The Start of the Dispute over Outsourcing
On August 26, 2009, in a LMCC meeting between the management and the union, PAL announced its intention to spin-off/outsource the following departments: Information Technology, Human Resources, Benefits, Legal, Medical, Airport Services, Catering, Reservations, Ticket Offices, and Revenue Accounting etc. It cited losses incurred by the company. In that meeting, the old leadership of the PALEA requested that the plan be kept a secret to managers and union members.
PAL President Jaime Bautista formalized its communication to the union on September 9, 2009 by way of a letter stating therein the intention of the management to spin-off/outsource the Airport Services Department and Catering Department. The same was to become effective on November 15, 2009.
On September 10 and 11, 2009, the previous PALEA leadership reminded PAL management that the one year extension of CBA suspension is due to expire. The union thus formally notified the company of its intention to re-negotiate the remaining four years of the collective bargaining agreement (2009-2013). During the LMCC meetings that ensued, PALEA stressed that the CBA negotiation is the most appropriate venue to thresh out unresolved issues on the planned outsourcing.
Due to the divergent positions of the parties, the union filed on September 22, 2009 with the National Conciliation and Mediation Board (NCMB) a Notice of Preventive Mediation citing union busting as the sole and principal issue which was docketed as NCMB-NCR-PM-09-126-09. Several conciliation meetings were held between September 25, 2009 and October 5, 2009. The parties did not reach any agreement on the issue of outsourcing.
Meanwhile, in September 2009, PAL offered an Early Retirement Program to its managers and administrative personnel. The same program was made optional and voluntary to the rank-and-file employees.
Without significant progress in the conciliation conferences, on January 28, 2010, PALEA withdrew the Notice of Preventive Mediation and filed a Notice of Strike on the ground of union busting, particularly: (1) Intended mass lay-off of union members and officers by April 2010; (2) Illegal outsourcing of regular positions; (3) Direct negotiations with union members for them to avail of the ERP with promise of re-employment; (4) Unresolved issues during preventive mediation/LMCC; (5) Non-compliance with payscale, item II of the wage distortion case; and (6) Others.
New Officers Lead the Fight
Meantime, from February 17 to 25, 2010, a local union election was held. The new set of officers assumed their official functions on March 29, 2010. The new PALEA leadership had not yet warmed up to their responsibilities when on April 16, 2010, the PAL President issued a letter informing the union of the complete closure of several departments of the company and abolition of all affected regular positions by May 31, 2010.
PAL management announced that 2,604 regular employees were sent notices of termination through registered mail. The new leadership initiated successive protest actions on April 19 and 23, 2010.
On the day of the last protest action, then DOLE Secretary Marianito Roque issued an Assumption of Jurisdiction Order (AJ) which was received by the union on April 26, 2010 and by the management on April 27, 2010. The management, on April 26 and 27, 2010 issued the Notices of Termination.
Mediation/conciliation hearings were held on April 30, 2010 and May 7, 2010. Then Usec. Rosalinda Baldoz chaired the hearings. In the last hearing, the parties agreed that the AJ issued by the DOLE suspended the effects of the Notice of Termination. The parties submitted their respective position papers, replies, rejoinders and motions on May 17, May 27 and June 7, 2010.
Lagman’s Midnight Decision
After eight calendar days from the submission of the Rejoinder on June 15, 2010, and despite the pendency of the Motion for the Production of Documents filed by the union, the Acting Secretary of Labor Romeo Lagman rendered a decision adverse to PALEA. The dispositive portion of the decision reads:
“WHEREFORE, premises considered, this Office holds that the intended closure of the Philippine Airlines In-Flight Catering operations, Airport Services Operations and Call Center Reservations Operations and the consequent severance from employment of all affected employees as reported to the DOLE Regional Offices, as well as the contracting out of the these operations to the named service providers, are based on lawful ground and all in a valid exercise of managerial prerogative and as such valid and lawful in all respects.”
PALEA condemned the decision of the Acting Secretary as a midnight decision. On June 22, 2010, around 300 members of PALEA conducted a two-hour protest rally in front of the DOLE office in Intramuros.
