SYLLABI/SYNOPSIS

 

FIRST DIVISION

[G.R. No. 127598.  January 27, 1999]

MANILA ELECTRIC COMPANY, petitioner, vs. THE HONORABLE SECRETARY OF LABOR LEONARDO QUISUMBING AND MERALCO EMPLOYEES AND WORKERS ASSOCIATION (MEWA), respondents.

D E C I S I O N

MARTINEZ, J.:

In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to annul the orders of the Secretary of labor dated August 19, 1996 and December 28, 1996, wherein the Secretary required MERALCO and its rank and file union- the Meralco Workers Association (MEWA) – to execute a collective bargaining agreement (CBA) for the remainder of the parties’ 1992-1997 CBA cycle, and to incorporate in this new CBA the Secretary’s dispositions on the disputed economic and non-economic issues.

MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO.

On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate the terms and conditions of their existing 1992-1997 Collective Bargaining Agreement (CBA) covering the remaining period of two years starting from December 1, 1995 to November 30, 1997.[1] MERALCO signified its willingness to re-negotiate through its letter dated October 17, 1995[2] and formed a CBA negotiating panel for the purpose.  On November 10, 1995, MEWA submitted its proposal[3] to MERALCO, which, in turn, presented a counter-proposal.  Thereafter, collective bargaining negotiations proceeded.  However, despite the series of meetings between the negotiating panels of MERALCO and MEWA, the parties failed to arrive at “terms and conditions acceptable to both of them.”

On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of the National Conciliation and Mediation Board (NCMB) of the Department of Labor and Employment (DOLE) which was docketed as NCMB-NCR-NS-04-152-96, on the grounds of bargaining deadlock and unfair labor practices.  The NCMB then conducted a series of conciliation meetings but the parties failed to reach an amicable settlement.  Faced with the imminence of a strike, MERALCO on May 2, 1996, filed an Urgent Petition[4] with the Department of Labor and Employment which was docketed as OS-AJ No. 0503[1]96 praying that the Secretary assume jurisdiction over the labor dispute and to enjoin the striking employees to go back to work.

The Labor Secretary granted the petition through its Order[5] of May 8, 1996, the dispositive portion of which reads:

“WHEREFORE, premises considered, this Office now assumes jurisdiction over the labor dispute obtaining between the parties pursuant to Article 263 (g) of the Labor Code.  Accordingly, the parties are here enjoined from committing any act that may exacerbate the situation.  To speed up the resolution of the dispute, the parties are also directed to submit their respective Position Papers within ten (10) days from receipt.

‘Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences between the parties to bridge their differences and eventually hammer out a solution that is mutually acceptable.  He shall be assisted by the Legal Service.

SO ORDERED.”

Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the Secretary resolved the labor dispute through an Order,[6] containing the following awards:

“ECONOMIC DEMANDS

Wage increase -  P2,300.00 for the first year covering the

                                period from December 1, 1995 to November 30, 1996

                           -  P2,200.00 for the second year covering

                           the period December 1, 1996 to November 30, 1997.

Red Circle Rate (RCR) Allowance- all RCR allowances (promotional increases that go beyond the maximum range of a job classification salary) shall be integrated into the basic salary of employees effective December 1, 1995.

Longevity Allowance- the integration of the longevity allowance into the basic wage is denied; the present policy is maintained.

Longevity Increase- the present longevity bonus is maintained but the bonus shall be incorporated into the new CBA.

Sick Leave- MEWA’s demand for upgrading is denied; the company’s present policy is maintained.  However, those who have not used the sick leave benefit during a particular year shall be entitled to a one-day sick leave incentive.

Sick leave reserve- the present reserve of 25 days shall be reduced to 15 days; the employee has the option either to convert the excess of 10 days to cash or let it remain as long as he wants.  In case he opts to let it remain, he may later on convert it to cash at his retirement or separation.

Vacation Leave - MEWA’s demand for upgrading denied & the company’s present policy is maintained which must be incorporated into the new CBA but scheduled vacation leave may be rounded off to one full day at a time in case of a benefit involving a fraction of a day.

Union Leave-  of MEWA’s officers, directors or stewards assigned to perform union duties or legitimate union activity is increased from 30 to 40 Mondays per month.

Maternity, Paternity and Funeral leaves- the existing policy is to be maintained and must be incorporated in the new CBA unless a new law granting paternity leave benefit is enacted which is superior to what the company has already granted.

Birthday Leave - union’s demand is granted.  If birthday falls on the employee’s rest day or on a non-working holiday, the worker shall be entitled to go on leave with pay on the next working day.

