Panay Electric Company, Inc. vs. National Labor Relations Commission

A no-strike clause in a CBA bars an economic strike, and a strike grounded on unfair labor practice is protected only if the union acted in good faith; union officers who knowingly participate in an illegal strike may lose employment status, but an employee illegally suspended through an arbitrary transfer may recover back salaries and moral damages.

Panay Electric Company, Inc. and Panay Electric Company Employees and Workers Association were parties to a Collective Bargaining Agreement containing a “no strike, no lock-out” clause and a grievance procedure. The union represented the company’s employees, and the dispute implicated the company’s management prerogative to reassign employees and the union’s right to strike. The CBA’s no-strike clause and grievance procedure supplied the contractual framework for the strike and the NLRC’s ruling.

On 30 October 1990, Panay Electric Company, Inc. posted in its premises a notice announcing the need for a “Report Clerk” who could assume the responsibility of gathering accounting and computer data at its power plant. The position was open to any employee “with Pay Class V” of the company. When nobody applied, the EDP/Personnel Manager recommended Enrique Huyan, who was then an Administrative Personnel Assistant at the head office and a Vice President of respondent union. The recommendation was approved by the company’s President and General Manager.

In a letter dated 09 November 1990, Huyan informed the company that he was not interested in accepting the new position. He explained that the manner of implementing the transfer appeared to be a demotion from Administrative Personnel Assistant to Report Clerk; that Report Clerk was Pay Class III under the organizational chart; that as union Vice President his transfer would hinder his function in settling labor matters and other problems with other PECEWA officers; and that the activation of the geothermal power plant in Palimpinon, Negros had produced additional displaced workers, so his transfer would be another onus on the Power Plant supervisor and his lack of technical know-how would obstruct operations. On 20 November 1990, the EDP/Personnel Manager required Huyan to explain within 48 hours why no disciplinary action should be taken against him for gross insubordination and failure to follow the General Manager’s approved directive. On 03 December 1990, Huyan was given a notice of dismissal for failure to comply with the General Manager’s general directive of 11/9/90 to a new assigned task in the Power Plant; failure to comply with his direct superior’s verbal directive to proceed to the Power Plant on 11/10/90 and 11/19/90; failure to comply with the personnel manager’s verbal directive to proceed to the Power Plant on 11/16/90; continued unauthorized entry and use of the Personnel Section and property from 11/16/90 up to the present; and failure to report to his assigned task in the Power Plant for more than seven consecutive days from November 16, 1990 up to the present. An administrative investigation was conducted, and Huyan was ordered dismissed effective 10 December 1990.

The union filed a notice of strike on 20 December 1990. On 02 January 1990, a strike vote was taken where 113 out of 149 union members voted; the result showed 108 “yes” votes, 1 “no” vote, and 4 abstentions. On 22 January 1991, the union went on strike. The company filed a petition to declare the strike illegal. On 25 January 1991, upon receipt of an order from the Secretary of Labor and Employment certifying the dispute to the NLRC, the union lifted its strike and, on the day following, the striking employees, including Huyan, reported for work.

Before the NLRC, the union averred that the real reason for ordering Huyan’s transfer was to penalize him for his union activities, particularly for being the suspected “Mao,” author of the column “Red Corner” in the Union’s New Digest, which featured an item on alleged wrongdoings by top company officials at the power plant. It cited a letter dated 10 October 1990 from the company’s Operations Manager to the General Manager suggesting an investigation of “Mao’s” real identity and, once ascertained, dismissal from the company. The union claimed that the company singled out Huyan for transfer; that the Personnel Manager recommended it without Huyan’s prior knowledge; that Huyan requested reconsideration but the Personnel Manager did not reply; that the transfer was a demotion; and that under the company’s Code of Offenses, the “insubordination” charged was punishable with dismissal only after a fourth commission.

The company, in turn, maintained that Huyan’s refusal to assume his new position was insubordination for which he was dismissed; that the directive was a valid exercise of management prerogative; that the union, including its officers and members, committed a serious breach of the CBA’s “no strike, no lock-out” clause; and that during the strike union officers and members committed illegal acts: union director Rey Espinal blocked the service vehicle of PECO collectors Domingo Tabobo and James Russel Balin, hurled invectives at them, and challenged them to fight; union Vice President Prescilla Napiar, with union member Ma. Teresa Cruz, approached PECO messenger Douglas Legada and snatched from him the envelope containing passbooks; and when PECO employees Carlos Miguel Borja and Joemar Paloma were on their way to deliver bank passbooks to PECO messengers riding in the car of Willy Hallares, Napiar blocked their way at the gate and demanded inspection of the car for PECO bills, an unidentified union member placed a big stone against the right front tire, and union auditor Allen Aquino insisted on inspecting the glove compartment.

