Facts:

The case at hand is Arco Metal Products, Co., Inc. and Mrs. Salvador Uy versus Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU), as adjudicated by the Supreme Court of the Philippines under G.R. No. 170734, with a decision rendered on May 14, 2008. The petitioners, Arco Metal Products Co., Inc., a manufacturing company, and its president, Mrs. Salvador Uy, faced complaints from the respondent, a labor union representing the rank-and-file employees of the company, regarding the payment of 13th month pay, vacation leave, and sick leave conversions.

In December 2003, the petitioners paid these benefits to three union members on a prorated basis, only according to the actual service rendered within the year. The affected employees were Rante Lamadrid, who was sick from August 27, 2003, to February 27, 2004; Alberto Gamban, suspended from June 10 to July 1, 2003; and Rodelio Collantes, also sick during part of 2003. The union objected to this prorated scheme, arguing tha

...

Facts:

Parties Involved

• Petitioner: Arco Metal Products, Co., Inc. and Mrs. Salvador Uy, engaged in the manufacture of metal products.
• Respondent: Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU), representing petitioner's rank-and-file employees.

Nature of the Dispute

• The dispute centers on the method of computing benefits such as the 13th month pay, bonus, vacation leave, and sick leave conversion to cash.
• The petitioner paid these benefits in full to employees irrespective of whether they rendered a full 12 months of service.
• In select cases (notably involving three union members in December 2003), benefits were computed on a prorated basis based on the actual period of service, while in other instances the benefits were granted in full.

Chronology and Prior Decisions

• The voluntary arbitrator, Apron M. Mangabat, issued a ruling in favor of the petitioner, interpreting the Collective Bargaining Agreement (CBA) provisions to mean that an employee must render one full year of service to be entitled to full benefits and that errors in full payment did not reflect a company practice.
• Unsatisfied with the arbitrator’s findings, the respondent filed a Petition for Review under Rule 43 before the Court of Appeals.
• The Court of Appeals found that:
• The pertinent CBA provisions did not preclude the application of prorated conversions for leave benefits.
• There existed an existing voluntary practice of paying full benefits, as no contrary evidence was furnished by the petitioner.
• The full payment practice, even if involving only a few cases over several years (1992, 1993, 1994, 1999, 2002, and 2003), had equated to a de facto company practice.

Allegations and Contentions

• Respondent argued that paying full benefits regardless of actual service rendered violated the rule against diminution of benefits under Article 100 of the Labor Code.
• Petitioner maintained that the full benefits paid in isolated cases were at most an “error” and not an established practice, emphasizing that the benefits should only be given in full to employees who rendered one full year of service as explicitly provided in the CBA.

Supporting Evidence and Expert Testimony

• Evidence included the affidavit of Joselito Baingan, the manufacturing group head of the petitioner, stating that full payment was inadvertent.
• However, the petitioner’s failure to produce evidence of similar prorated payments for employees who did not render a full year weakened its position.

Final Disposition in Lower Courts

• The Court of Appeals modified the earlier voluntary arbitration decision by affirming, with modification, that the benefits shall indeed be paid in full once the practice has ripened, notwithstanding the actual length of service within one year.
• Petitioner’s subsequent attempt to secure reconsideration was denied, prompting the petition for review which ultimately failed.

Issue:

Interpretation of CBA Benefit Provisions

• Whether the provisions of the CBA clearly require employees to render one full year of service in order to be entitled to full benefits (i.e., 13th month pay, bonus, vacation leave, and sick leave conversion to cash).
• The correct interpretation of the phrase “for each year of service” as contained in the CBA.

Existence of Voluntary Employer Practice

• Whether the practice of granting full benefits to employees—despite less than a full year’s service—has ripened into an established and voluntary company practice.
• Whether isolated instances of full payment constitute an established practice even if they appear to be errors or oversights.

Application of the Non-Diminution Doctrine

• Whether the payment of full benefits irrespective of the actual period of service amounts to a violation of the rule against diminution of benefits under Article 100 of the Labor Code.
• How the principle of non-diminution of benefits, along with constitutional and labor law considerations, should govern the interpretation of the benefits provided under the CBA.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)