University of San Agustin Employees' Union-FFW vs. Court of Appeals

A strike conducted in defiance of a validly issued Assumption of Jurisdiction Order under Article 263(g) of the Labor Code is illegal, and union officers who knowingly participated therein are deemed to have lost their employment status; the AJO is deemed served upon posting by sheriffs at designated places, and striking workers must immediately return to work upon such service. Additionally, economic disputes arising from the interpretation or implementation of a CBA must be referred to voluntary arbitration pursuant to the grievance machinery provisions of the CBA and Articles 261 and 262 of the Labor Code, and cannot be circumvented by the mere filing of a notice of strike where the CBA contains a no-strike clause and a voluntary arbitration mechanism.

Respondent University of San Agustin is a non-stock, non-profit educational institution offering both basic and higher education courses in Iloilo City. Petitioner University of San Agustin Employees' Union-FFW (Union) is the duly recognized collective bargaining unit for teaching and non-teaching rank-and-file personnel of the University, while the individual petitioners are the Union's officers. On July 27, 2000, the parties entered into a five-year collective bargaining agreement (CBA) which, among other provisions, stipulated that economic provisions would have a three-year period (up to 2003), contained a "no strike, no lockout" clause, and established a grievance machinery procedure culminating in voluntary arbitration for the resolution of management-labor disputes arising from the interpretation or implementation of the CBA.

Respondent University of San Agustin is a non-stock, non-profit educational institution in Iloilo City offering both basic and higher education courses. Petitioner University of San Agustin Employees' Union-FFW (Union) is the duly recognized collective bargaining unit for the University's teaching and non-teaching rank-and-file personnel, while the individual petitioners are the Union's officers. On July 27, 2000, the parties entered into a five-year collective bargaining agreement (CBA) providing, among other things, that the economic provisions thereof would have a period of three years or up to 2003. Complementary to said provisions was Section 3 of Article VIII of the CBA, providing for salary increases for School Years 2000-2003, such increase to take the form of either a lump sum or a percentage of the tuition incremental proceeds (TIP). The CBA also contained a "no strike, no lockout" clause and a grievance machinery procedure to resolve management-labor disputes, including a voluntary arbitration mechanism should the grievance committee fail to satisfactorily settle such disputes.

Pursuant to the CBA, the parties commenced negotiations for the economic provisions for the remaining two years, i.e., SY 2003-2004 and SY 2004-2005. During the negotiations, the parties could not agree on the manner of computing the TIP, thus necessitating preventive mediation proceedings before the National Conciliation and Mediation Board (NCMB), Iloilo City. The impasse respecting the computation of TIP was not resolved, prompting the Union to declare a bargaining deadlock grounded on the parties' failure to arrive at a mutually acceptable position on the manner of computing the seventy percent (70%) of the net TIP to be allotted for salary and other benefits for SY 2003-2004 and SY 2004-2005. Thereafter, the Union filed a Notice of Strike before the NCMB, which the University opposed through a Motion to Strike Out Notice of Strike and to Refer the Dispute to Voluntary Arbitration, invoking the "no strike, no lockout" clause of the CBA. The NCMB, however, failed to resolve the University's motion.

The parties then made a joint request for the Secretary of Labor and Employment (SOLE) to assume jurisdiction over the dispute, docketed as OS-AJ-0032-2003. On September 18, 2003, the SOLE issued an Assumption of Jurisdiction Order (AJO) pursuant to Article 263(g) of the Labor Code, enjoining any strike or lockout whether actual or intended and directing the parties to cease and desist from committing any act that might exacerbate the situation. On September 19, 2003, the Union staged a strike. At 6:45 a.m. of the same day, Sheriffs Francisco L. Reyes and Rocky M. Francisco arrived at the university to serve the AJO. At the main entrance, they met Merlyn Jara, the Union's vice president, who after reading the AJO refused to receive it, citing Union Board Resolution No. 3 naming the union president as the only person authorized to do so. The sheriffs explained that even without acknowledgment, the AJO would be considered served, and that once posted it would be deemed received by the Union. At approximately 8:45 a.m., the sheriffs posted copies of the AJO at the main gate of the university, at the main entrance of its buildings, and at the Union's office inside the campus. At 9:20 a.m., the sheriffs served the AJO on the University. Notwithstanding the sheriffs' advice as to the legal implication of the Union's refusal, the Union went ahead with the strike. At around 5:25 p.m., the Union president arrived at the university premises and received the AJO from the sheriffs.

On September 24, 2003, the University filed a Petition to Declare Illegal Strike and Loss of Employment Status at the NLRC Sub-regional Arbitration Branch No. VI in Iloilo City, later consolidated with OS-AJ-0032-2003 before the SOLE. On April 6, 2004, the SOLE rendered a Decision resolving the economic issues and dismissing the petition to declare the strike illegal for want of legal and factual basis, finding no basis to declare loss of employment status. The University's motion for reconsideration was denied on May 24, 2004. The University then elevated the matter to the Court of Appeals via a petition for certiorari. On March 4, 2005, the CA partially granted the University's petition, declaring the September 19, 2003 strike illegal and the union officers deemed to have lost their employment status, while affirming the SOLE's resolution on economic issues. Both parties filed motions for partial reconsideration. On August 23, 2005, the CA issued its Partially Amended Decision, granting the University's motion on the economic issues by directing the parties to refer said issues to voluntary arbitration, while standing firm on the illegality of the strike. The Union and its dismissed officers then filed the instant petition before the Supreme Court.

• Legality of the Strike: Petitioners argued that the CA gravely erred in declaring the September 19, 2003 strike illegal and in declaring the union officers as deemed to have lost their employment status, contending that in cases where a strike has already commenced, the SOLE always gives twenty-four hours to the striking workers within which to return to work, and that considering the totality of the strikers' conduct, they had not manifested naked display of recalcitrance nor shown bad faith to the University.
• Jurisdiction over Economic Issues: Petitioners maintained that the CA gravely erred in directing the economic issues to voluntary arbitration, citing settled jurisprudence that the labor secretary's authority to assume jurisdiction over a labor dispute must include and extend to all questions and controversies arising therefrom, even including cases over which the Labor Arbiter has exclusive jurisdiction.

• CBA Grievance Machinery: Respondent University consistently maintained that the Union must exhaust the grievance machinery provisions of the CBA, which end in voluntary arbitration, filing a Motion to Strike Out Notice of Strike and to Refer the Dispute to Voluntary Arbitration before the NCMB precisely to call attention to this obligation.
• Illegality of the Strike: Respondent University argued that the strike was illegal because it was conducted in defiance of the AJO issued by the SOLE under Article 263(g) of the Labor Code, which automatically enjoined any strike and required workers to immediately return to work.

• Legality of the Strike: Whether the CA committed grave abuse of discretion in declaring the September 19, 2003 strike illegal and in declaring the union officers as deemed to have lost their employment status, given the alleged practice of granting twenty-four hours to return to work and the totality of the strikers' conduct.
• Referral to Voluntary Arbitration: Whether the CA erred in directing the economic issues of the labor dispute to voluntary arbitration, notwithstanding jurisprudence holding that the SOLE's authority to assume jurisdiction extends to all questions and controversies arising from the labor dispute.

• Legality of the Strike: No. The strike was illegal because the AJO was deemed served upon posting at 8:45 a.m. on September 19, 2003, and Article 263(g) of the Labor Code requires striking workers to immediately return to work upon such service; no twenty-four-hour grace period exists in law or jurisprudence.
• Referral to Voluntary Arbitration: No. The economic issues arose from the interpretation or implementation of the CBA and were therefore proper subjects of the grievance machinery and voluntary arbitration under Articles 261 and 262 of the Labor Code and the parties' own CBA provisions.