Group Hospitalization & Surgical Insurance Plan (GHSIP) and Health Maintenance Plan (HMP)- present policy is maintained insofar as the cost sharing is concerned- 70% for the Company and 30% for MEWA.

Health Maintenance Plan (HMP) for dependents - subsidized dependents increased from three to five dependents.

Longevity Bonus- is increased from P140.00 to P200.00 for every year of service to be received by the employee after serving the Company for 5 years.

Christmas Bonus and Special Christmas Grant- MEWA’s demand of one month salary as Christmas Bonus and two month’s salary as Special Christmas Grant is granted and to be incorporated in the new CBA.

Midyear Bonus- one month’s pay to be included in the CBA.

Anniversary Bonus - union’s demand is denied.

Christmas Gift Certificate - company has the discretion as to whether it will give it to its employees.

Retirement Benefits:

a.       Full retirement-present policy is maintained;

b.       one cavan of rice per month is granted to retirees;

c.       special retirement leave and allowance-present policy is maintained;

d.       HMP coverage for retirees- HMP coverage is granted to retirees who have not reached the age of 70, with MERALCO subsidizing 100% of the monthly premium; those over 70 are entitled to not more than 30 days of hospitalization at the J.F. Cotton Hospital with the company shouldering the entire cost.

e.       HMP coverage for retiree’s dependents is denied

f.       Monthly pension of P3,000.00 for each retiree is denied.

g.       Death benefit for retiree’s beneficiaries is denied.

Optional retirement - union’s demand is denied; present policy is maintained; employee is eligible for optional retirement if he has rendered at least 18 years of service.

Dental, Medical and Hospitalization Benefits- grant of all the allowable medical, surgical, dental and annual physical examination benefits, including free medicine whenever the same is not available at the JFCH.

Resignation benefits- union’s demand is denied.

Night work- union demand is denied but present policy must be incorporated in CBA.

Shortswing- work in another shift within the same day shall be considered as the employee’s work for the following day and the employee shall be given additional four (4) hours straight time and the applicable excess time premium if he works beyond 8 hours in the other shift.

High Voltage allowance- is increased from P45.00 to P55.00 to be given to any employee authorized by the Safety Division to perform work on or near energized bare lines & bus including stockman drivers & crane operators and other crew members on ground.

High Pole Allowance- is increased from P30.00 to P40.00 to be given to those authorized to climb poles up to at least 60 ft. from the ground.  Members of the team including stockman drivers, crane operators and other crew members on the ground, are entitled to this benefit.

Towing Allowance- where stockmen drive tow trailers with long poles and equipment on board, they shall be entitled to a towing allowance of P20.00 whether they perform the job on regular shift or on overtime.

Employee’s Cooperative- a loan of P3 M seed money is granted to the proposed establishment of a cooperative, payable in twenty (20) years starting one year from the start of operations.

Holdup Allowance- the union demand is denied; the present policy shall be maintained.

Meal and Lodging Allowance- shall be increased effective December 1, 1995 as follows:

Breakfast - from P25.00 to P35.00

Lunch                  - from P35.00 to P45.00

Dinner      - from P35.00 to P45.00

Lodging    - from P135.00 to P180.00 a night in all MERALCO franchise areas

Payroll Treatment for Accident while on Duty- an employee shall be paid his salary and allowance if any is due plus average excess time for the past 12 months from the time of the accident up to the time of full recovery and placing of the employee back to normal duty or an allowance of P2,000.00, whichever is higher.

Housing and Equity Assistance Loan- is increased to P60,000.00; those who have already availed of the privilege shall be allowed to get the difference.

Benefits for Collectors:

a.       Company shall reduce proportionately the quota and monthly average product level (MAPL) in terms of equivalent bill assignment when an employee is on sick leave and paid vacation leave.

b.       When required to work on Saturdays, Sundays and holidays, an employee shall receive P60.00 lunch allowance and applicable transportation allowance as determined by the Company and shall also receive an additional compensation to one day fixed portion in addition to lunch and transportation allowance.

c.       The collector shall be entitled to an incentive pay of P25.00 for every delinquent account disconnected.

d.       When a collector voluntarily performs other work on regular shift or overtime, he shall be entitled to remuneration based on his computed hourly compensation and the reimbursement of actually incurred transportation expenses.

e.       Collectors shall be provided with bobcat belt bags every year

f.       Collector’s cash bond shall be deposited under his capital contribution to MESALA.

g.       Collectors quota and MAPL shall be proportionately reduced during typhoons, floods, earthquakes and other similar force majeure events when it is impossible for a collector to perform collection work.

