Octavio vs. PLDT

A resolution issued by a Union-Management Grievance Committee pursuant to the grievance machinery established in a CBA is binding on the employees when they fail to exhaust the remaining steps of the agreed procedure — particularly elevation to voluntary arbitration — before resorting to labor tribunals or courts, the principle of exhaustion of administrative remedies requiring strict observance of the grievance process agreed upon by the parties.

PLDT and the Gabay ng Unyon sa Telekominaksyon ng mga Superbisor (GUTS), a labor union representing supervisory employees, were parties to successive Collective Bargaining Agreements covering the periods 1999–2001 and 2002–2004. Each CBA provided for across-the-board salary increases for employees within the bargaining unit and established a grievance machinery and procedure for the resolution of disputes arising from the interpretation or implementation of the CBA. The grievance procedure culminated in a Board of Arbitrators whose decision was to be final and binding on both the company and the union. Octavio was hired by PLDT on October 1, 2000 as a probationary Sales System Analyst I and became a regularized supervisory employee and GUTS member on January 1, 2001.

On May 28, 1999, PLDT and GUTS entered into a CBA covering the period January 1, 1999 to December 31, 2001. Article VI, Section 1 thereof granted across-the-board salary increases to all employees in the bargaining unit: 10% of basic wage or ₱2,000.00 whichever is higher effective January 1, 1999; 11% or ₱2,250.00 whichever is higher effective January 1, 2000; and 12% or ₱2,500.00 whichever is higher effective January 1, 2001. On October 1, 2000, PLDT hired Octavio as Sales System Analyst I on a probationary status, and he became a member of GUTS. Upon regularization on January 1, 2001, he was receiving a monthly basic salary of ₱10,000.00. On February 1, 2002, he was promoted to Sales System Analyst 2, and his salary was increased to ₱13,730.00.

On May 31, 2002, PLDT and GUTS entered into another CBA covering January 1, 2002 to December 31, 2004, providing salary increases of 8% or ₱2,000.00 whichever is higher for 2002; 10% or ₱2,700.00 whichever is higher for 2003; and 10% or ₱2,400.00 whichever is higher for 2004. Octavio claimed that he was not given the salary increase of ₱2,500.00 effective January 1, 2001 under the first CBA, nor the ₱2,000.00 increase effective January 1, 2002 under the second CBA. He wrote to GUTS President Fajardo, who in turn informed PLDT's Human Resource Head of the grievance. The Union-Management Grievance Committee convened on October 7, 2002, composed of representatives from both PLDT and GUTS.

The Grievance Committee failed to reach an agreement and adopted the management position. On the first issue, management explained that upon Octavio's promotion on February 1, 2002, his salary was adjusted to ₱13,730.00 — the minimum for the new position — and that when the GUTS CBA was concluded in June 2002, his salary was recomputed to include the ₱2,000.00 first-year increase retroactive to January 2002, yielding ₱12,000.00, but the promotional policy adjusted this back to ₱13,730.00, the minimum of the new position. On the second issue, management stated that regularized supervisory employees as of January 1 were not entitled to the GUTS CBA increase, though probationary employees hired outside PLDT and regularized as supervisors on January 1, 2002 would be entitled prospectively — a policy applied to 18 personnel of the International & Luzon Core Network Management Center but not to previous similar cases.

Aggrieved by the Committee Resolution, Octavio filed a complaint before the NLRC Arbitration Branch for payment of the claimed salary increases, rather than elevating the grievance to the Board of Arbitrators as prescribed in Step 3 of the CBA's grievance procedure. The Labor Arbiter dismissed the complaint and upheld the Committee Resolution, a disposition affirmed by the NLRC, which also ruled that it lacked jurisdiction over the dispute as it involved CBA interpretation and implementation. The Court of Appeals likewise dismissed Octavio's petition, declaring the Committee Resolution binding upon him for failure to question its validity through the proper CBA procedure.

