San Miguel Corporation vs. NLRC

A union cannot legally declare a strike on grounds involving alleged violations of a Collective Bargaining Agreement or bargaining deadlock without first exhausting the mandatory grievance machinery and arbitration procedure contractually agreed upon; failure to strictly comply with the step-by-step grievance procedure renders the strike illegal, and labor tribunals have the positive duty to compel adherence to these contractual mechanisms.

In July 1990, San Miguel Corporation implemented a streamlining program due to financial losses, shutting down several plants and declaring 55 positions redundant across three divisions. The San Miguel Corporation Employees Union (SMCEU) filed grievances seeking redeployment of the affected employees pursuant to the grievance procedure outlined in the parties' 1990 Collective Bargaining Agreement. While most employees were eventually redeployed or accepted early retirement, a deadlock was declared regarding the remaining 17 employees, leading the union to file a notice of strike on grounds including bargaining deadlock and CBA violations.

• In July 1990, San Miguel Corporation shut down several plants and declared 55 positions redundant—seventeen in the Business Logistics Division, seventeen in the Ayala Operations Center, and eighteen in the Magnolia-Manila Buying Station—allegedly due to financial losses and the need to streamline operations.
• The private respondent union filed grievance cases for the retrenched employees, praying for their redeployment to other divisions, pursuant to Sections 5 and 8, Article VIII of the parties' 1990 Collective Bargaining Agreement which provided for a three-step grievance procedure culminating in a Conciliation Board (Step 3) and subsequent arbitration.
• During the grievance proceedings, most employees were either redeployed or accepted early retirement, leaving only seventeen employees remaining when the parties reached Step 3 of the grievance procedure.
• On October 26, 1990, SMC informed the union that if the remaining seventeen employees could not be redeployed by October 30, 1990, their services would be terminated on November 2, 1990; the meeting adjourned when the union representative declared a deadlock, stating there was nothing more to discuss.
• On November 7, 1990, the union filed a notice of strike with the National Conciliation and Mediation Board citing: (a) bargaining deadlock; (b) union busting; (c) gross violation of the CBA including non-compliance with the grievance procedure; (d) failure to provide a list of vacant positions; and (e) defiance of voluntary arbitration award.
• SMC moved to dismiss the notice of strike, but the NCMB failed to act on the motion, prompting SMC to file a complaint with the NLRC.

• The NLRC has a positive legal duty to compel arbitration and to enjoin a strike that violates the no-strike clause of the Collective Bargaining Agreement.
• Injunction is the only immediate and effective substitute for the disastrous economic warfare that arbitration is designed to avoid.
• The union failed to exhaust the mandatory grievance procedure under the CBA, specifically by abandoning the process at Step 3 (Conciliation Board) and refusing to proceed to arbitration before declaring a strike.
• The grounds cited for the strike—bargaining deadlock and CBA violations—are non-strikeable under Rule XXII, Section 1 of the IRR of Book V of the Labor Code.
• The union, not the company, violated the mandatory provisions of the CBA by abandoning the grievance proceedings.

• The union maintained that a genuine bargaining deadlock existed between the parties, justifying the notice of strike as the appropriate remedy.
• The union alleged that SMC committed gross violations of the CBA, including non-compliance with the grievance procedure and failure to provide a list of vacant positions as required by a side agreement appended to the 1990 CBA.
• The union claimed that SMC's actions constituted union busting and defiance of voluntary arbitration awards, which allegedly justified the strike.

• Procedural: Whether the National Labor Relations Commission committed grave abuse of discretion in dismissing the petitioner's complaint for lack of merit.
• Substantive Issues:
  • Whether the grounds cited in the notice of strike—bargaining deadlock and alleged violations of the Collective Bargaining Agreement—constitute valid and strikeable grounds under the Labor Code.
  • Whether the union exhausted the mandatory grievance procedure under the CBA before declaring a strike.
  • Whether the union violated the no-strike clause and mandatory grievance procedure provisions of the CBA.

• Procedural: The NLRC gravely abused its discretion in dismissing the complaint. The dismissal was contrary to law and the evidence establishing that the grounds for strike were non-strikeable and that the union failed to comply with the mandatory grievance procedure under the CBA.
• Substantive:
  • The grounds relied upon by the union—bargaining deadlock and CBA violations—are non-strikeable under Rule XXII, Section 1 of the IRR of Book V of the Labor Code, which provides that violations of CBA provisions, except flagrant and/or malicious refusal to comply with economic provisions, are not unfair labor practices and shall not be strikeable.
  • No actual bargaining deadlock existed because the Conciliation Board at Step 3 of the grievance machinery was still available to resolve the conflicting views of the parties; the union prematurely declared a deadlock without exhausting the grievance procedure.
  • The union violated the mandatory provisions of the CBA by abandoning the grievance proceedings and refusing to avail of the remedies under the agreement; the CBA's no-strike clause and grievance procedure must be strictly adhered to.
  • The parties are directed to complete the third level (Step 3) of the Grievance Procedure and proceed with Arbitration proceedings if necessary.

• Exhaustion of Contractual Grievance Procedure — Parties to a collective bargaining agreement are strictly bound to comply with the step-by-step grievance machinery established therein; the procedure must be followed in its entirety to achieve its objective of preventing strikes and peacefully settling disputes. A strike declared in violation of the mandatory grievance procedure is illegal.
• Non-Strikeable Issues under the Labor Code — Violations of collective bargaining agreements, except for flagrant and/or malicious refusal to comply with economic provisions, do not constitute unfair labor practice and are not valid grounds for strike; similarly, issues brought to voluntary or compulsory arbitration cannot be the basis for a strike or lockout.
• Management Prerogative to Reorganize — The abolition of departments or positions due to redundancy is a valid exercise of management prerogative, presumed to be in good faith absent proof of ill motive or anti-union animus.

• "the main purpose of the parties in adopting a procedure in the settlement of their disputes is to prevent a strike. This procedure must be followed in its entirety if it is to achieve its objective."
• "strikes held in violation of the terms contained in the collective bargaining agreement are illegal, specially when they provide for conclusive arbitration clauses. These agreements must be strictly adhered to and respected if their ends have to be achieved."

• Liberal Labor Union vs. Philippine Can Company, 91 Phil. 72 — Cited as controlling precedent establishing that strikes held in violation of the mandatory grievance procedure provided in the CBA are illegal, and that such procedures must be followed in their entirety to achieve the objective of preventing strikes.
• Dangan vs. NLRC, 127 SCRA 706 — Cited to support the principle that the abolition of departments or positions is a recognized management prerogative.

• Rule XXII, Section 1 of the Rules and Regulations Implementing Book V of the Labor Code — Provides that violations of collective bargaining agreements, except flagrant and/or malicious refusal to comply with economic provisions, are not unfair labor practices and shall not be strikeable; also prohibits strikes on issues brought to voluntary or compulsory arbitration.
• Sections 5 and 8, Article VIII of the 1990 Collective Bargaining Agreement — Establish the mandatory step-by-step grievance procedure (Steps 1 through 3) and the submission to arbitration clause that must be exhausted before any strike may be declared.