G.R. No. 122226.

March 25, 1998

UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), Petitioner, v. HON.

BIENVENIDO E. LAGUESMA and PEPSI-COLA PRODUCTS, PHILIPPINES,
INC. Respondents.

DECISION

MENDOZA, J.:

Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the union filed
a petition for certification election on behalf of the route managers at Pepsi-Cola Products
Philippines, Inc. However, its petition was denied by the med-arbiter and, on appeal, by the
Secretary of Labor and Employment, on the ground that the route managers are managerial
employees and, therefore, ineligible for union membership under the first sentence of Art. 245 of
the Labor Code, which provides:

Ineligibility of managerial employees to join any labor organization; right of supervisory

employees . Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-
and-file employees but may join, assist or form separate labor organizations of their own.

Petitioner brought this suit challenging the validity of the order dated August 31, 1995, as
reiterated in the order dated September 22, 1995, of the Secretary of Labor and Employment. Its
petition was dismissed by the Third Division for lack of showing that respondent committed
grave abuse of discretion. But petitioner filed a motion for reconsideration, pressing for
resolution its contention that the first sentence of Art. 245 of the Labor Code, so far as it declares
managerial employees to be ineligible to form, assist or join unions, contravenes Art. III 8 of the
Constitution which provides:

The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for the purposes not contrary to law shall not be abridged.

For this reason, the petition was referred to the Court en banc.
The Issues in this Case

Two question are presented by the petition: (1) whether the route managers at Pepsi-Cola
Products Philippines, Inc. are managerial employees and (2) whether Art. 245, insofar as it
prohibits managerial employees from forming, joining or assisting labor unions, violates Art. III,
8 of the Constitution.

In resolving these issues it would be useful to begin by defining who are managerial employees
and considering the types of managerial employees.
Types of Managerial Employees

The term manager generally refers to anyone who is responsible for subordinates and other
organization resources.1 As a class, managers constitute three levels of a pyramid:

Top Management

_________________

Middle Management

_________________

First Line

Management
(also called Supervisor)

____________________

____________________

Operatives

Or Operating Employees

FIRST-LINE MANAGERS The lowest level in an organization at which individuals are

responsible for the work of others is called first-line or first-level management. First-line
managers direct operating employees only; they do not supervise other managers. Example of
first-line managers are the foreman or production supervisor in a manufacturing plant, the
technical supervisor in a research department, and the clerical supervisor in a large office. First-
level managers are often called supervisors.

MIDDLE MANAGERS The term middle management can refer to more than one level in an
organization. Middle managers direct the activities of other managers and sometimes also those
of operating employees. Middle managers principal responsibilities are to direct the activities
that implement their organizations policies and to balance the demands of their superiors with the
capacities of their subordinates. A plant manager in an electronics firm is an example of a middle
manager.

TOP MANAGERS Composed of a comparatively small group of executives, top management is

responsible for the overall management of the organization. It establishes operating policies and
guides the organizations interactions with its environment. Typical titles of top managers are
chief executive officer, president, and senior vice-president. Actual titles vary from one
organization to another and are not always a reliable guide to membership in the highest
management classification.2cräläwvirtualibräry

As can be seen from this description, a distinction exist between those who have the authority to
devise, implement and control strategic and operational policies (top and middle managers) and
those whose task is simply to ensure that such polices are carried out by the rank-and-file
employees of an organization (first-level managers/supervisors). What distinguishes them from
the rank-and file employees is that they act in the interest of the employer in supervising such
rank-and-file employees.

Managerial employees may therefore be said to fall into two distinct categories: the
managers per se, who compose the former group described above, and the supervisors who form
the latter group. Whether they belong to the first or second category, managers, vis--vis
employers, are, likewise, employees.3cräläwvirtualibräry

The first question is whether route managers are managers are managerial employees or
supervisors.
Previous Administrative Determinations of the Question Whether Route Managers are Managerial Employees

It appears that this question was the subject of two previous determinations by the Secretary of
Labor and Employment, in accordance with which this case was decided by the med-arbiter.

In Case No. OS-MA-10318-91, entitled Workerss Alliance Trade Union (WATU) v. Pepsi-Cola
Products Philippines, Inc., decided on November 13, 1991, the Secretary of Labor found:

We examined carefully the pertinent job description of the subject employees and other
documentary evidence on record vis--vis paragraph (m), Article 212 of the Labor Code, as
amended, and we find that only those employees occupying the position of route manager and
accounting manager are managerial employees. The rest i.e. quality control manager,
yard/transport manager and warehouse operations manager are supervisory employees.