• Legality of the Strike: The Court found the CA's conclusions well supported by evidence, particularly the Sheriff's Report, which is an official statement of the sheriff's acts in obedience to the SOLE's directive. In the absence of contrary evidence, a presumption exists that a sheriff has regularly performed his official duty, and the Union failed to sufficiently dispute the truth of the narration of facts in the sheriff's report. The report unequivocally stated the union officers' refusal to receive the AJO when served on the morning of September 19, 2003. The Union's Board Resolution No. 3, which gave sole authority to its president to receive the AJO, could not circumvent the standard operating procedure of the Office of the Undersecretary for Labor Relations, which considers AJOs duly served upon posting of copies at designated places—a procedure adopted to prevent the thwarting of AJOs by the simple expedient of refusal to receive them. The Union could not feign ignorance of this procedure because its counsel was a former DOLE Regional Director. Under Article 263(g) of the Labor Code, when the SOLE assumes jurisdiction over a labor dispute in an industry indispensable to the national interest, such assumption has the effect of automatically enjoining an impending strike or, if one has already taken place, requiring all striking employees to immediately return to work. The AJO was served by posting at 8:45 a.m. on September 19, 2003, yet the strikers persisted in their refusal and waited for their union president to receive the order at 5:25 p.m. The Union's assertion of a well-settled practice granting twenty-four hours to return to work was rejected as having no basis in law and jurisprudence; the phrase "immediately return to work" in Article 263(g) indicates an almost instantaneous or automatic compliance, not a twenty-four-hour period. The deliberate intent to disregard the AJO and proceed with the strike rendered the strike illegal, and the union officers were deemed to have lost their employment status for knowingly participating in the illegal act.

• Referral to Voluntary Arbitration: The Court found logic in the CA's directive for the parties to proceed with voluntary arbitration as provided in their CBA. The economic benefits issue, including the formula for computing the TIP share of employees, arose from the interpretation or implementation of the CBA. The CBA itself provided for a grievance machinery to resolve any complaint or dissatisfaction arising from the interpretation or implementation of the CBA, and stipulated that unresolved grievances would be referred to a voluntary arbitrator for final resolution. Through no fault of the University, these processes were not exhausted: while undergoing preventive mediation before the NCMB, the Union declared a bargaining deadlock, filed a notice of strike, and went on strike. The University filed a Motion to Strike Out Notice of Strike and to Refer the Dispute to Voluntary Arbitration, but the NCMB did not act on it. The University's stance was consistent with Articles 261 and 262 of the Labor Code, which respectively grant voluntary arbitrators original and exclusive jurisdiction over unresolved grievances arising from the interpretation or implementation of a CBA, and provide that the Commission, its Regional Offices, and DOLE Regional Directors shall not entertain such disputes but shall immediately refer them to the grievance machinery or voluntary arbitration. The NCMB's own Manual of Procedures, specifically Section 6(c)(i), Rule VI, mandated that disputes arising from the interpretation or implementation of a CBA shall be referred to the grievance machinery under Article 261 of the Labor Code. The NCMB should have declared the Union's Notice of Strike as not duly filed and referred the dispute to voluntary arbitration. The Court treated the present case as an exception to the general rule in International Pharmaceuticals, Inc. vs. Secretary of Labor that the SOLE's jurisdiction extends to all questions and controversies arising from the labor dispute, because the NCMB's inaction on the University's motion veritably forced the University to seek and submit to the SOLE's jurisdiction. The peculiar facts showed the University was deprived of a remedy that would have enjoined the strike and was left without recourse except to invoke the SOLE's jurisdiction. The Court refused to allow the no-strike, no-lockout, grievance machinery, and voluntary arbitration clauses in CBAs to be circumvented by the simple expedient of filing a notice of strike, as this would render Articles 261 and 262 of the Labor Code and voluntary arbitration clauses in CBAs meaningless.

• Assumption of Jurisdiction and Automatic Return-to-Work Order — When the SOLE assumes jurisdiction over a labor dispute in an industry indispensable to the national interest under Article 263(g) of the Labor Code, such assumption automatically enjoins an impending strike or lockout. If a strike has already taken place, all striking employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike. The phrase "immediately return to work" means almost instantaneous or automatic compliance upon service of the AJO—not within twenty-four hours. The Court applied this doctrine by holding that the AJO was deemed served upon posting at 8:45 a.m. on September 19, 2003, and the strikers' failure to return to work immediately rendered the strike illegal.

