Wise and Co., Inc. vs. Wise & Co., Inc. Employees Union-NATU

Discrimination per se is not unlawful, and no discrimination exists where the employees concerned are not similarly situated; accordingly, management may, as part of its prerogative, extend profit-sharing benefits to non-union employees outside the CBA-covered bargaining unit without violating the rights of union members under the CBA.

Petitioner Wise and Co., Inc. is the employer, while respondent Wise & Co., Inc. Employees Union-NATU is the labor union representing its employees. A collective bargaining agreement effective May 1, 1985 to April 30, 1988 defined the bargaining unit as all regular or permanent employees below the rank of assistant supervisor, while expressly excluding regular rank-and-file employees in the office of the president, vice-president, and other offices such as personnel, security, corporate affairs, and accounting and treasury. The dispute concerns the scope of profit-sharing benefits in relation to that CBA and the bargaining unit.

On April 3, 1987, petitioner Wise and Co., Inc. issued a memorandum circular introducing a profit-sharing scheme for its managers and supervisors, with initial distribution to take effect on March 31, 1988. The CBA then in force between petitioner and respondent Wise & Co., Inc. Employees Union-NATU was effective May 1, 1985 to April 30, 1988 and defined the bargaining unit as all regular or permanent employees below the rank of assistant supervisor; it expressly excluded regular rank-and-file employees in the office of the president, vice-president, and other offices such as personnel, security, corporate affairs, and accounting and treasury.

On July 3, 1987, respondent union, through its president, wrote petitioner asking for participation in the profit-sharing scheme. Petitioner denied the request on the ground that it had to adhere strictly to the CBA. Meanwhile, talks were underway for early negotiation of the CBA due to expire on April 30, 1988, and negotiation began earlier than the freedom period. On November 11, 1987, petitioner wrote respondent union advising that it was prepared to consider including employees covered by the CBA in the profit-sharing scheme beginning 1987, provided the ongoing negotiations were concluded prior to December 1987. The collective bargaining negotiations, however, reached a deadlock on the issue of the scope of the bargaining unit. Conciliation efforts on March 29, 1988 failed to settle the dispute.

On March 30, 1988, petitioner distributed the profit-sharing benefit not only to managers and supervisors but also to all other rank-and-file employees not covered by the CBA. This prompted respondent union to file a notice of strike alleging that petitioner was guilty of unfair labor practice because union members were discriminated against in the grant of the profit-sharing benefits. Management then refused to proceed with CBA negotiations unless the notice of strike was first resolved. The union agreed to postpone discussions on the profit-sharing demand until a new CBA was concluded. After a series of conciliation conferences, the parties agreed to settle the dispute through voluntary arbitration. After the parties submitted their position papers, a rejoinder, and a reply, the voluntary arbitrator issued an award on March 20, 1989 ordering petitioner to extend the benefits of the 1987 profit-sharing scheme to the members of respondent union.

The record showed that the non-union employees who received the profit-sharing benefit were outside the bargaining unit and did not derive benefits from the CBA. Petitioner denied the union’s accusation that the grant was intended to discourage non-union employees from joining the union, and noted that despite the benefit, some non-union workers actually joined respondent union thereafter.

• Discrimination: Petitioner argued that discrimination per se is not unlawful, especially when the employees are not similarly situated.
• CBA as Law Between Parties: Petitioner maintained that the terms and conditions stipulated in the CBA have the force and effect of law between the parties, so respondent union cannot demand, as a matter of right, what is not stipulated in the CBA.
• Implied Admission: Petitioner argued that the union’s act of negotiating for the inclusion of the profit-sharing benefit in the present CBA was an implied admission that the union members were not entitled to it in 1987.
• Grave Abuse and Baseless Motive: Petitioner alleged that the voluntary arbitrator committed grave abuse of discretion in concluding that petitioner was motivated by a desire to defeat or otherwise prejudice the basic rights of its employees, a conclusion petitioner called clearly baseless.

• Discrimination and Unfair Labor Practice: Respondent union contended that petitioner was guilty of unfair labor practice because union members were discriminated against in the grant of the profit-sharing benefits.
• Motive to Discourage Unionization: Respondent union contended that the grant to non-union employees was made at a time when there was a deadlock in CBA negotiations, apparently to discourage non-union employees from joining the union.
• Management Commitment: Respondent union decried that petitioner’s president agreed to include its members in the coverage of the 1987 profit-sharing benefit provided they would agree to an earlier negotiation for the renewal of the CBA that expired in 1988.

