Pepsi-Cola Products, Philippines, Inc. vs. Secretary of Labor

A supervisors’ local union may not affiliate with a national federation of rank-and-file employees where the federation actively participates in union activity in the company and the supervisors would co-mingle with employees they directly supervise; a pending petition to cancel a union’s registration does not bar a certification election because the union retains legal personality until cancellation is ordered; and confidential employees are disqualified from joining a supervisors’ union under Article 245 of the Labor Code by necessary implication, with employee status determined by actual functions rather than title.

Pepsi-Cola Products, Philippines, Inc. (PEPSI) operated a plant in Tin-ao, Cagayan de Oro City, where a supervisors’ union sought to represent supervisory employees. The supervisors’ union was affiliated with Union de Obreros Estivadores de Filipinas (UOEF), a federation that also counted two rank-and-file unions of the same company—Pepsi-Cola Labor Unity (PCLU) and Pepsi-Cola Employees Union of the Philippines (PEUP)—among its affiliates. Article 245 of the Labor Code, as amended by Republic Act No. 6715, governs the eligibility of managerial and supervisory employees to organize, prohibiting managerial employees from joining any labor organization and barring supervisory employees from membership in a rank-and-file labor organization while allowing them to form separate labor organizations of their own. The dispute implicated the interaction of that provision with certification-election and union-registration proceedings before the Med-Arbiter, the Bureau of Labor Relations, and the Secretary of Labor and Employment.

In June 1990, the Pepsi-Cola Employees Organization-UOEF (Union) filed a petition for certification election with the Med-Arbiter, seeking to be the exclusive bargaining agent of supervisors of Pepsi-Cola Products, Philippines, Inc. (PEPSI). On July 12, 1990, the Med-Arbiter granted the petition, stating that the Union was an affiliate of Union de Obreros Estivadores de Filipinas (UOEF) together with two rank-and-file unions, Pepsi-Cola Labor Unity (PCLU) and Pepsi-Cola Employees Union of the Philippines (PEUP).

On July 23, 1990, PEPSI filed with the Bureau of Labor Relations a petition to set aside, cancel and/or revoke the Union’s charter affiliation, docketed as Case No. 725-90, on the grounds that (a) the Union’s members were managers and (b) a supervisors’ union cannot affiliate with a federation whose members include the rank-and-file union of the same company. PEPSI later moved to reopen the case because it was not furnished a copy of the certification election petition, submitted its position paper, and received summons for a pre-trial conference that was rescheduled. On October 12, 1990, PEPSI appealed to the Secretary of Labor, questioning the setting of the certification election and moving to suspend it; the motion was granted on October 18, 1990. On November 12, 1990, the Secretary denied the appeal and the motion for reconsideration, prompting PEPSI to file a petition for certiorari; on February 6, 1991, the Supreme Court granted a temporary restraining order and/or preliminary injunction.

In the related proceedings, the Med-Arbiter issued an Order dated May 23, 1991 dismissing MED ARB ROX Case No. R1000-919104-RU-012 and R1000-9102-RU-008 for lack of merit and ordering a certification election among the supervisory workers of PEPSI at its Tin-ao, Cagayan de Oro City plant, including satellite warehouses within the plant’s territorial coverage and control. The choices were the Cagayan de Oro Pepsi-Cola Supervisors Union (U.O.E.P.) and “No union.” The listed supervisory employees included Route Managers, a C & C Manager, a Sales Service Department Manager, a Chief Checker, an Accounting Manager, a Warehouse Operations Manager, and a Maintenance Manager. PEPSI appealed on June 6, 1991. On October 4, 1991, the Secretary modified the Med-Arbiter’s Order by referring the cancellation cases to the Office of the Regional Director and sustaining the call for certification election. PEPSI’s motion for reconsideration was denied on December 12, 1991. Meanwhile, the Bureau of Labor Relations issued Registration Certificate No. 11492-LC in favor of the Union.

PEPSI contended that public respondent committed grave abuse of discretion in ruling that the Union’s officers and members were not managerial employees; that the Union was prohibited from affiliating with a federation already affiliated with the rank-and-file union; and that the petition for cancellation of union registration did not constitute a prejudicial question to the certification election. In its supplemental reply, PEPSI stressed that officials of PCLU and PEUP were top-ranking officers of UOEF, the federation of the supervisors’ union, and that the supervisory union could thereby do indirectly what it could not do directly.

On September 1, 1992, the Union resolved to withdraw its affiliation from UOEF. The Court found that Route Managers, Chief Checkers, and Warehouse Operations Managers were supervisors, while Credit and Collection Managers and Accounting Managers were highly confidential employees. Their job descriptions indicated that they did not lay down company policies and had to report to their respective superiors; the mere designation of an employee as manager did not necessarily make him one.

