In Naseco Guards Association-PEMA (NAGA-PEMA) v. National Service Corporation (NASECO), the Supreme Court clarified the extent of due process required in labor disputes, specifically regarding the reevaluation of monetary benefits awarded in a Collective Bargaining Agreement (CBA). The Court ruled that a reevaluation by the Department of Labor and Employment (DOLE) does not necessarily require a full hearing or the introduction of new evidence, provided the parties were previously given an opportunity to present their case. This decision emphasizes that due process is satisfied when parties have the chance to be heard, even if the decision-maker revisits existing evidence to make a new assessment.

NASECO and NAGA-PEMA: Did the Court of Appeals err when it insisted on a full hearing for evidence?

The case originated from a labor dispute between NASECO Guards Association-PEMA (NAGA-PEMA), the collective bargaining representative of NASECO’s security guards, and National Service Corporation (NASECO), a subsidiary of the Philippine National Bank (PNB). The dispute centered on NASECO’s refusal to bargain for economic benefits in the CBA, leading to a notice of strike and eventual assumption of jurisdiction by the DOLE Secretary. The DOLE Secretary issued a resolution directing NASECO and NAGA-PEMA to execute a new CBA with specific employee benefits. NASECO challenged this resolution, arguing it was financially unsustainable and would lead to the company’s closure. The Court of Appeals (CA) initially ordered a recomputation and reevaluation of the benefits. After the DOLE affirmed its original order, NASECO again appealed to the CA, which this time ruled that the DOLE Secretary had deprived NASECO of due process by not allowing the parties to adduce evidence. NAGA-PEMA then appealed to the Supreme Court.

The Supreme Court addressed the central issue of whether NASECO’s right to due process was violated during the reevaluation process. The Court emphasized that due process is essentially about providing a litigant with “a day in court,” meaning an opportunity to be heard and present evidence. The crucial point is the availability of this opportunity, not necessarily its utilization. The Court cited Lumiqued v. Exevea, stating that due process is satisfied if a party is granted an opportunity to seek reconsideration of the ruling.

The Court found that NASECO’s right to due process was not violated. It clarified that a reevaluation is a process of revisiting and reassessing previous findings, not a completely new proceeding requiring fresh evidence and full hearings. The Court highlighted that the DOLE Secretary had, in fact, allowed both parties to submit their computations regarding the awarded benefits. The records showed that NASECO had the opportunity to present supporting documents, including financial statements, to demonstrate its alleged financial incapacity. Therefore, the Supreme Court concluded that the DOLE Secretary had satisfied the requirement of due process by allowing NASECO the opportunity to be heard and present its case, even without a full-blown hearing during the reevaluation phase.

The Court then addressed NAGA-PEMA’s argument that PNB, as the owner and controller of NASECO, should be held liable for the CBA benefits, given NASECO’s financial condition. The Court invoked the doctrine of piercing the corporate veil, which allows disregarding the separate legal personality of a corporation when it is used to defeat public convenience, justify wrong, protect fraud, or defend crime. The Court cited Concept Builders, Inc. v. NLRC to emphasize that the separate personality of a corporation is a fiction created by law for convenience and justice.

However, the Court clarified that piercing the corporate veil is an extraordinary measure to be applied with caution. Control alone is insufficient; there must be a perpetuation of fraud or an illegal purpose behind the control to justify disregarding the corporate fiction. In this case, the Court found no evidence that NASECO’s corporate structure or its relationship with PNB was designed to circumvent labor laws or perpetrate fraud. The Court stated that “Even control over the financial and operational concerns of a subsidiary company does not by itself call for disregarding its corporate fiction. There must be a perpetuation of fraud behind the control or at least a fraudulent or illegal purpose behind the control in order to justify piercing the veil of corporate fiction.”

NAGA-PEMA argued that the “no loss, no profit” scheme between NASECO and PNB effectively meant that PNB was the ultimate source of funds for NASECO’s operations and employee benefits. However, the Court found no evidence that this scheme was implemented to defeat public convenience or circumvent labor laws. Furthermore, the Court noted the existence of a separate pending case regarding the absorption or regularization of NASECO employees against PNB and NASECO, indicating that the issue of PNB’s role as the employer was already under consideration by labor tribunals. Therefore, the Supreme Court declined to pierce the corporate veil and hold PNB directly liable for NASECO’s obligations.

FAQs

What was the key issue in this case?	The central issue was whether the DOLE Secretary violated NASECO’s right to due process by not allowing the parties to adduce evidence during the reevaluation of CBA benefits. The Supreme Court clarified the requirements for due process in such circumstances.
What does ‘reevaluation’ mean in this context?	Reevaluation means revisiting and reassessing previous findings. It does not necessarily require a full hearing or the introduction of new evidence, as it is a continuation of the original case.
When is due process considered to be observed?	Due process is properly observed when there is an opportunity to be heard, to present evidence, and to file pleadings, which was never denied to respondent. The availability of this opportunity is what matters.
What is the doctrine of ‘piercing the corporate veil’?	Piercing the corporate veil allows disregarding the separate legal personality of a corporation when it is used to defeat public convenience, justify wrong, protect fraud, or defend crime. This is an extraordinary measure applied with caution.
Under what circumstances can the corporate veil be pierced?	The corporate veil can be pierced when the corporation is used as a device to defeat labor laws, or when the corporation is merely an adjunct, a business conduit or an alter ego of another corporation. There must generally be a perpetuation of fraud or an illegal purpose.
Was PNB held liable for NASECO’s CBA benefits?	No, the Supreme Court declined to pierce the corporate veil and hold PNB directly liable for NASECO’s CBA benefits. The Court found no evidence that NASECO’s corporate structure was designed to circumvent labor laws or perpetrate fraud.
What was the significance of the ‘no loss, no profit’ scheme?	The Court found that NAGA-PEMA failed to prove that such an agreement was designed to skirt labor regulations or that NASECO was a mere conduit for PNB.
What was the final ruling of the Supreme Court?	The Supreme Court partly granted the petition, reversing the CA’s decision to remand the case for introduction of new evidence. The Orders of the Secretary of Labor were reinstated and upheld.

In conclusion, the Supreme Court’s decision in Naseco Guards Association-PEMA v. National Service Corporation provides valuable guidance on the requirements of due process in labor disputes, particularly during the reevaluation of CBA benefits. The Court clarified that due process is satisfied when parties have the opportunity to be heard, even if a full hearing is not conducted during reevaluation, and reaffirmed the principle that the corporate veil should not be easily pierced absent evidence of fraud or illegal purpose.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: NASECO GUARDS ASSOCIATION-PEMA v. NATIONAL SERVICE CORPORATION, G.R. No. 165442, August 25, 2010