American Wire and Cable Daily Rated Employees Union vs. American Wire and Cable Co., Inc.

A bonus is not a demandable and enforceable obligation, except when it is made part of the wage, salary, or compensation of the employee, or when it has been promised by the employer and expressly agreed upon, or it has had a fixed amount and has been a long and regular practice.

American Wire and Cable Co., Inc. employs workers represented by two labor organizations: the Monthly-Rated Union and the Daily-Rated Union. The company historically granted its employees a service award, a 35% premium pay for work on specific days during the Holy Week and Christmas seasons, and a Christmas party with incidental benefits. Following a downturn in financial performance attributed to political turmoil and economic instability, the company discontinued these benefits. It also denied a promotional increase to fifteen members of the Daily-Rated Union who had been assigned new job classifications.

• The Unions and the Company: American Wire and Cable Co., Inc. is a manufacturing corporation with two labor organizations: the Monthly-Rated Union and the Daily-Rated Union.
• The Withdrawn Benefits: The company unilaterally withdrew or denied several benefits previously enjoyed by the employees: (a) the service award; (b) 35% premium pay based on basic pay for work rendered during Holy Monday, Holy Tuesday, Holy Wednesday, and December 23, 26, 27, 28, and 29; (c) the Christmas party and its incidental benefits; and (d) promotional increases for fifteen Daily-Rated Union members who were given new job classifications.
• Voluntary Arbitration Findings: The parties submitted the dispute to voluntary arbitration. Voluntary Arbitrator Angel A. Ancheta found that the company did not violate Article 100 of the Labor Code. The benefits were not subjects of any express agreement or incorporated into the Collective Bargaining Agreement (CBA). Evidence demonstrated a downtrend in the amounts given as service awards and a shift in Christmas party venues from paid locations to free ones to reduce costs. The 35% premium pay had been granted for only two years, with the company owner expressly reserving that it could not continue due to financial constraints. Finally, the fifteen employees were not promoted but merely subjected to a realignment of positions, precluding a promotional increase.

• Article 100 Violation: Petitioner argued that the withdrawal of benefits violated Article 100 of the Labor Code because the grants were a customary practice given since time immemorial. These benefits were not dependent on profits and could no longer be unilaterally withdrawn without the union's tacit consent.
• Unaudited Financial Statements: Petitioner maintained that the Court of Appeals erred in relying on the company's unaudited Revenues and Profitability Analysis, as audited financial statements constitute the normal and legal method of proof for a company's profit and loss performance.
• Nature of Service Award: Petitioner contended that the yearly service award is dependent on length of service rather than company profit, rendering its unilateral withdrawal unlawful.

• Benefits as Non-Demandable: Respondent countered that the benefits did not ripen into demandable rights because their grant was conditional upon the company's financial performance, which had substantially changed due to national political turmoil and economic instability.
• Sufficiency of Unaudited Statements: Respondent argued that while audited financial statements are the normal method of proof, they are not the exclusive legal method to ascertain profit and loss.
• No Actual Promotion: Respondent asseverated that the fifteen union members did not receive promotions warranting salary increases, but merely experienced a realignment of positions.

• Article 100 Violation: Whether private respondent is guilty of violating Article 100 of the Labor Code when it withdrew the benefits and entitlements given to the members of petitioner union.

• Article 100 Violation: No violation of Article 100 was established because the withdrawn benefits were bonuses, not demandable obligations. A bonus is a management prerogative given in addition to what is strictly due the employee, and it becomes enforceable only if made part of the wage or compensation, expressly agreed upon, or granted with a fixed amount as a long and regular practice. The subject benefits were never incorporated into the CBA or subject to any express agreement. The service award and Christmas party lacked fixed amounts and consistency, evidenced by a downtrend in service award amounts and a shift to free venues for the party. The 35% premium pay was granted for only two years with an express reservation, precluding its characterization as a long and regular practice. Because the benefits were not demandable, the validity of the company's unaudited financial statements need not be resolved. Furthermore, the claim for a promotional increase was properly denied, the Voluntary Arbitrator's factual finding that no actual promotion occurred—only a realignment of positions—being binding.

• Bonus as a Non-Demandable Obligation — A bonus is an act of generosity granted by an enlightened employer to spur greater efforts, which is a management prerogative and not a demandable and enforceable obligation, except when made part of the wage, salary, or compensation of the employee. The Court applied this to characterize the 35% premium pay, Christmas party benefits, and service awards as non-enforceable bonuses.
• Requisites for a Bonus to Ripen into a Demandable Right — For a bonus to be enforceable, it must have been (1) promised by the employer and expressly agreed upon by the parties, or (2) had a fixed amount, and (3) had been a long and regular practice on the part of the employer. The Court found none of these requisites present: the benefits were not in the CBA, had no fixed amounts, and were not granted consistently or for a sufficient duration to constitute a regular practice.

• "A bonus is not a demandable and enforceable obligation, except when it is made part of the wage, salary or compensation of the employee."
• "To hold that an employer should be forced to distribute bonuses which it granted out of kindness is to penalize him for his past generosity."

• Producers Bank of the Philippines v. NLRC, G.R. No. 100701, 28 March 2001 — Followed for the definition of a bonus as a management prerogative and an act of generosity that is not demandable unless part of compensation.
• Philippine Appliance Corp. v. Court of Appeals, G.R. No. 149434, 03 June 2004 — Followed for the rule that a bonus must have a fixed amount and be a long and regular practice to be enforceable.
• Saballa v. NLRC, G.R. Nos. 102472-84, 22 August 1996 and Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC, G.R. No. 97846, 25 September 1998 — Clarified; while these cases held that audited financial statements are the normal method of proof of profit and loss, they do not mandate that audited statements are the exclusive legal method.

• Article 100, Labor Code — Prohibition against elimination or diminution of benefits. Applied as the central issue; however, the Court held it inapplicable because the withdrawn benefits were mere bonuses that had not ripened into demandable rights.

Puno (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ.