MANTRADE/FMMC Division Employees and Workers Union v. Bacungan

An administrative implementing rule that excludes monthly paid employees from holiday pay benefits by creating a presumption of payment is ultra vires and null and void, as it diminishes labor benefits beyond what the statute itself delimits or withholds, and any deprivation of benefits must appear in the law itself to be valid.

The petitioner is a labor union (affiliated with the Philippine Social Security Labor Union — PSSLU Fed. — TUCP) representing employees of Mantrade Development Corporation. The dispute centers on whether monthly salaried employees are entitled to holiday pay under Article 94 of the Labor Code, which grants every worker the right to holiday pay subject to enumerated exclusions under Article 82. The then Secretary of Labor had issued Section 2, Rule IV, Book III of the Implementing Rules and Policy Instruction No. 9, which created a presumption that employees uniformly paid by the month were already compensated for all days whether worked or not — effectively excluding them from holiday pay. Two prior Supreme Court decisions — Insular Bank of Asia and America Employees' Union vs. Inciong (1984) and Chartered Bank Employees Association vs. Ople (1985) — had already declared this implementing rule void, and the present case required the Court to apply those rulings to a specific employer.

The petitioner union represents the employees of Mantrade Development Corporation. The dispute between the union and the corporation concerned whether the corporation's monthly salaried employees were entitled to holiday pay under Article 94 of the Labor Code. The matter was submitted to voluntary arbitration before respondent Arbitrator Froilan M. Bacungan.

The arbitrator rendered a decision ruling that Mantrade Development Corporation was not under legal obligation to pay holiday pay to its monthly paid employees who were uniformly paid by the month, irrespective of the number of working days, with a salary of not less than the statutory or established minimum wage. The arbitrator acknowledged that monthly salaried employees are not among those excluded from holiday pay under Article 94 of the Labor Code itself, which grants every worker the right to holiday pay except those in retail and service establishments regularly employing fewer than ten workers. However, he found them excluded under Section 2, Rule IV, Book III of the Rules and Regulations implementing Article 94, which provides that employees uniformly paid by the month shall be presumed to be paid for all days in the month whether worked or not. The arbitrator further opined that the corporation had no legal obligation unless it were argued that the implementing rule was not in conformity with the law and thus without force and effect.

Petitioner then filed a petition for certiorari and mandamus with the Supreme Court, questioning the validity of the implementing rule. By the time the petition reached the Court, two subsequent decisions had already settled the validity question. In Insular Bank of Asia and America Employees' Union vs. Inciong, promulgated October 24, 1984, a division of the Court held that Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9 were null and void, as they amended the Labor Code's holiday pay provisions in the guise of clarifying them by enlarging the scope of exclusion. This ruling was reiterated by the Court en banc on August 28, 1985 in Chartered Bank Employees Association vs. Ople, which added that the additional exclusion constituted a deprivation that must be in the law itself to be valid, and that an administrative interpretation diminishing labor benefits beyond what the statute delimits is ultra vires.

• Validity of Implementing Rule: Petitioner questioned the validity of the pertinent section of the Rules and Regulations Implementing the Labor Code on which respondent arbitrator based his decision.

• Finality of Arbitration Award: Respondent corporation contended that petitioner was barred from pursuing the present action under Article 263 of the Labor Code, which provides that voluntary arbitration awards or decisions shall be final, unappealable, and executory, as well as the rules implementing the same, the pertinent provision of the Collective Bargaining Agreement, and Article 2044 of the Civil Code.
• Certiorari Does Not Lie: Respondent argued that certiorari does not lie because respondent arbitrator is not an "officer exercising judicial functions" within the contemplation of Rule 65, Section 1, of the Rules of Court; that the petition raises an error of judgment rather than an error of jurisdiction; that it prays for annulment of DOLE rules rather than annulment of the arbitration proceedings; and that appeal by certiorari under Section 29 of the Arbitration Law (R.A. No. 876) is inapplicable because labor disputes are expressly excluded by Section 3 of said law.
• Mandamus Not Proper: Respondent contended that mandamus does not lie to compel performance of an act the law does not clearly enjoin as a duty, and that mandamus is not proper to enforce a contractual obligation, the remedy being an action for specific performance.

