HSBC Employees Union vs. NLRC

A strike staged without compliance with the mandatory procedural requirements of Article 263 of the Labor Code is illegal, but the liability for the illegal strike is individual, not collective — union officers may be terminated only upon proof of their knowing participation in the illegal strike, and ordinary members may be terminated only upon proof that they committed illegal acts during the strike; where the employer fails to prove either, the dismissal is illegal, and the employee's entitlement to backwages or nominal damages depends on whether the dismissal lacked both substantive and procedural due process or only procedural due process.

The Hongkong & Shanghai Banking Corporation Employees Union (Union) was the duly recognized collective bargaining agent of the rank-and-file employees of respondent Hongkong & Shanghai Banking Corporation (HSBC). A collective bargaining agreement (CBA) governed the relations between the Union and its members, on one hand, and HSBC, effective April 1, 1990 until March 31, 1993 for the non-representational (economic) aspect, and effective April 1, 1990 until March 31, 1995 for the representational aspect. The CBA included a salary structure comprising grade levels, entry-level pay rates, and individual pays depending on length of service.

The Union was the duly recognized collective bargaining agent of HSBC's rank-and-file employees, with a CBA effective April 1, 1990 to March 31, 1993 for economic provisions and to March 31, 1995 for representational aspects. The CBA included a salary structure comprising grade levels, entry-level pay rates, and individual pays depending on length of service. On January 18, 1993, HSBC announced its implementation of a Job Evaluation Program (JEP) retroactive to January 1, 1993, consisting of job designations per grade level with accompanying salary scales providing minimum and maximum pay per salary level.

By letter dated January 20, 1993, the Union demanded suspension of the JEP, labeling it an unfair labor practice. On January 22, 1993, the Union informed HSBC it would exercise its right to concerted action, and members began picketing during breaktime while wearing black hats and black bands on their arms. HSBC responded on January 25, 1993, insisting the JEP was an express recognition of its CBA obligations. The concerted activities persisted for 11 months, even as both sides began renegotiating the CBA's economic provisions on March 5, 1993. The sustained actions impelled HSBC to suspend negotiations on March 19, 1993, and to issue memoranda, warnings, and reprimands. HSBC also filed a ULP complaint with the NLRC.

On December 19, 1993, after HSBC accorded regular status to Patrick King — the first person hired under the JEP — the Union conducted a strike vote by open balloting, with the majority voting in favor. The following day, the Union served a letter protesting the JEP's continued implementation. On December 22, 1993, at around 12:30 p.m., Union officers and members walked out and gathered outside HSBC's offices on Ayala Avenue, Makati and Ortigas Center, Pasig. According to HSBC, the members blocked entry and exit points, preventing bank officers, including the chief executive officer, from entering or leaving the premises. HSBC resorted to a petition for habeas corpus and airlifted trapped officials by helicopter on December 24, 1993. HSBC also filed a complaint to declare the strike illegal and petitioned for injunction with the NLRC, which issued a TRO on January 6, 1994, and a writ of preliminary injunction on January 31, 1994.

HSBC issued return-to-work notices on December 22, 1993. Only 25 employees complied. On December 27, 1993, HSBC terminated the individual petitioners, who continued their concerted activities. The Labor Arbiter found the strike illegal for non-compliance with Article 263 — no notice of strike filed, no cooling-off period observed, no strike-vote results submitted — and deemed all participating officers and members to have lost employment status. The NLRC modified this ruling, declaring the dismissal of 18 members unlawful for lack of procedural due process, noting they were neither officers nor identified as having committed illegal acts. The CA further modified by deleting the indemnity award and ordering backwages under the Serrano doctrine. The Labor Arbiter's factual findings — corroborated by affidavits, testimonies, photographs, and video recordings — depicted obstruction, violence, and intimidation during the picketing, including a stationary barricade on January 5, 1994, during which the bank's CEO fell to the ground from pushing and shoving.

