Manila Hotel Company vs. Court of Industrial Relations

An employer's discriminatory distribution of Christmas bonus and salary adjustments against union members constitutes unfair labor practice, and the Court of Industrial Relations may grant affirmative relief under Section 5 of Republic Act No. 875; the CIR also retains jurisdiction to implement the parties' settlement of retirement gratuity in supplemental proceedings.

Manila Hotel Company operated the Pines Hotel in Baguio City, where its employees were represented by the Pines Hotel Employees Association (CUGCO); Sofronio G. Rivera was the hotel's general manager. The National Development Company owned the Pines Hotel, which it later sold to Resort Hotels Corporation. The labor dispute arose under the Industrial Peace Act (Republic Act No. 875), the Minimum Wage Law (Republic Act No. 4180), and the Retirement Law (Republic Act No. 186).

Manila Hotel Company operated the Pines Hotel in Baguio City, and its employees there were represented by the Pines Hotel Employees Association (CUGCO). Sofronio G. Rivera was the hotel's general manager. The National Development Company owned the Pines Hotel. In the mid-1960s, the union's relationship with Manila Hotel Company was marked by demands for better living conditions and strikes.

On May 16, 1966, an unfair labor practice complaint on six counts was filed against Manila Hotel Company and Rivera, docketed as CIR Case No. 4506-ULP. After hearing, the CIR dismissed four counts and found them guilty on two: discrimination in the 1965 Christmas bonus and discrimination in salary adjustments under Republic Act No. 4180. On the bonus, the company had traditionally distributed 7% of net profit pro rata among employees of Manila Hotel, Taal Vista Lodge, and Pines Hotel. In 1965, it allocated 50% to Manila Hotel employees, 25% to Taal Vista Lodge, and 25% to Pines Hotel. The 7% net profit was P8,239.73; Manila Hotel's eight employees received about P500 each, Taal Vista's thirty employees about P70 each, and Pines Hotel's one hundred twenty employees about P20 each. Two Manila Hotel employees, Modesto Hilario and Margarita Reyes, also received year-end bonuses of P2,011.55 and P1,645.82 despite having been employed only since September 1964. The company claimed the allocation was valid discretion because Manila Hotel realized net profit of P226,055.42 while Pines Hotel and Taal Vista Lodge incurred losses, but the CIR found the claim without factual basis because Manila Hotel's income came from leasing its building and facilities to Mrs. Esperanza Zamora, with which its eight administrative employees had nothing to do, while Pines Hotel and Taal Vista Lodge were actually operated by the company.

On salary adjustments, the CIR found discrimination under Republic Act No. 4180, which increased the daily minimum wage by two pesos from P4.00 to P6.00 and prescribed a monthly minimum of P180.00 for monthly-paid employees effective July 1, 1965. The company contended it was not refusing to pay P180.00 but that the Office of the Economic Coordination and the Bureau of Labor Standards' interpretative bulletin prescribed P157.00. The CIR rejected this because the bulletin referred to daily wage employees, not monthly-paid Pines Hotel employees, and was a mere opinion. It also found the company's financial-straits claim untenable: Manila Hotel employees and some Taal Vista Lodge employees received salary adjustments beginning July 1, 1965; two employees received year-end bonuses; Taal Vista Lodge always lost money while Pines Hotel sometimes profited. The record showed eight Manila office employees received P18,000.00 in salary adjustments for July 1, 1965 to June 30, 1966, while eighty regular Pines Hotel employees received only P15,000.00.

