Insular Hotel Employees Union-NFL vs. Waterfront Insular Hotel Davao

A voluntary arbitrator acquires no jurisdiction over a labor dispute when the Notice of Mediation is filed by parties lacking authority to represent the certified bargaining agent, and the employer's signing of a Submission Agreement does not constitute waiver or estoppel where the employer timely and persistently objects to the complainant's standing. A Memorandum of Agreement reducing wages and benefits is valid and enforceable where it was voluntarily entered into by the union to prevent the employer's closure, and where the union members impliedly ratified it by individually signing new employment contracts embodying the reduced terms.

Respondent Waterfront Insular Hotel Davao is a hotel corporation, and DIHFEU-NFL was the recognized and certified exclusive bargaining agent of its rank-and-file employees. The hotel suspended operations for six months due to alleged severe business losses, and the union, through its president Domy R. Rojas, offered concessions to help the hotel resume operations. The dispute arose from the subsequent Memorandum of Agreement that reduced employee wages and benefits, which some employees later challenged as an unlawful diminution of benefits.

Respondent Waterfront Insular Hotel Davao sent the DOLE a Notice of Suspension of Operations on November 6, 2000, stating it would suspend operations for six months due to severe and serious business losses, and assuring that employees would be paid all benefits legally due if operations could not resume. During the suspension, Domy R. Rojas, President of the Davao Insular Hotel Free Employees Union-NFL (DIHFEU-NFL), the recognized labor organization, sent respondent several letters offering concessions to help the hotel. In letters dated November 8, 10, 20, and 25, 2000, Rojas proposed suspending CBA renegotiations, reducing economic benefits, restructuring manpower, and other cost-saving measures. In January 2001, DIHFEU-NFL submitted a Manifesto concretizing these proposals.

After negotiations, respondent and DIHFEU-NFL, represented by Rojas and Vice-Presidents Exequiel J. Varela Jr. and Avelino C. Bation Jr., signed a Memorandum of Agreement (MOA) dated May 8, 2001, wherein respondent agreed to reopen the hotel subject to the concessions offered by the union. The MOA reduced manpower to 100 rank-and-file employees, established a new pay scale, reduced meal allowances, leaves, and medical benefits, and waived the union's right to renegotiate wages for ten years. The retained employees individually signed a "Reconfirmation of Employment" embodying the new terms and conditions, with each employee assisted by Rojas, who also signed the document. Respondent resumed operations on June 15, 2001.

On August 22, 2002, Darius Joves and Debbie Planas, claiming to be local officers of the National Federation of Labor (NFL), filed a Notice of Mediation with the NCMB, stating the union involved was "DARIUS JOVES/DEBBIE PLANAS ET. AL, National Federation of Labor" and raising the issue of "Diminution of wages and other benefits through unlawful Memorandum of Agreement." At the NCMB conference, respondent and IHEU-NFL, represented by Joves, signed a Submission Agreement choosing AVA Olvida as voluntary arbitrator. Joves presented Special Powers of Attorney that were undated and unnotarized. Respondent immediately filed a Manifestation questioning the authority of the complainants and raising the existence of an intra-union dispute. Cullo, the employees' counsel, admitted in subsequent pleadings that the case was filed not by the local union but by the NFL and individual employees named in the SPAs. AVA Olvida denied respondent's motion to withdraw, and later modified the party-complainant to "Insular Hotel Employees Union-NFL et. al." After AVA Olvida inhibited himself, AVA Montejo was selected as the new voluntary arbitrator, who rendered a Decision declaring the MOA invalid and ordering reinstatement of wages and benefits. Both parties appealed to the Court of Appeals, which reversed AVA Montejo's Decision and declared the MOA valid and enforceable.