• Validity of Dismissal: Petitioners argued they were illegally dismissed and that the CA erred in selectively applying the twin-notice requirement in determining the validity of the dismissal of the employees.
• Union Officers' Participation: Petitioners maintained that for Union officers, there must be a prior showing that they had knowingly participated in the illegal strike before termination, and that HSBC did not make such showing — specifically, Carmina C. Rivera and Mario T. Fermin were on leave during the strike.
• Insubordination and Abandonment: Petitioners argued they could not be dismissed on the ground of insubordination or abandonment, participation in a concerted action being a guaranteed right.
• Good Faith: Petitioners asserted that their participation in concerted activities out of their sincere belief that HSBC had committed ULP in implementing the JEP constituted good faith to be appreciated in their favor.
• Penalty of Suspension vs. Dismissal: Petitioners contended their actions merited only suspension at most, not the extreme penalty of dismissal.
• Revisiting the Doctrine on Procedural Requirements: Petitioners argued that the prevailing rule automatically making a strike illegal due to non-compliance with mandatory procedural requirements should be revisited, citing the amendment under Batas Pambansa Blg. 227 as indicating legislative intent to ease restrictions on the right to strike.

• Factual Issues Already Settled: HSBC countered that the appeal raised factual issues already settled by the CA, NLRC, and LA, rendering such issues inappropriate for determination in this appeal.
• Illegal Strike: HSBC argued it was not liable for illegal dismissal because petitioners had willfully staged an illegal strike without prior compliance with Article 263 of the Labor Code.
• Mandatory Procedural Requirements: HSBC maintained that the procedural requirements of Article 263 were mandatory and indispensable under Article 264, which expressly made non-compliance a prohibited activity and penalized Union officers who participated in the illegal strike with loss of employment status.
• No Good Faith: HSBC argued good faith could not be accorded to petitioners because, aside from non-compliance with mandatory procedure, they presented no proof that the strike was held for a lawful purpose, that the JEP amounted to ULP, or that they made a sincere effort to settle the disagreement.
• Application of Agabon: HSBC contended that the 18 dismissed employees were entitled only to nominal damages, not backwages, following the ruling in Agabon vs. National Labor Relations Commission, which modified the doctrine in Serrano vs. National Labor Relations Commission.

• Validity of the Strike: Whether the strike commenced on December 22, 1993 was lawfully conducted.
• Unlawful Acts During the Strike: Whether the commission of unlawful acts during the strike further rendered it illegal.
• Good Faith: Whether good faith availed the petitioners notwithstanding their non-compliance with Article 263.
• Individual vs. Collective Liability: Whether the finding on the illegal strike justified the wholesale termination of the strikers from employment.
• Due Process: Whether HSBC complied with the twin-notice requirement in terminating the petitioners.
• Damages and Reliefs: What damages were due to the illegally dismissed employees, and whether Agabon or Serrano applied.

• Validity of the Strike: No. The strike was illegal for non-compliance with the mandatory procedural requirements of Article 263 of the Labor Code — no notice of strike filed, no cooling-off period observed, no secret-ballot strike vote reported — rendering it a prohibited activity under Article 264(a).
• Unlawful Acts During the Strike: Yes. The strike was further rendered illegal by the commission of prohibited acts under Article 264(e), including obstruction of free ingress and egress, violence, coercion, and intimidation, as established by affidavits, testimonies, photographs, and video recordings.
• Good Faith: No. Good faith did not avail because the petitioners' disregard of the procedural requirements negated their claim; sincere belief in ULP was insufficient without compliance with the law's restrictions on the exercise of the right to strike.
• Individual vs. Collective Liability: No, wholesale termination was not justified. Liability for the illegal strike is individual, not collective; union officers may be terminated only upon proof of knowing participation, and ordinary members only upon proof of commission of illegal acts during the strike.
• Due Process: No. HSBC failed to comply with the twin-notice requirement; its notices were pro forma, did not apprise the strikers of specific grounds under the Labor Code, and did not afford them opportunity to be heard.
• Damages and Reliefs: Employees dismissed without both substantive and procedural due process (Fermin, Fagutao, and the 18 members) are entitled to backwages and separation pay; those dismissed with valid cause but without procedural due process are entitled only to nominal damages of P30,000 each under Agabon.

