Manila Electric Company vs. The Hon. Secretary of Labor and Employment, et al.

Security guards and other security personnel are no longer ineligible to join labor organizations under RA 6715, which amended Article 245 of the Labor Code to disqualify only managerial and supervisory employees from joining rank-and-file unions. Implementing rules that disqualify security guards from joining rank-and-file organizations are null and void for being not germane to the object and purposes of the statute upon which they purportedly derive statutory moorings.

Manila Electric Company (MERALCO) is an employer with an existing Collective Bargaining Agreement (CBA) with the MERALCO Employees and Workers Association (MEWA) covering its rank-and-file employees in Pay Grades I-VI. The CBA excluded certain categories of employees from the bargaining unit, including employees in the Patrol Division, Treasury Security Services Section, managerial employees, and secretaries, as well as employees in specified departments who were automatically disqualified from becoming union members. The Staff and Technical Employees Association of MERALCO (STEAM-PCWF) and the First Line Association of MERALCO Supervisory Employees (FLAMES) sought to represent employees excluded from the MEWA bargaining unit. The legal backdrop includes the Labor Code provisions on self-organization, the issuance of EO 111 which eliminated the disqualification of security guards from joining labor organizations, and the subsequent enactment of RA 6715 which reorganized employee classifications into managerial, supervisory, and rank-and-file.

Manila Electric Company (MERALCO) is an employer with an existing Collective Bargaining Agreement with the MERALCO Employees and Workers Association (MEWA) covering its rank-and-file employees in Pay Grades I-VI. On November 22, 1988, the Staff and Technical Employees Association of MERALCO (STEAM-PCWF), a labor organization of staff and technical employees, filed a petition for certification election seeking to represent regular employees who are: (a) non-managerial employees with Pay Grades VII and above; (b) non-managerial employees in the Patrol Division, Treasury Security Services Section, and Secretaries who are automatically removed from the bargaining unit; and (c) employees within the rank-and-file unit who are automatically disqualified from becoming union members. The petition was premised on the exclusion/disqualification of certain employees pursuant to Article I, Sections 2 and 3 of the existing MEWA CBA, which excluded from the bargaining unit employees in the Patrol Division, Treasury Security Services Section, managerial employees, and secretaries, and which automatically disqualified regular rank-and-file employees in certain organizational elements from becoming union members.

MERALCO moved for the dismissal of the petition on the grounds that the employees sought to be represented were either managerial employees prohibited by law from forming or joining a supervisory union, security services personnel prohibited from joining or assisting the rank-and-file union, secretaries who do not consent to the petitioner's representation, or rank-and-file employees already represented by MEWA. MERALCO also argued that the petition would disturb the administration of the existing CBA in violation of Article 232 of the Labor Code, and that the petition was not supported by the written consent of at least twenty percent of the alleged 2,500 employees sought to be represented.

Before the Med-Arbiter, MERALCO contended that employees from Pay Grades VII and above are classified as managerial employees prohibited from forming, joining, or assisting a labor organization of the rank-and-file, and that employees in the Patrol Division and Treasury Security Services Section, being tasked with providing security to the company, are not eligible to join the rank-and-file bargaining unit pursuant to the then Implementing Rules and Regulations of the Labor Code. On March 15, 1989, the Med-Arbiter ruled that employees excluded from the existing CBA have the right to form a union of their own, except those performing managerial functions, and directed the holding of a certification election among the regular rank-and-file employees of MERALCO.

MERALCO appealed, and MEWA filed an appeal-in-intervention. With the enactment of RA 6715 and its implementing rules, STEAM-PCWF renounced its representation of the employees in the Patrol Division, Treasury Security Services Section, and rank-and-file employees in Pay Grades I-VI. On September 13, 1989, FLAMES filed a similar petition seeking to represent employees with Pay Grades VII to XIV, which was consolidated with the STEAM-PCWF petition. On November 3, 1989, the Secretary of Labor affirmed with modification the Med-Arbiter's order, directing that employees covered by Section 3, Article I of the existing CBA shall remain in the rank-and-file unit, and including FLAMES as among the choices in the certification election. MERALCO's motion for reconsideration was denied on January 16, 1990.

