G.R. Nos. 158930-31 & 158944-45 ; March 3, 2008
Union of Filipro Employees – Drug, Food and Allied Industries Unions – Kilusang Mayo Uno (UFE-DFA-KMU) vs. Nestlé Philippines, Inc. and Nestlé Philippines, Inc. vs. UFE-DFA-KMU.

FACTS

UFE-DFA-KMU, the exclusive bargaining agent for Nestlé’s rank-and-file employees, initiated CBA negotiations for 2001-2004. Nestlé responded by proposing ground rules that would exclude certain company-initiated benefits, including the Retirement Plan, from being negotiable items in the CBA, asserting these were unilateral grants. The union opposed this precondition, leading to a deadlock. UFE-DFA-KMU filed a Notice of Strike citing bargaining deadlock and unfair labor practice, specifically Nestlé’s bad faith bargaining by setting preconditions. Following a strike vote, the Secretary of Labor assumed jurisdiction over the dispute, enjoined the strike, and directed the parties to submit position papers.

ISSUE

The primary issues were: (1) Whether Nestlé committed unfair labor practice by setting a precondition to bargaining; and (2) Whether the company’s Retirement Plan is a valid subject for mandatory collective bargaining.

RULING

The Court ruled Nestlé did not commit unfair labor practice. The legal logic is that proposing ground rules, including identifying negotiable items, is a legitimate part of the bargaining process’s preliminary stages. A party’s insistence on its position during negotiations, without more, does not automatically constitute bad faith. Bad faith requires a clear showing of an illicit motive or a deliberate design to frustrate an agreement. Nestlé’s act of stating its position on the Retirement Plan’s negotiability was a permissible assertion of its bargaining stance, not an unlawful refusal to bargain.
However, the Court affirmed that the Retirement Plan is a mandatory subject of bargaining. The legal reasoning is grounded in the principle that benefits which have ripened into company practice or are integral to the employees’ terms of employment become proper subjects of collective negotiation. The Retirement Plan, having been consistently granted, forms part of the employees’ compensation package. Therefore, its terms and conditions cannot be unilaterally excluded from the bargaining table. The parties were directed to resume negotiations specifically on this item. The Court’s resolution denied the union’s motion for partial reconsideration and clarified its original decision, remanding the case to the Secretary of Labor for disposition consistent with this ruling.