G.R. No. L-39140 & 39145 May 17, 1980
ARMED FORCES OF THE PHILIPPINES MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. ARMED FORCES OF THE PHILIPPINES MUTUAL BENEFIT ASSOCIATION, INC. EMPLOYEES’ UNION (AFP-MBAI-EU), et al., and THE COURT OF INDUSTRIAL RELATIONS, respondents; ARMED FORCES OF THE PHILIPPINES MUTUAL BENEFIT ASSOCIATION, INC. EMPLOYEES’ UNION (AFP-MBAI-EU), et al., petitioners, vs. ARMED FORCES OF THE PHILIPPINES MUTUAL BENEFIT ASSOCIATION, INC. (AFP-MBAI) and COURT OF INDUSTRIAL RELATIONS (CIR), respondents.

FACTS

The AFP Mutual Benefit Association, Inc. (AFP-MBAI) dismissed thirty-four employees on June 30, 1970, the same day it entered into a collective bargaining agreement with the AFP-MBAI Employees’ Union. The Union filed an unfair labor practice case, alleging the dismissals were illegal and discriminatory, targeting members active in union campaigns and economic demands. The Association countered that the dismissals were due to a lawful reduction of personnel, necessitated by financial losses and the suspension of certain loan operations. It further moved to dismiss the case concerning nineteen complainants who had executed quitclaim documents, waiving their rights.
The Court of Industrial Relations (CIR) found the dismissals constituted unfair labor practice. It rejected the defense of financial losses, noting the Association’s current assets sufficiently exceeded its liabilities. The CIR also ruled the quitclaims executed by some employees were void for being contrary to public policy, as they sought to waive rights arising from an unfair labor practice. It ordered the reinstatement of all complainants with three years’ back wages.

ISSUE

The core issue is whether the CIR correctly found the dismissals to be an unfair labor practice and properly ordered reinstatement with back wages, notwithstanding the Association’s claim of financial cause and the employees’ execution of quitclaims.

RULING

The Supreme Court affirmed the CIR’s ruling with modification. The legal logic rests on two pillars. First, the Court upheld the finding of unfair labor practice. The timing of the dismissals, coinciding with the CBA signing, and the targeting of union members established a discriminatory motive. The Association’s claim of financial necessity was disproven by the CIR Examiner’s report, which showed the company had a healthy current asset-to-liability ratio of 2.62 to 1, indicating no genuine need for a retrenchment that solely affected unionists.
Second, the Court ruled that quitclaims are invalid concerning unfair labor practice. Under Section 5(a) of the Industrial Peace Act (Republic Act No. 875), the CIR’s jurisdiction to prevent unfair labor practices is exclusive and cannot be undermined by private settlements. Public policy dictates that such compromises cannot extinguish claims arising from violations of labor rights designed to protect collective interests. Therefore, the reinstatement order properly included all dismissed employees, regardless of any executed quitclaims. The Court modified the back wage award, ordering payment equivalent to three years’ salary at pre-dismissal rates without requiring proof of interim earnings, following established precedent for illegal dismissals constituting unfair labor practice.