General Milling Corporation vs. Casio, et al.

An employer who dismisses an employee pursuant to a union security clause in a Collective Bargaining Agreement must still observe procedural due process—specifically, the twin requirements of notice and hearing—and must determine and prove that: (1) the union security clause is applicable; (2) the union is requesting enforcement of the union security provision; and (3) there is sufficient evidence to support the union's decision to expel the employee. The employer's failure to make its own determination of the sufficiency of evidence supporting the union's expulsion decision, and its failure to accord the employee notice and hearing prior to termination, renders the dismissal illegal notwithstanding the validity of the closed shop provision.

General Milling Corporation (GMC) is an employer in Lapu-Lapu City whose rank and file employees were represented by the labor union Ilaw at Buklod ng Mangagawa (IBM)-Local 31 Chapter (Local 31), the sole and exclusive bargaining agent. On November 30, 1991, IBM-Local 31, through its officers and board members, entered into a Collective Bargaining Agreement (CBA) with GMC, effective retroactively to August 1, 1991. The CBA contained union security provisions—specifically, a maintenance of membership clause (Section 3) and a provision authorizing the company, upon written request of the union, to terminate employees who fail to maintain good standing membership (Section 6). Union security clauses are recognized and explicitly allowed under Article 248(e) of the Labor Code, which permits parties to require membership in a recognized collective bargaining agent as a condition for employment.

General Milling Corporation (GMC) was the employer of Ernesto Casio, Rolando Igot, Mario Famador, Nelson Lim, Felicisimo Booc, Procopio Obregon, Jr., and Antonio Aninipok (Casio, et al.), who were regular employees with daily earnings ranging from ₱173.75 to ₱201.50 and length of service varying from eight to 25 years. Casio was elected IBM-Local 31 President for a three-year term in June 1991, while his co-respondents were union shop stewards. The labor union Ilaw at Buklod ng Mangagawa (IBM)-Local 31 Chapter (Local 31) was the sole and exclusive bargaining agent of the rank and file employees of GMC, and on November 30, 1991, IBM-Local 31, through its officers and board members—Virgilio Pino, Paulino Cabreros, Ma. Luna P. Jumaoas, Dominador Booc, Bartolome Auman, Remegio Cabantan, Fidel Valle, Loreto Gonzaga, Edilberto Mendoza, and Antonio Panilag (Pino, et al.)—entered into a Collective Bargaining Agreement (CBA) with GMC, effective retroactively to August 1, 1991. The CBA contained union security provisions: Section 3 required all employees to be members in good standing of the union within thirty days upon signing of the agreement and to maintain such membership as a condition of employment; Section 6 provided that the company, upon written request of the union, shall terminate the services of any employee who fails to fulfill the conditions set forth in Sections 3 and 4, subject to the provisions of the Labor Laws of the Philippines, with the union absolving the company from any and all liabilities.

In a letter dated February 24, 1992, Rodolfo Gabiana, the IBM Regional Director for Visayas and Mindanao, furnished Casio, et al. with copies of Affidavits of GMC employees Basilio Inoc and Juan Potot, charging Casio, et al. with "acts inimical to the interest of the union," and gave them three days from receipt thereof within which to file their answers or counter-affidavits. However, Casio, et al. refused to acknowledge receipt of Gabiana's letter. Subsequently, on February 29, 1992, Pino, et al., as officers and members of IBM-Local 31, issued a Resolution expelling Casio, et al. from the union, stating that Casio, et al. had refused to acknowledge receipt of the letter-complaint, that the three-day period had lapsed prompting the union Board to investigate the charge ex parte, and that after such ex parte investigation the charge had been "more than adequately substantiated by the affidavits/witnesses and documentary exhibits presented." The Resolution recommended that Casio, et al. be dismissed from work.