On March 28, 1968, the eighty-six Pines Hotel employees received written notices that the National Development Company had sold the Pines Hotel to Resort Hotels Corporation on that date and that Manila Hotel Company's operation would cease the next day, so their services were terminated as of the close of business hours of March 28, 1968. The union filed an urgent petition with prayer for a temporary restraining order on the same date, complaining that the abrupt termination was in bad faith, during the pendency of the ULP case, without due notice, and in violation of the tenure guaranteed by their subsisting collective bargaining agreement. The union prayed for consolidation with CIR Case No. 4506-ULP and for a restraining order, and it established picket lines. The CIR docketed the petition as No. 4506-ULP (1) and called the parties to conferences on March 29 and April 2, 1968. At the conferences, Manila Hotel Company manifested willingness to grant retirement gratuity to all employees. Its board of directors met on April 4 and April 8, 1968 and approved resolutions: employees with twenty years or more of service would be paid in accordance with law, with gratuity computed on basic salary as of the day of separation; employees with one to nineteen years of service would receive one month's salary for every year of service, not exceeding twelve months. The company deposited P100,000.00 with the CIR for gratuity and/or separation pay and other money claims, and the union withdrew its picket line. An advance equivalent to one month's salary was given in April 1968. On September 5, 1968, the CIR ordered payment of accrued leaves from the deposit, which Manila Hotel Company did not challenge.

On December 5, 1968, the CIR ordered payment of full gratuity to the sixteen employees with twenty years or more of service, with net gratuity of P75,714.77, attorney's fees of P27,139.00, hotel bills of P1,847.23 held in custody, and an additional deposit of P26,285.43 plus P62.86 deposit fee. On February 27, 1969, the CIR ordered Manila Hotel Company to deposit P103,856.30 for the gratuity of the seventy employees with one to nineteen years of service, with hotel bills of P2,921.94 held in abeyance. Manila Hotel Company had filed an opposition and/or motion to dismiss on May 2, 1968, asserting no valid cause of action, lack of jurisdiction over the subject matter and respondent, payment/waiver/extinguishment of the claim, and that injunction did not lie. On appeal, it re-assigned lack of jurisdiction because there was no longer an employer-employee relationship and no reinstatement sought, and because union counsel could not file an unfair labor practice charge directly with the CIR under Section 5(b) of Republic Act No. 875, and the CIR could not issue awards without resolving its motion to dismiss or allowing an answer. The CIR found, and the record showed, that Manila Hotel Company had repeatedly manifested willingness to pay gratuity and had not disputed the factual bases of the payment orders.

• Jurisdiction over Supplemental Proceedings: Petitioner argued that the CIR had no jurisdiction over the case below because there was no longer an employer-employee relationship, notwithstanding that the case referred to unfair labor practice acts and no reinstatement was sought.
• Direct Filing by Union Counsel: Petitioner maintained that the union's lawyer could not file an unfair labor practice charge directly with the CIR because only the CIR prosecutor may file the same under Section 5(b) of Republic Act No. 875.
• Failure to Resolve Motion to Dismiss/Answer: Petitioner argued that the CIR could not issue an order granting awards without first resolving its motion to dismiss for lack of jurisdiction and/or granting it the right to file an answer to a complaint.
• No Valid Cause of Action / Injunction: Petitioner's opposition and/or motion to dismiss asserted that the urgent petition stated no valid cause of action and that the injunction prayed for did not lie against the company.
• Claim Extinguished: Petitioner also asserted below that the union's claim had been paid, waived, abandoned, or otherwise extinguished, citing its policy and board resolution regarding payment of gratuity and/or termination pay.
• Bonus Discretion: In L-30755, petitioner contended that giving the lion's share of the 1965 Christmas bonus to its eight Manila administrative employees was a valid exercise of discretion because Manila Hotel realized a net profit of P226,055.42 while Pines Hotel and Taal Vista Lodge incurred heavy losses.
• Minimum Wage Interpretation: Petitioner contended it could not be guilty of unfair labor practice because it was not unwilling to pay the P180.00 minimum salary; rather, the Office of the Economic Coordination, applying the Bureau of Labor Standards' interpretative bulletin, prescribed P157.00 for the employees.
• Propriety of Payment Through CIR: Petitioner raised that payment of retirement gratuity directly through the CIR, instead of through the Government Service Insurance System, might disregard employees' accountabilities and outstanding obligations.

• Bad Faith Termination: Respondent union complained that Manila Hotel Company abruptly terminated all eighty-six Pines Hotel employees during the pendency of the unfair labor practice case, in bad faith, without due notice, and in violation of the tenure guaranteed by their subsisting collective bargaining agreement.
• Consolidation and Injunction: The union prayed that its urgent petition be consolidated with CIR Case No. 4506-ULP and that a temporary restraining order be issued against the abrupt dismissal or termination of services.
• Settlement and Withdrawal: The union accepted Manila Hotel Company's offer of retirement gratuity, withdrew its picket line, and no longer insisted on its members' continued employment under the collective bargaining agreement.

