active dissuasion of those who attempted to return, not by any willful act on his part.

• Unlawful Lockout: Respondent union contended that petitioner, upon learning that his drivers had formed a labor union, refused on June 27, 1953, to let them use and operate the jeepneys regularly assigned to them, constituting an unlawful lockout and unfair labor practice under Republic Act No. 875.
• Anti-Union Motive: Respondent alleged that petitioner's act was motivated by his desire not to have a union within his company, as he dismissed the drivers upon learning of the union's formation.

• Unfair Labor Practice: Whether petitioner committed unfair labor practice by locking out his drivers on June 27, 1953.
• Back Wages: Whether the drivers are entitled to back wages in light of petitioner's good-faith belief and the drivers' voluntary refusal to return to work.

• Unfair Labor Practice: Yes. The suspension of operations on June 27, 1953, was technically a lockout under the Industrial Peace Act, entitling the drivers to reinstatement, as it was done without the required notice and without collective bargaining negotiations.
• Back Wages: No. Reinstatement was ordered without back wages, because petitioner acted in good faith under an honest belief that no employer-employee relationship existed, and the continued stoppage resulted from the drivers' voluntary refusal to return rather than from any willful unfair labor practice.

• Unfair Labor Practice: The Court agreed with the CIR that the act of suspending the operation of the jeepneys on June 27, 1953, was legally and technically not in consonance with the Industrial Peace Act, amounting to a virtual lockout. The lockout was effected without the required notice and without any collective bargaining negotiations. The mere suspicion that a strike might be called did not justify the act. The drivers were therefore entitled to reinstatement. However, the Court found petitioner's version of events more credible, supported by multiple witnesses including disinterested persons and patrolmen, as against the sole testimony of the union president and hearsay declarations.

• Back Wages: The Court exercised the discretion afforded by Section 5 of Republic Act No. 875, which allows the court to consider the employer's good faith in granting affirmative reliefs. Two circumstances warranted denial of back wages. First, there was no willful violation of the Industrial Peace Act: petitioner had honestly believed he was not the employer of the drivers—a belief the Supreme Court itself had initially and unanimously shared before reversing on appeal. Second, petitioner had urged the drivers to return to work the very next morning, June 28, but the drivers not only refused but compelled those who did return to join the strike. The cessation of operations after June 27 was therefore not the direct consequence of petitioner's lockout or any willful discriminatory act, but the result of the drivers' own voluntary and deliberate refusal to return. Relying on Philippines Marine Radio Officers' Association vs. Court of Industrial Relations, 102 Phil. 373, the Court held there is no reason to grant back pay where there has been no willful unfair labor practice or refusal by the employer to admit laborers back to work.

• Good Faith as Bar to Back Wages in Unfair Labor Practice — Where an employer commits an act constituting unfair labor practice but does so in good faith under an honest belief in the legitimacy of his position (e.g., that no employer-employee relationship exists), and where the cessation of work results from the employees' own voluntary refusal to return rather than from the employer's willful act, reinstatement may be ordered but back wages denied. Section 5 of Republic Act No. 875 vests discretion in the court to consider the employer's good faith in determining the scope of affirmative relief.

• Voluntary Refusal to Return to Work — Where the employer promptly offers reinstatement and the employees voluntarily and deliberately refuse to return, the period of unemployment following the employer's offer is attributable to the employees' own conduct, not to the employer's lockout, and does not warrant back wages for that period.

• "while the drivers members of respondent union may, in this case, be entitled to reinstatement, we find no justification for their receiving back wage for the period that they themselves refused to return to work." — This passage states the ratio decidendi on the back-wages issue: the Court's conclusion that voluntary refusal by employees negates entitlement to back wages.

• "the cassation or stoppage of the operation after June 27, was not the direct consequence of petitioner's locking them up or of any willful unfair or discriminatory act of the former, but the result of their (the drivers) voluntary and deliberate refusal to return to work." — This passage articulates the causal-analysis doctrine distinguishing a lockout's initial effect from the employees' subsequent voluntary refusal, which controls the back-wages determination.

• "In the application of the affirmative reliefs granted by law, this good faith of the respondent must be taken into consideration in those portions where the law allows this court or use its sound discretion and judgment." — This passage defines the Court's approach to Section 5 of R.A. 875, anchoring the discretionary denial of back wages in the employer's good faith.

• National Labor Union vs. Dinglasan, 98 Phil. 694 (G.R. No. L-7945) — The prior Supreme Court decision in the same case establishing that an employer-employee relationship existed between Dinglasan and his drivers under the boundary system. This ruling became final on May 29, 1956, and served as the predicate for the unfair labor practice proceedings on the merits.

• Philippines Marine Radio Officers' Association vs. Court of Industrial Relations, 102 Phil. 373 — Controlling precedent followed by the Court for the proposition that back pay is not warranted where there has been no willful unfair labor practice or refusal by the employer to admit laborers back to work. The Court found the circumstances analogous and applied the rule to deny back wages.

• Section 5, Republic Act No. 875 (Industrial Peace Act) — Empowers the court to grant affirmative relief in unfair labor practice cases, including reinstatement with or without back wages, in the exercise of sound discretion and judgment. The Court relied on this provision to consider the employer's good faith as a factor warranting denial of back wages while still ordering reinstatement.

Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Endencia, and Gutierrez David, JJ., concurred.