UFE-DFA-KMU vs. Nestlé Philippines, Inc.

An employer's adamant insistence on excluding a specific benefit from collective bargaining negotiations, to the point of impasse, does not constitute unfair labor practice or bad faith, as the statutory duty to bargain does not compel a party to agree to a proposal or make a concession.

UFE-DFA-KMU, the exclusive bargaining agent for rank-and-file employees of Nestlé's Cabuyao plant, sought to negotiate a new collective bargaining agreement (CBA). Nestlé responded with counter-proposals and ground rules, explicitly stating that unilateral grants—including the Retirement Plan—were not proper subjects for CBA negotiations and should be excluded. The Union viewed this exclusion as a precondition to bargaining and filed notices of strike citing both a bargaining deadlock on economic issues and unfair labor practice for bad faith. To avert the impending strike, the Secretary of Labor assumed jurisdiction over the dispute.

• CBA Negotiations and Impasse: On 4 April 2001, UFE-DFA-KMU informed Nestlé of its intent to open CBA negotiations. Nestlé responded with counter-proposals and ground rules. On 29 May 2001, Nestlé informed the Union that unilateral grants, including the Retirement Plan, Incidental Straight Duty Pay, and Calling Pay Premium, were by nature not proper subjects of CBA negotiations and should be excluded.
• Strike Notices: After fifteen unsuccessful meetings, the Union filed a Notice of Strike on 31 October 2001 citing a bargaining deadlock on economic issues (retirement, panel composition, costs and attendance, CBA). A second Notice of Strike was filed on 7 November 2001 citing unfair labor practice, specifically bargaining in bad faith by setting a precondition on the ground rules regarding the Retirement Plan.
• Assumption of Jurisdiction: On 26 November 2001, Nestlé filed a Petition for Assumption of Jurisdiction with the DOLE. Secretary Sto. Tomas assumed jurisdiction on 29 November 2001. Despite a Return-to-Work Order issued on 16 January 2002, the Union continued the strike.
• DOLE Secretary's Rulings: Acting Secretary Brion issued an Order on 2 April 2002 declaring the Retirement Plan a unilateral grant and not a mandatory bargaining subject, dismissing the ULP charge, and directing the adoption of CBA terms from other Nestlé bargaining units.
• Appellate Court Ruling: The Court of Appeals annulled the DOLE Secretary's Orders and directed the resumption of CBA negotiations. Both parties elevated the case to the Supreme Court via separate Petitions for Review on Certiorari, which were consolidated.

• Unfair Labor Practice (UFE-DFA-KMU): Petitioner argued that Nestlé committed unfair labor practice by setting a precondition to bargaining—specifically, demanding the exclusion of the Retirement Plan before discussing other issues. Petitioner invoked res ipsa loquitor, claiming the transaction speaks for itself.
• Scope of Assumption of Jurisdiction (UFE-DFA-KMU): Petitioner maintained that the DOLE Secretary could only assume jurisdiction over the issues mentioned in the Notice of Strike, which it claimed was limited to the ground rules of the CBA negotiations.
• Clarification on Remand (Nestlé): Petitioner sought clarification of the Court's directive to "resume negotiations respecting the Retirement Plan," arguing that because the DOLE Secretary had already assumed jurisdiction over the entire CBA controversy, the parties should not be left to negotiate the issue by themselves.

• Against ULP (Nestlé): Respondent countered that its insistence on excluding the Retirement Plan was a legitimate bargaining position based on the benefit's nature as a unilateral grant, not an act of bad faith or a refusal to bargain. The duty to bargain does not compel agreement.
• Against Limitation of Jurisdiction (Nestlé): Respondent argued against limiting the DOLE Secretary's assumption of jurisdiction, asserting that the dispute encompassed substantive economic issues beyond mere ground rules, as evidenced by the Union's own first Notice of Strike.

• Unfair Labor Practice: Whether Nestlé committed unfair labor practice by setting a precondition to collective bargaining negotiations when it insisted on excluding the Retirement Plan.
• Scope of Assumption of Jurisdiction: Whether the Secretary of Labor's assumption of jurisdiction was limited to the ground rules of the CBA negotiations.
• Proper Forum for Resolution: Whether the issue of the Retirement Plan should be resolved through voluntary negotiations by the parties or remanded to the Secretary of Labor for compulsory arbitration.

