Slord Development Corporation vs. Benerando M. Noya

A valid dismissal under a union security clause requires: (1) the union security clause is applicable; (2) the union is requesting enforcement of the union security provision in the CBA; and (3) there is sufficient evidence to support the union's decision to expel the employee from the union. When these requisites concur, the dismissal is valid for just cause, but the employer must still observe procedural due process consisting of the twin requirements of notice and hearing; failure to do so entitles the employee to nominal damages of ₱30,000.00.

Respondent Benerando M. Noya was employed as a welder by petitioner Slord Development Corporation, a domestic corporation engaged in the manufacturing and processing of sardines and other canned goods. His employment was covered by a Collective Bargaining Agreement (CBA) effective April 14, 2009 to April 15, 2014 between petitioner and Nagkakaisang Lakas ng Manggagawa-Katipunan (NLM-Katipunan), the company's sole and exclusive bargaining agent for all regular rank-and-file employees. The CBA contained a union security clause, specifically a closed shop agreement, requiring employees to join and maintain membership in good standing with NLM-Katipunan as a condition for continued employment.

Respondent Benerando M. Noya was employed on September 9, 2008 as a welder by petitioner Slord Development Corporation, a domestic corporation engaged in the manufacturing and processing of sardines and other canned goods. His employment was covered by a CBA effective April 14, 2009 to April 15, 2014 between petitioner and NLM-Katipunan, the company's sole and exclusive bargaining agent for all regular rank-and-file employees. Among its provisions was a union security clause containing a closed shop agreement, which provided that any union member who is expelled from the union or fails to maintain membership — including for organizing or joining another labor union, or for violation of the union's Constitution and By-Laws — shall, upon written demand to the company by the union, be dismissed from employment.

Petitioner claimed that sometime in December 2013, respondent asked several employees to affix their signatures on a blank sheet of yellow paper for the purpose of forming a new union, prompting the president of NLM-Katipunan to file expulsion proceedings against him for disloyalty. Subsequently, on February 9, 2014, respondent organized a new union named the Bantay Manggagawa sa SLORD Development Corporation (BMSDC), which he registered with the Department of Labor and Employment (DOLE) on February 20, 2014.

In the ensuing investigation, respondent failed to appear and participate at the scheduled hearings before the union. Thus, NLM-Katipunan resolved, with the ratification of its members, to expel respondent on the ground of disloyalty. A notice of expulsion dated February 27, 2014 was issued by NLM-Katipunan to respondent. Subsequently, a letter dated March 16, 2014 was sent by NLM-Katipunan to petitioner, demanding his termination from employment pursuant to the union security clause of the CBA. After notifying respondent of the union's decision to expel him and showing him all the documents attached to the union's demand for his dismissal, respondent's employment was terminated on March 19, 2014.

Consequently, respondent filed a complaint for illegal dismissal, unfair labor practice, and illegal deduction against petitioner before the NLRC, asserting that he did not violate any CBA provision since he validly organized BMSDC during the freedom period. The evidence presented to petitioner by NLM-Katipunan included: (a) a written statement of Elaine Rosel stating that respondent and one Henry Cabasa went to her house on December 13, 2013 to convince her to join in forming another union and made her sign on a yellow paper; (b) a joint written statement of Meliorita V. Nolla and Emilda S. Rubido corroborating Rosel's claim; (c) a written statement of Joselito Gonzales attesting to respondent's act of soliciting signatures for the purpose of forming a new union; (d) an affidavit of NLM-Katipunan President Lolita Abong further corroborating Gonzales' statement and formally lodging a complaint against respondent before the union; and (e) an application for registration of BMSDC showing that respondent formed and organized BMSDC on February 9, 2014.

• Just Cause for Dismissal: Petitioner argued that respondent's dismissal was valid because he committed an act of disloyalty by organizing a rival union outside the freedom period, which constituted a violation of the union security clause of the CBA, and the union's demand for his dismissal was supported by sufficient evidence.
• No Grave Abuse of Discretion: Petitioner maintained that the NLRC did not commit grave abuse of discretion in ruling that there existed just cause to validly terminate respondent's employment, as its decision was supported by substantial evidence and consistent with law and jurisprudence.
• Procedural Due Process: Petitioner conceded that it failed to observe the proper procedure in terminating respondent's employment, but maintained that this only warranted the payment of nominal damages, not a finding of illegal dismissal.