The NLRC found that the Operations Manager’s request used as basis for Huyan’s transfer was made as early as June 18, 1990 but was acted upon only on October 15, 1990, as shown by handwritten notations changing the designation “Computer Data Clerk” to “Report Clerk”; that the action came a few days after the Operations Manager recommended investigating and dismissing “MAO”; that the announcement was limited to Pay Class V employees, of whom only six or seven in the entire workforce qualified; that Huyan was one of them and was admitted by the EDP/Personnel Manager to be the best qualified; that the EDP/Personnel Manager did not discuss the transfer with Huyan before or after making the recommendation; that no official written notice of reassignment was addressed to Huyan, the evidence being an approved memorandum from the EDP/Personnel Manager to the General Manager with a copy furnished to the union and Huyan; that the announcement did not state that the Report Clerk position, formerly Pay Class III, had been upgraded to Pay Class V; and that the company did not respond to Huyan’s letter for reconsideration.

• Insubordination and Management Prerogative: Petitioner maintained that Huyan’s refusal to assume his new position was insubordination for which he was dismissed, and that the company’s directive was a valid exercise of management prerogative.
• Illegal Strike and Illegal Acts: Petitioner argued that the union, including its officers and members, committed a serious breach of the CBA’s “no strike, no lock-out” clause and that during the strike union officers and members committed illegal acts, including blocking a service vehicle, snatching an envelope containing passbooks, and demanding inspection of a car carrying bank passbooks.
• Monetary Awards and Other Union Officers: Petitioner assailed the NLRC decision insofar as it awarded monetary benefits and damages to Huyan and Napiar and did not sanction the dismissal of other union officers and members.

• Unfair Labor Practice and Anti-Union Motive: Respondent union averred that the real reason for Huyan’s transfer was to penalize him for his union activities, particularly for being the suspected “Mao,” author of the column “Red Corner” in the Union’s New Digest.
• Demotion and Procedural Defects: Respondent union argued that the transfer was a demotion; that the Personnel Manager recommended it without Huyan’s prior knowledge; and that Huyan requested reconsideration but the Personnel Manager did not reply.
• Penalty Under the Code of Offenses: Respondent union claimed that under the company’s Code of Offenses, the “insubordination” charged was punishable with dismissal only after a fourth commission.

• Illegal Strike and Separation Benefits: Whether union officers who knowingly participate in an illegal strike may be declared to have lost employment status and denied separation benefits under the CBA.
• Unfair Labor Practice: Whether the company committed unfair labor practice in transferring Huyan.
• Huyan’s Dismissal: Whether Huyan’s refusal to accept the transfer constituted insubordination warranting dismissal.
• Dismissal of Other Union Officers: Whether the NLRC committed grave abuse of discretion in merely suspending the other union officers and members instead of ordering their dismissal.
• Back Salaries and Damages: Whether Huyan is entitled to back salaries, moral damages, and exemplary damages.

• Illegal Strike and Separation Benefits: Yes. Under Article 264 of the Labor Code, a union officer who knowingly participates in an illegal strike may be declared to have lost employment status; the NLRC found Huyan and Napiar to be principal leaders who did not act in good faith, so their separation benefits were unwarranted.
• Unfair Labor Practice: No. The company’s principal cause was suspicion that Huyan was “MAO,” not his union office; any employee suspected would have been the object of the company’s moves.
• Huyan’s Dismissal: No. Huyan’s refusal was not serious misconduct or willful disobedience; he sought reconsideration and was provoked by an arbitrary transfer, so his dismissal was illegal.
• Dismissal of Other Union Officers: No. The NLRC found no sufficient proof of bad faith or serious disorders by the other officers, and the SC found no grave abuse of discretion in imposing suspension only.
• Back Salaries and Damages: Yes as to back salaries and moral damages; no as to exemplary damages. Huyan is entitled to back salaries and benefits for the illegal suspension from 09 November 1990 to 25 January 1991 and moral damages reduced to ₱10,000.00; exemplary damages are not warranted under Article 2232 of the Civil Code.