Political Demands:

a.       Scope of the collective bargaining unit- the collective bargaining unit shall be composed of all regular rank-and-file employees hired by the company in all its offices and operative centers throughout its franchise area and those it may employ by reason of expansion, reorganization or as a result of operational exigencies.

b.       Union recognition and security -

i.   The union shall be recognized by the Company as sole and exclusive bargaining representative of the rank-and-file employees included in the bargaining unit.  The Company shall agree to meet only with Union officers and its authorized representatives on all matters involving the Union and all issues arising from the implementation and interpretation of the new CBA.

ii.  The union shall meet with the newly regularized employees for a period not to exceed four (4) hours, on company time, to acquaint the new regular employees of the rights, duties and benefits of Union membership.

iii.  The right of all rank-and-file employees to join the union shall be recognized in accordance with the maintenance of membership principle as a form of union security.

c.       Transfer of assignment and job security-

i.  No transfer of an employee from one position to another shall be made if motivated by considerations of sex, race, creed, political and religious belief, seniority or union activity.

ii.  If the transfer is due to the reorganization or decentralization, the distance from the employee’s residence shall be considered unless the transfer is accepted by the employee.  If the transfer is extremely necessary, the transfer shall be made within the offices in the same district.

iii.  Personnel hired through agencies or contractors to perform the work done by covered employees shall not exceed one month.  If extension is necessary, the union shall be informed.  But the Company shall not permanently contract out regular or permanent positions that are necessary in the normal operation of the Company.

d.       Check off Union Dues- where the union increases its dues as approved by the Board of Directors, the Company shall check off such increase from the salaries of union members after the union submits check off authorizations signed by majority of the members.  The Company shall honor only those individual authorizations signed by the majority of the union members and collectively submitted by the union to the Company’s Salary Administration.

e.       Payroll Reinstatement- shall be in accordance with Article 223, p. 3 of the Labor Code.

f.       Union Representation in Committees- the union is allowed to participate in policy formulation and in the decision-making process on matters affecting their rights and welfare, particularly in the Uniform Committee, the Safety Committee and other committees that may be formed in the future.

Signing Bonus- P4,000.00 per member of the bargaining unit for the conclusion of the CBA

Existing benefits already granted by the Company but which are not expressly or impliedly repealed in the new agreement shall remain subsisting and shall be included in the new agreement to be signed by the parties effective December 1, 1995.

On August 30, 1996, MERALCO filed a motion for reconsideration[7] alleging that the Secretary of Labor committed grave abuse of discretion amounting to lack or excess of jurisdiction:

1.  in awarding to MEWA a package that would cost at least P1.142 billion, a package that is grossly excessive and exorbitant, would not be affordable to MERALCO and would imperil its viability as a public utility affected with national interest.

2.  in ordering the grant of a P4,500.00 wage increase, as well as a new and improved fringe benefits, under the remaining two (2) years of the CBA for the rank-and-file employees.

3.  in ordering the ‘incorporation into the CBA of all existing employee benefits, on the one hand, and those that MERALCO has unilaterally granted to its employees by virtue of voluntary company policy or practice, on the other hand.’

4.  in granting certain ‘political demands’ presented by the union.

5.  in ordering the CBA to be ‘effective December 1995’ instead of August 19, 1996 when he resolved the dispute.

MERALCO filed a supplement to the motion for reconsideration on September 18, 1995, alleging that the Secretary of Labor did not properly appreciate the effect of the awarded wages and benefits on MERALCO’s financial viability.

MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order on the wage increase, leaves, decentralized filing of paternity and maternity leaves, bonuses, retirement benefits, optional retirement, medical, dental and hospitalization benefits, short swing and payroll treatment.  On its political demands, MEWA asked the Secretary to rule its proposal to institute a Code of Discipline for its members and the union’s representation in the administration of the Pension Fund.

On December 28, 1996, the Secretary issued an Order[8] resolving the parties’ separate motions, the modifications of the August 19, 1996 Order being highlighted hereunder:

1)  Effectivity of Agreement - December 1, 1995 to November 30, 1997.

Economic Demands

2)  Wage Increase:

First year -     P2,200.00 per month;

Second year - P2,200.00 per month.

3)  Integration of Red Circle Rate (RCR) and Longevity Allowance into Basic Salary -the RCR allowance shall be integrated into the basic salary of employees as of August 19, 1996 (the date of the disputed Order).

4)  Longevity Bonus - P170 per year of service starting from 10 years of continuous service.

5)  Vacation Leave - The status quo shall be maintained as to the number of vacation leave but employee’s scheduled vacation may be taken one day at a time in the manner that this has been provided in the supervisory CBA.

6)  Sick Leave Reserve - is reduced to 15 days, with any excess payable at the end of the year.  The employee has the option to avail of this cash conversion or to accumulate his sick leave credits up to 25 days for conversion to cash at retirement or separation from the service.

