Note: The workbook lists this case under Cooperatives within "Other exclusions to the right to self-organize." Its holding rests on the nature of the cooperative under P.D. No. 175 and on Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja, not on any exclusion written into the Labor Code. Note that the Cooperative Code of the Philippines (R.A. No. 6938, 1990) was enacted after this decision and expressly contemplates that a cooperative may employ persons who are not members; the disqualification announced here continues to be applied to member-employees, and later cases should be consulted for how the two regimes interact. The decision cites the Davao City case as "G.R. No. 7795, September 26, 1988," a docket number that appears one digit short as published; it is reproduced as printed rather than corrected. Article 256, quoted in the decision, is now Article 268 under DOLE Department Advisory No. 01, s. 2015.
Facts
- Benguet Electric Cooperative, Inc. (BENECO) is a non-profit electric cooperative serving its members and patron-consumers in Baguio City and the Province of Benguet.
- On June 21, 1985, BWLU-ADLO petitioned for direct certification for all of BENECO's rank and file, alleging 214 rank-and-file employees, 198 of them — 92.5% — supporting the petition, no election in the last twelve months, and no CBA.
- BENECO moved to dismiss on the ground that decides the case: the employees "are not eligible to form, join or assist labor organizations of their own choosing because they are members and joint owners of the cooperative."
- On September 2, 1985, Med-Arbiter Elnora V. Balleras gave due course but limited the electorate to "all the rank and file employees (non-members/consumers and without any involvement in the actual ownership of the cooperative)," and made a specific finding that only thirty-seven (37) employees answered that description. That figure is the number against which the whole election is later measured.
- Appeals by both BELU and BENECO were dismissed on March 25, 1986, and BENECO's certiorari petition, G.R. No. 74209, was dismissed by minute resolution on April 28, 1986.
- On October 1, 1986 the election was held. Before a ballot was cast, BENECO's counsel manifested that "the cooperative is protesting that employees who are members-consumers are being allowed to vote when … they are not eligible to be members of any labor union," and submitted a certification that only four employees were non-members. The protest was registered before the balloting, which is why no waiver argument was available against BENECO later.
- The canvass showed BELU with forty-nine (49) of eighty-three (83) "valid" votes cast — eighty-three voters against a finding of thirty-seven eligibles.
- On February 17, 1987 the Med-Arbiter dismissed BENECO's Protest, reading the minute resolution in G.R. No. 74209 as having answered the eligibility question "in the affirmative." On June 23, 1987, BLR Director Pura Ferrer-Calleja affirmed and certified BELU. BENECO brought certiorari; the Solicitor General agreed with BENECO. Decided December 29, 1989.
Issue
Are employees of a cooperative who are at the same time its members and co-owners eligible to form, join or assist a labor organization for collective bargaining — and does it matter that they take no part in the actual management and hold none of the managerial powers?
Secondary issue. Whether the Director gravely abused her discretion in certifying BELU where 83 employees voted although only 37 were found eligible, measured against Article 256's requirement that "at least a majority of all eligible voters in the unit must have cast their votes."
Ancillary issue. Whether cooperative membership may be equated with ownership of stock in an ordinary corporation, so that employers could manufacture the disqualification by handing out stock bonuses.
Ruling
NO, they are not eligible. "[T]he right to collective bargaining is not available to an employee of a cooperative who at the same time is a member and co-owner thereof," and "the fact that the members-employees … do not participate in the actual management of the cooperative does not make them eligible." Employees who are neither members nor co-owners "are entitled to exercise the rights to self-organization, collective bargaining and negotiation as mandated by the 1987 Constitution and applicable statutes."
Secondary issue. YES, grave abuse of discretion. Even accepting BELU's contention that the 37 original non-members could still vote though later "forced and compelled to join the cooperative on pain of disciplinary action," the election "is still null and void since even those who were already members … at the time of the issuance of the med-arbiter's order … were allowed to vote," so "it cannot be determined whether or not respondent union was duly elected by the eligible voters of the bargaining unit."
