Liberty Flour Mills Employees vs. Liberty Flour Mills, Inc.

Wage increases stipulated in a collective bargaining agreement may absorb the emergency cost of living allowance required by P.D. No. 525 where they meet or exceed the minimum allowances under LOI No. 174. A union shop clause may justify dismissal of employees who disaffiliate from the contracting union during the CBA term, and BLR certification is not required to validate the CBA.

Liberty Flour Mills, Inc. and the Philippine Labor Alliance Council (PLAC) were parties to a three-year collective bargaining agreement effective January 1, 1974, which provided wage increases and a union shop clause. Petitioners Antonio Evaristo and Policarpio Biascan were employees who later organized a rival union affiliated with the Federation of National Democratic Labor Unions. The dispute implicated P.D. No. 525, which required emergency cost of living allowances, and LOI No. 174 with its Interpretative Bulletin, which allowed wage adjustments to be treated as substantial compliance with minimum allowance standards.

On February 6, 1974, respondent Philippine Labor Alliance Council (PLAC) and respondent Liberty Flour Mills, Inc. entered into a three-year collective bargaining agreement effective January 1, 1974. The CBA provided for a daily wage increase of P2.00 for 1974, P1.00 for 1975, and another P1.00 for 1976. It contained a compliance clause and established a union shop by imposing “membership in good standing for the duration of the CBA as a condition for continued employment” of workers. Petitioners Antonio Evaristo and Policarpio Biascan were employees of the company.

On October 18, 1974, PLAC filed a complaint against the company for non-payment of the emergency cost of living allowance under P.D. No. 525. A similar complaint was filed on March 4, 1975, this time by petitioners, who apparently were already veering away from PLAC. On March 20, 1975, Evaristo and Biascan, after organizing a union affiliated with the Federation of National Democratic Labor Unions, filed with the Bureau of Labor Relations a petition for certification election among the rank-and-file employees of the company. PLAC then expelled the two for disloyalty and demanded their dismissal; the company complied on May 20, 1975.

The objection of Evaristo and Biascan to their termination was certified for compulsory arbitration and assigned to Labor Arbiter Apolinario N. Lomabao, Jr. Meanwhile, the claims for emergency allowance were referred for voluntary arbitration to Edmundo Cabal, who eventually dismissed them on the ground that the allowances were already absorbed by the wage increases. This latter case was ultimately also certified for compulsory arbitration and consolidated with the termination case being heard by Lomabao.

The CBA concluded in 1974 was certifiable and was in fact certified on April 11, 1975. Evaristo and Biascan were dismissed only on May 20, 1975, more than a month after the certification. In a certification election held on December 27, 1976, Ilaw at Buklod ng Manggagawa, with which the union organized by Biascan and Evaristo was affiliated, won overwhelmingly with 441 votes against 5 votes for PLAC. However, the two had disaffiliated from PLAC as early as March 1975 and thus rendered themselves subject to dismissal under the union shop clause.

Petitioners claimed the 1974 CBA was entered into in bad faith and to forestall the payment of emergency allowances expected to be decreed, but they nonetheless invoked the same agreement to argue that the complaint for emergency allowances was invalidly referred to Cabal rather than Froilan M. Bacungan. They contended that the wage increases were the result of negotiation undertaken long before the promulgation of P.D. No. 525 and should not be considered part of the emergency allowance decreed, citing Section 15 of the Rules implementing P.D. No. 525. They also argued that Section 2 of the CBA was invalid because it constituted a waiver by laborers of future benefits that might be granted by law. Evaristo and Biascan claimed they were illegally dismissed for organizing another labor union opposed to PLAC, which they described as a company union, and insisted on back wages. They said the reinstatement issue had become academic because Evaristo had been readmitted and Biascan chose to await the resolution of the case, but they still sought back wages.

