In Erson Ang Lee v. Samahang Manggagawa, the Supreme Court upheld the right of workers to form a union and engage in collective bargaining, preventing employers from using separate corporate entities to frustrate this right. The Court allowed a certification election to proceed among the employees of three related companies, treating them as a single bargaining unit. This decision ensures that businesses cannot use corporate structures to undermine workers’ rights to organize and collectively bargain, reinforcing the protection afforded to labor under Philippine law.

Lamination Layers: When Shared Resources Obscure Workers’ Rights?

Erson Ang Lee, doing business as “Super Lamination Services,” challenged a Department of Labor and Employment (DOLE) decision allowing a certification election among the rank-and-file employees of Super Lamination, Express Lamination Services, Inc., and Express Coat Enterprises, Inc. Lee argued that these were separate entities, and thus, employees of one could not vote in the certification election of another. The core legal question was whether the doctrine of piercing the corporate veil should apply to treat these ostensibly separate companies as a single employer for purposes of collective bargaining.

The case began with three separate unions—Samahang Manggagawa ng Super Lamination (SMSLS-NAFLU-KMU), Express Lamination Workers’ Union, and Samahan ng mga Manggagawa ng Express Coat Enterprises, Inc.—filing petitions for certification elections in their respective companies. Super Lamination, Express Lamination, and Express Coat, all under the representation of one counsel, opposed the petitions, claiming a lack of employer-employee relationship between the establishments and the union members. They argued that employees listed in one company’s roster were actually employed by another, leading to the denial of all three petitions by DOLE’s National Capital Region (NCR) Med-Arbiters.

The unions appealed to the Office of the DOLE Secretary, which consolidated the appeals. They argued that the companies were unorganized and under the same management’s control and supervision. DOLE sided with the unions, finding that the companies had a common human resource department and rotated their workers, indicating a work-pooling scheme. This, according to DOLE, justified treating the companies as one entity for determining the appropriate bargaining unit in a certification election. DOLE applied the concept of multi-employer bargaining under Department Order 40-03, Series of 2003, and ordered a certification election among the rank-and-file employees of all three companies.

Lee appealed to the Court of Appeals (CA), which affirmed DOLE’s decision, agreeing that the companies were sister companies adopting a work-pooling scheme. The CA held that DOLE correctly applied the concept of multi-employer bargaining. Lee then elevated the case to the Supreme Court, arguing that separate corporations cannot be treated as a single bargaining unit.

The Supreme Court denied the petition and affirmed the CA’s decision. The Court tackled the issue of whether the doctrine of piercing the corporate veil was warranted. While acknowledging that separate corporations generally have distinct juridical personalities, the Court emphasized that this principle is not absolute. The doctrine of piercing the corporate veil allows the courts to disregard this separation when it is used to defeat public convenience, justify wrong, protect fraud, or defend crime. The Court cited several instances where it had disregarded separate juridical personalities to protect the rights of third parties, particularly laborers.

The Court outlined a settled formulation of the doctrine, stating that “when two business enterprises are owned, conducted, and controlled by the same parties, both law and equity will, when necessary to protect the rights of third parties, disregard the legal fiction that these two entities are distinct and treat them as identical or as one and the same.” It emphasized that this formulation has been applied to cases where laborers are disadvantaged due to the separate juridical personalities of their employers, citing examples where corporations were held jointly and severally liable for back wages or found guilty of illegal dismissal.

In this case, the Court found that Super Lamination, Express Lamination, and Express Coat were under the control and management of petitioner Ang Lee. It enumerated several key facts that supported this conclusion: (1) the companies were engaged in the same business; (2) they operated and hired employees through a common human resource department; (3) workers were constantly rotated among the three companies; (4) the common human resource department imposed disciplinary sanctions and directed the daily performance of employees; (5) Super Lamination included employees of the other companies in its payroll and SSS registration; (6) Super Lamination issued and signed identification cards for employees working for the other companies; and (7) all three companies were represented by the same counsel, who presented the same arguments.