• Validity of the Strike: The right to strike, while constitutionally and legally recognized, is subject to limitations prescribed by law. Article 263 of the Labor Code requires three mandatory procedural steps: (1) a notice of strike filed with the DOLE at least 30 days before the intended date (or 15 days in case of ULP); (2) a strike vote approved by the majority of the total union membership obtained by secret ballot; and (3) a notice of the voting results furnished to the DOLE at least seven days before the intended strike. The petitioners filed no notice of strike, observed no cooling-off period, and conducted the strike vote by open rather than secret balloting, in violation of Article 263 and Section 7, Rule XIII of the Omnibus Rules Implementing the Labor Code. The mandatory character of these requirements is unmistakable from the language of Article 264(a), which prohibits any labor organization from declaring a strike without first having filed the required notice and obtained and reported the strike vote. The doctrine of mandatory compliance was established not by judicial declaration but by congressional enactment; the principle of verba legis non est recedendum applies. The petitioners' plea to revisit the doctrine was unwarranted, as the legislators would have stated plainly had they intended to relax the restriction.

• Unlawful Acts During the Strike: The strike was far from orderly and peaceful. HSBC's claim that petitioners obstructed ingress and egress was supported by affidavits, testimonies, photographs, and video recordings reviewed by the Labor Arbiter, depicting acts of obstruction, violence, and intimidation. The video footage of January 5, 1994 showed a stationary, non-moving picket constituting a barricade, during which the bank's CEO fell to the ground from pushing and shoving. Article 264(e) expressly enjoins striking workers from committing violence, coercion, intimidation, or obstructing free ingress and egress. The employment of prohibited means rendered the strike illegal regardless of the justification of its ends. Picketing that obstructs the free use of property, when accompanied by intimidation and violence, constitutes a nuisance subject to regulation.

• Good Faith: The petitioners' disregard of the procedural requirements negated their claim of good faith. It was not enough for them to believe their employer was guilty of ULP; they must also have shown compliance with the legal restrictions on the exercise of the right to strike. They did not establish compliance with the requirements for the strike vote and the strike notice. Citing Pilipino Telephone Corporation vs. PILTEA, the Court emphasized that good faith cannot be ascribed to the means taken in conducting the strike where the procedural requirements were not observed; a lawful strike must have both a lawful purpose and lawful means.

• Individual vs. Collective Liability: As a general rule, the mere finding of illegality of a strike does not justify wholesale termination of strikers. The last paragraph of Article 264(a) distinguishes between union officers and members: officers may be deemed terminated upon a finding of their knowing participation in the illegal strike, while members suffer the same fate only if shown to have knowingly participated in the commission of illegal acts during the strike. The adverb "knowingly" preceding "participates" reflects legislative intent to require knowledge as a condition sine qua non before a union officer can be dismissed, making it difficult for employers to circumvent the law by arbitrarily dismissing employees. In the case of Fermin, HSBC did not prove his presence during the strike; the Union president and Fermin's widow testified he was on leave due to a heart condition, and moral support did not constitute overt participation. Rivera's dismissal was upheld because she admitted joining the picket line; Dela Chica, as Union president, instigated and called for the strike; Militante and Atanacio were identified as having actively participated. The 18 members and Fagutao were illegally dismissed because HSBC did not prove they committed illegal acts during the strike. Their refusal to heed the return-to-work order constituted neither insubordination — the order not being reasonable, lawful, and connected to their duties — nor abandonment, as they had no intention to sever the employment relationship, having joined the strike precisely to assert and improve their terms and conditions of work.

• Due Process: Article 277(b) of the Labor Code mandates that the employer furnish the worker a written notice containing the causes for termination and afford ample opportunity to be heard. Under King of Kings Transport, Inc. vs. Mamac, the first notice must contain specific causes, a detailed narration of facts, and a directive giving the employee a reasonable period to submit a written explanation; the second notice must indicate that all circumstances have been considered and grounds established. HSBC's first notice merely directed the strikers to report back to work, threatening termination for non-compliance, without apprising them of any ground under the Labor Code. The second notice merely ratified the hasty and unilateral decision to terminate, ratifying abandonment, insubordination, and hampering operations as grounds without any hearing. Both notices fell short of the twin-notice requirement, resulting in illegal dismissal.

