[With resolution of March 29, 1962]

San Carlos Milling versus Allied Workers Association of the Philippines

The Case

This is a labor case that arose from a collective bargaining relationship gone sour. San Carlos Milling Company, the employer, dismissed an old employee named Sinforoso Kyamko at the demand of the Allied Workers Association of the Philippines, the incumbent union, invoking a union shop clause. A rival union, the Philippine Land Air Sea Labor Union, protested the dismissal, demanded reinstatement, and when refused, staged a strike. The employer retaliated by refusing to take the strikers back. The case matters because the Supreme Court drew a sharp line on how union shop and closed shop clauses must be read: strictly, and never extended by implication to old employees already working when the agreement was signed. It also settled that a strike for better terms is a legitimate activity whose legality does not depend on whether the demands are reasonable.

Procedural History

The dispute was brought before the Court of Industrial Relations, which heard two related cases jointly. The Court of Industrial Relations found that only the dismissal of Kyamko constituted an unfair labor practice on the part of the Company, and it ordered the reinstatement of Kyamko and the strikers with back wages. The Company moved for reconsideration, and the Court of Industrial Relations denied the motion. The Company then elevated the matter to the Supreme Court by certiorari. The Supreme Court rendered its main decision, and both the Company and the Allied Workers Association of the Philippines filed motions for reconsideration. The Supreme Court denied those motions in its resolution of March 29, 1962, and remanded the records to the Court of Industrial Relations for the determination of the amount and manner of payment of back wages.

Facts

On December 2, 1952, San Carlos Milling Company entered into a collective bargaining agreement with the Allied Workers Association of the Philippines, a legitimate labor organization of its workers. The contract contained a union shop agreement and provided that its duration would be three years, automatically renewable thereafter unless the parties agreed otherwise. Later, a second union, the Philippine Land Air Sea Labor Union, was organized in the company. Sinforoso Kyamko, an employee since 1948 and a member of the Allied Workers Association of the Philippines, joined this second union and actively campaigned for it.

On December 13, 1955, the board of directors of the Allied Workers Association of the Philippines resolved to investigate members who had committed acts of disloyalty. Kyamko was investigated, was present, and was given the opportunity to defend himself. He was found guilty of disloyalty and expelled from the association on December 26, 1955. Upon the union's demand, the Company dismissed Kyamko on February 18, 1956, pursuant to the union shop provisions of the contract.

Earlier, on November 28, 1955, the Philippine Land Air Sea Labor Union had informed the Company of its organization and its intention to demand a certification election, and on December 2, 1955, it filed a petition for certification election, which was still pending when the strike came. On March 5, 1956, the rival union asked for Kyamko's reinstatement and petitioned for better terms and conditions of employment, warning of a strike if the Company did not act within thirty days. The Company refused, and on April 12, 1956, the union declared a strike joined by 149 of its members. The strikers offered to return to work on April 27, 1956, but the Company refused to reinstate them.

Issues

• Whether or not the Company's dismissal of Kyamko pursuant to its union shop agreement with the Allied Workers Association of the Philippines was legally justified.
• Whether or not the strike declared on April 12, 1956 was legal.
• Whether or not the Company was obliged to reinstate the strikers who offered to return to work.
• Whether or not the Company is liable for back wages, and if so, in what amount.

Applicable Provisions

The decision quotes the renewal clause of the December 12, 1952 contract, which provides:

That the duration of this agreement shall be for three years from December 12, 1952, and automatically renewable thereafter unless the parties hereto agree and decide otherwise.

This clause is the basis for holding that the contract was still in force when Kyamko was dismissed.

The decision also quotes the July 14, 1955 agreement, which provides:

The parties further record their complete understanding and agreement to effect a renewal for another three years of the Collective Bargaining and Union Shop Agreement entered into between them on December 12, 1952 upon its expiration on December 11, 1955.

This confirms the express renewal of the contract for another three years.

Paragraph 4 of the union shop agreement, covering new employees, provides:

New employees and laborers hired who are not members of the Workers Association will be on temporary status and the employer agrees that before they will be considered regular employees and laborers, they have to become members of the Allied Workers Association of the Philippines or the Allied Workers Association of the Philippines, San Carlos Chapter within 30 days from the date of employment and if they refuse to affiliate with the said labor organization within this time, they will be immediately dismissed by the employer. After a laborer or employee is hired pursuant to this arrangement, and he resigns later from the Workers Association or is expelled from it due to acts committed by him contrary to the By-Laws, rules and regulations of the Workers Association, the management, upon advice of the Workers Association, shall dismiss the said laborer or employee.

