2018 Labor Law, Q16

Nagrab Union and Nagrab Corporation have an existing CSA which contains the following provision: “New employees within the coverage of the bargaining unit who may be regularly employed shall become members of Nagrab Union. Membership in good standing with the Nagrab Union is a requirement for continued employment with Nagrab Corporation.” Nagrab Corporation subsequently acquired all the assets and rights of Nuber Corporation and absorbed all of the latter’s employees. Nagrab Union immediately demanded enforcement of the above-stated CSA provision with respect to the absorbed employees. Nagrab Corporation refused on the ground that this should not apply to the absorbed employees who were former employees of another corporation whose assets and rights it had acquired.
(a) Was Nagrab Corporation correct in refusing to enforce the CSA provision with respect to the absorbed employees? (2.5%)
(b) May a newly-regularized employee of Nagrab Corporation (who is not part of the absorbed employees) refuse to join Nagrab Union? How would you advise the human resources manager of Nagrab Corporation to proceed? (2.5%)

Quick check

Are union security clauses, such as union shop provisions, recognized as valid under Article 259(e) of the Labor Code?

Under Bank of the Philippine Islands v. BPI Employees Union, do union security clauses apply to absorbed employees?

What exception permits a newly-regularized employee to refuse to join a union under a union shop clause?

Under Alabang Country Club v. NLRC, what procedural requirement must an employer observe before terminating a worker under a union security clause?

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How should an HR manager handle a union's demand to dismiss an employee who refuses to join under a valid union shop clause?

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1. Union Security Clause
Under Article 259(e) of the Labor Code, a union security clause, such as a union shop provision in a Collective Bargaining Agreement, is a valid restriction on the right of self-organization. It requires non-union employees within the bargaining unit to join the recognized bargaining representative as a condition for continued employment. Such provisions aim to strengthen the bargaining position of the exclusive bargaining agent and prevent free-riding among employees who benefit from collective agreements without supporting the union.

2. Corporate Asset Acquisition
In Bank of the Philippine Islands v. BPI Employees Union - Davao Chapter, the Supreme Court ruled that when an acquiring corporation absorbs employees of another company following an asset acquisition or merger, those absorbed workers automatically become regular employees of the surviving entity. Consequently, absorbed employees who fall within the coverage of the existing bargaining unit become fully subject to the existing collective bargaining agreement, including its valid union security provisions.

3. Union Shop Enforcement
To legally terminate an employee based on a union security clause, the employer and union must comply with the three-requisite test established in Alabang Country Club, Inc. v. NLRC. First, the union security clause must be clear and applicable. Second, the bargaining union must make a formal request for termination. Third, the employer must observe procedural due process by affording the employee written notice and an opportunity to be heard before imposing dismissal.

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The questions reproduced here are the official texts of the Philippine Bar Examinations, published by the Supreme Court. They are reproduced for study purposes.The suggested answers are the author’s own.

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Where a question comes from an earlier examination, the suggested answer applies the law as it now stands, which may differ from the law in force when the question was given, and may therefore differ from what would have been the correct answer at that time. Where the difference is material, the answer notes it.The practice scoring feature measures wording overlap with the suggested answer. It is not a grade, carries no official weight, and says nothing about whether your reasoning is sound.Errors are possible. If you find one, please tell me and I will correct it.Last reviewed: October 2026