GOYA, INC., Petitioner, vs. GOYA, INC. EMPLOYEES UNION-FFW, Respondent. G.R. No.

170054 January 21, 2013

Facts:
 Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation engaged in the manufacture,
importation, and wholesale of top quality food products, hired contractual employees from PESO Resources
Development Corporation to perform temporary and occasional services in its factory in Marikina City.
 This prompted respondent Goya, Inc. Employees Union–FFW (Union) to request for a grievance conference on the
ground that the contractual workers do not belong to the categories of employees stipulated in the existing
CBA. When the matter remained unresolved, the grievance was referred to the NCMB for voluntary arbitration.
 Hearing on July 1, 2004, the Company and the Union manifested before VA Bienvenido E. Laguesma that amicable
settlement was no longer possible; hence, they agreed to submit for resolution the solitary issue of "[w]hether or
not the Company is guilty of unfair labor acts in engaging the services of PESO, a third party service provider, under
the existing CBA, laws, and jurisprudence."

Union’s arguments
 The Union asserted that the hiring of contractual employees from PESO is not a management prerogative and in
gross violation of the CBA tantamount to ULP. It noted that the contractual workers engaged have been assigned
to work in positions previously handled by regular workers and Union members, in effect violating Section 4,
Article I of the CBA, which provides for three categories of employees in the Company (probationary, regular and
casual).
 With the hiring of contractual employees, the Union contended that it would no longer have probationary and
casual employees from which it could obtain additional Union members; thus, rendering inutile Section 1, Article
III (Union Security) of the CBA.

 In countering the Union’s allegations, the Company argued that:

o (a) the law expressly allows contracting and subcontracting arrangements through DOLE Order No. 18-02;
(b) the engagement of contractual employees did not, in any way, prejudice the Union, since not a single
employee was terminated and neither did it result in a reduction of working hours nor a reduction or
splitting of the bargaining unit; and (c) Section 4, Article I of the CBA merely provides for the definition of
the categories of employees and does not put a limitation on the Company’s right to engage the services
of job contractors or its management prerogative to address temporary/occasional needs in its operation.

VA decision
 October 26, 2004, VA Laguesma dismissed the Union’s charge of ULP for being purely speculative and for lacking
in factual basis, but the Company was directed to observe and comply with its commitment under the CBA. The
VA opined:
o While the foregoing agreement between the parties did eliminate management’s prerogative of
outsourcing parts of its operations, it serves as a limitation on such prerogative particularly if it involves
functions or duties specified under the aforequoted agreement.
o It is clear that the parties agreed that in the event that the Company needs to engage the services of
additional workers who will perform "occasional or seasonal work directly connected with the regular
operations of the COMPANY," or "specific projects of limited duration not connected directly with the
regular operations of the COMPANY", the Company can hire casual employees which is akin to contractual
employees. If we note the Company’s own declaration that PESO was engaged to perform "temporary or
occasional services", then it should have directly hired the services of casual employees rather than do it
through PESO.
o It is evident, therefore, that the engagement of PESO is not in keeping with the intent and spirit of the
CBA provision in question. It must, however, be stressed that the right of management to outsource parts
of its operations is not totally eliminated but is merely limited by the CBA. Given the foregoing, the
Company’s engagement of PESO for the given purpose is indubitably a violation of the CBA.
  While the Union moved for partial reconsideration of the VA Decision, the Company immediately filed a petition
for review before the CA under Rule 43 of the Revised Rules of Civil Procedure to set aside the directive to observe
and comply with the CBA commitment pertaining to the hiring of casual employees when necessitated by business
circumstances, and professing that such order was not covered by the sole issue submitted for voluntary
arbitration.

CA decision
 June 16, 2005, the CA dismissed the petition:
o This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling that "the
engagement of PESO is not in keeping with the intent and spirit of the CBA." The said ruling is interrelated
and intertwined with the sole issue to be resolved that is, "Whether or not the Company is guilty of unfair
labor practice in engaging the services of PESO, a third party service provider, under existing CBA, laws,
and jurisprudence." Both issues concern the engagement of PESO by the Company which is perceived as
a violation of the CBA and which constitutes as unfair labor practice on the part of the Company.
o This is easily discernible in the decision of the Hon. Voluntary Arbitrator when it held:
 x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it does not
constitute unfair labor practice as it (sic) not characterized under the law as a gross violation of
the CBA. Violations of a CBA, except those which are gross in character, shall no longer be treated
as unfair labor practice. Gross violations of a CBA means flagrant and/or malicious refusal to
comply with the economic provisions of such agreement. x x x