Ancillary issue. NO. The floodgates argument rests "on the erroneous presumption that membership in a cooperative is the same as ownership of stocks in ordinary corporations."
"WHEREFORE, the petition is hereby GRANTED and the assailed resolution of respondent director is ANNULLED. The certification election conducted on October 1, 1986, is SET ASIDE. The Regional Office No. 1 of San Fernando, La Union is hereby directed to immediately conduct new certification election proceedings among the rank and file employees of the petitioner who are not members of the cooperative. SO ORDERED."
Ratio
- The Court treated the eligibility question as already settled, citing Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja and its reiteration in Batangas-Electric Cooperative Labor Union v. Young and San Jose City Electric Service Cooperative.
- In the same breath it fixed the limit of the rule, preserving the full rights of employees who are neither members nor co-owners.
- Against the Director's dual-capacity argument it held that non-participation in management is simply the wrong criterion — because the Davao City holding "was based on the fact that as members of the cooperative they are co-owners thereof. As such, they cannot invoke the right to collective bargaining for 'certainly an owner cannot bargain with himself or his co-owners.'"
- The rule is then stated in the form quoted ever after: "It is the fact of ownership of the cooperative, and not involvement in the management thereof, which disqualifies a member from joining any labor organization within the cooperative. Thus, irrespective of the degree of their participation in the actual management … all members thereof cannot form, assist or join a labor organization for the purpose of collective bargaining."
- The floodgates argument failed on a premise. Cooperatives "enjoy other privileges not granted to" ordinary corporations — Sections 4, 5, 6 and 8 of P.D. No. 175 — and their members "have rights and obligations different from those of stockholders." It was "precisely because of the special nature of cooperatives" that the rule was laid down: owners "run and operate the business while the others are its employees"; "irrespective of the number of shares owned by each member they are entitled to cast one vote each"; share capital "earn[s] limited interest"; and they enjoy tax exemptions and "even exemption from the minimum wage laws."
- On the election the Court set the finding against the canvass — 37 eligibles, 83 voters, 49 votes for BELU — and then closed off the union's best answer, since even employees who were members before the Med-Arbiter's order, and so could not claim compulsion, had voted.
- The vice is one of computation, not of motive. Under Article 256, "[t]o have a valid election, at least a majority of all eligible voters in the unit must have cast their votes" — and that uncertainty is what made the certification a grave abuse of discretion.
Doctrine
The cooperative exclusion. "[T]he right to collective bargaining is not available to an employee of a cooperative who at the same time is a member and co-owner thereof," because "certainly an owner cannot bargain with himself or his co-owners." It is ownership, not management, that disqualifies: "irrespective of the degree of their participation in the actual management … all members thereof cannot form, assist or join a labor organization for the purpose of collective bargaining." Non-member employees keep the full rights to self-organization, collective bargaining and negotiation. Cooperative membership ≠ stock ownership — cooperatives and their members carry privileges, rights and obligations ordinary corporations and stockholders do not. Double majority: under Article 256, "[t]o have a valid election, at least a majority of all eligible voters in the unit must have cast their votes," so where ineligible voters participate and the tally cannot be reconciled with the number of eligibles, the election is void.
Limits. The disqualification is membership-based and cooperative-specific. It does not reach a cooperative's non-member employees, who must be given their own election — and the Court ordered exactly that. It does not rest on managerial status, so the Article 212(m) analysis is inapposite; conversely a non-member employee who is managerial remains excluded for the ordinary reason. It does not extend to stockholders of ordinary corporations, however small the holding. And it says nothing about a member's other entitlements — the holding is about collective bargaining, not wages, hours or security of tenure. Two timing points: the ruling predates the Cooperative Code (R.A. No. 6938, 1990), which expressly contemplates that a cooperative may employ non-members; and the Court's willingness to void the election turned on BENECO having protested before the balloting — compare Algire v. De Mesa, where failure to question timely proved fatal. Renumbering: Article 256 is now Article 268.