• Managerial Status: PEPSI contended that public respondent committed grave abuse of discretion in ruling that private respondent’s officers and members were not managerial employees.
• Prohibited Affiliation: PEPSI contended that private respondent was prohibited from affiliating itself with a federation already affiliated with the rank-and-file union.
• Prejudicial Question: PEPSI contended that public respondent committed grave abuse of discretion in ruling that the institution of a petition for cancellation of union registration did not constitute a prejudicial question to a petition for certification election.
• Suspension of Certification Election: PEPSI asserted that a final determination of the Petition to Set Aside, Cancel, Revoke Charter Union Affiliation should first be disposed of before granting the certification election, because allowing the election would render any decision of the Bureau of Labor Relations moot and academic.
• Indirect Circumvention: PEPSI stressed that officials of PCLU and PEUP were top-ranking officers of UOEF, the federation of the supervisors’ union, so the supervisory union could do indirectly what it could not do directly; affiliation would negate the law’s intent that supervisory employees may only join separate labor organizations and cannot be eligible for membership in a rank-and-file labor organization.
• Notice and Appeal: PEPSI moved to reopen the case because it was not furnished a copy of the Petition for Certification Election, and it appealed the setting of the certification election to the Secretary of Labor.

• No Prohibition on Affiliation: The Federation argued that Article 245 does not prohibit a local union composed of supervisory employees from being affiliated to a federation which has local unions with rank-and-file members as affiliates.
• Grounds for Cancellation: The Federation argued that the inclusion of managerial employees is not among the grounds for cancellation under Section 7, Rule II, Book V of the Omnibus Rules Implementing the Labor Code, and that the Union remains a legitimate labor organization.
• Appealability of Interlocutory Order: The Secretary, through the Office of the Solicitor General, argued that under Article 259 only orders of the Med-Arbiter can be appealed to the Secretary and only on the ground that the rules and regulations for the conduct of the certification election were violated; the Representation Officer’s order is interlocutory and not appealable.
• Legal Personality Until Cancellation: The Secretary argued that until a final order cancelling its certificate of registration or charter certificate, a labor organization remains legitimate and entitled to all rights, including the right to be certified as a bargaining representative.
• No Grave Abuse on Unpresented Issue: The Secretary argued that public respondent cannot be deemed to have committed grave abuse of discretion on an issue that was never presented before it for resolution.
• Article 245 Does Not Preclude Same Federation: The Secretary argued that Article 245 does not preclude a supervisors’ union and a rank-and-file union from being affiliated with the same federation; a federation of local unions is not the labor organization referred to in Article 245, and affiliation does not make supervisory employees members of the rank-and-file union or vice versa.
• Employer Lacks Standing: The Secretary argued that an employer has no legal standing to question the validity of a certification election, which is the sole and exclusive concern of the employees, with the employer a mere bystander.
• Confidential Employees: The Office of the Solicitor General submitted that Route Managers, Chief Checkers, and Warehouse Operations Managers are supervisors, while Credit and Collection Managers and Accounting Managers are highly confidential employees.

• Affiliation with Federation: Whether a supervisors’ union can affiliate with the same federation of which two rank-and-file unions are likewise members, without violating Article 245 of the Labor Code, as amended by Republic Act No. 6715.
• Prejudicial Question / Certification Election: Whether the pendency of a petition to cancel or revoke the union’s registration certificate constitutes a prejudicial question that bars a certification election.
• Managerial/Confidential Status: Whether the union’s officers and members are managerial employees, and whether Credit and Collection Managers and Accounting Managers are highly confidential employees not eligible for membership in a supervisors’ union.

• Affiliation with Federation: Moot and academic. The Union withdrew from UOEF on September 1, 1992; nonetheless, the governing principle is that a supervisors’ local union may not affiliate with a national federation of rank-and-file employees where the federation actively participates in union activity in the company and the supervisors would co-mingle with employees they directly supervise.
• Prejudicial Question / Certification Election: No. A certification election may proceed despite the pendency of a petition to cancel the union’s registration certificate because the union retains legal personality until an order cancelling its registration is issued; certification proceedings are non-adversarial and fact-finding.
• Managerial/Confidential Status: No as to managerial status for Route Managers, Chief Checkers, and Warehouse Operations Managers; they are supervisors. Credit and Collection Managers and Accounting Managers are highly confidential employees and are not eligible for membership in a supervisors’ union. Employee status depends on actual functions, not title.