• Service of AJO by Posting — An Assumption of Jurisdiction Order is deemed served upon posting of copies thereof by sheriffs at designated places, in accordance with the standard operating procedure of the Office of the Undersecretary for Labor Relations. This procedure was adopted to prevent the thwarting of AJOs by the simple expedient of refusal of parties to receive the same. A party cannot circumvent service by designating a single authorized recipient through an internal board resolution. The Court applied this by giving full credence to the Sheriff's Report, which documented the Union's refusal to receive the AJO and the sheriffs' subsequent posting thereof, and by holding that the AJO was effectively served at 8:45 a.m.

• Presumption of Regular Performance of Official Duty — In the absence of contrary evidence, a presumption exists that a sheriff has regularly performed his official duty. To controvert this presumption, there must be clear and convincing evidence. The Court applied this presumption to the Sheriff's Report, which the Union failed to sufficiently dispute.

• Grievance Machinery and Voluntary Arbitration as Primary Mode for CBA Disputes — Disputes arising from the interpretation or implementation of a CBA, including bargaining deadlocks where the CBA so provides, must be referred to the grievance machinery and ultimately to voluntary arbitration under Articles 261 and 262 of the Labor Code. The no-strike, no-lockout, grievance machinery, and voluntary arbitration clauses in a CBA must be strictly adhered to and respected, and cannot be circumvented by the simple expedient of filing a notice of strike or lockout. The NCMB, under its own Manual of Procedures, should declare a notice of strike involving issues cognizable by the grievance machinery as "not duly filed" and refer the dispute to voluntary arbitration. The Court applied this doctrine by sustaining the CA's directive to refer the economic issues—particularly the TIP computation—to voluntary arbitration, holding that the NCMB's failure to act on the University's motion deprived the University of its contractual remedy and forced it to submit to the SOLE's jurisdiction, making this case an exception to the general rule that the SOLE's assumed jurisdiction extends to all controversies arising from the labor dispute.

• Loss of Employment Status of Union Officers in Illegal Strikes — Union officers who knowingly participate in an illegal strike are deemed to have lost their employment status. The Court applied this by affirming the CA's ruling that the individual petitioner union officers lost their employment status for having knowingly participated in the illegal strike of September 19, 2003.

• "The Union's assertion of a well settled practice that the SOLE always gives twenty-four hours (24) to the striking workers within which to return to work, offers no refuge. Aside from the fact that this alleged well settled practice has no basis in law and jurisprudence, Article 263(g) of the Labor Code, supra, is explicit that if a strike has already taken place at the time of assumption of jurisdiction or certification, all striking or locked out employees shall immediately return to work." — This passage articulates the ratio decidendi on the immediacy of the return-to-work obligation under Article 263(g), rejecting the supposed twenty-four-hour grace period.

• "Following Liberal, this Court will not allow the no strike, no lockout, grievance machinery and voluntary arbitration clauses found in CBAs to be circumvented by the simple expedient of filing of a notice of strike or lockout." — This passage states the controlling doctrine that CBA dispute-resolution clauses cannot be rendered nugatory by unilateral resort to strike or lockout notices, and is the canonical formulation of the Court's ruling on the primacy of voluntary arbitration for CBA-derived disputes.

• "As here, a union can easily circumvent the grievance machinery and a previous agreement to resolve differences or conflicts through voluntary arbitration through the simple expedient of filing a notice of strike. On the other hand, management can avoid the grievance machinery and voluntary arbitration provisions of its CBA by simply filing a notice of lockout." — This passage explains the policy rationale for enforcing CBA grievance and voluntary arbitration clauses, illustrating the mischief the Court sought to prevent.

