San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union-PTWGO

A violation of a collective bargaining agreement constitutes unfair labor practice cognizable by the Labor Arbiter only when it is gross in character and pertains to the economic provisions of the CBA; the seniority rule in promotions, having a bearing on salary and benefits, may be considered an economic provision under a liberal construction of Article 261 of the Labor Code.

At the time material to the case, respondent San Miguel Corporation Employees Union – PTWGO (the Union) was the sole bargaining agent of all the monthly paid employees of petitioner San Miguel Foods, Incorporated (SMFI). The parties had forged a Collective Bargaining Agreement (CBA) that included, among others, provisions on Job Security (Article III, Section 5), Grievance Machinery (Article VIII, Section 4), and a multi-step grievance procedure for resolving disputes between management and labor.

On November 9, 1992, some employees of SMFI's Finance Department, through the Union represented by Edgar Moraleda, brought a grievance against Finance Manager Gideon Montesa before SMFI Plant Operations Manager George Nava, pursuant to Step 1 of the grievance machinery under the CBA. The grievance charged Montesa with "discrimination, favoritism, unfair labor practices, not flexible, harassment, promoting divisiveness and sectarianism, etc." The Union sought the review, evaluation, and upgrading of all Finance staff, as well as the promotion of Montesa to other SMC affiliates and subsidiaries.

At the grievance meeting held on January 14, 1993, SMFI informed the Union that it planned to address the grievance through a "work management review" to be completed by March 1993 and asked the finance personnel for their cooperation. The review was not completed by March 1993, prompting the Union to elevate the grievance to Step 2 on March 26, 1993. Almost nine months later, on October 6, 1993, SMFI rendered a "Decision on Step 1 Grievance" stating that it was still in the process of completing the work management review and that the Union's requests could not be granted.

On October 20, 1993, the Union filed a complaint before the NLRC Arbitration Branch against SMFI, its President Amadeo P. Veloso, and Finance Manager Montesa, charging them with unfair labor practice and unjust discrimination in matters of promotion. The complaint prayed that SMFI be ordered to promote the named employees with corresponding pay increases or adjustments, including payment of salary differentials and attorney's fees, and to cease and desist from further discrimination. Instead of filing a position paper as required by the Labor Arbiter, SMFI filed a motion to dismiss, contending that the issues raised were grievance issues that should be resolved through the grievance machinery or voluntary arbitration provided in the CBA. The Union opposed the motion.

The Labor Arbiter, by Order of February 18, 1994, granted the motion to dismiss and remanded the case to the grievance machinery. The Union appealed to the NLRC, which granted the appeal and ordered the Labor Arbiter to continue proceedings. SMFI's motion for reconsideration was denied, leading it to file a petition for certiorari with the Supreme Court, which was referred to the Court of Appeals pursuant to St. Martin Funeral Homes vs. NLRC. The Court of Appeals, by Decision of July 31, 2002, denied the petition, holding that the Labor Arbiter has jurisdiction over the complaint because SMFI's violation of the seniority rule under the CBA amounted to ULP. SMFI thereafter lodged the present petition for review on certiorari before the Supreme Court.

• Insufficiency of Allegations: Petitioner argued that the allegations in the Union's complaint did not establish a cause of action for ULP, the Union having merely contended that SMFI was guilty thereof without specifying the ultimate facts upon which the charge was based. SMFI cited Section 1 of Rule 8 of the Rules of Court, requiring every pleading to contain a plain, concise, and direct statement of the ultimate facts, as applying suppletorily to proceedings before the Labor Arbiter.
• Grievance Machinery as Proper Forum: Petitioner contended that the issues raised in the complaint were grievance issues that should be resolved through the grievance machinery provided in the CBA or through voluntary arbitration, also provided in the CBA, rather than before the Labor Arbiter.
• Scope of Appellate Review: Petitioner questioned why the Court of Appeals made findings on SMFI's disregard of the seniority rule under the CBA when the petition before that court merely raised a question of jurisdiction.

• ULP Under Article 248(e) and (i): Respondent alleged in its Position Paper that SMFI committed large scale and wanton unjust discrimination in matters of promotion against named Finance Department employees, constituting ULP under Article 248(e) of the Labor Code, and gross and blatant violations of the CBA's Job Security and Grievance Machinery provisions, constituting ULP under Article 248(i).
• Violation of Seniority Rule: Respondent charged that SMFI appointed less senior employees to positions in the Finance Department, intentionally bypassing more senior employees who were deserving of said appointments, in violation of the seniority rule under the CBA.