• Affiliation with Federation: The issue in G.R. No. 96663 became moot and academic because the Union withdrew from UOEF on September 1, 1992. The Court cited cases dismissing moot petitions, including Narciso Nakpil vs. Aragon, Toribio vs. Bidin, and Gumaua vs. Espino, and F. C. Fisher vs. Yangco Steamship Co., which held that courts need not indulge in academic discussion of a moot question. However, following University of San Agustin, Inc. vs. Court of Appeals, the Court stated the governing principle for guidance. Quoting Atlas Lithographic Services, Inc. vs. Laguesma, the Court explained that if the intent of the law is to avoid a situation where supervisors merge with the rank-and-file or where the supervisors’ labor organization would represent conflicting interests, then a local supervisors’ union should not be allowed to affiliate with the national federation of rank-and-file employees where that federation actively participates in union activity in the company. The prohibition against a supervisors’ union joining a local union of rank and file is not confined to direct membership; it extends to a supervisors’ local union applying for membership in a national federation whose members include local unions of rank-and-file employees, especially where the supervisors would co-mingle with employees they directly supervise in their own bargaining unit.
• Prejudicial Question / Certification Election: The Court applied the ruling in Association of the Court of Appeals Employees (ACAE) vs. Ferrer-Calleja that a certification proceeding is not a litigation in the ordinary sense but an investigation of a non-adversarial and fact-finding character. Technical rules of evidence do not apply if the decision to grant it proceeds from an examination of the sufficiency of the petition and the arguments in the position papers and other documents. The established rule is that an order to hold a certification election is proper despite the pendency of a petition for cancellation of the registration certificate of the respondent union. The rationale is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing the cancellation.
• Managerial/Confidential Status: Article 245 singles out managerial employees as ineligible to join, assist or form any labor organization, but under the doctrine of necessary implication, confidential employees are similarly disqualified. A confidential employee is one entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employer’s property. The rationale behind the disqualification of managerial employees—conflict of interest and the risk of company domination—also applies to confidential employees, who, if allowed to unionize for collective bargaining, might be governed by their own motives rather than the employer’s interest and could become sources of undue advantage or spies for either party to a collective bargaining agreement. The Court found merit in the Office of the Solicitor General’s submission that Route Managers, Chief Checkers, and Warehouse Operations Managers are supervisors, while Credit and Collection Managers and Accounting Managers are highly confidential employees. Designation should be reconciled with actual job description; the job descriptions indicated that these employees did not lay down company policies and had to report to their respective superiors. The mere fact that an employee is designated manager does not necessarily make him one. Under National Steel Corporation vs. Laguesma, what is essential is the nature of the employee’s function, not the nomenclature or title given to the job.

• Moot and Academic with Governing Principle — A case may be dismissed as moot and academic when the issue has ceased to be justiciable, as when the supervisors’ union withdrew from the federation on September 1, 1992. Nonetheless, the Court may state the governing principle for the guidance of the parties and others similarly situated, as it did by reiterating the rule on supervisors’ union affiliation.
• Prohibition on Supervisors’ Union Affiliation with Rank-and-File Federation — Article 245 prohibits supervisory employees from membership in a rank-and-file labor organization. The prohibition is not confined to direct membership; it extends to a supervisors’ local union applying for membership in a national federation whose members include local unions of rank-and-file employees, especially where the supervisors would co-mingle with employees they directly supervise in their own bargaining unit. A local supervisors’ union should not be allowed to affiliate with a national federation of rank-and-file employees where the federation actively participates in union activity in the company.
• Certification Election Despite Pending Cancellation — A certification election is not a litigation but an investigation of a non-adversarial and fact-finding character. The pendency of a petition to cancel or revoke a union’s registration certificate does not constitute a prejudicial question to a certification election; the union retains legal personality until an order cancelling its registration is issued.
• Doctrine of Necessary Implication as to Confidential Employees — While Article 245 expressly disqualifies managerial employees from joining, assisting, or forming any labor organization, confidential employees are similarly disqualified by necessary implication. A confidential employee is one entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employer’s property. The rationale is that their unionization would create conflicting interests and could make them sources of undue advantage or spies for either party to a collective bargaining agreement.
• Function Over Nomenclature in Employee Status — The nature of the employee’s function, not the nomenclature or title given to the job, determines whether the employee is rank-and-file, supervisory, or managerial. The mere designation of an employee as manager does not necessarily make him one. Applied to the case, Route Managers, Chief Checkers, and Warehouse Operations Managers were supervisors, while Credit and Collection Managers and Accounting Managers were highly confidential employees.

