PRICE STABILIZATION CORPORATION, PETITIONER, VS. COURT OF INDUSTRIAL RELATIONS AND PRISCO WORKERS’ UNION, ET AL., RESPONDENTS.

Price Stabilization Corporation versus Court of Industrial Relations

The Case

This is a petition for review by certiorari filed by the Price Stabilization Corporation, known as PRISCO, against the Court of Industrial Relations and the PRISCO Workers' Union. PRISCO asks the Supreme Court to set aside an order of the industrial court requiring it to pay its security guards their basic pay and twenty five per cent additional compensation for one hour of overtime work rendered from April 1953 to January 1954. The case matters for two reasons. First, it settles the dividing line between the jurisdiction of the Court of Industrial Relations and that of the regular courts over money claims of laborers. Second, it applies the Civil Code rules on ratification to a supplemental employment obligation created by a memorandum issued by an officer without prior authority but later tolerated by the general manager.

Procedural History

On February 1955, the PRISCO Workers' Union filed a petition with the Court of Industrial Relations, seeking overtime pay for one hour of daily work rendered by its members as security guards, and additional compensation for work on Sundays and legal holidays. PRISCO answered, denying the overtime claim on the ground that the overtime was unauthorized, and alleging that the Sunday and holiday work had already been paid and that the claim had been withdrawn.

After hearing, the Court of Industrial Relations, on December 1957, issued an order requiring PRISCO to pay the claimants their basic pay and twenty five per cent additional compensation for the one hour of overtime work. It dismissed the second claim for lack of evidence and in view of a petition signed by fifty nine of the one hundred thirty one claimants withdrawing that claim.

PRISCO moved for reconsideration. The Court of Industrial Relations, sitting en banc, was divided: two judges voted for straight denial, two voted to set aside the order as null and void for lack of jurisdiction, and one concurred in the denial because the question of jurisdiction had not been raised in the pleadings. PRISCO then filed this petition for review by certiorari with the Supreme Court.

Facts

The claimants were security guards employed by PRISCO and required to observe a twenty four hour guard duty divided into three shifts of eight hours each. On April 1953, the Assistant Chief Security Officer of PRISCO, acting for the Chief Security Officer, issued a memorandum directing the security guards to report for duty two hours in advance of the usual time for guard work. Pursuant to this memorandum, the guards rendered the extra hour of work until January 1954, when the order was revoked after a change of management.

Shortly after the memorandum was enforced, the security guards protested to the management, particularly to the General Manager, Santiago de la Cruz, and to two directors. Instead of revoking the memorandum as unauthorized, the General Manager told the guards that it was being enforced to discipline them, that their work was only light, and that one hour was of no importance.

The Court of Industrial Relations held that this amounted to a tacit ratification of the memorandum by an official who, as PRISCO itself claimed, had the power to validly act for it. Applying the Civil Code provisions on ratification, the court concluded that any defect in the memorandum was corrected. PRISCO argued that those provisions govern voidable contracts only, and that the memorandum was not a contract but an illegal order that could not be tacitly ratified.

Issues

• Whether or not the Court of Industrial Relations had jurisdiction over the claim for overtime pay filed by the PRISCO Workers' Union.
• Whether or not the Court of Industrial Relations correctly applied Articles 1393 and 1396 of the new Civil Code to the case.

Applicable Provisions

Article 1393 of the new Civil Code provides:

Ratification may be affected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right.

This provision supplies the test for whether the General Manager's conduct amounted to tacit ratification of the unauthorized memorandum.

Article 1396 of the new Civil Code provides:

Ratification cleanses the contract from all its defects from the moment it was constituted.

This provision explains why the ratification reached back and validated the supplemental obligation from the time the memorandum took effect.

Ruling

On the first issue, the Court reviewed its prior decisions and drew out the underlying principle. Where the employer employee relationship is still existing, or is sought to be reestablished because of its wrongful severance, as where the employee seeks reinstatement, the Court of Industrial Relations has jurisdiction over all claims arising out of or in connection with employment, such as those related to the Minimum Wage Law and the Eight Hour Labor Law. After the relationship has terminated and no reinstatement is sought, such claims become mere money claims and fall within the jurisdiction of the regular courts. The Court expressly declared this principle as the one governing all cases of this nature. Since the claimants were actually in the employ of PRISCO at the time they presented their claims, the Court of Industrial Relations correctly took cognizance of the case.

On the second issue, the Court held that PRISCO's view was without merit. A contract of employment existed between PRISCO and the claimants, under which the latter were to render eight hours of labor. When PRISCO's official required them to render an additional hour of work, and they had to comply because non compliance was punishable and actually punished with disciplinary action, a supplemental contractual obligation was created, both under the terms of the original contract of employment and under the Eight Hour Labor Law, that such additional work was to be compensated. That the memorandum was originally unauthorized did not make it illegal to the extent of not being capable of ratification by the duly authorized official, the General Manager. Hence, the lower court correctly applied Articles 1393 and 1396 upon the facts found by it and amply supported by the record.

Doctrine

First, the Court of Industrial Relations has jurisdiction over all claims arising out of or in connection with employment, including claims under the Minimum Wage Law and the Eight Hour Labor Law, where the employer employee relationship is still existing or is sought to be reestablished because of its wrongful severance. Once the relationship has terminated and no reinstatement is sought, the claims become mere money claims cognizable by the regular courts.

Second, an act of an unauthorized officer may be tacitly ratified by the duly authorized official, and under Article 1396 such ratification cleanses the act from all its defects from the moment it was constituted. The ratification rules are not confined to voidable contracts in the strict sense; they apply where a supplemental contractual obligation arises from the unauthorized act and the employer, with knowledge of the defect, accepts the benefits of the employee's compliance.

Disposition

The Supreme Court found no error in the decision appealed from and the resolution upholding it, affirmed both, and ordered PRISCO to pay the costs.

Remember This

Memorize the dividing line: while the employer employee relationship subsists or reinstatement is sought, the industrial court has jurisdiction over employment claims; after termination without reinstatement, they are mere money claims for the regular courts. Examiners use this case to test jurisdiction over overtime claims and the reach of tacit ratification under Articles 1393 and 1396.