The company’s position was that the emergency allowance required by P.D. No. 525 was already covered by the wage increases prescribed in the CBA. Pursuant to Article VIII, such allowances also included all other statutory minimum wage increases that might be decreed during the lifetime of the agreement. Section 2 provided that the wage increase would be considered compliance and payment of any required statutory increase as far as it would go and under no circumstances cumulative nor duplicative.

• Bad Faith CBA: Petitioners claimed the 1974 CBA was entered into in bad faith and to forestall the payment of emergency allowances expected to be decreed.
• Invalid Referral to Voluntary Arbitrator: Petitioners argued that the complaint for emergency allowances was invalidly referred to voluntary arbitrator Edmundo Cabal rather than Froilan M. Bacungan.
• Non-Absorption by CBA Wage Increases: Petitioners contended that the wage increases were the result of negotiation undertaken long before the promulgation of P.D. No. 525 and should not be considered part of the emergency allowance decreed, citing Section 15 of the Rules implementing P.D. No. 525.
• Invalid Waiver: Petitioners maintained that Section 2 of the CBA was invalid because it constituted a waiver by laborers of future benefits that might be granted by law, contrary to public policy.
• Illegal Dismissal and Back Wages: Evaristo and Biascan claimed they were illegally dismissed for organizing another labor union opposed to PLAC, which they described as a company union; they argued they were exercising the constitutional right to self-organization and were entitled to back wages.
• Academic Reinstatement: Petitioners said the reinstatement issue had become academic because Evaristo had been readmitted and Biascan chose to await the resolution of the case, but they still insisted on back wages because the dismissal was illegal.

• Absorption by CBA Wage Increases: Respondent Liberty Flour Mills, Inc. maintained that the emergency allowance required by P.D. No. 525 was already covered by the wage increases prescribed in the 1974 CBA.
• Statutory Increases Included: Pursuant to Article VIII of the CBA, such allowances also included all other statutory minimum wage increases that might be decreed during the lifetime of the agreement.
• Compliance Clause: Under Section 2, the wage increase was to be considered compliance and payment of any required statutory increase as far as it would go, and under no circumstances cumulative nor duplicative.
• Prematurity of Dismissal: Public respondent NLRC held that PLAC acted prematurely in demanding the dismissal of Evaristo and Biascan because the 1974 CBA providing for the union shop had not yet been certified, and it disallowed the award of back wages.

• Referral to Voluntary Arbitrator: Whether the complaint for emergency allowances was invalidly referred to voluntary arbitrator Edmundo Cabal rather than Froilan M. Bacungan.
• Absorption of Emergency Allowance: Whether the emergency cost of living allowance required by P.D. No. 525 was already absorbed by the wage increases stipulated in the 1974 CBA.
• Invalid Waiver: Whether Section 2 of the CBA constituted an invalid waiver of future statutory benefits.
• Effect of Non-Certification: Whether the union shop dismissal of Evaristo and Biascan was premature because the 1974 CBA had not yet been certified.
• Illegal Dismissal and Back Wages: Whether Evaristo and Biascan were illegally dismissed for union activities and entitled to back wages.

• Referral to Voluntary Arbitrator: No. The choice of voluntary arbitrator was not limited to Bacungan, and petitioners were estopped from raising the objection because they did not seasonably interpose it and willingly submitted to Cabal's jurisdiction.
• Absorption of Emergency Allowance: Yes. The emergency allowance under P.D. No. 525 was absorbed by the CBA wage increases, which exceeded the minimum allowance under LOI No. 174.
• Invalid Waiver: No. Section 2 did not constitute a waiver of future benefits; the benefits were already included in the wage increases, and any amount not covered by the increase would have to be paid by the company.
• Effect of Non-Certification: No. BLR certification is not required to stamp validity on a CBA; once duly entered into and signed, it is effective between the parties. In any event, the CBA was certified on April 11, 1975, before the May 20, 1975 dismissal.
• Illegal Dismissal and Back Wages: No. The union shop clause was validly enforced against Evaristo and Biascan, justifying their termination; the claim for back wages was properly denied.

