G.R. No. L-28607. May 31, 1971.
Shell Oil Workers’ Union, petitioner, vs. Shell Company of the Philippines, Ltd., and The Court of Industrial Relations, respondents.

FACTS

The dispute arose from the respondent Shell Company’s decision to dissolve its in-house security guard section at its Pandacan Installation and contract out the security services to a private agency. This move involved the transfer of eighteen security guards to other departments. The petitioner Union opposed this action, contending that the security guards were part of the bargaining unit and their positions were expressly covered by the existing collective bargaining agreement (CBA) effective from August 1, 1966, to December 31, 1969. The Union argued that the company’s action violated the CBA. Despite negotiations and a panel meeting on May 3, 1967, where the company communicated its final decision, the Union called a strike on May 25, 1967. The dispute was later certified to the Court of Industrial Relations (CIR). The CIR ruled in favor of the company, declaring the strike illegal. It held that the dissolution of the security section and the contracting out of services were a valid exercise of management prerogative aimed at achieving efficiency and economy. The CIR also ordered the dismissal of the eighteen security guards and thirteen Union officers for participating in the illegal strike.

ISSUE

The primary issue is whether the respondent company’s act of dissolving its security guard section and contracting out the work, during the effectivity of a collective bargaining agreement that included the guards, constituted an unfair labor practice and rendered the subsequent strike legal.

RULING

The Supreme Court reversed the decision of the CIR. The Court held that while management possesses prerogatives to adopt efficient and economical methods of operation, this right is not absolute and must yield to the terms of a binding collective bargaining agreement. The security guards were unequivocally included in the bargaining unit and their positions were specified in the wage schedules and appendices of the CBA. By unilaterally abolishing these positions during the contract’s term, the company violated its contractual obligations, thereby committing an unfair labor practice. Consequently, the strike called by the Union was a legitimate response to this unfair labor practice and was therefore legal. The Court set aside the dismissals of the eighteen security guards and the thirteen Union officers as an unwarranted sanction. However, the Court upheld the CIR’s finding on individual liability for serious acts of violence committed during the strike, meaning those individuals found responsible for such acts could still be subject to penalty. The decision underscores that a collective bargaining agreement is the law between the parties, and management prerogative cannot be invoked to justify its breach.