• No Violation of CBA: Respondent asserted that he did not violate any CBA provision since he validly organized BMSDC during the freedom period.
• Lack of Sufficient Evidence: Respondent argued that the act of soliciting signatures on a blank yellow paper was not prohibited under the Labor Code nor could it be automatically considered as an act of disloyalty, and that there was insufficient evidence to support the union's decision to expel him.
• Deprivation of Procedural Due Process: Respondent maintained that he was deprived of procedural due process, as he was not given ample opportunity to defend himself through written notices and subsequent hearing.

• Just Cause for Dismissal: Whether the Court of Appeals correctly ruled that respondent was illegally dismissed.
• Procedural Due Process: Whether petitioner observed the twin requirements of notice and hearing in terminating respondent's employment.

• Just Cause for Dismissal: No. The Court of Appeals erroneously ascribed grave abuse of discretion on the part of the NLRC, whose decision was supported by substantial evidence and consistent with law and jurisprudence. The three requisites for a valid dismissal under a union security clause concurred: the closed shop agreement was applicable, the union demanded enforcement, and there was sufficient evidence to support the union's decision to expel respondent.
• Procedural Due Process: No. Records failed to show that petitioner accorded respondent ample opportunity to defend himself through written notices and subsequent hearing. The dismissal was valid for just cause, but the employer was ordered to pay nominal damages, increased from ₱10,000.00 to ₱30,000.00 in line with existing jurisprudence.

• Just Cause for Dismissal: The Court examined the CA's decision from the prism of whether the latter had correctly determined the presence or absence of grave abuse of discretion in the NLRC's decision. In labor cases, grave abuse of discretion may be ascribed to the NLRC when its findings and conclusions are not supported by substantial evidence. The Court found that the NLRC's ruling had basis in the evidence and the applicable law and jurisprudence. Case law recognizes that dismissal from employment due to the enforcement of the union security clause in the CBA is another just cause for termination of employment, even though not explicitly mentioned in the Labor Code. The violation of a union security clause amounts to a commission of a wrongful act or omission out of one's own volition. The Court found the confluence of the three requisites for a valid dismissal under a union security clause: (1) the CBA contains a closed shop agreement stipulating that employees must join NLM-Katipunan and remain members in good standing; (2) NLM-Katipunan requested enforcement of the union security clause through a letter dated March 16, 2014 demanding respondent's dismissal; and (3) there was sufficient evidence to support the union's decision to expel respondent, including written statements from employees, an affidavit from the union president, and the application for registration of BMSDC. The Court distinguished the case from PICOP Resources, Incorporated vs. Taneca, noting that respondent did not only solicit support in the formation of a new union but actually formed and organized a rival union, BMSDC, outside the freedom period. Citing Tanduay Distillery Labor Union vs. NLRC, the Court ruled that the organization by union members of a rival union outside the freedom period, without first terminating their membership in the union and without the knowledge of the officers of the latter union, is considered an act of disloyalty for which the union members may be sanctioned. The requirement of union membership ceases to be binding only during the sixty-day freedom period immediately preceding the expiration of the CBA.
• Procedural Due Process: The Court applied the doctrine in Distribution & Control Products, Inc. vs. Santos, which explained that procedural due process consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written notices before termination: (1) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the employee of the employer's decision to dismiss him. The requirement of a hearing is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. Since records failed to show that petitioner accorded respondent ample opportunity to defend himself through written notices and subsequent hearing, respondent's right to procedural due process was violated, entitling him to nominal damages. The Court increased the award from ₱10,000.00 to ₱30,000.00 in line with existing jurisprudence, which holds that in cases involving dismissals for just cause but without observance of the twin requirements of notice and hearing, the validity of the dismissal shall be upheld, but the employer shall be ordered to pay nominal damages in the amount of ₱30,000.00.

• Union Security Clause — A stipulation in a CBA based on Article 259 (formerly 248), paragraph (e) of the Labor Code, commonly known as the "union security clause," is a generic term applied to and comprehends "closed shop," "union shop," "maintenance of membership," or any other form of agreement which imposes upon employees the obligation to acquire or retain union membership as a condition affecting employment. The Court applied this doctrine in upholding the validity of the closed shop agreement between petitioner and NLM-Katipunan, which required employees to join and remain members in good standing as a condition for continued employment.
• Requisites for Valid Dismissal Under a Union Security Clause — To validly terminate the employment of an employee through the enforcement of the union security clause, the following requisites must concur: (1) the union security clause is applicable; (2) the union is requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient evidence to support the decision of the union to expel the employee from the union. The Court found all three requisites present in this case.
• Act of Disloyalty — The organization by union members of a rival union outside the freedom period, without first terminating their membership in the union and without the knowledge of the officers of the latter union, is considered an act of disloyalty for which the union members may be sanctioned. As an act of loyalty, a union may require its members not to affiliate with any other labor union and to consider its infringement as a reasonable cause for separation, pursuant to the union security clause in its CBA. This requirement ceases to be binding only during the sixty-day freedom period immediately preceding the expiration of the CBA.
• Procedural Due Process in Dismissal Cases — Procedural due process consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the employee of the employer's decision to dismiss him. The requirement of a hearing is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. In cases involving dismissals for just cause but without observance of the twin requirements of notice and hearing, the validity of the dismissal shall be upheld, but the employer shall be ordered to pay nominal damages in the amount of ₱30,000.00.

