Meralco VS. Secretary of Labor and – file employees within the community.
It should be
(2002 Decision)
Facts
In the decision dated January 27, 1999, the parties
(Meralco and Meralco Employees Workers Association)
are directed to execute a Collective Bargaining Agreement
incorporating the terms and conditions contained in the
unaffected portions of the Secretary of Labor’s orders and
the modification set forth. The retirement fund issue is
remanded to the Secretary of Labor for reception of
evidence and determination of the legal personality of
the Meralco retirement fund.
Dissatisfied with the Decision, some alleged members of
private respondent union (Union, brevity) filed a motion
for intervention and a motion for reconsideration of the
said decision.
Petitioner warns that if the wage increase of 2,200.00 per
month as ordered by the Secretary is allowed, it would
simply pass the cost covering such increase to the
consumers through an increase in the rate of electricity.
The court takes judicial notice that the new amounts
granted in this case are significantly higher than the
weighted average salary currently enjoyed by other rank –
noted that the relations between the labor and capital is
impressed with public interest which must yield to the
common good. Neither party should act oppressively
against the other or impair the interest or convenience of
the public. Besides, matters of salary increases are part of
management prerogative.
ISSUES & RULINGS:
On the allegation concerning the grant of loan to a
cooperative, there is no merit in the union’s claim that it
is no different from housing loans granted by the
employer. The award of loans for housing is justified
because it pertains to a basic necessity of life. It is part of
a privilege recognized by the employer and allowed by
law. In contrast, providing seed money for the
establishment of the employee’s cooperative is a matter
in which the employer has no business interest or legal
obligation.
On Management Prerogative, Contracting out of
Services; the employer is allowed to contract out services
for six (6) months or more. –However, a line must be
drawn between management prerogatives regarding
business operations per se and those which affect the
rights of employees and in treating the latter, the
employer should see to it that its employees are at least
properly informed of its decision or modes of action in
order to attain a harmonious labor – management
relationship and enlighten the workers concerning their
rights. Hiring of workers is within the employer’s inherent
freedom to regulate and is a valid exercise of its
management prerogative subject only to special laws and
agreements on the matter and the fair standards of
justice. The management cannot be denied the faculty of
prompting efficiency and attaining economy by a study of
what units are essential for its operation. It has the
ultimate determination of whether – services should be
performed by its personnel or contracted to outside
agencies.

While there should be mutual consultation, eventually

deference is to be paid to what management decides.
Contracting out of service is an exercise of business
judgement or management prerogatives. Absent of proof
that management acted in malicious or arbitrary
manner, the court will not interfere with the exercise of
judgement by an employer.
 GTE Directories VS. Sanchez
Facts
GTE Directories (GTE, for brevity) is a foreign corporation
engaged in the Philippine in the business of publishing
the PLDT (Philippine Long Distance Telehpone Compay)
telephone directories for Metro Manila and several
provinces.
The practice was for its sales representative to be given
work assignments within specific territories by the so –
called “draw method”. These sales territories were so
plotted or mapped out as to have “an equal number of
advertisers as well as revenue. Within these territories,
the sales representatives were given quotas.
A territory was not fully released to the salesperson for
handling at one time, but assigned in increments
(increase) or partial releases of account. Now, increments
were given by the so called “Grid System” (division or
sections) within each territory. At such closing date, a
salesperson should have achieved a certain amount of the
revenue target designated for his grid, otherwise, he loses
the forthcoming gird or forfeits the remaining grids not
yet received.
The Grid system was installed for the following reasons
1. To give all salespersons an opportunity to contact
advertisers within a reasonable period
2. To assure GTE that it will get its share of
advertising budget from clients as early as possible
3. To ensure an even flow of work throughout the
company.
This company practice was observed from 1980 until
sometime in 1984 when GTE realized that competition
among media for a share of the advertising revenue had
become so keen as to require quick reaction.
GTE, therefore, launched an aggressive campaign to get
what it considered to be its rightful share of advertising
budget of its clientele before it could be allocated to
other media (newspaper, television etc)
It adopted a new strategy by which:
1. All its sales representative were required to
achieve specified revenue targets within pre –
determined periods.
2. In cases of cancelled revenue accounts or
advertisements, it required all its salesperson to re
– establish contact and renew the same within
fixed period
3. If the cancelled revenue accounts were not
renewed within the assigned period, said accounts
 were declared, for a set period, OPEN TERRITORY
to all sales representative including the one who
reported the cancellation.
4. If not renewed during set open territory period,
said cancelled accounts were deemed no longer
“open territory” and the same could be referred
for handling to contractual salesperson and/or
outside agencies.
GTE informed all its sales representative of the new policy
in a memorandum. The new policy was regarded as an
improvement over the previous sales production policy.
It appears that the new policy did not sit well with the
union. It demanded that it be given 15 days “to raise
questions or objections to or to seek reconsideration of
the sales and administrative practices issued by the
company”
GTE granted it’s the request of the union and the union
submitted proposals for revisions, corrections and
deletions of some policies incorporated.
GTE next formulated a new set of “Sales Administrative
Practices” which it issued a memorandum requiring all
Premise Sales Representative (PRS) to submit individual
reports reflecting target revenues but this was
superseded by another memorandum revising the
previous schedules that the amount required on the 1 st
deadline (30K) has been reduce to (20K) having taken into
consideration that most of your accounts you have
already on hand are with your respective “prep artists”
The sales representative did not submit the reports.
Instead the Union sent a letter to the Sales Manager
which stated that:
1. only one (1) out of 19 sales representative met the
20K revenue,
2. that the schedule was not drawn up as a result of
an agreement of all concerned since GTE had
failed to get affirmative responses from clustered
groups of Sales Representative.
