Case Summary (G.R. No. 242255)
Formation and Purpose of BOMC
Bank of Philippine Islands Operations Management Corporation (BOMC) was created under BSP Circular No. 1388, Series of 1993 as a wholly bank-owned subsidiary to provide support services—such as check clearing, delivery of statements, fund transfers, card production, operations accounting, and cash servicing—distinct from core banking functions.
Initial Service Agreement and Unfair Labor Practice Claim
BPI and BOMC entered into a service agreement covering Metro Manila branches. No existing BPI employee was displaced; reassigned personnel were given other tasks. The BPI Employees Union-Metro Manila-FUBU filed an unfair labor practice (ULP) complaint. The Labor Arbiter ruled in favor of the union, but the NLRC reversed that decision. The Court of Appeals denied certiorari, upholding BPI’s legitimate exercise of management prerogative without diminution of employee benefits.
Extension to Davao and Incorporation of FEBTC Functions
On January 1, 1996, the service agreement was implemented in Davao City. Following BPI’s merger with Far East Bank and Trust Company (FEBTC) on April 10, 2000, BOMC assumed BPI’s cashiering function and FEBTC’s cashiering, distribution, and bookkeeping functions. Twelve former FEBTC employees were transferred to BOMC to fulfill its service complement.
Union Protest and Attempted Grievance Procedure
The Davao bargaining agent, BPIEU-Davao City-FUBU, formally protested the outsourcing and transfer of personnel on June 14, 2000. The Union claimed that the functions belonged to BPI employees and that the merger-absorbed FEBTC staff should join the existing bargaining unit under the union-shop provision. BPI declined to treat the matter as grievous under the CBA, suggesting a Labor-Management Conference (LMC) instead.
Labor-Management Conference and Contentions
At the LMC, BPI invoked management prerogative to preserve jobs and reallocate staff efficiently. The Union contended that BOMC’s creation fragmented the bargaining unit, undermining union strength and denying former FEBTC employees the right to organize within the union.
Strike Notice and NLRC Certification
After the Union demanded submission of the dispute to the CBA grievance machinery and BPI’s refusal, it filed a strike notice with the NCMB alleging ULP through contracting out, violation of duty to bargain, and union busting. The Secretary of Labor certified the dispute to the NLRC for compulsory arbitration and ordered both parties to cease acts that might exacerbate the conflict.
NLRC Resolution Upholding Service Agreement
On December 21, 2001, the NLRC dismissed the ULP charge and upheld the validity of the BPI-BOMC service agreement as a proper exercise of management prerogative. It found no coercion or interference with employees’ right to self-organization and noted the absence of any terminated union member. It held BSP Circular No. 1388, not DOLE Order No. 10, as the governing regulation.
Court of Appeals’ Affirmation
The Court of Appeals denied the Union’s Rule 65 certiorari petition, finding NLRC’s factual findings supported by substantial evidence and not tainted by grave abuse of discretion. The CA recognized BPI’s prerogative to reorganize tasks after a corporate merger and held that union representation of merged employees arises only upon their voluntary selection of the union.
Union’s Assignments of Error
The Union maintained that BPI’s outsourcing violated the CBA’s union-shop clause by reducing bargaining-unit positions and depriving former FEBTC employees of union membership. It further argued that DOLE Department Order No. 10 applies and precludes outsourcing core union jobs.
Union’s Reliance on Jurisprudence
Invoking Sime Darby Pilipinas, Inc. v. NLRC and Shell Oil Workers’ Union v. Shell Co. of the Philippines, Ltd., the Union asserted that outsourcing positions in the bargaining unit constitutes an unfair labor practice where the CBA contains no express reservation of management’s right to dissolve such positions.
BPI’s Defense of Outsourcing
BPI justified its service agreement on three grounds: compliance with BSP Circular No. 1388; legitimate management prerogative to streamline operations and focus on core banking activities; and CBA recognition of BPI’s exclusive prerogatives over hiring, transfers, and maintenance of efficiency. It distinguished Shell Oil on its absence of a CBA assurance to maintain specific positions.
Primordial Issue Before the Supreme Court
Whether BPI’s outsourcing of cashiering, distribution, and bookkeeping functions to BOMC—and the transfer of twelve former FEBTC employees thereto—violates law or the existing CBA, particularly the union-shop clause, or constitutes an unfair labor practice.
Article 261 and Treatment of CBA Violations
Under Article 261 of the Labor Code, only gross violations of economic provisions of a CBA constitute ULP; other CBA breaches are treated as grievances. The union-shop clause, union security provisions, and recognition articles relied upon are non-economic and thus outside the scope of ULP.
Management Prerogative and Good-Faith Outsourcing
Outsourcing is generally a business judgment entitled to deference absent proof of malice, arbitrariness, or bad faith. The Union presented no evidence of employee terminations, salary or benefit reductions, or malicious int
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Factual Antecedents
- BPI Operations Management Corporation (BOMC) was formed under Central Bank Circular No. 1388 (1993) as a separate subsidiary to provide support services (check-clearing, statement printing, fund transfers, card production, operations accounting, cash servicing) for banks.
- Initial service agreement between BPI and BOMC covered Metro Manila branches; no BPI employee was displaced and those whose functions were transferred received alternate assignments.
- A similar service agreement was rolled out in Davao City on January 1, 1996.
- On April 10, 2000, BPI merged with Far East Bank and Trust Company (FEBTC), with BPI as the surviving entity. BOMC then handled BPI’s cashiering functions and FEBTC’s cashiering, distribution, and bookkeeping functions.
- Twelve former FEBTC rank-and-file employees were transferred to BOMC to staff the outsourced functions. The BPI Employees Union-Davao City-FUBU (the Union) protested that this transfer deprived it of bargaining-unit members and violated its union-shop provision.
Procedural History
- June 14, 2000: The Union filed a formal protest and demanded grievance-procedure elevation; BPI refused, proposing a Labor-Management Conference (LMC).
- During the LMC, BPI invoked management prerogative; the Union claimed outsourcing undermined its bargaining unit and right to self-organization.
- The Union filed a strike notice with the National Conciliation and Mediation Board on grounds of contracting-out union functions, refusal to bargain, and union-busting.
- BPI secured a certification order from the DOLE Secretary referring the dispute to the NLRC for compulsory arbitration.
- October 27, 2000: NLRC hearing; parties submitted position papers.
- November 29, 2000: The Union filed an Omnibus Motion to Cease and Desist alleging contemptuous acts by BPI (creation of a Task Force Committee of former FEBTC employees and integration of clearing operations under BOMC).
Position of the Union (Petitioner)
- Outsourcing of cashiering, distribution, clearing, and bookkeeping—functions previously performed by union members—breached the union-shop clause in the CBA and reduced Union membership.
- Transfer of twelve FEBTC employees beyond BPI’s bargaining unit violated employees’ right to self-organization and union security provisions.
- Management prerogative is not absolute; must