• Trans-Asia Shipping Lines, Inc. vs. CA, et al., G.R. No. 145428, July 7, 2004, 433 SCRA 610 — Cited as controlling authority for the proposition that assumption of jurisdiction by the SOLE always co-exists with an order for workers to return to work immediately and for employers to readmit all workers, and that the SOLE is granted great breadth of discretion in resolving labor disputes.
• Liberal Labor Union vs. Philippine Can Company, 91 Phil. 72 (1952) — Cited as controlling authority for the principle that strikes held in violation of CBA terms, especially those providing for conclusive arbitration clauses, are illegal, and that parties must exhaust all available means within their reach before resorting to force. The Court relied on this case to hold that the Union should have been directed to proceed to voluntary arbitration, even though in Liberal it was management that refused to cooperate with the grievance machinery.
• International Pharmaceuticals, Inc. vs. Secretary of Labor, et al., G.R. Nos. 92981-83, January 9, 1992, 205 SCRA 59 — Cited as the general rule that the SOLE's jurisdiction over labor disputes includes and extends to all questions and controversies arising therefrom, including cases over which the Labor Arbiter has exclusive jurisdiction. The Court distinguished and treated the present case as an exception due to the peculiar facts showing the University was forced to submit to the SOLE's jurisdiction by the NCMB's inaction.
• Union of Filipro Employees vs. Nestle Philippines, Inc., G.R. Nos. 88710-12, December 19, 1990, 192 SCRA 396; St. Scholastica's College vs. Torres, G.R. No. 100158, June 29, 1992, 210 SCRA 565; Telefunken Semiconductors Employees Union-FFW vs. Court of Appeals, G.R. Nos. 143013-14, December 18, 2000, 348 SCRA 565; Grand Boulevard Hotel vs. Genuine Labor Organization of Workers in Hotel, Restaurant and Allied Industries (GLOWHRAIN), G.R. No. 153664, July 18, 2003, 406 SCRA 688 — Cited collectively as a line of authorities indicating that the phrase "immediately return to work" in Article 263(g) requires an almost instantaneous or automatic compliance, not a twenty-four-hour period.

• Article 263(g), Labor Code — Empowers the SOLE to assume jurisdiction over labor disputes in industries indispensable to the national interest and provides that such assumption automatically enjoins an impending strike or lockout, or if one has already taken place, requires all striking or locked-out employees to immediately return to work and the employer to immediately resume operations and readmit all workers. Applied as the statutory basis for declaring the strike illegal: the AJO was served by posting at 8:45 a.m. on September 19, 2003, and the strikers' failure to immediately return to work rendered the strike unlawful.
• Article 261, Labor Code — Grants voluntary arbitrators or panels of voluntary arbitrators original and exclusive jurisdiction over unresolved grievances arising from the interpretation or implementation of a CBA and those arising from the interpretation or enforcement of company personnel policies. Provides that violations of a CBA, except those gross in character, shall be resolved as grievances under the CBA, and that the Commission, its Regional Offices, and DOLE Regional Directors shall not entertain such disputes but shall immediately refer them to the grievance machinery or voluntary arbitration. Applied to hold that the economic issues, including the TIP computation formula, were proper subjects of voluntary arbitration.
• Article 262, Labor Code — Provides that voluntary arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks. Applied in conjunction with Article 261 to support the CA's directive that the parties refer the economic issues to voluntary arbitration, as the CBA itself provided that practically all disputes, including bargaining deadlocks, shall be referred to the grievance machinery ending in voluntary arbitration.
• Section 6(c)(i), Rule VI, NCMB Manual of Procedures in the Settlement and Disposition of Conciliation and Preventive Mediation Cases — Provides that disputes arising from the interpretation or implementation of a CBA or from the interpretation or enforcement of company personnel policies shall be referred to the grievance machinery under Article 261 of the Labor Code. Applied to hold that the NCMB should have declared the Union's Notice of Strike as not duly filed and referred the labor dispute to voluntary arbitration, and that the NCMB's failure to do so deprived the University of its contractual remedy.

Reynato S. Puno (Chairperson, Second Division), Angelina Sandoval-Gutierrez, Renato C. Corona, and Adolfo S. Azcuna concurred. No separate concurring opinions were noted.