Philippine Bank of Communications vs. PBCOMEA

Once a company policy or benefit is incorporated into a collective bargaining agreement, the employer cannot unilaterally modify its terms without the participation of the bargaining agent; any unilateral modification violates the CBA and constitutes a diminution of benefits.

Philippine Bank of Communications, an entity engaged in the commercial banking business, maintained a multi-purpose loan program and a service award policy for its qualified employees. The Philippine Bank of Communications Employees Association (PBCOMEA) served as the sole and exclusive bargaining agent of the bank's rank-and-file employees. The parties' relationship was governed by a collective bargaining agreement that incorporated certain company policies, including the service award policy originally adopted on January 1, 1998. Successive changes in management in 2007 and 2014 led to modifications of these long-standing policies, generating the dispute that culminated in voluntary arbitration.

In the 1980s, Philippine Bank of Communications adopted a multi-purpose loan program granting qualified employees the ability to avail themselves of several loans simultaneously, subject to a debt service ratio not exceeding 35% of net pay. The program also allowed employees to pledge or utilize their mid-year and year-end bonuses for loan purposes, regardless of whether their monthly salary could still accommodate the amortizations within the allowable ratio. In 2003, the loan policy and its corresponding benefits were incorporated into the parties' collective bargaining agreement. In 2007, new management took over and crafted a new loan policy making the grant of loans through pledges or deductions from bonuses discretionary. The Philippine Bank of Communications Employees Association, the sole and exclusive bargaining agent of the bank's rank-and-file employees, opposed the new policy, prompting petitioner to suspend its implementation. In 2014, yet another group of investors took over and redefined the program, disallowing additional loans using bonuses as pledges when amortization could still be accommodated by take-home pay. Respondent again protested, but unlike the previous management, the new management unilaterally enforced the latest program.

Separately, petitioner had maintained a service award policy effective January 1, 1998, recognizing employees who completed at least ten years of service and every five years thereafter, with awarding ceremonies held on the bank's anniversary date, September 4 of each year. The policy covered regular officers and staff who completed the required years, and expressly provided that employees who retired under the mandatory retirement policy prior to the anniversary date would receive the award in a special ceremony on the date of retirement, while employees who resigned prior to the scheduled ceremony would receive the award together with their separation benefits. The original policy also stated that management, in the exercise of its sole and exclusive prerogative, may add, delete, amend, or reverse the policy. The service award policy was subsequently incorporated into the CBA, with Section 2, Article XII providing that management and the union shall review the existing service award policy to determine the respective allocations for the service award token and the cash bonus before March 31, 2013.

On September 18, 2015, under its new management, petitioner modified the service award policy to require that an employee must be "on board as of release date or September 4 of each year" to be entitled to the award. Consequently, at least three employees—John Conrad Clavio, Ronald Buenavista, and Marcus Brian Belo—were unable to receive the service award because they were no longer "on board" as of the release date. Respondent asked for the recall of both the loan and service award policies, but to no avail, and the matter was brought under voluntary arbitration. The OVA found that the subject policies were incorporated in the CBA and could not be changed without the consent of both contracting parties. The CA partly granted the petition on the loan policy issue but sustained the voiding of the "on board" requirement, ruling that petitioner unilaterally imposed a new condition in violation of the CBA and that the grant of service awards to retired and resigned employees had ripened into a vested right.

• CBA Compliance: Petitioner argued that it did not violate the CBA when it required an employee to be "on board" as of the release date of the service award, and that applying the clear provisions of the CBA, it was not precluded from amending the eligibility requirements.
• Non-Diminution of Benefits: Petitioner maintained that the amended service award policy does not violate the rule on non-diminution of benefits.
• Vested Rights: Petitioner insisted that resigned employees did not acquire any vested right to the service award because of the cessation of the employer-employee relationship between them and petitioner at the time of distribution.
• Management Prerogative: Petitioner argued that even assuming the January 1, 1998 Service Award Policy was incorporated in the existing CBA, its exclusive management prerogative to amend the terms of the service award should be recognized.

• CBA Violation: Respondent countered that the OVA properly removed the "on board" requirement, stressing that nothing in the January 1, 1998 Service Award Policy required a candidate to be "on board" as of the date of release.
• Incorporation in CBA: Respondent argued that the service award policy was incorporated in the CBA by necessary implication, placing it outside the purview of management prerogative.
• Limitation on Unilateral Change: Respondent maintained that while petitioner may have had the prerogative to unilaterally change the service award policy at the time of its introduction in 1998, once the service award became an item in the CBA, it could no longer be unilaterally changed without the participation of respondent.

• CBA Violation: Whether the Court of Appeals committed reversible error in ruling that petitioner violated the CBA when it required an employee to be on board as of the release date of the service award.
• Vested Rights: Whether retired or resigned employees acquired a vested right over the service award despite the fact that they are no longer connected with petitioner.

• CBA Violation: No. The CA correctly ruled that petitioner violated the CBA by unilaterally imposing the "on board" requirement, as the service award policy had been incorporated into the CBA and could not be modified without the union's participation.
• Vested Rights: Yes, by affirmation. The Court affirmed the CA's ruling that the grant of service awards to retired and resigned employees ripened into a vested right, the benefit having been given since 1998 and subsequently incorporated in the CBA.