Gabiana then wrote a letter dated March 10, 1992, addressed to Eduardo Cabahug, GMC Vice-President for Engineering and Plant Administration, informing the company of the expulsion of Casio, et al. and requesting that they "be immediately dismissed from their work for the interest of industrial peace in the plant." Gabiana followed up with another letter dated March 19, 1992, inquiring why Casio, et al. were still employed despite the union's request, reiterating the demand for dismissal, and warning that failure to do so would constitute gross violation of the existing CBA and constrain the union to file a case for unfair labor practice against GMC. Pressured by the threatened filing of a suit for unfair labor practice, GMC acceded to Gabiana's request and issued a Memorandum dated March 24, 1992 terminating the employment of Casio, et al. effective April 24, 1992 and placing them under preventive suspension for the meantime. The termination letters served by GMC on Casio, et al. stated that the company was constrained to terminate their employment in light of the union's "very insistent demand, verbal and in writing," the "explicitly mandatory language of the closed shop provision of the CBA," and to avoid the union accusation of "coddling" them; the letters made no mention at all of the evidence supporting the decision of IBM-Local 31 to expel Casio, et al. from the union.

On March 27, 1992, Casio, et al., in the name of IBM-Local 31, filed a Notice of Strike with the NCMB-Regional Office No. VII, alleging illegal dismissal of union officers and members, discrimination, coercion, and union busting; the NCMB-RO held conciliation proceedings, but no settlement was reached. Casio, et al. then filed a Complaint with the NLRC Regional Arbitration Branch VII on August 3, 1992 against GMC and Pino, et al. for unfair labor practice, illegal suspension, illegal dismissal, and moral and exemplary damages. The Labor Arbiter dismissed the case for lack of jurisdiction and endorsed it to the NCMB-RO, after which the parties agreed to first submit the case to the grievance machinery of IBM-Local 31; when the IBM-Local 31 Board failed to hold grievance proceedings, NCMB Voluntary Arbitrator Canonoy-Morada assumed jurisdiction over the case. The Voluntary Arbitrator rendered an Award on August 16, 1995 dismissing the Complaint for lack of merit but granting separation pay and attorney's fees, finding that the termination was in valid compliance with the closed shop provision, that GMC had no competence to determine the good standing of a union member, that Casio, et al. waived their right to due process when they refused to receive Gabiana's letter, that the preventive suspension was an act of self-defense, and that the Resolution expelling Casio, et al. also automatically ousted them as union officers. The Court of Appeals set aside the Voluntary Arbitration Award, ruling that while the dismissal was made pursuant to a valid closed shop provision, GMC failed to observe the elementary rules of due process, and ordered reinstatement with backwages, holding Pino, et al. liable for moral and exemplary damages and attorney's fees. GMC filed the instant Petition for Review, and Pino, et al. did not appeal from the decision of the Court of Appeals.

• Grave Abuse of Discretion in Setting Aside the Award: GMC argued that the Court of Appeals committed grave abuse of discretion amounting to lack of or excess of jurisdiction when it set aside the Voluntary Arbitration Award and awarded reinstatement and full backwages to Casio, et al., departing from the principle of conclusiveness of the trial judge's findings.

• Due Process Accorded by the Union: GMC argued that before IBM-Local 31 expelled Casio, et al. from the union and requested GMC to dismiss them pursuant to the closed shop provision, IBM-Local 31 already accorded Casio, et al. due process, only that Casio, et al. refused to avail themselves of such opportunity.

• No Authority to Inquire into Union Internal Affairs: GMC maintained that Casio, et al. were expelled by IBM-Local 31 for "acts inimical to the interest of the union," and GMC had no authority to inquire into or rule on which employee-member is or is not loyal to the union, this being an internal affair of the union; thus, GMC had to rely on the presumption that Pino, et al. regularly performed their duties as IBM-Local 31 officers and board members.

• Liability Should Fall on Union Officers: GMC asserted that Pino, et al., the IBM-Local 31 officers and board members who resolved to expel Casio, et al., and not GMC, should be held liable for the reinstatement of and payment of full backwages to Casio, et al., for the company had acted in good faith and merely complied with the closed shop provision in the CBA.

• Failure to Identify Supporting Evidence: Casio, et al. countered that GMC failed to identify the specific pieces of evidence supporting the findings of the Voluntary Arbitrator.

• Separate Proceedings Required: Casio, et al. contended that to accord them due process, GMC itself, as the employer, should have held proceedings distinct and separate from those conducted by IBM-Local 31, and that GMC cannot justify its failure to conduct its own inquiry using the argument that such proceedings would constitute an intrusion by the company into the internal affairs of the union.