• Damages and Reliefs: The Court distinguished two types of illegal dismissal. The first type — dismissal without both substantive and procedural due process — applied to Fermin, Fagutao, and the 18 members, who were entitled to reinstatement and full backwages under Article 279, subject to the policy that no backwages are awarded during the period of the strike for those who voluntarily participated. Separation pay of one month per year of service was awarded in lieu of reinstatement due to the lapse of 22 years. The second type — dismissal based on valid cause but lacking procedural due process — applied to the remaining petitioners, who were entitled only to nominal damages of P30,000 each under Agabon. HSBC's reliance on Agabon for the 18 employees was misplaced, as Agabon involved the second type of dismissal, not the first.

• Individual Liability for Illegal Strike — The liability for an illegal strike is individual, not collective. The mere finding of illegality of a strike does not justify wholesale termination of all strikers. Union officers may be terminated only upon proof of their knowing participation in the illegal strike; ordinary members may be terminated only upon proof that they committed illegal acts during the strike. The adverb "knowingly" in Article 264(a) requires knowledge as a condition sine qua non before a union officer can be dismissed, reflecting legislative intent to prevent employers from arbitrarily dismissing employees under the guise of management prerogative.

• Mandatory Procedural Requirements for a Valid Strike — Three requirements under Article 263 are mandatory: (1) a notice of strike filed with the DOLE at least 30 days before the intended date (or 15 days for ULP); (2) a strike vote approved by the majority of the total union membership obtained by secret ballot; and (3) a notice of the voting results furnished to the DOLE at least seven days before the intended strike. Non-compliance renders the strike illegal under Article 264(a). This doctrine is established by congressional enactment, not judicial declaration, and the principle of verba legis non est recedendum applies.

• Twin-Notice Requirement in Termination — Under Article 277(b) and as elaborated in King of Kings Transport, Inc. vs. Mamac, the employer must serve two notices: (1) a first written notice containing the specific causes or grounds for termination, a detailed narration of facts, and a directive giving the employee a reasonable period (at least five calendar days) to submit a written explanation; and (2) a written notice of termination indicating that all circumstances have been considered and grounds established to justify severance. Failure to comply results in illegal dismissal.

• Agabon vs. Serrano Distinction — Under Agabon, an employee dismissed for a just or authorized cause but without procedural due process is entitled to nominal damages of P30,000, and the dismissal is upheld. Under Serrano (as applied here to employees dismissed without any valid cause), the employee is entitled to full backwages and reinstatement (or separation pay in lieu thereof). The distinction turns on whether substantive cause existed: if the dismissal lacked both substantive and procedural due process, Article 279 reliefs apply; if the dismissal had valid cause but lacked procedural due process, only nominal damages under Agabon are awarded.

• Good Faith in Strikes — Good faith cannot be ascribed to the means of conducting a strike where the procedural requirements of Article 263 were not observed. A lawful strike must have both a lawful purpose and lawful means. Sincere belief that the employer committed ULP is insufficient where the union disregarded the law's restrictions on the exercise of the right to strike.

• Insubordination and Abandonment — For insubordination to exist, the order must be: (1) reasonable and lawful; (2) sufficiently known to the employee; and (3) in connection with his duties. For abandonment, two elements are required: (1) failure to report for work without valid or justifiable reason; and (2) a clear intention to sever the employer-employee relationship, the second being the more decisive factor. A striking employee's refusal to heed a return-to-work order constitutes neither insubordination nor abandonment, as participation in concerted action is a guaranteed right.

• "A strike staged without compliance with the requirements of Article 263 of the Labor Code is illegal, and may cause the termination of the employment of the participating union officers and members. However, the liability for the illegal strike is individual, not collective." — This is the opening statement of the decision, articulating the core doctrinal framework that governs the entire ruling: the interplay between the illegality of a strike and the individualized nature of liability for it.

• "Any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his employment." — This quotation reproduces the last paragraph of Article 264(a) of the Labor Code as quoted in the decision, the textual basis for the Court's distinction between officers and members and for the requirement of "knowing" participation.

• "Note that the verb 'participates' is preceded by the adverb 'knowingly.' This reflects the intent of the legislature to require 'knowledge' as a condition sine qua non before a union officer can be dismissed from employment for participating in an illegal strike." — This passage, drawn from Club Filipino, Inc. vs. Bautista and adopted by the Court, defines the canonical interpretation of the "knowingly participates" standard and is frequently cited in subsequent illegal-strike jurisprudence.