7)  Birthday Leave - the grant of a day off when an employee’s birthday falls on a non-working day is deleted.

8)  Retirement Benefits for Retirees - The benefits granted shall be effective on August 19, 1996, the date of the disputed order up to November 30, 1997, which is the date the CBA expires and shall apply to those who are members of the bargaining unit at the time the award is made.

One sack of rice per quarter of the year shall be given to those retiring between August 19, 1996 and November 30, 1997.

On HMP Coverage for Retirees- The parties ‘maintain the status quo, that is, with the Company complying with the present arrangement and the obligations to retirees as is.’

9)  Medical, Dental and Hospitalization Benefits - The cost of medicine unavailable at the J.F. Cotton Hospital shall be in accordance with MERALCO’s Memorandum dated September 14, 1976.

10)  GHSIP and HMP for Dependents - The number of dependents to be subsidized shall be reduced from 5 to 4 provided that their premiums are proportionately increased.

11)  Employees’ Cooperative - The original award of P3 million pesos as seed money for the proposed Cooperative is reduced to P1.5 million pesos.

12)  Shortswing - the original award is deleted.

13)  Payroll Treatment for Accident on Duty - Company ordered to continue its present practice on payroll treatment for accident on duty without need to pay the excess time the Union demanded.

Political Demands:

14)  Scope of the collective bargaining unit - The bargaining unit shall be composed of all rank and file employees hired by the Company in accordance with the original Order.

15)  Union recognition and security - The incorporation of a closed shop form of union security in the CBA; the Company is prohibited from entertaining individuals or groups of individuals only on matters that are exclusively within the domain of the union; the Company shall furnish the union with a complete list of newly regularized employees within a week from regularization so that the Union can meet these employees on the Union’s and the employee’s own time.

16)   Transfer of assignment and job security - Transfer is a prerogative of the Company  but the transfer must be for a valid business reason, made in good faith and must be reasonably exercised.  The CBA shall provide that ‘No transfer of an employee from one position to another, without the employee’s written consent, shall be made if motivated by considerations of sex, race, creed, political and religious belief, age or union activity.

17)  Contracting Out - The Company has the prerogative to contract out services provided that this move is based on valid business reasons in accordance with law, is made in good faith, is reasonably exercised and, provided further that if the contracting out involves more than six months, the Union must be consulted before its implementation.

18)  Check off of union dues

In any increase of union dues or contributions for mandatory activities, the union must submit to the Company a copy of its board resolution increasing the union dues or authorizing such contributions;

If a board resolution is submitted, the Company shall deduct union dues from all union members after a majority of the union members have submitted their individual written authorizations.  Only those check-off authorizations submitted by the union shall be honored by the Company.

With respect to special assessments, attorney’s fees, negotiation fees or any other extraordinary fees, individual authorizations shall be necessary before the company may so deduct the same.

19)  Union Representation in Committees - The union is granted representation in the Safety Committee, the Uniform Committee and other committees of a similar nature and purpose involving personnel welfare, rights and benefits as well as duties.

Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravely abused his discretion:

1). . . in awarding wage increases of P2,200.00 for 1996 and P2,200.00 for 1997;

2) . . . in awarding the following economic benefits:

a.       Two months Christmas bonus;

b.       Rice Subsidy and retirement benefits for retirees;

c.       Loan for the employees’ cooperative;

d.       Social benefits such as GHSIP and HMP for dependents, employees’ cooperative and housing equity assistance loan;

e.       Signing bonus;

f.       Integration of the Red Circle Rate Allowance

g.       Sick leave reserve of 15 days

h.       The 40-day union leave;

i.        High pole/high voltage and towing allowance;

and

j.        Benefits for collectors

3) . . . in expanding the scope of the bargaining unit to all regular rank and file employees hired by the company in all its offices and operating centers and those it may employ by reason of expansion, reorganization or as a result of operational exigencies;

4) . . . in ordering for a closed shop when his original order for a maintenance of membership arrangement was not questioned by the parties;

5) . . . in ordering that Meralco should consult the union before any contracting out for more than six months;

6) . . . in decreeing that the union be allowed to have representation in policy and decision making into matters affecting “personnel welfare, rights and benefits as well as duties;”

7) . . . in ruling for the inclusion of all terms and conditions of employment in the collective bargaining agreement;

8) . . . in exercising discretion in determining the retroactivity of the CBA;

Both MEWA and the Solicitor General; on behalf of the Secretary of Labor, filed their comments to the petition.  While the case was also set for oral argument on Feb 10, 1997, this hearing was cancelled due to MERALCO not having received the comment of the opposing parties.  The parties were instead required to submit written memoranda, which they did.  Subsequently, both petitioner and private respondent MEWA also filed replies to the opposing parties’ Memoranda, all of which We took into account in the resolution of this case.