• Inconsistency of Good Faith Claim: Casio, et al. argued that the claim of GMC that it had acted in good faith when it dismissed them in accordance with the closed shop provision of the CBA is inconsistent with the failure of the company to accord the dismissed employees their right to due process.

• Propriety of Reviewing Factual Findings: Whether the Supreme Court should review the factual findings of the Court of Appeals where the factual findings of the Voluntary Arbitrator and the Court of Appeals are contradictory.

• Sufficiency of Evidence Supporting Expulsion: Whether there was sufficient evidence to support the decision of IBM-Local 31 to expel Casio, et al. from the union, as required for a valid dismissal pursuant to the union security clause.

• Observance of Procedural Due Process: Whether GMC failed to accord Casio, et al. procedural due process—notice and hearing—prior to terminating their employment pursuant to the closed shop provision of the CBA.

• Solidary Liability of GMC: Whether GMC can be held solidarily liable with Pino, et al. for the payment of full backwages to Casio, et al. despite the union's request for dismissal and the union's undertaking to absolve the company from liability.

• Propriety of Reviewing Factual Findings: Yes. The Court took a second look at the evidence on record because the factual findings of the Voluntary Arbitrator and the Court of Appeals were contradictory, a recognized exception to the general rule that the Supreme Court is not a trier of facts.

• Sufficiency of Evidence Supporting Expulsion: No. The third requisite for a valid dismissal pursuant to a union security clause—that there is sufficient evidence to support the decision of the union to expel the employee—was lacking, as GMC never alleged nor attempted to prove that it actually looked into the evidence of IBM-Local 31 and made a determination on the sufficiency thereof.

• Observance of Procedural Due Process: No. GMC failed to accord Casio, et al. procedural due process, as the records were bereft of any supporting evidence to substantiate GMC's bare allegation that Casio, et al. were accorded due process by IBM-Local 31, and GMC did not conduct a separate and independent investigation or furnish the employees with the two required written notices.

• Solidary Liability of GMC: Yes. GMC cannot insist that it has no liability for the payment of backwages and damages, as the expulsion of Casio, et al. by IBM-Local 31 and the termination of their employment by GMC are two separate and distinct acts, and the failure of GMC to observe substantive and procedural due process makes it liable for illegal dismissal.

• Propriety of Reviewing Factual Findings: The Court acknowledged that in a petition for review on certiorari under Rule 45, only questions of law may generally be raised, as the Supreme Court is not a trier of facts. However, a departure from the general rule may be warranted where the findings of fact of the Court of Appeals are contrary to the findings and conclusions of the trial court or quasi-judicial agency, or when the same is unsupported by the evidence on record. Because the Voluntary Arbitrator was convinced that Casio, et al. were legally dismissed while the Court of Appeals believed the opposite, the Court was constrained to take a second look at the evidence on record.

• Sufficiency of Evidence Supporting Expulsion: The Court applied the three requisites for a valid dismissal based on the union security clause, as laid down in Alabang Country Club, Inc. vs. National Labor Relations Commission: (1) the union security clause is applicable; (2) the union is requesting for 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. The first two requisites were undisputed—the CBA included a maintenance of membership and closed shop clause, and IBM-Local 31, through Gabiana, twice requested GMC to terminate the employment of Casio, et al. However, the third requisite was lacking. The termination letters served by GMC made no mention at all of the evidence supporting the decision of IBM-Local 31 to expel Casio, et al., and GMC never alleged nor attempted to prove that it actually looked into the evidence and made a determination on the sufficiency thereof. Without such a determination, GMC cannot claim that it had terminated the employment of Casio, et al. for just cause.