• "We cannot go to the extent of ascribing good faith to the means taken in conducting the strike. The requirement of the law is simple, that is—1. Give a Notice of Strike; 2. Observe the cooling period; 3. Observe the mandatory seven day strike ban ... To be lawful, a strike must simply have a lawful purpose and should be executed through lawful means." — This passage, quoted from Pilipino Telephone Corporation vs. PILTEA, articulates the dual requirement of lawful purpose and lawful means, and the insufficiency of good faith alone where procedural requirements are disregarded.

• Serrano vs. National Labor Relations Commission, G.R. No. 117040, January 27, 2000, 323 SCRA 445 — Applied by the CA to award full backwages to the 18 employees dismissed without procedural due process. The Court clarified that Serrano applies to dismissals lacking both substantive and procedural due process, entitling employees to Article 279 reliefs.
• Agabon vs. National Labor Relations Commission, G.R. No. 158693, November 17, 2004, 442 SCRA 573 — HSBC argued Agabon should limit the 18 employees to nominal damages. The Court distinguished Agabon as applying only to dismissals with valid cause but lacking procedural due process, awarding P30,000 nominal damages; it did not apply to employees dismissed without any valid ground.
• Club Filipino, Inc. vs. Bautista, G.R. No. 168406, July 13, 2009, 592 SCRA 471 — Followed for its interpretation of "knowingly participates" in Article 264(a) as requiring knowledge as a condition sine qua non before a union officer may be dismissed for participating in an illegal strike.
• Pilipino Telephone Corporation vs. Pilipino Telephone Employees Association (PILTEA), G.R. No. 160058, June 22, 2007, 525 SCRA 361 — Followed for the principle that good faith cannot be ascribed to the means of conducting a strike where procedural requirements were not observed, and that a lawful strike requires both lawful purpose and lawful means.
• King of Kings Transport, Inc. vs. Mamac, G.R. No. 166208, June 29, 2007, 526 SCRA 116 — Followed for the detailed contents of the twin notices required in termination proceedings under Article 277(b).
• Suico vs. National Labor Relations Commission, G.R. No. 146762, January 30, 2007, 513 SCRA 325 — Followed for the proposition that the right to due process applies to all workers regardless of the cause of termination, including termination arising from acts prohibited under Article 264.
• Bacus vs. Ople, G.R. No. L-56856, October 23, 1984, 132 SCRA 690 — Cited for the general rule that the mere finding of illegality of a strike does not justify wholesale termination of strikers.
• Shell Oil Workers' Union vs. Shell Company of the Phil., G.R. No. L-28607, February 12, 1972, 43 SCRA 224 — Cited for the principle that responsibility for an illegal strike is individual rather than collective.

• Article 263, Labor Code — Specifies the limitations on the right to strike, including the mandatory procedural requirements: filing a notice of strike with the DOLE (30 days for bargaining deadlocks, 15 days for ULP), observing the cooling-off period, conducting a strike vote by secret ballot approved by the majority of the total union membership, and reporting the results to the DOLE at least seven days before the intended strike. Non-compliance renders the strike illegal.
• Article 264, Labor Code — Defines prohibited activities in labor disputes. Article 264(a) prohibits declaring a strike without filing the required notice and obtaining and reporting the strike vote; it provides that union officers who knowingly participate in an illegal strike and workers or officers who knowingly participate in the commission of illegal acts during a strike may be declared to have lost their employment status. Article 264(e) prohibits violence, coercion, intimidation, and obstruction of free ingress and egress during picketing.
• Article 277(b), Labor Code — Mandates the twin-notice requirement: the employer must furnish the worker a written notice containing the causes for termination and afford ample opportunity to be heard and to defend himself with the assistance of a representative.
• Article 279, Labor Code — Provides that an employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and full backwages, inclusive of allowances and other benefits, computed from the time compensation was withheld up to actual reinstatement.
• Section 3, Article XIII, 1987 Constitution — Guarantees the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law.
• Section 7, Rule XIII, Omnibus Rules Implementing the Labor Code — Requires that a decision to declare a strike must be approved by a majority of the total union membership obtained by secret ballot in meetings or referenda called for that purpose.

Sereno, C.J., Leonardo-De Castro, Perez, and Perlas-Bernabe, JJ., concurred.