Manila Diamond Hotel Employees’ Union


The Hon. Court of Appeals, The Secretary of Labor and Employment, and The Manila Diamond Hotel


Justice Azcuna, First Division

Docket Number and Date of Decision

G.R. No. 140518, December 16, 2004

Significance of the Case

In this case, the Supreme Court explained the legislative intendment or purpose behind Article 236 (g) of the Labor Code, and reiterated the rule that payroll reinstatement in lieu of actual reinstatement is not sanctioned under the provision of the said article.


On November 11, 1996, the Union filed a petition for a certification election so that it may be declared the exclusive bargaining representative of the Hotel’s employees for the purpose of collective bargaining. The petition was dismissed by the Department of Labor and Employment (DOLE) on January 15, 1997.

After a few months, despite the dismissal of their petition, the Union sent a letter to the Hotel informing the latter of its desire to negotiate for a collective bargaining agreement. The Hotel, however, refused to negotiate with the Union, citing the earlier dismissal of the Union’s petition for certification by DOLE.

Failing to settle the issue, the Union staged a strike against the Hotel. Numerous confrontations followed, further straining the relationship between the Union and the Hotel. The Hotel claims that the strike was illegal and dismissed some employees for their participation in the allegedly illegal concerted activity. The Union, on the other hand, accused the Hotel of illegally dismissing the workers.

A Petition for Assumption of Jurisdiction under Article 263(g) of the Labor Code was later filed by the Union before the Secretary of Labor. Thereafter, Secretary of Labor Trajano issued an Order directing the striking officers and members of the Union to return to work within twenty-four (24) hours and the Hotel to accept them back under the same terms and conditions prevailing prior to the strike.

After receiving the above order the members of the Union reported for work, but the Hotel refused to accept them and instead filed a Motion for Reconsideration of the Secretary’s Order.

Acting on the motion for reconsideration, then Acting Secretary of Labor Español modified the one earlier issued by Secretary Trajano and instead directed that the strikers be reinstated only in the payroll.

This is where the controversy arose. The union alleged that the Secretary of Labor committed grave abuse of discretion for modifying its earlier order and requiring instead the reinstatement of the employees in the payroll.

The Court of Appeals dismissed the Union’s petition and affirmed the Secretary of Labor’s Order for payroll reinstatement. It held that the challenged order is merely an error of judgment and not a grave abuse of discretion and that payroll reinstatement is not prohibited by law, but may be “called for” under certain circumstances. The CA cited University of Santo Tomas vs. NLRC as basis for its ruling.


The Supreme Court reversed the decision of the CA, and ruled that the Secretary of Labor committed grave abused of discretion in ordering payroll reinstatement in lieu of actual reinstatement. The Court noted the difference between UST case and the instant case. In UST case the teachers could not be given back their academic assignments since the order of the Secretary for them to return to work was given in the middle of the first semester of the academic year. The NLRC was, therefore, faced with a situation where the striking teachers were entitled to a return to work order, but the university could not immediately reinstate them since it would be impracticable and detrimental to the students to change teachers at that point in time.

In the present case, there is no similar compelling reason that called for payroll reinstatement as an alternative remedy. A strained relationship between the striking employees and management is no reason for payroll reinstatement in lieu of actual reinstatement.

Under Article 263(g), all workers must immediately return to work and all employers must readmit all of them under the same terms and conditions prevailing before the strike or lockout. The Court pointed out that the law uses the precise phrase of “under the same terms and conditions,” revealing that it contemplates only actual reinstatement. This is in keeping with the rationale that any work stoppage or slowdown in that particular industry can be inimical to the national economy.

The Court reiterates that Article 263(g) was not written to protect labor from the excesses of management, nor was it written to ease management from expenses, which it normally incurs during a work stoppage or slowdown. This law was written as a means to be used by the State to protect itself from an emergency or crisis. It is not for labor, nor is it for management.

Related Case

  1. University of Santo Tomas (UST) vs. NLRC, G.R. No. 89920, October 18, 1990.

Last Edited: Sunday, March 20, 2011

Caveat: Subsequent court and administrative rulings, or changes to, or repeal of, laws, rules and regulations may have rendered the whole or part of this article inaccurate or obsolete.

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