Metropolitan Bank and Trust Company vs. National Labor Relations Commission, et al.

A benefit that an employer has regularly, knowingly, and voluntarily granted to employees over a significant period of time, despite the lack of a legal or contractual obligation to do so, ripens into a vested right of the employees and can no longer be unilaterally reduced or withdrawn by the employer. The Court applied this principle to hold that Metrobank's practice of granting improved retirement benefits to its officers, effective January 1 of the year and without any condition on employment date, constituted a company practice that could not be diminished by the new condition imposed in the 1998 Officers' Benefits Memorandum.

Respondents Felipe Patag and Bienvenido Flora were former officers of petitioner Metropolitan Bank and Trust Company (Metrobank), a commercial bank. Both availed of the bank's compulsory retirement plan under the 1995 Officers' Benefits Memorandum. Since the 1986-1988 Collective Bargaining Agreement (CBA), and continuing with each CBA concluded thereafter with its rank and file employees, Metrobank would issue a Memorandum granting similar or better benefits to its managerial employees or officers, retroactive to January 1st of the first year of effectivity of the CBA. This practice formed the backdrop against which respondents claimed entitlement to improved retirement benefits under the 1998 Officers' Benefits Memorandum.

Respondents Felipe Patag and Bienvenido Flora were former employees of petitioner Metropolitan Bank and Trust Company (Metrobank). Both availed of the bank's compulsory retirement plan in accordance with the 1995 Officers' Benefits Memorandum. At the time of his retirement on February 1, 1998, Patag was an Assistant Manager with a monthly salary of ₱32,100.00. Flora was a Senior Manager with a monthly salary of ₱48,500.00 when he retired on April 1, 1998. Both received their respective retirement benefits computed at 185% of their gross monthly salary for every year of service as provided under the 1995 Memorandum. Patag was fully paid the total amount of ₱1,957,782.71 while Flora was paid the total amount of ₱3,042,934.29 in retirement benefits.

Early in 1998, Collective Bargaining Agreement (CBA) negotiations were ongoing between Metrobank and its rank and file employees for the period 1998-2000. Patag wrote a letter dated February 2, 1998, requesting that his retirement benefits be computed at the new rate should there be an increase thereof in anticipation of possible changes in officers' benefits after the signing of the new CBA. Flora likewise wrote Metrobank on March 25, 1998, requesting the bank to use as basis in the computation of their retirement benefits the increased rate of 200% as embodied in the just concluded CBA between the bank and its rank and file employees. Metrobank did not reply to their requests.

The records show that since the 1986-1988 CBA, and continuing with each CBA concluded thereafter with its rank and file employees, Metrobank would issue a Memorandum granting similar or better benefits to its managerial employees or officers, retroactive to January 1st of the first year of effectivity of the CBA. When the 1998-2000 CBA was approved, Metrobank, in line with its past practice, issued on June 10, 1998, a Memorandum on Officers' Benefits, which provided for improved benefits to its officers (the 1998 Officers' Benefits Memorandum), signed by then Metrobank President Antonio S. Abacan, Jr. The compulsory retirement benefit for officers was increased from 185% to 200% effective January 1, 1998, but with the condition that the benefits shall only be extended to those who remain in service as of June 15, 1998.

On June 29, 1998, Flora again wrote a letter asking Metrobank for a reconsideration of its condition that the new officers' benefits shall apply only to those officers still employed as of June 15, 1998. Metrobank denied this request on July 17, 1998. Consequently, on August 31, 1998, Patag and Flora, through their counsel, wrote a letter to Metrobank demanding the payment of their unpaid retirement benefits amounting to ₱284,150.00 and ₱448,050.00, respectively, representing the increased benefits they should have received under the 1998 Officers' Benefits Memorandum. In its letter-reply dated September 17, 1998, Metrobank's First Vice-President Paul Lim, Jr. informed Patag and Flora of their ineligibility to the improved officers' benefits as they had already ceased their employment and were no longer officers of the bank as of June 15, 1998.