• Jurisdiction of the Voluntary Arbitrator: Petitioner argued that the CA erred in finding that the voluntary arbitrator had no jurisdiction over the case simply because the Notice of Mediation did not mention the name of the local union, thereby disregarding the Submission Agreement duly signed by the parties and their legal counsels which mentioned the name of the local union as Insular Hotel Employees Union-NFL.
• Financial Distress of Respondent: Petitioner argued that the CA erred in disregarding the provisions of the CBA simply because it believed the unproven allegations of respondent that it was suffering from financial crisis, anchoring its position on the denial by the Wage Board of respondent's petition for exemption from Wage Order No. RTWPB-X1-08 on the ground that it was a distressed establishment.
• Application of Article 100 of the Labor Code: Petitioner argued that the CA erred in concluding that Article 100 of the Labor Code applies only to benefits enjoyed prior to the adoption of the Labor Code, which in effect allows the diminution of benefits enjoyed by employees from its adoption henceforth.

• Lack of Jurisdiction: Respondent maintained that the NCMB and Voluntary Arbitrators had no jurisdiction over the complaint, arguing that the Notice of Mediation was filed by parties without authority, that the Submission Agreement did not name the local union DIHFEU-NFL, and that it had timely withdrawn its consent to arbitrate by filing a motion to withdraw.
• Non-Entity of IHEU-NFL: Respondent contended that IHEU-NFL is a non-entity since DIHFEU-NFL is the only registered union in Waterfront Davao, as shown by a DOLE Certification dated November 16, 2006.
• Validity of the MOA: Respondent argued that the MOA it had entered into with the officers of the Union was valid, having been voluntarily executed to address the hotel's financial distress and to enable the resumption of operations.

• Jurisdiction of the Voluntary Arbitrator: Whether the voluntary arbitrator had jurisdiction over the case when the Notice of Mediation was filed by the NFL and individual employees rather than by the certified bargaining representative, the local union.
• Validity of the MOA: Whether the Memorandum of Agreement reducing wages and benefits was valid and enforceable despite the alleged financial distress of respondent and the non-ratification of the MOA by the union's general membership.
• Application of Article 100 of the Labor Code: Whether Article 100 of the Labor Code prohibits the reduction of benefits voluntarily agreed upon by the union and the employer after the promulgation of the Labor Code.

• Jurisdiction of the Voluntary Arbitrator: No. The NCMB and voluntary arbitrators had no jurisdiction over the case because the Notice of Mediation was filed by individual employees and the NFL, not by the certified or duly recognized bargaining representative, and respondent timely and persistently objected to the complainants' authority.
• Validity of the MOA: Yes. The MOA was valid and enforceable, having been voluntarily entered into by the union to prevent the hotel's closure, and the union members impliedly ratified it by individually signing the "Reconfirmation of Employment" contracts embodying the reduced terms.
• Application of Article 100 of the Labor Code: No. Article 100 of the Labor Code applies only to benefits already enjoyed at the time of the promulgation of the Labor Code, and it does not prohibit a union from voluntarily offering and agreeing to reduce wages and benefits.

