University of the Immaculate Conception vs. Office of the Secretary of Labor and Employment

The Secretary of Labor possesses plenary and discretionary authority under Article 263(g) of the Labor Code to assume jurisdiction over labor disputes in industries indispensable to national interest, which includes the incidental power to create ad hoc tripartite committees to resolve contentious issues such as the computation of net incremental proceeds from tuition fee increases, provided there is a reasonable connection to the settlement of the labor dispute. Additionally, confidential employees who willfully refuse to sever their union membership after being lawfully excluded from the bargaining unit may be dismissed for loss of confidence under Article 282(c) of the Labor Code, but employers must comply with the mandatory two-notice rule to avoid liability for nominal damages.

UIC, a non-stock, non-profit educational institution in Davao City, engaged in collective bargaining with the UIC Teaching and Non-Teaching Employees Union-FFW. In 1994, a voluntary arbitration panel ruled that certain employees (secretaries, registrars, accounting personnel, and guidance counselors) were confidential employees and must be excluded from the bargaining unit. When these employees refused to choose between keeping their positions or resigning from the union, UIC terminated them on February 21, 1995. Simultaneously, disputes arose regarding the computation of net incremental proceeds from tuition fee increases under Republic Act No. 6728, leading the Secretary of Labor to assume jurisdiction over the labor dispute on January 23, 1995.

• UIC is a non-stock, non-profit educational institution operating in Davao City, while the Union is the certified sole bargaining agent of its rank-and-file employees.
• On June 20, 1994, the Union filed a notice of strike citing bargaining deadlock and unfair labor practice; on July 20, 1994, the parties agreed to salary increases equivalent to 75% of tuition fee increment for the first year and 80% for the second and third years.
• UIC demanded the exclusion of secretaries, registrars, accounting personnel, and guidance counselors from the bargaining unit as confidential employees; a voluntary arbitration panel sustained UIC's position on November 8, 1994, and denied the Union's motion for reconsideration on February 8, 1995.
• On February 21, 1995, UIC gave the affected employees the option to keep their positions or resign from the Union; when they elected to keep both, UIC sent notices of termination effective the same date.
• On March 10, 1995, the Union filed a notice of strike, prompting the Secretary to suspend the termination effects on March 28, 1995, and order payroll reinstatement of the employees.
• On January 20, 1995, the Union filed a second notice of strike regarding the computation of incremental proceeds, leading the Secretary to assume jurisdiction on January 23, 1995.
• On October 8, 1998, the Secretary ordered the parties to execute a CBA embodying agreed salary increases based on tuition fee increments.
• On April 21, 2004, the parties signed an agreement settling all issues except the computation of net incremental proceeds for school years 1995-2000, which they agreed to compute and compare with actual amounts distributed.
• On May 17, 2004, the Union moved for the creation of a tripartite committee to compute the net proceeds; UIC opposed, arguing the CBA's grievance machinery should apply.
• On June 8, 2004, the parties signed the CBA for school years 1995-2000 but rescinded the paragraph regarding computation of net incremental proceeds; the CBA was submitted to the Regional Labor Office on July 14, 2004 but was not ratified by the majority of the bargaining unit.
• On July 5, 2004, the DOLE granted the motion to create a tripartite committee, which held meetings on September 14, 2005 and October 18, 2005 where both parties presented computations.
• On September 18, 2006, the Secretary issued a Resolution ordering UIC to distribute P11,070,473.00 to affected employees and allowing illegal dismissal cases to continue.
• On November 23, 2007, UIC filed an Omnibus Motion to cite Alfredo Olvida, a non-lawyer and Regional Legal Assistant of the Federation of Free Workers, for contempt for preparing, signing, and filing pleadings before the Supreme Court and Court of Appeals.

• The Secretary gravely abused his discretion in ordering the creation of a tripartite committee to compute net incremental proceeds because the parties had already signed a CBA containing grievance machinery provisions that should govern the computation.
• The matter of net incremental proceeds was already settled by the full settlement clause in the CBA, and the Union waived its rights by agreeing to rescind the April 21, 2004 Agreement paragraph on computation.
• The tripartite committee's computation was erroneous because it failed to comply with the formula in St. Joseph's College v. St. Joseph's College Workers' Association and improperly disallowed deductions claimed by UIC.
• The respondent employees were not illegally dismissed because they were confidential employees who could be lawfully excluded from the bargaining unit, and their refusal to resign from the Union constituted willful disobedience and breach of trust justifying termination under Article 282(c) of the Labor Code.
• The Secretary's award of back wages should be barred by res judicata as it merely complied with the previous Supreme Court ruling affirming payroll reinstatement.
• Alfredo Olvida should be held in contempt for unauthorized practice of law for preparing and signing pleadings before the courts despite not being a member of the Philippine Bar.