• "Union security is a generic term which is applied to and comprehends 'closed shop,' 'union shop,' 'maintenance of membership' or any other form of agreement which imposes upon employees the obligation to acquire or retain union membership as a condition affecting employment." — This passage defines the concept of union security and its various forms, providing the doctrinal foundation for the Court's analysis of the closed shop agreement in this case.
• "To validly terminate the employment of an employee through the enforcement of the union security clause, the following requisites must concur: (1) the union security clause is applicable; (2) the union is requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient evidence to support the decision of the union to expel the employee from the union." — This is the canonical formulation of the three-part test for valid dismissal under a union security clause, which the Court applied to uphold the validity of respondent's termination.
• "It is settled that in cases involving dismissals for just cause but without observance of the twin requirements of notice and hearing, the validity of the dismissal shall be upheld, but the employer shall be ordered to pay nominal damages in the amount of ₱30,000.00." — This passage states the controlling rule on the effect of procedural due process violations in otherwise valid dismissals, justifying the Court's increase of the nominal damages award.

• BPI vs. BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank, 674 Phil. 609 (2011) — Cited as authority for the validity of closed shop agreements as a form of union security clause and as a valid restriction of the freedom not to join any labor organization in favor of unionism.
• PICOP Resources, Incorporated vs. Taneca, 641 Phil. 175 (2010) — Distinguished from the present case; in that case, the union members did not actually join or form another union but merely signed an authorization letter supporting the petition for certification election of another union, whereas respondent here actually formed and organized a rival union.
• Tanduay Distillery Labor Union vs. NLRC, 233 Phil. 488 (1987) — Followed as controlling precedent for the rule that the organization by union members of a rival union outside the freedom period, without first terminating their membership in the union and without the knowledge of the officers of the latter union, is considered an act of disloyalty for which the union members may be sanctioned.
• Distribution & Control Products, Inc. vs. Santos, G.R. No. 212616, July 10, 2017, 830 SCRA 452 — Cited as authority for the doctrine that procedural due process consists of the twin requirements of notice and hearing, and that the employer must furnish the employee with two written notices before termination.
• Ortiz vs. DHL Philippines Corporation, G.R. No. 183399, March 20, 2017, 821 SCRA 27 — Cited as authority for the rule that in cases involving dismissals for just cause but without observance of the twin requirements of notice and hearing, the employer shall be ordered to pay nominal damages in the amount of ₱30,000.00.
• General Milling Corporation vs. Casio, 629 Phil. 12 (2010) — Cited as authority for the requisites for valid dismissal under a union security clause and for the principle that a CBA is the law between the company and the union.
• Celebes Japan Foods Corporation vs. Yermo, 617 Phil. 626 (2009) — Cited for the principle that the violation of a union security clause amounts to a commission of a wrongful act or omission out of one's own volition.
• Quebral vs. Angbus Construction, Inc., 798 Phil. 179 (2016) — Cited for the definition of substantial evidence as that amount of relevant evidence that a reasonable mind might accept as adequate to justify a conclusion.

• Article 259 (formerly 248), paragraph (e), Labor Code — Provides that "[n]othing in this Code or in any other law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition for employment, except those employees who are already members of another union at the time of the signing of the collective bargaining agreement." This provision serves as the statutory basis for the validity of the union security clause in the CBA.
• Article 297 (formerly 282), Labor Code — The provision enumerating just causes for termination of employment; the Court noted that while dismissal due to enforcement of a union security clause is not explicitly mentioned in this provision, case law recognizes it as another just cause for termination.
• Rule 45, Rules of Civil Procedure — The procedural rule governing petitions for review on certiorari; the Court noted that only questions of law may be raised in and resolved by this Court on petitions brought under this rule.

Carpio, Senior Associate Justice (Chairperson), Caguioa, and Hernando, JJ., concurred. J. Reyes, Jr., J., was on official leave.