PHILIPPINE AMERICAN EMBROIDERIES, INC., ALBERT NASSER AND JACK NASSER, PETITIONERS, VS. EMBROIDERY & GARMENT WORKERS UNION, RESPONDENT.

Philippine American Embroideries versus Embroidery and Garment Workers Union

The Case

This is a labor case about the boundary between an employer's lawful prerogative to close a losing department and the statutory prohibition against unfair labor practice. The Embroidery and Garment Workers Union charged Philippine American Embroideries, Incorporated, together with its President Albert Nasser and its Vice-President Jack Nasser, with unfair labor practice before the Court of Industrial Relations, alleging refusal to bargain, interference with union activities, discrimination affecting tenure, and lockout. The case matters because the Supreme Court here reverses a finding of unfair labor practice where the closure of a department was shown to rest on continuing business losses rather than on the employees' union affiliation, and because it clarifies that an employer may lawfully ask a union to prove its majority before bargaining.

Procedural History

The union filed its complaint with the Court of Industrial Relations, charging unfair labor practice under Section 4(a), subparagraphs (1), (4) and (6) of Republic Act Number 875, the Industrial Peace Act. The trial Judge, Emiliano Tabigne, ruled against the complainant on all four issues and dismissed the complaint. On motion for reconsideration, the Court en banc, by a divided vote, reversed the trial Judge: it found the company and the two Nasser brothers guilty of unfair labor practice under subparagraphs (4) and (6), ordered reinstatement with back wages, ordered them to cease and desist, and dismissed only the charge of company domination. Presiding Judge Jose Bautista penned the resolution, concurred in by Associate Judge Baltazar Villanueva; Associate Judge Arsenio Martinez concurred and dissented in a separate opinion; Associate Judge Amando Bugayong concurred in the result; and Associate Judge Tabigne maintained his previous stand in a long dissent. The company and the Nasser brothers then brought the matter to the Supreme Court on petition for review.

Facts

Philippine American Embroideries, Incorporated, managed by the Nasser brothers, began its machine-made department for scalloping handkerchiefs in 1956. From the start it followed a practice of laying off employees who could not fulfill their quotas, after giving them warnings of fifteen days or one month, and only those who failed to meet their quotas were laid off. From the early part of 1958 the workers in that department were told by management of the losses it was incurring; the financial statements showed a loss of 62,444 pesos and 55 centavos in 1957 and a loss of 45,872 pesos and 47 centavos in 1958, a total of 108,317 pesos and 3 centavos.

In the last week of October 1958 the workers organized and affiliated with the Embroidery and Garment Workers Union, with about one hundred seventy members from the machine-made department. On October 31 the union wrote the company of its existence, its majority, and its desire to bargain collectively; on November 3 the company received the union's collective bargaining proposals. In the afternoon of that same day, Albert Nasser announced to the workers the closure of the machine-made department and the opening of a new Knitting Gloves Department, telling them to file applications so they could rejoin the company. The company continued to make scalloped handkerchiefs by transferring the machinery to various places in the provinces, leased to independent contractors.

On November 15 the company replied to the demand for bargaining, asking the union first to prove its majority and to obtain a certification from the Court of Industrial Relations, since the company believed the union did not represent the majority and since it had an existing collective bargaining agreement with another union, the Kapisanang Manggagawa sa Phil-American Embroideries, Incorporated. On November 26 the union filed this complaint. On April 4, 1959 the dismissed members made an unconditional offer to work, but the company refused the collective offer and insisted on individual applications. The union's own witness, Felicidad Ros, admitted that the employees organized precisely because they feared being laid off due to the cessation of work.

Issues

• Whether or not the company refused to bargain collectively in violation of Section 4(a), subparagraph (6) of the Industrial Peace Act.
• Whether or not the company interfered in the union activities or affairs of the members of the union.
• Whether or not the company discriminated against the members of the union affecting their tenure of employment.
• Whether or not the company locked out the employees, especially the members of the union.

Applicable Provisions

Section 4(a) of Republic Act Number 875, the Industrial Peace Act, defines unfair labor practice for an employer, and its subparagraphs (4) and (6) are the ones the Court en banc applied against the company:

It shall be unfair labor practice for an employer to commit any of the following acts: To discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization: Provided, That nothing in this Act or in any other Act of the Philippines shall preclude an employer from making an agreement with a labor organization to require as a condition of employment membership therein, if such labor organization is the representative of the employees as provided in section twelve, in the appropriate collective bargaining unit covered by such agreement when made; To refuse to bargain collectively with the representatives of his employees subject to the provisions of section thirteen of this Act.

These are the provisions under which the union charged the company, and the whole question is whether the closure and the request for proof of majority fell within them.

Ruling

The Supreme Court reversed the Court en banc on all the issues and dismissed the complaint. On the charge of discrimination and interference, the Court held that the closure of the machine-made department was not an act of discrimination or a means of dismissal but the result of continued losses in operations, a ground entirely justified by law. The Court found that the department had suffered financial reverses for almost two years, that the employees had been forewarned of closure unless the situation improved, and that the workers affiliated with the union only as a means of preventing the loss of their jobs. The Court stressed that the presentation of bargaining proposals on November 3 could not have been the motive for the closure on the same day, since there was then no existing labor dispute and the company had learned of the union only three days before.

On the charge of refusal to bargain, the Court held that the company did not ignore the demand or refuse to bargain at all. It merely asked the union to prove that it counted with a majority of the employees and to secure a certification from the Court of Industrial Relations. The Court said this was not only the legally approved procedure but was dictated by the fact that the company had an existing collective bargaining agreement with another union.

On the charge of lockout, the Court accepted the trial Judge's finding that the practice of laying off workers who failed their quotas began in 1956, was justified, and was not motivated by the union activities or affiliations of the workers. As to the refusal of the collective offer of work, the Court held that unfair labor practice can hardly be inferred from a willingness to accept applications for work, and that the dismissed employees were in fact seeking employment in the new Knitting Gloves Department, not reinstatement to the defunct department.

Doctrine

An employer may lawfully close a department or cease operations when continued operation would mean financial ruin or business collapse; such a closure, grounded on continuing losses and preceded by warnings to the employees, is not discrimination in regard to tenure of employment under Section 4(a), subparagraph (4) of the Industrial Peace Act, even if it coincides with the employees' union affiliation. Union affiliation does not empower employees to compel the company to continue operations merely to secure continuous employment.

An employer does not refuse to bargain collectively under Section 4(a), subparagraph (6) when, instead of ignoring the union's demand, it asks the union first to prove its majority and to secure a certification from the Court of Industrial Relations, especially where it has an existing collective bargaining agreement with another union. And a willingness to accept applications for work, rather than a rejection of an offer of reinstatement, cannot give rise to an inference of unfair labor practice.

Disposition

The Supreme Court reversed and set aside the resolution of the Court en banc and dismissed the complaint, with costs, in favor of Philippine American Embroideries, Incorporated and the Nasser brothers.

Remember This

Memorize this line: a bona fide closure of a losing department, forewarned and grounded on continuing losses, is a lawful exercise of management prerogative and not unfair labor practice, and asking a union to prove its majority before bargaining is not refusal to bargain. Examiners use this case to test the discrimination and refusal-to-bargain clauses of the Industrial Peace Act, and to distinguish a genuine closure from a retaliatory lockout.