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408 Phil. 701


[ G.R. No. 127422, April 17, 2001 ]




Before us is a petition for certiorari with prayer for a temporary restraining order and a writ of preliminary injunction under Rule 65 of the 1997 Rules of Civil Procedure, as amended, seeking to nullify the orders dated October 7, 1996 and December 17, 1996, issued by the then Secretary of Labor and Employment, Hon. Leonardo A. Quisumbing,[1] in OS-AJ-05-10(1)-96, "IN RE: LABOR DISPUTE AT LMG CHEMICALS CORPORATION"

The facts as culled from the records are:

LMG Chemicals Corporation, (petitioner) is a domestic corporation engaged in the manufacture and sale of various kinds of chemical substances, including aluminum sulfate which is essential in purifying water, and technical grade sulfuric acid used in thermal power plants.  Petitioner has three divisions, namely: the Organic Division, Inorganic Division and the Pinamucan Bulk Carriers.  There are two unions within petitioner's Inorganic Division. One union represents the daily paid employees and the other union represents the monthly paid employees. Chemical Workers Union, respondent, is a duly registered labor organization acting as the collective bargaining agent of all the daily paid employees of petitioner's Inorganic Division.

Sometime in December 1995, the petitioner and the respondent started negotiation for a new Collective Bargaining Agreement (CBA) as their old CBA was about to expire.  They were able to agree on the political provisions of the new CBA, but no agreement was reached on the issue of wage increase. The economic issues were not also settled.

The positions of the parties with respect to wage issue were:

"Petitioner Company

P40 per day on the first year
P40 per day on the second year
P40 per day on the third year
Respondent Union
P350 per day on the first 18 months, and
P150 per day for the next 18 months"

In the course of the negotiations, respondent union pruned down the originally proposed wage increase quoted above to P215 per day, broken down as follows:

"P142 for the first 18 months
P73 for the second 18 months"

With the CBA negotiations at a deadlock, on March 6, 1996, respondent union filed a Notice of Strike with the National Conciliation and Mediation Board, National Capital Region.  Despite several conferences and efforts of the designated conciliator-mediator, the parties failed to reach an amicable settlement.

On April 16, 1996, respondent union staged a strike.  In an attempt to end the strike early, petitioner, on April 24, 1996, made an improved offer of P135 per day, spread over the period of three years, as follows:

"P55 per day on the first year;
P45 per day on the second year;
P35 per day on the third year."

On May 9, 1996, another conciliation meeting was held between the parties.  In that meeting, petitioner reiterated its improved offer of P135 per day which was again rejected by the respondent union.

On May 20, 1996, the Secretary of Labor and Employment, finding the instant labor dispute impressed with national interest, assumed jurisdiction over the same.

In compliance with the directive of the Labor Secretary, the parties submitted their respective position papers both dated June 21, 1996.

In its position paper, petitioner made a turn-around, stating that it could no longer afford to grant its previous offer due to serious financial losses during the early months of 1996.  It then made the following offer:

Zero increase in the first year;

P30 per day increase in the second year; and
P20 per day increase in the third year.

In its reply to petitioner's position paper, respondent union claimed it had a positive performance in terms of income during the covered period.

On October 7, 1996, the Secretary of Labor and Employment issued the first  assailed order, pertinent portions of which read:

"xxx. In the light of the Company's last offer and the Union's last position, We decree that the Company's offer of P135 per day wage increase be further increased to P140 per (day), which shall be incorporated in the new CBA, as follows:

P90 per day for the first 18 months, and

P50 per day for the next 18 months.

After all, the Company had granted its supervisory employees an increase of P4,500 per month or P166 per day, more or less, if the period reckoned is 27 working days.

In regard to the division of the three-year period into two sub-periods of 18 months each, this office take cognizance of the same practice under the old CBA.

2.  Other economic demands

Considering the financial condition of the Company, all other economic demands except those provided in No. 3 below are rejected. The provisions in the old CBA as well as those contained in the Company's Employee's Primer of Benefits as of Aug. 1, 1994 shall be retained and incorporated in the new CBA.