• Judicial Review of Voluntary Arbitration Awards: Whether the decision of a voluntary arbitrator is subject to judicial review via certiorari.
• Validity of Implementing Rule on Holiday Pay: Whether Section 2, Rule IV, Book III of the Implementing Rules, which presumes monthly paid employees are already paid for all days including holidays, is valid.
• Availability of Mandamus: Whether mandamus is an appropriate remedy to compel payment of holiday pay to monthly salaried employees.

• Judicial Review of Voluntary Arbitration Awards: Yes. Decisions of voluntary arbitrators acting in a quasi-judicial capacity are subject to judicial review where questions of law or abuse of discretion are properly raised in petitions for certiorari.
• Validity of Implementing Rule on Holiday Pay: No, the rule is invalid. Section 2, Rule IV, Book III is null and void as it is ultra vires, enlarging the scope of exclusion from holiday pay beyond what the Labor Code provides.
• Availability of Mandamus: Yes. In view of prior Court decisions clearly defining the legal duty to grant holiday pay to monthly salaried employees, mandamus is an appropriate equitable remedy.

• Judicial Review of Voluntary Arbitration Awards: The Court relied on Oceanic Bic Division (FFW) vs. Romero, which established that voluntary arbitrators act in a quasi-judicial capacity and that their decisions involving interpretation of law should not be beyond judicial review. The provision in Article 262 of the Labor Code making voluntary arbitration awards "final, unappealable and executory" refers to appeals to the National Labor Relations Commission, not to judicial review. Despite statutory provisions making decisions of certain administrative agencies "final," the Court takes cognizance of petitions where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of law are raised. Administrative officials are presumed to act in accordance with law, yet the Court does not hesitate to pass upon their work where a question of law is involved or where abuse of discretion is properly raised.

• Validity of Implementing Rule on Holiday Pay: Article 94 of the Labor Code grants holiday pay to every worker, with exclusions spelled out in Article 82, which lists government employees, managerial employees, field personnel, family members dependent on the employer, domestic helpers, persons in the personal service of another, and workers paid by results. Monthly paid employees are not among those excluded. Section 2, Rule IV, Book III of the implementing rules added another excluded group — "employees who are uniformly paid by the month" — through a presumption that such employees were already paid for all days whether worked or not. While framed as a presumption, this constitutes a taking away or deprivation of benefits that must be in the law itself to be valid. An administrative interpretation that diminishes labor benefits more than what the statute delimits or withholds is ultra vires. This had already been settled in IBAAEU vs. Inciong and reiterated in Chartered Bank Employees Association vs. Ople.

• Availability of Mandamus: While mandamus generally does not lie to compel performance of an act the law does not clearly enjoin as a duty, and is not proper to enforce contractual obligations (the remedy being specific performance), the subsequent decisions of the Court in IBAAEU vs. Inciong and Chartered Bank Employees Association vs. Ople have clearly defined the legal duty to grant holiday pay to monthly salaried employees. With that legal duty established, mandamus becomes an appropriate equitable remedy.

• Judicial Review of Voluntary Arbitration Awards — Voluntary arbitrators act in a quasi-judicial capacity, and their decisions involving interpretation of law are subject to judicial review by the Supreme Court. The "final, unappealable, and executory" character of voluntary arbitration awards under Article 262 of the Labor Code refers to appeals to the NLRC, not to judicial review via certiorari. The Court will take cognizance of petitions where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of law is raised.

• Ultra Vires Administrative Rules in Labor Law — An administrative interpretation that diminishes the benefits of labor more than what the statute delimits or withholds is ultra vires and null and void. Administrative rules cannot enlarge the scope of statutory exclusions from labor benefits; any deprivation or taking away of benefits must appear in the law itself to be valid. A presumption framed as an implementing rule that effectively excludes a class of employees from statutory benefits constitutes an invalid diminution.

• Mandamus as Equitable Remedy — Where subsequent decisions of the Court have clearly defined a legal duty, mandamus is an appropriate equitable remedy to compel performance of that duty, even if the duty was not clearly established at the time the obligation arose.

• "A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity. There is no reason why her decisions involving interpretation of law should be beyond this Court's review. Administrative officials are presumed to act in accordance with law and yet we do not hesitate to pass upon their work where a question of law is involved or where a showing of abuse of discretion in their official acts is properly raised in petitions for certiorari." — This passage, quoted from Oceanic Bic Division (FFW) vs. Romero, articulates the ratio decidendi for judicial review of voluntary arbitration awards and is the controlling formulation on the quasi-judicial nature of voluntary arbitrators.

