Philips Industrial Development, Inc. vs. National Labor Relations Commission

Confidential employees who assist or act in a confidential capacity to persons exercising managerial functions in labor relations, or who have access to confidential labor-relations matters, are ineligible for inclusion in the rank-and-file bargaining unit; service engineers and sales representatives may not be automatically included in that unit but may determine through a referendum whether to join, subject to Article 245 of the Labor Code as amended by R.A. No. 6715, which excludes supervisory employees from rank-and-file labor organizations.

Philips Industrial Development, Inc. (PIDI) is a domestic corporation engaged in the manufacturing and marketing of electronic products. Since 1971, it had six collective bargaining agreements with Philips Employees Organization-FFW (PEO-FFW), a registered labor union and the certified bargaining agent of all PIDI rank-and-file employees. The first CBA excluded supervisors referred to in R.A. No. 875, confidential employees, security guards, temporary employees, and sales representatives from the bargaining unit; the second to fifth CBAs excluded the sales force, confidential employees, heads of small units, managerial employees, temporary employees, and security personnel. The sixth CBA, covering 1987 to 1989, provided that the inclusion or exclusion of service engineers, sales personnel, and confidential employees in the bargaining unit would be submitted to arbitration. Statutory context included Article 245 of the Labor Code, as amended by E.O. No. 111 and later by R.A. No. 6715, governing managerial and supervisory employees’ eligibility for labor organizations.

Philips Industrial Development, Inc. (PIDI) was a domestic corporation engaged in the manufacturing and marketing of electronic products. Since 1971, it had entered into six collective bargaining agreements with the Philips Employees Organization-FFW (PEO-FFW), a registered labor union and the certified bargaining agent of all PIDI rank-and-file employees. In the first CBA, covering 1971 to 1974, the supervisors referred to in R.A. No. 875, confidential employees, security guards, temporary employees, and sales representatives were excluded from the bargaining unit. In the second to the fifth CBAs, covering 1975 to 1977, 1978 to 1980, 1981 to 1983, and 1984 to 1986, the sales force, confidential employees, and heads of small units, together with managerial employees, temporary employees, and security personnel, were specifically excluded from the bargaining unit. The confidential employees included the division secretaries of light, telecom, data, and consumer electronics; marketing managers; secretaries of the corporate planning and business manager; the fiscal and financial system manager and audit and EDP manager; and the staff of both the General Management and the Personnel Department.

In the sixth CBA, covering 1987 to 1989, the parties agreed that the subject of inclusion or exclusion of service engineers, sales personnel, and confidential employees in the coverage of the bargaining unit would be submitted for arbitration. Pursuant thereto, in June 1987, PEO-FFW filed a petition before the Bureau of Labor Relations praying for an order directing the parties to select a voluntary arbitrator in accordance with its rules and regulations. Because the parties failed to agree on a voluntary arbitrator, the BLR endorsed the petition to the Executive Labor Arbiter of the National Capital Region for compulsory arbitration pursuant to Article 228 of the Labor Code. The case was docketed as Case No. NLRC-NCR-00-11-03936-87 and assigned to Executive Labor Arbiter Arthur Amansec.

On 17 March 1988, Labor Arbiter Amansec rendered a decision ordering the respondent to conduct a referendum to determine the will of the service engineers and sales representatives as to their inclusion or exclusion in the bargaining unit. The same decision declared that the division secretaries and all staff of general management, personnel and industrial relations department, and secretaries of audit, EDP, and financial systems were confidential employees and were therefore deemed excluded from the bargaining unit. PEO-FFW appealed from that decision to the NLRC.