3.  Effectivity of the new CBA

Article 253-A of the Labor Code, as amended, provides that when no new CBA is signed during a period of six months from the expiry date of the old CBA, the retroactivity period shall be according to the parties' agreement. Inasmuch as the parties could not agree on this issue and since this Office has assumed jurisdiction, then this matter now lies at the discretion of the Secretary of Labor and Employment. Thus the new Collective Bargaining Agreement which the parties will sign pursuant to this Order shall retroact to January 1, 1996.

x    x x

ACCORDINGLY, this Office now directs the parties to incorporate these dispositions in their new Collective bargaining Agreement effective January 1, 1996 to December 31, 1998."

Forthwith, petitioner filed a motion for reconsideration but was denied by the  Secretary in his order dated December 16, 1996.

Petitioner now contends that in issuing the said orders, respondent Secretary gravely abused his discretion, thus:





Anent the first ground, petitioner asserts that the decreed amount of P140 wage increase has no basis in fact and in law.  Petitioner insists that public respondent Secretary whimsically presumed that the company can survive despite the losses being suffered by its  Inorganic Division and its additional losses caused by the strike held by respondent union. Petitioner further contends that respondent Secretary disregarded its evidence showing that for the first part of 1996, its Inorganic Division suffered serious losses amounting to P15.651 million.  Hence, by awarding wage increase without any basis, respondent Secretary gravely abused his discretion and violated petitioner's right to due process.

We are not persuaded.

As aptly stated by the Solicitor General in his comment  on the petition dated July 1, 1997,  respondent Secretary  considered all the evidence and arguments adduced by both parties.   In ordering the wage increase, the Secretary ratiocinated  as follows:


In the Company's Supplemental Comment, it says that it has three divisions, namely: the Organic Division, Inorganic Division and the Pinamucan Bulk Carriers. The Union in this instant dispute represent the daily wage earners in the Inorganic Division.  The respective income of the three divisions is shown in Annex B to the Company's Supplemental Comment.  The Organic Division posted an income of P369,754,000 in 1995. The Inorganic Division realized an income of P261,288,000 in the same period. The tail ender is the Pinamucan Bulk Carriers Division with annual income of P11,803,000 for the same period. Total Company income for the period was P642,845,000.

It is a sound business practice that a Company's income from all sources are collated to determine its true financial condition. Regardless of whether one division or another losses or gains in its yearly operation is not material in reckoning a Company's financial status. In fact, the loss in one is usually offset by the gains in the others. It is not a good business practice to isolate the employees or workers of one division, which incurred an operating loss for a particular period.  That will create demoralization among its ranks, which will ultimately affect productivity. The eventual loser will be the company.

So, even if We believe the position of the company that its Inorganic Division lost last year and during the early months of this year, it would not be a good argument to deny them of any salary increase.  When the Company made the offer of P135 per day for the three year period, it was presumed to have studied its financial condition properly, taking into consideration its past performance and projected income.  In fact, the Company realized a net income of P10,806,678 for 1995 in all its operations, which could be one factor why it offered the wage increase package of P135 per day for the Union members.

Besides, as a major player in the country's corporate field, reneging from a wage increase package it previously offered and later on withdrawing the same simply because this Office had already assumed jurisdiction over its labor dispute with the Union cannot be countenanced.  It will be worse if the employer is allowed to withdraw its offer on the ground that the union staged a strike and consequently subsequently suffered business setbacks in its income projections. To sustain the Company's position is like hanging the proverbial sword of Damocles over the Union's right to concerted activities, ready to fall when the latter clamors for better terms and conditions of employment.

But we cannot also sustain the Union's demand for an increase of P215 per day.  If we add the overload factors such as the increase in SSS premiums, medicare and medicaid, and other multiplier costs, the Company will be saddled with additional labor cost, and its projected income for the CBS period may not be able to absorb the added cost without impairing its viability. xxx"

Verily, petitioner's assertion that respondent Secretary failed to consider the evidence on record  lacks merit.  It was only the Inorganic Division of the petitioner corporation that was sustaining losses.  Such incident does not justify the withholding of any salary increase as petitioner's income from all sources are collated for the determination of its true financial condition.  As correctly stated by the Secretary, "the loss in one is usually offset by the gains in the others."

Moreover, petitioner company granted its supervisory employees, during the pendency of the negotiations between the parties, a wage increase of P4,500 per month or P166 per day, more or less.  Petitioner justified this by saying that the said increase was pursuant to its  earlier agreement with the supervisors.  Hence, the company had no choice but to abide by such agreement  even if it was already sustaining losses as a result of the strike of the rank-and-file employees.