To qualify as managerial employee, there must be a clear showing of the exercise of managerial
attributes under paragraph (m), Article 212 of the Labor Code as amended. Designations or titles
of positions are not controlling. In the instant case, nothing on record will support the claim that
the quality control manager, yard/transport manager and warehouse operations manager are
vested with said attributes. The warehouse operations manager, for example, merely assists the
plant finance manager in planning, organizing, directing and controlling all activities relative to
development and implementation of an effective management control information system at the
sale offices. The exercise of authority of the quality control manager, on the other hand, needs
the concurrence of the manufacturing manager

As to the route managers and accounting manager, we are convinced that they are managerial
employees. Their job descriptions clearly reveal so.

On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92, entitled In Re: Petition
for Direct Certification and/or Certification Election-Route Managers/Supervisory Employees of
Pepsi-Cola Products Phils. Inc., as follows:

The issue brought before us is not of first impression. At one time, we had the occasion to rule
upon the status of route manager in the same company vis a vis the issue as to whether or not it is
supervisory employee or a managerial employee. In the case of Workers Alliance Trade Unions
(NATU) vs. Pepsi Cola Products, Phils., Inc. (OS-MA-A-10-318-91), 15 November 1991, we
ruled that a route manager is a managerial employee within the context of the definition of the
law, and hence, ineligible to join, form or assist a union. We have once more passed upon the
logic of our Decision aforecited in the light of the issues raised in the instant appeal, as well as
the available documentary evidence on hand, and have come to the view that there is no cogent
reason to depart from our earlier holding. Route Managers are, by the very nature of their
functions and the authority they wield over their subordinates, managerial employees. The
prescription found in Art. 245 of the Labor Code, as amended therefore, clearly applies to
them.4 4

Citing our ruling in Nasipit Lumber Co. v. National Labor Relations Commission,55 however,
petitioner argues that these previous administrative determinations do not have the effect of res
judicata in this case, because "labor relations proceedings" are "non-litigious and summary in
nature without regard to legal technicalities."6 Nasipit Lumber Co. involved a clearance to
dismiss an employee issued by the Department of Labor. The question was whether in a
subsequent proceeding for illegal dismissal, the clearance was res judicata. In holding it was not,
this Court made it clear that it was referring to labor relations proceedings of a non-adversary
character, thus:

The requirement of a clearance to terminate employment was a creation of the Department of

labor to carry out the Labor Code provisions on security of tenure and termination of
employment. The proceeding subsequent to the filing of an application for clearance to terminate
employment was outlined in Book V, Rule XIV of the Rules and Regulations Implementing the
Labor Code. The fact that said rule allowed a procedure for the approval of the clearance with or
without the opposition of the employee concerned (Secs. 7 & 8), demonstrates the non-litigious
and summary nature of the proceeding. The clearance requirement was therefore necessary only
as an expeditious shield against arbitrary dismissal without the knowledge and supervision of the
Department of Labor. Hence, a duly approved clearance implied that the dismissal was legal or
for cause (Sec. 2).7 v. National Labor Relations Commission, 177 SCRA 93, 100 (1989).7

But the doctrine of res judicata certainly applies to adversary administrative proceedings. As

early as 1956, in Brillantes v. Castro,88 we sustained the dismissal of an action by a trial court on
the basis of a prior administrative determination of the same case by the Wage Administration
Service, applying the principle of res judicata. Recently, in Abad v. NLRC99 we applied the
related doctrine of stare decisis in holding that the prior determination that certain jobs at the
Atlantic Gulf and Pacific Co. were project employments was binding in another case involving
another group of employees of the same company. Indeed, in Nasipit Lumber Co., this Court
clarified toward the end of its opinion that "the doctrine of res judicata applies . . . to judicial or
quasi judicial proceedings and not to the exercise of administrative powers."10v. National Labor
Relations Commission, supra note 7.10 Now proceedings for certification election, such as those
involved in Case No. OS-M-A-10-318-91 and Case No. OS-A-3-71-92, are quasi judicial in
nature and, therefore, decisions rendered in such proceedings can attain finality.11v. B.F.
Goodrich (Marikina Factory) Confidential and Salaries Employees Union-NATU, 49 SCRA 532
(1973).11
Thus, we have in this case an expert's view that the employees concerned are managerial
employees within the purview of Art. 212 which provides:

(m) "managerial employee" is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or
discipline employees. Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not
falling within any of the above definitions are considered rank-and-file employees for purposes
of this Book.

