Title
Bank of the Philippine Islands vs. BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank
Case
G.R. No. 164301
Decision Date
Aug 10, 2010
BPI-FEBTC merger led to dispute over Union Shop Clause applicability; SC ruled absorbed FEBTC employees as "new employees," requiring Union membership under CBA to ensure fairness and industrial peace.

Case Summary (G.R. No. 164301)

Applicable Law and Legal Framework

Primary statutory and constitutional authorities relied on in the decision include: the Labor Code provisions on union security (notably Article 248(e)), provisions of the Corporation Code governing mergers (notably Section 80), and constitutional provisions recognizing and promoting unionism and protection of labor (the 1987 Constitution, Article XIII, Section 3, and Article III, Section 8). Relevant Labor Code provisions on termination, redundancy and retirement (Articles 279, 282, 283, 287) and procedural and representational provisions (Articles 234, 256) are also engaged by the reasoning.

Relevant Contract Provisions (CBA)

Article I (recognition and bargaining unit); Article II, Section 1 (Maintenance of Membership): requires employees who are Union members at the CBA’s effective date, and employees who join during the CBA’s life, to maintain membership as a condition of continued employment. Article II, Section 2 (Union Shop): provides that “new employees falling within the bargaining unit … who may hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union as a condition of their continued employment.”

Procedural History

The Union requested enforcement of the union‑shop clause against FEBTC employees absorbed by BPI. A voluntary arbitrator ruled for BPI/absorbed employees, concluding absorbed employees were not “new employees” and could not be compelled to join the Union. The Union appealed to the Court of Appeals, which reversed and ordered enforcement. BPI sought review; the Court of Appeals decision was the subject of the petition now summarized.

Core Legal Issue

Whether employees of FEBTC who were absorbed into BPI as a result of the merger should be regarded as “new employees” for purposes of enforcing BPI’s existing CBA union‑shop clause, thereby obliging them to join the Union within the time prescribed by the CBA.

Facts Material to Disposition

  • The merger plan between FEBTC and BPI was executed and approved by relevant authorities; assets and liabilities of FEBTC were transferred to BPI.
  • FEBTC employees were thereafter employed by BPI with recognition of prior status, tenure, salaries and benefits.
  • The absorbed FEBTC rank‑and‑file employees in Davao City were not members of any union at the time of the merger.
  • After some refused to join or withdrew membership, the Union sought BPI’s implementation of the union‑shop clause; grievance machinery and voluntary arbitration followed.

Voluntary Arbitrator’s Conclusion

The arbitrator treated absorbed FEBTC employees as not subject to the union‑shop clause, reasoning that they became employees of BPI by “operation of law” as part of FEBTC’s assets and liabilities and therefore were not “new employees” who were hired and later regularized by BPI.

Court of Appeals Holding

The Court of Appeals reversed: it concluded that, for purposes of the union‑shop clause, absorbed employees are to be treated as “new employees” because their employment with BPI commenced only upon the merger (i.e., they acquired a new employer and new conditions), and treating them otherwise would create an unfair disparity and encourage “free‑riding” that would undermine union membership and industrial peace.

Supreme Court’s Analysis — Overview

The Supreme Court affirms the Court of Appeals’ ruling. The Court grounds its decision principally on (1) interpretation and purpose of union security provisions under the Labor Code and jurisprudence promoting unionism; (2) the express terms of the CBA; and (3) the absence in the Corporation Code or the merger documents of any provision expressly excluding transferred employees from application of the surviving corporation’s CBA. The Court rejects the arbitrator’s treatment of human beings as mere “assets and liabilities” transferred in the merger and rejects the proposition that employment contracts are ipso jure excluded from the effects of the merger.

Supreme Court’s Reasoning on Merger and Employee Status

  • The Court emphasizes that the Corporation Code provisions on mergers (Section 80) do not address terms and conditions of employment or automatically exempt absorbed employees from a surviving corporation’s existing CBA. Section 80 effects (transfer of property, assumption of liabilities) do not, by themselves, determine whether absorbed employees are excluded from union security clauses.
  • The Court asserts that humans are not “assets or liabilities” in ordinary legal parlance and that employment relationships remain in personam; absent express assumption of labor contracts in the merger plan, the surviving corporation’s business management decisions (including whom it retains) are relevant. Nevertheless, and crucially, even where BPI recognized prior service and benefits, those recognitions do not ipso facto remove absorbed employees from the scope of the surviving corporation’s union‑shop clause.

Supreme Court’s Interpretation of “New Employees” under the CBA

  • The Court reads the term “new employees” in the union‑shop clause broadly and rejects petitioner’s narrow construction that it applies only to employees who began as probationary or non‑regular employees and were later regularized. The CBA does not define “new employees” to require prior probationary status.
  • The Court reasons that “new employees” are those who enter the employer’s service during the life of the CBA (regardless of the means by which they became employees) and whose numbers affect the bargaining unit and union majority status. Absorbed FEBTC employees became BPI employees during the effective period of the CBA (post‑merger) and therefore fall within the clause’s intended ambit.

Policy and Practical Considerations Supporting Union Coverage

  • The Court stresses the constitutional and statutory policy of promoting unionism as an instrument of social justice and as protection for workers generally. A union‑shop clause serves to maintain union viability, prevent “free‑riding,” and preserve industrial peace.
  • The Court warns that a restrictive interpretation — exempting absorbed employees — would create perverse incentives for employers to dilute union membership through strategic mergers with non‑union firms and thereby undermine collective bargaining and union majority status.
  • The Court rejects the suggestion that agency fees alone would be an adequate remedy in this context because allowing an employer to exempt absorbed employees from the union‑shop clause would still permit erosion of the union’s membership base in ways that agency fees would not fully prevent.

Exceptions to Union‑Shop Coverage and Their (In)applicability Here

The Court reiterates established exceptions to union security coverage: bona fide religious objections, employees already members of another union at the CBA’s signing, confidential employees excluded from the bargaining unit, and employees expressly excluded by the CBA. None of these exceptions applied to the absorbed FEBTC employees on the record.

On the Nature of Employment Contracts and Employer Choice

  • The Court acknowledges that employment contracts are in personam and that, absent express assumption, labor contracts are not necessarily binding against a transferee. It also recognizes the employer’s prerogative to choose whom to retain post‑merger and employees’ reciprocal freedom to decline absorption (e.g., by resigning or retiring).
  • Despite these acknowledgements, the Cou

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