• Unfair Labor Practice — 1965 Christmas Bonus: Whether the CIR erred in finding Manila Hotel Company guilty of unfair labor practice for discrimination in the distribution of the 1965 Christmas bonus and in ordering pro-rata distribution among all employees.
• Unfair Labor Practice — Salary Adjustments: Whether the CIR erred in finding Manila Hotel Company guilty of unfair labor practice for discrimination in salary adjustments under Republic Act No. 4180 and in ordering implementation of the P180.00 monthly minimum salary for Pines Hotel employees.
• Jurisdiction over Supplemental Gratuity Claim (L-30139): Whether the CIR had jurisdiction to issue its December 5, 1968 order for payment of retirement gratuity to the sixteen employees with twenty years or more of service, despite petitioner's claims of lack of employer-employee relationship, improper direct filing by union counsel, and failure to resolve its motion to dismiss or allow an answer.
• Jurisdiction over Gratuity for Employees with Less Than Twenty Years (L-30818): Whether the CIR had jurisdiction and propriety to issue its February 27, 1969 order for payment of retirement gratuity to the seventy employees with one to nineteen years of service.
• GSIS Accountabilities: Whether payment of retirement gratuity directly through the CIR, instead of through the GSIS, might disregard the employees' accountabilities and outstanding obligations.

• Unfair Labor Practice — 1965 Christmas Bonus: No. The CIR correctly found discrimination; petitioner failed to show any error in the order to distribute the bonus pro rata, which was a proper exercise of the CIR's power under Section 5 of Republic Act No. 875 to grant affirmative relief.
• Unfair Labor Practice — Salary Adjustments: No. The CIR correctly rejected petitioner's reliance on the interpretative bulletin and financial-straits claim; the record showed discriminatory salary adjustments, and the Pines Hotel monthly-paid employees were entitled to P180.00 under Republic Act No. 4180.
• Jurisdiction over Supplemental Gratuity Claim (L-30139): Yes. The CIR had jurisdiction to implement the settlement; petitioner's jurisdictional objections were moot and academic because it had already agreed to pay gratuity and deposited P100,000.00.
• Jurisdiction over Gratuity for Employees with Less Than Twenty Years (L-30818): Yes. The CIR acted within its jurisdiction in implementing the agreement and settlement for payment of retirement gratuity; the same errors raised in L-30139 were rejected.
• GSIS Accountabilities: The CIR was directed to make the corresponding verification that the sixteen employees' accountabilities to the GSIS are fully discharged before final payment.

• Unfair Labor Practice — 1965 Christmas Bonus: The CIR found that petitioner radically departed from its adopted procedure of distributing pro rata among all employees the traditional Christmas bonus of 7% of net profit, as approved by the Office of the Economic Coordinator and followed for six or seven years prior to 1965. In 1965, 50% was allotted to Manila Hotel employees, 25% to Taal Vista Lodge employees, and 25% to Pines Hotel employees; the Pines Hotel employees, who were the most numerous, received a lesser bonus, while Manila Hotel and Taal Vista Lodge had no existing labor organization. Two Manila Hotel employees also received year-end bonuses despite having been employed only since September 1964. Petitioner's claim that the lion's share given to its eight Manila administrative employees was valid discretion because Manila Hotel realized a net profit of P226,055.42 while Pines Hotel and Taal Vista Lodge incurred losses lacked factual basis: Manila Hotel's only income came from leasing its building and facilities to Mrs. Esperanza Zamora, with which its eight administrative employees had nothing to do, while Pines Hotel and Taal Vista Lodge were actually operated by petitioner, with Pines Hotel at times making actual profits and Taal Vista Lodge always showing operational losses. The CIR correctly held that whether Pines Hotel incurred losses was of no moment; since management granted a Christmas bonus, it should have been divided equally as before. No error was shown in the order to distribute the bonus pro rata, which was a proper exercise of the CIR's power under Section 5 of Republic Act No. 875 to grant affirmative relief upon adjudging an unfair labor practice.