At the very least, the principle of finality of administrative determination compels respect for the
finding of the Secretary of Labor that route managers are managerial employees as defined by
law in the absence of anything to show that such determination is without substantial evidence to
support it. Nonetheless, the Court, concerned that employees who are otherwise supervisors may
wittingly or unwittingly be classified as managerial personnel and thus denied the right of self-
organization, has decided to review the record of this case.
DOLE's Finding that Route Managers are Managerial Employees Supported by Substantial Evidence in the Record

The Court now finds that the job evaluation made by the Secretary of Labor is indeed supported
by substantial evidence. The nature of the job of route managers is given in a four-page
pamphlet, prepared by the company, called "Route Manager Position Description," the pertinent
parts of which read:

A. BASIC PURPOSE

A Manager achieves objectives through others.

As a Route Manager, your purpose is to meet the sales plan; and you achieve this
objective through the skillful MANAGEMENT OF YOUR JOB AND THE
MANAGEMENT OF YOUR PEOPLE.

These then are your functions as Pepsi-Cola Route Manager. Within these functions -
managing your job and managing your people - you are accountable to your District
Manager for the execution and completion of various tasks and activities which will
make it possible for you to achieve your sales objectives.

B. PRINCIPAL ACCOUNTABILITIES

1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:

1.1 SALES DEVELOPMENT

1.1.1 Achieve the sales plan.

1.1.2 Achieve all distribution and new account objectives.

1.1.3 Develop new business opportunities thru personal contacts with dealers.

1.1.4 Inspect and ensure that all merchandizing [sic] objectives are achieved in all
outlets.

1.1.5 maintain and improve productivity of all cooling equipment and kiosks.

1.1.6 Execute and control all authorized promotions.

1.1.7 Develop and maintain dealer goodwill.

1.1.8 Ensure all accounts comply with company suggested retail pricing.
 1.1.9 Study from time to time individual route coverage and productivity for
possible adjustments to maximize utilization of resources.

1.2 Administration

1.2.1 Ensure the proper loading of route trucks before check-out and the proper
sorting of bottles before check-in.

1.2.2 Ensure the upkeep of all route sales reports and all other related reports and
forms required on an accurate and timely basis.

1.2.3 Ensure proper implementation of the various company policies and

procedures incl. but not limited to shakedown; route shortage; progressive
discipline; sorting; spoilages; credit/collection; accident; attendance.

1.2.4 Ensure collection of receivables and delinquent accounts.

2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:

2.1 Route Sales Team Development

2.1.1 Conduct route rides to train, evaluate and develop all assigned route salesmen
and helpers at least 3 days a week, to be supported by required route ride
documents/reports & back check/spot check at least 2 days a week to be
supported by required documents/reports.

2.1.2 Conduct sales meetings and morning huddles. Training should focus on the
enhancement of effective sales and merchandizing [sic] techniques of the
salesmen and helpers. Conduct group training at least 1 hour each week on
a designated day and of specific topic.

2.2 Code of Conduct

2.2.1 Maintain the company's reputation through strict adherence to PCPPI's code
of conduct and the universal standards of unquestioned business
ethics.12 12

Earlier in this opinion, reference was made to the distinction between managers per se (top
managers and middle managers) and supervisors (first-line managers). That distinction is evident
in the work of the route managers which sets them apart from supervisors in general. Unlike
supervisors who basically merely direct operating employees in line with set tasks assigned to
them, route managers are responsible for the success of the company's main line of business
through management of their respective sales teams. Such management necessarily involves the
planning, direction, operation and evaluation of their individual teams and areas which the work
of supervisors does not entail.

The route managers cannot thus possibly be classified as mere supervisors because their work
does not only involve, but goes far beyond, the simple direction or supervision of operating
employees to accomplish objectives set by those above them. They are not mere functionaries
with simple oversight functions but business administrators in their own right. An idea of the role
of route managers as managers per se can be gotten from a memo sent by the director of metro
sales operations of respondent company to one of the route managers. It
reads:13cräläwvirtualibräry

03 April 1995

To : CESAR T. REOLADA

From : REGGIE M. SANTOS

Subj : SALARY INCREASE

Effective 01 April 1995, your basic monthly salary of P11,710 will be increased
to P12,881 or an increase of 10%. This represents the added managerial responsibilities you
will assume due to the recent restructuring and streamlining of Metro Sales Operations brought
about by the continuous losses for the last nine (9) months.

