Philippine Supreme Court Resolutions > Year 2010 > March 2010 Resolutions > [G.R. No. 163947 : March 17, 2010] SANDIGAN NG KAWANI-FILIPINO (SA GSK), PETITIONER, VS. GLAXO SMITHKLINE AND PANEL OF VOLUNTARY ARBITRATORS - AVA ROGELIO F.C. TARRIELA (CHAIRMAN), AVA GERARDO D. RABANES (MEMBER), AVA FLORO F. OLIVEROS (MEMBER), RESPONDENTS :

Quoted hereunder, for your information,  is a resolution of this Court dated 17 March 2010:

G.R. No. 163947: SANDIGAN NG KAWANI-FILIPINO (SA GSK), petitioner, versus GLAXO SMITHKLINE and PANEL OF VOLUNTARY ARBITRATORS - AVA ROGELIO F.C. TARRIELA (CHAIRMAN), AVA GERARDO D. RABANES (MEMBER), AVA FLORO F. OLIVEROS (MEMBER), respondents.


Before the Court is a petition for review^[1] assailing the Decision^[2] dated 16 January 2004 and Resolution^[3] dated 7 June 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 74229.

On 17 January 2000, Glaxo Wellcome and Smithkline entered into a global merger in the United Kingdom (UK). The objective was to acquire all the issued share capital of the two companies and form a new company, Glaxo SmithKline PLC (GSK PLC). On 27 December 2000, the acquisition of the shares was realized. Thereafter, the two companies integrated their operations and subsidiaries worldwide.

In the Philippines, Glaxo Wellcome Philippines, Inc. (GWPI) and Smithkline Beecham Research Limited (SBRL) integrated their operations to form Glaxo Smithkline, Inc. (GSK), respondent in this case, which is controlled by GSK PLC, its foreign mother company.

Initially, there were plans to merge GWPI and SBRL. However, GWPI was registered as a local coiporation while SBRL was merely a branch office of a foreign corporation. Merger or consolidation, as defined under the Corporation Code, did not materialize. Thus, GWPI and SBRL maintained their own separate legal personality although both entities were managed by a single management team and business operations were handled by a common owner. The two entities also adopted the trade name GSK in their common business activities for marketing purposes.

It was only a year later, or in February 2002, when GSK was incorporated here in the Philippines.^[4]

As a result of the integration, GSK management conducted a review of the policies affecting medical representatives (MRs). These policies were discussed with the officers and members of petitioner Sandigan ng Kawam-Filipino (SA-GSK), the Union of the rank and file employees of SBRL. Among the items decided on by GSK was the policy on availment of leave of GWPI which would be implemented to SBRL MRs.

SA-GSK opposed the implementation of the policy on the ground that the policy was unfair and diminished the existing benefits of SBRL's MRs without the required participation of the employees as provided in SA-GSK's Collective Bargaining Agreement (CBA) with SBRL. SA-GSK stated that GSK unilaterally implemented the said policy without due consultation with the union violating Section 5, Article IV of the CBA:

SECTION 5. The Management reinforces the view of the Union in strengthening the SB Employees' Council. The Employee Affairs Committee of the SBEC shall meet periodically or as often as possibly to discuss issues involving lab or-management relations and to recommend measures to stabilize and strengthen such relations for the mutual benefit of the Company and the Union. Examples are:

1.    Incentive Program, both Sales and Plant

2.    Trade Sale Target Setting

3.    R & F Performance Appraisal

On 27 June 2001, after exhausting all remedies of grievance machinery, SA-GSK and GSK submitted the dispute for voluntary arbitration with the National Conciliation and Mediation Board (NCMB).^[5] The two issues submitted for resolution were (1) whether or not the company committed unfair implementation of the policy on leave availment, and (2) whether or not the company committed a violation of SA-GSK's CBA on workers' participation.

Sometime in July 2001, while the case was pending, the head office of SBRL in the UK informed its branch in the Philippines that SBRL's pharmaceutical field force operations would be discontinued on the ground of partial cessation of business effective 31 August 2001. The directive resulted in the designation of the marketing aspect of the business to GWPI and the manufacturing arm to SBRL.

SBRL was then directed and authorized to terminate the services of its affected employees - Area Business Managers and Professional Sales Representatives. SBRL gave two options: (1) for the employees to apply with GWPI, and if accepted, they will be covered by a GWPI employment package; or (2) to accept the termination and receive a separation package. Eventually, some employees applied with GWPI and were hired, while the others elected to be separated and accepted the corresponding separation package.

On 21 August 2001, GSK filed a Motion to Dismiss the case with the NCMB. GSK asserted that the issues raised have become moot and academic due to the partial cessation of business of SBRL's pharmaceutical field force operations. On the other hand, SA-GSK opposed the motion alleging that the closure should not have any effect on its union members, who became GSK's employees.

The following month, SA-GSK filed a complaint^[6] for unfair labor practice (ULP) and illegal dismissal against GSK, GWPI, SBRL and some of its officers with the National Labor Relations Commission (NLRC).

In a Resolution^[7] dated 5 December 2001, the NCMB Panel of Voluntary Arbitrators granted the motion to dismiss on the ground that the issues presented have become moot and academic due to a supervening event. The relevant portion states:

We cannot subscribe to the argument of the Union that the employees of SBRL who are union members automatically became employees of GSK at the time of what it termed as the "merger of equals". What happened was not a merger in its strict technical or legal sense, at least until now. GSK, to date, is not a legal entity separate and distinct from GWPI or SBRL. What happened was just an integration of operations in preparation for the finalization of the merger. What happened was that, the employees of SBRL were not automatically absorbed by GSK. Otherwise, they could not have applied for employment with GWPI. Their act of applying for employment with GWPI is a very clear indication that they have not become employees of GSK. xxx

xxx [T]he ones affected by the closure of SBRL:s pharmaceutical business field force operations are medical representatives. They were the ones who applied for employment with GWPI and/or accepted separation packages. Thus, for those who applied and were accepted by GWPI, they have no choice, as employees of GWPI, but to accept the policies of GWPI for it is the prerogative of GWPI to run its business. The unfairness of the questioned policy is therefore no longer an issue as all employees are subject to the same. The former SBRL employees who now are employees of GWPI cannot say that the questioned policy, in relation to the SBRL policy on the matter, is unfair to them precisely because they are now the employees of GWPI. There is now no point in comparing the questioned policy with that of the SBRL policy. For those who accepted their separation packages, it is easy to understand that they no longer have the personality to be affected by the implementation of the policy precisely because they are no longer employees of either GWPI or SBRL. In any event, there is no more point in determining whether or not the CBA between the Union and SBRL was followed precisely because the CBA has no application at this time, at least insofar as the affected employees of the instant case, the medical representatives, are concerned.

From the foregoing it would seem that the issues subject of the present dispute have been rendered moot and academic by a supervening event, x x x

With respect to the second issue, GSK has not violated Sec. 5, Art. IV of the Union's CBA with SBRL x x x.

GSK has shown that there were several meetings between the management and the Union regarding the questioned policy. Beginning in January 2001 where a Sales and Marketing Conference of the Medical Representatives was held, several meetings/consultations with the employees and the union were held thereafter, specifically on February 13, 15, 16, 20 and 23: 2001 and on March 26, 2001.

"Workers participation" should not be construed as the forging of an agreement with the acquiescence or approval of the employees. It only means that the employees should be given an unhampered opportunity to air their concerns about a matter or policy which the employer seeks to craft and implement. The prerogative still lies with the employer. The agreement or disagreement of the employees should not affect the validity of the policy if it is otherwise valid. In this case, the Union may have some doubts about the policy but it is a fact that management had several consultations with it. And that is [what] "workers participation" [is] all about.^[8]

SA-GSK filed a Motion for Reconsideration which was denied in an Order^[9] dated 14 November 2002.

