GOLDEN DONUTS, INC. AND LEOPOLDO PRIETO, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, AGAPITO MACANDOG, LEONISA M. HONTIVEROS, ROSITA D. TAMARGO, LUCITA TEGIO AND ALMA …

Golden Donuts versus National Labor Relations Commission

The Case

This is a petition for certiorari brought by Golden Donuts, Incorporated and its officer Leopoldo Prieto against the National Labor Relations Commission and five of its former employees: Agapito Macandog, Leonisa Hontiveros, Rosita Tamargo, Lucita Tegio, and Alma Magtarayo. The company asks the Supreme Court to set aside the Commission's resolution, which had ordered the reinstatement of the five employees with back wages after a strike and a union settlement. The case matters because it fixes a rule every labor lawyer must know: a union, however large its majority, cannot compromise the individual money claims and security of tenure of members who did not consent to the settlement.

Procedural History

The five employees filed their complaints with the Labor Arbiter in September 1990. On January 29, 1993, the Labor Arbiter rendered a decision upholding their dismissal and holding them bound by the compromise agreement that the union had signed with the company, while nonetheless awarding them separation pay and certain money claims. The employees appealed to the National Labor Relations Commission. On October 29, 1993, the Commission modified the Labor Arbiter's decision, ordering reinstatement without loss of seniority rights and back wages limited to three years, while retaining the monetary awards. The company moved for reconsideration, and on January 31, 1994, the Commission denied the motion. The company then came to the Supreme Court by petition for certiorari.

Facts

The five private respondents were employees of Golden Donuts and members of the Kapisanan ng Manggagawa sa Dunkin Donut, a union affiliated with the Confederation of Free Workers, whose collective bargaining agreement with the company expired in November 1989. Negotiations for a new agreement broke down. On one scheduled meeting the management panel arrived thirty five minutes late, and the union panel walked out. Management sent a letter of apology and proposed new dates, but the union declared a deadlock and refused to attend. Despite further letters from management, the union did not return to the table, and on December 18, 1989, the union went on strike.

The company filed a complaint seeking a declaration that the strike was illegal, asking for the dismissal of the union officers and members who committed illegal acts, and claiming damages. The strike was marked by barricades that trapped officers and employees inside the premises, the overturning of a company van and the smashing of its windshield, headlights, and side mirrors, and the brandishing of broken bottles. The strike was also carried out without a strike vote and without reporting to the Department of Labor and Employment.

Facing the gravity of the possible penalties, the union's counsel pleaded for a compromise. On July 16, 1990, the union and the company entered into a compromise agreement under which the parties would withdraw all cases against each other and undertake not to file new ones, and the striking workers, two hundred sixty two in all, would receive separation pay in amounts listed in an attached schedule. Only the five private respondents refused the amount due them. They argued that the agreement was entered into by their counsel and the union president without their individual consent or authority, and that it was never ratified by the majority of the membership. They then filed the complaints that led to this case.

Issues

• Whether or not a union may compromise or waive the rights to security of tenure and the money claims of its minority members without the latter's consent.
• Whether or not the compromise agreement entered into by the union, not consented to nor ratified by the minority members, has the effect of res judicata upon them.
• Whether or not, as a consequence, the private respondents are entitled to the monetary benefits subject of their individual complaints.

Applicable Provisions

Rule 138, Section 23 of the 1964 Revised Rules of Court, on the authority of an attorney to compromise, provides:

The authority to compromise cannot lightly be presumed and should be duly established by evidence.

This governs whether the union or its counsel could bind the dissenting members to the settlement.

Article 1319 of the Civil Code, on the perfection of contracts, provides:

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.

This is the basis for holding that a compromise, being a contract, binds only those who consented to it.

Article 279 of the Labor Code, on security of tenure, is the source of the twin reliefs of reinstatement and back wages awarded to the private respondents.

Ruling

On the first issue, the Court held that even if a clear majority of the union members agreed to the settlement, the union had no authority to compromise the individual claims of members who did not consent. The authority to compromise cannot lightly be presumed and must be duly established by evidence. Absent a showing of special authority, there was no valid waiver of the private respondents' rights to reinstatement and back wages, and they were not bound by the agreement.

On the second issue, the Court answered in the negative. It relied on its ruling in the La Campana case, quoted in the decision:

Money claims due to laborers cannot be the object of settlement or compromise effected by a union or counsel without the specific individual consent of each laborer concerned. The beneficiaries are the individual complainants themselves. The union to which they belong can only assist them but cannot decide for them.

The Court reaffirmed this in the General Rubber case, holding that the waiver of accrued money claims is a personal right that must be personally exercised, and that neither the officers nor the majority of the union had authority to waive the rights of dissenting minority members. A compromise is a contract perfected by mere consent, and it cannot affect third persons who are not parties to it. Since the private respondents never signed the agreement, the judgment approving it could not have the effect of res judicata upon them, because the requirement of identity of parties was not satisfied.

On the third issue, the Court held that since the Labor Arbiter found no evidence that the private respondents committed any illegal act during the strike, the company's failure to reinstate them after the settlement amounted to illegal dismissal, entitling them to reinstatement and back wages. The burden is on the employer to prove that the termination was for a valid cause and after due process. The Court, however, deleted the award of separation pay, since the private respondents were entitled to reinstatement and there was no showing of strained relations that would prevent it.

Doctrine

A union cannot compromise or waive the individual money claims and security of tenure of its members without their specific individual consent. The waiver of accrued money claims is a personal right that must be personally exercised, and neither the union officers nor the majority can waive the rights of the dissenting minority. A compromise is a contract perfected by consent under Article 1319 of the Civil Code, and it binds only the parties to it; a judgment approving a compromise is conclusive only upon the parties and their privies, so it cannot operate as res judicata against non-signatories for want of identity of parties. An employee illegally dismissed is entitled to reinstatement and back wages under Article 279 of the Labor Code, and separation pay is deleted where reinstatement is proper and no strained relations are shown.

Disposition

The Supreme Court dismissed the petition and affirmed the Commission's resolution and order, with the modification deleting the award of separation pay to the private respondents.

Remember This

Memorize this line: the union may assist the worker but cannot decide for him, because money claims and security of tenure are personal rights that require individual consent to be waived. Examiners use this case to test union authority to compromise, the requisites of a valid waiver of labor claims, and the res judicata effect of a compromise judgment on non-signatories.