• Illegal Strike and Separation Benefits: The Constitution guarantees the right to strike in accordance with law, but the right is not absolute. A CBA no-strike, no-lock-out clause is valid and may be invoked against an economic strike, but not against a strike grounded on unfair labor practice; for a ULP strike, it is enough that the workers acted honestly on an impression of ULP and the circumstances warranted good-faith belief. The NLRC found the 22–25 January 1991 strike illegal for violating the CBA no-strike clause and for disregarding the grievance procedure, and found Huyan and Napiar, the principal leaders, not in good faith. Under Article 264 of the Labor Code, a union officer who knowingly participates in an illegal strike may be declared to have lost employment status; thus the NLRC’s award of separation benefits to Huyan and Napiar was unwarranted.
• Unfair Labor Practice: The NLRC found that the company’s principal cause was suspicion that Huyan was “MAO,” the author of the “Red Corner” column; Huyan’s union office was incidental, and any employee suspected of being “MAO” would have been the object of the company’s moves regardless of union affiliation. The company did not single out Huyan because he was a union officer or because it was anti-union, so the charge of unfair labor practice cannot be sustained. The SC sustained this finding as part of the NLRC’s supported factual assessment.
• Huyan’s Dismissal: The NLRC found that the transfer was arbitrary: the Operations Manager’s request was made as early as 18 June 1990 but acted upon only on 15 October 1990, shortly after the recommendation to investigate and dismiss “MAO”; the announcement was limited to Pay Class V employees, of whom only six or seven qualified; Huyan was the best qualified; the EDP/Personnel Manager did not discuss the transfer with Huyan; no official written notice of reassignment was addressed to him; the announcement did not state that the Report Clerk position had been upgraded from Pay Class III to Pay Class V; and the company did not reply to his letter for reconsideration. Huyan did not comply with the directives, but his refusal was not without reason; he sought reconsideration and was not defiant. There was no serious misconduct or willful disobedience warranting dismissal, and no abandonment. The SC sustained the finding that the dismissal was illegal.
• Dismissal of Other Union Officers: The NLRC found no sufficient proof to hold the other union officers guilty of bad faith in taking part in the strike or of perpetrating serious disorders during the concerted activity, so it imposed suspension only. The SC’s review is limited to grave abuse of discretion because NLRC factual findings are practically conclusive absent such abuse. The SC saw no grave abuse in the NLRC’s refusal to order dismissal of those officers.
• Back Salaries and Damages: An illegally dismissed employee is ordinarily entitled to reinstatement and backwages under Article 279 of the Labor Code, but the NLRC did not order reinstatement because of the strained relationship and Huyan’s conduct as a union officer. The SC sustained the award of back salaries and benefits for the period of illegal suspension from 09 November 1990, when he was effectively suspended, until 25 January 1991, when the Secretary of Labor and Employment directed the striking employees to return to work. The SC reduced moral damages to ₱10,000.00 because the company acted arbitrarily in deciding to transfer Huyan. Exemplary damages were deleted because Article 2232 of the Civil Code requires wanton, fraudulent, reckless, oppressive, or malevolent conduct, and the NLRC’s findings fell short of that standard.