Full Digest — Recitation Format
Gist
BWLU-ADLO petitioned for direct certification among the 214 rank and file employees of BENECO, a non-profit electric cooperative. BENECO moved to dismiss on the ground that its employees are also members and joint owners of the cooperative and so may not unionise at all. The Med-Arbiter split the difference: she ordered an election but confined the electorate to employees who are "non-members/consumers and without any involvement in the actual ownership," and found on the evidence that only thirty-seven (37) employees answered that description. When the election was held on October 1, 1986, eighty-three (83) employees were nevertheless allowed to vote and BELU took forty-nine (49) of them; the BLR Director certified BELU as bargaining agent over BENECO's protest. The Supreme Court annulled the certification and set the election aside. On eligibility, an employee who is also a member is a co-owner, and "certainly an owner cannot bargain with himself or his co-owners" — and what disqualifies him is ownership, not managerial participation, so the BLR Director's argument that the members exercise no managerial powers missed the point. On validity, because ineligible members voted, "it cannot be determined whether or not respondent union was duly elected by the eligible voters of the bargaining unit" as Article 256 requires. The 37 non-member employees keep their constitutional right to organise, and the Court ordered a fresh election among them.
Facts
- Petitioner Benguet Electric Cooperative, Inc. (BENECO) is a non-profit electric cooperative supplying electric service to its members and patron-consumers in the City of Baguio and the Province of Benguet, with operations at Alapang, La Trinidad, Benguet.
- On June 21, 1985, the Beneco Worker's Labor Union-Association of Democratic Labor Organizations (BWLU-ADLO) petitioned for direct certification as sole and exclusive bargaining representative of all BENECO's rank and file, alleging that the cooperative had 214 rank and file employees, that 198 of them — 92.5% — supported the petition, that no certification election had been held in the last 12 months, that there was no existing bargaining representative, and that there was no CBA.
- The Beneco Employees Labor Union (BELU) opposed, claiming it had already been certified as sole and exclusive bargaining representative by a Med-Arbiter's order of October 20, 1980, and that two cases it had filed against BENECO — one on bargaining deadlock, one for unfair labor practice — were pending before the NLRC and barred any representation question.
- BENECO moved to dismiss on a different ground altogether: the employees sought to be represented "are not eligible to form, join or assist labor organizations of their own choosing because they are members and joint owners of the cooperative." That is the only issue that survives to the Supreme Court; the deadlock-bar and certification-year objections drop out.
- On September 2, 1985, Med-Arbiter Elnora V. Balleras gave due course to the petition but limited the electorate, ordering the election held "among all the rank and file employees (non-members/consumers and without any involvement in the actual ownership of the cooperative)" with three choices — BWLU-ADLO, BELU, and No Union — and directing that "[t]he payroll for the month of June 1985 shall be the basis in determining the qualified voters."
- On the evidence at the hearing the Med-Arbiter made a specific finding that there are thirty-seven (37) employees who are not members and have no involvement in the actual ownership of the cooperative. That figure of 37 is the number against which the whole election is later measured.
- Both BELU and BENECO appealed the order; the appeals were dismissed for lack of merit on March 25, 1986.
- BENECO then went to the Supreme Court on certiorari with a prayer for injunction, docketed G.R. No. 74209, which was dismissed for lack of merit in a minute resolution dated April 28, 1986.
- On October 1, 1986 the certification election was held. Before it was conducted, BENECO's counsel verbally manifested that "the cooperative is protesting that employees who are members-consumers are being allowed to vote when... they are not eligible to be members of any labor union for purposes of collective bargaining; much less, to vote in this certification election," and submitted a certification showing that only four (4) employees were non-members, insisting that only those four could vote. The protest was registered before a ballot was cast, which is why no waiver argument was available against BENECO later.