This paragraph expressly authorizes dismissal after expulsion, but only for new employees, and the Court refused to extend it to old employees.

Paragraph 5, covering employees already working, provides:

Employees and laborers presently working in any department or section of the factory or mill of the Employer, including those who are working by piece jobs or pakiao system, who are not members of the Workers Association shall hereby be declared as temporary employees and laborers and shall be given thirty days time from the date of this agreement within which to join or affiliate with the Workers Association, and if they refuse to do so their positions will be declared vacant and will be filled in the manner provided for in this agreement. However, employees and laborers who have rendered ten years continuous service with the Employer may not be affected by this condition, provided they are not members of, and will not join or affiliate with other labor unions or associations, although they may join the Workers Association, if they so desire.

This paragraph requires old employees to join within thirty days, but it contains no clause authorizing their dismissal upon subsequent expulsion, and that silence is decisive.

Ruling

On the first issue, the Court held that the contract of December 12, 1952 had been renewed. The word automatically modifying renewable, and the phrase unless the parties hereto agree and decide otherwise, showed that no further act was needed to continue the contract, and the July 14, 1955 agreement removed all doubt. The Court stressed that it was concerned with the intent of the parties, not with strict grammatical construction, and that a construction unduly hampering the renewal of labor contracts appears undesirable.

But the Court held that the union shop agreement did not authorize Kyamko's dismissal. Paragraph 4 expressly authorized dismissal after expulsion only for new employees. Paragraph 5, covering those presently working, required them to join within thirty days but said nothing about dismissal upon later expulsion. The Court ruled that union shop, as with closed shop provisions, should be strictly construed against the existence of union shop, and will not be deemed to authorize by implication the dismissal of employees already working before the agreement was made. Kyamko, an employee since 1948, was an old employee on whom the union shop imposed no obligation to remain a member in good standing. His dismissal was therefore, in legal effect, an unfair labor practice prompted by his membership and activities in the rival union.

On the second issue, the Court held the strike legal. A strike to secure better terms and conditions of employment is a legitimate labor activity recognized by law, and its legality does not depend on the reasonableness of the demands. Even if Kyamko's dismissal had been lawful, that alone would not make the strike illegal.

On the third issue, the Court held that the Company had no right to count the strikers' participation in a legal strike against them. A strike is not abandonment of employment, and workers do not cease to be employed, in legal contemplation, simply because they struck against their employer. The union shop itself could not bar readmission, since its coverage was limited and the strikers had not been expelled in accordance with the procedure followed against Kyamko.

On the fourth issue, the Court, considering the difficulty of the questions involved, gave the Company the benefit of its good faith and reduced the back wages to one-half, counted from April 27, 1956 up to actual reinstatement. On reconsideration, the Court refused total exemption, since that would place the entire burden of the employer's error on the laborers, who were the weaker party in economic power and resources.

Doctrine

Union shop and closed shop provisions are harsh and onerous and must be strictly construed against the existence of union shop. They are not extended beyond the explicit coverage of their terms and will not be deemed to authorize by implication the dismissal of employees already working before the agreement was made. The dismissal of laborers for non-union membership must be expressly and unequivocally stipulated. As the Court put it in the resolution:

An undertaking of this nature is so harsh that it must be strictly construed, and doubts must be resolved against the existence of closed shop.

A strike to secure better terms and conditions of employment is a legitimate labor activity, and its legality does not depend on the reasonableness of the demands. A strike is not abandonment of employment, and an employer commits an unfair labor practice when it refuses to readmit strikers solely because they participated in a legal strike. Good faith on the part of the employer may justify an equitable reduction of back wages, but not a total exemption.

Disposition

The Court affirmed the finding of unfair labor practice and ordered the reinstatement of Kyamko and the strikers, but modified the decision by reducing the back wages to one-half, and remanded the records to the Court of Industrial Relations for the determination of the amount and manner of payment.

Remember This

Memorize this line: union shop and closed shop clauses are strictly construed against the existence of union shop, and the dismissal of old employees for non-union membership must be expressly and unequivocally stipulated. Examiners use this case on the strict construction of union security clauses, on the legality of strikes for better terms, and on the rule that a strike is not abandonment of employment.