Follow Grievance Procedures First: Why Philippine Unions Must Exhaust CBA Remedies Before Striking

TLDR: Before resorting to a strike, Philippine labor unions must strictly adhere to the grievance and arbitration procedures outlined in their Collective Bargaining Agreements (CBAs). This Supreme Court case emphasizes that strikes initiated without exhausting these contractual remedies are illegal. Companies can seek court intervention to compel arbitration and halt unlawful strikes, ensuring industrial peace and respect for negotiated agreements.

G.R. No. 99266, March 02, 1999

INTRODUCTION

Imagine a company facing financial difficulties, needing to streamline operations to survive. Layoffs, while painful, become a necessary measure. Now, picture the affected employees, worried about their livelihoods, and their union ready to fight for their jobs. This is the volatile landscape of labor disputes, where the right to strike clashes with the need for orderly resolution. This landmark Supreme Court case, San Miguel Corporation vs. National Labor Relations Commission, delves into this very conflict, clarifying when a strike is legally permissible in the Philippines and underscoring the crucial role of Collective Bargaining Agreements (CBAs) in resolving labor-management disagreements. At the heart of the dispute was San Miguel Corporation’s (SMC) restructuring due to financial losses, leading to employee redundancies and a subsequent strike notice from the San Miguel Corporation Employees Union (SMCEU). The central legal question: Can a union declare a strike without fully exhausting the grievance and arbitration procedures stipulated in their CBA?

LEGAL CONTEXT: CBA GRIEVANCE MACHINERY AND THE LIMITS OF STRIKES

Philippine labor law strongly encourages peaceful dispute resolution. Collective Bargaining Agreements (CBAs) are the cornerstone of this approach, acting as contracts between employers and unions, outlining terms and conditions of employment, and crucially, establishing mechanisms for resolving conflicts. These mechanisms typically involve a multi-step grievance procedure, often culminating in voluntary arbitration. A ‘grievance’ in this context is any complaint or dissatisfaction arising from the interpretation or application of the CBA or company policies affecting employees.

The Labor Code of the Philippines and its Implementing Rules recognize the right to strike, but this right is not absolute. It is primarily intended as a tool of last resort, particularly in cases of bargaining deadlocks during CBA negotiations or unresolved unfair labor practices. Crucially, the law discourages strikes over issues that can be resolved through agreed-upon grievance procedures or voluntary arbitration. Rule XXII, Section 1 of the Rules and Regulations Implementing Book V of the Labor Code explicitly states:

“Section 1. Grounds for strike and lockout. — A strike or lockout may be declared in cases of bargaining deadlocks and unfair labor practices. Violations of the collective bargaining agreements, except flagrant and/or malicious refusal to comply with its economic provisions, shall not be considered unfair labor practice and shall not be strikeable. No strike or lockout may be declared on grounds involving inter-union and intra-union disputes or on issues brought to voluntary or compulsory arbitration.”

This provision underscores that mere violations of a CBA, especially those addressable through grievance machinery, are not valid grounds for a strike. Strikes circumventing agreed dispute resolution processes are generally deemed illegal, undermining the very purpose of CBAs – to foster stable labor relations and prevent disruptive work stoppages. Furthermore, a ‘collective bargaining deadlock’ requires a genuine impasse in negotiations, not simply a disagreement that can be addressed through existing grievance mechanisms. The spirit of the law and jurisprudence favors utilizing contractual dispute resolution methods before resorting to the economic warfare of a strike.

CASE BREAKDOWN: SMC VS. SMCEU – The Path to the Supreme Court

San Miguel Corporation, facing financial headwinds in 1990, initiated a restructuring process, leading to the declaration of 55 redundant positions across its Business Logistics Division, Ayala Operations Center, and Magnolia-Manila Buying Station. Understandably, the San Miguel Corporation Employees Union (SMCEU) sprang into action to protect its members. The union filed grievance cases for the retrenched employees, seeking their redeployment within the company.

The CBA between SMC and SMCEU meticulously laid out a three-step grievance procedure:

1. Step 1: Employee and Union representatives discuss the grievance orally with the immediate superior. If unresolved, a written grievance is filed with the Department Manager.
2. Step 2: If Step 1 is unsatisfactory, the grievance is elevated to the Plant Manager/Director. Grievance meetings are held, and the Plant Manager issues a written decision.
3. Step 3: If still unresolved, the matter goes to a Conciliation Board, composed of representatives from both the company and the union, tasked with resolving the grievance.

Crucially, the CBA also provided for voluntary arbitration if the Conciliation Board failed to reach a resolution. As the grievance process unfolded, SMC redeployed many of the affected employees. However, for the remaining 17 employees, a deadlock was declared by the union representative during a Step 3 meeting on October 26, 1990. SMC informed the union that termination would proceed if redeployment was not possible by October 30, 1990.

Instead of pursuing arbitration as stipulated in the CBA, the union filed a notice of strike with the National Conciliation and Mediation Board (NCMB) on November 7, 1990, citing bargaining deadlock, union busting, CBA violations, and failure to provide a list of vacant positions. SMC countered by filing a complaint with the National Labor Relations Commission (NLRC), seeking to dismiss the strike notice and compel the union to follow the CBA’s grievance and arbitration procedures. The NLRC, in a brief resolution, dismissed SMC’s complaint.

