San Pedro Hospital v. Secretary of Labor

G.R. No. 104624 (October 11, 1996)

Facts:

Petitioner San Pedro Hospital of Digos, Inc. is a charitable, non-stock, non-profit medical and educational training corporation that had a three-year collective bargaining agreement (CBA) with the San Pedro Hospital Employees Union, represented by the Nagkahiusang Mamumuo sa San Pedro Hospital of Digos - National Federation of Labor (NAMASAP-NFL). The CBA was effective from December 15, 1987, until December 15, 1990. Negotiations for the renewal of the CBA began on February 12, 1991, but the parties could not reach an agreement on wage increases and other provisions.

On February 19, 1991, the union declared a deadlock, and on February 20, 1991, it initiated picketing actions at the hospital. The hospital's operations were severely disrupted, leading to a significant reduction in patient admissions. The union filed a Notice of Strike with the National Conciliation and Mediation Board (NCMB) on March 4, 1991. After failed conciliation attempts, the union went on strike on May 28, 1991.

On June 12, 1991, the hospital issued a "Notice of Temporary Suspension of Operations," effective June 15, 1991, citing financial difficulties. The Secretary of Labor assumed jurisdiction over the dispute on June 13, 1991, ordering the striking workers to return to work. However, the hospital refused to accept the returning workers, citing the temporary suspension of operations.

The Secretary of Labor later issued an order on October 16, 1991, ruling that the hospital's suspension of operations was unjustified and directed the hospital to pay backwages to the returning workers and to enter into a new CBA with the union. The hospital filed a motion for reconsideration, which was denied on January 31, 1992, leading to the present petition for certiorari.

Legal Issues:

1. Did the Secretary of Labor act with grave abuse of discretion in issuing the orders without allowing the hospital to present evidence?
2. Can the Secretary compel the hospital to enter into a new CBA despite the temporary suspension of operations?
3. Did the Secretary err in ordering the payment of backwages, effectively ruling on the legality of the strike?

Arguments:

Petitioner’s Arguments:

• The Secretary of Labor did not afford the hospital an opportunity to present evidence, particularly regarding its financial condition.
• The Secretary's order to enter into a new CBA was inappropriate since the hospital had ceased operations.
• The order to pay backwages was tantamount to a ruling on the legality of the strike, which the Secretary was not authorized to do.

Respondent’s Arguments:

• The Secretary's orders were based on substantial evidence, including the hospital's financial statements submitted by the union.
• The temporary suspension of operations was not justified and was intended to circumvent the workers' rights.
• The Secretary acted within his jurisdiction in ordering backwages due to the invalidity of the temporary suspension.

Court’s Decision and Legal Reasoning:

The Court ruled that the Secretary of Labor did not act with grave abuse of discretion. It found that the hospital was given ample opportunity to present its evidence, but it failed to substantiate its claims of financial distress. The Secretary's conclusion that the temporary suspension was not legitimate was supported by the hospital's financial records, which indicated that it was not in dire financial straits.

The Court held that the Secretary's order to enter into a new CBA was valid, as the employer-employee relationship was merely suspended and not terminated. The Secretary's directive to pay backwages was also upheld, as it was based on the illegality of the temporary suspension rather than a ruling on the legality of the strike.

However, the Court acknowledged a supervening event: the hospital's permanent closure due to financial losses. It concluded that while the Secretary's orders were justified at the time, the subsequent permanent closure rendered the directive to enter into a new CBA moot and academic.

Significant Legal Principles Established:

• A temporary suspension of operations must be justified by substantial evidence; otherwise, it may be deemed illegal.
• The Secretary of Labor has the authority to order backwages for employees affected by an unjustified suspension of operations.
• The employer-employee relationship is suspended during a legitimate temporary suspension of operations, allowing for collective bargaining to continue.