University of the East vs. University of the East Employees' Association

A change in the distribution of the 70% incremental proceeds from tuition fee increases from equal sharing to percentage of salary is not a diminution of benefits where the prior equal-sharing method was not a deliberate and voluntary employer grant that ripened into company practice, the law leaves the manner of distribution to school authorities, and the new scheme was taken up in consultation with the employees.

University of the East is a private educational institution duly organized under Philippine laws, and University of the East Employees' Association is the duly registered labor union of its rank-and-file employees. Presidential Decree No. 451, as amended, and Republic Act No. 6728, otherwise known as the Government Assistance to Students and Teachers in Private Education Act, require that 70% of incremental proceeds from tuition fee increases go to payment of salaries, wages, allowances and other benefits of teaching and non-teaching personnel except administrators who are principal stockholders, while leaving the manner of distribution unspecified. Prior to school year 1983-1984, the parties had utilized a distribution proportionate to personnel numbers, memorialized in an October 18, 1983 tripartite Agreement among management, the faculty association and the rank-and-file union.

Prior to school year 1983-1984, University of the East distributed the 70% incremental proceeds from tuition fee increases mandated by Presidential Decree No. 451, as amended, in proportion to the average number of academic and non-academic personnel. On October 18, 1983, management, the UE Faculty Association and the University of the East Employees' Association signed an Agreement providing that for the 60% incremental proceeds from the approved increase effective school year 1982-1983 the formula used in previous years based on average personnel numbers would be followed, and that for school year 1983-1984 the UEEA proposal to determine academic personnel by full load equivalent would be adopted.

Starting school year 1994-1995, the University distributed the 70% incremental proceeds based on a new formula of percentage of salary rather than average personnel numbers. According to UEEA, this reduced the shares of rank-and-file employees while increasing those of management personnel. Through its president Ernesto C. Verceles, UEEA sent a letter dated December 22, 1994 to then UE President Dr. Rosalina S. Cajucom questioning the partial distribution of only five percent of basic wage implemented on December 13, 1994, invoking past tripartite meetings, the traditional ₱1.00 per faculty share to ₱100.00 monthly practice, unfair prejudice to low-salaried personnel, the October 18, 1983 Tripartite Agreement, and Article XX, Section 5 of the collective bargaining agreements on continuation of existing benefits. On February 23, 1995, UEEA sent another letter reiterating its objection and requesting a tripartite conference.

Thereafter, on June 19, 1995, a tripartite meeting was held among representatives of management, the faculty union and UEEA. The minutes, signed and attested to by the UEEA officers who attended, reflected agreement that distribution of the incremental proceeds would now be based on percentage of salary and not anymore on average personnel numbers, specifically 9.96% of salaries as of May 31, 1994 for school year 1994-1995. According to UE, the change followed inquiry with the Department of Education, Culture and Sports, whose Secretary stated that the law was silent on the manner of distribution and that discretion was vested in school authorities, subject only to the requirement that proceeds accrue to covered teaching and non-teaching personnel.

On April 27, 1999, UEEA filed its NLRC complaint for non-payment or underpayment. The Labor Arbiter found that equal sharing had been adopted as policy since 1983, formed part of the collective bargaining agreement and the October 18, 1983 tripartite agreement, had not been shown to be superseded, and could not be defeated by reliance on the DECS Secretary's letter where disposition had been agreed upon in a collective bargaining agreement. The NLRC initially affirmed that factual view in 2004 before reversing itself in 2005 to sustain the salary-percentage scheme.

• Second Motion for Reconsideration: Petitioner argued that while a second motion for reconsideration is generally prohibited, it may be allowed in meritorious cases, and Section 14 of the NLRC Rules cannot prevent the NLRC from relieving itself from patent error in order to render justice, with technical rules liberally construed to facilitate rather than frustrate justice.
• Holistic Review and NLRC Power: Petitioner maintained that resolution of the second motion issue should not be dogmatic but should take a complete and holistic view of the peculiar circumstances, including liberal interpretation of the rules and the inherent power of the NLRC to amend and reverse its findings as necessary to render justice.
• Prescription: Petitioner argued that the complaint, being a money claim arising from employer-employee relations, prescribed in three years, and since it was filed only on April 27, 1999, more than three years after the alleged 1994 violation, prescription had set in.
• Consensual and Non-Arbitrary Distribution: Petitioner maintained that the percentage-of-salary distribution was not arbitrary or unilateral because it was taken up and agreed upon in the June 19, 1995 tripartite meeting after consultation with DECS Secretary Armand Fabella, whose minutes were distributed and signed by participants, estopping UEEA after acceptance of benefits.
• Faculty Union Acquiescence: Petitioner argued that the UE Faculty Association, also a party to the October 18, 1983 Agreement, did not complain against the new distribution scheme.
• Statutory Discretion: Petitioner contended that law and jurisprudence leave to private educational institutions the discretion on disposition of the 70% incremental proceeds, on the sole condition that proceeds go to salaries, wages, allowances and other benefits of teachers and non-teaching personnel.

