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SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO v. MA. NIEVES D. CONFESOR

FACTS:

On June 28, 1990, petitioner-union San Miguel Corporation Employees Union - PTGWO entered into a Collective Bargaining Agreement (CBA) with private respondent San Miguel Corporation (SMC) to take effect on June 30, 1989. The CBA provided that it would remain in force and effect until June 30, 1992. The CBA also stated that the term of the agreement, insofar as the representation aspect is concerned, would be for five years from July 1, 1989, to June 30, 1994.

In August 1991, SMC informed its employees that it would undergo restructuring. As a result, the Magnolia and Feeds and Livestock Division were spun-off and became separate corporations, namely, Magnolia Corporation and San Miguel Foods, Inc. Despite the spin-offs, the CBA remained in force.

After June 30, 1992, the CBA was renegotiated. The petitioner-union insisted that the bargaining unit should include employees of Magnolia and SMFI, and that the renegotiated terms of the CBA would be effective for the remaining two years until June 30, 1994. SMC argued that the employees who moved to Magnolia and SMFI are no longer part of the bargaining unit, and that the CBA should be effective for three years.

Due to the deadlock, the petitioner-union filed a Notice of Strike, and SMC requested the National Conciliation and Mediation Board (NCMB) to conduct preventive mediation. No settlement was reached, and a strike vote was conducted in favor of a strike.

SMC, Magnolia, and SMFI filed a petition with the Secretary of Labor to assume jurisdiction over the labor dispute. The Secretary of Labor assumed jurisdiction and held conciliation meetings, but no agreement was reached. Eventually, the Secretary of Labor issued an order directing that the renegotiated terms of the CBA would be effective for three years from June 30, 1992, and that the CBA would only cover SMC employees, excluding Magnolia and SMFI employees.

The petitioner-union questioned the order of the Secretary of Labor and filed a motion for a temporary restraining order to stop the certification elections in the different companies. The court granted the temporary restraining order. Meanwhile, the Samahan ng Malayang Manggagawa-San Miguel Corporation-Federation of Free Workers (SMM-SMC-FFW) filed a motion to intervene, citing a previous case recognizing the separation of Magnolia employees from the SMC bargaining unit. Efren Carreon, acting president of the SMCEU-PTGWO, also filed a petition for the dismissal of the case and challenged the legal personality of the union president.

In this case, the main issues are: 1) whether the duration of the collective bargaining agreement (CBA) is for three years or only two years and 2) whether the bargaining unit of San Miguel Corporation (SMC) includes the employees of Magnolia and San Miguel Foods Inc. The petitioner-union argues that the non-representation provisions of the CBA should be for the remaining two years of the current CBA term, based on a previous decision of the Secretary of Labor. However, the Secretary of Labor ruled that the renegotiated terms of the CBA should run for a period of three years. The Secretary of Labor's decision is based on Article 253-A of the Labor Code, which states that the CBA has a term of five years as far as the representation aspect is concerned, while all other provisions should be negotiated not later than three years after its execution. The ambiguity lies with the terms of the other provisions of the CBA. The legislative intent of the law was discussed during the passage of the Herrera-Veloso Law, indicating that the CBA could be negotiated for one, two, or three years, but the representation aspect should have a term of five years to allow for industrial peace and development of rapport with management.

In another discussion, various individuals discussed the expiration of collective bargaining agreements (CBAs) and the representation issue. The conversation touched on the duration of the CBAs, negotiations for changing the terms, and the possibility of a certification election. The individuals discussed the need for negotiations to promptly take place and emphasized the importance of knowing the current marketplace conditions. They also mentioned the possibility of voluntary arbitration and the inclusion of a provision for retroactive application of a new union takes over the contract administration.

ISSUES:

  1. Whether the term of the collective bargaining agreement (CBA) can be shortened despite the residual representative status of the union for 2 more years.

  2. Whether the employees of Magnolia and San Miguel Foods, Inc. should still be considered part of the bargaining unit of SMC.

  3. Whether the employees of Magnolia and SMFI should be included in the bargaining unit of SMC.

  4. The issue in this case is whether the union formed by the employees of both Magnolia and San Miguel Foods Inc. (SMFI) is the appropriate bargaining unit considering that Magnolia has been formed into a separate corporation.

