Santuyo vs. Remerco Garments Manufacturing, Inc.

A labor arbiter has no jurisdiction over cases arising from the interpretation or implementation of a collective bargaining agreement; such cases must be referred to the grievance machinery and, if unresolved within seven days, automatically referred to voluntary arbitration as provided in the CBA and the Labor Code. Additionally, where the Secretary of Labor has assumed jurisdiction over a labor dispute in an industry indispensable to the national interest and rendered a final order, that order binds all members of the bargaining unit represented by the union, barring subsequent individual complaints on the same matter.

Petitioners were sewers employed by respondent Remerco Garments Manufacturing, Inc. (RGMI), a garment manufacturer that exported one hundred percent of its products to the United States and Canada, holding a substantial export quota allocation and employing 305 workers. They were members of the Kaisahan ng Manggagawa sa Remerco Garments Manufacturing Inc.-KMM Kilusan (union), which was the collective bargaining agent of the bargaining unit and had an existing collective bargaining agreement (CBA) with RGMI. Following an illegal strike staged by the union from 1992 to 1994, union officers were dismissed and recalled employees were placed on a piece-rate basis instead of a daily rate, setting the stage for the subsequent dispute over the legality of that salary scheme change.

From 1992 to 1994, the Kaisahan ng Manggagawa sa Remerco Garments Manufacturing Inc.-KMM Kilusan (union) staged a strike against respondent Remerco Garments Manufacturing, Inc. (RGMI) arising from a serious industrial dispute. The strike was subsequently declared illegal, resulting in the dismissal of all union officers. Employees who wished to sever their employment received separation pay, while those who wished to resume work were recalled on the condition that they would no longer be paid a daily rate but on a piece-rate basis. Petitioners, who had been employed as sewers, were among those recalled.

Without allowing RGMI to normalize its operations, the union filed a notice of strike with the National Conciliation and Mediation Board (NCMB) on August 8, 1995, alleging that RGMI conducted a time and motion study and changed the salary scheme from a daily rate to a piece-rate basis without consulting the union, thereby violating the existing collective bargaining agreement (CBA) and diminishing the salaries agreed upon. RGMI responded by filing a notice of lockout with the NCMB on August 24, 1995. While conciliation proceedings were pending, RGMI transferred its factory site on November 11, 1995. Two days later, on November 13, 1995, the union went on strike and blocked entry to RGMI's new premises.

On November 21, 1995, the Secretary of Labor assumed jurisdiction pursuant to Article 263(g) of the Labor Code and ordered RGMI's striking workers to return to work immediately, directing both parties to submit position papers. The union denied going on strike or blocking entries and enumerated RGMI's alleged unfair labor practices, including the change in salary scheme, refusal to pay wages for three weeks, and transfer of the plant. RGMI insisted that its employees refused to obey the November 21, 1995 order and prayed that the strike be declared illegal and that all union officers and employees who refused to return be declared to have abandoned their employment.

After evaluating the parties' positions, the Secretary of Labor found that RGMI did not lock out its employees, as it had informed them of the worksite transfer, but he did not rule on the legality of the strike. Based on the time and motion study, the Secretary of Labor found that employees would receive higher wages on a piece-rate rather than a daily-rate basis, making the new scheme more advantageous. In his September 18, 1996 order, he ordered all employees to return to work and RGMI to pay unpaid salaries from September 25 to October 14, 1995 on the piece-rate basis. Neither the union nor RGMI appealed, rendering the order final and executory.

Meanwhile, on October 18, 1995, while conciliation proceedings were pending, petitioners filed a complaint for illegal dismissal against RGMI and Victoria Reyes, accusing the latter of harassment. They subsequently amended the complaint to demand payment of accrued salaries from September 25 to October 14, 1995, computed at the daily rate of ₱145 plus the CBA-decreed increase of ₱11 per day, as well as the monetary equivalent of withheld CBA benefits, namely a ₱200 Christmas package and ₱50 per person budget for the 1994 and 1995 Christmas party, and 17-day vacation leave in 1994 and 1995. A further amendment alleged that respondents suspended petitioners for questioning the piece-rate scheme. Respondents moved to dismiss, arguing that the complaint involved CBA implementation and should be resolved through the grievance procedure, and that the labor arbiter lacked jurisdiction due to the pending NCMB conciliation. The labor arbiter found in favor of petitioners on July 15, 1999, ordering payment of unpaid salaries at the daily rate with CBA increases, benefits, separation pay, and attorney's fees. The NLRC affirmed on appeal on March 19, 2004. The Court of Appeals reversed on April 27, 2006, holding that the labor arbiter had no jurisdiction over the complaint. Petitioners' motion for reconsideration was denied on August 9, 2006, prompting the present petition.

