Case Summary (G.R. No. 152154)
Petitioner and Respondent Positions
• Petitioner’s Position – Payments of 13th month pay, bonus, vacation leave and sick leave conversion are to be prorated if an employee’s service within the year is less than twelve months, as dictated by the collective bargaining agreement (CBA).
• Respondent’s Position – Past instances of full payment to short-service employees established a binding company practice; any unilateral pro-ration diminishes employee benefits in violation of Article 100, Labor Code.
Key Dates
• December 2003 – Petitioner prorated benefits for three employees with prolonged absences.
• June 18, 2004 – Decision of voluntary arbitrator Mangabat in NCMB-NCR Case No. PM-12-345-03.
• September 29, 2005 – Court of Appeals Decision in CA-G.R. SP No. 85089.
• December 9, 2005 – Court of Appeals Resolution denying reconsideration.
• May 14, 2008 – Supreme Court Decision under review (1987 Constitution applies).
Applicable Law
• 1987 Philippine Constitution, Article II, Section 18; Article XIII, Section 3 – Mandates protection and full promotion of workers’ rights.
• Labor Code Article 100 – Prohibits diminution of benefits during the term of a CBA.
• Civil Code Article 1308 – Principle of mutuality of contracts.
• Jurisprudence enforcing non‐diminution and binding nature of voluntary company practices (e.g., Davao Fruits Corp. v. ALU; Sevilla Trading Co. v. Semana).
Background Facts
• Petitioner manufactures metal products; respondent is its labor union.
• During 2003, three employees (absent due to sickness or suspension) were paid prorated benefits.
• Respondent protested, citing prior full payments to seven employees in 1992–2003.
• Parties agreed to voluntary arbitration.
Voluntary Arbitration Ruling
• Arbitrator Mangabat held that full payment of benefits had not ripened into company practice.
• He accepted petitioner’s affidavit claiming past full payments were “mere error.”
• He interpreted CBA language “for each year of service” to mean one full year is required for entitlement.
Court of Appeals Decision
• Found no intent under the CBA to prohibit prorated payment.
• Determined full-benefit payments in seven past instances constituted a voluntary practice.
• Questioned why petitioner waited eleven years to correct the “error.”
• Held that the non-diminution rule barred unilateral pro-ration once a practice ripened.
• Ordered full benefits for all employees irrespective of actual service within any year.
Issues on Appeal
- Whether the CBA entitles employees to full monetization of benefits regardless of service rendered.
- Whether past instances of full payment ripened into a binding company practice under Article 100.
Analysis on CBA Interpretation
• Vacation and Sick Leave (Articles XIV and XV) clearly require “at least one (1) year of service” for full entitlement; prorated payment is mandated upon resignation or separation.
• 13th Month Pay and Bonus (Article XVIII) mirror statutory computation: 1/12 of basic compensation per full calendar year; bonus likewise corresponds to service fraction.
• Conclusion: CBA does not obligate full benefits to employees with less than one year’s service.
Analysis on Company Practice and Non-Diminution Principle
• Non-diminution of benefits
Case Syllabus (G.R. No. 152154)
Facts of the Case
- Petitioner Arco Metal Products, Co., Inc. is engaged in the manufacture of metal products; respondent SAMARM-NAFLU is the labor union of its rank-and-file employees.
- In December 2003, petitioner paid 13th month pay, bonus, and cash conversion of unused leaves pro rata to three employees who had not served a full twelve-month period:
• Rante Lamadrid (sickness, 27 August 2003 to 27 February 2004)
• Alberto Gamban (suspension, 10 June 2003 to 1 July 2003)
• Rodelio Collantes (sickness, August 2003 to February 2004) - Respondent protested, invoking Article 100 of the Labor Code’s prohibition on diminution of benefits, and filed a complaint before the National Conciliation and Mediation Board.
Procedural History
- Parties submitted their dispute to voluntary arbitration before Apron M. Mangabat, Accredited Voluntary Arbitrator.
- Arbitrator Mangabat ruled in favor of petitioner, finding that full payment of benefits in prior instances was an error and that CBA provisions required one year of service to earn full benefits.
- Respondent filed a Petition for Review under Rule 43 before the Court of Appeals, challenging the arbitrator’s factual conclusion on employer practice.
- The Court of Appeals, in CA-G.R. SP No. 85089, granted the petition by affirming and modifying the arbitrator’s decision, ordering full payment of 13th month pay, bonus, vacation leave, and sick leave cash conversion irrespective of service rendered.
- Petitioner’s motion for reconsideration was denied, prompting the present petition to the Supreme Court under Rule 45.
Issue on Interpretation of CBA Provisions
- Whether the relevant Collective Bargaining Agreement provisions entitle an employee to full vacation leave, sick leave, 13th month