• Withholding and Unilateral Change: Respondent alleged that starting school year 1994-1995, UE withheld a sizeable portion of the rank-and-file share, abandoning the prior proportionate, equal, share-and-share-alike distribution and arbitrarily and unilaterally imposing percentage-based-on-salaries distribution that reduced rank-and-file shares while increasing management shares.
• Tripartite Agreement and CBA Protection: Respondent maintained that the equal-sharing practice was protected by the October 18, 1983 Tripartite Agreement specifying distribution in proportion to personnel numbers and full load equivalent, and by Article XX, Section 5 of the past and current collective bargaining agreements continuing implementation of all benefits hitherto enjoyed and subject of communications between the University and the Association.
• DECS Qualification: Respondent argued that the May 17, 1994 letter of Secretary Fabella, while stating discretion was vested in school authorities, qualified that distribution was excepted where it formed part of a collective bargaining agreement, and therefore could not justify departure from the agreed manner.

• Second Motion for Reconsideration: Whether UE's second motion for reconsideration before the NLRC is a prohibited pleading that did not interrupt the running of the reglementary period.
• Diminution of Benefits and Company Practice: Whether the change in the distribution scheme of the 70% incremental proceeds from equal sharing to percentage of salaries constitutes diminution of benefits that ripened into company practice.
• Prescription: Whether UEEA's right to question the distribution for school year 1994-1995 has already prescribed under the three-year period for money claims.

• Second Motion for Reconsideration: Yes, as a rule a second motion for reconsideration is generally a prohibited pleading, but suspension of procedural rules is authorized for extraordinarily persuasive reasons such as patent nullity to secure substantial justice.
• Diminution of Benefits and Company Practice: No. The equal-sharing distribution did not ripen into a vested company practice, the grant lacking deliberate voluntary character and the law leaving the manner of distribution to school discretion.
• Prescription: Yes. The money claim prescribed, having been filed on April 27, 1999, more than three years after the cause of action accrued when the salary-percentage distribution was discussed on June 19, 1995.

• Second Motion for Reconsideration: A second motion for reconsideration is generally prohibited under the cited NLRC rule and jurisprudence. However, procedural rules are mere tools to expedite resolution and must not frustrate substantial justice through strict, rigid application. Suspension is thus authorized in cases of extraordinarily persuasive reasons, such as a patently null decision, consistent with liberal construction to achieve just disposition.
• Diminution of Benefits and Company Practice: The prohibition against elimination or diminution applies only where the benefit is founded on express policy or has ripened into consistent, deliberate long practice, characterized by regularity and voluntary, deliberate intent over a significant period, with indubitable showing that the employer continued the grant knowing the employees were not legally entitled. Even continuous equal-sharing distribution could not vest because it lacked deliberate voluntary character, having resulted from erroneous application of law absent clear administrative guidelines. R.A. No. 6728 mandates only that 70% go to covered personnel's salaries, wages, allowances and other benefits; as to manner, discretion is vested in school authorities, which may use across-the-board increases, merit increases, or allowances, subject only to accrual to specific personnel and irrevocability for the same year. Nor was the change peremptory, UEEA's December 22, 1994 and February 23, 1995 letters having led to the June 19, 1995 tripartite meeting where its representatives did not object and signed the minutes signifying conformity. The October 18, 1983 Agreement pertained only to school year 1982-1983 and was deemed superseded by the June 19, 1995 agreement.
• Prescription: Money claims arising from employer-employee relations must be filed within three years from accrual of the cause of action. The cause of action accrued when the percentage-of-salary distribution was discussed in the June 19, 1995 tripartite meeting, yet UEEA filed only on April 27, 1999 without timely challenge, so prescription had set in.

• Second motion for reconsideration; extraordinarily persuasive reasons — As a rule, a second motion for reconsideration is a prohibited pleading that does not toll finality. Suspension of procedural rules may nevertheless be authorized for extraordinarily persuasive reasons, such as when the decision is a patent nullity. Applied here to justify giving due course to UE's second motion in order to correct substantive error and serve substantial justice.
• Liberal construction of procedural rules to serve substantial justice — Rules of procedure are designed to secure, not override, substantial justice; they are mere tools to expedite decision-making whose strict and rigid application must be avoided when it would produce technicalities frustrating rather than promoting justice. Applied here to permit reexamination of the NLRC ruling despite the general prohibition.
• Non-diminution of benefits; company practice requisites — Employees enjoy vested rights over existing benefits voluntarily granted that cannot be reduced or discontinued, but only if the grant is founded on express policy or has ripened into practice over a long period that is consistent and deliberate, presupposing clearly established favorable practice and payments ripened into enjoyed benefits, with regularity and voluntary deliberate intent over a significant period and knowledge that employees are not otherwise legally entitled. Applied here to reject the claim that equal sharing had become demandable, for lack of deliberate voluntary grant and long-practice character.
• Erroneous application of law negates voluntary company practice — A grant by an employer through erroneous application of law due to absence of clear administrative guidelines is not a voluntary act and may be unilaterally discontinued without violating non-diminution. Applied here, following Globe Mackay Cable and Radio Corporation vs. NLRC, to hold that no vested rights accrued from prior equal-sharing distribution of the 70% proceeds.
• Disposition of 70% incremental proceeds under R.A. No. 6728 — Seventy percent of tuition fee increases or subsidized amounts allotted for tuition must go to salaries, wages, allowances and other benefits of teaching and non-teaching personnel except administrator-principal stockholders, with at least twenty percent for facilities and operations; the manner of distribution among covered personnel is left to school authorities, which may grant across-the-board increases, merit increases, or allowances, limited only by accrual to specific personnel and non-revocation for the same year. Applied here to sustain the salary-percentage scheme agreed at the tripartite meeting.
• Prescription of money claims arising from employer-employee relations — Such claims must be filed within three years from accrual of the cause of action. Applied here to bar the April 27, 1999 complaint challenging the distribution discussed on June 19, 1995.