On 28 February 2002, the Labor Arbiter dismissed the complaint for ULP and illegal dismissal due to want of merit.^[10]

SA-GSK then filed a petition for review with the CA.  On 16 January 2004, the CA dismissed the case.

SA-GSK filed a Motion for Reconsideration which was denied by the CA in a Resolution dated 7 June 2004.

Hence, this petition.

The main issue is whether the CA correctly affirmed the resolution of the NCMB, which granted the motion to dismiss filed by GSK.

Petitioner SA-GSK insists that the CA erred in affirming the resolution of the NCMB Panel of Voluntary Arbitrators which granted the motion to dismiss filed by GSK. Petitioner asserts that the NCMB committed grave abuse of discretion in failing to resolve the two issues submitted for resolution due to a supervening event. Also, petitioner submits that the CA erred in disregarding that the union members who questioned the legality of their dismissal are still considered as employees for purposes of labor relations even if they ceased to be employees of SBRL.

Respondent GSK, on the other hand, maintains that the issues agreed to by the parties became immaterial when the closure of SBRL's pharmaceutical field force operations occurred. Such supervening event did not exist at the time the parties forged their agreement but materialized later on during the process of integration of GWPI and SBRL's operations. With regard to some union members who filed the illegal dismissal complaint, circumstances show that they were validly separated from employment due to SBRL's termination of its pharmaceutical field force operations.

The petition lacks merit.

In a petition for review on certiorari under Rule 45 of the Rules of Court, a mere statement that the CA erred is insufficient. The petition must state the law or jurisprudence and the particular ruling of the appellate court violative of such law or jurisprudence.^[11]

In the present case, petitioner did not show that the ruling of the CA is violative of any law or jurisprudence. The petitioner merely stated that the two issues submitted for resolution to the NCMB were not passed upon and that the NCMB resolved other issues not submitted to them for resolution. However, the CA, in upholding the resolution of the NCMB, made its own findings in the present case:

The voluntary arbitrators aptly ratiocinated that the issue on the policy on leave availment affecting SBRL employees can no longer be questioned by petitioner due to lack of personality of its members as they ceased to be employees of SBRL, either for having accepted employment with GWPI or for having accepted SBRL's separation package.

Anent the question on the absence of workers' participation on the policy of leave availment, the NCMB in its resolution dated 07 December 2001 correctly made the following observations:

"GSK has shown that there were several meetings between the management and the union regarding the questioned policy. Beginning in January 2001 where a sales and marketing conference of the medical representatives was held, several meetings/consultations with the employees and the union were held thereafter, specifically on February 13, 15, 16, 20 and 23, 2001 and on March 26, 2001."

Granting arguendo that there was a breach of the union's CBA on the right of the employees to be duly consulted on the questioned policy, We concur with the following arguments of the private respondent:

"x x x With respect to the CBA provision on workers' participation, suffice it to say that the CBA is between the Union and SBRL, covering employees of SBRL. Thus, since the affected MRs are now employees of GWPI, they are no longer covered by the SBRL CBA. Besides, GWPI is not a party to the said CBA."

xxx Petitioner as a union of SBRL's rank-and-file employees has failed to adduce proof that private respondent was designated by SBRL or the union as its assignee or successor-in-interest. SBRL, GWPI and the private respondent have their own distinct and separate personalities. Thus, the subject CBA is a bilateral covenant confined within the parameters of the rights and obligations of SBRL and the petitioner.

xxx SBRL's partial cessation of its business operations due to its integration with GWPI is within the bounds of management prerogative and should not be regarded as unfair labor practice against petitioner's members.

The case of Manlimos vs. NLRC (242 SCRA 146) finds application in the instant case that in the event of a conveyance of a corporation's rights or assets, it is the transferee's sound discretion who among the employees shall be retained or terminated.

"In the exercise of such management prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal or terminations of its employees in the process, xxx

Where such transfer of ownership is in good faith, the transferee is under no legal duty to absorb the transferor's employees as there is no law compelling such absorption. The most that the transferee may do, for reasons of public policy and social justice, is to give preference to the qualified separated employees in the filling of vacancies in the facilities of the purchaser."