Let me remind you that for our operations to be profitable, we have to sustain the intensity and
momentum that your group and yourself have shown last March. You just have to deliver the
desired volume targets, better negotiated concessions, rationalized sustaining deals,
eliminate or reduced overdues, improved collections, more cash accounts, controlled
operating expenses, etc. Also, based on the agreed set targets, your monthly performance will
be closely monitored.

You have proven in the past that your capable of achieving your targets thru better planning,
managing your group as a fighting team, and thru aggressive selling. I am looking forward to
your success and I expect that you just have to exert your doubly best in turning around our
operations from a losing to a profitable one!

Happy Selling!!

(Sgd.) R.M. SANTOS

The plasticized card given to route managers, quoted in the separate opinion of Justice Vitug,
although entitled "RM's Job Description," is only a summary of performance standards. It does
not show whether route managers are managers per se or supervisors. Obviously, these
performance standards have to be related to the specific tasks given to route managers in the
four-page "Route Manager Position Description," and, when this is done, the managerial nature
of their jobs is fully revealed. Indeed, if any, the card indicates the great latitude and discretion
given to route managers - from servicing and enhancing company goodwill to supervising and
auditing accounts, from trade (new business) development to the discipline, training and
monitoring of performance of their respective sales teams, and so forth, - if they are to fulfill the
company's expectations in the "key result areas."

Article 212(m) says that "supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment." Thus, their only
power is to recommend. Certainly, the route managers in this case more than merely recommend
effective management action. They perform operational, human resource, financial and
marketing functions for the company, all of which involve the laying down of operating policies
for themselves and their teams. For example, with respect to marketing, route managers, in
accordance with B.1.1.1 to B.1.1.9 of the Route Managers Job Description, are charged, among
other things, with expanding the dealership base of their respective sales areas, maintaining the
goodwill of current dealers, and distributing the company's various promotional items as they see
fit. It is difficult to see how supervisors can be given such responsibility when this involves not
just the routine supervision of operating employees but the protection and expansion of the
company's business vis-a-vis its competitors.

While route managers do not appear to have the power to hire and fire people (the evidence
shows that they only "recommended" or "endorsed" the taking of disciplinary action against
certain employees), this is because this is a function of the Human Resources or Personnel
Department of the company.1414 And neither should it be presumed that just because they are
given set benchmarks to observe, they are ipso facto supervisors. Adequate control methods (as
embodied in such concepts as "Management by Objectives [MBO]" and "performance
appraisals") which require a delineation of the functions and responsibilities of managers by
means of ready reference cards as here, have long been recognized in management as effective
tools for keeping businesses competitive.

This brings us to the second question, whether the first sentence of Art. 245 of the Labor Code,
prohibiting managerial employees from forming, assisting or joining any labor organization, is
constitutional in light of Art. III, 8 of the Constitution which provides:
The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.

As already stated, whether they belong to the first category (managers per se) or the second
category (supervisors), managers are employees. Nonetheless, in the United States, as Justice
Puno's separate opinion notes, supervisors have no right to form unions. They are excluded from
the definition of the term "employee" in 2(3) of the Labor-Management Relations Act of
1947.15v. Bell Aerospace Co., 416 U.S. 281, n 11, 40 L.Ed.2d 134, 147, n. 11 (1974), thus:

Supervisors are management people. They have distinguished themselves in their work. They
have demonstrated their ability to take care of themselves without depending upon the pressure
of collective action. No one forced them to become supervisors. They abandoned the "collective
security" of the rank and file voluntarily, because they believed the opportunities thus opened to
them to be more valuable to them than such "security". It seems wrong, and it is wrong, to
subject people of this kind, who have demonstrated their initiative, their ambition and their
ability to get ahead, to the leveling processes of seniority, uniformity and standardization that the
Supreme Court recognizes as being fundamental principles of unionism. (J.I. Case
Co. v. National Labor Relations Board, 321 U.S. 332, 88 L.Ed. 762, 64 S. Ct. 576 (1994). It is
wrong for the foremen, for it discourages the things in them that made them foremen in the first
place. For the same reason, that it discourages those best qualified to get ahead, it is wrong for
industry, and particularly for the future strength and productivity of our country.15 In the
Philippines, the question whether managerial employees have a right of self-organization has
arisen with respect to first-level managers or supervisors, as shown by a review of the course of
labor legislation in this country.
Right of Self-Organization of Managerial Employees under Pre-Labor Code Laws

Before the promulgation of the Labor Code in 1974, the field of labor relations was governed by
the Industrial Peace Act (R.A. No. 875).