• Discrimination and Unfair Labor Practice: Whether the grant of profit-sharing benefits to non-union employees outside the CBA-covered bargaining unit, while not extending the same benefits to union members covered by the CBA, constitutes unlawful discrimination or unfair labor practice.
• Management Prerogative: Whether the grant of profit-sharing benefits to employees outside the bargaining unit falls within management prerogative and may be sustained absent bad faith.
• CBA as Law Between Parties: Whether respondent union may demand, as a matter of right, profit-sharing benefits not stipulated in the CBA.
• Grave Abuse of Discretion: Whether the voluntary arbitrator acted with grave abuse of discretion amounting to lack or excess of jurisdiction in ordering petitioner to extend the 1987 profit-sharing scheme to union members.
• Motive and Bad Faith: Whether petitioner was motivated by a desire to defeat or otherwise prejudice the basic rights of its employees in granting the profit-sharing benefits.

• Discrimination and Unfair Labor Practice: No. Discrimination per se is not unlawful, and there can be no discrimination where the employees concerned are not similarly situated; union members covered by the CBA and non-union employees outside the bargaining unit are distinct groups.
• Management Prerogative: Yes. Management may regulate all aspects of employment according to its discretion and judgment, including granting profit-sharing benefits to employees outside the bargaining unit, provided it acts in good faith and not to defeat or circumvent employee rights under special laws or valid agreement.
• CBA as Law Between Parties: Yes. The CBA constitutes the law between the employer and union members, and the union cannot demand as a matter of right benefits not stipulated in it.
• Grave Abuse of Discretion: Yes. The voluntary arbitrator acted with grave abuse of discretion in ordering the extension despite the lack of factual and legal basis; the award was reversed and set aside as null and void.
• Motive and Bad Faith: No. The record does not support the conclusion that petitioner was motivated by a desire to defeat or prejudice the basic rights of its employees; the grant appeared to have been made in good faith and without ulterior motive.

• Discrimination and Unfair Labor Practice: The CBA in force defined the bargaining unit as all regular or permanent employees below the rank of assistant supervisor and expressly excluded regular rank-and-file employees in the office of the president, vice-president, and other offices such as personnel, security, corporate affairs, and accounting and treasury. The profit-sharing privilege was extended to this excluded class of employees who did not derive benefits from the CBA. Because the union employees covered by the CBA and the non-union employees outside the bargaining unit were different and distinct, no discrimination was committed. Discrimination per se is not unlawful, and there can be no discrimination where the employees concerned are not similarly situated. The union could not claim grave abuse of discretion on the part of petitioner because the two groups were not similarly situated; the non-union employees were not covered by the CBA and did not derive or enjoy its benefits.

• Management Prerogative: The Court held that it is the prerogative of management to regulate, according to its discretion and judgment, all aspects of employment. This flows from the established rule that labor law does not authorize interference in the employer’s conduct of its business. Such management prerogative may be availed of without fear of liability so long as it is exercised in good faith for the advancement of the employer’s interest, not for the purpose of defeating or circumventing the rights of employees under special laws or valid agreement, and not in a malicious, harsh, oppressive, vindictive, or wanton manner or out of malice or spite. The grant of profit-sharing benefits to employees outside the bargaining unit fell under this managerial prerogative and appeared to have been done in good faith and without ulterior motive.

• CBA as Law Between Parties: The CBA contained a clause classifying employees into those who are members of the union and those who are not. Union members derive their benefits from the terms and conditions of the CBA, which constitute the law between the contracting parties. Both the employer and the union members are bound by that agreement. Thus, the union could not demand as a matter of right a profit-sharing benefit not stipulated in the CBA.

• Grave Abuse of Discretion: The voluntary arbitrator ordered petitioner to extend the 1987 profit-sharing scheme to union members despite the absence of factual and legal basis. Because the grant to non-union employees outside the bargaining unit was a valid exercise of management prerogative and did not constitute discrimination, the arbitrator’s award was null and void. The petition was granted and the award reversed and set aside.

• Motive and Bad Faith: The union’s contention that the grant to non-union employees was made during a deadlock in CBA negotiations and was apparently intended to discourage non-union employees from joining the union was not borne by the record. Petitioner denied the accusation and pointed out that despite the benefit extended to them, some non-union workers actually joined respondent union thereafter. Although petitioner’s president had agreed to consider including CBA-covered employees in the 1987 profit-sharing benefit provided the ongoing negotiations were concluded before December 1987, the negotiations actually reached a deadlock and were not resolved or consummated within the expected period; the union therefore could not claim that petitioner had a duty to extend the benefit to its members. The Court cautioned that it would not hesitate to strike down any act of the employer that tends to be discriminatory against union members, but under the peculiar circumstances of the case there was no such intention.