Thus, We do not subscribe to the assertion of petitioner that on the basis of the integration of SBRL with GWPI, petitioner's members who were affected by the closure of SBRL pharmaceutical division were automatically absorbed by GWPI. GWPI has the sole and final say who among the SBRL employees who applied for employment are qualified to join its work force.^[12]

We agree with the CA's observations. The right to close the operation of an establishment is one of the authorized causes in terminating employment of workers. Such right, however, provides a limitation that the closure should not be used as a tool to circumvent the provisions on termination of employment embodied in the Labor Code.

Article 283 of the Labor Code provides:

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. - The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

This provision states that there are three requirements necessary for a valid cessation of business operations: (1) service of a written notice to the employees and to the DOLE at least one month before the intended date thereof; (2) the cessation of business must be bona fide in character; and (3) payment to the employees of termination pay amounting to one month pay or at least one-half month pay for every year of service, whichever is higher.^[13]

We subscribe to the ruling of the CA in the present case that the three requirements were met by SBRL when it closed its pharmaceutical field force operations:

SBRL duly complied with the aforesaid requirements. As early as 24 July 2001 and 27 July 2001 or more than a month prior to the effectivity of the cessation of SBRL pharmaceutical operations on 31 August 2001, SBRL duly informed its employees and the DOLE: respectively, regarding its partial closure. Anent the second requirement, the cessation of its pharmaceutical business operations was brought about by the integration of GWPI and SBRL to increase business competitiveness. Thus, there existed a justifiable ground why SBRL partially ceased its pharmaceutical business operations. As to the third requirement, the SBRL medical representatives who decided to terminate their services were paid the corresponding separation pays more than what is mandated by law. An employer may close or cease his business operations or undertaking even if he is not suffering from serious business losses or financial reverses as in the herein case, as long as he pays his employees their termination pay in the amount corresponding to their length of service, x x x^[14]

In view of the valid cessation of SBRL's pharmaceutical field force operations, the two issues originally submitted for resolution to the NCMB became moot as a result of the exercise of a legitimate management prerogative. The CA sums its best when it held that "a case becomes moot and academic when there is no more actual controversy between the parties or no useful purpose can be served in passing upon the merits."^[15] The NCMB, therefore, correctly ruled in dismissing the case.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 16 January 2004 and and Resolution dated 7 June 2004 of the Court of Appeals in CA-G.R. SP No. 74229.

SO ORDERED. (Del Castillo, J., no part; Peralta, J, designated additional member per Raffle dated 15 March 2010)

WITNESS the Honorable Antonio T. Carpio, Chairperson, Honorable Arturo D. Brion, Diosdado M. Peralta (designated additional member per Raffle dated 15 March 2010), Roberto A. Abad and Jose P. Perez, Members, Second Division, this 17^th day of March, 2010.

Endnotes:

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^[1] Under Rule 45 of the Rules of Court.

^[2] Rollo, pp. 30-41. Penned by Justice Buenaventura J. Guerrero with Justices Andres B. Reyes, Jr. and Regalado E. Maambong, concurring.

^[3] Id. at 66.

^[4] Id. at 173.

^[5] Docketed as VA CASE NO. NCMB-NCR RVA-05-010-01.   Voluntary Arbitrators Rogelio F.C. Tarriela, Gerardo D. Rabanes and Floro S. Oliveros comprised the Pane! of Voluntary Arbitrators.

^[6] Docketed as NLRC-NCR (South) Case No. 30-07-03038-01.

^[7] Id. at 93-100.

^[8] Id. at 97-99.

^[9] Id. at 135.

^[10] Id. at 327-344.

^[11] Jose v. Michaelmar Phils., Inc., G.R No. 169606, 27 November 2009.

^[12] 12    Id. at 36-38

^[13] Industrial Timber Corporation v. Ababon, G.R. Nos. 164513 &. 164965, 25 January 2006   480 SCRA 171, 184.

^[14] Rollo, pp. 38-39.

^[15] Id. at 40.