• CBA Violation: The CBA is the law between the parties, and where its terms are clear and unambiguous, the literal meaning of its stipulations must prevail. The original Service Award Policy dated January 1, 1998 expressly reserved to management the sole and exclusive prerogative to add, delete, amend, or reverse the policy, and it covered incumbent, retired, and resigned employees alike. However, once the service award policy was incorporated into the CBA—specifically Section 2, Article XII, which required management and the union to jointly review the existing service award policy—the participation of both petitioner and respondent became necessary for any revision. The CBA's wording was clear and unequivocal: petitioner could revise the service award policy only with the knowledge and participation of respondent. By unilaterally requiring that only those "on board" at the time of awarding could receive the service award, without consulting respondent, petitioner violated the CBA. The right of petitioner to ascertain who among its employees are entitled to a service award was not totally eliminated but was limited by the express provision of the CBA. Furthermore, the unilateral modification amounted to a diminution of benefits because petitioner withdrew a benefit enjoyed by employees and founded on a company policy. The Court found no sufficient reason for petitioner not to comply with its obligations under the CBA.
• Vested Rights: The CA had ruled that the grant of service awards to retired and resigned employees ripened into a vested right, as it was a benefit given by petitioner to qualified employees who rendered the required years dating back to 1998 and subsequently incorporated in the CBA. The Supreme Court affirmed this ruling without separately reanalyzing the vested rights issue, as the petition was denied in its entirety and the CA's decision and resolution were affirmed. The Court's reasoning on the CBA violation and diminution of benefits subsumed the vested rights question: because the service award policy was incorporated into the CBA and could not be unilaterally modified, retired and resigned employees who had completed the required years of service retained their entitlement to the award.

• CBA as Law Between the Parties — A collective bargaining agreement is the law between the contracting parties, and compliance therewith is mandated by the express policy of law. Where the terms of the CBA are clear and leave no doubt as to the parties' intention, the literal meaning of its stipulations shall prevail. The Court applied this doctrine by finding Section 2, Article XII of the CBA clear and unequivocal in requiring joint review by management and the union of the service award policy, thereby precluding unilateral modification by the employer.
• Management Prerogative Limited by CBA Incorporation — While management retains the prerogative to establish and modify company policies, that prerogative is limited once the policy is incorporated into a CBA. The employer's right to determine eligibility for benefits is not totally eliminated but is circumscribed by the express provisions of the CBA, requiring the bargaining agent's participation for any modification. The Court held that petitioner's original 1998 reservation of sole management prerogative to amend the service award policy was superseded by the policy's incorporation into the CBA.
• Non-Diminution of Benefits — An employer cannot unilaterally withdraw a benefit enjoyed by employees and founded on company policy. The Court found that petitioner's unilateral imposition of the "on board" requirement withdrew the service award from retired and resigned employees who had completed the required years of service, amounting to a prohibited diminution of benefits.

• "It is axiomatic that the CBA comprises the law between the contracting parties, and compliance therewith is mandated by the express policy of the law." — This passage states the fundamental principle that the CBA is binding law between the parties, forming the doctrinal basis for the Court's ruling that petitioner could not unilaterally modify the service award policy.
• "The right of petitioner to ascertain who among its employees are entitled to a service award is not totally eliminated but it is limited by the express provision of the CBA." — This defines the boundary of management prerogative when a company policy is incorporated into a CBA, clarifying that the employer retains discretion but only within the limits set by the collective agreement.
• "At the same time, the act of petitioner of modifying the terms and conditions of the grant of service award amounted to a diminution of benefits. Such is the case because petitioner unilaterally withdrew a benefit enjoyed by the employees and founded on a company policy." — This articulates the non-diminution principle as applied to the facts, establishing that unilateral withdrawal of an incorporated benefit violates both the CBA and the prohibition against diminution.

• Coca-Cola Bottlers Philippines, Inc. vs. Iloilo Coca-Cola Plant Employees Labor Union, G.R. No. 195297, December 5, 2018 — Followed. Cited for the principle that the CBA is the law between the contracting parties, compliance is mandated by law, and where the CBA is clear and unambiguous, its literal meaning controls.
• Supreme Steel Corp. vs. Nagkakaisang Manggagawa ng Supreme Independent Union (NMS-IND-APL), 662 Phil. 66 (2011) — Followed. Cited for the principle that the CBA is the norm of conduct or law between the parties, and for the non-diminution of benefits doctrine.
• Goya, Inc. vs. Goya, Inc. Employees Union-FFW, 701 Phil. 645 (2013) — Followed. Cited for the principle that where the CBA is clear and unambiguous, it becomes the law between the parties and compliance is mandated by the express policy of the law.
• Benson Industries Employees Union-ALU-TUCP vs. Benson Industries, Inc., 740 Phil. 670 (2014) — Followed. Cited for the principle that parties are bound by the terms and conditions of the CBA, with the sole limitation that they are not contrary to law, morals, public order, or public policy.

• Section 2, Article XII, CBA — Required management and the union to review the existing service award policy to determine the respective allocations for the service award token and the cash bonus before March 31, 2013. The Court found this provision clear and unequivocal, requiring mutual participation for any modification of the service award policy, thereby precluding unilateral action by petitioner.
• Service Award Policy dated January 1, 1998 — Established the service award for employees completing at least ten years of service and every five years thereafter, with express coverage of retired and resigned employees who completed the required years. The policy originally reserved to management the sole and exclusive prerogative to add, delete, amend, or reverse the policy. The Court noted that while this reservation existed in the original policy, incorporation into the CBA changed the legal character of the policy, requiring the union's participation for future modifications.

Perlas-Bernabe, S.A.J. (Chairperson), Hernando, Gaerlan, and Dimaampao, JJ., concurred.