The NLRC found, as affirmed by the CA, that there was a company practice of paying improved benefits to the bank's officers effective every January 1 of the same year the improved benefits are granted to rank and file employees in a CBA. Respondents were able to prove that for the period 1986-1997, Metrobank issued at least four separate memoranda, coinciding with the approval of four different CBAs with the rank and file, wherein bank officers were granted benefits, including retirement benefits, that were commensurate or superior to those provided for in Metrobank's CBA with its rank and file employees. The record further revealed that these improved officers' benefits were always made to retroact effective every January 1 of the year of issuance of said memoranda and without any condition regarding the term or date of employment. The condition that the managerial employee or bank officer must still be employed by petitioner as of a certain date was imposed for the first time in the 1998 Officers' Benefits Memorandum.

• Entitlement to Benefits: Petitioner contended that respondents Patag and Flora, having qualified for compulsory retirement under the 1995 Officers' Benefits Memorandum, cannot now claim to be eligible to higher retirement benefits under the 1998 Improved Benefits Memorandum, since they had unqualifiedly received the full payment of their retirement benefits.

• Condition of Eligibility: Petitioner argued that the 1998 Improved Benefits Memorandum was issued after Patag and Flora compulsorily retired on February 1, 1998 and April 1, 1998, respectively, and there was an express condition in the 1998 Officers' Benefits Memorandum that the improved benefits shall apply only to officers who remain in service as of June 15, 1998.

• Company Practice: Petitioner claimed that although its officers were extended the same as or higher benefits than those contained in its CBA with its rank and file employees from 1986 to 1997, the same cannot be concluded to have ripened into a company practice since the provisions of the retirement plan itself and the law on retirement should be controlling.

• Estoppel: Petitioner argued that respondents should be deemed estopped from claiming additional benefits in view of their unqualified receipt of their retirement benefits and other benefits.

• Discrimination: Petitioner contended that the CA's ruling would result in unfair discrimination since there were at least twelve other retirees in 1998 similarly situated as respondents whose retirement benefits were computed at the old rate but who did not file cases against Metrobank.

• Company Practice: Respondents asserted that from 1986 to 1995, it has been the practice of Metrobank that whenever it enters and signs a new CBA with its rank and file employees, it likewise issues a memorandum extending benefits to its officers which are higher or at least the same as those provided in the said CBA for the rank and file employees effective every 1st of January of the year, without any condition that the officers-beneficiaries should remain employees of the petitioner as of a certain date of a given year.

• Vested Right: Respondents maintained that under the circumstances, the practice may be deemed to have ripened into company practice or policy which cannot be peremptorily withdrawn.

• Entitlement to Improved Benefits: Whether respondents can still recover higher benefits under the 1998 Officers' Benefits Memorandum despite the fact that they have compulsorily retired prior to the issuance of said memorandum and did not meet the condition therein requiring them to be employed as of June 15, 1998.

• Estoppel: Whether respondents are barred by estoppel from instituting the action after having unqualifiedly acknowledged and received the full payment of their retirement benefits.

• Entitlement to Improved Benefits: Yes. Respondents were entitled to the improved retirement benefits under the 1998 Officers' Benefits Memorandum. The Court found that Metrobank's practice of granting improved benefits to its officers, retroactive to January 1 of the year and without any condition on employment date, from 1986 to 1997, constituted a voluntary employer practice which cannot be unilaterally withdrawn or diminished without violating Article 100 of the Labor Code.

• Estoppel: No. There was nothing in the receipts/vouchers signed by respondents to indicate that they acknowledged full receipt of all amounts due them or that they are waiving their right to claim any deficiency in their benefits. Respondents' consistent acts of demanding the improved benefits before and after their actual receipt of their partial benefits belie any intention to waive their legal right to demand the deficiency in their benefits.