• Observance of Procedural Due Process: The Court held that the failure of GMC to make a determination of the sufficiency of evidence supporting the union's expulsion decision was a direct consequence of the non-observance of procedural due process. The Court rejected GMC's defense that its only duty was to ascertain that IBM-Local 31 accorded Casio, et al. due process, finding this argument without basis. The Court cited the rule that allegations must be proven by sufficient evidence, and that in illegal dismissal cases, the burden of proving that the dismissal was not illegal rests on the employer. The records were "absolutely bereft of any supporting evidence" to substantiate GMC's bare allegation that Casio, et al. were accorded due process by IBM-Local 31. The Court noted that the IBM-Local 31 Resolution merely stated that "a copy of the said letter complaint was dropped or left in front of E. Casio," and it was not established that the letter-complaint was properly served, that Casio willfully refused to accept it, or that Casio had authority to receive it on behalf of the other employees. The Court also found that Casio, et al. were expelled only five days after the issuance of the letter-complaint, that the three-day period was not shown to have started and expired, and that the three-day period was not sufficient for Casio, et al. to prepare their defenses. The Court further held that the acts of Pino, et al. do not enjoy the presumption of regularity in the performance of official duties, because the presumption applies only to public officers. The Court emphasized the twin requirements of notice and hearing as essential elements of procedural due process: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought, and (2) a subsequent notice informing the employee of the employer's decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality. The Court stressed that the rights of an employee to be informed of the charges against him and to reasonable opportunity to present his side are not wiped away by a union security clause, and that an employee is entitled to be protected not only from a company which disregards his rights but also from his own union. In the case at bar, Casio, et al. did not receive any other communication from GMC except the written notice of termination dated March 24, 1992, and GMC, by its own admission, did not conduct a separate and independent investigation.

• Solidary Liability of GMC: The Court held that GMC cannot insist that it has no liability for the payment of backwages and damages, and that the liability should fall only upon Pino, et al. The Court explained that the expulsion of Casio, et al. by IBM-Local 31 and the termination of their employment by GMC, although related, are two separate and distinct acts. Despite a closed shop provision in the CBA and the expulsion of Casio, et al. from the union, law and jurisprudence impose upon GMC the obligation to accord Casio, et al. substantive and procedural due process before complying with the demand of the union to dismiss the expelled union members from service. The failure of GMC to carry out this obligation makes it liable for illegal dismissal. The Court cited Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos for the proposition that notwithstanding the fact that the dismissal was at the instance of the federation and that the federation undertook to hold the company free from any liability, the company may still be held liable if it was remiss in its duty to accord the would-be dismissed employees their right to be heard. The Court awarded Casio, et al. backwages and separation pay, considering that reinstatement was no longer possible because the positions they previously occupied were no longer existing, as declared by GMC, and attorney's fees equivalent to 10% of the total monetary award.

• Union Security Clause Requisites for Valid Dismissal — For an employer to validly terminate an employee by enforcing the union security clause, the employer needs only to determine and prove that: (1) the union security clause is applicable; (2) the union is requesting for 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. These requisites constitute just cause for terminating an employee based on the union security provision of the CBA. In this case, the third requisite was lacking because GMC never alleged nor attempted to prove that it actually looked into the evidence of the union and made a determination on the sufficiency thereof.

• Due Process in Union Security Clause Dismissals — The rights of an employee to be informed of the charges against him and to reasonable opportunity to present his side in a controversy with either the company or his own union are not wiped away by a union security clause or a union shop clause in a collective bargaining agreement. An employee is entitled to be protected not only from a company which disregards his rights but also from his own union, the leadership of which could yield to the temptation of swift and arbitrary expulsion from membership and hence dismissal from his job. The employer must furnish the employee with two written notices before termination: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought, and (2) a subsequent notice informing the employee of the employer's decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality.

• Separate and Distinct Acts of Expulsion and Termination — The expulsion of an employee by the union and the termination of employment by the employer, although related, are two separate and distinct acts. Despite a closed shop provision in the CBA and the expulsion of the employee from the union, law and jurisprudence impose upon the employer the obligation to accord the employee substantive and procedural due process before complying with the demand of the union to dismiss the expelled union member from service. The failure of the employer to carry out this obligation makes it liable for illegal dismissal.

• Presumption of Regularity Not Applicable to Union Officers — The presumption of regularity in the performance of official duties applies only to public officers from the highest to the lowest in the service of the Government, departments, bureaus, offices, and/or its political subdivisions. It does not apply to the acts of union officers and board members in expelling union members.

• "The Court has stressed time and again that allegations must be proven by sufficient evidence because mere allegation is definitely not evidence." — This passage states the evidentiary standard applied by the Court in rejecting GMC's bare allegation that Casio, et al. were accorded due process by IBM-Local 31, emphasizing that the employer bears the burden of proving that the dismissal was not illegal.