• Referral to Voluntary Arbitrator: No violation occurred because the choice of voluntary arbitrator was not limited to Bacungan, although he was probably the first preference. Petitioners were estopped from raising the objection because they did not seasonably interpose it and instead willingly submitted to Cabal's jurisdiction when he undertook to hear their complaint. Their ambivalent position—claiming the CBA was entered into in bad faith while invoking it to support the referral objection—further weakened the claim.

• Absorption of Emergency Allowance: The validity of the voluntary arbiter's finding was examined despite Article 262-A of the Labor Code making such decisions final and unappealable. Under Oceanic Bic Division (FFW) vs. Romero and Mantrade/FMMC Division Employees and Workers Union vs. Bacungan, the Supreme Court may take cognizance of petitions questioning such decisions where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of law is raised; a voluntary arbitrator acts in a quasi-judicial capacity, and decisions involving interpretation of law are not beyond the Court's review. On the merits, Section 6 of the Interpretative Bulletin on LOI No. 174 provides that all allowances, bonuses, wage adjustments, and other benefits given by employers shall be treated as substantial compliance with the minimum standards of LOI No. 174 if they conform to at least the minimum allowance scales in the immediately preceding section and are given in response to the President's appeal on January 4, 1974, or to countervail the quantum jump in the cost of living due to the energy crisis starting November 1973, or pursuant to P.D. No. 390, provided the payment is retroactive to February 18, 1974 or earlier. Section 5 classifies employers: P50.00 or higher monthly allowance where authorized capital stock or total assets exceed P1 million; P30.00 or higher where not less than P100,000 but not more than P1 million; and P15.00 or higher where less than P100,000. The company fell under the first category, as its capitalization exceeded P1 million, and was required to pay a minimum allowance of P50.00 a month. The CBA required a monthly increase, on a 30-day basis, of P60.00 for 1974, P90.00 for 1975, and P120.00 for 1976; even on a 26-day basis, the increases were P52.00, P78.00, and P104.00. These amounts exceeded the minimum allowance, so the emergency allowance was absorbed. Section 15 of the Rules implementing P.D. No. 525, allowing agreements more favorable to employees or prohibiting diminution of existing benefits, was not to be read in isolation; it meant that benefits over and above the prescribed allowances could still be agreed upon or, if already granted, could not be withdrawn or diminished. No waiver occurred because the benefits were already included in the wage increases, and the law itself considered the increases under LOI No. 174 as equivalent to or in lieu of the emergency allowance under P.D. No. 525. The company had agreed to grant the emergency allowance even before the obligation was imposed by the government. The claim for an additional P50.00 allowance failed because the employees were already enjoying the stipulated increases. Section 2's phrase “as far as it will go” meant that any amount not covered by the wage increase would have to be made good by the company. The same clause was reproduced verbatim in the 1977 CBA after PLAC was replaced by the new union formed by Evaristo and Biascan.

• Invalid Waiver: Section 2 of the CBA did not constitute an invalid waiver of future benefits. The benefits were already included in the wage increases, and the law itself considered those increases, under the conditions prescribed in LOI No. 174, as equivalent to or in lieu of the emergency allowance granted by P.D. No. 525. The “as far as it will go” clause required the company to pay any difference between the stipulated wage increase and the statutory minimum wage, so there was no waiver as to that amount. Section 15 of the Rules implementing P.D. No. 525 did not support petitioners' position because it merely allowed more favorable agreements and prohibited diminution of existing benefits; it did not invalidate a CBA clause that treated wage increases as compliance with statutory allowance requirements.