• Jurisdiction: Petitioners insisted that the labor arbiter had jurisdiction over the complaint inasmuch as it was filed as a complaint for illegal dismissal.
• Non-applicability of the Secretary of Labor's order: Petitioners claimed that the September 18, 1996 order of the Secretary of Labor was inapplicable to them, asserting that despite being members of the union, they were not among those who went on strike.

• Lack of jurisdiction: Respondents argued that the labor arbiter had no jurisdiction over the complaint because it involved the implementation of the CBA, which should be resolved according to the grievance procedure laid out therein.
• Pending conciliation proceedings: Respondents moved to dismiss the complaint in view of the pending conciliation proceedings in the NCMB, which involved the same issue, thus ousting the labor arbiter of jurisdiction.

• Jurisdiction over CBA disputes: Whether the labor arbiter had jurisdiction over the petitioners' complaint for illegal dismissal when the controversy实质上 involved the interpretation and implementation of the collective bargaining agreement.
• Applicability of the Secretary of Labor's order: Whether the September 18, 1996 order of the Secretary of Labor, which resolved the labor dispute between the union and RGMI, applies to the petitioners as members of the bargaining unit.

• Jurisdiction over CBA disputes: No. The labor arbiter had no jurisdiction because the controversy was a labor dispute involving the interpretation and implementation of the CBA, which under Articles 217(c), 260, and 261 of the Labor Code must be referred to the grievance machinery and voluntary arbitration.
• Applicability of the Secretary of Labor's order: Yes. The September 18, 1996 order of the Secretary of Labor applies to the petitioners as members of the bargaining unit represented by the union, and the order had become final and executory, barring the complaint under the principle of conclusiveness of judgments.

• Jurisdiction over CBA disputes: Petitioners clearly and consistently questioned the legality of RGMI's adoption of the piece-rate salary scheme, asserting that it violated the existing CBA. The controversy was therefore not a simple case of illegal dismissal but a labor dispute under Article 212(l) of the Labor Code, involving the manner of ascertaining employees' salaries—a matter governed by the CBA. Article 217(c) of the Labor Code requires labor arbiters to refer cases involving the implementation of CBAs to the grievance machinery and voluntary arbitration as provided in said agreements. Article 260 further clarifies that such disputes must first be referred to the grievance machinery and, if unresolved within seven calendar days, automatically referred to voluntary arbitration. Article 261 grants voluntary arbitrators original and exclusive jurisdiction over unresolved grievances arising from the interpretation or implementation of the CBA. Accordingly, the labor arbiter should have referred the matter to the grievance machinery provided in the CBA; because he lacked jurisdiction, his decision was void.

• Applicability of the Secretary of Labor's order: Article 263(g) of the Labor Code gives the Secretary of Labor discretion to assume jurisdiction over a labor dispute likely to cause a strike or lockout in an industry indispensable to the national interest and to decide the controversy or refer it to the NLRC for compulsory arbitration. The Secretary of Labor assumed jurisdiction because RGMI had 305 employees and was a major exporter of garments to the United States and Canada, contributing substantial foreign exchange to the economy. In doing so, the Secretary's power is plenary and discretionary, enabling him to resolve all questions and controversies to settle the dispute. His September 18, 1996 order resolved the labor dispute between the union and RGMI, and since neither party appealed, it became final and executory. Unions are the agents of their members for the purpose of securing just and fair wages and good working conditions; since petitioners were part of the bargaining unit represented by the union, the order applies to them. Furthermore, because the union was the bargaining agent of petitioners, the complaint was barred under the principle of conclusiveness of judgments, as parties are bound by findings in a previous judgment with respect to matters actually raised and adjudged. The labor arbiter should have dismissed the complaint on the ground of res judicata.

• Jurisdiction over CBA interpretation and implementation disputes — Under Articles 217(c), 260, and 261 of the Labor Code, labor arbiters must refer cases arising from the interpretation or implementation of collective bargaining agreements to the grievance machinery provided in the CBA, and if unresolved within seven calendar days, the dispute automatically goes to voluntary arbitration. Voluntary arbitrators have original and exclusive jurisdiction over such unresolved grievances. Violations of a CBA, except those gross in character (flagrant and/or malicious refusal to comply with economic provisions), shall no longer be treated as unfair labor practice but as grievances under the CBA. In this case, the labor arbiter's failure to refer the complaint to the grievance machinery rendered his decision void for lack of jurisdiction.