• No strike, no lock-out clause — A CBA stipulation prohibiting strikes and lockouts is valid, but the employer may invoke it only against an economic strike or one conducted to force wage or other concessions not mandated by law; it cannot be used to prevent a strike grounded on unfair labor practice. In this case, the SC affirmed the illegality of the 22–25 January 1991 strike because the union violated the CBA no-strike clause and disregarded the grievance procedure.
• Good-faith unfair labor practice strike — For a strike grounded on unfair labor practice, it is not essential that the unfair labor practice was actually committed; it suffices that the striking workers acted honestly on an impression that the company committed unfair labor practice and the surrounding circumstances warranted a good-faith belief. The NLRC found Huyan and Napiar, the principal leaders, not in good faith, so the strike was illegal.
• Consequences of illegal strike under Article 264 — Any union officer who knowingly participates in an illegal strike, and any worker or union officer who knowingly participates in illegal acts during a strike, may be declared to have lost employment status. The SC applied this to Huyan and Napiar as principal leaders who were not in good faith, deleting their separation benefits.
• Management prerogative to transfer — The employer’s right to transfer employees is not absolute and cannot be exercised arbitrarily or in bad faith. The SC sustained the finding that Huyan’s transfer was arbitrary because of the timing after the “MAO” investigation, the limited Pay Class V announcement, the lack of discussion with Huyan, the absence of an official written notice, and the company’s failure to reply to his reconsideration request.
• Unfair labor practice vs. arbitrary management action — A company’s act may be arbitrary without being unfair labor practice. The transfer was not unfair labor practice because the company’s principal motive was suspicion that Huyan was “MAO,” not his union office; any employee suspected would have been the object of the company’s moves. Still, the arbitrary exercise of management prerogative could not be sustained and made the dismissal illegal.
• NLRC findings of fact — The NLRC’s findings of fact are practically conclusive on the SC except when there is grave abuse of discretion; only when the findings are bereft of substantial support from the records may the SC make its own independent evaluation. The SC applied this deference to the NLRC’s findings on the strike, Huyan’s transfer, and the other officers’ participation.
• Exemplary damages under Article 2232 — Exemplary damages are awarded only when a person acts in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The SC deleted the award because the NLRC’s findings fell short of the underhandedness required.

• “The right to strike, however, is not absolute. It has heretofore been held that a "no strike, no lock-out" provision in the Collective Bargaining Agreement ("CBA") is a valid stipulation although the clause may be invoked by an employer only when the strike is economic in nature or one which is conducted to force wage or other concessions from the employer that are not mandated to be granted by the law itself.” — Establishes that the no-strike clause is valid but may be invoked only against economic strikes, not unfair labor practice strikes.
• “It would be inapplicable to prevent a strike which is grounded on unfair labor practice. In this situation, it is not essential that the unfair labor practice act has, in fact, been committed; it suffices that the striking workers are shown to have acted honestly on an impression that the company has committed such unfair labor practice and the surrounding circumstances could warrant such a belief in good faith.” — Defines the good-faith exception for unfair labor practice strikes.
• “Article 264, Title VIII, Book V, of the Labor Code provides that "(a)ny union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly, participates in the commission of illegal acts during a strike may be declared to have lost his employment status."” — Supplies the statutory basis for declaring union officers who knowingly join an illegal strike to have lost employment status.
• “Exemplary damages, upon the other hand, are awarded only when a person acts in a wanton, fraudulent, reckless, oppressive or malevolent manner (Art. 2232, Civil Code). NLRC's findings fall short of the underhandedness required so as to justify this award.” — Explains why the SC deleted the exemplary damages award.

• Five J Taxi vs. NLRC, 235 SCRA 556 — Cited for the rule that NLRC findings of fact are practically conclusive on the SC absent grave abuse of discretion.
• Inter-Orient Maritime Enterprises, Inc. vs. NLRC, 235 SCRA 268 — Cited for the same rule on the conclusiveness of NLRC factual findings.
• Loadstar Shipping Co., Inc. vs. Gallo, 229 SCRA 654 — Cited for the same rule on the conclusiveness of NLRC factual findings.
• Master Iron Labor Union vs. NLRC, 219 SCRA 47 — Cited for the validity of a no strike, no lock-out clause and its limits.
• People's Industrial and Commercial Employees and Workers Organization (FFW) vs. People's Industrial and Commercial Corporation, 112 SCRA 430, 440 — Cited for the good-faith belief in unfair labor practice as an exception to the no-strike clause.

• Section 3, Article XIII, of the Constitution — Guarantees workers’ right to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. The SC used it to frame the right to strike as constitutionally protected but not absolute.
• Article 264, Title VIII, Book V, Labor Code — Provides that any union officer who knowingly participates in an illegal strike, and any worker or union officer who knowingly participates in illegal acts during a strike, may be declared to have lost employment status. The SC applied it to Huyan and Napiar as principal leaders not in good faith, deleting their separation benefits.
• Article 279, Labor Code — Provides that an illegally dismissed employee is ordinarily entitled to reinstatement and backwages. The SC noted this rule but sustained the NLRC’s award of back salaries and benefits for Huyan’s illegal suspension instead of reinstatement.
• Article 2232, Civil Code — Limits exemplary damages to cases where a person acts in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The SC applied it to delete the exemplary damages award.