• Amendment of CBA Without Employee Consent: Octavio argued that the employer and the bargaining representative may not amend CBA provisions without the consent and approval of the employees, and that the Committee Resolution, which effectively modified the CBA's salary increase provisions, is therefore void.
• Binding Effect of the Resolution: Octavio asserted that the Committee Resolution is not binding on him because it constituted an unauthorized modification of the CBA in violation of Article 253 of the Labor Code.
• Merit Increases vs. CBA Increases: Octavio maintained that merit increases are distinct and separate from across-the-board salary increases provided under the CBA, and that PLDT was bound to grant him the ₱2,000.00 CBA increase for 2002 on top of the merit increase given by reason of his promotion.
• Discrimination and Unfair Labor Practice: Octavio claimed that PLDT committed unfair labor practice by granting the salary increase claim of 18 supervisory employees regularized on January 1, 2002 while discriminating against him, and prayed for damages and attorney's fees.
• Diminution of Benefits: Octavio averred that PLDT's unilateral decision to deem the ₱2,000.00 CBA increase as included in the ₱3,730.00 merit increase amounted to diminution of benefits under Article 100 of the Labor Code.

• Prior Resolution by Grievance Committee: PLDT countered that the issues raised by Octavio had already been resolved by the Union-Management Grievance Committee through the Committee Resolution, which the committee considered the most practicable and reasonable solution for both management and union.
• No Unfair Labor Practice: PLDT argued that the grant of across-the-board salary increase to those regularized starting January 1, 2002 and the exclusion of those regularized on January 1, 2001 did not constitute unfair labor practice, as it did not result in discrimination or encourage or discourage union membership.
• Finality of Committee Resolution: PLDT asserted that the Committee Resolution had already become final and conclusive between the parties due to Octavio's failure to elevate it to the proper forum.
• Lack of NLRC Jurisdiction: PLDT claimed that the NLRC had no jurisdiction to hear and decide Octavio's claims, as they involved the interpretation and implementation of the CBA.

• Grievance Procedure and Exhaustion of Remedies: Whether Octavio's failure to elevate the Grievance Committee Resolution to the Board of Arbitrators as prescribed in the CBA's grievance procedure renders the resolution binding upon him.
• Validity of Committee Resolution as CBA Modification: Whether the employer and bargaining representative may amend the provisions of the CBA without the consent and approval of the employees, and whether the Committee Resolution constitutes such an amendment.
• Merit Increases vs. CBA Increases: Whether merit increases may be awarded simultaneously with increases given in the CBA.
• Damages for CBA Violation: Whether damages may be awarded to the employee for violation by the employer of its commitment under its existing CBA.

• Grievance Procedure and Exhaustion of Remedies: Yes, the Committee Resolution is binding. By failing to elevate his grievance to the Board of Arbitrators as prescribed in Step 3 of the CBA's grievance procedure, Octavio is deemed to have waived his right to question the resolution.
• Validity of Committee Resolution as CBA Modification: No, the resolution is not an invalid modification of the CBA. It is a product of the grievance procedure outlined in the CBA itself, arrived at after negotiations between management and union representatives, and provides only for the proper implementation of the CBA provision on salary increases.
• Merit Increases vs. CBA Increases: No simultaneous award is required in this case. The recomputation of Octavio's salary to include the ₱2,000.00 CBA increase within his promotional salary of ₱13,730.00 was undertaken to avoid salary distortion, a legitimate concern in collective bargaining.
• Damages for CBA Violation: No. No CBA violation was established, as the Committee Resolution was valid and binding, and even assuming a diminution of benefits, Article 100 does not prohibit a union from offering and agreeing to reduce wages and benefits, the right to free collective bargaining including the right to suspend it.

• Grievance Procedure and Exhaustion of Remedies: Under Article 260 of the Labor Code, grievances arising from the interpretation or implementation of a CBA must be resolved in accordance with the grievance procedure embodied therein, and all unsettled grievances must be automatically referred to voluntary arbitration as prescribed in the CBA. The CBA of 2002–2004 established a three-step grievance procedure: Step 1 (presentation to the division head), Step 2 (appeal to the Union-Management Grievance Committee), and Step 3 (elevation to a Board of Arbitrators for final and binding decision). Octavio's claim was processed through Steps 1 and 2, but when the Grievance Committee deadlocked and adopted the management position, Octavio did not proceed to Step 3. Instead, nine months later, he filed a complaint before the NLRC. It is settled that when parties have validly agreed on a procedure for resolving grievances, that procedure must be strictly observed. The rule on exhaustion of administrative remedies requires that all means within the administrative machinery be exhausted before judicial intervention is invoked. By bypassing the Board of Arbitrators, Octavio denied that body the opportunity to pass upon a matter within its jurisdiction and is deemed to have waived his right to question the Committee Resolution. The CA correctly held that this failure renders the resolution binding upon him.

