CARLOS F. GALVADORES, ET AL., PETITIONERS, VS. CRESENCIANO B. TRAJANO, DIRECTOR OF THE BUREAU OF LABOR RELATIONS, MANGGAGAWA NG KOMUNIKASYON SA PILIPINAS (FTWU), PHILIPPINE LONG…

Galvadores versus Trajano

The Case

This is a petition brought by Carlos Galvadores and some five thousand two hundred fifty-eight fellow employees of the Philippine Long Distance Telephone Company, all members of the Free Telephone Workers Union, now the Manggagawa ng Komunikasyon sa Pilipinas, against the Director of the Bureau of Labor Relations, the Union itself, and their counsel, Attorney Jose Espinas. The employees challenge the legality of a check-off of attorney's fees amounting to about one million pesos, taken from the monetary benefits awarded to them in a deadlocked collective bargaining negotiation that was resolved by compulsory arbitration. The case matters because it fixes the rule that no extraordinary deduction may be taken from an employee's wages or benefits without that employee's own written authorization, and that attorney's fees arising from collective bargaining may be charged only against union funds.

Procedural History

The employees, through their authorized representative Carlos Galvadores, filed a letter-complaint with the Ministry of Labor and Employment, assailing the imposition of the attorney's fees. The Minister of Labor referred the dispute to the Bureau of Labor Relations because it was intra-union in nature, and that Bureau held several hearings. The Director of the Bureau of Labor Relations dismissed the complaint for lack of merit, holding that the outcome of the plebiscite negated any further question on the right of the union counsel to collect. The employees then came to the Supreme Court by petition, and the Court resolved to give due course.

Facts

Attorney Espinas had been the legal counsel of the Union since 1964, hired on a case to case contingent fee basis. On September 7, 1983, the Union President wrote him a letter engaging his services in the ongoing labor dispute at the Philippine Long Distance Telephone Company, binding the Union to compensate him on a contingent basis of ten percent of any improvement, with retroactive effect, over the company's last offer in the deadlocked collective bargaining negotiations. That last offer was two hundred thirty pesos for the first year, one hundred pesos for the second year, and ninety pesos for the third year.

On September 9, 1983, the Minister of Labor and Employment assumed jurisdiction over all unresolved issues in the deadlock and resolved them by compulsory arbitration. On October 23, 1983, the Minister awarded across-the-board wage increases of three hundred thirty pesos a month effective November 9, 1982, one hundred fifty-five pesos a month effective November 9, 1983, and one hundred fifty-five pesos a month effective November 9, 1984, plus a Christmas bonus of one and one-half month pay per employee effective December 1983, and other fringe benefits. There were, in other words, improvements over the company's last offer.

On October 29, 1983, the Executive Board of the Union passed a resolution requesting the company to deduct one hundred fifteen pesos per employee for the legal services extended by Attorney Espinas. The employees objected, and on November 2, 1983, initially six hundred and eventually five thousand two hundred fifty-eight of them filed a letter-complaint assailing the imposition of one hundred thirty pesos, later corrected to one hundred fifty-five pesos, per employee as attorney's fees. They argued that the fees were unreasonable, that they violated the Labor Code, and that the deductions could not be given legal effect by a mere board resolution but needed ratification by the general membership. The company withheld the assessment from the differential pay but refused to turn it over to the Union without prior authority from the Ministry. On March 22, 1984, the Union filed a manifestation that about six thousand sixty-seven members had ratified the October 29 resolution in a plebiscite. The employees questioned the plebiscite because its second question was misleading and deceptive, assuming that there was no dispute regarding the deduction of attorney's fees.

Issues

• Whether or not the individual written authorization of all the employees must first be obtained before any assessment for attorney's fees may be made against the monetary benefits awarded to them.
• Whether or not compulsory arbitration is a mandatory activity under the Labor Code that dispenses with the need for individual written authorizations.
• Whether or not the attorney's fees, if legally payable, should be taken from Union funds rather than from the employees' benefits.

Applicable Provisions

Article 222 of the Labor Code provides:

(b) No attorney's fees, negotiation fees or similar charges of any kind arising from any collective bargaining negotiations or conclusion of the collective bargaining agreement shall be imposed on any individual member of the contracting union; Provided, however, that attorney's fees may be charged against union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void.

This provision bars the imposition of attorney's fees on any individual union member and confines their payment to union funds.

Article 242 of the Labor Code provides:

(o) Other than for mandatory activities under the Code, no special assessment, attorney's fees, negotiation fees or any other extraordinary fees may be checked off from any amount due an employee without individual written authorization duly signed by the employee. The authorization should specifically state the amount, purpose and beneficiary of the deduction.

This provision requires the employee's own signed authorization, stating the amount, purpose and beneficiary, before any extraordinary deduction may be checked off.

Ruling

On the first issue, the Court held that the provisions are clear: no check-offs from any amounts due employees may be effected without individual written authorizations duly signed by the employees, specifically stating the amount, purpose and beneficiary of the deduction. The required individual authorizations in this case were wanting, and the petitioner employees were vigorously objecting. The question asked in the plebiscite, besides not being explicit, assumed that there was no dispute relative to attorney's fees.

On the second issue, the Court rejected the argument that compulsory arbitration is a mandatory activity exempt from the rule. The benefits awarded to the employees still formed part of the collective bargaining negotiations although placed already under compulsory arbitration. This is not the mandatory activity under the Code which dispenses with individual written authorizations for check-offs, notwithstanding its compulsory nature; it is a judicial process of settling disputes laid down by law. Besides, Article 222 does not except a collective bargaining agreement later placed under compulsory arbitration from the ambit of its prohibition. The Court stressed the cardinal principle that employees are protected by law from unwarranted practices that diminish their compensation without their knowledge and consent.

On the third issue, the Court agreed with the Solicitor General that the matter is squarely covered by Article 222 of the Labor Code, as amended, so that attorney's fees, if legally payable, can only be charged against Union funds.

Doctrine

No attorney's fees, negotiation fees or similar charges arising from collective bargaining negotiations or the conclusion of a collective bargaining agreement may be imposed on any individual member of the contracting union; they may be charged only against union funds, in an amount agreed upon by the parties, and any contract or arrangement to the contrary is null and void. Apart from mandatory activities under the Code, no special assessment, attorney's fees, negotiation fees or other extraordinary fees may be checked off from any amount due an employee without that employee's individual written authorization, duly signed, specifically stating the amount, purpose and beneficiary of the deduction. Compulsory arbitration is not a mandatory activity that dispenses with these written authorizations; it is a judicial process of settling disputes laid down by law, and the benefits awarded therein remain part of the collective bargaining negotiations.

Disposition

The Court set aside the Decision of the Director of the Bureau of Labor Relations, and held that the attorney's fees involved may be charged against Union funds pursuant to Article 222 of the Labor Code, as may be agreed upon between the parties.

Remember This

Memorize the line that attorney's fees from collective bargaining may be charged only against union funds, never against the individual member, and that no extraordinary deduction may be checked off without the employee's own signed authorization stating the amount, purpose and beneficiary. Examiners use this case to test the check-off rules under Articles 222 and 242 of the Labor Code, and to ask whether compulsory arbitration counts as a mandatory activity that excuses written authorization.