- The canvass showed BELU garnering forty-nine (49) of the eighty-three (83) "valid" votes cast. Eighty-three voters, against a finding of thirty-seven eligibles.
- BENECO formalised its manifestation by filing a Protest. On February 17, 1987, the Med-Arbiter dismissed it, holding among other things that whether member-consumers who are employees may form, assist or join a labor union "has been answered in the affirmative by the Supreme Court in G.R. No. 74209."
- On June 23, 1987, BLR Director Pura Ferrer-Calleja affirmed the Med-Arbiter and certified BELU as sole and exclusive bargaining agent of all the rank and file employees of BENECO.
- BENECO filed this petition for certiorari alleging grave abuse of discretion. The Solicitor General, in his Comment, agreed with BENECO and prayed that the petition be given due course, so the Court required the respondent Director to file her own Comment; the petition was given due course on April 19, 1989 and decided December 29, 1989.
Arguments of the Parties
A. Petitioner BENECO. The cooperative's position was a single proposition applied twice. Employees who are members of the cooperative are its joint owners, and an owner cannot bargain collectively with himself, so they "are not eligible to form, join or assist labor organizations of their own choosing." It followed, first, that the bargaining unit could contain only non-member employees — by its own certification, four of them — and, second, that "the certification election held on October 1, 1986 was null and void since members-employees of petitioner cooperative who are not eligible to form and join a labor union for purposes of collective bargaining were allowed to vote therein." Because Article 256 measures validity against "all eligible voters in the unit," an electorate padded with ineligibles cannot yield a valid certification.
B. Respondent BLR Director and BELU. The Director answered from the dual capacity of the member-employee: that a person "assumes a dual capacity as rank and file employee and as member of a certain cooperative does not militate... against his/her exercise of the right to self-organization and to collective bargaining guaranteed by the Constitution and Labor Code because, while so doing, he/she is acting in his/her capacity as rank and file employee thereof." Their employment status "as rank and filers who are hired for fixed compensation had not changed," and they "still do not actually participate in the management of the cooperative as said function is entrusted to the Board of Directors and to the elected or appointed officers thereof," being vested with none of the managerial powers. BELU added that membership in the cooperative "is only nominal," and pressed a floodgates argument: if nominal ownership were "enough to take away the constitutional protections afforded to labor, then there would be no hindrance for employers to grant, on a scheme of generous profit sharing, stock bonuses to their employees and thereafter claim that since their employees are now also co-owners" they are disqualified — which would "allow the floodgates of destruction to be opened upon the rights of labor which the Constitution endeavors to protect."
C. Common Ground. No one disputed the Med-Arbiter's finding that only 37 employees were non-members at the time of her order, nor the canvass figures — 83 voters, 49 votes for BELU. It was accepted that BENECO is a non-profit electric cooperative under the cooperative statutes, and that its rank-and-file member-employees exercise no managerial functions. The Solicitor General sided with BENECO rather than with the public respondent, which is why the BLR Director was separately required to comment.
Issue
A. Main Issue (Topic/Subtopic-Centered). Are employees of a cooperative who are at the same time members and co-owners of it eligible to form, join or assist a labor organization for purposes of collective bargaining — and does it matter that they take no part in the actual management of the cooperative and hold none of the powers that would make them managerial employees?
B. Secondary Issues. Whether the BLR Director committed grave abuse of discretion in certifying BELU as sole and exclusive bargaining representative, where 83 employees voted although the Med-Arbiter had found only 37 eligible, measured against the requirement in Article 256 that "at least a majority of all eligible voters in the unit must have cast their votes."
C. Ancillary/Incidental Issues. Whether membership in a cooperative may be equated with ownership of stock in an ordinary corporation, such that recognising the disqualification would let employers manufacture it by distributing stock bonuses; and the effect of the Med-Arbiter's reading of the minute resolution in G.R. No. 74209.
