G.R. No. 164301 - Bank of the Philippine Islands vs. BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank

BPI and the Far East Bank and Trust Company (FEBTC) executed an Articles of Merger on January 20, 2000, which was approved by both the Bangko Sentral ng Pilipinas and the Securities and Exchange Commission, thereby effecting a full merger.

Under the approved merger plan, all of FEBTC’s assets and liabilities were transferred to and absorbed by BPI as the surviving corporation.

As a result of this merger, FEBTC employees were absorbed by BPI with their employment status, tenure, salaries, and benefits duly recognized and maintained.

Prior to the merger, an existing Collective Bargaining Agreement (CBA) between BPI and its certified labor union (BPI Employees Union-Davao Chapter – Federation of Unions in BPI Unibank) contained a union shop clause.

The union shop clause stipulated that “new employees falling within the bargaining unit” must join the union within 30 days after becoming regular employees as a condition for continuing employment.

After the merger, the union invited the former FEBTC employees to join the union, resulting in a split: some employees joined, others refused or later retracted their membership.

The union, asserting its exclusive bargaining rights, sought that BPI implement the union shop clause against the former FEBTC employees who did not join the union, even going as far as requesting their dismissal.

The issue was first resolved by a voluntary arbitrator, who ruled in favor of BPI’s interpretation that the absorbed employees were not “new employees” subject to the union shop clause.

Dissatisfied with the arbitrator’s decision, the union appealed, and the Court of Appeals reversed the ruling by holding that despite their continuity of service, the absorbed employees are considered “new” for the purpose of applying the union shop clause.

BPI subsequently elevated the case to the Supreme Court through a petition for review under Rule 45, arguing that the merger should exempt the absorbed employees from the mandatory union membership requirement.

Petitioner BPI contended that the merger of FEBTC with BPI automatically transferred employment without creating “new employment” relationships; thus, the union shop clause should not apply to the absorbed employees.

The union and Court of Appeals maintained that the language of the CBA did not distinguish between employees hired directly as new regulars and those absorbed by merger, arguing that for the purpose of industrial peace, both groups must be uniformly subject to the union shop provision.

Broader issues also arose concerning the balance between an individual’s right not to join a union and the collective need to preserve union strength as mandated by applicable labor laws and the spirit of the Labor Code.

Whether BPI, as the surviving corporation in a merger, may invoke the merger as a ground to exempt its absorbed (FEBTC) employees from the union shop clause mandated in its CBA.
Whether the absorbed FEBTC employees should be classified as “new employees” subject to the union shop requirement despite the continuity of their service records.
Whether employment contracts transferred via the merger inherently shield absorbed employees from obligations (such as compulsory union membership) that apply to employees hired de novo under the CBA.
The constitutional and policy implications of compelling union membership, including the tension between an employee’s right to free association and the collective objective of maintaining a strong, effective union.