• "An administrative interpretation which diminishes the benefits of labor more than what the statute delimits or withholds is obviously ultra vires." — Quoted from Chartered Bank Employees Association vs. Ople, this is the canonical formulation of the ultra vires doctrine applied to administrative rules that exceed statutory authority by diminishing labor benefits.

• "While the additional exclusion is only in the form of a presumption that all monthly paid employees have already been paid holiday pay, it constitutes a taking away or a deprivation which must be in the law if it is to be valid." — Also from Chartered Bank Employees Association vs. Ople, this passage defines why a presumption-based exclusion in an implementing rule is invalid: it operates as a substantive deprivation requiring statutory basis.

• Oceanic Bic Division (FFW) vs. Romero, 130 SCRA 392 (1984) — Controlling precedent followed on the issue of judicial review of voluntary arbitrators' decisions; established that voluntary arbitrators act in a quasi-judicial capacity and their decisions are subject to certiorari review for questions of law or abuse of discretion.

• Insular Bank of Asia and America Employees' Union (IBAAEU) vs. Inciong, 132 SCRA 663 (1984) — Controlling precedent followed; declared Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9 null and void for enlarging the scope of exclusion from holiday pay beyond the Labor Code.

• Chartered Bank Employees Association vs. Ople, 138 SCRA 273 (1985) — Reiterated and expanded the ruling in IBAAEU vs. Inciong; added the ultra vires doctrine, holding that an administrative interpretation diminishing labor benefits beyond statutory limits is void.

• CBTC Employees Union vs. Clave, 141 SCRA 9 (1986) — Cited as additional support for the ruling that the implementing rule excluding monthly paid employees from holiday pay is invalid.

• Province of Pangasinan vs. Reparations Commission, 80 SCRA 376 (1977) — Cited for the general rule that mandamus is not proper to enforce contractual obligations, the remedy being specific performance; distinguished from the present case where a legal duty was established.

• Dionisio vs. Paterno, 98 SCRA 677 (1980) — Cited in support of mandamus as an appropriate equitable remedy where a legal duty is clearly defined.

• Gonzales vs. Government Service Insurance System, 107 SCRA 492 (1981) — Cited in support of mandamus as an appropriate equitable remedy where a legal duty is clearly defined.

• Article 94, Labor Code — Grants every worker the right to holiday pay during regular holidays, except in retail and service establishments regularly employing fewer than ten workers. Applied as the statutory basis for monthly paid employees' entitlement to holiday pay.

• Article 82, Labor Code — Defines the coverage and scope of exclusions from the Labor Code's benefits title, listing government employees, managerial employees, field personnel, family members dependent on the employer, domestic helpers, persons in the personal service of another, and workers paid by results. Applied to show that monthly paid employees are not among those excluded from holiday pay.

• Article 262, Labor Code — Provides that voluntary arbitration awards are final, unappealable, and executory, except where money claims exceed ₱100,000 or 40% of paid-up capital, or where there is abuse of discretion or gross incompetence. Interpreted as referring to appeals to the NLRC, not to judicial review.

• Article 263, Labor Code — Provides that voluntary arbitration awards or decisions shall be final, unappealable, and executory. Respondent corporation invoked this to bar the petition; the Court rejected this contention.

• Section 2, Rule IV, Book III, Implementing Rules of the Labor Code — Provides that employees uniformly paid by the month, irrespective of the number of working days, with a salary of not less than the statutory minimum wage, shall be presumed to be paid for all days in the month whether worked or not. Declared null and void as ultra vires.

• Article 2044, Civil Code — Provides that any stipulation that the arbitrators' award or decision shall be final is valid, without prejudice to Articles 2038, 2039, and 2040. Invoked by respondent corporation; rejected as a bar to judicial review.

• Rule 65, Section 1, Rules of Court — Governs the special civil action of certiorari. Respondent argued the arbitrator is not an "officer exercising judicial functions"; the Court rejected this characterization.

• Section 29, Republic Act No. 876 (Arbitration Law) — Provides for appeal by certiorari from arbitration awards. Respondent argued it was inapplicable because Section 3 of the same law excludes labor disputes.

• Section 3, Republic Act No. 876 (Arbitration Law) — Excludes labor disputes from the coverage of the Arbitration Law. Invoked by respondent corporation to argue that certiorari under the Arbitration Law is unavailable.

Fernan, Alampay, Gutierrez, Jr., and Paras, JJ., concurred.