• Management Prerogative — Management has the prerogative to regulate, according to its discretion and judgment, all aspects of employment. This flows from the rule that labor law does not authorize interference in the employer’s conduct of its business. The prerogative may be exercised without liability if it is done in good faith for the advancement of the employer’s interest, not to defeat or circumvent employee rights under special laws or valid agreement, and not in a malicious, harsh, oppressive, vindictive, or wanton manner or out of malice or spite. The grant of profit-sharing benefits to employees outside the bargaining unit was sustained as a valid exercise of this prerogative.

• Discrimination and Similarly Situated Employees — Discrimination per se is not unlawful, and there can be no discrimination where the employees concerned are not similarly situated. The Court applied this doctrine by distinguishing union members covered by the CBA, who derive benefits from the CBA, from non-union employees outside the bargaining unit, who do not derive such benefits. Because the two groups were different and distinct, the grant of profit-sharing benefits to the latter did not constitute unlawful discrimination or unfair labor practice against the former.

• CBA as Law Between Contracting Parties — The terms and conditions of a CBA constitute the law between the contracting parties, binding both the employer and the union members. A union cannot demand as a matter of right a benefit not stipulated in the CBA. The Court applied this doctrine in holding that the union members’ entitlement to profit-sharing benefits had to be grounded on the CBA, and absent such stipulation, no enforceable right existed.

• Caveat Against Discriminatory Employer Acts — Although management prerogative is recognized, the Court will not hesitate to strike down any act of the employer that tends to be discriminatory against union members. The Court ruled otherwise only because the peculiar circumstances of the case showed no such discriminatory intention.

• "Indeed, discrimination per se is not unlawful. There can be no discrimination where the employees concerned are not similarly situated." — This is the Court’s canonical formulation of the discrimination principle, used to reject the union’s unfair labor practice claim because the union members and non-union employees were not similarly situated.
• "such management prerogative may be availed of without fear of any liability so long as it is exercised in good faith for the advancement of the employers' interest and not for the purpose of defeating or circumventing the rights of employees under special laws or valid agreement and are not exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite." — This passage states the requisites for the valid exercise of management prerogative, which the Court found satisfied in the grant of profit-sharing benefits to employees outside the bargaining unit.
• "In the case of the union members, they derive their benefits from the terms and conditions of the CBA contract which constitute the law between the contracting parties." — This excerpt articulates the CBA-as-law doctrine, which the Court used to hold that the union could not demand profit-sharing benefits not stipulated in the CBA.
• "However, the court serves notice that it will not hesitate to strike down any act of the employer that tends to be discriminatory against union members. It is only because of the peculiar circumstances of this case showing there is no such intention that this court ruled otherwise." — This caveat qualifies the ruling, emphasizing that management prerogative does not license discriminatory acts against union members.

• Caltex Phils. vs. Phil. Labor Organization, Caltex Chapter, 92 Phil. 1014, 1018 (1953). — Cited in support of the principle that discrimination per se is not unlawful and that there is no discrimination where the employees concerned are not similarly situated.
• NLU vs. Insular-Yebana Tobacco Corporation, 2 SCRA 924, 931 (1961); Republic Savings Bank vs. CIR, 21 SCRA 226, 235-236 (1967). — Cited to support the rule that labor law does not authorize interference in the employer’s conduct of its business, grounding the management prerogative recognized in the decision.
• PRC vs. Garcia, 18 SCRA 107, 110 (1966); and LVN vs. LVN Employees Association, 35 SCRA 147, 156 (1970). — Cited for the conditions on the exercise of management prerogative: good faith, advancement of the employer’s interest, no defeat or circumvention of employee rights under special laws or valid agreement, and no malicious, harsh, oppressive, vindictive, or wanton exercise out of malice or spite.
• Mactan Workers Union vs. Aboitiz, 45 SCRA 577, 581-582 (1977). — Cited for the doctrine that the terms and conditions of the CBA constitute the law between the contracting parties, binding the employer and union members.

• Article 1, Section 1, Collective Bargaining Agreement — Defines the bargaining unit as all regular or permanent employees below the rank of assistant supervisor; the Court relied on this to distinguish CBA-covered union members from non-union employees outside the bargaining unit.
• Collective Bargaining Agreement, exclusions from the appropriate bargaining unit — Expressly excludes regular rank-and-file employees in the office of the president, vice-president, and other offices such as personnel, security, corporate affairs, and accounting and treasury; the Court used this to show that the profit-sharing recipients were outside the CBA’s coverage.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.