In its petition before the Supreme Court, MERALCO relented and recognized the respondents' desired representation of supervisory employees from Grades VII up, but believed that the Secretary of Labor should establish a demarcation line between supervisory and managerial rank, and not classify outright the group of employees represented by STEAM-PCWF and FLAMES as rank-and-file employees. MERALCO also questioned the Secretary of Labor's directive allowing security guards to be represented by respondents, contending that this contravenes the provisions of RA 6715 and its implementing rules which disqualify supervisory employees and security guards from membership in a labor organization of the rank-and-file.

• Classification of Employees: MERALCO argued that employees from Pay Grades VII and above are classified as managerial employees who, under the law, are prohibited from forming, joining, or assisting a labor organization of the rank-and-file, and that until a judicial finding is made that they are not managerial employees, STEAM-PCWF cannot represent them.
• Security Personnel Disqualification: MERALCO contended that employees in the Patrol Division and Treasury Security Services Section, being tasked with providing security to the company, are not eligible to join the rank-and-file bargaining unit pursuant to the Implementing Rules of the Labor Code, and that allowing security guards to be represented by respondents contravenes the provisions of RA 6715 and its implementing rules which disqualify supervisory employees and security guards from membership in a labor organization of the rank-and-file.
• Disturbance of Existing CBA: MERALCO argued that the petition for certification election would disturb the administration of the existing Collective Bargaining Agreement in violation of Article 232 of the Labor Code.
• Lack of Written Consent: MERALCO argued that the petition itself shows that it is not supported by the written consent of at least twenty percent of the alleged 2,500 employees sought to be represented.
• Demarcation Line Requirement: MERALCO argued that the Secretary of Labor should establish a demarcation line between supervisory and managerial rank, and not classify outright the group of employees represented by STEAM-PCWF and FLAMES as rank-and-file employees.

• Right to Self-Organization: The Secretary of Labor ruled that employees excluded from the existing Collective Bargaining Agreement have the right to form a union of their own, except those performing managerial functions, and that the holding of a certification election would allow employees who resented their alleged involuntary membership in the existing CBA to fully translate their sentiment on the matter.
• Supervisory Classification: FLAMES argued that employees with Pay Grades VII to XIV are not managerial employees, and that although employees with Pay Grade XV carry the rank of Department Managers, their recommendatory powers are subject to evaluation, review, and final action by department heads and other higher executives of the company.
• Security Guards' Right to Organize: The Secretary of Labor, in accommodating supervisory employees, applied the provisions of RA 6715 to security guards by favorably allowing them free access to a labor organization, whether rank-and-file or supervisory, in recognition of their constitutional right to self-organization.

• Establishment of Separate Bargaining Unit: Whether the respondent Secretary of Labor acted with grave abuse of discretion in ruling that another rank-and-file bargaining unit can be established independent, distinct, and separate from the existing rank-and-file bargaining unit.
• Classification of Employees from Pay Grades VII and Above: Whether the respondent Secretary of Labor acted with grave abuse of discretion in ruling that employees from Pay Grades VII and above are rank-and-file employees.
• Security Guards' Union Membership: Whether the respondent Secretary of Labor acted with grave abuse of discretion in ruling that security guards or personnel may be lumped together with the rank-and-file union and/or the supervisory union.

• Establishment of Separate Bargaining Unit: No. The authority given by the Secretary of Labor for the establishment of two labor organizations for the rank-and-file was disregarded, and the Court upheld certification elections only for supervisory employees from Pay Grade VII and up, with STEAM-PCWF and FLAMES as choices.
• Classification of Employees from Pay Grades VII and Above: No. The employees from Pay Grades VII and up have been recognized and accepted as supervisory, not rank-and-file, based on MERALCO's own admission and the records showing that STEAM-PCWF renounced its representation of rank-and-file employees and FLAMES limited its representation to employees belonging to Pay Grades VII-XIV, generally accepted as supervisory employees.
• Security Guards' Union Membership: No. Under RA 6715, security guards may now freely join a labor organization of the rank-and-file or that of the supervisory union, depending on their rank, and the implementing rules disqualifying them are null and void for being not germane to the object and purposes of EO 111 and RA 6715.