• Effect of Non-Certification: The NLRC's conclusion that the dismissal was premature because the CBA had not yet been certified was erroneous. In Tanduay Distillery Labor Union vs. NLRC, the failure of the Bureau of Labor Relations to certify or act on a request for certification of a CBA was of no moment; an uncertified CBA that was duly filed and submitted and that complied with all requirements for certification was certifiable. The 1974 CBA was certifiable and was in fact certified on April 11, 1975. Evaristo and Biascan were dismissed only on May 20, 1975, more than a month after certification. The correct view was that expressed by Commissioner Cecilio P. Seno in his concurring and dissenting opinion: after the cancellation of the registration certificate of the Federation of Democratic Labor Unions, no other union contested PLAC's exclusive representation, so there was no legal impediment to the validity and enforceability of the CBA; BLR certification is not required to put a stamp of validity on the contract, and once duly entered into and signed, a CBA becomes effective between the parties regardless of whether it has been certified by the BLR. Although the certification election held on December 27, 1976 was won overwhelmingly by Ilaw at Buklod ng Manggagawa, with which the union organized by Biascan and Evaristo was affiliated, 441 votes against 5 for PLAC, this did not excuse the fact that the two had disaffiliated from PLAC as early as March 1975 and thus rendered themselves subject to dismissal under the union shop clause.

• Illegal Dismissal and Back Wages: The dismissal of Evaristo and Biascan was not illegal. The union shop clause was validly enforced against them and justified the termination of their services. They disaffiliated from PLAC as early as March 1975 and thereby rendered themselves subject to dismissal under the union shop clause in the CBA. The reinstatement issue had become academic because Evaristo had been readmitted and Biascan chose to await the resolution of the case, but the claim for back wages still had to be denied because the dismissal was not illegal. State policy promotes unionism to enable workers to negotiate with management on the same level and with more persuasiveness than if they bargained individually. The Constitution guarantees the rights to self-organization, collective bargaining and negotiations, and peaceful concerted actions including the right to strike in accordance with law. These purposes could be thwarted if every worker chose to go his own separate way instead of joining co-employees in collective action. The law has sanctioned union shop and closed shop stipulations as a means of encouraging workers to join and support the labor union of their own choice as their representative. Although the Court would have preferred to resolve the case in favor of petitioners, the law and the facts were against them, and no constitutional violation was shown.

• Absorption of statutory emergency allowances by CBA wage increases — Under Section 6 of the Interpretative Bulletin on LOI No. 174, allowances, bonuses, wage adjustments, and other benefits given by employers are treated as substantial compliance with the minimum standards of LOI No. 174 if they conform to at least the minimum allowance scales and are given in response to the President's appeal on January 4, 1974, or to countervail the cost-of-living increase due to the energy crisis starting November 1973, or pursuant to P.D. No. 390, provided payment is retroactive to February 18, 1974 or earlier. Section 5 sets minimum monthly allowances based on employer capitalization or assets: P50.00 for those exceeding P1 million, P30.00 for those between P100,000 and P1 million, and P15.00 for those below P100,000. The Court applied this rule to hold that the emergency cost of living allowance under P.D. No. 525 was absorbed by the CBA wage increases because the company fell under the P50.00 category and the CBA increases exceeded that amount.

• Non-waiver of future benefits / “as far as it will go” clause — A CBA provision stating that wage increases shall be considered compliance and payment of any statutory minimum wage increase as far as it will go, and shall not be cumulative or duplicative, does not constitute an invalid waiver of future statutory benefits. The benefits are already included in the wage increases, and any amount not covered by the increase must be made good by the employer. The Court applied this to uphold Section 2 of the CBA and reject petitioners' claim that it waived future benefits.

• Review of voluntary arbitrator decisions — Although Article 262-A of the Labor Code makes a voluntary arbitrator's decision final and unappealable, the Supreme Court may take cognizance of petitions questioning such decisions where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of law is raised. A voluntary arbitrator acts in a quasi-judicial capacity, and decisions involving interpretation of law are not beyond the Court's review. The Court applied this to examine the validity of the voluntary arbiter's finding that the emergency allowances were absorbed by the wage increases.

• Effect of BLR certification on CBA validity — A collective bargaining agreement becomes effective between the parties once it is duly entered into and signed; certification by the Bureau of Labor Relations is not required to put a stamp of validity on the contract. The Court applied this, following Tanduay Distillery Labor Union vs. NLRC, to hold that the union shop dismissal was not premature and that the CBA was in any event certified on April 11, 1975, before the May 20, 1975 dismissal.

