Case Summary (G.R. No. 164301)
Petitioner and Respondent
Petitioner: Bank of the Philippine Islands (BPI)
Respondent: BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank
Key Dates
• January 20, 2000: Articles and Plan of Merger executed.
• March 23, 2000: Bangko Sentral ng Pilipinas approves merger.
• April 7, 2000: Securities and Exchange Commission approves merger.
• March 31, 2000: Union informs former FEBTC employees of union shop clause.
• November 23, 2001: Voluntary Arbitrator’s decision.
• September 30, 2003: Court of Appeals decision.
• August 10, 2010: Supreme Court decision.
Applicable Law
• 1987 Philippine Constitution – labor and social justice provisions:
– Article II, Sec. 18 (affirms labor as primary social economic force);
– Article XIII, Sec. 3 (full protection to labor; collective bargaining; union security clauses permitted).
• Labor Code (P.D. 442, as amended):
– Art. 248(e) (union shop and closed-shop agreements valid; exemption for employees already members of another union at CBA signing).
– Arts. 282–284 (just and authorized causes for termination; security of tenure).
• Corporation Code (B.P. Blg. 68):
– Sec. 76 (merger and consolidation procedures).
– Sec. 80 (effects of merger: surviving corporation succeeds to all rights, assets, liabilities, franchises of constituent corporations).
Antecedent Facts
By SEC-approved plan of merger, FEBTC’s entire assets and liabilities passed to BPI. All FEBTC employees were absorbed by BPI with continuity of status, tenure, salary and benefits. The former FEBTC rank-and-file employees in Davao were not union members at the time of merger. The Union is certified as exclusive bargaining agent of all regular rank-and-file employees in BPI’s Davao offices.
Collective Bargaining Agreement Provisions
ARTICLE I (Recognition)
– BANK recognizes UNION as sole and exclusive representative of all regular rank-and-file employees in Davao.
ARTICLE II (Union Security)
– Sec. 1 (Maintenance of Membership): Employees who are union members on CBA effectivity, and those who become members thereafter, must maintain membership as condition of continued employment.
– Sec. 2 (Union Shop): “New employees” in bargaining unit who become regular employees shall, within 30 days, join the Union as condition of continued employment.
Procedural History
- Union requests BPI to enforce union shop clause against absorbed FEBTC employees who declined membership and retracted it.
- Grievance machinery fails to resolve; matter submitted to voluntary arbitration.
- Voluntary Arbitrator (Rosalina Letrondo-Montejo) rules that absorbed employees are not covered by union shop clause, as they are not hired and regularized but absorbed by operation of law, and thus cannot be compelled to join the Union.
- Court of Appeals reverses, holding absorbed employees are “new” for CBA purposes, must join to maintain industrial peace and protect union security.
- Supreme Court grant of BPI’s petition for review under Rule 45.
Issue
Whether former FEBTC employees absorbed by BPI in the merger are “new employees” obligated under the union shop clause of the existing CBA to join the Union as condition of their continued employment.
Court’s Analysis and Rationale
- Merger Effects. Under Sec. 80 of the Corporation Code, BPI succeeded to all rights, assets, liabilities, franchises of FEBTC. Employment contracts of FEBTC employees were among the obligations thus assumed, subject to constitutional and statutory restrictions on termination.
- Employment Contracts. Employment is a personal, consensual contract; merger does not novate the contract but continues it under the surviving corporation.
- CBA Scope. The union shop clause applies to “new employees falling within the bargaining unit … who may hereafter be regularly employed by the Bank.” There is no requirement that “new employees” must have undergone a probationary period. All employees hired or absorbed into regular status during the term of the CBA are “new employees” for its purposes.
- Constitutional and Policy Considerations. The Constitution and Labor Code permit but do not mandate exclusion of absorbed employees from union security clauses. Union security provisions encourage collective bar
Case Syllabus (G.R. No. 164301)
Procedural Posture
- Petition for review under Rule 45 of the Rules of Court by Bank of the Philippine Islands (BPI) seeking to reverse the Court of Appeals’ decision.
- Arising from CA Decision dated September 30, 2003 (CA-G.R. SP No. 70445) which reversed Voluntary Arbitrator’s Decision dated November 23, 2001.
- Issue: whether FEBTC employees absorbed by merger are “new employees” of BPI and thus covered by the union shop clause in the existing CBA.
Antecedent Facts
- January 20, 2000: BPI and Far East Bank & Trust Company (FEBTC) execute Articles and Plan of Merger.
- March 23, 2000: Bangko Sentral ng Pilipinas approves the merger; SEC issues Certificate of Filing on April 7, 2000.
- Upon merger, FEBTC ceases; BPI absorbs all its assets, liabilities and employees as its own, recognizing their status, tenure, salaries and benefits.
- FEBTC rank-and-file employees in Davao City unorganized at time of merger.
- March 31, 2000: BPI Employees Union invites absorbed FEBTC employees to a meeting on the union shop clause in BPI’s existing CBA.
Collective Bargaining Agreement and Union Shop Clause
- ARTICLE I recognizes the Union as sole collective bargaining agent for rank-and-file employees in Davao City.
- ARTICLE II, Section 1 (Maintenance of Membership): existing and subsequently joining union members must maintain membership as a condition of continued employment.
- ARTICLE II, Section 2 (Union Shop): “new employees” regularly employed by BPI during CBA term must join Union within 30 days of regularization as condition of continued employment.
Post-Merger Response and Grievance
- Some absorbed employees joined the Union; others refused or retracted membership.
- Union sends notices, calls hearings; non-attendees prompted Union president to request BPI to implement union shop and dismiss non-joiners.
- BPI fails to act; Union refers dispute to Grievance Committee, then to voluntary arbitration.
Voluntary Arbitration Proceedings
- Voluntary Arbitrator Rosalina Letrondo-Montejo (Nov 23, 2001) finds:
- Absorbed FEBTC employees are not “new employees” but permanent by operation of law as assets and liabilities of FEBTC.
- Such employees cannot be compelled to join the Union; right not to join any organization is constitutional.
- Motion for Reconsideration denied (March 25, 2002).
Court of Appeals Decision
- CA reverses and sets aside Arbitrator’s ruling (Sept 30, 2003); Motion for Reconsideration denied (June 9, 2004).
- Defines union shop: non-members may be hired but must join after a certain period to retain employment.
- Holds absorbed employees equivalent to new employees since:
- They have a new employer, terms, conditions and policies.
- Their service with FEBTC is tacked to BPI; no gap in service.
- Applies union shop clause to absorbed employees to preserve industrial peace and union solidarity.
Issues for Review
I. Whether CA gravely erred in ruling absorbed FEBTC employees are “new employees” for uni