On 16 January 1989, the NLRC rendered the questioned decision setting aside the Labor Arbiter’s decision and entering a new one declaring PIDI’s service engineers, sales force, division secretaries, all staff of General Management, Personnel and Industrial Relations Department, and Secretaries of Audit, EDP and Financial Systems included within the rank-and-file bargaining unit. The NLRC concluded that, based on the Omnibus Rules Implementing the Labor Code and Article 245 of the Labor Code, all workers except managerial employees and security personnel were qualified to join or be part of the bargaining unit. It also ruled that the Labor Arbiter’s directive to conduct a referendum among service engineers and sales representatives was erroneous because it arrogated to those employees the right to define what the law means, and that the Labor Arbiter’s exclusion of confidential employees was contrary to law because the law mentioned only managerial employees and security guards as excluded. PIDI’s motion for reconsideration was denied, and it then filed the instant petition.

• CBA History and Confidentiality: Petitioner argued that including the subject employees in the existing bargaining unit would run counter to the history of the parties’ CBA, since the five previous CBAs consistently excluded this group; the rationale for exclusion was that these employees held highly sensitive, confidential, and highly fiduciary positions, and their inclusion could subject the company to breaches in security and possible revelation of highly sensitive and confidential matters, cripple the company’s bargaining position, and give undue advantage to the union.
• Absence of Mutuality of Interests: Petitioner maintained that there was no mutuality of interests between the service engineers and sales representatives and the regular rank and file, citing a table showing disparity in qualifications, work schedule, night shift differential pay, stand-by call and allowance, uniforms, retirement benefits, year-end performance evaluation, sales commission, car loan, and precalculated kilometer allowance.
• Grave Abuse of Discretion: Petitioner alleged that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in holding that service engineers, sales representatives, and confidential employees of PIDI were qualified to be part of the existing bargaining unit.
• Globe Doctrine: Petitioner alleged that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in not applying the “Globe Doctrine.”

• Statutory Coverage (NLRC): In its assailed decision, the NLRC concluded that under Section 1, Rule II, Book V of the Omnibus Rules Implementing the Labor Code, as amended by Section 3 of the Implementing Rules of E.O. No. 111; paragraph (c), Section 2, Rule V of the same Code, as amended by Section 6 of the Implementing Rules of E.O. No. 111; and Article 245 of the Labor Code, as amended, all workers except managerial employees and security personnel are qualified to join or be part of the bargaining unit.
• Confidential Employees (NLRC): The NLRC ruled that the Labor Arbiter’s declaration excluding division secretaries and staff of general management, personnel and industrial relations, and secretaries of audit, EDP, and financial systems from the bargaining unit was contrary to law because the law did not mention them among those excluded, only managerial employees and security guards.
• Referendum (NLRC): The NLRC ruled that the Labor Arbiter’s directive to conduct a referendum among service engineers and sales representatives was erroneous because it arrogated to those employees the right to define what the law means, and because management, being most interested in excluding them, could lobby or exert pressure on them and agitate unrest among the rank and file.
• Supervisory Employees (NLRC): The NLRC noted that supervisory unions had already been dissolved and their members who did not fall within the definition of managerial employees had become eligible to join or assist the rank-and-file organization.
• Office of the Solicitor General: The Office of the Solicitor General, counsel for public respondent NLRC, supported the Labor Arbiter’s decision and refused to uphold the NLRC’s position; it maintained that the division secretaries, staff of General Management, Personnel and Industrial Relations, and secretaries of Audit, EDP and Financial Systems were confidential employees disqualified from joining PEO-FFW and could not even form their own union under Golden Farms, Inc. vs. Ferrer-Calleja. It also argued that service engineers and sales representatives were entitled to join or form a union but had interests dissimilar to the rank and file, so they should be allowed to determine for themselves what union to join or form through a referendum under the Globe Doctrine.