• Unfair Labor Practice — Salary Adjustments: The CIR found petitioner guilty of unfair labor practice in granting salary adjustments pursuant to the two-peso increase in the daily minimum wage under Republic Act No. 4180. Petitioner contended it could not be guilty because it was not unwilling to pay the P180.00 minimum salary; rather, the Office of the Economic Coordination, applying the Bureau of Labor Standards' interpretative bulletin, prescribed P157.00. The CIR rejected this, holding that the interpretative bulletin referred to daily wage employees, not monthly-paid Pines Hotel employees, and was a mere opinion. The contention that company finances did not warrant revision of salary scales was also untenable: Manila Hotel employees and some Taal Vista Lodge employees, where there was no existing labor organization, were given salary adjustments beginning July 1, 1965; despite alleged financial reverses, the company granted year-end bonuses to two employees; Taal Vista Lodge always lost in operation while Pines Hotel made profits at times; and Taal Vista Lodge employees received adjustments without strictly adhering to the interpretative bulletin, which the CIR viewed as done to discourage union members. The record showed that eight Manila office employees were granted a total of P18,000.00 in salary adjustments for July 1, 1965 to June 30, 1966, whereas eighty regular Pines Hotel employees received only P15,000.00; the total salary adjustments given every ten Pines Hotel employees would not equal the adjustment given one single Manila office employee. The CIR correctly removed the unfair discrimination by ordering payment to the Pines Hotel employees of the new minimum monthly salary of P180.00 for monthly-paid employees under Republic Act No. 4180.

• Jurisdiction over Supplemental Gratuity Claim (L-30139): Upon the union's urgent petition on March 28, 1968, the CIR took cognizance, docketed it as a supplemental case of the original unfair labor practice case as No. 4506-ULP (1), and called the parties to conferences on March 29 and April 2, 1968. A settlement was worked out: petitioner agreed to pay retirement gratuities to all eighty-six Pines Hotel employees, deposited P100,000.00 with the CIR, and the union withdrew its picket line. An advance equivalent to one month's salary was given in April 1968, and the CIR's September 5, 1968 order for accrued leaves was never challenged. The December 5, 1968 order for the sixteen employees with twenty years or more of service implemented that settlement. Petitioner's opposition and/or motion to dismiss filed on May 2, 1968 raised four grounds, but the first two were re-assigned as errors on appeal. These alleged errors were moot and academic because, even as of May 2, 1968, petitioner had already recognized the CIR's valid jurisdiction over the unfair labor complaint arising from the abrupt termination and had come to a settlement in April 1968 with its agreement to pay retirement gratuity and its deposit of P100,000.00. The union, accepting the settlement, had lifted its picket line and no longer insisted on its members' continued employment under the collective bargaining agreement. Since the employees' claims had been settled with petitioner's agreement to pay retirement gratuity, the CIR had jurisdiction to issue the December 5, 1968 payment order to implement the very agreement and settlement. Petitioner's claim that the union members sought no reinstatement had no factual basis, because the union precisely sought an injunction against the abrupt termination and claimed entitlement to continued employment under the collective bargaining agreement. Petitioner's claim that union counsel could not file an unfair labor practice charge directly with the CIR may be correct as far as it goes, but what the union actually filed was a separate urgent petition with prayer for a restraining order; the CIR in effect granted the union's alternative prayer for consolidation with Case No. 4506-ULP and, assuming a prior preliminary investigation was necessary, undertook such investigation by immediately calling the parties to conferences. No prejudice was caused to petitioner because the parties promptly arrived at a satisfactory settlement upon petitioner's undertaking to pay retirement gratuity to all eighty-six affected employees. The CIR no longer had to formally rule on petitioner's opposition and/or motion to dismiss by virtue of the earlier settlement. As to the point not raised in the opposition-motion below, payment of retirement gratuity directly through the CIR might disregard employees' accountabilities and outstanding obligations; the CIR was expected to take safeguard measures by calling a GSIS representative in charge of the GSIS accounts of the sixteen employees to verify before authorizing final payment.