In accordance with the general definition above, this law defined "supervisor" as follows:

SECTION 2. . . .

(k) "Supervisor" means any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline other employees, or
responsibly to direct them, and to adjust their grievances, or effectively to recommend such acts,
if, in connection with the foregoing, the exercise of such authority is not of a merely routinary or
clerical nature but requires the use of independent judgment.16 16

The right of supervisors to form their own organizations was affirmed:

SEC. 3. Employees' Right to Self-Organization. -- Employees shall have the right to self-
organization and to form, join or assist labor organizations of their own choosing for the purpose
of collective bargaining through representatives of their own choosing and to engage in
concerted activities for the purpose of collective bargaining and other mutual aid and protection.
Individuals employed as supervisors shall not be eligible for membership in a labor organization
of employees under their supervision but may form separate organizations of their
own.17cräläwvirtualibräry

For its part, the Supreme Court upheld in several of its decisions the right of supervisors to
organize for purposes of labor relations.18v. Filoil Supervisory and Confidential Employees
Association, 6 SCRA 522 (1972); Kapisanan ng mga Manggagawa sa Manila Railroad
Co. v. CIR, 106 Phil 607 (1959).18

Although it had a definition of the term "supervisor," the Industrial Peace Act did not define the
term "manager." But, using the commonly-understood concept of "manager," as above stated, it
is apparent that the law used the term "supervisors" to refer to the sub-group of "managerial
employees" known as front-line managers. The other sub-group of "managerial employees,"
known as managers per se, was not covered.
However, in Caltex Filipino Managers and Supervisors Association v. Court of Industrial
Relations,19J.)19 the right of all managerial employees to self-organization was upheld as a
general proposition, thus:

It would be going too far to dismiss summarily the point raised by respondent Company - that of
the alleged identity of interest between the managerial staff and the employing firm. That should
ordinarily be the case, especially so where the dispute is between management and the rank and
file. It does not necessarily follow though that what binds the managerial staff to the corporation
forecloses the possibility of conflict between them. There could be a real difference between
what the welfare of such group requires and the concessions the firm is willing to grant. Their
needs might not be attended to then in the absence of any organization of their own. Nor is this to
indulge in empty theorizing. The record of respondent Company, even the very case cited by it,
is proof enough of their uneasy and troubled relationship. Certainly the impression is difficult to
erase that an alien firm failed to manifest sympathy for the claims of its Filipino executives. To
predicate under such circumstances that agreement inevitably marks their relationship, ignoring
that discord would not be unusual, is to fly in the face of reality.

. . . The basic question is whether the managerial personnel can organize. What respondent
Company failed to take into account is that the right to self-organization is not merely a statutory
creation. It is fortified by our Constitution. All are free to exercise such right unless their purpose
is contrary to law. Certainly it would be to attach unorthodoxy to, not to say an emasculation of,
the concept of law if managers as such were precluded from organizing. Having done so and
having been duly registered, as did occur in this case, their union is entitled to all the rights under
Republic Act No. 875. Considering what is denominated as unfair labor practice under Section 4
of such Act and the facts set forth in our decision, there can be only one answer to the objection
raised that no unfair labor practice could be committed by respondent Company insofar as
managerial personnel is concerned. It is, as is quite obvious, in the negative.20 20

Actually, the case involved front-line managers or supervisors only, as the plantilla of
employees, quoted in the main opinion,21J.) (emphasis added).21 clearly indicates:

CAFIMSA members holding the following Supervisory Payroll Position Title are Recognized by
the Company

Payroll Position Title

Assistant to Mgr. - National Acct. Sales

Jr. Sales Engineer

Retail Development Asst.

Staff Asst. - 0 Marketing

Sales Supervisor

Supervisory Assistant

Jr. Supervisory Assistant

Credit Assistant

Lab. Supvr. - Pandacan

Jr. Sales Engineer B

Operations Assistant B

Field Engineer

Sr. Opers. Supvr. - MIA A/S

Purchasing Assistant

Jr. Construction Engineer

St. Sales Supervisor

Deport Supervisor A

Terminal Accountant B

Merchandiser

Dist. Sales Prom. Supvr.

Instr. - Merchandising

Asst. Dist. Accountant B

Sr. Opers. Supervisor

Jr. Sales Engineer A

Asst. Bulk Ter. Supt.

Sr. Opers. Supvr.