• Establishment of Separate Bargaining Unit: The Court held that since MERALCO admitted that employees belonging to Pay Grades VII and up are supervisory, and STEAM-PCWF and FLAMES would represent supervisory employees only, the authority given by the Secretary of Labor for the establishment of two labor organizations for the rank-and-file had to be disregarded. The Court upheld certification elections only for supervisory employees from Pay Grade VII and up, with STEAM-PCWF and FLAMES as choices. The employees covered by Section 3, Article I of the MEWA-CBA were directed to remain in the existing labor organization for the rank-and-file, with the condition in the CBA deemed as not having been written into the contract, as unduly restrictive of an employee's exercise of the right to self-organization.

• Classification of Employees from Pay Grades VII and Above: The Court noted that the Secretary of Labor's resolution was premised on the provisions of Article 212, then paragraph (k), of the 1988 Labor Code defining "managerial" and "rank-and-file" employees, the law then in force when the complaint was filed, which recognized only two groups of employees. However, RA 6715 was subsequently passed, which reorganized the employee-ranks by including a third group, the supervisory employees, and laid down the distinction between supervisory employees and those of managerial ranks in Article 212, renumbered paragraph (m), depending on whether the employee concerned has the power to lay down and execute management policies, in the case of managerial employees, or merely to recommend them, in the case of supervisory employees. The Court found that the required parameter for segregating supervisory from managerial employees is not necessary since the law itself, Article 212(m), as amended by Section 4 of RA 6715, has already laid down the corresponding guidelines. The determinative factor in classifying an employee as managerial, supervisory, or rank-and-file is the nature of the work of the employee concerned.

• Security Guards' Union Membership: The Court examined the history of the disqualification of security guards from joining labor organizations. Under the old rules, security guards were barred from joining a rank-and-file organization pursuant to then Article 245 of the Labor Code, which provided that security guards and other personnel employed for the protection and security of the person, properties, and premises of the employer shall not be eligible for membership in any labor organization. On December 24, 1986, President Corazon C. Aquino issued E.O. No. 111, which eliminated the provision on the disqualification of security guards, retaining only the disqualification of managerial employees. On March 2, 1989, Congress passed RA 6715, Section 18 of which amended Article 245 to disqualify managerial employees from joining any labor organization and supervisory employees from membership in a labor organization of the rank-and-file employees, but did not include security guards in the disqualification. The Court held that the implementing rules of RA 6715, insofar as they disqualify security guards from joining a rank-and-file organization, are null and void for being not germane to the object and purposes of EO 111 and RA 6715 upon which such rules purportedly derive statutory moorings. Citing Shell Philippines, Inc. vs. Central Bank, the Court stated that the rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted, and cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. The Court acknowledged possible consequences in allowing security personnel to join labor unions within the company they serve, such as divided loyalties in the faithful performance of their duties, but expressed hope that the corresponding amendatory and/or suppletory laws be passed by Congress to avoid possible conflict of interest in security personnel.

• Classification of Employees (Managerial, Supervisory, Rank-and-File) — Under Article 212(m) of the Labor Code, as amended by Section 4 of RA 6715, a "managerial employee" is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline employees. Supervisory employees are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. All employees not falling within any of the above definitions are considered rank-and-file employees. The determinative factor in classifying an employee is the nature of the work of the employee concerned. The Court applied this doctrine in determining that employees from Pay Grades VII and up are supervisory employees, not rank-and-file, based on the parties' admissions and the statutory guidelines.

• Nullity of Implementing Rules Not Germane to the Statute — The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned. The Court applied this doctrine in declaring null and void the implementing rules of RA 6715 insofar as they disqualify security guards from joining a rank-and-file organization, since RA 6715 itself does not include security guards in the disqualification.

• Right to Self-Organization — The constitutional right of workers to self-organization includes the right to form, join, or assist labor organizations for purposes of collective bargaining. Conditions in a CBA that unduly restrict the exercise of this right are contrary to law and public policy and should be considered as not having been written into the contract. The Court applied this doctrine in ruling that the condition in the MEWA-CBA automatically disqualifying certain employees from becoming union members unduly restricts the exercise of the right to self-organization, and the option to join or not to join the union should be left entirely to the employees themselves.