The Court also found an attempt to frustrate the workers’ right to collectively bargain. The companies alternately referred to one another as the employer of the union members, resulting in the dismissal of the certification election petitions and confusion among the employees. To safeguard the workers’ right to collective bargaining, the Court held that the corporate veil of Express Lamination and Express Coat must be pierced, and the three companies treated as one for the purpose of holding a certification election.

The Court distinguished this case from Diatagon Labor Federation Local v. Ople and Indophil Textile Mill Worker Union v. Calica, where it had refused to treat separate corporations as a single bargaining unit. In those cases, the corporations were found to be completely independent or were not involved in any act that frustrated the laborers’ rights. The Court emphasized that, in this case, not only were the companies found to be under the control of the petitioner, but there was also a discernible attempt to disregard the workers’ and unions’ right to collective bargaining.

The Court also addressed the argument that the rank-and-file employees of the three companies could not constitute an appropriate bargaining unit due to their different geographical locations. The Court reiterated that the basic test for determining an appropriate bargaining unit is whether the employees have substantial, mutual interests in wages, hours, working conditions, and other subjects of collective bargaining. While geographical location is a factor, it can be disregarded if the communal or mutual interests of the employees are not sacrificed.

In this case, the Court found that the employees had a communal interest based on their constant rotation among the three companies and the performance of the same or similar duties. Their employment status and working conditions were substantially similar, justifying the conclusion that they shared a community of interest. This finding aligns with the policy favoring a single-employer unit, as it strengthens the employees’ bargaining capacity. As the Court correctly observed, the work-pooling scheme should not be used to defeat the workers’ right to collective bargaining, which is essential for promoting harmonious labor-management relations.

FAQs

What was the key issue in this case?	The key issue was whether the doctrine of piercing the corporate veil should be applied to treat three related companies as a single employer for the purpose of a certification election.
What is a certification election?	A certification election is a process where employees vote to determine which union, if any, will represent them in collective bargaining with their employer. This ensures fair representation and negotiation.
What does it mean to “pierce the corporate veil”?	Piercing the corporate veil is a legal doctrine that allows a court to disregard the separate legal personality of a corporation. This is typically done when the corporation is used to commit fraud, injustice, or circumvent the law.
Why did the Supreme Court decide to pierce the corporate veil in this case?	The Court pierced the corporate veil because the three companies were found to be under the control of the same person and were using their separate corporate identities to frustrate the workers’ right to collective bargaining.
What is a bargaining unit?	A bargaining unit is a group of employees who share a community of interest and are represented by a union for collective bargaining purposes. The appropriate bargaining unit is key to ensuring fair representation.
What is multi-employer bargaining?	Multi-employer bargaining involves several employers negotiating collectively with a union that represents their employees. While optional under Department Order No. 40-03, it demonstrates the State’s policy to promote free and responsible collective bargaining.
What factors determine an appropriate bargaining unit?	The main factor is whether the employees share substantial, mutual interests in wages, hours, working conditions, and other subjects of collective bargaining. Geographical location is considered, but is secondary to the communal interests of the employees.
What is the significance of a work-pooling scheme in this case?	The work-pooling scheme, where employees were constantly rotated among the three companies, demonstrated that the companies were not truly separate and that the employees shared a community of interest, strengthening the case for piercing the corporate veil.

The Supreme Court’s decision in Erson Ang Lee v. Samahang Manggagawa reaffirms the importance of protecting workers’ rights to self-organization and collective bargaining. By applying the doctrine of piercing the corporate veil, the Court ensured that employers cannot use separate corporate entities to undermine these rights. This ruling serves as a reminder that labor laws are designed to promote fairness and equity in the workplace, and that the courts will not hesitate to disregard corporate structures when they are used to circumvent these laws.

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: Erson Ang Lee v. Samahang Manggagawa, G.R. No. 193816, November 21, 2016