Tabangao Shell Refinery Employees Association v.

Pilipinas Shell Petroleum

Corporation

FACTS: As the current collective bargaining agreement (CBA) between the union and
corporation is coming to an end, the parties started negotiations for a new CBA. The union
proposed a 20% annual across-the-board salary increase for the next 3 years however, the
company proposed a lump sum of P80,000 yearly for the 3-year period to all covered
employees. In reply to the union’s request to provide in full details the basis for its counter-
proposal, the company explained that it is based on the affordability of the corporation and
the current salary levels in the industry but the union rejected it. After another negotiation,
the company increased its offer to P88,000 but again the union requested for justification
but the company refused to give in insisting that the financial measures were available in the
refinery scorecard in the website and shared network drives. The union charged that the
company was bargaining in bad faith while the company expressed its disagreement with
the union’s manifestation and proposed the declaration of a deadlock and recommended a
third party’s assistance.

The union filed a Notice of Strike in the Nat’l. Conciliation & Mediation Board (NCMB)
alleging bad faith bargaining on the part of the company. In the mandatory conciliation-
mediation proceedings, the parties failed to reach an amicable settlement. When the
company learned of the union’s unanimous vote to hold a strike, it filed a Petition for
Assumption of Jurisdiction with the Secretary of Labor & Employment under Art. 263(g) of
the Labor Code. The DOLE, finding that the strike would have a negative impact on national
interest assumed jurisdiction over the dispute and directed the parties to submit their
respective position paper and maintain the status quo existing at the time of the Order or if
the strike had commenced, the workers were directed to return to work and the employer
to readmit all workers under the same terms and conditions prevailing before the strike. The
union filed a petition before the CA questioning the jurisdiction of the DOLE as the issue
raised was unfair labor practice of the company in the form of bad faith bargaining and not
the CBA deadlock citing item 8 of the CBA rules that deadlock can only be declared upon
mutual consent of both parties but where the union did not consent. The CA dismissed the
petition for lack of merit declaring that the DOLE acquired jurisdiction over the dispute
vested to it by Art. 263(g) of the Labor Code.

Meanwhile, the union filed a complaint against the company in the NLRC on allegations of
the company’s refusal to bargain. The NLRC finding that the case arose from the same CBA-
related labor dispute, transmitted the case to the DOLE. The DOLE, holding that there was
already deadlock and there was no showing that the company engaged in unfair labor
practice by bargaining in bad faith, decided the matter of the wage increase and other
economic issues of the new CBA, i.e. to give a lump sum package of P95,000 per year for three
years per covered employee & retention of benefits covered by the preceding CBA. Both
parties did not appeal the DOLE decision thus, it attained finality. The union then went to the
Court via a petition for review under Rule 45 of the Rules of Court.

ISSUE: Whether or not respondent corporation is guilty of bargaining in bad faith?

HELD: NO. The Court held that duty to bargain does not compel any party to accept a
proposal or to make any concession (Art. 252, Labor Code). While the purpose of collective
bargaining is the reaching of an agreement between the employer and the employee’s union
resulting in a binding contract between the parties, the failure to reach an agreement after
negotiations continued for a reasonable period does not mean lack of good faith. A CBA, like
any contract is a product of mutual consent and not of compulsion and the duty to bargain
does not include the obligation to reach an agreement. Respondent’s unswerving position on
the matter of annual lump sum payment in lieu of wage increase did not, by itself, constitute
bad faith even if such position caused a stalemate in the negotiations.

As there was no bad faith on the part of the company in its bargaining with the union,
deadlock was possible and did occur. Fact is, that the negotiations between the union and
the company were stalled by the opposing offers of yearly wage increase by the union, on
the one hand, and annual lump sum payment by the company, on the other hand. Each
party found the other’s offer unacceptable and neither party was willing to yield. The
company suggested seeking the assistance of a third party to settle the issue but the union
preferred the remedy of filing a notice of strike. The absence of the parties’ mutual
declaration of deadlock does not mean that there was no deadlock. This is the essence of
Article 263(g) of the Labor Code which gives the Secretary of Labor & Employment
jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry
indispensable to the national interest. The Court denied the petition declaring that the
Secretary of Labor and Employment committed no abuse of discretion when she assumed
jurisdiction over the labor dispute of the union and the company.