Manila Cordage Company vs. Court of Industrial Relations

A "maintenance-of-membership" clause in a collective bargaining agreement does not authorize the dismissal of employees who resign from the union unless the clause clearly and expressly states that continued union membership is a condition of continued employment; because such an undertaking is harsh, it must be strictly construed and all doubts resolved against the existence of the right to dismiss.

Manila Cordage Company is a Philippine corporation that entered into collective bargaining agreements with Manco Labor Union (NLU) in 1957 and 1959, when Manco Labor Union served as the exclusive bargaining representative of the company's employees. Both CBAs contained a "maintenance-of-membership" clause stipulating that employees who were already union members at the time of signing would continue to remain members for the duration of the agreement. A rival union, Manila Cordage Workers Union, was later formed and began recruiting members from Manco Labor Union. The dismissed employees—Silvino Rabago, Natalio Nisperos, and Ricardo Trajano—were members of Manco Labor Union when the CBAs were executed.

Manila Cordage Company is a Philippine corporation employing workers initially represented by Manco Labor Union (NLU), a legitimate labor organization, as their exclusive bargaining representative. In 1957, the company and Manco Labor Union entered into a collective bargaining agreement that included, among other stipulations, a "maintenance-of-membership" clause providing that "all employees of the COMPANY who are already members of the UNION at the time of the signing of this AGREEMENT shall continue to remain members of the UNION for the duration of this AGREEMENT." The same clause was embodied in the 1959 CBA between the same parties. At the time these agreements were executed, employees Silvino Rabago, Ricardo Trajano, and Natalio Nisperos were already members of Manco Labor Union.

Shortly after 1959, some employees formed a rival union, the Manila Cordage Workers Union, and began a membership campaign. Several employees who were members of Manco Labor Union resigned from that union and joined the new organization. At the instance of Manco Labor Union, which maintained that the maintenance-of-membership clause required continued union membership as a condition of employment, the Manila Cordage Company dismissed those who resigned, including Rabago, Vicente Untalan, Ruperto Balsamo, Nisperos, Trajano, Roque Ruby, and Salvador de Leon. Manco Labor Union held meetings informing members that under the CBA stipulations, continued membership in Manco Labor Union was a condition precedent to employment. Some of those who resigned withdrew their resignations and were re-employed by the company.

On March 28, 1961, an acting prosecutor of the Court of Industrial Relations filed a complaint for unfair labor practice against Manila Cordage Company and Manco Labor Union, docketed as Case No. 2728-ULP, on behalf of the Manila Cordage Workers Union and its members. An amended complaint dated July 14, 1961 added Ricardo Trajano and Salvador de Leon as complainants. The complaint alleged that Manco Labor Union, through its President, knowingly and unlawfully influenced and connived with the company in dismissing employees solely because they had resigned from Manco Labor Union and joined the rival union. Manco Labor Union answered that the dismissals were based on the existing CBA, while the company claimed it acted in good faith pursuant to its contractual obligations, fearing charges of contractual breach and reprisal from Manco Labor Union.

After trial, the CIR rendered its decision on May 4, 1966, finding substantial evidence of unfair labor practice against both the company and Manco Labor Union, ordering reinstatement of Rabago, Nisperos, and Trajano with back wages from the dates of their respective dismissals. Motions for reconsideration were denied on October 19, 1966, although the Presiding Judge voted to eliminate the back wage award while concurring in the reinstatement order. The CIR found that the maintenance-of-membership clause did not give the company the right to dismiss employees merely because they resigned from Manco Labor Union, and that the "Whereas" proviso relied upon by the respondents referred only to terms and conditions of employment such as working hours, wages, and benefits—not to tenure or duration of employment.

• Maintenance-of-Membership Clause: Manila Cordage Company argued that under the maintenance-of-membership clause in the CBA, all employees who were already members of Manco Labor Union when the agreement took effect were required to remain such members as a condition of continued employment, citing American federal and state court decisions and treatise writers uniformly defining such provisions as conditions of employment.
• Employee Status: Petitioner contended that individuals whose employment had ceased due to alleged unfair labor practices and who had not sought other substantially equivalent and regular employment ceased to be "employees" within the meaning of Section 2(d) of Republic Act No. 875, and were therefore not entitled to protection and relief under the Act.
• Good Faith Defense: Petitioner maintained that individuals dismissed pursuant to a union security clause are not entitled to back wages when the employer effected dismissal in good faith and in an honest belief that the clause authorized such dismissal.
• CBA Violation by Complainants: Manco Labor Union argued that by resigning from the union, the complainants violated the maintenance-of-membership clause of the CBA, making them liable to dismissal in the same manner as strikers who violate a no-strike clause.
• No Discrimination: Manco Labor Union maintained it could not be held guilty of discrimination, noting that other employees who resigned and later withdrew their resignations were not penalized, and that it had even requested reinstatement of Untalan and Balsamo when they withdrew their resignations.
• Dismissal of Complaint: Petitioner argued the complaint should have been dismissed.