• Unfair Labor Practice: No unfair labor practice was committed. The duty to bargain collectively does not compel either party to agree to a proposal or make a concession. An employer's steadfast insistence on excluding a particular substantive provision from the CBA, to the point of impasse, does not establish bad faith. Nestlé's position that the Retirement Plan was a unilateral grant was a legitimate bargaining stance, and its active participation in conciliation and submission of proposals on other CBA matters negated any refusal to bargain.
• Scope of Assumption of Jurisdiction: The Secretary of Labor properly assumed jurisdiction over substantive economic issues beyond the ground rules. The first Notice of Strike explicitly cited a bargaining deadlock on economic issues, including retirement benefits. The Secretary's authority under Article 263(g) of the Labor Code includes the power to decide all questions incidental to the labor dispute, not merely those specified in the notice.
• Proper Forum for Resolution: The issue of the Retirement Plan was remanded to the Secretary of Labor for proper disposition. Because the Secretary had already assumed jurisdiction over the labor dispute, the parties cannot be directed to resolve the issue through voluntary negotiation; compulsory arbitration by the Secretary is the mandated mechanism.

• Duty to Bargain Collectively — Defined under Articles 252 and 253 of the Labor Code, the duty to bargain means the mutual obligation to meet and convene in good faith. However, it does not compel any party to agree to a proposal or make a concession. The failure to reach an agreement after reasonable negotiations does not establish a lack of good faith. An adamant insistence on a bargaining position to the point of impasse does not constitute bad faith or unfair labor practice.
• Assumption of Jurisdiction by the Secretary of Labor — Under Article 263(g) of the Labor Code, the Secretary is explicitly granted the authority to assume jurisdiction over a labor dispute causing or likely to cause a strike in an industry indispensable to national interest, and decide the same accordingly. This power necessarily includes questions incidental to the labor dispute, encompassing issues necessarily involved in the dispute itself, and not just those ascribed in the Notice of Strike.

• "Obviously, the purpose of collective bargaining is the reaching of an agreement resulting in a contract binding on the parties; but the failure to reach an agreement after negotiations have continued for a reasonable period does not establish a lack of good faith. The statutes invite and contemplate a collective bargaining contract, but they do not compel one. The duty to bargain does not include the obligation to reach an agreement."
• "An employer’s steadfast insistence to exclude a particular substantive provision is no different from a bargaining representative’s perseverance to include one that they deem of absolute necessity. Indeed, an adamant insistence on a bargaining position to the point where the negotiations reach an impasse does not establish bad faith."

• Nestlé, Phils. Inc. vs. NLRC, G.R. No. 90231, February 4, 1991 — Cited as the controlling precedent establishing that the present Retirement Plan at the Nestlé Cabuyao Plant was a unilateral grant.
• Tiu v. National Labor Relations Commission, G.R. No. 123276, 18 August 1997 — Followed for the proposition that bare allegations of unfair labor practice, without substantial evidence, are insufficient to warrant a finding of ULP.
• Capitol Medical Center, Inc. v. Meris, G.R. No. 155098, 16 September 2005 — Followed regarding management prerogatives and the presumption of good faith in the exercise thereof.
• Hongkong Shanghai Banking Corporation Employees Union v. National Labor Relations Commission, G.R. No. 125038, 6 November 1997 — Followed for the principle that there is no per se test of good faith in bargaining; it is an inference drawn from the facts.

• Article 252, Labor Code — Defines the meaning of the duty to bargain collectively, emphasizing that it does not compel any party to agree to a proposal or make a concession.
• Article 253, Labor Code — Prescribes the duty to bargain when a CBA exists, requiring parties to keep the status quo and continue terms until a new agreement is reached.
• Article 247, Labor Code — Defines the concept of unfair labor practice as violating the constitutional right to self-organization and disrupting industrial peace.
• Article 248(g), Labor Code — Enumerates as an unfair labor practice the violation of the duty to bargain collectively as prescribed by the Code.
• Article 263(g), Labor Code — Grants the Secretary of Labor the authority to assume jurisdiction over labor disputes in industries indispensable to national interest and decide the same, including incidental issues.
• Rule XIII, Sec. 4, Book V, Implementing Rules of the Labor Code — Requires notices of strike to state the acts complained of and efforts to resolve the dispute amicably.

Justices Consuelo Ynares-Santiago, Alicia Austria-Martinez, Adolfo S. Azcuna, and Dante O. Tinga.