Ergonomic Systems Philippines, Inc. vs. Enaje

Only the local union, as the principal and real party in interest to the Collective Bargaining Agreement, may invoke the union security clause; the federation, being merely an agent of the local union, has no independent authority to demand the dismissal of union officers based on acts of disloyalty to the federation rather than to the local union. Consequently, union officers may be dismissed only for knowingly participating in an illegal strike, while union members may be dismissed for participating in illegal strikes only if they committed illegal acts during the strike, mere participation being insufficient grounds for termination.

Ergonomic Systems Philippines, Inc. (ESPI) employed respondents as union officers and members of the Ergonomic System Employees Union-Workers Alliance Trade Unions (local union), which was affiliated with the Workers Alliance Trade Unions-Trade Union Congress of the Philippines (Federation). On October 29, 1999, the local union entered into a Collective Bargaining Agreement (CBA) with ESPI valid for five years. Prior to the CBA's expiration, on November 15, 2001, the union officers secured independent registration of the local union with the Department of Labor and Employment, signaling an intent to disaffiliate from the Federation.

• The CBA and Union Affiliation: On October 29, 1999, the Ergonomic System Employees Union-Workers Alliance Trade Unions (local union) entered into a Collective Bargaining Agreement (CBA) with Ergonomic Systems Philippines, Inc. (ESPI), valid for five years until October 2004. The local union was affiliated with the Workers Alliance Trade Unions-Trade Union Congress of the Philippines (Federation) but had not been independently registered.
• Independent Registration and Federation Charges: On November 15, 2001, before the CBA expired, the union officers secured independent registration of the local union with the Department of Labor and Employment Regional Office. Subsequently, the Federation charged the union officers with disloyalty for attending seminars of other unions without consent and for initiating disaffiliation during the freedom period.
• Expulsion and Termination of Officers: On January 10, 2002, the Federation found twelve union officers guilty of disloyalty and expelled them from the Federation. On January 11, 2002, the Federation furnished ESPI with its decision and recommended the officers' termination pursuant to the union security clause in the CBA. ESPI notified the officers and, after they refused to receive notices or respond, terminated them on February 20, 2002.
• The Strike and Work Stoppage: On February 26, 2002, the local union filed a notice of strike with the National Conciliation and Mediation Board (NCMB). From February 21 to 23, 2002, the union staged noise barrages and "slow down" activities. On February 22, 2002, forty union members refused to submit Daily Production Reports (DPRs). On February 26, 2002, twenty-eight members abandoned work and held a picket, while ten others failed to report for work without official leave from February 26 to March 2, 2002.
• Termination of Members: ESPI required the union members to explain their refusal to submit DPRs and their abandonment of work. When they refused to receive notices, received them under protest, or failed to submit explanations, ESPI issued letters of termination for refusal to submit DPRs and for abandonment of work.

• Procedural Defects in the Strike: Petitioners argued that the respondents failed to comply with mandatory procedural requirements for a valid strike, specifically the taking of a strike vote and the observance of the seven-day period after submission of the strike vote report to the NCMB.
• Validity of Dismissal: Petitioners maintained that mere participation of union officers in an illegal strike constitutes sufficient ground for termination of employment, and that union members committed illegal acts during the strike warranting dismissal, including obstruction of ingress and egress and acts of violence, coercion, or intimidation.
• Impossibility of Reinstatement: Petitioners contended that reinstatement was no longer possible because the industrial building owned by Ergo Contracts Philippines, Inc. was totally destroyed by fire on February 6, 2005.
• Union Security Clause: Petitioners asserted that the respondents violated the union security clause in the CBA, and that their termination was effected in response to the Federation's valid demand.

• Invalid Grounds for Dismissal: Respondents countered that they were not legally terminated because the grounds relied upon were nonexistent; they merely disaffiliated from the Federation but remained loyal to the local union, and thus did not violate the union security clause.
• Feasibility of Reinstatement: Respondents argued that reinstatement was not physically impossible because the building destroyed by fire belonged to Ergo Contracts Philippines, Inc., not ESPI, and that ESPI had other offices nationwide where they could be reinstated.
• Entitlement to Separation Pay: Respondents maintained that having failed to comply with the order to reinstate them and having ceased operations, petitioners must be ordered to pay separation pay.

• Union Security Clause Invocation: Whether the Federation may invoke the union security clause in demanding the respondents' dismissal.
• Procedural Compliance for Strike: Whether the strike conducted by the respondents complied with the legal requirements.
• Validity of Dismissal: Whether the respondents' dismissal from employment was valid.

• Union Security Clause: The Federation could not invoke the union security clause. Only the local union, as the principal and real party in interest to the CBA, may invoke the clause; the Federation is merely an agent. The CBA recognized the local union, not the Federation, as the sole and exclusive bargaining agent. Disloyalty to the Federation does not constitute disloyalty to the local union, and the local union retains the right to disaffiliate from the Federation.
• Strike Legality: The strike was illegal. While the cooling-off period need not be observed for union busting, the requirements of a strike vote approved by majority of the total union membership and the submission of a report to the NCMB at least seven days before the intended strike are mandatory. The strike commenced on February 21, 2002, but the strike vote was taken only on April 2, 2002, and the report was submitted on April 4, 2002.
• Liability of Union Officers: Union officers who knowingly participate in an illegal strike may be declared to have lost their employment status. The union officers were properly dismissed for knowingly participating in the illegal strike.
• Liability of Union Members: Ordinary union members cannot be terminated for mere participation in an illegal strike; proof must be adduced showing they committed illegal acts during the strike. The petitioners failed to present sufficient evidence that the union members committed illegal acts such as obstruction or violence; thus, their dismissal was illegal.
• Relief for Union Members: Union members are not entitled to back wages because they did not render work during the illegal strike, and the exception to the "fair day's wage for a fair day's labor" rule applies only when the strike is legal. However, given the passage of considerable time, separation pay equivalent to one month's salary for each year of service is awarded in lieu of reinstatement.