• Union shop and closed shop clauses — The State promotes unionism to enable workers to negotiate with management on equal footing; the Constitution guarantees the rights to self-organization, collective bargaining and negotiations, and peaceful concerted actions including the right to strike in accordance with law. The law sanctions union shop and closed shop stipulations to encourage workers to join and support the labor union of their choice. The Court applied this to uphold the dismissal of Evaristo and Biascan, who disaffiliated from PLAC during the CBA term.

• "In spite of statutory provisions making "final" the decision of certain administrative agencies, we have taken cognizance of petitions questioning these decisions where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law were brought to our attention." — This states the exception to the finality of administrative and voluntary arbitrator decisions and supports the Court's review of the voluntary arbiter's absorption finding.

• "The Court holds that such allowances are indeed absorbed by the wage increases required under the agreement." — This is the ratio on the emergency allowance claim.

• "The certification of the collective bargaining agreement by the Bureau of Labor Relations is not required to put a stamp of validity to such contract. Once it is duly entered into and signed by the parties, a collective bargaining agreement becomes effective as between the parties regardless of whether or not the same has been certified by the BLR." — This is the rule adopted from Commissioner Seno's concurring and dissenting opinion on the effect of non-certification.

• "The union shop clause was validly enforced against them and justified the termination of their services." — This is the ratio on the dismissal and denial of back wages.

• Oceanic Bic Division (FFW) vs. Romero, 130 SCRA 392 — Cited for the rule that despite statutory finality provisions, the Supreme Court may review decisions of administrative agencies and voluntary arbitrators where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of law are raised.
• Mantrade/FMMC Division Employees and Workers Union vs. Bacungan, 144 SCRA 510 — Reiterated the same rule on review of final administrative and voluntary arbitrator decisions.
• Tanduay Distillery Labor Union vs. NLRC, 149 SCRA 470 — Held that the BLR's failure to certify a CBA is of no moment; an uncertified CBA duly filed and submitted and certifiable is effective, and certification is not required for validity or enforceability. Followed.

• P.D. No. 525 — Required emergency cost of living allowance; the claim for non-payment was held absorbed by the CBA wage increases.
• LOI No. 174, Section 6, Interpretative Bulletin — Provides that allowances, bonuses, wage adjustments, and other benefits are substantial compliance with minimum standards if they conform to the minimum allowance scales and are given in response to the President's appeal or to countervail the cost-of-living increase, among other conditions.
• LOI No. 174, Section 5, Interpretative Bulletin — Classifies employers and sets minimum monthly allowances: P50.00 for capitalization or assets exceeding P1 million; P30.00 for P100,000 to P1 million; and P15.00 for less than P100,000. The company fell under the P50.00 category.
• Section 15, Rules Implementing P.D. No. 525 — Allows more favorable agreements and prohibits diminution of existing benefits; held not to invalidate the CBA's absorption clause and not to be read in isolation.
• Article 262-A, Labor Code — Makes voluntary arbitrator decisions final and unappealable; the NLRC relied on this, but the Supreme Court may review such decisions in proper cases.
• Article VIII, Section 2, 1974 CBA — Provides that wage increases shall be considered compliance and payment of any statutory minimum wage increase as far as it will go, and shall not be cumulative or duplicative.
• Constitution (right to self-organization, collective bargaining and negotiations, and peaceful concerted actions including the right to strike in accordance with law) — Cited to support State policy promoting unionism and the validity of union shop and closed shop clauses.

Narvasa, Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

• Commissioner Cecilio P. Seno (NLRC) — His concurring and dissenting opinion disagreed with the NLRC majority's conclusion that the dismissal was premature because the CBA had not been certified. He reasoned that BLR certification is not required to validate a CBA and that once duly entered into and signed, it is effective between the parties regardless of certification. The Supreme Court adopted this view as the correct one.