• Jurisdiction of the Voluntary Arbitrator: The Court found that the Notice of Mediation was filed by a party who had no authority to do so. Under Section 3, Rule IV of the NCMB Manual of Procedure, only a certified or duly recognized bargaining representative may file a notice of preventive mediation. Cullo himself admitted in several pleadings that the case was filed not by the Union but by individual members thereof. The Court held that respondent's signing of the Submission Agreement did not bar it from raising the jurisdictional issue, as jurisdiction may be raised at any stage of the proceedings and is not lost by waiver or estoppel. Citing Figueroa vs. People, the Court noted that estoppel is the exception rather than the rule and must be applied rarely and only in extraordinary circumstances. The Court further held that individual union members lack standing to question the MOA before the NCMB, citing Tabigue vs. International Copra Export Corporation and Atlas Farms, Inc. vs. NLRC, which state that only disputes involving the union and the company shall be referred to the grievance machinery or voluntary arbitrators. Regarding the federation's standing, the Court cited Coastal Subic Bay Terminal, Inc. vs. DOLE, holding that a local union does not owe its existence to the federation, and mere affiliation does not give the mother federation the license to act independently of the local union. The Court also addressed respondent's contention that IHEU-NFL is a non-entity, holding that respondent is estopped from raising this issue as it did not raise it before the NCMB and the Voluntary Arbitrators.
• Validity of the MOA: The Court held that the CA was not without basis in declaring that respondent was suffering from impending financial distress, as respondent's audited financial statements showed total operating losses of ₱48,409,385.00 for the years 1998, 1999, and until September 30, 2000. While the Wage Board denied respondent's petition for exemption, the denial was partly due to the fact that the June 2000 financial statements were not audited, and Cullo did not question the accuracy and authenticity of the audited financial statements. The Court further held that the non-ratification of the MOA was not fatal to its validity. The members of the Union individually signed "Reconfirmation of Employment" contracts, which stipulated the new salary and benefits scheme and made reference to the MOA. The Court held that the signing of these contracts should be deemed an implied ratification of the MOA, citing Planters Products, Inc. vs. NLRC, which held that it is iniquitous to receive benefits from a CBA and later disclaim its validity. The Court also noted that Rojas was properly authorized under a Board of Directors Resolution to negotiate with respondent, and that the Constitution and By-Laws of DIHFEU-NFL authorize the president to represent the union.
• Application of Article 100 of the Labor Code: The Court cited Apex Mining Company, Inc. vs. NLRC, which held that the prohibition against elimination or diminution of benefits in Article 100 is specifically concerned with benefits already enjoyed at the time of the promulgation of the Labor Code. Even assuming Article 100 applies, the Court cited Rivera vs. Espiritu, which held that the right to free collective bargaining includes the right to suspend it, and that a CBA entered into voluntarily to prevent the employer's closure is valid. The Court concluded that while the scales of justice usually tilt in favor of labor, the peculiar circumstances of this case prevented the application of that principle, as the law also recognizes that management has rights entitled to respect and enforcement in the interest of fair play.

• Jurisdiction of the NCMB and Voluntary Arbitrators — Under Section 3, Rule IV of the NCMB Manual of Procedure, only a certified or duly recognized bargaining representative may file a notice of preventive mediation. The Court applied this rule to hold that the NCMB and voluntary arbitrators lacked jurisdiction where the Notice of Mediation was filed by individual employees and the federation, not by the certified bargaining representative.
• Estoppel and Jurisdiction — The issue of jurisdiction may be raised at any stage of the proceedings, even on appeal, and is not lost by waiver or by estoppel. Estoppel is the exception rather than the rule, applied rarely and only in extraordinary circumstances. The Court applied this doctrine to hold that respondent's signing of the Submission Agreement did not bar it from raising the jurisdictional issue, as it had timely and persistently objected.
• Standing of Individual Union Members — Only disputes involving the union and the company shall be referred to the grievance machinery or voluntary arbitrators. Individual union members who have not been duly authorized to represent the union lack standing to file a case before the NCMB. The Court applied this doctrine to hold that the individual employees had no authority to question the MOA.
• Relationship Between Local Union and Federation — 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, nor does it give the mother federation the license to act independently of the local union. The relationship is that of agency, where the local union is the principal and the federation is the agent. The Court applied this doctrine to hold that the NFL had no authority to file the complaint in behalf of the individual employees.
• Implied Ratification of a CBA — The signing of individual employment contracts embodying the terms of a CBA or MOA may be deemed an implied ratification of the agreement by the union members, notwithstanding the absence of formal ratification. The Court applied this doctrine to hold that the union members' signing of the "Reconfirmation of Employment" contracts constituted implied ratification of the MOA.
• Article 100 of the Labor Code — The prohibition against elimination or diminution of benefits in Article 100 is specifically concerned with benefits already enjoyed at the time of the promulgation of the Labor Code, and does not apply to situations arising after the promulgation date. The Court applied this doctrine to hold that Article 100 did not bar the reduction of benefits under the MOA.
• Right to Free Collective Bargaining — The right to free collective bargaining includes the right to suspend it. A CBA entered into voluntarily to prevent the employer's closure is valid. The Court applied this doctrine to uphold the validity of the MOA.