Credit Supervisor A

Asst. Stores Supvr. A

Ref. Supervisory Draftsman

Refinery Shift Supvr. B

Asst. Supvr. A - Operations (Refinery)

Refinery Shift Supvr. B

Asst. Lab. Supvr. A (Refinery)

St. Process Engineer B (Refinery)

Asst. Supvr. A - Maintenance (Refinery)

Asst. Supvr. B - Maintenance (Refinery)

Supervisory Accountant (Refinery)

Communications Supervisor (Refinery)

Finally, also deemed included are all other employees excluded from the rank and file unions but
not classified as managerial or otherwise excludable by law or applicable judicial precedents.
Right of Self-Organization of Managerial Employees under the Labor Code

Thus, the dictum in the Caltex case which allowed at least for the theoretical unionization of top
and middle managers by assimilating them with the supervisory group under the broad phrase
"managerial personnel," provided the lynchpin for later laws denying the right of self-
organization not only to top and middle management employees but to front line managers or
supervisors as well. Following the Caltex case, the Labor Code, promulgated in 1974 under
martial law, dropped the distinction between the first and second sub-groups of managerial
employees. Instead of treating the terms "supervisor" and "manager" separately, the law lumped
them together and called them "managerial employees," as follows:

ART. 212. Definitions . . . .

(k) "Managerial Employee" is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or
discipline employees, or to effectively recommend such managerial actions. All employees not
falling within this definition are considered rank and file employees for purposes of this
Book.22 22

The definition shows that it is actually a combination of the commonly understood definitions of
both groups of managerial employees, grammatically joined by the phrase "and/or."

This general definition was perhaps legally necessary at that time for two reasons. First, the 1974
Code denied supervisors their right to self-organize as theretofore guaranteed to them by the
Industrial Peace Act. Second, it stood the dictum in the Caltex case on its head by prohibiting all
types of managers from forming unions. The explicit general prohibition was contained in the
then Art. 246 of the Labor Code.

The practical effect of this synthesis of legal concepts was made apparent in the Omnibus Rules
Implementing the Labor Code which the Department of Labor promulgated on January 19, 1975.
Book V, Rule II, 11 of the Rules provided:

Supervisory unions and unions of security guards to cease operation. - All existing supervisory
unions and unions of security guards shall, upon the effectivity of the Code, cease to operate as
such and their registration certificates shall be deemed automatically cancelled. However,
existing collective agreements with such unions, the life of which extends beyond the date of
effectivity of the Code, shall be respected until their expiry date insofar as the economic benefits
granted therein are concerned.

Members of supervisory unions who do not fall within the definition of managerial employees
shall become eligible to join or assist the rank and file labor organization, and if none exists, to
form or assist in the forming of such rank and file organization. The determination of who are
managerial employees and who are not shall be the subject of negotiation between
representatives of the supervisory union and the employer. If no agreement is reached between
the parties, either or both of them may bring the issue to the nearest Regional Office for
determination.

The Department of Labor continued to use the term "supervisory unions" despite the demise of
the legal definition of "supervisor" apparently because these were the unions of front line
managers which were then allowed as a result of the statutory grant of the right of self-
organization under the Industrial Peace Act. Had the Department of Labor seen fit to similarly
ban unions of top and middle managers which may have been formed following the dictum in
Caltex, it obviously would have done so. Yet it did not, apparently because no such unions of top
and middle managers really then existed.
Real Intent of the 1986 Constitutional Commission

This was the law as it stood at the time the Constitutional Commission considered the draft of
Art. III, 8. Commissioner Lerum sought to amend the draft of what was later to become Art. III,
8 of the present Constitution:

MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to insert between the
words "people" and "to" the following: WHETHER EMPLOYED BY THE STATE OR
PRIVATE ESTABLISHMENTS. In other words, the section will now read as follows: "The
right of the people WHETHER EMPLOYED BY THE STATE OR PRIVATE
ESTABLISHMENTS to form associations, unions, or societies for purposes not contrary to law
shall not be abridged."23 23

Explaining his proposed amendment, he stated:

MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is granted to all
persons whether or not they are employed in the government. Under that provision, we allow
unions in the government, in government-owned and controlled corporations and in other
industries in the private sector, such as the Philippine Government Employees' Association,
unions in the GSIS, the SSS, the DBP and other government-owned and controlled
corporations. Also, we have unions of supervisory employees and of security guards. But what is
tragic about this is that after the 1973 Constitution was approved and in spite of an express
recognition of the right to organize in P.D. No. 442, known as the Labor Code, the right of
government workers, supervisory employees and security guards to form unions was abolished.

