In Slord Development Corporation v. Benerando M. Noya, the Supreme Court addressed the legality of dismissing an employee for forming a rival union, based on a Collective Bargaining Agreement’s (CBA) closed shop provision. The Court ruled that the dismissal was valid due to the employee’s disloyalty, but the employer failed to follow proper procedure. This decision clarifies the balance between union security clauses and an employee’s right to organize, highlighting the importance of due process even when just cause for termination exists. The employer was ordered to pay nominal damages for the procedural lapse, emphasizing the need for adherence to both substantive and procedural requirements in labor disputes.

When Forming a New Union Leads to Termination: Navigating CBA’s Closed Shop Rule

The case of Slord Development Corporation v. Benerando M. Noya revolves around the intricate interplay between an employee’s right to form a union and a company’s adherence to a closed shop provision within a Collective Bargaining Agreement (CBA). Benerando Noya, a welder at Slord Development Corporation, was terminated after he formed a new union, the Bantay Manggagawa sa SLORD Development Corporation (BMSDC). His termination was triggered by a demand from the existing union, Nagkakaisang Lakas ng Manggagawa-Katipunan (NLM-Katipunan), citing the CBA’s union security clause. This clause mandated that employees must maintain membership in good standing with NLM-Katipunan, and Noya’s actions were deemed a violation, leading to his expulsion from the union and subsequent dismissal from his job.

The legal question at the heart of this case is whether Slord Development Corporation legally terminated Noya, considering the closed shop provision and Noya’s right to form a new union. The Labor Arbiter (LA) initially dismissed Noya’s complaint for illegal dismissal, siding with Slord Development Corporation. The LA reasoned that the company was obligated to terminate Noya’s employment after his expulsion from NLM-Katipunan, due to the binding closed shop agreement. However, the National Labor Relations Commission (NLRC) partially reversed this decision, acknowledging the disloyalty but finding that the company failed to provide Noya with adequate opportunity to defend himself. As a result, the NLRC ordered Slord Development Corporation to pay Noya nominal damages.

Dissatisfied with the NLRC’s ruling, Noya elevated the case to the Court of Appeals (CA), which sided with Noya, declaring his dismissal illegal. The CA argued that there was insufficient evidence to support the union’s decision to expel him and that Noya was deprived of procedural due process. The CA ordered Slord Development Corporation to reinstate Noya, pay his backwages, and provide other allowances, along with attorney’s fees. This prompted Slord Development Corporation to seek recourse from the Supreme Court, challenging the CA’s decision and seeking a reversal.

At the core of the dispute is the validity and enforceability of the union security clause, specifically the closed shop agreement, within the CBA. Article 259 (formerly 248), paragraph (e) of the Labor Code, allows parties to require membership in a recognized collective bargaining agent as a condition for employment, with certain exceptions. This provision forms the legal basis for union security clauses, which aim to promote unionism and collective bargaining. The Supreme Court has consistently recognized the validity of closed shop agreements as a legitimate form of union security, viewing them as a means to encourage workers to join and support their chosen union.

“Union security is a generic term which is applied to and comprehends ‘closed shop,’ ‘union shop,’ ‘maintenance of membership’ or any other form of agreement which imposes upon employees the obligation to acquire or retain union membership as a condition affecting employment,” the Court noted, underscoring the breadth of union security arrangements. However, the enforcement of such clauses is not without limitations. The Court emphasized that to validly terminate an employee through a union security clause, three requisites must be met: applicability of the clause, a union request for enforcement, and sufficient evidence supporting the union’s decision to expel the employee.

In evaluating the case, the Supreme Court found that all three requisites were indeed present. First, the CBA contained a valid closed shop agreement, requiring employees to join and maintain good standing with NLM-Katipunan. Second, NLM-Katipunan formally requested the enforcement of the union security clause by demanding Noya’s dismissal due to his disloyalty. Finally, the Court found that there was sufficient evidence to support the union’s decision to expel Noya. NLM-Katipunan presented statements from employees indicating that Noya solicited signatures to form a new union and an application for registration of BMSDC, confirming his involvement in organizing a rival union outside the freedom period.

The Court distinguished this case from previous rulings, such as PICOP Resources, Incorporated v. Tañeca, where employees merely signed an authorization letter for another union’s certification election. Here, Noya went a step further by actively forming and organizing BMSDC, a rival union. This distinction was critical in the Court’s determination that Noya’s actions constituted disloyalty, justifying his expulsion from NLM-Katipunan. Furthermore, the Court cited Tanduay Distillery Labor Union v. NLRC, which held that organizing a rival union outside the freedom period, without terminating membership in the existing union, is an act of disloyalty that warrants sanction.

However, despite finding just cause for Noya’s termination, the Supreme Court also addressed the issue of procedural due process. The Court reiterated that procedural due process requires that the employer provide the employee with two written notices: one informing them of the acts or omissions for which dismissal is sought and another informing them of the employer’s decision to dismiss. Additionally, the employee must be given an opportunity to be heard. In this case, the Court found that Slord Development Corporation failed to provide Noya with ample opportunity to defend himself through written notices and a subsequent hearing.

As a result, the Supreme Court upheld the finding that Noya’s right to procedural due process was violated, entitling him to nominal damages. The Court increased the award of nominal damages from P10,000.00 to P30,000.00, aligning it with existing jurisprudence. This decision reaffirms the importance of adhering to procedural requirements, even when just cause for termination exists. The Court emphasized that while Noya’s disloyalty justified his dismissal, Slord Development Corporation’s failure to follow proper procedure warranted the payment of nominal damages.

FAQs

What was the key issue in this case?	The key issue was whether an employee could be legally terminated for forming a rival union under a CBA with a closed shop provision, and whether the employer followed proper procedure in doing so.
What is a closed shop agreement?	A closed shop agreement requires employees to join and remain members of a specific union as a condition of their employment. It is a form of union security clause aimed at promoting unionism.
What is the “freedom period” in labor law?	The freedom period is the 60-day period immediately preceding the expiration of a CBA, during which employees can freely join or form a new union without violating union security clauses.
What did the Court rule about the employee’s dismissal?	The Court ruled that the dismissal was justified due to the employee’s act of disloyalty in forming a rival union outside the freedom period, which violated the CBA’s closed shop agreement.
Did the employer follow the correct procedure for dismissal?	No, the employer failed to provide the employee with sufficient notice and opportunity to be heard, violating the employee’s right to procedural due process.
What is the remedy for a procedural due process violation in a dismissal case?	The employer is typically ordered to pay nominal damages to the employee. In this case, the Supreme Court increased the damages to P30,000.00.
What are the requirements for a valid termination based on a union security clause?	The requirements are: (1) the union security clause is applicable; (2) the union requests enforcement; and (3) there is sufficient evidence to support the union’s decision to expel the employee.
What is the difference between a closed shop and a union shop?	A closed shop requires new employees to already be union members upon hiring, while a union shop requires new employees to join the union within a specified period after being hired.
What constitutes disloyalty in the context of union membership?	Disloyalty can include forming or joining a rival union outside the freedom period, without first terminating membership in the existing union.

In conclusion, the Supreme Court’s decision in Slord Development Corporation v. Benerando M. Noya underscores the delicate balance between union security and employee rights. While closed shop agreements are recognized as valid tools for promoting unionism, their enforcement must adhere to both substantive and procedural due process requirements. Employers must ensure that employees are afforded adequate notice and opportunity to be heard, even when there is just cause for termination under a union security clause.

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: SLORD DEVELOPMENT CORPORATION, PETITIONER, V. BENERANDO M. NOYA, RESPONDENT., G.R. No. 232687, February 04, 2019