• Assumption of jurisdiction by the Secretary of Labor — Under Article 263(g) of the Labor Code, the Secretary of Labor may assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest. The Secretary's power is plenary and discretionary, enabling him to resolve all questions and controversies to settle the dispute effectively. In this case, the Secretary assumed jurisdiction because RGMI was a major garment exporter with 305 workers, contributing substantial foreign exchange. His September 18, 1996 order, unappealed by either party, became final and executory.

• Union as agent of its members — Unions are the agent of their members for the purpose of securing just and fair wages and good working conditions. As members of the bargaining unit represented by the union, petitioners are bound by the Secretary of Labor's order resolving the labor dispute between the union and RGMI.

• Conclusiveness of judgments (res judicata) — The parties to a case are bound by the findings in a previous judgment with respect to matters actually raised and adjudged therein. Since the union was the bargaining agent of petitioners, the complaint before the labor arbiter was barred by the prior final order of the Secretary of Labor.

• "This provision requires labor arbiters to refer cases involving the implementation of CBAs to the grievance machinery provided therein and to voluntary arbitration." — This passage states the ratio decidendi on jurisdiction: that the Labor Code mandates referral of CBA implementation disputes to grievance machinery and voluntary arbitration, divesting labor arbiters of jurisdiction.

• "His power is therefore plenary and discretionary in nature to enable him to effectively and efficiently dispose of the issue." — This defines the scope of the Secretary of Labor's authority under Article 263(g), emphasizing the breadth of power necessary to resolve labor disputes in industries indispensable to the national interest.

• "Settled is the rule that unions are the agent of its members for the purpose of securing just and fair wages and good working conditions." — This canonical formulation of the union-as-agent doctrine explains why the Secretary of Labor's order binds individual members of the bargaining unit, including those who claim not to have participated in the strike.

• Silva vs. National Labor Relations Commission, G.R. No. 110226, June 19, 1997, 274 SCRA 159 — Cited by the Court of Appeals in support of its ruling that the labor arbiter had no jurisdiction over the complaint involving CBA implementation; followed by the Supreme Court.

• Steel Corporation of the Philippines vs. SCP Employees Union-National Federation of Labor Unions, G.R. No. 169829-30, April 16, 2008, 551 SCRA 594 — Cited for the proposition that Article 263(g) gives the Secretary of Labor discretion to assume jurisdiction over labor disputes in industries indispensable to the national interest.

• Philcom Employees Union vs. Philippine Global Communications, G.R. No. 144315, July 17, 2006, 495 SCRA 214 — Cited for the principle that the Secretary of Labor's power under Article 263(g) is plenary and discretionary in nature.

• Heirs of Teodolo Cruz vs. Court of Industrial Relations, G.R. Nos. L-23331-32 and L-23361-62, December 27, 1969, 30 SCRA 917 — Cited for the doctrine that unions are the agent of their members for the purpose of securing just and fair wages and good working conditions.

• Philippine Commercial International Bank vs. Alejandro, G.R. No. 175587, September 21, 2007, 533 SCRA 738 — Cited for the principle of conclusiveness of judgments—that parties are bound by findings in a previous judgment with respect to matters actually raised and adjudged.

• Article 217(c), Labor Code — Provides that cases arising from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the labor arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements. Applied to hold that the labor arbiter should have referred the complaint to the CBA's grievance machinery rather than adjudicating it himself.

• Article 260, Labor Code — Provides that all grievances submitted to the grievance machinery which are not settled within seven calendar days from submission shall automatically be referred to voluntary arbitration prescribed in the CBA. Applied to establish the mandatory referral process for CBA disputes.

• Article 261, Labor Code — Grants voluntary arbitrators original and exclusive jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the CBA. Applied to confirm that voluntary arbitrators, not labor arbiters, have jurisdiction over such disputes.

• Article 263(g), Labor Code — Authorizes the Secretary of Labor to assume jurisdiction over labor disputes causing or likely to cause a strike or lockout in an industry indispensable to the national interest and to decide the controversy or certify it to the NLRC for compulsory arbitration. Applied to validate the Secretary of Labor's assumption of jurisdiction over the RGMI labor dispute and his September 18, 1996 order.

• Article 212(l), Labor Code — Defines "labor dispute" as including any controversy or matter concerning terms or conditions of employment. Applied to characterize the controversy over the salary scheme change as a labor dispute rather than a simple illegal dismissal case.

Velasco, Jr., P.J.; Nachura, J.; Peralta, J.; Mendoza, J. — all concurred in the decision without separate opinions.