• Jurisdiction of Labor Arbiter: Whether the Labor Arbiter has jurisdiction over the Union's complaint for unfair labor practice.
• ULP Under Article 248(e): Whether SMFI's questioned promotions constitute unfair labor practice under Article 248(e) of the Labor Code.
• ULP Under Article 248(i): Whether SMFI's alleged violation of the CBA constitutes unfair labor practice under Article 248(i) of the Labor Code.

• Jurisdiction of Labor Arbiter: Yes. The Labor Arbiter has jurisdiction, the Union's position paper having alleged a gross violation of the seniority rule under the CBA's Job Security provision, which bears on salary and benefits and may be considered an economic provision under Article 261 of the Labor Code.
• ULP Under Article 248(e): No. The questioned promotions do not amount to ULP under Article 248(e) because those promoted were themselves members of the complaining Union, negating any intent to encourage or discourage union membership.
• ULP Under Article 248(i): Yes, in part. While violation of the grievance machinery provision is not ULP because it is not an economic provision, the gross violation of the seniority rule under the Job Security provision qualifies as ULP cognizable by the Labor Arbiter, the seniority rule bearing on salary and benefits.

• Jurisdiction of Labor Arbiter: The jurisdiction of Labor Arbiters, enumerated in Article 217 of the Labor Code, includes complaints for ULP. SMFI argued that the Union's complaint failed to specify the ultimate facts constituting ULP, invoking Section 1 of Rule 8 of the Rules of Court. While the complaint itself indeed did not specify the particular acts of ULP or the ultimate facts in support thereof, the Union's Position Paper detailed those acts and facts. Section 7, Rule V of the New Rules of Procedure of the NLRC provides that proceedings before the Labor Arbiter shall be non-litigious in nature and that the technicalities of law and procedure and the rules obtaining in courts of law shall not strictly apply. Accordingly, Section 1 of Rule 8 of the Rules of Court should not be strictly applied, and allegations in both the complaint and the position paper may be considered in determining jurisdiction.

• ULP Under Article 248(e): Article 248(e) of the Labor Code prohibits discrimination in regard to wages, hours of work, and other terms and conditions of employment in order to encourage or discourage membership in any labor organization. The Union did not allege that the questioned promotions were made to encourage or discourage union membership. In fact, those promoted were members of the complaining Union. The promotions therefore do not amount to ULP under Article 248(e).

• ULP Under Article 248(i): Article 248(i) makes it unlawful for an employer to violate a collective bargaining agreement. This provision is qualified by Article 261, which provides that violations of a CBA, except those which are gross in character, shall no longer be treated as ULP and shall be resolved as grievances under the CBA. Gross violations of a CBA mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement. Pursuant to Silva vs. NLRC, for a ULP case to be cognizable by the Labor Arbiter, the allegations must show prima facie the concurrence of two things: (1) gross violation of the CBA, and (2) the violation pertains to the economic provisions of the CBA. The Union charged SMFI with violating both the grievance machinery provision and the Job Security provision of the CBA. The grievance machinery provision is not an economic provision, failing the second requirement. However, the Union also charged SMFI with violating the seniority rule under the Job Security provision by appointing less senior employees and bypassing more senior, equally or more qualified employees. Since the seniority rule in promotion bears on salary and benefits, it may, following a liberal construction of Article 261 pursuant to Article 4 of the Labor Code (all doubts resolved in favor of labor), be considered an economic provision. The charge of bypassing more senior employees constitutes a gross or flagrant violation, satisfying both requirements for Labor Arbiter jurisdiction.