Ruling
Main Issue: NO, they are not eligible. "[T]he right to collective bargaining is not available to an employee of a cooperative who at the same time is a member and co-owner thereof," and "the fact that the members-employees of petitioner do not participate in the actual management of the cooperative does not make them eligible" — "[i]t is the fact of ownership of the cooperative, and not involvement in the management thereof, which disqualifies a member from joining any labor organization within the cooperative." Employees who are neither members nor co-owners, however, "are entitled to exercise the rights to self-organization, collective bargaining and negotiation as mandated by the 1987 Constitution and applicable statutes." Secondary Issue: YES, grave abuse of discretion. Even accepting that the 37 original non-members could still vote although later "forced and compelled to join the cooperative on pain of disciplinary action," the election "is still null and void since even those who were already members of the cooperative at the time of the issuance of the med-arbiter's order... were allowed to vote," so that "it cannot be determined whether or not respondent union was duly elected by the eligible voters of the bargaining unit." Ancillary Issue: NO — the floodgates argument rests "on the erroneous presumption that membership in a cooperative is the same as ownership of stocks in ordinary corporations."
Dispositive portion (verbatim):
"WHEREFORE, the petition is hereby GRANTED and the assailed resolution of respondent director is ANNULLED. The certification election conducted on October 1, 1986, is SET ASIDE. The Regional Office No. 1 of San Fernando, La Union is hereby directed to immediately conduct new certification election proceedings among the rank and file employees of the petitioner who are not members of the cooperative.SO ORDERED."
Ratio
- The Court treated the eligibility question as already settled, citing Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja and its reiteration in Batangas-Electric Cooperative Labor Union v. Young and San Jose City Electric Service Cooperative, Inc. v. Ministry of Labor and Employment — in each of which the Court "had stated that the right to collective bargaining is not available to an employee of a cooperative who at the same time is a member and co-owner thereof."
- In the same breath it fixed the limit of the rule: "[w]ith respect, however, to employees who are neither members nor co-owners of the cooperative they are entitled to exercise the rights to self-organization, collective bargaining and negotiation as mandated by the 1987 Constitution and applicable statutes."
- Against the Director's dual-capacity argument the Court held that non-participation in management is simply the wrong criterion: "the fact that the members-employees of petitioner do not participate in the actual management of the cooperative does not make them eligible to form, assist or join a labor organization for the purpose of collective bargaining with petitioner."
- The reason is that the Davao City holding "was based on the fact that as members of the cooperative they are co-owners thereof. As such, they cannot invoke the right to collective bargaining for 'certainly an owner cannot bargain with himself or his co-owners.'"
- The Court then stated the rule in the form that is quoted ever after: "It is the fact of ownership of the cooperative, and not involvement in the management thereof, which disqualifies a member from joining any labor organization within the cooperative. Thus, irrespective of the degree of their participation in the actual management of the cooperative, all members thereof cannot form, assist or join a labor organization for the purpose of collective bargaining."
- BELU's floodgates argument failed on a premise: it "is based on the erroneous presumption that membership in a cooperative is the same as ownership of stocks in ordinary corporations." Cooperatives "enjoy other privileges not granted to" ordinary corporations — the Court citing Sections 4, 5, 6 and 8 of P.D. No. 175 — and "members of cooperatives have rights and obligations different from those of stockholders of ordinary corporations." It was "precisely because of the special nature of cooperatives" that the Davao City rule was laid down.
- The quoted passage from Davao City supplies the marks of that special nature: its "owners and/or members are the ones who run and operate the business while the others are its employees"; "irrespective of the number of shares owned by each member they are entitled to cast one vote each"; "[t]heir share capital earn limited interest"; and they enjoy "exemption from income tax and sales taxes, preferential right to supply their products to State agencies and even exemption from the minimum wage laws."