• Entitlement to Improved Benefits: The Court held that to be considered a company practice, the giving of the benefits should have been done over a long period of time, and must be shown to have been consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof. The Court found that the NLRC's and CA's factual conclusions were fully supported by substantial evidence on record. Respondents were able to prove that for the period 1986-1997, Metrobank issued at least four separate memoranda, coinciding with the approval of four different CBAs with the rank and file, wherein bank officers were granted benefits, including retirement benefits, that were commensurate or superior to those provided for in Metrobank's CBA with its rank and file employees. The record further revealed that these improved officers' benefits were always made to retroact effective every January 1 of the year of issuance of said memoranda and without any condition regarding the term or date of employment. The condition that the managerial employee or bank officer must still be employed by petitioner as of a certain date was imposed for the first time in the 1998 Officers' Benefits Memorandum. The Court noted that for over a decade, Metrobank has consistently, deliberately and voluntarily granted improved benefits to its officers, after the signing of each CBA with its rank and file employees, retroactive to January 1st of the same year as the grant of improved benefits and without the condition that the officers should remain employees as of a certain date. This undeniably indicates a unilateral and voluntary act on Metrobank's part, to give said benefits to its officers, knowing that such act was not required by law or the company retirement plan. The Court also noted that Metrobank failed to present evidence of past retirees over the period 1986 to 1997 who retired prior to the issuance of the relevant officers' benefits memorandum but after the usual January 1st memorandum effectivity date and whose retirement benefits were computed at the old rate and not at the improved rate. The Court further observed that the imposition of the condition shortly after respondents made their requests was "suspicious, to say the least." The Court applied the time-honored rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence or in the interpretation of agreements and writings should be resolved in the former's favor.

• Estoppel: The Court found that there was nothing in the receipts/vouchers signed by respondents to indicate that they acknowledged full receipt of all amounts due them or that they are waiving their right to claim any deficiency in their benefits. The Court noted that even written, express quitclaims, releases and waivers in labor cases may be invalidated under certain circumstances. As a rule, quitclaims, waivers or releases are looked upon with disfavor and are commonly frowned upon as contrary to public policy and ineffective to bar claims for the measure of a worker's legal rights. The Court found that respondents' consistent acts of demanding the improved benefits before and after their actual receipt of their partial benefits belie any intention to waive their legal right to demand the deficiency in their benefits.

• Company Practice Doctrine — To be considered a company practice, the giving of the benefits should have been done over a long period of time, and must be shown to have been consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof. The Court applied this doctrine to find that Metrobank's practice of granting improved benefits to its officers from 1986 to 1997, retroactive to January 1 of the year and without any condition on employment date, ripened into a company practice that cannot be unilaterally withdrawn.

• Vested Rights Doctrine — Where there is an established employer practice of regularly, knowingly and voluntarily granting benefits to employees over a significant period of time, despite the lack of a legal or contractual obligation on the part of the employer to do so, the grant of such benefits ripens into a vested right of the employees and can no longer be unilaterally reduced or withdrawn by the employer. The Court applied this doctrine to hold that the condition in the 1998 Officers' Benefits Memorandum requiring officers to remain in service as of June 15, 1998 effectively reduced benefits of employees who retired prior to the issuance of the memorandum, despite the fact that in the past no such condition was imposed.

• Prohibition Against Diminution of Benefits — Under Article 100 of the Labor Code, nothing in the Code shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of the Code. The Court held that the condition imposed in the 1998 Officers' Benefits Memorandum violated the spirit and intent of this provision.

• "To be considered a company practice, the giving of the benefits should have been done over a long period of time, and must be shown to have been consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof." — This passage defines the standard for establishing a company practice, which was the central issue in the case.

• "In other words, for over a decade, Metrobank has consistently, deliberately and voluntarily granted improved benefits to its officers, after the signing of each CBA with its rank and file employees, retroactive to January 1st of the same year as the grant of improved benefits and without the condition that the officers should remain employees as of a certain date. This undeniably indicates a unilateral and voluntary act on Metrobank's part, to give said benefits to its officers, knowing that such act was not required by law or the company retirement plan." — This passage establishes the factual basis for the Court's finding of a company practice in this case.

• "However, it is the jurisprudential rule that where there is an established employer practice of regularly, knowingly and voluntarily granting benefits to employees over a significant period of time, despite the lack of a legal or contractual obligation on the part of the employer to do so, the grant of such benefits ripens into a vested right of the employees and can no longer be unilaterally reduced or withdrawn by the employer." — This passage articulates the vested rights doctrine that formed the basis of the Court's ruling.