• "Time and again, the Court has upheld the theory that the rules of procedure are designed to secure and not to override substantial justice." — States the justification for suspending the prohibition on second motions for reconsideration in meritorious cases.
• "These are mere tools to expedite the decision or resolution of cases, hence, their strict and rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice must be avoided." — Defines the limits of procedural rigidity and supports liberal construction favoring substantive review.
• "Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer, thus, said benefits cannot be reduced, diminished, discontinued or eliminated by the latter." — Articulates the starting premise of the non-diminution rule before applying its requisites to reject vesting here.
• "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." — Provides the canonical test for company practice, applied to find no deliberate voluntary grant of equal sharing.

• Globe Mackay Cable and Radio Corporation vs. NLRC, No. L-74156, June 29, 1988, 163 SCRA 71, 78 — Controlling authority for the rule that benefits granted through erroneous application of law without clear administrative guidelines are not voluntary and may be discontinued; directly applied to deny vesting of equal sharing.
• Jardin vs. National Labor Relations Commission, 383 Phil. 187, 195 (2000) — Cited for the general rule that a second motion for reconsideration is a prohibited pleading.
• Alcantara vs. Ponce, 514 Phil. 222 (2005); Tirazona vs. Philippine EDS Techno-Services, Inc., G.R. No. 169712, January 20, 2009, 576 SCRA 625, 628, citing Ortigas and Company Limited Partnership vs. Velasco, 324 Phil. 483, 489 (1996) — Cited as authority allowing second motions for reconsideration upon extraordinarily persuasive reasons.
• Ramos vs. NLRC, 358 Phil. 705 (1998) — Cited for allowing suspension where the decision is a patent nullity.
• Cando vs. Olazo, G.R. No. 160741, March 22, 2007, 518 SCRA 741; Peñosa vs. Dona, G.R. No. 154018, April 3, 2007, 520 SCRA 232 — Cited for liberal construction of procedural rules to promote substantial justice.
• Barroga vs. Data Center College of the Philippines, G.R. No. 174158, June 27, 2011; Boncodin vs. National Power Corporation Employees Consolidated Union, G.R. No. 162716, September 27, 2006, 503 SCRA 611, 628; Metropolitan Bank and Trust Co. vs. National Labor Relations Commission, G.R. No. 152928, June 18, 2009, 589 SCRA 376, 384-385 — Cited for the requisites of non-diminution and voluntary, deliberate, regular company practice.
• Arco Metal Products Co., Inc. vs. Samahan ng mga Manggagawa sa Arco Metal-NAFLU, G.R. No. 170734, May 14, 2008, 554 SCRA 110, 119 — Cited for the minimum-duration and consistency considerations in determining voluntary company practice.

• Article 100, Labor Code — Prohibition against elimination or diminution of supplements or other employee benefits being enjoyed at promulgation; applied as the source of the non-diminution principle, held inapplicable absent express policy or ripened deliberate practice.
• Article 291, Labor Code — Three-year prescriptive period for money claims arising from employer-employee relations from accrual of the cause of action; applied to bar the 1999 complaint challenging the 1995 distribution.
• Section 5(2), R.A. No. 6728 — Requires 70% of subsidized tuition amounts or tuition fee increases to go to salaries, wages, allowances and other benefits of teaching and non-teaching personnel except administrator-stockholders, with 20% for facilities and separate records subject to inspection; applied to define the mandatory destination of proceeds while leaving distribution method to schools.
• P.D. No. 451, as amended — Original mandate for 70% incremental proceeds from tuition fee increases to benefit covered personnel; applied as the historical basis for the pre-1983 distribution and the October 18, 1983 Agreement.
• Section 13-14, Rule VII, NLRC New Rules of Procedure — Prescribed form for NLRC resolutions and prohibition on second motions for reconsideration; invoked by UE to attack the earlier NLRC resolutions and addressed in allowing suspension for extraordinarily persuasive reasons.

Velasco, Jr. (Chairperson), Peralta, Abad, and Sereno, JJ., concur. Sereno, J., designated as additional member of the Third Division per Special Order No. 1028 dated June 21, 2011.