• "The rights of an employee to be informed of the charges against him and to reasonable opportunity to present his side in a controversy with either the company or his own union are not wiped away by a union security clause or a union shop clause in a collective bargaining agreement. An employee is entitled to be protected not only from a company which disregards his rights but also from his own union the leadership of which could yield to the temptation of swift and arbitrary expulsion from membership and hence dismissal from his job." — This is the canonical formulation of the Court's holding that union security clauses do not dispense with the employer's obligation to observe due process, and that employees are protected from arbitrary action by both the employer and the union.

• "GMC completely missed the point that the expulsion of Casio, et al. by IBP-Local 31 and the termination of employment of the same employees by GMC, although related, are two separate and distinct acts." — This passage articulates the Court's reasoning for holding GMC solidarily liable with the union officers, establishing that the employer's independent obligation to observe due process is not extinguished by the union's expulsion of the employee.

• Alabang Country Club, Inc. vs. National Labor Relations Commission, G.R. No. 170287, February 14, 2008, 545 SCRA 351 — Controlling precedent for the grounds for valid termination of an employee and the three requisites for a valid dismissal based on the union security clause, which the Court applied to find that the third requisite was lacking in this case.

• Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc., 179 Phil. 317 (1979) — Followed for the proposition that the employer is bound to exercise caution in terminating the services of its employees especially when made upon the request of a labor union pursuant to the CBA, and that dismissals must not be arbitrary and capricious; the Court found the same circumstances took place in this case as in Liberty Cotton Mills, where the employer acted in bad faith in dismissing workers without giving them the benefit of a hearing.

• Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos, 383 Phil. 329 (2000) — Followed for the rule that while a company may validly dismiss employees expelled by the union under the union security clause upon the recommendation of the union, the dismissal should not be done hastily and summarily, and that even on the assumption that the federation had valid grounds to expel the union officers, due process requires that these union officers be accorded a separate hearing by the company.

• Great Southern Maritime Services Corporation vs. Acuña, 492 Phil. 518 (2005) — Followed for the rule that in illegal dismissal cases, the burden of proving that the employee was not dismissed or that the dismissal was not illegal rests on the employer, and that a party alleging a critical fact must support his allegation with substantial evidence.

• Cariño vs. National Labor Relations Commission, G.R. No. 91086, May 8, 1990, 185 SCRA 177 — Cited in support of the proposition that an employee is entitled to be protected not only from a company which disregards his rights but also from his own union, the leadership of which could yield to the temptation of swift and arbitrary expulsion from membership and hence dismissal from his job.

• Marsaman Manning Agency, Inc. vs. National Labor Relations Commission, 371 Phil. 827 (1999) — Cited for the rule that the presumption of regularity in the performance of official duties applies only to public officers, not to union officers.

• Article 248(e), Labor Code — Prohibits discrimination in regard to wages, hours of work, and other terms and conditions of employment in order to encourage or discourage membership in any labor organization, but explicitly allows parties to require membership in a recognized collective bargaining agent as a condition for employment, except those employees who are already members of another union at the time of the signing of the collective bargaining agreement. The Court cited this provision as the statutory basis for recognizing union security clauses.

• Article 282, Labor Code — Cited through Alabang Country Club as one of the grounds for which an employee may be validly terminated (just causes), alongside authorized causes under Article 283, termination due to disease under Article 284, and termination by the employee or resignation under Article 285.

• Republic Act No. 6715 — Cited for the rule that employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time their actual compensation was withheld from them up to the time of their actual reinstatement, but if reinstatement is no longer possible, the backwages shall be computed from the time of their illegal termination up to the finality of the decision.

• Rule 45, Rules of Court — The procedural basis for the Petition for Review on Certiorari, under which only questions of law may generally be raised, subject to exceptions where the findings of fact of the Court of Appeals are contrary to the findings and conclusions of the trial court or quasi-judicial agency.

• Rule 65, Rules of Court — The procedural basis for the Petition for Certiorari filed by Casio, et al. with the Court of Appeals to set aside the Voluntary Arbitration Award.

Chief Justice Reynato S. Puno (Chairperson), Associate Justice Conchita Carpio Morales, Associate Justice Lucas P. Bersamin, and Associate Justice Martin S. Villarama, Jr. concurred in the decision.