o Germane to the resolution of the above issue is the provision in their CBA with respect to the categories
of the employees: x x x x
 A careful reading of the enumerated categories of employees reveals that the PESO contractual
employees do not fall within the enumerated categories of employees stated in the CBA of the
parties. Following the said categories, the Company should have observed and complied with the
provision of their CBA. Since the Company had admitted that it engaged the services of PESO to
perform temporary or occasional services which is akin to those performed by casual
employees, the Company should have tapped the services of casual employees instead of
engaging PESO.
 It bears stressing that a management prerogative refers to the right of the employer to regulate
all aspects of employment, such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees, supervision of their work,
lay-off and discipline, and dismissal and recall of work, presupposing the existence of employer-
employee relationship. On the basis of the foregoing definition, the Company’s engagement of
PESO was indeed a management prerogative. This management prerogative of contracting out
services, however, is not without limitation. In contracting out services, the management must
be motivated by good faith and the contracting out should not be resorted to circumvent the
law or must not have been the result of malicious arbitrary actions.
 In the case at bench, the categories of employees particularly with respect to casual employees
serve as limitation to the Company’s prerogative to outsource parts of its operations especially
when hiring contractual employees. As stated earlier, the work to be performed by PESO was
similar to that of the casual employees. With the provision on casual employees, the hiring of
PESO contractual employees, therefore, is not in keeping with the spirit and intent of their CBA.
(Citations omitted)

 The Company moved to reconsider the CA Decision, but it was denied; hence, this petition.

Issue: Whether or not the Company is guilty of unfair labor practice in engaging the services of PESO, a third party service
provider, under existing CBA, laws, and jurisprudence?
Ruling: NO.
 Indeed, the opinion of the VA is germane to, or, in the words of the CA, "interrelated and intertwined with," the
sole issue submitted for resolution by the parties.

 Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation v. Saornido.
o In Ludo, the company was engaged in the manufacture of coconut oil, corn starch, glucose and related
products. In the course of its business operations, it engaged the arrastre services of CLAS for the loading
and unloading of its finished products at the wharf. The arrastre workers deployed by CLAS to perform
the services needed were subsequently hired, on different dates, as Ludo’s regular rank-and-file
employees. Thereafter, said employees joined LEU, which acted as the exclusive bargaining agent of the
rank-and-file employees. When LEU entered into a CBA with Ludo, providing for certain benefits to the
employees, it requested to include in its members’ period of service the time during which they rendered
arrastre services so that they could get higher benefits. The matter was submitted for voluntary
arbitration when Ludo failed to act. Per submission agreement executed by both parties, the sole issue
for resolution was the date of regularization of the workers.
o The VA Decision ruled that: (1) the subject employees were engaged in activities necessary and desirable
to the business of Ludo, and (2) CLAS is a labor-only contractor of Ludo.
o It then disposed as follows: (a) the complainants were considered regular employees six months from the
first day of service at CLAS; (b) the complainants, being entitled to the CBA benefits during the regular
employment, were awarded sick leave, vacation leave, and annual wage and salary increases during such
period; (c) respondents shall pay attorney’s fees of 10% of the total award; and (d) an interest of 12% per
annum or 1% per month shall be imposed on the award from the date of promulgation until fully paid.
The VA added that all separation and/or retirement benefits shall be construed from the date of
regularization subject only to the appropriate government laws and other social legislation. Ludo filed a
motion for reconsideration, but the VA denied it. On appeal, the CA affirmed in toto the assailed decision;
hence, a petition was brought before this Court raising the issue, among others, of whether a voluntary
arbitrator can award benefits not claimed in the submission agreement.
o In denying the petition, We ruled:
 Generally, the arbitrator is expected to decide only those questions expressly delineated by the
submission agreement. Nevertheless, the arbitrator can assume that he has the necessary power
to make a final settlement since arbitration is the final resort for the adjudication of disputes. The
succinct reasoning enunciated by the CA in support of its holding, that the Voluntary Arbitrator in
a labor controversy has jurisdiction to render the questioned arbitral awards, deserves our
concurrence, thus:
 In general, the arbitrator is expected to decide those questions expressly stated and
limited in the submission agreement. However, since arbitration is the final resort for the
adjudication of disputes, the arbitrator can assume that he has the power to make a final
settlement. Thus, assuming that the submission empowers the arbitrator to decide
whether an employee was discharged for just cause, the arbitrator in this instance can
reasonably assume that his powers extended beyond giving a yes-or-no answer and
included the power to reinstate him with or without back pay.
 In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary
jurisdiction and authority to interpret the agreement to arbitrate and to determine the scope of
his own authority subject only, in a proper case, to the certiorari jurisdiction of this Court. The
Arbitrator, as already indicated, viewed his authority as embracing not merely the determination
of the abstract question of whether or not a performance bonus was to be granted but also, in
the affirmative case, the amount thereof.

 Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision. Said case reaffirms the
plenary jurisdiction and authority of the voluntary arbitrator to interpret the CBA and to determine the scope of
his/her own authority. Subject to judicial review, the leeway of authority as well as adequate prerogative is aimed
at accomplishing the rationale of the law on voluntary arbitration – speedy labor justice.
  In this case, a complete and final adjudication of the dispute between the parties necessarily called for the
resolution of the related and incidental issue of whether the Company still violated the CBA but without being
guilty of ULP as, needless to state, ULP is committed only if there is gross violation of the agreement.

 Lastly, the Company kept on harping that both the VA and the CA conceded that its engagement of contractual
workers from PESO was a valid exercise of management prerogative. It is confused.
 To emphasize, declaring that a particular act falls within the concept of management prerogative is significantly
different from acknowledging that such act is a valid exercise thereof. What the VA and the CA correctly ruled was
that the Company’s act of contracting out/outsourcing is within the purview of management prerogative.
 Both did not say, however, that such act is a valid exercise thereof. Obviously, this is due to the recognition that
the CBA provisions agreed upon by the Company and the Union delimit the free exercise of management
prerogative pertaining to the hiring of contractual employees. Indeed, the VA opined that "the right of the
management to outsource parts of its operations is not totally eliminated but is merely limited by the CBA," while
the CA held that "this management prerogative of contracting out services, however, is not without limitation. x
x x These categories of employees particularly with respect to casual employees serve as limitation to the
Company’s prerogative to outsource parts of its operations especially when hiring contractual employees."

 A collective bargaining agreement is the law between the parties:

o It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they
are obliged to comply with its provisions.

 In this case, Section 4, Article I (categories of employees) of the CBA between the Company and the Union must
be read in conjunction with its Section 1, Article III (on union security). Both are interconnected and must be given
full force and effect. Also, these provisions are clear and unambiguous. The terms are explicit and the language of
the CBA is not susceptible to any other interpretation. Hence, the literal meaning should prevail.
 As repeatedly held, the exercise of management prerogative is not unlimited; it is subject to the limitations found
in law, collective bargaining agreement or the general principles of fair play and justice. To reiterate, the CBA is
the norm of conduct between the parties and compliance therewith is mandated by the express policy of the law.

 WHEREFORE, the petition is DENIED. SO ORDERED.

Section 4. Categories of Employees.– The parties agree on the following categories of employees:
(a) Probationary Employee. – One hired to occupy a regular rank-and-file position in the Company and is serving a
probationary period. If the probationary employee is hired or comes from outside the Company (non-Goya, Inc.
employee), he shall be required to undergo a probationary period of six (6) months, which period, in the sole judgment of
management, may be shortened if the employee has already acquired the knowledge or skills required of the job. If the
employee is hired from the casual pool and has worked in the same position at any time during the past two (2) years, the
probationary period shall be three (3) months.
(b) Regular Employee. – An employee who has satisfactorily completed his probationary period and automatically granted
regular employment status in the Company.
(c) Casual Employee, – One hired by the Company to perform occasional or seasonal work directly connected with the
regular operations of the Company, or one hired for specific projects of limited duration not connected directly with the
regular operations of the Company.

Section 1. Condition of Employment. – As a condition of continued employment in the Company, all regular rank-and-file
employees shall remain members of the Union in good standing and that new employees covered by the appropriate
bargaining unit shall automatically become regular employees of the Company and shall remain members of the Union in
good standing as a condition of continued employment.