• "The implementing rules of RA 6715, therefore, insofar as they disqualify security guards from joining a rank and file organization are null and void, for being not germane to the object and purposes of EO 111 and RA 6715 upon which such rules purportedly derive statutory moorings." — This passage states the ratio decidendi on the issue of security guards' eligibility to join labor organizations, declaring the implementing rules void for exceeding the statute.

• "The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned." — This passage, quoted from Shell Philippines, Inc. vs. Central Bank, articulates the doctrine on the limits of administrative rule-making power, which the Court applied to nullify the implementing rules disqualifying security guards.

• "While therefore under the old rules, security guards were barred from joining a labor organization of the rank and file, under RA 6715, they may now freely join a labor organization of the rank and file or that of the supervisory union, depending on their rank." — This passage summarizes the Court's holding on the eligibility of security guards to join labor organizations under the amended law.

• "However, we cannot approve of the condition set in Section 3, Article I of the CBA that the employees covered are automatically disqualified from becoming union members. The condition unduly restricts the exercise of the right to self organization by the employees in question. It is contrary to law and public policy and, therefore, should be considered to have not been written into the contract." — This passage, quoted from the Secretary of Labor's resolution and affirmed by the Court, establishes the doctrine that CBA conditions unduly restricting the right to self-organization are void.

• National Waterworks and Sewerage Authority vs. National Waterworks and Sewerage Authority Consolidated Unions, 11 SCRA 766 — Cited for the definition of the nature of the work of a managerial employee, including that the employee's primary duty consists of the management of the establishment or of a customarily recognized department or subdivision thereof, that he customarily and regularly directs the work of other employees, that he has the authority to hire or discharge other employees or that his suggestions and recommendations as to hiring, discharging, advancement, promotion, or any other change of status of other employees are given particular weight, and that he customarily and regularly exercises discretionary powers.

• Shell Philippines, Inc. vs. Central Bank, G.R. No. 51353, June 27, 1988, 162 SCRA 628 — Cited as controlling precedent for the doctrine that the rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted, and cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute.

• University of Sto. Tomas vs. Board of Tax Appeals, 93 Phil. 376 — Cited in support of the doctrine that rules that subvert the statute cannot be sanctioned.

• Article 212(m), Labor Code, as amended by Section 4 of RA 6715 — Defines managerial employees as those vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline employees; supervisory employees as those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment; and rank-and-file employees as all employees not falling within any of the above definitions. The Court applied this provision in determining that employees from Pay Grades VII and up are supervisory employees.

• Article 245, Labor Code, as amended by Section 18 of RA 6715 — Provides that managerial employees are not eligible to join, assist, or form any labor organization, and that supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist, or form separate labor organizations of their own. The Court applied this provision in ruling that security guards are not included in the disqualification.

• Article 245, Labor Code (old), as amended by E.O. No. 111 — Previously provided that security guards and other personnel employed for the protection and security of the person, properties, and premises of the employer shall not be eligible for membership in any labor organization. E.O. No. 111 eliminated this disqualification, retaining only the disqualification of managerial employees. The Court traced this history to show that security guards were freed to join a rank-and-file organization.

• Article 232, Labor Code — Cited by MERALCO in arguing that the petition for certification election would disturb the administration of the existing Collective Bargaining Agreement. The Court did not directly address this argument in its ruling.

• Section 2(c), Rule V, Book V, Implementing Rules and Regulations of the Labor Code (1988) — Provided that the appropriate bargaining unit of the rank-and-file employees shall not include security guards, as amended by Section 6 of the Implementing Rules of EO 111. The Court found this rule superseded by RA 6715.

• Paragraph 2, Section 1, Rule II, Book V, Implementing Rules of RA 6715 — Provided that supervisory employees and security guards shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist, or form separate labor organizations of their own. The Court declared this rule null and void insofar as it disqualifies security guards, for being not germane to the object and purposes of EO 111 and RA 6715.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Griño-Aquino, Regalado, and Davide, Jr., JJ., concurred.