Petitioner's actuation is actually a discrimination against respondent union members.  If it could grant a wage increase to its supervisors, there is no valid reason why it should deny the same to respondent union members.  Significantly, while petitioner asserts that it sustained losses in the first part of 1996, yet during the May 9, 1996 conciliation meeting, it made the offer of P135 daily wage to the said union members.

This Court, therefore, holds that respondent Secretary did not gravely abuse his discretion in  ordering the wage increase.  Grave abuse of discretion implies whimsical and capricious exercise of power which, in the instant case, is not obtaining.

On the second ground, petitioner contends that public respondent committed grave abuse of discretion when he ordered that the new CBA which the parties will sign  shall retroact to January 1, 1996, citing the cases of Union of Filipro Employees vs. NLRC,[2] and Pier 8 Arrastre and Stevedoring Services, Inc. vs. Roldan Confesor.[3] Invoking the provisions of Article 253-A of the Labor Code, petitioner insists that public respondent's discretion on the issue of the date of the effectivity of the new CBA is limited to either: (1) leaving the matter of the date of effectivity of the new CBA to the agreement of the parties or (2) ordering that the terms of the new CBA be prospectively applied.

It must be emphasized that respondent Secretary assumed jurisdiction over the dispute because it is impressed with national interest.  As noted by the Secretary, "the petitioner corporation was then supplying the sulfate requirements of MWSS as well as the sulfuric acid of NAPOCOR, and consequently, the continuation of the strike would seriously affect the water supply of Metro Manila and the power supply of the Luzon Grid."  Such authority of the Secretary to assume jurisdiction carries with it the power to determine the retroactivity of the parties' CBA.

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.[4]

In St. Luke's Medical Center, Inc. vs. Torres[5], a deadlock developed during the CBA negotiations between the management and the union.  The Secretary of Labor assumed jurisdiction and ordered  that their CBA shall retroact to the date of the expiration of the previous CBA.  The management claimed that the Secretary of Labor gravely abused his discretion.  This Court held:


Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration of the previous CBA, contrary to the position of the petitioner. Under the circumstances of the case, Art. 253-A cannot be properly applied to herein case. As correctly stated by public respondent in his assailed Order of April 12, 1991 -

`Anent the alleged lack of basis for retroactivity provisions awarded, We would stress that the provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreement by and between the parties, and not arbitral awards.'

Therefore in the absence of the specific provision of law prohibiting retroactivity of the effectivity of the arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent is deemed vested with plenary powers to determine the effectivity thereof."

Finally, to deprive respondent Secretary of such power and discretion  would run counter to the well-established rule that all doubts in the interpretation of labor laws should be resolved in favor of labor.  In upholding the assailed orders of respondent Secretary,  this  Court is only giving meaning to this rule. Indeed, the Court should help labor authorities in providing workers immediate benefits, without being hampered by arbitration or litigation processes that prove to be not only nerve-wracking but financially burdensome in the long run.

As we said in Maternity Children's Hospital vs. Secretary of Labor[6]:

"Social Justice Legislation, to be truly meaningful and rewarding to our workers, must not be hampered in its application by long winded-arbitration and litigation. Rights must be asserted and benefits received with the least inconvenience.  Labor laws are meant to promote, not to defeat, social justice."

WHEREFORE, the instant petition is DENIED.  The assailed orders of the Secretary of Labor dated October 7, 1996 and December 16, 1996 are AFFIRMED.  Costs against petitioner.


Melo (Chairman), Vitug, and Gonzaga-Reyes, JJ., concur.
Panganiban J., no part. Former partner in law firm representing a party.

[1] Now Associate Justice of this Court.

[2] 192 SCRA 412 (1990).

[3] G.R. No. 110854, February 13, 1995.

[4] International Pharmaceuticals, Inc vs. Honorable Secretary of Labor G.R. No. 92981-83, January 9, 1992

[5] G.R. No. 99395, June 30, 1993, cited in Mindanao Terminal and Brokerage Service, Inc. vs. Ma. Nieves Roldan- Confessor, G.R. No. 111809, May 5, 1997.

[6] 174 SCRA 632

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