• Bargaining Unit Inclusion: Whether the NLRC committed grave abuse of discretion in holding that service engineers, sales representatives, and confidential employees are qualified to be included in the existing rank-and-file bargaining unit.
• Confidential Employees: Whether confidential employees may be included in the rank-and-file bargaining unit.
• Service Engineers and Sales Representatives: Whether service engineers and sales representatives may be automatically included in the existing rank-and-file bargaining unit or should be allowed to determine their inclusion through a referendum.
• Globe Doctrine: Whether the NLRC committed grave abuse of discretion in not applying the Globe Doctrine.
• Supervisory Employees: Whether service engineers and sales representatives holding supervisory positions are eligible for membership in the rank-and-file bargaining unit under Article 245 as amended by R.A. No. 6715.

• Bargaining Unit Inclusion: Yes. The NLRC committed grave abuse of discretion in reversing the Labor Arbiter and including all the subject employees in the rank-and-file bargaining unit.
• Confidential Employees: No. Confidential employees are ineligible for inclusion in the rank-and-file bargaining unit because the rationale for excluding managerial employees from labor organizations applies to them.
• Service Engineers and Sales Representatives: No. They cannot be automatically included in the rank-and-file bargaining unit; the referendum ordered by the Labor Arbiter is the appropriate procedure to determine their will, subject to Article 245 as amended by R.A. No. 6715 for those holding supervisory positions.
• Globe Doctrine: No. The Globe Doctrine finds no application because the only issue is inclusion in or exclusion from the bargaining unit and PIDI never questioned the Labor Arbiter’s decision; the doctrine applies only in evenly balanced claims by competitive groups.
• Supervisory Employees: No. Under Article 245 as amended by R.A. No. 6715, supervisory employees are not eligible for membership in a rank-and-file labor organization but may join, assist, or form separate labor organizations of their own.

• Bargaining Unit Inclusion: The NLRC did not accurately comprehend the issue raised before it. The issue was not whether the subject employees may join or form a union, but whether they may be part of the existing bargaining unit for PIDI’s rank-and-file employees. Even if the issue were as the NLRC perceived it, the NLRC committed palpable error in ruling that under the law all workers, except managerial employees and security personnel, are qualified to join a union or form part of a bargaining unit. At the time Case No. NLRC-NCR-00-11-03936-87 was filed in 1987, security personnel were no longer disqualified from joining or forming a union because Section 6 of E.O. No. 111, enacted on 24 December 1986, repealed the original Article 245 of the Labor Code and substituted a different provision, making security guards eligible for membership in any labor organization. The NLRC therefore committed grave abuse of discretion in reversing the Labor Arbiter and decreeing the inclusion of all the subject employees in the rank-and-file bargaining unit.
• Confidential Employees: All the employees included by the NLRC, except the service engineers and sales force personnel, are confidential employees. Their classification as such was not seriously disputed by PEO-FFW, and the five previous CBAs between PIDI and PEO-FFW explicitly considered them confidential employees. By the very nature of their functions, they assist and act in a confidential capacity to, or have access to confidential matters of, persons who exercise managerial functions in the field of labor relations. The rationale behind the ineligibility of managerial employees to form, assist, or join a labor union equally applies to confidential employees. In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, the Court explained that if managerial employees belonged to or were affiliated with a union, the union might not be assured of their loyalty because of evident conflict of interests, and the union could become company-dominated with the presence of managerial employees in union membership. In Golden Farms, Inc. vs. Ferrer-Calleja, the Court explicitly made this rationale applicable to confidential employees such as accounting personnel and radio and telegraph operators, who, having access to confidential information, may become the source of undue advantage and may act as spies of either party to a collective bargaining agreement. Allowing confidential employees to join the existing union of the rank and file would violate the terms of the CBA wherein such employees, by the nature of their functions and positions, were expressly excluded.
• Service Engineers and Sales Representatives: In holding that the service engineers and sales representatives were included in the bargaining unit for PIDI’s rank-and-file employees, the NLRC practically forced them to become members of PEO-FFW or to be subject to its sphere of influence, since PEO-FFW was the certified bargaining agent for that unit. This violated, obstructed, impaired, and impeded the service engineers’ and sales representatives’ constitutional right to form unions or associations and to self-organization. In Victoriano vs. Elizalde Rope Workers Union, the Court ruled that a right comprehends liberty or freedom, meaning the absence of legal restraint so that an employee may act for himself without being prevented by law, and power, whereby an employee may, as he pleases, join or refrain from joining an association. The employee decides whether to join an association, which association to join, and even after joining retains the liberty and power to leave and cancel membership at any time. The right to join a union includes the right to abstain from joining any union, and the law does not impose upon the employee the duty to join an association. The Labor Arbiter’s directive to hold a referendum to determine the will of the service engineers and sales representatives as to their inclusion or exclusion in the bargaining unit was therefore the most appropriate procedure conforming to their right to form, assist, or join a labor union or organization. However, because the Labor Arbiter’s decision was rendered before the effectivity of R.A. No. 6715, its future application to the private parties, insofar as service engineers and sales representatives holding supervisory positions or functions are concerned, must take into account Article 245 of the Labor Code as amended by R.A. No. 6715.
• Globe Doctrine: The Court found it unnecessary to discuss the alleged grave abuse of discretion in not applying the Globe Doctrine. Since the only issue was the subject employees’ inclusion in or exclusion from the bargaining unit in question, and PIDI never questioned the Labor Arbiter’s decision, the Globe Doctrine found no application. The doctrine applies only in instances of evenly balanced claims by competitive groups for the right to be established as the bargaining unit, which did not obtain in this case.
• Supervisory Employees: Article 245 of the Labor Code, as amended by R.A. 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. This provision must guide the future application of the Labor Arbiter’s decision to service engineers and sales representatives holding supervisory positions or functions.