PALEA Challenges PNoy on the Dispute
The next day around 600 PALEA members trooped to the residence of then President-elect Benigno Aquino at Times St., Quezon City. A letter accompanied by the case documents were delivered and received by the staff of the President. Among other things, PALEA appealed for the following:
1. Presidential intervention in the PAL-PALEA dispute
2. Cleansing of corrupt officials in the Department of Labor and Employment
3. Reform of the policy regarding contractual employment.
PALEA filed its Motion for Reconsideration to Lagman’s decision on June 28, 2010. The filing was accompanied by a protest action that was attended by more or less 300 union members. PALEA argued that the retrenchment of almost 3,000 regular rank-and-file employees who are union members, including union officers, is invalid and constitutive of Unfair Labor Practice because:
1. It violates the law and the parties’ CBA
a. The termination of the regular employees is not necessitated by the company’s financial situation.
b. PAL violated the CBA provision against Labor Contracting.
c. PAL violated the CBA provision on Job Security.
2. It violates Article 248 of the Labor Code, and Department Order No. 18-02. Despite PAL’s insistence, what it planned to do was not a “spin-off” but an “outsourcing” which is equivalent to contracting-out of services.
PALEA maintained that the real intention of PAL in pursuing its planned mass lay-off is to contractualize the regular positions now existing in the company with the ultimate motive of busting the union.
Meantime, the union embarked on a lobbying campaign. Institutions such as the clergy, academe and Congress were involved. International alliances like the International Transports Workers Federation (ITF) were also tapped in the campaign.
As a result of the lobbying, a privilege speech was delivered by TUCP Party-list Representative Raymond Mendoza on August 9, 2010. The next day, PALEA was invited to a mini hearing by the House Committee on Labor.
On August 20, 2010, a conciliation conference was called by the new DOLE Sec. Rosalinda Baldoz. In said hearing, the management manifested that “it shall await the resolution of the Motion for Reconsideration” filed by the Union. PALEA, on the other hand, manifested that it prefers that conciliation meetings be held further. The Union, however, manifested that management should first scrap its plan to terminate employees.
By September 2, PALEA, through the its legal counsels, received the documents previously demanded, by way of Motion to Produce Documents, but completely denied by then Sec. Romeo Lagman. These were PAL’s financial statement for 2009-10, the contracts signed by the Company with Sky Kitchen and ePLDT Ventus, which were two of the service providers. However the contract between PAL and Sky Logistics, the service provider of the ground handling was not presented by PAL.
PALEA submitted its comments to the above-mentioned documents on September 14, 2010. Notably, the financial statement provided by the Company showed that PAL is no longer on the red. It had financially recovered and in fact already registered an income.
The union thus petitioned the Labor Secretary to reverse the decision of former Acting Secretary Lagman and issue a new decision:
1. Declaring the intended retrenchment/closure of the various department of PAL as illegal;
2. Declaring PAL guilty of unfair labor practice.
Baldoz’ Halloween Massacre
Labor Secretary Baldoz rendered her decision affirming the earlier decision on October 29, 2010 but an official copy was only received by the PALEA legal counsels on November 2, 2010.
The Notice of Order reads, in part:
Wherefore, the Motion for Reconsideration filed by PALEA is hereby DENIED and the Decision of the Acting Secretary of Labor and Employment dated 15 June 2010 is hereby AFFIRMED, with MODIFICATION that the following components of the Transition Benefits Package shall be given to all affected employees:
a) All employees affected by outsourcing of In-Flight Catering, Airport Services, and Call Center Reservations Operations shall be absorbed by the respective service providers and PAL shall be bound and held liable by way of guarantee in favor of all affected employees, for payment for one year, of whatever salary is granted respectively by the service providers upon their admission to employment with said service providers;
b) Increase in separation pay in the amount of 1.25% per year of service;
c) Additional gratuity of fifty thousand pesos (P50,000.00) per affected employee;
d) Vacation Leave balance that is 100% commutable to cash regardless of years of service;
e) Sick Leave balance that is 100% commutable to cash regardless of years of service;
f) Trip pass benefits in accordance with Article XX of the CBA and the PAL Personnel Policies and Procedures Manual, graduated under the following terms:
15 years in service and more Lifetime
10-15 years 8 sets
5-10 years 5 sets
Less than 5 years 2 sets
g) Extension of one (1) year of the medical and hospitalization package based on Articles XIII to XV of the CBA and consistent with the (1) year period that PAL guarantees payment of the affected workers’ salaries, as provided in item (a).