• The Union was constrained to seek the creation of a tripartite committee because UIC had ignored and rejected the existence and efficacy of the CBA, leaving no other means to resolve the computation issue.
• The parties had mutually agreed on the manner of computing the net incremental proceeds in the April 21, 2004 Agreement.
• The respondent employees were dismissed without due process on the same date the termination notices were sent, violating their right to procedural due process.
• Confidential employees have the right to maintain union membership for legal representation, not collective bargaining, and there is no legal justification for their dismissal.
• The matter of back wages is barred by res judicata since the Secretary's award merely enforced the previous Supreme Court ruling in G.R. No. 151379 affirming payroll reinstatement.
• Alfredo Olvida, as Regional Legal Assistant of FFW, was authorized by the Union to handle the cases, and non-lawyers may appear before the Commission or Labor Arbiters under Article 222(a) of the Labor Code.

• Procedural Issues:
  • Whether the Secretary of Labor gravely abused his discretion in ordering the creation of a tripartite committee to compute net incremental proceeds when the parties had already signed a CBA containing grievance machinery.
  • Whether the Supreme Court should review the factual findings of the tripartite committee regarding the computation of net incremental proceeds.
• Substantive Issues:
  • Whether the Secretary has the authority under Article 263(g) of the Labor Code to order the creation of a tripartite committee to determine the amount of net incremental proceeds.
  • Whether the dismissal of the twelve respondent employees was illegal.
  • Whether UIC is entitled to reimbursement of salaries paid to the employees during the pendency of the appeal.
  • Whether Alfredo Olvida is guilty of indirect contempt for unauthorized practice of law.

• Procedural:
  • The Secretary did not gravely abuse his discretion in creating the tripartite committee. The CBA had not been ratified by the majority of the bargaining unit as required by Article 231 of the Labor Code, rendering it ineffective and leaving no enforceable grievance machinery to speak of. The Secretary's order was reasonably connected to the settlement of the decade-old labor dispute.
  • The Supreme Court will not review or evaluate the probative value of evidence presented below in a petition for review under Rule 45, as it is not a trier of facts. Findings of fact of labor tribunals, when affirmed by the Court of Appeals, are accorded great respect and finality.
• Substantive:
  • The Secretary has plenary and discretionary power under Article 263(g) to assume jurisdiction over labor disputes in industries indispensable to national interest, which includes the incidental jurisdiction to create ad hoc committees to aid in resolution. The authority to create the tripartite committee flows from this jurisdiction and is reasonably connected to the objective of settling the labor dispute.
  • The dismissal of the twelve respondent employees was valid for just cause under Article 282(c) (loss of confidence) because they were confidential employees who willfully refused to sever their union membership after a final arbitration decision excluded them from the bargaining unit. Confidential employees hold positions of trust and confidence, and their willful refusal creates a potential conflict of interest justifying loss of confidence.
  • However, UIC failed to comply with the mandatory two-notice rule under procedural due process, having sent only one notice of termination without a prior notice apprising the employees of the particular acts warranting dismissal. UIC is ordered to pay each respondent employee P30,000.00 as nominal damages for non-compliance with procedural due process.
  • UIC cannot claim reimbursement of salaries paid to the employees during the pendency of the appeal. It is obligatory for the employer to reinstate and pay wages during the period of appeal until reversal by the higher court.
  • Alfredo Olvida is guilty of indirect contempt for unauthorized practice of law. Article 222(a) of the Labor Code allowing non-lawyers to appear only applies to proceedings before the NLRC and labor arbiters, not to courts of law. He is ordered to pay a fine of P2,000.00 with a stern warning that repetition will be dealt with more severely.

• Incidental Jurisdiction — A grant of jurisdiction implies the necessary and usual incidental powers essential to effectuate it, including the authority to do all things reasonably necessary for the administration of justice within the scope of jurisdiction, unless explicitly withheld by the legislature. The Secretary of Labor's power to create ad hoc committees under Article 263(g) is an exercise of incidental jurisdiction.
• Plenary and Discretionary Power under Article 263(g) — The Secretary of Labor's authority to assume jurisdiction over labor disputes causing or likely to cause strikes in industries indispensable to national interest is plenary and discretionary, extending to all questions and controversies arising therefrom. Courts will not interfere with the Secretary's judgment unless grave abuse of discretion is shown, applying the standard of reasonableness.
• Loss of Confidence as Just Cause for Dismissal — Under Article 282(c) of the Labor Code, loss of confidence must be based on a willful breach of trust by an employee occupying a position of trust and confidence. Confidential employees are deemed to hold positions of trust and confidence, and their willful refusal to sever union membership after lawful exclusion from the bargaining unit constitutes a valid ground for dismissal.
• Two-Notice Rule in Termination Proceedings — An employer must serve two written notices to comply with procedural due process: (1) a notice apprising the employee of the particular acts or omissions warranting dismissal, and (2) a notice informing the employee of the decision to dismiss. Non-compliance entitles the employee to nominal damages even if the dismissal is for just cause.
• Unauthorized Practice of Law — Only members of the Philippine Bar may practice law before the courts. Article 222(a) of the Labor Code allowing non-lawyers to represent parties is limited to proceedings before the NLRC and labor arbiters and does not extend to courts of law.