The union disputes the allegation of MERALCO that the Secretary abused his discretion in issuing the assailed orders arguing that he acted within the scope of the powers granted him by law and by the Constitution.  The union contends that any judicial review is limited to an examination of the Secretary’s decision-making/discretion - exercising process to determine if this process was attended by some capricious or whimsical act that constitutes “grave abuse”; in the absence of such abuse, his findings - considering that he has both jurisdiction and expertise to make them - are valid.

The union’s position is anchored on two premises:

First, no reviewable abuse of discretion could have attended the Secretary’s arbitral award because the Secretary complied with constitutional norms in rendering the dispute award.  The union posits that the yardstick for comparison and for the determination of the validity of the Secretary’s actions should be the specific standards laid down by the Constitution itself.  To the union, these standards include the State policy on the promotion of workers’ welfare,[9] the principle of distributive justice,[10] the right of the State to regulate the use of property,[11] the obligation of the State to protect workers, both organized and unorganized, and insure their enjoyment of “humane conditions of work” and a “living wage,” and the right of labor to a just share in the fruits of production.[12]

Second, no reversible abuse of discretion attended the Secretary’s decision because the Secretary took all the relevant evidence into account, judiciously weighed them, and rendered a decision based on the facts and law.  Also, the arbitral award should not be reversed given the Secretary’s expertise in his field and the general rule that findings of fact based on such expertise is generally binding on this Court.

To put matters in proper perspective, we go back to basic principles.  The Secretary of Labor’s statutory power under Art. 263 (g) of the Labor Code to assume jurisdiction over a labor dispute in an industry indispensable to the national interest, and, to render an award on compulsory arbitration, does not exempt the exercise of this power from the judicial review that Sec. 1, Art. 8 of the Constitution mandates.  This constitutional provision states:

“Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government.”

Under this constitutional mandate, every legal power of the Secretary of Labor under the Labor Code, or, for that matter, any act of the Executive, that is attended by grave abuse of discretion is subject to review by this Court in an appropriate proceeding.  To be sure, the existence of an executive power alone - whether granted by statute or by the Constitution - cannot exempt the executive action from judicial oversight, interference or reversal when grave abuse of discretion is, or is alleged to be, present.  This is particularly true when constitutional norms are cited as the applicable yardsticks since this Court is the final interpreter of the meaning and intent of the Constitution.[13]

The extent of judicial review over the Secretary of Labor’s arbitral award is not limited to a determination of grave abuse in the manner of the secretary’s exercise of his statutory powers.  This Court is entitled to, and must - in the exercise of its judicial power - review the substance of the Secretary’s award when grave abuse of discretion is alleged to exist in the award, i.e., in the appreciation of and the conclusions the Secretary drew from the evidence presented.

The natural and ever present limitation on the Secretary’s acts is, of course, the Constitution.  And we recognize that indeed the constitutional provisions the union cited are State policies on labor and social justice that can serve as standards in assessing the validity of a Secretary of Labor’s actions.  However, we note that these provisions do not provide clear, precise and objective standards of conduct that lend themselves to easy application.  We likewise recognize that the Constitution is not a lopsided document that only recognizes the interests of the working man; it too protects the interests of the property owner and employer as well.[14]

For these reasons - and more importantly because a ruling on the breadth and scope of the suggested constitutional yardsticks is not absolutely necessary in the disposition of this case - we shall not use these yardsticks in accordance with the time-honored practice of avoiding constitutional interpretations when a decision can be reached using non-constitutional standards.  We have repeatedly held that one of the essential requisites for a successful judicial inquiry into constitutional questions is that the resolution of the constitutional question must be necessary in deciding the case.[15]

In this case we believe that the more appropriate and available standard - and one does not require a constitutional interpretation - is simply the standard of reasonableness.  In layman’s terms, reasonableness implies the absence of arbitrariness;[16] in legal parlance, this translates into the exercise of proper discretion and to the observance of due process.  Thus, the question we have to answer in deciding this case is whether the Secretary’s actions have been reasonable in light of the parties positions and the evidence they presented.

MEWA’s second premise - i.e., that the Secretary duly considered the evidence presented - is the main issue that we shall discuss at length below.  Additionally, MEWA implied that we should take great care before reading an abuse of discretion on the part of the Secretary because of his expertise on labor issues and because his findings of fact deserve the highest respect from this Court.