RULING:

  1. The term of the CBA can be shortened if it improves the general welfare of both the workers and the company. The Office must consider the peculiarities and unique characteristics of the employer. In this case, the spin-offs of two divisions of the mother corporation (SMC) necessitated the recognition of the existing unions as bargaining agents. Since the other unions agreed to a 3-year cycle for their CBAs, it would be ideal to maintain stability and avoid confusion by also having a 3-year cycle for the economic provisions of the CBA of the unions involved in the spin-offs. Ordering a 2-year term for the renegotiated provisions may result in chaos, confusion, and discontent from other unions who already agreed to a 3-year term.

  2. The employees of Magnolia and San Miguel Foods, Inc. should not be considered part of the bargaining unit of SMC. These companies were spun-off to operate as distinct entities, and the reason for these transformations was to achieve better industry focus, flexibility, and decision-making. Thus, they should not be considered part of SMC's bargaining unit.

  3. The employees of Magnolia and SMFI should not be included in the bargaining unit of SMC. The spin-offs of Magnolia and SMFI resulted in the creation of distinct entities with separate juridical personalities. Each company is run, supervised, and controlled by different management teams, enforces its own rules and policies, and maintains separate financial statements. The employees of the different companies have different interests in terms of the nature of work, wages, hours of work, and other conditions of employment. Therefore, it is best to have separate bargaining units for each company where the employees can bargain separately according to their needs and working conditions.

  4. The Supreme Court ruled that the union formed by the employees of both Magnolia and SMFI is not the appropriate bargaining unit because Magnolia has been formed into a separate corporation. The Court noted that the separate interests of the employees of Magnolia and SMFI from those of San Miguel Corporation (SMC) have been recognized in a previous case. It was stated that Magnolia has ceased to be a division of SMC and now has a separate personality. As a result, any further discussion on the propriety of the elections held by the petitioners is rendered moot and academic. The court found no grave abuse of discretion on the part of the Secretary of Labor in rendering the assailed Order. Therefore, the petition was dismissed for lack of merit.

PRINCIPLES:

  • The legislators intended to maintain industrial peace and stability by having a period of effectivity for the economic and non-economic provisions of the CBA, except for representation.

  • No outside union can challenge the status of the incumbent union as the exclusive bargaining agent within five (5) years.

  • The terms and conditions of employment cannot be questioned during the period of effectivity of the CBA.

  • The CBA is a contract between the parties and they must respect its terms and conditions.

  • The period of effectivity for the non-representation provisions of the CBA is determined by the parties.

  • The objective of a collective contract is to promote industrial harmony and stability in the terms and conditions of employment.

  • The term of a CBA can be shortened if it improves the general welfare of both the workers and the company.

  • The Office must consider the peculiarities and unique characteristics of the employer when deciding on the term of a CBA.

  • The voluntary recognition by the company of the continuing representative status of the unions after spin-offs is linked to the company's stand on the term of the renegotiated cycle for the CBAs.

  • Spin-offs of divisions may necessitate the recognition of existing unions as bargaining agents for the new entities.

  • Companies spun-off to operate as distinct entities should not be considered part of the bargaining unit of the parent company.

  • The transformation of companies through spin-offs is a management prerogative and business judgment that the courts cannot interfere with unless it is contrary to law, public policy, or morals.

  • The doctrine of piercing the corporate veil is not applicable when there is no bad faith imputed on the part of the company.

  • In determining an appropriate bargaining unit, the test is mutuality or commonality of interests among the employees.

  • Factors to consider in determining the appropriate bargaining unit include the will of the employees, affinity and unit of employees' interest, prior collective bargaining history, and employment status.

  • The basic test in determining the appropriate bargaining unit is that it must affect a grouping of employees who have substantial mutual interests in terms of employment and working conditions.

  • A bargaining unit must involve a grouping of employees who have substantial, mutual interests in wages, hours, working conditions, and other subjects of collective bargaining.

  • A separate corporation with its own distinct personality may have separate interests from the original corporation, which may affect the appropriateness of a bargaining unit.