PALEA and its allied labor organization condemned the Labor Secretary’s ruling as “Halloween massacre.” They held a symbolic protest at the DOLE by laying makeshift crosses and coffins.
A few days after the Notice of Order was issued, PAL managers started convincing union members to adhere to the decision. Thus, PALEA filed a Notice of Strike (NOS) with the DOLE based on the following grounds of unfair labor practices:
1. Individual bargaining with union members tantamount to interference with, restraint, and coercion of employees in their exercise of their rights to self-organization;
2. Mass termination of Union officers amounting to Union Busting.
As an offshoot of the Notice of Strike filed by the Union, series of conciliation conferences were held under the auspices of the DOLE.
Meanwhile on November 8, 2010, a broad-labor press conference was attended by big labor organizations expressing support to the cause of PALEA. A congressional inquiry ensued on November 10, 2010. The issues were focused on the validity of the termination of 2,600 employees on the basis of management prerogative to outsource.
Presidential Intervention
On November 12, 2010, PALEA filed a Petition for Presidential Intervention in the labor row. The petition was based on the power of the President (1) to intervene and assume direct jurisdiction over any labor dispute involving industries that, in his opinion, are indispensable to the national interest; and (2) to determine such industries.
In the petition, PALEA raised the issue that “the Secretary of Labor and Employment” committed grave error in her findings of facts and in the application of law and jurisprudence in denying the motion for reconsideration of PALEA.
The union thus asked:
“Wherefore, it is respectfully prayed that the Honorable Office of the President directly intervene and assume jurisdiction over the labor dispute in Philippine Airlines, Inc. relating to the mass termination of more than 2,600 regular employees, and issue an Order:
1. Directing PAL to stop from prematurely implementing the 29 October 2010 Order of the Secretary of Labor and Employment, and from committing other acts that will exacerbate the dispute;
2. Reversing the 29 October 2010 Order of the Secretary of Labor and Employment; and
3. Declaring PAL guilty of unfair labor practice for the implementation of the mass termination of more than 2,600 regular employees.
4. Other just and equitable reliefs are likewise prayed for.”
Subsequently, on November 15, 2010, the Union and the legal counsels had a meeting with the Executive Secretary (ES) of the President. The meeting was exploratory in nature. The Secretary floated possible settlements between the parties. PALEA , however, stood firm on its position that the outsourcing has no legal basis.
In unity with the cause of PALEA, big labor groups staged a National Day of Action for the Protection of Regular Jobs and against Contractual Employment on November 25, 2010 at the country’s premier business
District of Ayala Ave., Makati
City.
In the intermediate period, PAL management continued to convince members to avail of the decision of the DOLE in relation to outsourcing. A strike vote was conducted on December 7, 2010. A solid 86% of the votes cast affirmed the holding of the strike.
Before the result of the strike vote could be reported to the DOLE, the Office of the President issued an AJ mandating management and the union to desist from undertaking any action that may aggravate the situation. Thereby, the decision of the DOLE dated June 15, 2010 and October 29, 2010 were ordered put on hold.
The Fight over a New CBA
On February 3, 2011, as ordered by the Office of the President, PAL and PALEA appeared in a conciliation meeting mediated by Sec. Ronald Llamas, ASec. Rolando Geron and ASec. Jose Amorado. In said meeting, PAL admitted for the first time that the financial condition of the Company is not the main reason but just one of the reasons for the outsourcing program. The management also raised the issue of “a global trend in the airline industry” and that the program is within the scope of their “management prerogative.”
On the other hand, PALEA interposed that the issues may be discussed in the collective bargaining negotiations. In the meeting PALEA argued that the CBA has not been renegotiated for almost thirteen (13) years, and that PALEA already submitted its CBA proposal way back on October 8, 2010.