This Court has recognized the Secretary of Labor’s distinct expertise in the study and settlement of labor disputes falling under his power of compulsory arbitration.[17] It is also well-settled that factual findings of labor administrative officials, if supported by substantial evidence, are entitled not only to great respect but even to finality.[18] We, therefore, have no difficulty in accepting the union’s caveat on how to handle a Secretary of Labor’s arbitral award.

But at the same time, we also recognize the possibility that abuse of discretion may attend the exercise of the Secretary’s arbitral functions; his findings in an arbitration case are usually based on position papers and their supporting documents (as they are in the present case), and not on the thorough examination of the parties’ contending claims that may be present in a court trial and in the face-to-face adversarial process that better insures the proper presentation and appreciation of evidence.[19] There may also be grave abuse of discretion where the board, tribunal or officer exercising judicial function fails to consider evidence adduced by the parties.[20] Given the parties’ positions on the justiciability of the issues before us, the question we have to answer is one that goes into the substance of the Secretary’s disputed orders:  Did the Secretary properly consider and appreciate the evidence presented before him?

We find, based on our consideration of the parties’ positions and the evidence on record, that the Secretary of Labor disregarded and misappreciated evidence, particularly with respect to the wage award.  The Secretary of Labor apparently also acted arbitrarily and even whimsically in considering a number of legal points; even the Solicitor General himself considered that the Secretary gravely abused his discretion on at least three major points:  (a) on the signing bonus issue; (b) on the inclusion of confidential employees in the rank and file bargaining unit, and (c) in mandating a union security “closed-shop” regime in the bargaining unit.

We begin with a discussion on the wages issue.  The focal point in the consideration of the wage award is the projected net income for 1996 which became the basis for the 1996 wage award, which in turn - by extrapolation - became the basis for the (2nd Year) 1997 award.  MERALCO projected that the net operating income for 1996 was 14.7% above the 1999 level or a total net operating income of 4.171 Billion, while the union placed the 1996 net operating income at 5.795 Billion.

MERALCO based its projection on the increase of the income for the first 6 months of 1996 over the same period in 1995.  The union, on the other hand, projected that the 1996 income would increase by 29% to 35% because the “consumption of electric power is at its highest during the last two quarters with the advent of the Yuletide season.”  The union likewise relied heavily on a newspaper report citing an estimate by an all Asia capital financial analyst that the net operating income would amount to 5.795 Billion.[21]

Based essentially on these considerations, the Secretary made the following computations and ordered his disputed wage award:

Projected net operating

Income for 1996                                                   5,795,000,000

Principals and interests                                           1,426,571,703

Dividends at 1995 rate                                          1,636,949,000

Net amount left with the Company                         2,729,479,297

Add:  Tax credit equivalent to 35% of labor cost       231,804,940

Company’s net operating income                           2,961,284,237

“For 1997, the projected income is P7,613,612 which can easily absorb the incremental increase of P2,200 per month or a total of P4,500 during the last year of the CBA period.

          x x x                                  x x x                                  x x x

“An overriding aim is to estimate the amount that is left with the Company after the awarded wages and benefits and the company’s customary obligations are paid.  This amount can be the source of an item not found in the above computations but which the Company must provide for, that is - the amount the company can use for expansion.

“Considering the expansion plans stated in the Company’s Supplement that calls for capital expenditures of 6 billion, 6.263 billion and 5.802 billion for 1996, 1997 and 1998 respectively, We conclude that our original award of P2,300 per month for the first year and P2,200 for the second year will still leave much by way of retained income that can be used for expansion.”[22] (Underscoring ours.)

We find after considering the records that the Secretary gravely abused his discretion in making this wage award because he disregarded evidence on record.  Where he considered MERALCO’s evidence at all, he apparently misappreciated this evidence in favor of claims that do not have evidentiary support.  To our mind, the MERALCO projection had every reason to be reliable because it was based on actual and undisputed figures for the first six months of 1996.[23] On the other hand, the union projection was based on a speculation of Yuletide consumption that the union failed to substantiate.  In fact, as against the union’s unsubstantiated Yuletide consumption claim, MERALCO adduced evidence in the form of historical consumption data showing that a lengthy consumption does not tend to rise during the Christmas period.[24] Additionally, the All-Asia Capital Report was nothing more than a newspaper report that did not show any specific breakdown or computations.  While the union claimed that its cited figure is based on MERALCO’s 10-year income stream,[25] no data or computation of this 10-year stream appear in the record.

While the Secretary is not expected to accept the company-offered figures wholesale in determining a wage award, we find it a grave abuse of discretion to completely disregard data that is based on actual and undisputed record of financial performance in favor of the third-hand and unfounded claims the Secretary eventually relied upon.  At the very least, the Secretary should have properly justified his disregard of the company figures.  The Secretary should have also reasonably insured that the figure that served as the starting point for his computation had some substantial basis.