• Two-Concurrence Test for ULP Based on CBA Violation (Silva vs. NLRC) — For a ULP case predicated on violation of a CBA to be cognizable by the Labor Arbiter, the allegations must show prima facie the concurrence of two elements: (1) gross violation of the CBA, meaning flagrant and/or malicious refusal to comply with its economic provisions; and (2) the violation pertains to the economic provisions of the CBA. In this case, the Court found both elements present with respect to the seniority rule under the Job Security provision, which bears on salary and benefits and was thus treated as an economic provision under a liberal construction of Article 261.
• Non-Litigious Nature of Labor Arbiter Proceedings — Proceedings before the Labor Arbiter are non-litigious in nature, and the technicalities of law and procedure and the rules obtaining in courts of law shall not strictly apply. Accordingly, the formal pleading requirements of Section 1, Rule 8 of the Rules of Court are not strictly enforced; allegations in both the complaint and the position paper may be considered in determining jurisdiction.
• Liberal Construction in Favor of Labor (Article 4, Labor Code) — All doubts in the implementation and interpretation of the Labor Code shall be resolved in favor of labor. The Court applied this principle to construe the seniority rule — which has a bearing on salary and benefits — as an "economic provision" of the CBA within the meaning of Article 261, thereby bringing the gross violation thereof within the jurisdiction of the Labor Arbiter as a ULP.

• "Section 1 of Rule 8 of the Rules of Court should thus not be strictly applied to a case filed before a Labor Arbiter. In determining jurisdiction over a case, allegations made in the complaint, as well as those in the position paper, may thus be considered." — This passage establishes the doctrinal basis for looking beyond the complaint to the position paper when determining Labor Arbiter jurisdiction, grounded in the non-litigious nature of labor proceedings.

• "Since the seniority rule in the promotion of employees has a bearing on salary and benefits, it may, following a liberal construction of Article 261 of the Labor Code, be considered an 'economic provision' of the CBA." — This is the ratio decidendi on the jurisdictional question: the Court's application of Article 4's pro-labor presumption to expand the concept of "economic provisions" under Article 261 to include the seniority rule.

• "It may not be seriously disputed that this charge is a gross or flagrant violation of the seniority rule under the CBA, a ULP over which the Labor Arbiter has jurisdiction." — This sentence crystallizes the Court's conclusion that both requisites under Silva vs. NLRC are satisfied, conferring jurisdiction on the Labor Arbiter.

• St. Martin Funeral Homes vs. NLRC, G.R. No. 130866, September 16, 1998, 295 SCRA 494 — Controlling procedural precedent. The Court En Banc declared that all appeals from the NLRC to the Supreme Court via petition for certiorari under Rule 65 should henceforth be initially filed in the Court of Appeals. Pursuant to this ruling, the Supreme Court referred SMFI's petition to the Court of Appeals.
• Silva vs. NLRC, G.R. No. 110226, June 19, 1997, 274 SCRA 159 — Controlling substantive precedent. The Court applied the two-concurrence test articulated therein: for a ULP case based on CBA violation to be cognizable by the Labor Arbiter, the allegations must show prima facie both a gross violation of the CBA and that the violation pertains to the economic provisions of the CBA.

• Article 217, Labor Code — Enumerates the jurisdiction of Labor Arbiters, which includes complaints for unfair labor practice. The Court cited this provision to confirm that ULP complaints fall within the Labor Arbiter's original jurisdiction.
• Article 248(e), Labor Code — Prohibits employers from discriminating in regard to wages, hours of work, and other terms and conditions of employment in order to encourage or discourage membership in any labor organization. The Court found this provision inapplicable because those promoted were members of the complaining Union, negating any anti-union motive.
• Article 248(i), Labor Code — Prohibits employers from violating a collective bargaining agreement. The Court applied this provision as qualified by Article 261, limiting ULP treatment to gross violations of the economic provisions of the CBA.
• Article 261, Labor Code — Provides that violations of a CBA, except those gross in character, shall no longer be treated as ULP and shall be resolved as grievances under the CBA; defines gross violations as flagrant and/or malicious refusal to comply with the economic provisions of the agreement. The Court applied this provision to determine which CBA violations qualify as ULP cognizable by the Labor Arbiter.
• Article 4, Labor Code — Provides that all doubts in the implementation and interpretation of the Labor Code shall be resolved in favor of labor. The Court relied on this provision to justify a liberal construction of Article 261, treating the seniority rule as an economic provision.
• Section 1, Rule 8, Rules of Court — Requires every pleading to contain a plain, concise, and direct statement of the ultimate facts. The Court held that this provision should not be strictly applied to proceedings before the Labor Arbiter.
• Section 7, Rule V, New Rules of Procedure of the NLRC — Provides that proceedings before the Labor Arbiter shall be non-litigious in nature and that technicalities of law and procedure shall not strictly apply. The Court invoked this provision to justify considering the position paper in determining jurisdiction.

Quisumbing, Carpio, Tinga, and Velasco, Jr., JJ., concurred.