• Confidential Employees and Bargaining Unit — Confidential employees who assist or act in a confidential capacity to persons exercising managerial functions in labor relations, or who have access to confidential labor-relations matters, are ineligible for inclusion in the rank-and-file bargaining unit. The rationale for excluding managerial employees from labor organizations applies to them because their presence in a union may create a conflict of loyalty, lead to company domination of the union, or make them a source of undue advantage or spies for either party to a collective bargaining agreement. The Court applied this to division secretaries, staff of general management, personnel and industrial relations, and secretaries of audit, EDP, and financial systems.
• Right to Self-Organization Includes the Right to Abstain — The constitutional and statutory right to join a union includes the right to abstain from joining any union. An employee decides whether to join an association, which association to join, and may leave or cancel membership at any time. The law does not impose a duty to join any association. The Court applied this to service engineers and sales representatives, holding that they could not be forced into PEO-FFW merely because it was the certified bargaining agent for the rank-and-file unit.
• Globe Doctrine — In determining the proper bargaining unit, the express will or desire of the employees shall be considered. The doctrine applies only in instances of evenly balanced claims by competitive groups for the right to be established as the bargaining unit. The Court held that it found no application because the only issue was inclusion in or exclusion from the bargaining unit and PIDI never questioned the Labor Arbiter’s decision.
• Supervisory Employees under Article 245 — Managerial employees are not eligible to join, assist, or form any labor organization. Supervisory employees are not 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 Court applied this prospectively to service engineers and sales representatives holding supervisory positions or functions.
• Security Personnel Eligibility — After Section 6 of E.O. No. 111 repealed the original Article 245 of the Labor Code, security guards became eligible for membership in any labor organization. The Court used this to correct the NLRC’s statement that security personnel remained excluded from union membership.
• Distinction Between Right to Join a Union and Inclusion in a Bargaining Unit — The issue is not whether employees may join or form a union, but whether they may be part of an existing bargaining unit. The Court applied this distinction to clarify that the NLRC had misapprehended the central question in the case.

