G.R. No. L-32630. April 30, 1979.
PHILIPPINE NATIONAL RAILWAYS, petitioner, vs. UNION DE MAQUINISTA, FOGONEROS Y MOTORMEN, KAPISANAN NG MGA MANGGAGAWA SA PEROKARIL and THE COURT OF INDUSTRIAL RELATIONS, respondents.

FACTS

In 1964, respondent unions staged a strike against the Philippine National Railways (PNR) due to salary inequities compared to another union, the Mechanical Department Labor Union. The Court of Industrial Relations (CIR) granted them staggered wage increases and recommended a management-labor panel to standardize salaries under the principle of equal pay for equal work. However, in 1965, PNR extended the same 20% increase to all employees, nullifying the unions’ gains and reinstating the inequity. The unions protested, leading to negotiations in 1968. During these talks, PNR General Manager Nicanor Jimenez, by a letter dated May 10, 1968, accepted a specific salary adjustment plan for the unions’ members and directed its inclusion in the upcoming budget.
Despite this clear commitment from its General Manager, the PNR Board of Directors took no action to implement the approved salary increases. Meanwhile, the Board approved salary increases for other employee groups, including supervisors and medical staff, in 1969. The respondent unions filed a complaint for unfair labor practice, alleging the PNR violated its duty to bargain collectively in good faith by reneging on the agreement reached with General Manager Jimenez.

ISSUE

Whether the Philippine National Railways committed unfair labor practice by failing to bargain collectively in good faith when its Board of Directors refused to implement the salary adjustment agreement reached between the unions and the PNR General Manager.

RULING

Yes, the PNR committed unfair labor practice. The Supreme Court affirmed the CIR’s finding that the PNR violated its statutory duty to bargain collectively in good faith under the Industrial Peace Act. The legal logic centers on the binding nature of the negotiation process and the obligation of good faith. General Manager Jimenez possessed apparent authority to negotiate and bind the PNR in collective bargaining. His May 10, 1968 letter constituted a clear counter-proposal accepted by the unions, forming a meeting of the minds. The PNR’s subsequent inaction—where its Board bypassed the General Manager’s memorandum and approved raises for other groups while ignoring this agreement—demonstrated bad faith.
The Court emphasized that the duty to bargain collectively is a mutual obligation to meet, confer, and negotiate promptly and expeditiously in good faith. Good faith requires that parties make a sincere effort to reach a common ground and, once an agreement is reached through authorized representatives, to honor it. The PNR’s conduct, by disregarding the concluded agreement and favoring other employee groups, indicated a deliberate evasion of its duty, disrupting harmonious labor relations. The financial constraints cited by PNR were rendered unpersuasive by its contemporaneous grants of increases to other classes of employees. Thus, the petition was denied.