SHELL OIL WORKERS’ UNION vs. SHELL COMPANY OF THE PHILIPPINES, LTD.

, and THE
COURT OF INDUSTRIAL RELATIONS

G.R. No. L-28607, May 31, 1971.

FACTS:

Respondent Shell Company of the Philippines (COMPANY) dissolved its security guard section
stationed at its Pandacan Installation, notwithstanding its (guard section) continuance and that
such is assured by an existing collective bargaining contract. The respondent company transferred
18 security guards to its other department and consequently hired a private security agency to
undertake the work of said security guards. This resulted in a strike called by petitioner Shell Oil
Workers’ Union (UNION), The President certified it to respondent Court of Industrial Relations
(CIR). CIR declared the strike illegal on the ground that such dissolution was a valid exercise of a
management prerogative. Thus this appeal is taken.

Petitioner argued that the 18 security guards affected are part of the bargaining unit and covered
by the existing collective bargaining contract, as such, their transfers and eventual dismissals are
illegal being done in violation of the existing contract. The Company maintained that in contracting
out the security service and redeploying the 18 security guards affected, it was merely performing
its legitimate prerogative to adopt the most efficient and economical method of operation, that said
action was motivated by business consideration in line with past established practice and made
after notice to and discussion with the Union, that the 18 guards concerned were dismissed for
wilfully refusing to obey the transfer order, and that the strike staged by the Union is illegal.

ISSUE:

Whether the existing collective bargaining contract on maintaining security guard section, among
others, constitute a bar to the decision of the management to contract out security guards.

RULING:

YES. The strike was legal because there was a violation of the collective bargaining agreement by
Company. It was part of the CBA that the Security Guard Section will remain. Yet, the Company did
not comply with the stipulation in CBA. It was thus an assurance of security of tenure, at least,
during the lifetime of the agreement. For what is involved is the integrity of the agreement reached,
the terms of which should be binding on both parties
The stand of Shell Company as to the scope of management prerogative is not devoid of plausibility,
management prerogative of the Company would have been valid if it were not bound by what was
stipulated in CBA. The freedom to manage the business remains with management. It cannot be
denied the faculty of promoting efficiency and attaining economy by a study of what units are
essential for its operation. To it belongs the ultimate determination of whether services should be
performed by its personnel or contracted to outside agencies. However, while management has the
final say on such matter, the labor union is not to be completely left out.

An unfair labor practice is committed by a labor union or its agent by its refusal ‘to bargain
collectively with the employer’. Collective bargaining does not end with the execution of an
agreement, being a continuous process, the duty to bargain necessarily imposing on the parties the
obligation to live up to the terms of such a collective bargaining agreement if entered into, it is
undeniable that non-compliance therewith constitutes an unfair labor practice.

The right to self-organization guarded by the Industrial Peace Act explicitly includes the right “to
engage in concerted activities for the purpose of collective bargaining and to the mutual aid or
protection.” The employee, tenant or laborer is inhibited from striking or walking out of his
employment only when so enjoined by the CIR and after a dispute has been submitted thereto and
pending award or decision by the court of such dispute.

In the present case, the employees or laborers may strike before being ordered not to do so and
before an industrial dispute is submitted to the CIR, subject to the power of the latter, after hearing
when public interest so requires or when the dispute cannot, in its opinion, be promptly decided or
settled, to order them to return to work, with the consequence that if the strikers fail to return to
work, when so ordered, the court may authorize the employer to accept other employees or
laborers.” Thus a strike may not be staged only when, during the pendency of an industrial dispute,
the CIR has issued the proper injunction against the laborers (section 19, Commonwealth Act No.
103, as amended).

WHEREFORE, the decision of respondent Court of Industrial Relations of August 5, 1967 is

reversed.

MANILA ELECTRIC COMPANY, petitioner, vs. Hon. Secretary of Labor Leonardo Quisumbing
and Meralco Employees and Workers Association (MEWA), respondents.
[G.R. No. 127598. February 22, 2000]

Facts;
In 1999, the SC promulgated a decision directing the parties to execute a CBA which provided for
increase in wages and retroactive application of arbitral awards. MERALCO filed this petition
arguing that an increase in wages will result in higher rates of electricity which will be passed to the
consumers. The Union likewise asks for reconsideration in so far as the 1999 decision denied them
the benefit of being granted loans to set up a cooperative. Finally, the Union questions the right
given to MERALCO in contracting out jobs without need to consult the Union.

Issues;
1. WON increase in wages will result in higher prices of electricity
2. WON grant of arbitral awards retroactive
3. WON cooperative may demand for the loan for a cooperative
4. WON contracting without need to consult Union valid provision

Held / Ratio;
1. This is a non sequitur. An increase in the prices of electric current needs the approval of the
appropriate regulatory government agency and does not automatically result from a mere
increase in the wages. Collective bargaining disputes "requires due consideration and proper
balancing of the interests of the parties to the dispute and of those who might be affected by the
dispute."It should be noted that the relations between labor and capital is impressed with
public interest which must yield to the common good. Neither party should act oppressively
against the other or impair the interest or convenience of the public.

2. CBA arbitral awards granted after six months from the expiration of the last CBA shall retroact
to such time agreed upon by both employer and the employees or their union. Absent such an
agreement as to retroactivity, the award shall retroact to the first day after the six-month
period following the expiration of the last day of the CBA should there be one. In the absence of
a CBA, the Secretary’s determination of the date of retroactivity as part of his discretionary
powers over arbitral awards shall control.

3. There is no merit in the union’s claim that it is no different from housing loans. The award of
loans for housing is justified because it pertains to a basic necessity. In contrast, providing seed
money for the establishment of the cooperative is a matter in which the employer has no
business interest or legal obligation.

4. The employer is allowed to contract out services for six months or more. However, a line must
be drawn between management prerogatives regarding business operations per se and those
which affect the rights of employees, and in treating the latter, the employer should see to it
that its employees are at least properly informed of its decision or modes of action in order to
attain a harmonious labor-management relationship and enlighten the workers concerning
their rights. Hiring of workers is within the employer’s inherent freedom to regulate and is a
valid exercise of its management prerogative subject only to special laws and agreements on
the matter and the fair standards of justice. While there should be mutual consultation,
eventually deference is to be paid to what management decides.