It also mentioned that last January 27, 2011, after the LMCC meeting between the management and the union, no less than the PAL President and COO, advised the union officers for PAL and PALEA to start the CBA negotiations. Accordingly, on January 31, 2011, PALEA President, wrote the management and furnished therein the union’s negotiation panel. A follow-up letter was sent to the management on February 4, 2011. However, there was no reply from the management.
In that conciliation conference, the PAL President informed those present that the company will negotiate the CBA only after the outsourcing program has been implemented. The union opposed and asserted that the CBA negotiations should immediately commence.
Also, in the said conciliation meeting, the management agreed and promised to furnish the Office of the President and the Union, PAL’s unaudited quarterly financial report for the 1st and 2nd quarters of fiscal year 2010-2011. On February 14, 2011, PALEA’s legal counsels received the copy of the financial reports.
The report revealed that PAL posted a comprehensive income of US$31.6M for the 1st quarter and US$28.2M for the 2nd quarter. Sometime in June 2010, PAL was also able to pay it maturing financial obligation to its creditors in the amount of USD$46.5M. Later PAL reported a comprehensive income of US$15.1M in the 3rd quarter of the current fiscal year ending March 2011.
Last February 17, 2011, PALEA received a letter dated February 16, 2011 from the PAL President which reads in part: ”Considering the pendency of the case relative to the spin-off/outsourcing of the Inflight Catering Services operations, Airport Services (i.e. ground handling, cargo terminal/cargo handling and ramp handling) and Call Center Reservations, before the Office of the President, we are constrained to temporarily hold in abeyance the commencement of the new PAL-PALEA CBA negotiations.”
Second Strike Vote on Refusal to Bargain
PALEA saw this as management’s refusal to bargain and a violation of the law. Thus on March 7, 2011, the union filed a Notice of Strike at the NCMB for unfair labor practice due to the management’s refusal to bargain.
On the same day, a notice of conference was received by the PALEA from the NCMB setting the conciliation meeting on March 9, 2011. In that conciliation conference, PAL management was adamant on its position that the CBA negotiation is held in abeyance pending the resolution of the issue of outsourcing in the Office of the President. For its part, PALEA maintained that the issues involved in the Notice of Strike is a totally separate and distinct issue from the issues now pending at the OP. Collective bargaining negotiations is a guaranteed right of the workers by the Constitution and an obligation on the part of the management. There is, thus, a clear proof that of management refusing to bargain, PALEA insisted.
Another marathon conciliation conference was held on March 14, 2011 in the NCMB lasting almost five hours. In the conference, management manifested its willingness to continue the CBA negotiation process and to submit its counter-proposal within (2) weeks.
On the other hand, PALEA clarified that it does not agree that the outsourcing issue should not be subject to CBA and the proposed that the CBA contain provisions on spin-off/outsourcing which are central to the resolution of the outsourcing case currently pending. Further, the union manifested that until such time that the management submits its counter-proposal, the issue is not resolved. The CBA negotiation can proceed independently without any pre-conditions.
On March 25, 2011 another conciliation conference was held. On the same date, PALEA submitted to the DOLE the results of the second strike vote. A 96% majority voted for a strike that may commence on April 1.
Strike Stopped by Another AJ
However, on this very same date, the OP thru Executive Secretary Paquito Ochoa, issued an order in relation to the Petition for Presidential Intervention filed by the Union. It affirmed in toto the decision of the DOLE with the modification that the gratuity pay was increased from Php50,000 to Php100,000. Said order was leaked to the media on very same date prior to the official receipt of the Union. PAL also came up with press releases welcoming and commending the President
As promised, PALEA received the copy of the CBA counter-proposal of the PAL management on March 28, 2011. The cover letter stated, “It is understood that the counter-proposal shall cover only those rank and file employees within the bargaining unit to be left behind after the spin-off/outsource of the three (3) above-mentioned departments (referring to ASD, Catering and Reservations).”
Marathon conciliation meetings were called by the DOLE from March 29 to April 1, 2011. On the last day, the parties ended the meeting past 5:00pm without any specific agreement. The parameters outlined by the DOLE through Usec. Hans Cacdac for the CBA negotiations hinged on the “good faith of the parties and that the present leadership and the collective bargaining unit of the Union should be recognized by the PAL management.”