• "Procedurally, the first step to submit a case for mediation is to file a notice of preventive mediation with the NCMB. It is only after this step that a submission agreement may be entered into by the parties concerned." — This passage establishes the procedural prerequisite for voluntary arbitration and supports the Court's finding that the NCMB lacked jurisdiction because the Notice of Mediation was filed by parties without authority.
• "From the foregoing, it is clear that only a certified or duly recognized bargaining agent may file a notice or request for preventive mediation. It is curious that even Cullo himself admitted, in a number of pleadings, that the case was filed not by the Union but by individual members thereof. Clearly, therefore, the NCMB had no jurisdiction to entertain the notice filed before it." — This passage articulates the controlling rule on who may file a notice of preventive mediation and applies it to the facts to conclude that the NCMB lacked jurisdiction.
• "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." — This passage defines the relationship between a local union and its federation and supports the Court's holding that the NFL had no authority to file the complaint.
• "To this Court's mind, the signing of the individual 'Reconfirmation of Employment' should, therefore, be deemed an implied ratification by the Union members of the MOA." — This passage states the Court's key holding on implied ratification, which was central to upholding the validity of the MOA.

• Figueroa vs. People, G.R. No. 147406, July 14, 2008, 558 SCRA 63 — Cited to explain that estoppel is the exception rather than the rule, applied rarely and only in extraordinary circumstances, and that the issue of jurisdiction may be raised at any stage of the proceedings.
• Tabigue vs. International Copra Export Corporation (INTERCO), G.R. No. 183335, December 23, 2009, 609 SCRA 223 — Cited for the proposition that only disputes involving the union and the company shall be referred to the grievance machinery or voluntary arbitrators, and that individual members who have not been duly authorized to represent the union lack standing.
• Coastal Subic Bay Terminal, Inc. vs. Department of Labor and Employment, G.R. No. 157117, November 20, 2006, 507 SCRA 300 — Cited to define the relationship between a local union and its federation as one of agency, where the local union is the principal and the federation is the agent.
• Apex Mining Company, Inc. vs. NLRC, G.R. No. 86200, February 25, 1992, 206 SCRA 497 — Cited for the proposition that Article 100 of the Labor Code applies only to benefits already enjoyed at the time of the promulgation of the Labor Code.
• Rivera vs. Espiritu, 425 Phil. 169 (2002) — Cited for the proposition that the right to free collective bargaining includes the right to suspend it, and that a CBA entered into voluntarily to prevent the employer's closure is valid.
• Planters Products, Inc. vs. NLRC, 251 Phil. 310 (1989) — Cited for the proposition that it is iniquitous to receive benefits from a CBA and later disclaim its validity, supporting the Court's finding of implied ratification.
• Duncan Association of Detailman-PTGWO vs. Glaxo Wellcome Philippines, Inc., 481 Phil. 687, 700 (2004) — Cited for the proposition that while the scales of justice usually tilt in favor of labor, the law also recognizes that management has rights entitled to respect and enforcement.

• Section 3, Rule IV, NCMB Manual of Procedure — Provides that only a certified or duly recognized bargaining representative may file a notice of preventive mediation, declare a strike, or request preventive mediation. The Court applied this provision to hold that the NCMB lacked jurisdiction over the case.
• Article 100, Labor Code — Prohibits the elimination or diminution of benefits being enjoyed at the time of the promulgation of the Labor Code. The Court applied this provision to hold that it does not prohibit a union from voluntarily agreeing to reduce wages and benefits after the promulgation of the Code.
• Article 260, Labor Code — Provides that parties to a CBA shall name their respective representatives to the grievance machinery, and only disputes involving the union and the company shall be referred to the grievance machinery or voluntary arbitrators. The Court applied this provision to hold that individual union members lack standing to file the case.
• Article 253-A, Labor Code — Provides for the two-fold purpose of promoting industrial stability and predictability and assigning specific timetables for negotiations. The Court cited this provision in Rivera vs. Espiritu to support the validity of agreements that suspend the CBA.
• Article 231, Labor Code and Sec. 1, Rule IX, Book V of the Implementing Rules — Require parties to a CBA to furnish copies to the appropriate Regional Office with proof of ratification. The Court cited this provision in Planters Products, Inc. vs. NLRC to note that non-ratification does not invalidate a CBA where employees have enjoyed benefits under it.

Carpio, J. (Chairperson), Velasco, Jr., J., Bersamin, J., and Abad, J. concurred in the decision.