Undeterred, SMC elevated the case to the Supreme Court. The Supreme Court, in no uncertain terms, sided with San Miguel Corporation. Justice Purisima, writing for the Court, emphasized the mandatory nature of the CBA’s grievance procedure. The Court pointed out that the union prematurely declared a deadlock and filed a strike notice without fully utilizing the Conciliation Board at Step 3 or proceeding to voluntary arbitration. The Supreme Court quoted its previous ruling in Liberal Labor Union vs. Phil. Can Co., stating:

“x x x the main purpose of the parties in adopting a procedure in the settlement of their disputes is to prevent a strike. This procedure must be followed in its entirety if it is to achieve its objective. x x x strikes held in violation of the terms contained in the collective bargaining agreement are illegal, specially when they provide for conclusive arbitration clauses. These agreements must be strictly adhered to and respected if their ends have to be achieved. x x x”

The Court concluded that the NLRC gravely abused its discretion in dismissing SMC’s complaint. It ordered the union and SMC to complete Step 3 of the grievance procedure and proceed to arbitration if necessary. The strike was deemed illegal because the union failed to exhaust the contractual remedies available to them under the CBA.

PRACTICAL IMPLICATIONS: Lessons for Employers and Unions

This Supreme Court decision serves as a powerful reminder of the sanctity of Collective Bargaining Agreements in the Philippines. It reinforces the principle that CBAs are not mere suggestions but legally binding contracts that must be honored by both employers and unions. For businesses, this case highlights the importance of:

• Crafting Clear and Comprehensive CBAs: Ensure your CBA includes a robust and well-defined grievance procedure, culminating in voluntary arbitration. Ambiguity can lead to disputes and weaken the effectiveness of the grievance mechanism.
• Enforcing CBA Provisions: Actively utilize and insist on adherence to the agreed-upon grievance procedures. Do not hesitate to seek legal intervention, like injunctions, to prevent illegal strikes that violate CBA terms.
• Documenting Grievance Proceedings: Maintain thorough records of all grievance steps, meetings, and decisions. This documentation is crucial evidence in case of legal challenges.

For labor unions, the ruling underscores the critical need to:

• Exhaust Grievance Procedures: Before contemplating a strike, meticulously follow every step of the grievance process outlined in the CBA. Premature strike notices will likely be deemed illegal.
• Understand CBA Obligations: Educate union members and leaders about the binding nature of the CBA and the importance of utilizing its dispute resolution mechanisms.
• Consider Arbitration: View voluntary arbitration as a constructive alternative to strikes. It offers a peaceful and legally recognized way to resolve deadlocks after exhausting grievance steps.

Key Lessons from San Miguel Corporation vs. NLRC:

• Grievance procedures in CBAs are mandatory and must be exhausted before strikes are considered legal.
• Strikes in violation of no-strike clauses or without exhausting grievance machinery are illegal.
• Philippine courts will uphold and enforce CBA provisions, promoting industrial peace and contractual stability.
• Employers have the right to seek injunctions to restrain illegal strikes and compel arbitration.

FREQUENTLY ASKED QUESTIONS (FAQs)

Q1: What is a Collective Bargaining Agreement (CBA)?

A: A CBA is a legally binding contract between an employer and a union representing the employees. It outlines the terms and conditions of employment, such as wages, benefits, working hours, and grievance procedures.

Q2: What is a grievance procedure?

A: A grievance procedure is a step-by-step process outlined in a CBA for resolving disputes or complaints arising from the interpretation or application of the CBA or company policies. It typically involves discussions and appeals through different levels of management and union representation.

Q3: What is voluntary arbitration?

A: Voluntary arbitration is a method of dispute resolution where both the employer and the union agree to submit their unresolved dispute to a neutral third party (the arbitrator) for a final and binding decision. It is a preferred alternative to strikes for resolving CBA-related conflicts.

Q4: When is a strike considered legal in the Philippines?

A: Strikes are generally legal in cases of bargaining deadlocks during CBA negotiations or unresolved unfair labor practices, provided all procedural requirements like strike votes and notices are met. Strikes are generally illegal if they violate a no-strike clause in a CBA or are initiated without exhausting grievance and arbitration procedures.

Q5: What is a ‘bargaining deadlock’?

A: A bargaining deadlock occurs when negotiations between the employer and union for a CBA reach a stalemate, meaning they cannot agree on key terms and conditions despite good-faith bargaining efforts.

Q6: Can a union strike if the employer violates the CBA?

A: Not immediately. The Supreme Court, in this case and others, emphasizes that unions must first utilize the grievance procedure outlined in the CBA to address alleged violations. Strikes are typically not allowed for CBA violations that can be resolved through grievance and arbitration.

Q7: What can an employer do if a union declares an illegal strike?

A: Employers can file a complaint with the NLRC to declare the strike illegal and seek an injunction from the court to stop the strike. They can also compel the union to comply with the CBA’s grievance and arbitration procedures.

Q8: Does management have the right to abolish positions or departments?

A: Yes, the Supreme Court recognizes the abolition of departments or positions as a legitimate management prerogative, especially for valid business reasons like financial losses or streamlining operations, as long as it is done in good faith and not to circumvent labor laws or union rights.

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