• "Thus, if the intent of the law is to avoid a situation where supervisors would merge with the rank-and-file or where the supervisors' labor organization would represent conflicting interests, then a local supervisors' union should not be allowed to affiliate with the national federation of union of rank-and-file employees where that federation actively participates in union activity in the company." — This passage, quoted from Atlas Lithographic Services, Inc. vs. Laguesma, states the governing principle on the prohibited affiliation of a supervisors’ local union with a rank-and-file federation.
• "The prohibition against a supervisors' union joining a local union of rank and file is replete with jurisprudence. The Court emphasizes that the limitation is not confined to a case of supervisors' wanting to join a rank-and-file union. The prohibition extends to a supervisors' local union applying for membership in a national federation the members of which include local unions of rank and file employees." — This excerpt clarifies that the Article 245 prohibition reaches indirect affiliation through a national federation, not merely direct membership in a rank-and-file local union.
• "At any rate, the Court applies the established rule correctly followed by the public respondent that an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing the cancellation." — This passage is the ratio for rejecting the prejudicial-question argument and allowing the certification election to proceed.
• "While Art. 245 of the Labor Code singles out managerial employee as ineligible to join, assist or form any labor organization, under the doctrine of necessary implication, confidential employees are similarly disqualified." — This excerpt states the doctrinal basis for excluding Credit and Collection Managers and Accounting Managers from the supervisors’ union.

• Atlas Lithographic Services, Inc. vs. Laguesma, 205 SCRA 121 [1992] — Relied on for the rule that a local supervisors’ union should not affiliate with a national federation of rank-and-file employees where the federation actively participates in union activity in the company, and that the prohibition extends to a supervisors’ local union applying for membership in a national federation whose members include rank-and-file local unions.
• Association of the Court of Appeals Employees (ACAE) vs. Hon. Pura Ferrer-Calleja, 203 SCRA 597 [1991] — Cited for the rule that certification proceedings are non-adversarial and fact-finding, and that a certification election may proceed despite the pendency of a petition to cancel the union’s registration certificate.
• National Association of Trade Unions (NATU) — Republic Planters Bank Supervisors Chapter vs. Hon. R. D. Torres, G.R. No. 93468, December 29, 1994 — Applied for the disqualification of confidential employees from joining a supervisors’ union under Article 245 by necessary implication.
• Bulletin Publishing Corporation vs. Sanchez, 144 SCRA 628 — Cited for the rationale behind the disqualification of managerial employees: conflict of interest and the risk of company domination if managerial employees join a union.
• Golden Farms vs. NLRC, 175 SCRA 471 — Cited in the discussion of confidential employees as persons who, having access to confidential information, may become sources of undue advantage or spies for either party to a collective bargaining agreement.
• Pier 8 Arrastre and Stevedoring Services, Inc. vs. Hon. Nieves Roldan-Confessor, G.R. No. 110854, February 14, 1995 — Cited in the NATU ruling on the disqualification of confidential employees.
• National Steel Corporation vs. Laguesma, G.R. No. 103743, January 29, 1996 — Cited for the rule that the nature of the employee’s function, not the nomenclature or title of the job, determines whether the employee is rank-and-file, managerial, or supervisory.
• University of San Agustin, Inc. vs. Court of Appeals — Cited for the principle that even if a case is moot and academic, a statement of the governing principle is appropriate for the guidance of the parties and others similarly situated.
• F. C. Fisher vs. Yangco Steamship Co. — Cited for the rule that courts need not indulge in academic discussion of a moot question.
• Narciso Nakpil vs. Hon. Crisanto Aragon, G.R. No. L-24087, January 22, 1980, 95 SCRA 85; Toribio vs. Bidin, G.R. No. L-37960, February 28, 1980, 96 SCRA 361; Gumaua vs. Espino, G.R. No. L-36188—37586, February 29, 1980, 96 SCRA 402 — Cited as cases in which petitions were dismissed as moot and academic.
• Adamson & Adamson, Inc. vs. CIR, No. L-35120, January 31, 1984, 127 SCRA 268 — Cited by the Secretary for the principle that a duly registered local union affiliating with a national union or federation does not lose its legal personality or independence.
• Consolidated Farms vs. Noriel, L-47752, July 31, 1978, 84 SCRA 469; Filipino Metals Corporation vs. Ople, L-43861, September 4, 1981, 107 SCRA 211; Trade Unions of the Philippines and Allied Services (TUPAS) vs. Trajano, No. L-61153, January 17, 1983, 120 SCRA 64 — Cited by the Secretary for the rule that a certification election is the sole and exclusive concern of employees and the employer is a mere bystander.
• Chua vs. Civil Service Commission — Cited for the doctrine of necessary implication in statutory construction.

• Article 245, Labor Code (Presidential Decree No. 442), as amended by Republic Act No. 6715 — Provides that managerial employees are not eligible to join, assist or form any labor organization, while 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 provision was applied to the supervisors’ union affiliation issue and to the disqualification of confidential employees by necessary implication.

Justices Melo, Vitug, and Gonzaga-Reyes concurred. Justice Panganiban was in the result.