3. That the union could not “comprehend how
cancelling, non – cancelling accounts help
production and that its members would fail
expectations of cancelling, non – cancelling
accounts since it would result to further reduction
of their pay which they believe is the purpose of
their discriminate and whimsical memo.
The following day, the union filed in behalf of the sales
representatives, a notice of strike grounded on alleged
unfair labor practices
GTE sent still another memorandum to 16 of its premise
sales representative, this time through its Director for
Marketing and Sales, requiring submissions of individual
reports reflecting target revenue. However, no
compliance was made. GTE thereupon suspended its
sales representative without pay. Thus, GTE terminated
the employment of the sales representative
The union declared a strike in which 60 employees
participated. During all time, conciliation efforts were
made by the Bureau of Labor Relations.
DECISION OF LABOR MINISTER – it directed all striking
employees to go back work and the management of GTE
directories to accept ALL returning employees. The labor
minister pronounced also that the dispute is “adversely
affects public interest”
GTE filed a motion for reconsideration which states that
“with or without the order, it will accept all striking
employees back to work except the 14 premise sales
representative who were dismissed for cause prior to
strike.”
The minister of labor denied the motion of GTE.
GTE, on the other hand, adverted that the general rule,
promulgations of company policies and regulations are
basic management prerogatives, although the principle of
CBA encompasses almost all relations between the
employer and its employees, UNLESS shown to be grossly
oppressive or contrary to law, generally binding and valid
on the parties.
ISSUE: W/N the adoption of the GTE Directories of a new
sales evaluation and production policy was within its
management prerogative?
HELD
 Yes, it is a valid exercise of management
prerogative
 Every business enterprise endeavours to increase
its profits. In the process, it may adopt or devise
means designed towards that goal. The free will of
management to conduct its own business affairs to
achieve its purpose cannot be denied. So long as a
company’s management prerogatives are exercised
in good faith for the advancement of the
employer’s interest and not for the purpose of
defeating or circumventing the rights of the
employees under special laws or under valid
agreements, this court will uphold them.
 In the case at bar, it must be conceded that its
adoption of a new sales evaluation and production
 policy was within its management prerogative to
regulate, according to its own discretion and
judgement.
 There were, objections presented by the union
such as
o That the schedule had not been drawn up
as a result of an agreement of all concerned
o That the new policy was incomprehensible
and discriminatory and whimsical and
would result to further reduction of the
sales representatives’ compensation.
However, the court fails to see, how these
objections and accusations justify the
deliberate and obdurate (inflexible) refusal of
the sale representative to obey the
management’s simple requirement for
submission by all Premise Sales Representative
(PSR) of individual reports or memoranda
requiring reflecting target revenues which is all
that GTE basically required and which it
addressed to the employees concerned no less
than 6 times.
 Surely at any point in time, compliance with their
superiors directives could not have foreclosed
their demands for the revocation or revision of
the new sales policies or rules; there was nothing
to prevent them from submitting the requisite
reports with the reservation to seek such
revocation or revision.
 Promulgation of company policies and
regulations are basic management prerogatives
and it is a recognized principle of law that
company policies and regulations are, unless
shown to be grossly oppressive or contrary to
law, generally binding and valid on the parties
and must complied with until finally revised or
amended unilaterally or preferably through
negotiations or competent authorities.
 Deliberate disregard or disobedience of rules by
the employees cannot be tolerated, UNLESS the
rules or orders imposed by the employer are
declared to be illegal by competent authority.
Thus, the employees ignored or disobey them at
their own peril. This is not to say that the
employees have no remedy against rules they
regard as unjust or illegal. They may object
thereto, ask to negotiate thereon, bring
proceedings for redress against the employer
before the Ministry of labor. But until and unless
the rule or orders are declared to be illegal or
improper by competent authority, the employees
ignore them at their peril.
 Biboso VS. Victoria Milling
Facts
There were 9 petitioners in this case, whose employment
admittedly were on probationary basis. Individual
complainants herein were employed by respondent as
academic teachers in respondent’s school, the St. Mary
Mazzarello School, which is operated by the respondent.
On April 14, 1973, complainants were notified by the
School Directress that the complainants were not going to
be rehired for the school year 1973 – 1974.
The examination of the case reveals that various contracts
have been identified and this contracts have been signed
by the complainants which clearly show that that the
complainants were hired as teachers of the school on
year – to – year basis and that they reapplied before the
expiration of the contracts or singed a new contract if the
school decided to renew the same.
None of the complainants who testified disputed during
the hearing that fact that they all signed identical
contracts of employment which provided for a definite
period of employment.
Thus, under the “Status of Employment” of said
contracts, the complaints were hired as temporary.
ISSUE: W/N the present constitution in expanding the
mandate of protection to labor covers those whose
employment were on probationary basis?
HELD
 The employer may terminate the employment of
teachers on probationary status after their
contracts have expired. It cannot be said that an
abuse could rightfully be imputed to it, much less
one that is of such gravity that calls for juridical
correction. In the case at bar, the petitioners were
all aware that all the time that their tenure was for
a limited duration. Upon its termination, both
parties to the employment relationship were free
to renew to it or to let it lapse. Thus, there is
nothing objectionable when office of the president
determined that the will of the parties as to the
limited duration thereof should be respected
 The security of tenure provision of the
constitution applies to probationary employees
during the duration of their employment and
before their contracts of probationary
employment expire – there was a safeguard as to
the duration of their employment, that is, to the
extent were the contracts provided therein. The
moment, the period expire in accordance with
contracts freely entered into, they could no longer
invoke the constitutional protection.