• "The issue is not whether the subject employees may join or form a union, but rather, whether or not they may be part of the existing bargaining unit for the rank and file employees of PIDI." — This passage clarifies the central issue and corrects the NLRC’s misapprehension of the question before it.
• "By the very nature of their functions, they assist and act in a confidential capacity to, or have access to confidential matters of, persons who exercise managerial functions in the field of labor relations." — This defines the basis for classifying the employees as confidential and for excluding them from the rank-and-file bargaining unit.
• "It is clear, therefore, that the right to join a union includes the right to abstain from joining any union." — This states the controlling principle on the right to self-organization and supports the referendum for service engineers and sales representatives.
• "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." — This is the Court’s quoted formulation of Article 245 as amended by R.A. No. 6715, applied prospectively to service engineers and sales representatives holding supervisory positions.

• Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, 144 SCRA 628, 635 [1986] — Elaborated the rationale for the ineligibility of managerial employees to join labor organizations, which the Court applied to confidential employees.
• Golden Farms, Inc. vs. Ferrer-Calleja, 175 SCRA 471 [1989] — Explicitly applied the managerial-employee rationale to confidential employees, holding that confidential employees with access to confidential information may become a source of undue advantage or spies and may be excluded from the rank-and-file union.
• Victoriano vs. Elizalde Rope Workers Union, 59 SCRA 54, 66-67 [1974] — Held that the right to join a union includes liberty and power, that the employee decides whether and which association to join, and that the right to join includes the right to abstain; controlling on the service engineers and sales representatives.
• In Re: Globe Machine and Stamping Company, 3 NLRC 294 [1937] — Source of the Globe Doctrine, which the Court held inapplicable because the case involved only inclusion in or exclusion from the bargaining unit and not evenly balanced claims by competitive groups.
• Manila Electric Co. vs. Secretary of Labor and Employment, 197 SCRA 275 [1991] — Cited to support the conclusion that security guards became eligible for membership in any labor organization after the repeal and substitution of Article 245 by E.O. No. 111.

• Article 245, Labor Code, as amended by E.O. No. 111 and R.A. No. 6715 — Governs the ineligibility of managerial employees and the right of supervisory employees. As amended by R.A. No. 6715, managerial employees are not eligible to join, assist, or form any labor organization; supervisory employees are not eligible for membership in a rank-and-file labor organization but may join, assist, or form separate labor organizations. The Court applied this provision prospectively to service engineers and sales representatives holding supervisory positions.
• Section 6, E.O. No. 111 — Repealed the original Article 245 on the ineligibility of security personnel and substituted a new Article 245 on the right of employees in the public service. By virtue of this repeal and substitution, security guards became eligible for membership in any labor organization; the Court used this to correct the NLRC’s reliance on the exclusion of security personnel.
• Article 228, Labor Code — Basis for compulsory arbitration after the parties failed to agree on a voluntary arbitrator; the BLR endorsed the petition to the Executive Labor Arbiter for compulsory arbitration.
• Article 246, Labor Code — Cited in support of the right to self-organization of service engineers and sales representatives.
• Section 8, Article III and Section 3, Article XIII, 1987 Constitution — Constitutional provisions on the right to form unions or associations and the right to self-organization; cited to support the holding that service engineers and sales representatives could not be forced into PEO-FFW.
• Article 223, Labor Code, as amended by R.A. No. 6715 — Finality of NLRC decisions; the Court required the parties to show cause why the petition should not be dismissed in view of this provision, but the decision ultimately gave due course to the petition and granted it without further discussion of finality.
• Section 1, Rule II, Book V, Omnibus Rules Implementing the Labor Code, as amended by Section 3 of the Implementing Rules of E.O. No. 111; paragraph (c), Section 2, Rule V, as amended by Section 6 of the Implementing Rules of E.O. No. 111 — The NLRC relied on these provisions to conclude that all workers except managerial employees and security personnel are qualified to join or be part of the bargaining unit; the Court found this interpretation erroneous in the context of inclusion in the existing rank-and-file bargaining unit.

Gutierrez, Feliciano, Bidin and Romero, JJ., concur.