And we have been fighting against this abolition . In every tripartite conference attended by the
government, management and workers, we have always been insisting on the return of these
rights. However, both the government and employers opposed our proposal, so nothing came out
of this until this week when we approved a provision which states:

Notwithstanding any provision of this article, the right to self-organization shall not be denied to
government employees.

We are afraid that without any corresponding provision covering the private sector, the security
guards, the supervisory employees or majority employees [sic] will still be excluded, and that is
the purpose of this amendment.

I will be very glad to accept any kind of wording as long as it will amount to absolute
recognition of private sector employees, without exception, to organize.

THE PRESIDENT. What does the Committee say?

FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by Commissioner
Rodrigo is well-taken. Perhaps, we can lengthen this a little bit more to read: "The right of the
people WHETHER UNEMPLOYED OR EMPLOYED BY STATE OR PRIVATE
ESTABLISHMENTS."

I want to avoid also the possibility of having this interpreted as applicable only to the employed.

MR. DE LOS REYES. Will the proponent accept an amendment to the amendment, Madam
President?

MR. LERUM. Yes, as long as it will carry the idea that the right of the employees in the private
sector is recognized.24cräläwvirtualibräry

Lerum thus anchored his proposal on the fact that (1) government employees, supervisory
employees, and security guards, who had the right to organize under the Industrial Peace Act,
had been denied this right by the Labor Code, and (2) there was a need to reinstate the right of
these employees. In consonance with his objective to reinstate the right of government, security,
and supervisory employees to organize, Lerum then made his proposal:

MR. LERUM. Mr. Presiding Officer, after a consultation with several Members of this
Commission, my amendment will now read as follows: "The right of the people INCLUDING
THOSE EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS to form associations,
unions, or societies for purposes not contrary to law shall not be abridged. In proposing that
amendment I ask to make of record that I want the following provisions of the Labor Code to be
automatically abolished, which read:

ART. 245. Security guards and other personnel employed for the protection and security of the
person, properties and premises of the employers shall not be eligible for membership in a labor
organization.

ART. 246. Managerial employees are not eligible to join, assist, and form any labor organization.

THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?

FR. BERNAS. The Committee accepts.

THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the amendment, as
amended.

Is there any objection? (Silence) The Chair hears none; the amendment, as amended, is
approved.25cräläwvirtualibräry

The question is what Commissioner Lerum meant in seeking to "automatically abolish" the then
Art. 246 of the Labor Code. Did he simply want "any kind of wording as long as it will amount
to absolute recognition of private sector employees, without exception, to organize"?26 Or, did he
instead intend to have his words taken in the context of the cause which moved him to propose
the amendment in the first place, namely, the denial of the right of supervisory employees to
organize, because he said, "We are afraid that without any corresponding provision covering the
private sector, security guards, supervisory employees or majority [of] employees will still be
excluded, and that is the purpose of this amendment"?27cräläwvirtualibräry

It would seem that Commissioner Lerum simply meant to restore the right of supervisory
employees to organize. For even though he spoke of the need to "abolish" Art. 246 of the Labor
Code which, as already stated, prohibited "managerial employees" in general from forming
unions, the fact was that in explaining his proposal, he repeatedly referred to "supervisory
employees" whose right under the Industrial Peace Act to organize had been taken away by Art.
246. It is noteworthy that Commissioner Lerum never referred to the then definition of
"managerial employees" in Art. 212(m) of the Labor Code which put together, under the broad
phrase "managerial employees," top and middle managers and supervisors. Instead, his repeated
use of the term "supervisory employees," when such term then was no longer in the statute
books, suggests a frame of mind that remained grounded in the language of the Industrial Peace
Act.

Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial
employees to organize, despite the fact that the Industrial Peace Act did not expressly provide for
the right of top and middle managers to organize. If Lerum was aware of the Caltex dictum, then
his insistence on the use of the term "supervisory employees" could only mean that he was
excluding other managerial employees from his proposal. If, on the other hand, he was not aware
of the Caltex statement sustaining the right to organize to top and middle managers, then the
more should his repeated use of the term "supervisory employees" be taken at face value, as it
had been defined in the then Industrial Peace Act.

At all events, that the rest of the Commissioners understood his proposal to refer solely to
supervisors and not to other managerial employees is clear from the following account of
Commissioner Joaquin G. Bernas, who writes:

In presenting the modification on the 1935 and 1973 texts, Commissioner Eulogio R. Lerum
explained that the modification included three categories of workers: (1) government employees,
(2) supervisory employees, and (3) security guards. Lerum made of record the explicit intent to
repeal provisions of P.D. 442, the Labor Code. The provisions referred to were:

ART. 245. Security guards and other personnel employed for the protection and security of the
person, properties and premises of the employers shall not be eligible for membership in a labor
organization.