• "It is a time-honored rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence or in the interpretation of agreements and writings should be resolved in the former's favor. The policy is to extend the applicability to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor." — This passage states the principle of resolving doubts in favor of labor, which the Court applied to affirm the findings of the CA.

• Davao Fruits Corporation vs. Associated Labor Unions, G.R. No. 85073, August 24, 1993, 225 SCRA 562 — Cited as a case where a company practice of including in the computation of the 13th-month pay the maternity leave pay and cash equivalent of unused vacation and sick leave lasted for six years and was held to have ripened into company practice.

• Tiangco vs. Leogardo, Jr., No. L-57636, May 16, 1983, 122 SCRA 267 — Cited as a case where the employer carried on the practice of giving a fixed monthly emergency allowance from November 1976 to February 1980, or three years and four months, and was held to have ripened into company practice.

• Sevilla Trading vs. Semana, G.R. No. 152456, April 28, 2004, 428 SCRA 239 — Cited as a case where the employer kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the computation of their 13th-month pay for at least two years, and was held to have ripened into company practice.

• National Sugar Refineries Corporation vs. NLRC, G.R. No. 101761, March 24, 1993, 220 SCRA 453 — Cited for the definition of company practice and the test for determining whether a benefit has ripened into a company practice.

• Tres Reyes vs. Maxim's Tea House, G.R. No. 140853, February 27, 2003, 398 SCRA 288 — Cited for the rule that factual findings of quasi-judicial bodies like the NLRC, particularly when they coincide with those of the Labor Arbiter and if supported by substantial evidence, are accorded respect and even finality by the Court.

• Oceanic Pharmacal Employees Union vs. Inciong, No. L-50568, November 7, 1979, 94 SCRA 270 — Cited as an example of the jurisprudential rule that established employer practice ripens into a vested right of employees.

• Davao Integrated Port Services, Inc. vs. Abarquez, G.R. No. 102132, March 19, 1993, 220 SCRA 197 — Cited as an example of the jurisprudential rule that established employer practice ripens into a vested right of employees.

• Republic Planters Bank vs. NLRC, G.R. No. 117460, January 6, 1997, 266 SCRA 142 — Cited as an example of the jurisprudential rule that established employer practice ripens into a vested right of employees.

• Manila Electric Company vs. Quisumbing, G.R. No. 127598, January 27, 1999, 302 SCRA 173 — Cited as an example of the jurisprudential rule that established employer practice ripens into a vested right of employees.

• Phil. Employ Services and Resources, Inc. vs. Paramio, G.R. No. 144786, April 15, 2004, 427 SCRA 732 — Cited for the rule that quitclaims, waivers or releases are looked upon with disfavor and are commonly frowned upon as contrary to public policy and ineffective to bar claims for the measure of a worker's legal rights.

• Travelaire & Tours Corp. vs. NLRC, G.R. No. 131523, August 20, 1998, 294 SCRA 505 — Cited for the time-honored rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence or in the interpretation of agreements and writings should be resolved in the former's favor.

• Article 100, Labor Code — Prohibition against elimination or diminution of benefits. The Court held that the condition imposed in the 1998 Officers' Benefits Memorandum requiring officers to remain in service as of June 15, 1998 effectively reduced benefits of employees who retired prior to the issuance of the memorandum, violating the spirit and intent of this provision.

• Article 287, Labor Code — Retirement provision. The Court addressed petitioner's argument that it had no obligation under this provision to grant improved benefits to employees who are no longer in the service at the time of the grant, noting that petitioner was "deliberately missing the point" because the company practice doctrine, not statutory obligation, was the basis of respondents' entitlement.

• Section 13, Article VIII, Constitution — Certification provision. Cited in the certification of the Chief Justice that the conclusions in the decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

• Puno, C.J. (Chairperson)
• Carpio, J.
• Corona, J.
• Bersamin, J.