• Union Security Clause Requisites: Before an employer terminates an employee pursuant to the union security clause, it must determine and prove that: (1) the union security clause is applicable; (2) the union is requesting 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.
• Principal-Agent Relationship in Labor Federations: A local union does not owe its existence to the federation with which it is affiliated; it is a separate and distinct voluntary association. Mere affiliation does not divest the local union of its own personality, neither does it give the mother federation the license to act independently of the local union. The local union is the principal; the federation is merely the agent.
• Right to Disaffiliate: Concomitant to the local union's prerogative to affiliate with a federation is its right to disaffiliate therefrom upon the terms laid down in the agreement which brought such affiliation into existence.
• Distinction Between Union Officers and Members in Illegal Strikes: Article 279(a) of the Labor Code distinguishes between union officers and members. A union officer may be dismissed for knowingly participating in an illegal strike, even without committing illegal acts. An ordinary union member cannot be terminated for mere participation in an illegal strike; proof must be adduced showing that he or she committed illegal acts during the strike.
• Back Wages During Illegal Strikes: The principle of "a fair day's wage for a fair day's labor" dictates that dismissed workers are entitled only to reinstatement without back wages when they participated in an illegal strike, as they did not render work for the employer. The exception allowing back wages despite non-performance of work requires that the strike be legal.
• Separation Pay in Lieu of Reinstatement: Separation pay may be awarded as an alternative to reinstatement in cases where reinstatement is no longer feasible due to the passage of a long period of time, when it would be inimical to the employer's interest, or where strained relations exist between the parties.

• "A local union does not owe its existence to the federation with which it is affiliated. It is a separate and distinct voluntary association owing its creation to the will of its members. Mere affiliation does not divest the local union of its own personality, neither does it give the mother federation the license to act independently of the local union. It only gives rise to a contract of agency, where the former acts in representation of the latter. Hence, local unions are considered principals while the federation is deemed to be merely their agent."
• "The right of a local union to disaffiliate from its mother federation is not a novel thesis unillumined by case law... The sole essence of affiliation is to increase, by collective action, the common bargaining power of local unions for the effective enhancement and protection of their interests... [L]ocal unions remain the basic units of association, free to serve their own interests subject to the restraints imposed by the constitution and bylaws of the national federation, and free also to renounce the affiliation upon the terms laid down in the agreement which brought such affiliation into existence."
• "In the determination of the consequences of illegal strikes, the law makes a distinction between union members and union officers. The services of an ordinary union member cannot be terminated for mere participation in an illegal strike; proof must be adduced showing that he or she committed illegal acts during the strike. A union officer, on the other hand, may be dismissed, not only when he actually commits an illegal act during a strike, but also if he knowingly participates in an illegal strike."
• "With respect to back wages, the principle of a 'fair day's wage for a fair day's labor' remains as the basic factor in determining the award thereof. If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed or otherwise illegally prevented from working... [T]he Court stressed that for this exception to apply, it is required that the strike be legal, a situation that does not obtain in the case at bar."

• PICOP Resources, Incorporated (PRI) v. Taneca, 641 Phil. 175 (2010) — Cited for the definition of union security and the various forms it may take (closed shop, union shop, maintenance of membership).
• PICOP Resources, Inc. v. Dequilla, 678 Phil. 118 (2011) — Established the three requisites that must be met before an employer may terminate an employee pursuant to the union security clause.
• Coastal Subic Bay Terminal, Inc. v. Department of Labor and Employment - Office of the Secretary, 537 Phil. 459 (2006) — Affirmed the principle that local unions are principals and federations are merely their agents in the contract of agency created by affiliation.
• Philippine Skylanders, Inc. v. NLRC, 426 Phil. 35 (2002) — Discussed the right of a local union to disaffiliate from its mother federation.
• Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc. — Landmark case upholding the right of local unions to separate from their mother federation on the ground that local unions do not owe their creation and existence to the national federation.
• G & S Transport Corporation v. Infante, 559 Phil. 701 (2007) — Held that dismissed workers who participated in an illegal strike are entitled only to reinstatement without back wages.
• Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Sulpicio Lines, Inc., 470 Phil. 115 (2004) — Distinguished between the liability of union officers and members for participating in illegal strikes.

• Article 234-A, Labor Code (as renumbered) — Provides that a chartered local union acquires legal personality through the charter certificate issued by a duly registered federation or national union.
• Article 278, Labor Code (as renumbered) — Enumerates the procedural requirements for a valid strike, including the notice of strike, strike vote, and submission of report.
• Article 278-C, Labor Code (as renumbered) — Provides that the cooling-off period shall not apply in cases of union busting.
• Article 279(a), Labor Code (as renumbered) — Prescribes the consequences for union officers and workers who participate in illegal strikes or commit illegal acts during strikes.

Samuel R. Martires (ponente), Presbitero J. Velasco, Jr. (Chairperson, on official leave), Lucas P. Bersamin, Marvic M.V.F. Leonen, and Alexander G. Gesmundo.