• Validity of Committee Resolution as CBA Modification: Octavio contended that the Committee Resolution modified the CBA in violation of Article 253 of the Labor Code, which prohibits either party from terminating or modifying a CBA during its lifetime. The Court rejected this argument because the resolution was a product of the grievance procedure outlined in the CBA itself, arrived at after management and union representatives conducted negotiations in accordance with the CBA. Octavio never assailed the competence of the grievance committee to take cognizance of his case, nor did he question the authority or credibility of the union representatives. Unions are the agents of their members for the purpose of securing just and fair wages and good working conditions; the union representatives are therefore deemed to have properly bargained on Octavio's behalf. The resolution did not modify the CBA but only provided for the proper implementation of the CBA provision respecting salary increases.

• Merit Increases vs. CBA Increases: Octavio insisted that merit increases are distinct from CBA across-the-board increases and that he should have received the ₱2,000.00 CBA increase on top of the ₱3,730.00 merit increase from his promotion. PLDT explained that the recomputation was undertaken to avoid salary distortion. The Court emphasized that collective bargaining should not be equated with adversarial litigation; it covers a process of finding a reasonable and acceptable solution to stabilize labor-management relations and promote industrial peace. The Committee Resolution was arrived at after considering the intention of both PLDT and GUTS to foster industrial peace, and the recomputation was a legitimate exercise within the grievance process.

• Damages for CBA Violation: Octavio argued that PLDT's refusal to grant the salary increases constituted a violation of Article 100 of the Labor Code, which prohibits the elimination or diminution of benefits. The Court found this argument devoid of merit. Even assuming there had been a diminution of benefits, Article 100 does not prohibit a union from offering and agreeing to reduce wages and benefits, as the right to free collective bargaining includes the right to suspend it. Since no CBA violation was established — the Committee Resolution being valid and binding — no basis for an award of damages existed.

• Exhaustion of Administrative Remedies in Labor Disputes — Before a party may seek judicial intervention, it is a precondition that all means of administrative processes afforded by the agreed grievance machinery be exhausted. If a remedy within the administrative mechanism can still be resorted to, that remedy must be exhausted first before the court's judicial power can be invoked. Premature invocation of judicial intervention is fatal to one's cause of action. The underlying principle rests on the presumption that when the administrative body or grievance machinery is afforded a chance to pass upon the matter, it will decide the same correctly. In this case, Octavio's failure to elevate the Grievance Committee Resolution to the Board of Arbitrators — the final step in the CBA's grievance procedure — constituted a failure to exhaust administrative remedies, rendering the resolution binding upon him.

• Binding Effect of Grievance Committee Resolution — A resolution issued by a Union-Management Grievance Committee pursuant to the grievance machinery established in a CBA is binding on the employees when they fail to question its validity and enforceability through the remaining steps of the agreed procedure. The union representatives on the grievance committee are deemed to have properly bargained on behalf of the members, as unions are the agents of their members for the purpose of securing just and fair wages and good working conditions. In this case, Octavio never assailed the competence of the grievance committee or the authority of the union representatives, so the Committee Resolution was binding upon him.

• Nature of Collective Bargaining — Collective bargaining should not be equated with adversarial litigation where rights and obligations are delineated and remedies applied. It covers a process of finding a reasonable and acceptable solution to stabilize labor-management relations and promote stable industrial peace. The Court applied this principle to uphold the Committee Resolution, which was arrived at after considering the intention of both PLDT and GUTS to foster industrial peace, including the avoidance of salary distortion.

• "It is settled that 'when parties have validly agreed on a procedure for resolving grievances and to submit a dispute to voluntary arbitration then that procedure should be strictly observed.'" — This passage articulates the ratio decidendi that the CBA's grievance procedure must be followed to its final step before resort to labor tribunals or courts.