Both parties extensely discussed the factors that the decision maker should consider in making a wage award.  While We do not seek to enumerate in this decision the factors that should affect wage determination, we must emphasize that a collective bargaining dispute such as this one requires due consideration and proper balancing of the interests of the parties to the dispute and of those who might be affected by the dispute.  To our mind, the best way in approaching this task holistically is to consider the available objective facts, including, where applicable, factors such as the bargaining history of the company, the trends and amounts of arbitrated and agreed wage awards and the company’s previous CBAs, and industry trends in general. As a rule, affordability or capacity to pay should be taken into account but cannot be the sole yardstick in determining the wage award, especially in a public utility like MERALCO.  In considering a public utility, the decision maker must always take into account the “public interest” aspects of the case; MERALCO’s income and the amount of money available for operating expenses - including labor costs - are subject to State regulation.  We must also keep in mind that high operating costs will certainly and eventually be passed on to the consuming public as MERALCO has bluntly warned in its pleadings.

We take note of the “middle ground” approach employed by the Secretary in this case which we do not necessarily find to be the best method of resolving a wage dispute.  Merely finding the midway point between the demands of the company and the union, and “splitting the difference” is a simplistic solution that fails to recognize that the parties may already be at the limits of the wage levels they can afford.  It may lead to the danger too that neither of the parties will engage in principled bargaining; the company may keep its position artificially low while the union presents an artificially high position, on the fear that a “Solomonic” solution cannot be avoided.  Thus, rather than encourage agreement, a “middle ground approach” instead promotes a “play safe” attitude that leads to more deadlocks than to successfully negotiated CBAs.

After considering the various factors the parties cited, we believe that the interests of both labor and management are best served by a wage increase of P1,900.00 per month for the first year and another P1,900.00 per month for the second year of the two-year CBA term.  Our reason for this is that these increases sufficiently protects the interest of the worker as they are roughly 15% of the monthly average salary of P11,600.00.[26] They likewise sufficiently consider the employer’s costs and its overall wage structure, while at the same time, being within the range that will not disrupt the wage trends in Philippine industries.

The records shows that MERALCO, throughout its long years of existence, was never remiss in its obligation towards its employees.  In fact, as a manifestation of its strong commitment to the promotion of the welfare and well-being of its employees, it has consistently improved their compensation package.  For instance, MERALCO has granted salary increases[27] through the collective bargaining agreement the amount of which since 1980 for both rank-and-file and supervisory employees were as follows:

AMOUNT OF CBA INCREASES

DIFFERENCE

CBA COVERAGE

RANK-AND-FILE

SUPERVISORY

      AMOUNT

        PERCENT

 

 1980

  230.00

   342.50

  112.50

    48.91%

 

  1981

  210.00

   322.50

  112.50

53.57

 

 1982

  200.00

   312.50

  112.50

             56.25

 

TOTAL

  640.00

   977.50

  337.50

52.73

 

 1983

  320.00

   432.50

 112.50

35.16

 

  1984

  350.00

   462.50

 112.50

32.14

 

  1985

  370.00

   482.50

 112.50

30.41

 

TOTAL

1,040.00

1,377.50

 337.50

32.45

 

  1986

   860.00

   972.50

 112.50

13.08

 

  1987

  640.00

  752.50

 112.50

17.58

 

 1988

  600.00

  712.50

 112.50

18.75

 

TOTAL

2,100.00

2,437.50

 337.50

16.07

 

 1989

1,100.00

1,212.50

 112.50

10.23

 

  1990

1,200.00

1,312.50

112.50

  9.38

 

   1991

1,300.00

1,412.50

112.50

  8.65

 

TOTAL

3,600.00

3,937.50

337.50

  9.38

 

   1992

 1,400.00

1,742.50

342.50

24.46

 

   1993

 1,350.00

1,682.50

332.50

24.63

 

   1994

 1,150.00

1,442.50

292.50

25.43

 

TOTAL

 3,900.00

4,867.50

967.50

24.81

 

Based on the above-quoted table, specifically under the column “RANK-AND-FILE,” it is easily discernible that the total wage increase of P3,800.00 for 1996 to 1997 which we are granting in the instant case is significantly higher than the total increases given in 1992 to 1994, or a span of three (3) years, which is only P3,900.00 a month.  Thus, the Secretary’s grant of P2,200.00 monthly wage increase in the assailed order is unreasonably high a burden for MERALCO to shoulder.

We now go to the economic issues.