• Jurisdiction over Gratuity for Employees with Less Than Twenty Years (L-30818): This appeal involved the February 27, 1969 order for payment to the seventy Pines Hotel employees with less than twenty years of service, who were not qualified for gratuity under the Retirement Act, Republic Act No. 186, of retirement gratuity of one month's salary for every year of service, not exceeding twelve months, as offered and agreed to by petitioner itself pursuant to its past practice. The CIR noted the previous payment of accrued leaves and one month's salary advance, and the manifestations of record evidencing petitioner's repeated willingness to pay such gratuity, as in the case of the sixteen other employees with twenty years or more of service. The CIR also noted that former employees of Manila Hotel Company in Manila were given one month's pay for every year of service but not exceeding twelve months when their services were terminated as a result of the relief of Mr. Zamora in 1954, except those transferred to Pines Hotel. Petitioner assigned the same identical errors as in L-30139, based on its opposition and/or motion to dismiss filed on May 2, 1968. The appeal was rejected for the same grounds: petitioner did not question or dispute the factual bases and findings of the CIR as to its undertaking and agreement to pay retirement gratuity by way of settlement of the dispute arising from the abrupt termination of employment with the sale of the Pines Hotel to a third party. The CIR, in issuing the appealed payment order, acted within its jurisdiction properly assumed in implementing the very agreement and settlement for payment of retirement gratuity arrived at by the parties.

• GSIS Accountabilities: The Court noted that only one point apparently not raised by petitioner in its opposition-motion below merited mention: payment of the retirement gratuity to the employees directly through the CIR from the amount deposited by petitioner, and not through the Government Service Insurance System in accordance with the usual practice, might disregard and not take into account some accountabilities and outstanding obligations of the employees. The Court expected the CIR to take the necessary safeguard measures to avoid such contingency by properly calling in a GSIS representative in charge of the GSIS accounts of the sixteen employees to make the proper verification before authorizing final payment of the amounts due to them.

• Unfair labor practice by discriminatory grant of bonuses and salary adjustments — An employer commits unfair labor practice when it discriminates against union members in granting economic benefits, such as Christmas bonus and salary adjustments, while favoring employees in units without a labor organization. The Court affirmed the CIR's finding that Manila Hotel's departure from pro-rata bonus distribution and its disproportionate salary adjustments to Manila office employees, compared with Pines Hotel employees, constituted discrimination.
• CIR jurisdiction and affirmative relief under Section 5, Republic Act No. 875 — The CIR has exclusive jurisdiction over the prevention of unfair labor practices and may grant affirmative relief once an unfair labor practice is adjudged. It may order pro-rata bonus distribution and salary adjustments to remedy discrimination.
• Jurisdiction to implement settlement in supplemental proceedings — Once parties in a pending unfair labor practice case reach a settlement and the employer agrees to pay retirement gratuity and deposits funds, the CIR retains jurisdiction over incidents implementing that settlement, even if the original employment relationship has ended. The employer cannot later challenge jurisdiction after accepting the benefits of the settlement.
• Moot and academic jurisdictional objections — A party that voluntarily agrees to a settlement, deposits money, and accepts the settlement's benefits cannot later raise jurisdictional objections; such objections become moot and academic.
• Procedural flexibility in unfair labor practice cases — While unfair labor practice charges are ordinarily filed by the CIR prosecutor under Section 5(b) of Republic Act No. 875, the CIR may consolidate a union's urgent petition with a pending unfair labor practice case and conduct preliminary investigation through conferences; absent prejudice, this does not invalidate subsequent settlement and payment orders.
• Retirement gratuity as agreed benefit — Where the employer's board of directors approved retirement gratuity for terminated employees, the CIR may order payment in accordance with that agreement; employees with twenty years or more of service are covered by Republic Act No. 186, while those with one to nineteen years of service are not qualified under Republic Act No. 186 but may receive gratuity as agreed.
• GSIS accountabilities safeguard — Payment of retirement gratuity through the CIR should not disregard employees' GSIS accountabilities; the CIR should call a GSIS representative to verify the employees' accounts before final payment.