On the night of April 1, 2011, PALEA staged a prayer rally attended by a various labor organizations. Some 2,000 PALEA members also participated. After the rally, when the officers were on caucus to assess the impact of the activities, an AJ was endorsed by a union staff purportedly left behind by a DOLE staff on that same night.
The Notice of Order dated April 1, 2011 reads, in part:
“This Office hereby CERTIFIES the labor dispute between PAL and PALEA to the National Labor Relations Commission for immediate Compulsory Arbitration. Accordingly, any intended strike or lockout or any form of concerted action is hereby automatically enjoined.”
The very next day PALEA announced to the public through the mass media that, left without any alternative and its rights violated by no less the government, it plans to test the law and if it is necessary, the AJ order will be defied.
Dispute over Temporary Outsourcing Scheme
PALEA did not boycott the proceeding before the National Labor Relations Commission and attended the hearings. As the NLRC heard the case, a new dispute arose over management’s attempts to implement a temporary or partial outsourcing.
Last May 30, PAL informed PALEA of an acute manpower shortage for passenger handling due to the exodus of customer service agents who have sought greener pastures abroad and asked for the union’s cooperation in allowing Lucio Tan-owned service provider MacroAsia to work the departure gates for a period of six months.
PALEA rejected outright the proposal and suggested instead that the vacant positions be filled up by direct hiring instead of outsourcing to a service provider. PALEA even offered to help in rehiring former PAL employees and recalling trainees who were not hired due to a freeze hiring program. Discussions between PAL and PALEA on these stop gap measures proceeded and last June 9 the union submitted a partial list of people interested in the position of customer service agents.
PALEA considers the temporary outsourcing of regular jobs to MacroAsia as a backdoor implementation of the controversial contractualization plan and a violation of the April 1 order of the Labor Secretary enjoining management and the union from engaging in any act that will exacerbate the labor dispute at PAL. On June 13, PALEA held a motorcade to protest PAL’s plan to hire on June 16 contractual workers from Lucio Tan-owned service provider MacroAsia.
The issue did not result to serious dispute as PAL acceded to PALEA’s demand and directly hired people from MacroAsia as employees of the flag carrier.
OP Denies PALEA MR
With Philippine Airlines (PAL) reporting a net yearly income of USD 72.5 million, PALEA once more petitioned the government to stop the outsourcing plan of management and order it to begin negotiations for a collective bargaining agreement (CBA). This was contained in manifestations by PALEA to the Office of the President (OP) and the National Labor Relations Commission (NLRC) filed on August 3, 2011. Aside from PAL’s big income, PALEA also cited in its manifestation the 14% increase in total current asset, decrease in the company’s total liabilities, 176% increase in equity among its shareholders, and even the growth of the flag carrier’s fleet to 51 aircraft.
But just a week after the manifestation, the OP released its decision on PALEA’s motion for reconsideration. In a decision dated August 11, the Office of the President (OP) denied the motion for reconsideration of the Philippine Airlines Employees Association (PALEA) and affirmed its earlier ruling allowing Philippine Airlines to lay off 2,600 employees and make them contractual workers in third-party service providers.
PALEA slammed the ruling as “PNoy’s fire-all-you-can policy” and “a second-rate trying-hard copycat of American industrial relations where giant money-making corporations can layoff at will” The union asserted that the decision overturned the provisions of the Labor Code and jurisprudence of the Courts that serious financial losses are a necessary ground for retrenchment.
PAL management invited PALEA to a dialogue on the implementation of the outsourcing plan but the latter rejected the overture. PALEA declared that it is willing to discuss measures for PAL’s growth that will not involve retrenchment. It once more offered to PAL that the outsourcing plan be subject to collective bargaining negotiations instead of being unilaterally imposed on employees.
As of the moment PAL management has announced that it will hold town hall meetings to inform employees about the mechanics of the outsourcing including the application process to the service providers. PALEA meanwhile has started protests actions such as wearing black ribbons at work and mass actions in the streets to drum up support.
The union has declared that it will act accordingly should management prematurely implement the outsourcing plan. PALEA asserts that OP ruling is yet executory pending final judicial resolution of the case.
