PAMPANGA BUS COMPANY, INC., PETITIONER, VS. PAMBUSCO EMPLOYEES’ UNION, INC., RESPONDENT.

Pampanga Bus Company versus Pambusco Employees' Union

The Case

This is a petition by the Pampanga Bus Company against the Pambusco Employees' Union, questioning an order of the Court of Industrial Relations that required the bus company to recruit its new employees and laborers from the members of the union. The company resisted, insisting that no law compels it to employ union members in preference to others. The case matters because it fixes the constitutional boundary between the right of laborers to organize and bargain collectively and the liberty of the employer to select whom it will hire, a boundary every labor lawyer must be able to draw.

Procedural History

The Court of Industrial Relations issued the order of May 31, 1939, directing the Pampanga Bus Company to recruit from the Pambusco Employees' Union the new employees or laborers it might need to replace union members who could be dismissed, with the proviso that if the union failed to supply employees with the necessary qualifications, the company could employ any other persons it desired. The company brought the matter to the Supreme Court, which resolved it by reversing the order of the Court of Industrial Relations.

Facts

The Pambusco Employees' Union was the labor organization of the workers of the Pampanga Bus Company. A controversy arose over the replacement of union members who might be dismissed from the company's service, and it reached the Court of Industrial Relations.

On May 31, 1939, the Court of Industrial Relations issued an order directing the company to recruit from the union the new employees or laborers it might need to replace those dismissed members. The order carried a proviso: if the union failed to provide employees possessing the necessary qualifications, the company could employ any other persons it desired.

In substance and in effect, the order compelled the company, against its will, to employ the members of the union preferentially in its service. The company challenged the order as an unconstitutional restraint on its liberty to contract and to choose its employees.

Issues

• Whether or not the Court of Industrial Relations had authority to issue a compulsory order requiring the employer to recruit its new employees preferentially from the members of a labor union.
• Whether or not the right of the employer to select its employees and to make contracts in relation to its business is part of the liberty protected by the due process clause of the Constitution.
• Whether or not the grant to labor organizations of the right to collective bargaining carries with it the power to compel the employer to enter into agreements or to employ union members against its will.

Applicable Provisions

Section 2 of Commonwealth Act Number 213, on the right of labor organizations, provides:

It shall be the right of labor organizations to collective bargaining with employers for the purpose of seeking better working and living conditions, fair wages, and shorter working hours for laborers, and, in general, to promote the material, social and moral well-being of their members.

This provision matters because the Court read it as granting the union the right to bargain, not the right to compel the employer to hire its members.

Section 21 of Commonwealth Act Number 103, on unfair discrimination against laborers, provides:

It shall be unlawful for any employer to discharge or to threaten to discharge, or in any other manner discriminate against, any laborer or employee because such person has testified or is about to testify, or because such employer believes that he may testify in any investigation, proceeding or public hearing conducted by the Court or any board of inquiry.

This provision matters because it shows the kind of limitation the law may impose on the employer's right to discharge, a limitation aimed at testimony before labor bodies.

Section 5 of Commonwealth Act Number 213, on coercion of employees, provides:

Any person or persons, landlord or landlords, corporation or corporations or their agents, partnership or partnerships or their agents, who intimidate or coerce any employee or laborer or tenant under his or their employ, with the intent of preventing such employee or laborer or tenant from joining any registered legitimate labor organization of his own choosing, or, who dismiss or threaten to dismiss such employee or laborer or tenant from his employment for having joined, or for being a member of, any registered legitimate labor organization, shall be guilty of a felony and shall be punished by imprisonment of not exceeding one year or a fine not exceeding one thousand pesos, or both, at the discretion of the court.

This provision matters because it protects the worker's freedom to join a union, but it does not authorize an order forcing the employer to hire union members.

Ruling

On the first issue, the Court held that the Court of Industrial Relations had no authority to issue the compulsory order. The order compelled the company, against its will, to employ the members of the union preferentially, and no law conferred that power on the labor court.

On the second issue, the Court held that the general right to make a contract in relation to one's business is an essential part of the liberty of the citizens protected by the due process clause of the Constitution. The right of a laborer to sell his labor to such person as he may choose is, in its essence, the same as the right of an employer to purchase labor from any person whom it chooses. The employer and the employee thus have an equality of right guaranteed by the Constitution. As the Court put it, quoting American authority:

If the employer can compel the employee to work against the latter's will, this is servitude. If the employe can compel the employer to give him work against the employer's will, this is oppression.

On the third issue, the Court held that the term collective bargaining denotes negotiations looking toward a collective agreement, and that the grant to labor unions of merely the right of collective bargaining impliedly recognizes the employer's liberty to enter or not into collective agreements with them. The Court knew of no provision of law compelling such agreements, and held that so fundamental a curtailment of freedom, if ever intended by law upon grounds of public policy, should be effected in a manner beyond all possibility of doubt. The supreme mandates of the Constitution should not be loosely brushed aside. The Court quoted the Supreme Court of the United States in Hitchman Coal and Company versus Mitchell:

Whatever may be the advantages of collective bargaining, it is not bargaining at all, in any just sense, unless it is voluntary on both sides.

The Court acknowledged that the freedom of contract may be limited by law through a proper exercise of the paramount police power, and pointed to Section 21 of Commonwealth Act Number 103 and Section 5 of Commonwealth Act Number 213 as examples of such limitations, enacted to promote industrial peace. But those provisions were patterned after the Wagner Act, and the Supreme Court of the United States in National Labor Relations Board versus Jones and Laughlin Steel Corporation had said that the Act does not compel agreements between employers and employees, does not compel any agreement whatever, and does not interfere with the normal exercise of the right of the employer to select its employees or to discharge them. The order appealed from therefore had to be reversed.

Doctrine

The right to make contracts in relation to one's business is an essential part of the liberty protected by the due process clause. The laborer's right to sell his labor to whom he chooses and the employer's right to purchase labor from whom it chooses are equal rights guaranteed by the Constitution. Collective bargaining, as granted by Section 2 of Commonwealth Act Number 213, means voluntary negotiation toward an agreement; it does not compel the employer to agree, nor to hire union members against its will. The police power may limit freedom of contract, as Sections 21 and 5 of the labor laws do by protecting workers from discrimination and coercion, but any fundamental curtailment of freedom must be effected in a manner beyond all possibility of doubt.

Disposition

The Supreme Court reversed the order of the Court of Industrial Relations, with costs against the Pambusco Employees' Union.

Remember This

Memorize the equality of right: if the employer can compel the employee to work against his will, that is servitude; if the employee can compel the employer to give him work against the employer's will, that is oppression. Examiners use this case to test whether collective bargaining is a voluntary right or a compulsory obligation, and to draw the line between valid police-power limits on hiring and unconstitutional compulsion to prefer union members.