• "The Court finds that petitioner has failed to show any error in respondent court's decision that petitioner distribute the bonus pro rata among all its employees regardless of their place of work, as was consistently done in the previous years, and that respondent court's order was but a proper exercise of its power under section 5 of Republic Act 875 to grant affirmative relief whenever it has adjudged the existence of an unfair labor practice." — This passage states the ratio decidendi on the 1965 Christmas bonus, affirming the CIR's finding of discrimination and its authority to grant affirmative relief under Republic Act No. 875.
• "Since the employees' claims had been settled with petitioner's agreement to pay them retirement gratuity, respondent court certainly had jurisdiction to issue its questioned payment order of December 5, 1968 to implement the very agreement and settlement arrived at by the parties in the case before it." — This passage is the core jurisdictional holding in L-30139, grounding the CIR's authority in the parties' settlement agreement rather than in the continued existence of an employer-employee relationship.
• "Respondent court having properly assumed jurisdiction over the dispute and sanctioned the settlement thereof offered by petitioner itself, certainly had unquestioned jurisdiction in all incidents relating to the implementation and carrying out of the settlement." — This passage defines the scope of the CIR's supplemental jurisdiction over incidents implementing a settlement in a pending unfair labor practice case.
• "Respondent court in issuing the appealed payment order was but acting within its jurisdiction properly assumed of implementing the very agreement and settlement for payment of retirement gratuity arrived at by the parties in the case before it." — This passage applies the same jurisdictional rationale to L-30818, rejecting the identical errors raised against the February 27, 1969 payment order for the seventy employees with one to nineteen years of service.

• Automotive Parts & Equipment Co. Inc. vs. Lingad, 30 SCRA 248 (Oct. 31, 1969) — Cited by the Court, by cf., in connection with the CIR's grant of affirmative relief for the Pines Hotel employees' minimum wage adjustment under Republic Act No. 4180.

• Section 5, Republic Act No. 875 — The CIR has jurisdiction over the prevention of unfair labor practices and is empowered to prevent any person from engaging in any unfair labor practice; this power is exclusive. The Court applied this provision to affirm the CIR's orders granting affirmative relief for discriminatory bonus distribution and salary adjustments.
• Section 5(b), Republic Act No. 875 — Sets out the procedure for unfair labor practice charges, including investigation and complaint by the CIR or its designated agency. The majority noted that petitioner's claim that union counsel could not file an unfair labor practice charge directly with the CIR may be correct as far as it goes, but the CIR in effect consolidated the union's urgent petition with the pending case and undertook preliminary investigation through conferences, causing no prejudice because the parties settled.
• Republic Act No. 4180 — The Minimum Wage Law, passed on April 21, 1965, decreed a two-peso increase in the daily minimum wage for workers in industrial and commercial establishments from P4.00 to P6.00, and provided a minimum monthly salary of P180.00 for monthly-paid employees effective July 1, 1965. The Court applied this provision to affirm the CIR's order that Pines Hotel monthly-paid employees receive the P180.00 monthly minimum.
• Republic Act No. 186 — The Retirement Law. The decision distinguished employees with twenty years or more of service, who were qualified under this law, from employees with one to nineteen years of service, who were not qualified under Republic Act No. 186 but were nonetheless entitled to retirement gratuity as agreed by petitioner's board of directors.

Concepcion, C.J., Zaldivar, Castro, Makasiar, Antonio, and Esguerra, JJ., concurred. Makalintal, J., was on leave. Fernando, J., concurred except as to the last paragraph in II — re L-30139. Barredo, J., filed a separate concurring opinion emphasizing that the appeals in G.R. Nos. L-30139 and L-30818 were completely devoid of merit and should be declared frivolous and dilatory; that the attack on the CIR's jurisdiction had no basis; that the question of unfair labor practice in relation to the termination became moot and academic when petitioner resolved to grant gratuities and the union agreed; and that while the procedure for unfair labor practice cases under Section 5(b) of Republic Act No. 875 should generally be followed, the CIR did not violate the law or subvert its broad jurisdiction under Section 5(a) by adopting a speedier and more practical procedure to settle the case.