• "It is well settled in our jurisprudence that the authority of the Secretary of Labor to assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to national interest includes and extends to all questions and controversies arising therefrom. The power is plenary and discretionary in nature to enable him to effectively and efficiently dispose of the primary dispute."
• "A grant of jurisdiction, in the absence of prohibitive legislation, implies the necessary and usual incidental powers essential to effectuate it — also referred to as 'incidental jurisdiction.' Incidental jurisdiction includes the power and authority of an office or tribunal to do all things reasonably necessary for the administration of justice within the scope of its jurisdiction, and for the enforcement of its judgment and mandates."
• "Confidential employees must perforce hold positions of trust and confidence... For all intents and purposes, the terms 'confidential employee' and 'employee holding a position of trust and confidence' are synonymous."
• "The willful act of refusing to leave the Union is sufficient basis for UIC to lose its trust and confidence on Respondent Employees. There was just cause for dismissing the Respondent Employees. Our conclusion follows the same reasoning why we finally adopted the doctrine that confidential employees should be excluded from the bargaining unit and disqualified from joining any union: employees should not be placed in a position involving a potential conflict of interests."

• LMG Chemicals Corporation v. Secretary of Labor — Cited to establish that the Secretary's authority under Article 263(g) is plenary and discretionary, extending to all questions arising from the labor dispute.
• University of San Agustin Employees' Union — FFW v. Court of Appeals — Distinguished by the Court; held that grievance machinery in a CBA must be recognized by the Secretary, but inapplicable here because the CBA was not yet ratified and effective.
• St. Joseph's College v. St. Joseph's College Workers' Association — Cited to confirm that the basic formula used by the tripartite committee for computing net incremental proceeds was consistent with this precedent.
• Asia Brewery v. TPMA — Followed to support the disallowance of deductions based on unaudited financial statements, which are deemed self-serving and inadmissible.
• Mabeza v. NLRC — Cited as the leading case defining positions of trust and confidence, establishing that confidential employees fall under this category.
• Bristol Myers Squibb (Phils.), Inc. v. Baban — Applied to enumerate the requisites for loss of confidence as a just cause for dismissal: (a) the employee must hold a position of trust and confidence, and (b) there must be a willful act justifying the loss of trust.
• Agabon v. NLRC — Cited for the doctrine that dismissal for just cause remains valid even if procedural due process was not observed, but the employer is liable for nominal damages for non-compliance.
• Garcia v. Philippine Airlines, Inc. — Cited to establish that an employer cannot compel reimbursement of salaries paid during the pendency of appeal, as reinstatement pending appeal is obligatory.

• Article 263(g) of the Labor Code — Grants the Secretary of Labor the power to assume jurisdiction over labor disputes in industries indispensable to national interest; the basis for the Secretary's broad authority including the creation of the tripartite committee.
• Article 231 of the Labor Code — Mandates that a CBA must be ratified by the majority of all workers in the bargaining unit to become effective; cited to show the CBA here was ineffective for lack of ratification.
• Article 282 of the Labor Code — Enumerates just causes for termination by employer, particularly Article 282(c) regarding fraud or willful breach of trust reposed in the employee.
• Article 248(a) of the Labor Code — Defines unfair labor practice as interference with, restraint, or coercion of employees in the exercise of their right to self-organization; interpreted to apply only to bona fide members of the bargaining unit, excluding confidential employees.
• Article 245 of the Labor Code — Prohibits managerial employees from joining labor unions; cited in relation to the exclusion of confidential employees from union membership.
• Article 222(a) of the Labor Code — Allows non-lawyers to appear before the Commission or Labor Arbiters only if they represent themselves or their organization; held not applicable to proceedings before the Supreme Court and Court of Appeals.
• Republic Act No. 6728, Section 5(2) — The Education Act provision requiring that 70% of tuition fee increases go to teaching and non-teaching personnel; the basis for the computation of net incremental proceeds.
• Rule 71, Section 3(e) and Section 4 of the Rules of Court — Defines indirect contempt as assuming to be an attorney and acting as such without authority, and prescribes the procedure for commencing contempt proceedings.