• Maintenance-of-Membership Clause: Whether the "maintenance-of-membership" clause in the CBA required employees who were already members of Manco Labor Union to remain such members as a condition of continued employment in Manila Cordage Company.
• Employee Status: Whether individuals dismissed for alleged unfair labor practices who had not sought other substantially equivalent employment ceased to be "employees" within the meaning of Section 2(d) of Republic Act No. 875.
• Back Wages and Good Faith: Whether individuals dismissed pursuant to a union security clause are not entitled to back wages when the employer effected dismissal in good faith and in an honest belief that the clause authorized such dismissal.
• Sufficiency of Complaint: Whether the complaint should have been dismissed.

• Maintenance-of-Membership Clause: No. The clause did not clearly state that maintenance of membership was a condition of continued employment; being a harsh undertaking, it must be strictly construed with doubts resolved against the right to dismiss, pursuant to Confederated Sons of Labor vs. Anakan Lumber Co.
• Employee Status: No. The dismissed complainants sought substantially equivalent and regular employment but failed to find any, remaining "employees" entitled to protection under Republic Act No. 875.
• Back Wages and Good Faith: No, but modified. The dismissal was precipitate and done with undue haste; petitioners should have sought permission from the CIR before dismissing. However, in equity, back wages were limited to two years.
• Sufficiency of Complaint: No. The CIR found substantial evidence of unfair labor practice under the Industrial Peace Act, and the reinstatement order was proper.

• Maintenance-of-Membership Clause: The stipulation that "all employees of the COMPANY who are already members of the UNION at the time of the signing of this AGREEMENT shall continue to remain members of the UNION for the duration of this AGREEMENT" did not clearly state that maintenance of membership was a condition of continued employment. Following Confederated Sons of Labor vs. Anakan Lumber Co., 107 Phil. 915, for the company to be bound to dismiss employees who do not maintain union membership, the stipulation must be so clear as to leave no room for doubt. Such an undertaking is harsh and must be strictly construed, with doubts resolved against the right to dismiss. The petitioner's attempt to construe the clause together with the "Whereas" provision was rejected: the "Whereas" proviso referred to terms and conditions of employment such as working hours, wages, and benefits—not to tenure or duration of employment. Under the rule that a particular provision prevails over a general provision in case of inconsistency (Rule 130(4), Section 10, New Rules of Court), the specific maintenance-of-membership clause controlled over the general "Whereas" proviso. Construing the stipulations as imposing a condition of continued employment would violate the natural and constitutional right of the laborer to organize freely (Article XI, Section 1(6), 1935 Constitution) and would be inconsistent with the constitutional mandate that the State shall afford protection to labor (Article XI, Section 6, 1935 Constitution). The CIR correctly found that the clause did not give the company the right to dismiss employees solely because they resigned from Manco Labor Union.

• Employee Status: The dismissed complainants sought out substantially equivalent and regular employment but failed to find any. They therefore remained "employees" within the meaning of Section 2(d) of Republic Act No. 875 and were entitled to protection and relief under the Act.

• Back Wages and Good Faith: The contention that petitioners acted in good faith and should not be liable for back wages had no merit. The dismissal was precipitate and done with undue haste. Given that the maintenance-of-membership clause did not clearly grant the right to dismiss, the petitioners should have raised the issue before the CIR in a petition for permission to dismiss the complainants rather than dismissing them outright. However, considering the circumstances and equity of the case, back wages were limited to two years from the date of respective dismissals, computed on the basis of wages at the time of dismissal, without deduction or qualification.

• Sufficiency of Complaint: The CIR correctly found substantial evidence of unfair labor practice against both the company (under Section 4(a), paragraphs 1, 2, and 4 of the Industrial Peace Act) and Manco Labor Union (under Section 4(b), paragraphs 1 and 2). The reinstatement order was correct, subject to the complainants still being within required physical and age requirements, with any medical examination to be given as old reinstated workers—not as a precondition to reinstatement—pursuant to the ruling in Davao Free Workers Front vs. CIR, 60 SCRA 408.

• Strict Construction of Union Security Clauses — A maintenance-of-membership clause must be strictly construed, and all doubts resolved against the existence of the right to dismiss. For an employer to be bound to dismiss employees who do not maintain their union membership, the stipulation must be so clear as to leave no room for doubt. An undertaking of this nature is harsh and must be strictly construed. Applied: The CBA's maintenance-of-membership clause, which stated only that employees "shall continue to remain members," did not clearly make membership a condition of continued employment, and thus did not authorize dismissal.