- Turning to the election, the Court set the Med-Arbiter's finding against the canvass: her order of September 2, 1985 made "a specific finding that there are only thirty-seven (37) employees of petitioner who are not members," yet "the minutes of the certification election show that a total of eighty-three (83) employees were allowed to vote and of these, forty-nine (49) voted for respondent union."
- It then closed off the union's best answer. Even conceding BELU's contention that the 37 original non-members could still vote because they were only "forced and compelled to join the cooperative on pain of disciplinary action," the election "is still null and void since even those who were already members of the cooperative at the time of the issuance of the med-arbiter's order, and therefore cannot claim that they were forced to join the union[,] were allowed to vote in the election."
- The vice is therefore one of computation, not of motive. Under Article 256, "[t]o have a valid election, at least a majority of all eligible voters in the unit must have cast their votes," so "it cannot be determined whether or not respondent union was duly elected by the eligible voters of the bargaining unit since even employees who are ineligible to join a labor union within the cooperative because of their membership therein were allowed to vote." That uncertainty is what made the certification a grave abuse of discretion.
Doctrine
B. Doctrines/Rules/Principles. "[T]he right to collective bargaining is not available to an employee of a cooperative who at the same time is a member and co-owner thereof," because "certainly an owner cannot bargain with himself or his co-owners." It is the fact of ownership, and not involvement in management, that disqualifies: "irrespective of the degree of their participation in the actual management of the cooperative, all members thereof cannot form, assist or join a labor organization for the purpose of collective bargaining." Employees who are neither members nor co-owners retain the full rights to self-organization, collective bargaining and negotiation under the 1987 Constitution and the Labor Code. Membership in a cooperative is not equivalent to ownership of stock in an ordinary corporation; cooperatives and their members have privileges, rights and obligations that ordinary corporations and stockholders do not. Under Article 256, "[t]o have a valid election, at least a majority of all eligible voters in the unit must have cast their votes" — so where ineligible voters participate and the tally cannot be reconciled with the number of eligibles, the election is void.
C. Distinctions/Limitations/Qualifications. The disqualification is membership-based and cooperative-specific. It does not reach a cooperative's non-member employees, who must be given their own election — and the Court ordered exactly that. It does not rest on managerial status, so the Article 212(m) analysis is simply inapposite; conversely, a non-member employee of a cooperative who is managerial remains excluded under Article 245 for the ordinary reason. It does not extend to stockholders of ordinary corporations, however small their holding, because share ownership is not cooperative membership. And it says nothing about a cooperative member's other statutory entitlements — the holding is about collective bargaining, not about wages, hours or security of tenure. Two timing points also matter: the ruling predates the Cooperative Code (R.A. No. 6938, 1990), and the Court's willingness to void the election turned on BENECO having protested before the balloting rather than after — compare Algire v. De Mesa, where a failure to question timely proved fatal.
D. Topic/Subtopic Integration (Mandatory). Classified DIRECT. The syllabus lists this case under item 4, "Other exclusions to the right to self-organize — Cooperatives," and it is the leading statement of that exclusion: a category of workers kept out of collective bargaining not by Article 245, not by E.O. No. 180, and not by any confidentiality rationale, but by the legal nature of the employer and the identity of owner and worker within it. Read beside ICMC v. Calleja — the companion exclusion in the same syllabus item — the pair shows the two ways the right can be displaced from outside the Labor Code: by the employer's character as an international organization clothed with immunity, and by the employer's character as an enterprise its own workers own. Read beside Filoil and Sugbuanon, the contrast is with exclusions drawn from what an employee does; here nothing about the work matters at all. The second half of the case belongs with the certification-election group later in the week: it is the clearest illustration in Week 5 of why the double majority in Article 256 makes voter eligibility a question of validity rather than of housekeeping.
Separate Opinions
None. The Decision, penned by Justice Cortes, was concurred in by Chief Justice Fernan and Justices Gutierrez, Jr. and Bidin. Justice Feliciano was on leave.