ART. 246. Managerial employees are not eligible to join, assist, and form any labor
organization.28 28
Implications of the Lerum Proposal

In sum, Lerum's proposal to amend Art. III, 8 of the draft Constitution by including labor unions
in the guarantee of organizational right should be taken in the context of statements that his aim
was the removal of the statutory ban against security guards and supervisory employees joining
labor organizations. The approval by the Constitutional Commission of his proposal can only
mean, therefore, that the Commission intended the absolute right to organize of government
workers, supervisory employees, and security guards to be constitutionally guaranteed. By
implication, no similar absolute constitutional right to organize for labor purposes should be
deemed to have been granted to top-level and middle managers. As to them the right of self-
organization may be regulated and even abridged conformably to Art. III, 8.
Constitutionality of Art. 245

Finally, the question is whether the present ban against managerial employees, as embodied in
Art. 245 (which superseded Art. 246) of the Labor Code, is valid. This provision reads:

ART. 245. Ineligibility of managerial employees to join any labor organization; right of

supervisory employees. - Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor organization
of the rank-and-file employees but may join, assist or form separate labor organizations of their
own.29 29

This provision is the result of the amendment of the Labor Code in 1989 by R.A. No. 6715,
otherwise known as the Herrera-Veloso Law. Unlike the Industrial Peace Act or the provisions
of the Labor Code which it superseded, R.A. No. 6715 provides separate definitions of the terms
"managerial" and "supervisory employees," as follows:

ART. 212. Definitions. . . .

(m) "managerial employee" is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire transfer, suspend, lay off, recall,
discharge, assign or discipline employees. Supervisory employees are those who, in the interest
of the employer, effectively recommend such managerial actions if the exercise of such authority
is not merely routinary or clerical in nature but requires the use of independent judgment. All
employees not falling within any of the above definitions are considered rank-and-file employees
for purposes of this Book.

Although the definition of "supervisory employees" seems to have been unduly restricted to the
last phrase of the definition in the Industrial Peace Act, the legal significance given to the phrase
"effectively recommends" remains the same. In fact, the distinction between top and middle
managers, who set management policy, and front-line supervisors, who are merely responsible
for ensuring that such policies are carried out by the rank and file, is articulated in the present
definition.3030 When read in relation to this definition in Art. 212(m), it will be seen that Art. 245
faithfully carries out the intent of the Constitutional Commission in framing Art. III, 8 of the
fundamental law.

Nor is the guarantee of organizational right in Art. III, 8 infringed by a ban against managerial
employees forming a union. The right guaranteed in Art. III, 8 is subject to the condition that its
exercise should be for purposes "not contrary to law." In the case of Art. 245, there is a rational
basis for prohibiting managerial employees from forming or joining labor organizations. As
Justice Davide, Jr., himself a constitutional commissioner, said in his ponencia in Philips
Industrial Development, Inc. v. NLRC:3131

In the first place, all these employees, with the exception of the service engineers and the sales
force personnel, are confidential employees. Their classification as such is not seriously disputed
by PEO-FFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered
them as confidential employees. By the very nature of their functions, they assist and act in a
confidential capacity to, or have access to confidential matters of, persons who exercise
managerial functions in the field of labor relations. As such, the rationale behind the ineligibility
of managerial employees to form, assist or joint a labor union equally applies to them.

In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on this rationale,
thus:

". . . The rationale for this inhibition has been stated to be, because if these managerial
employees would belong to or be affiliated with a Union, the latter might not be assured of their
loyalty to the Union in view of evident conflict of interests. The Union can also become
company-dominated with the presence of managerial employees in Union
membership."32cräläwvirtualibräry
To be sure, the Court in Philips Industrial was dealing with the right of confidential employees to
organize. But the same reason for denying them the right to organize justifies even more the ban
on managerial employees from forming unions. After all, those who qualify as top or middle
managers are executives who receive from their employers information that not only is
confidential but also is not generally available to the public, or to their competitors, or to other
employees. It is hardly necessary to point out that to say that the first sentence of Art. 245 is
unconstitutional would be to contradict the decision in that case.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Narvasa, C.J., Regalado, Romero, Bellosillo, Martinez, and Purisima, JJ., concur.

Davide, Melo, Puno, Vitug, Kapunan, Panganiban, and Quisumbing, JJ., has separate,
concurring and dissenting opinion.