MEYCAUAYAN COLLEGE, PETITIONER, VS. HONORABLE FRANKLIN M. DRILON, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT AND MEYCAUAYAN COLLEGE FACULTY AND PERSO…

Meycauayan College versus Secretary of Labor

The Case

This is a petition for certiorari filed by Meycauayan College against the Secretary of the Department of Labor and Employment, impleading the Meycauayan College Faculty and Personnel Association as private respondent. The college asks the Supreme Court to annul the Secretary's orders directing it to pay its teachers the salary differential due under their collective bargaining agreement. The case matters because it settles a question every labor lawyer must answer: when the law itself raises wages, may the employer treat that statutory increase as compliance with a separate, higher salary scale it freely contracted in a collective bargaining agreement? The Court answers no, and in doing so draws the enduring line between obligations imposed by law and obligations assumed by contract.

Procedural History

The dispute began as a labor dispute. The union filed a notice of strike with the Department of Labor and Employment, Regional Office Number Three in San Fernando, Pampanga, on the ground of unfair labor practice, alleging violation of the salary scale in the collective bargaining agreement. The union struck and picketed the college's premises. The Secretary of Labor assumed jurisdiction over the dispute and directed the Regional Office to hear the parties and submit a report. The Regional Director found that the college had complied with the statutory wage increases but had not complied with the contractual salary scale, and recommended payment of salary differentials. The Secretary of Labor agreed and, in his order of September 9, 1987, directed the college to implement the salary scale and pay the differentials for the school years covered. The college's motion for reconsideration was denied on December 3, 1987. The college then filed this petition for certiorari with the Supreme Court, with a prayer for a restraining order, which the Court granted on February 15, 1988.

Facts

Meycauayan College is a private educational institution operating in Meycauayan, Bulacan. On July 17, 1983, the college and the union, then headed by Mrs. Teresita Lim, entered into a collective bargaining agreement for the school years 1983 to 1986. Article Four of that agreement set out a salary scale, fixing a rate per period for teachers according to their length of service, ranging from the lowest class to the highest.

When the agreement was signed, several presidential decrees and a wage order had already fixed statutory minimum wages and living allowances. During the life of the agreement, further wage orders were issued increasing living allowances and integrating cost of living allowances into basic pay. The union admitted that its members were paid all these increases mandated by law. But in 1987, after the union presidency passed from Mrs. Lim, who was also the college registrar, to Mrs. Fe Villarico, the new president came upon a copy of the agreement and discovered that Article Four had never been implemented.

The union filed a notice of strike for unfair labor practice, alleging violation of the collective bargaining agreement. After the union struck and picketed, the Secretary of Labor assumed jurisdiction, and the Regional Director reported that the college had complied with the statutory increases but not with the contractual salary scale. The Secretary ordered the college to implement the salary scale and pay the differentials, including the thirteenth month pay differential, for the covered school years. The college brought the matter to the Supreme Court.

Issues

• Whether or not increases in employees' salaries resulting from the implementation of presidential decrees and wage orders, over and above the salary scale agreed upon in a collective bargaining agreement, preclude the employees from claiming the difference between their old salaries and those provided in that salary scale.
• Whether or not the Secretary of Labor abused his discretion in ruling that the college did not pay its teachers what was due them under the collective bargaining agreement.
• Whether or not the one-year prescriptive period for unfair labor practice claims bars the union's claim for salary differentials covering the earlier school years.
• Whether or not the Secretary of Labor had jurisdiction over what the college characterized as an ordinary money claim.

Applicable Provisions

Article 290 of the Labor Code, formerly Article 291, provides on prescription:

Offenses penalized under this Code and the rules and regulations issued pursuant thereto shall prescribe in three (3) years. All unfair labor practices arising from Book V shall be filed with the appropriate agency within one (1) year from accrual of such unfair labor practice; otherwise, they shall be forever barred.

The college invoked this one-year period to argue that the Secretary could not reach the earlier school years; the Court held the period inapplicable under the peculiar facts of the case.

Article 263, formerly Article 264, paragraph g, of the Labor Code, as discussed in the decision, is broad enough to give the Secretary of Labor power to take jurisdiction over what appears at first blush to be an ordinary money claim. The Court used it to uphold the Secretary's assumption of jurisdiction over the dispute.

Ruling

On the first issue, the Court held that the petition has no merit. A collective bargaining agreement is a contractual obligation, distinct from an obligation imposed by law. Its terms and conditions constitute the law between the parties, and the beneficiaries are entitled by right to the fulfillment of the obligation prescribed therein. Compliance with a collective bargaining agreement is mandated by the expressed policy to protect labor. Since the college pointed to no provision of law or of the agreement itself making statutory benefits encompass contractual ones, benefits derived from law and benefits derived from contract must be treated as distinct and separate. The Court rejected the college's attempt to distinguish an agreement on a salary scale from an agreement on a salary increase, because both aim at improving the economic condition of the laborers. An employer who has entered into an agreement with its employees may not renege on it simply because the law later grants the same or better terms. The Court put the rule this way:

Employee benefits derived from law are exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the agreement itself or by law.

On the second issue, the Court examined the intention of the parties, which is the key to interpreting contracts, and found the union's undisputed allegation that the agreement was entered into to improve the teachers' plight by increasing their salary based on length of service. The means used, an alteration of the salary scale, did not matter; the goal was a salary increase, and the college had failed to implement it.

On the third issue, the Court held the one-year prescriptive period inapplicable because of peculiar factual circumstances the college did not deny. Although the agreement covered the school years 1983 to 1986, a copy became available to the union only in 1987, and the union sought implementation immediately thereafter. The union members may have known of the agreement, but their president was herself a management employee, the college registrar, and they must have been deterred from demanding implementation earlier. To apply the prescriptive period would be unfair and prejudicial to the union members, especially those who had served longest and stood to benefit most from the salary scale.

On the fourth issue, the Court held that the Secretary's power is broad enough to cover what appears at first blush to be an ordinary money claim. Claims for pay differentials may have that character, but when they arise out of a violation of a collective bargaining agreement, they assume the character of an unfair labor practice and fall well within the Secretary's jurisdiction to decide.

Doctrine

A collective bargaining agreement is a contractual obligation distinct from an obligation imposed by law, and its terms and conditions are the law between the parties. Benefits derived from law are exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the agreement itself or by law. An employer may not use compliance with statutory wage increases to escape a higher salary scale it freely contracted, for to deny binding force to the agreement would place a premium on a party's refusal to comply, and such refusal constitutes unfair labor practice. The one-year prescriptive period for unfair labor practice claims yields where peculiar circumstances, such as the union president being a management employee and the agreement surfacing only later, would make its strict application unfair and prejudicial. Claims for pay differentials arising from a violation of a collective bargaining agreement assume the character of an unfair labor practice and fall within the jurisdiction of the Secretary of Labor.

Disposition

The Supreme Court affirmed the decision of the Secretary of Labor and lifted the temporary restraining order, with costs against Meycauayan College.

Remember This

Memorize the line that benefits derived from law are exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the agreement itself or by law. Examiners use this case to test the distinction between statutory and contractual obligations and to test jurisdiction over pay differentials arising from a collective bargaining agreement.