• Constitutional Right to Organize vs. Union Security — Construing a maintenance-of-membership clause as imposing a condition of continued employment violates the natural and constitutional right of the laborer to organize freely and is inconsistent with the constitutional mandate that the State shall afford protection to labor. Applied: The ambiguous clause could not be interpreted to restrict the employees' right to join a rival union.

• Particular vs. General Provisions in Contract Interpretation — Under Rule 130(4), Section 10 of the New Rules of Court, in case of inconsistency, a particular provision prevails over a general provision. Applied: The specific maintenance-of-membership clause prevailed over the general "Whereas" proviso, which referred only to terms and conditions of employment, not to tenure or duration.

• Continuing Employer-Employee Relationship in Unfair Labor Practice Cases — The filing and pendency of an unfair labor practice case presupposes a continuing employer-employee relationship; when decided in favor of workers, the relationship is deemed to have continued uninterruptedly notwithstanding unlawful dismissal. Reinstated workers may be subjected to medical examination as old reinstated workers, but not as a precondition to reinstatement. Applied: Reinstatement was ordered without requiring medical examination as a precondition, per Davao Free Workers Front vs. CIR.

• "In order that the Manila Cordage Company may be deemed bound to dismiss employees who do not maintain their membership in the Manco Labor Union, the stipulation to this effect must be so clear as to leave no room for doubt thereon. An undertaking of this nature is so harsh that it must be strictly construed and doubts must be resolved against the existence of the right to dismiss." — This passage articulates the controlling standard for interpreting union security clauses, requiring clarity and strict construction, and is the ratio decidendi on the maintenance-of-membership issue.

• "To construe the stipulations above-quoted as imposing as a condition to continued employment in the Manila Cordage Company the maintenance of membership in the Manco Labor Union is to violate the natural and constitutional right of the laborer to organize freely." — This passage establishes the constitutional dimension of the ruling, linking the interpretation of union security clauses to the fundamental right of self-organization.

• "The dismissal of the complainants by the petitioners was precipitate and done with undue haste. Considering that the so-called 'maintenance to membership' clause did not clearly give the petitioners the right to dismiss the complainants if said complainants did not maintain their membership in the Manco Labor Union, the petitioners should have raised the issue before the Court of Industrial Relations in a petition for permission to dismiss the complainants." — This passage defines the procedural obligation of employers facing ambiguity in union security clauses and justifies the award of back wages despite the good faith claim.

• Confederated Sons of Labor vs. Anakan Lumber Co., 107 Phil. 915 — Controlling precedent followed on the requirement that a union security clause must clearly and expressly state the right to dismiss; doubts must be resolved against the existence of such right.
• Davao Free Workers Front vs. CIR, 60 SCRA 408 — Applied mutatis mutandis on the issue of continuing employer-employee relationship in ULP cases and the impropriety of requiring medical examination as a precondition to reinstatement.
• Feati University Faculty Club vs. Feati University, 58 SCRA 395 — Cited (cf.) in connection with the limitation of back wages to two years.

• Section 4(a), paragraphs 1, 2, and 4, Industrial Peace Act (Republic Act No. 875) — Defines unfair labor practices for employers; applied to find Manila Cordage Company guilty of ULP for restraining and coercing employees in the exercise of their rights.
• Section 4(b), paragraphs 1 and 2, Industrial Peace Act — Defines unfair labor practices for labor organizations; applied to find Manco Labor Union guilty of ULP for influencing and conniving with the company in the dismissal of employees.
• Section 3, Republic Act No. 875 — Guarantees the rights of employees to self-organization and collective bargaining; the CIR ordered respondents to cease and desist from restraining employees in the exercise of these rights.
• Section 2(d), Republic Act No. 875 — Defines "employee"; applied to determine that dismissed complainants who could not find equivalent employment remained employees entitled to protection.
• Article XI, Section 1(6), 1935 Constitution — Guarantees the right to organize freely; invoked to invalidate an interpretation of the maintenance-of-membership clause that would restrict this right.
• Article XI, Section 6, 1935 Constitution — Mandates that the State shall afford protection to labor; invoked as inconsistent with construing the clause as a condition of employment.
• Rule 130(4), Section 10, New Rules of Court — Provides that a particular provision prevails over a general provision in case of inconsistency; applied to prioritize the specific maintenance-of-membership clause over the general "Whereas" proviso.

Teehankee (Chairman), Makasiar, Muñoz-Palma, Martin, and Guerrero, JJ., concurred.