• "By failing to question the Committee Resolution through the proper procedure prescribed in the CBA, that is, by raising the same before a Board of Arbitrators, Octavio is deemed to have waived his right to question the same." — This sentence states the decisive consequence of bypassing the agreed grievance machinery: waiver of the right to challenge the resolution, rendering it binding.

• "In fine, it cannot be gainsaid that the Committee Resolution is a modification of the CBA. Rather, it only provides for the proper implementation of the CBA provision respecting salary increases." — This passage distinguishes a grievance committee resolution arrived at through the CBA's own procedure from an impermissible modification of the CBA under Article 253.

• Vivero vs. Court of Appeals, 398 Phil. 158, 172 (2000) — Cited for the proposition that when parties have validly agreed on a procedure for resolving grievances and submitting disputes to voluntary arbitration, that procedure should be strictly observed. Followed as controlling doctrine.
• Diokno vs. Cacdac, G.R. No. 168475, July 4, 2007, 526 SCRA 440, 458 — Cited together with Metro Drug Distribution, Inc. vs. Metro Drug Corporation Employees Association–FFW, 508 Phil. 47, 60 (2005), for the rule on exhaustion of administrative remedies: a party must avail of all administrative processes before seeking judicial intervention. Followed.
• Rizal Security & Protective Services, Inc. vs. Maraan, G.R. No. 124915, February 18, 2008, 546 SCRA 23, 40 — Cited with Province of Zamboanga Del Norte vs. Court of Appeals, 396 Phil. 709, 720 (2000), for the principle that the exhaustion doctrine rests on the presumption that the administrative body will decide correctly when given the chance. Followed.
• Santuyo vs. Remerco Garments Manufacturing, Inc., G.R. No. 174420, March 22, 2010, 616 SCRA 333, 344 — Cited for the principle that unions are the agents of their members for the purpose of securing just and fair wages and good working conditions. Followed to uphold the authority of union representatives on the grievance committee.
• Insular Hotel Employees Union-NFL vs. Waterfront Insular Hotel Davao, G.R. Nos. 174040-41, September 22, 2010, 631 SCRA 136, 167 — Cited, in turn citing Rivera vs. Hon. Espiritu, 425 Phil. 169, 182 (2002), for the proposition that Article 100 does not prohibit a union from offering and agreeing to reduce wages and benefits, as the right to free collective bargaining includes the right to suspend it. Followed.
• Caltex Refinery Employees Association vs. Hon. Brillantes, 344 Phil. 624, 651 (1997) — Cited for the principle that collective bargaining should not be equated with adversarial litigation but rather with a process of finding reasonable and acceptable solutions to promote industrial peace. Followed.

• Article 260, Labor Code (Grievance Machinery and Voluntary Arbitration) — Requires parties to a CBA to establish a grievance machinery for the adjustment and resolution of grievances arising from the interpretation or implementation of the CBA, and provides that all unsettled grievances shall automatically be referred to voluntary arbitration prescribed in the CBA. Applied to hold that Octavio should have elevated his grievance to the Board of Arbitrators as prescribed in Step 3 of the CBA's grievance procedure.
• Article 253, Labor Code (Duty to Bargain Collectively When There Exists a CBA) — Provides that neither party shall terminate or modify a CBA during its lifetime. Invoked by Octavio to argue that the Committee Resolution was an invalid modification; the Court rejected this argument, holding that the resolution was a product of the CBA's own grievance procedure and merely provided for the proper implementation of the CBA's salary increase provision.
• Article 100, Labor Code (Prohibition Against Elimination or Diminution of Benefits) — Provides that nothing in the Labor Code shall be construed to eliminate or diminish supplements or other employee benefits being enjoyed at the time of promulgation. Invoked by Octavio to claim diminution of benefits; the Court held that even assuming a diminution, Article 100 does not prohibit a union from offering and agreeing to reduce wages and benefits.

Justice Antonio T. Carpio (Chairperson), Justice Jose Portugal Perez, Justice Jose Catral Mendoza, and Justice Estela M. Perlas-Bernabe concurred in the decision.