THE PHILIPPINE POSTAL SAVINGS BANK AND FRANCISCO V. LOPEZ, SUPERINTENDENT OF THE PHILIPPINE POSTAL SAVINGS BANK, PETITIONERS, VS. COURT OF INDUSTRIAL RE­LATIONS AND PHILIPPINE C…

Philippine Postal Savings Bank versus Court of Industrial Relations

The Case

This is a petition for review by certiorari filed by the Philippine Postal Savings Bank and its Superintendent, Francisco V. Lopez, against the Court of Industrial Relations and the Philippine Communications, Electronics and Electricity Workers Federation. The Bank asks the Supreme Court to set aside the orders of the Court of Industrial Relations refusing to dismiss the Federation's petition for certification as exclusive bargaining representative of the Bank's employees. The case matters because it fixes the test for whether government workers may invoke the labor protections of Republic Act No. 875 — turning on whether they are employed in governmental or in proprietary functions, and on the nature of the work for which their services are engaged.

Procedural History

On or about August 24, 1964, the Philippine Communications, Electronics and Electricity Workers Federation filed with the Court of Industrial Relations a petition praying that it be certified as the exclusive bargaining representative of all the employees of the Philippine Postal Savings Bank. The Bank moved to dismiss on the ground of lack of jurisdiction, contending that it is a mere division and integral part of the Bureau of Posts, which performs governmental functions and is not subject to Republic Act No. 875. After a preliminary hearing, Judge Bugayong issued an order dated March 4, 1965 denying the motion to dismiss and setting the case for hearing on the merits. The Court of Industrial Relations, sitting en banc, denied reconsideration in a resolution dated April 8, 1965. The Bank and its Superintendent then filed the present petition for review by certiorari to set aside those two issuances, which the Supreme Court resolved on the merits.

Facts

The Federation sought to represent the employees of the Philippine Postal Savings Bank for purposes of collective bargaining. The Bank resisted, insisting that it had no personality of its own apart from the Government, that it was merely a division of the Bureau of Posts, and that it could not be sued without the Government's consent. On that theory it argued that its employees fell outside the coverage of the labor statute.

The record, however, showed that the Bank operated separately from the Bureau of Posts. It kept a set of books of account distinct from those of the Bureau. Although the Bureau advanced the Bank's operational expenses, the Bank refunded them out of its earnings and reserve funds. Those earnings did not accrue to the general funds; they remained with the Bank and were invested by it. Properties acquired in the course of its operations were invested in and managed by the Bank for its own benefit.

Two later developments bore on jurisdiction. On October 28, 1965, the President of the Philippines certified the issue between the parties to the Court of Industrial Relations, under Section 10 of Republic Act No. 875, as a dispute affecting an industry indispensable to the national interest. Then, on November 21, 1966, the Bank itself asked the Court of Industrial Relations to order the Federation and its members to return to work; after a conference, the parties agreed that the respondents would return to work and the petitioners would deposit 83,000 pesos in payment of salary increases and overtime differentials and make specified promotional appointments.

Issues

• Whether or not the Court of Industrial Relations has jurisdiction over the certification petition, that is, whether or not the employees of the Philippine Postal Savings Bank are employed in proprietary rather than governmental functions.
• Whether or not the Bank's claim that it is a mere integral part of the Bureau of Posts, without personality of its own, removes its employees from the coverage of Republic Act No. 875.

Applicable Provisions

Section 11 of Republic Act No. 875 provides:

Prohibition Against Strikes in the Government. - The terms and conditions of employment in the Government, including any political subdivision or instrumentality thereof, are governed by law and it is declared to be the policy of this Act that employees therein shall not strike for the purpose of securing changes or modification in their terms and conditions of employment. Such employees may belong to any labor organization which does not impose the obligation to strike or join in strike. Provided, however, That this section shall apply only to employees employed in governmental functions and not to those employed in proprietary functions of the Government including but not limited to governmental corporations.

This is the provision on which the entire case turns, because it draws the line between employees in governmental functions, who may not join organizations imposing the obligation to strike, and employees in proprietary functions, who are not subject to that restriction.

Ruling

On the first issue, the Court held that the Bank performs proprietary functions. It distinguished the older cases cited by the petitioners — the Metropolitan Transportation Service, the Metropolitan Waterworks, the National Airports Corporation, and the Angat River Irrigation System — on the ground that those entities were mere offices or sections of the Government, integral parts thereof, with expenditures defrayed by the National Government and appropriations itemized in the General Appropriations Act. The Bank was different: it operated separately, kept distinct books, refunded advances from its own earnings, and its earnings did not accrue to the general funds. The Court relied on its earlier ruling in Government of the Philippine Islands versus China Banking Corporation, quoting it:

From this it follows that the funds of the Postal Savings Bank cannot be termed Insular Government funds, and debts contracted in favor of said bank in its ordinary operations as provided by law are not to be held debts in favor of the Insular Government, but in its own name and behalf and for its own benefit, as may be implied from the law on the matter. In such a loan, therefore, the Insular Government is not the lender or the creditor; and hence, the debt is contracted not in its favor but in favor of the Postal Savings Bank, which has a personality of its own.

On the second issue, the Court held that the right of a government employee to enjoy the benefits of Republic Act No. 875 depends, not on whether the office in which he works is engaged in governmental or proprietary functions, but on the nature of the work for which his services have been engaged. It drew this from the statutory phrase that the restriction does not apply to those employed in proprietary functions including but not limited to government corporations, which implies that even employees of an office that is an integral part of the Government may avail of the statute if they in particular are engaged in proprietary functions. The Court added that the presidential certification of October 28, 1965 under Section 10 of Republic Act No. 875 left no room for doubt on the jurisdiction of the Court of Industrial Relations, and that by asking that court to order a return to work and by agreeing to deposit 83,000 pesos, the petitioners had submitted to its jurisdiction and invoked the authority of the statute.

Doctrine

Government employees may join labor organizations, and their right to self-organization is upheld; but Section 11 of Republic Act No. 875 divides them into two groups. Those employed in governmental functions may not belong to labor organizations that impose the obligation to strike or join a strike. Those employed in proprietary functions are not subject to that restriction; they may join such organizations and may strike to secure changes in their terms and conditions of employment, and the power to strike necessarily implies the right to resort to peaceful collective bargaining. The jurisdiction of the Court of Industrial Relations over disputes affecting employees engaged in proprietary functions is well settled.

An entity such as the Philippine Postal Savings Bank, which operates separately from its parent bureau, keeps distinct books, refunds advances out of its own earnings, and holds its earnings and properties for its own benefit, performs proprietary functions and has a personality of its own. More broadly, the right of a government employee to the benefits of Republic Act No. 875 depends not on whether the office is engaged in governmental or proprietary functions, but on the nature of the work for which his services have been engaged.

Disposition

The Supreme Court affirmed the order and resolution of the Court of Industrial Relations, without special pronouncement as to costs; the Bank lost and the certification proceedings before the Court of Industrial Relations stood.

Remember This

The line under Section 11 of Republic Act No. 875 is drawn by the nature of the work, not by the label of the office: proprietary employees of the Government may organize, bargain, and strike, while those in governmental functions may not join organizations that impose the obligation to strike. Examiners use this case to test the governmental versus proprietary distinction and the separate personality of the Postal Savings Bank.