1.  CHRISTMAS BONUS

MERALCO questions the Secretary’s award of “Christmas bonuses” on the ground that what it had given its employees were special bonuses to mark or celebrate “special occasions,” such as when the Asia Money Magazine recognized MERALCO as the “best managed company in Asia.”  These grants were given on or about Christmas time, and the timing of the grant apparently led the Secretary to the conclusion that what were given were Christmas bonuses given by way of a “company practice” on top of the legally required 13th month pay.

The Secretary in granting the two-month bonus, considered the following factual finding, to wit:

“We note that each of the grant mentioned in the commonly adopted table of grants has a special description.  Christmas bonuses were given in 1988 and 1989.  However, the amounts of bonuses given differed.  In 1988, it was P1,500.  In 1989, it was ˝  month salary.  The use of “Christmas bonus” title stopped after 1989.  In 1990, what was given was a “cash gift” of ˝ month’s salary.  The grants thereafter bore different titles and were for varying amounts.  Significantly, the Company explained the reason for the 1995 bonuses and this explanation was not substantially contradicted by the Union.

“What comes out from all these is that while the Company has consistently given some amount by way of bonuses since 1988, these awards were not given uniformly as Christmas bonuses or special Christmas grants although they may have been given at or about Christmas time.

          “ x x x                               x x x                                  x x x

“The Company is not therefore correct in its position that there is not established practice of giving Christmas bonuses that has ripened to the status of being a term and condition of employment.  Regardless of its nomenclature and purpose, the act of giving this bonus in the spirit of Christmas has ripened into a Company practice.”[28]

It is MERALCO’s position that the Secretary erred when he recognized that there was an “established practice” of giving a two-month Christmas bonus based on the fact that bonuses were given on or about Christmas time.  It points out that the “established practice” attributed to MERALCO was neither for a considerable period of time nor identical in either amount or purpose.  The purpose and title of the grants were never the same except for the Christmas bonuses of 1988 and 1989, and were not in the same amounts.

We do not agree.

As a rule, a bonus is not a demandable and enforceable obligation;[29] it may nevertheless be granted on equitable consideration[30] as when the giving of such bonus has been the company’s long and regular practice.[31] To be considered a “regular practice,” the giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and deliberate.[32] Thus we have ruled in National Sugar Refineries Corporation vs. NLRC:[33]

“The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof.”

In the case at bar, the record shows the MERALCO, aside from complying with the regular 13th month bonus, has further been giving its employees an additional Christmas bonus at the tail-end of the year since 1988.  While the special bonuses differed in amount and bore different titles, it can not be denied that these were given voluntarily and continuously on or about Christmas time.  The considerable length of time MERALCO has been giving the special grants to its employees indicates a unilateral and voluntary act on its part, to continue giving said benefits knowing that such act was not required by law.

Indeed, a company practice favorable to the employees has been established and the payments made by MERALCO pursuant thereto ripened into benefits enjoyed by the employees.  Consequently, the giving of the special bonus can no longer be withdrawn by the company as this would amount to a diminution of the employee’s existing benefits.[34]

We can not, however, affirm the Secretary’s award of a two-month special Christmas bonus to the employees since there was no recognized company practice of giving a two-month special grant.  The two-month special bonus was given only in 1995 in recognition of the employees’ prompt and efficient response during the calamities.  Instead, a one-month special bonus, We believe, is sufficient, this being merely a generous act on the part of MERALCO.

2.  RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES

It appears that the Secretary of Labor originally ordered the increase of the retirement pay, rice subsidy and medical benefits of MERALCO retirees.  This ruling was reconsidered based on the position that retirees are no longer employees of the company and therefore are no longer bargaining members who can benefit from a compulsory arbitration award.  The Secretary, however, ruled that all members of the bargaining unit who retire between August 19, 1996 and November 30, 1997 (i.e., the term of the disputed CBA under the Secretary’s disputed orders) are entitled to receive an additional rice subsidy.

The question squarely brought in this petition is whether the Secretary can issue an order that binds the retirement fund.  The company alleges that a separate and independent trust fund is the source of retirement benefits for MERALCO retirees, while the union maintains that MERALCO controls these funds and may therefore be compelled to improve this benefit in an arbitral award.

The issue requires a finding of fact on the legal personality of the retirement fund.  In the absence of any evidence on record indicating the nature of the retirement fund’s legal personality, we rule that the issue should be remanded to the Secretary for reception of evidence as whether or not the MERALCO retirement fund is a separate and independent trust fund.  The existence of a separate and independent juridical entity which controls an irrevocable retirement trust fund means that these retirement funds are beyond the scope of collective bargaining: they are administered by an entity not a party to the collective bargaining and the funds may not be touched without the trustee’s conf