Title
BPI Employees Union-Davao City-FUBU vs. Bank of the Philippine Islands
Case
G.R. No. 174912
Decision Date
Jul 24, 2013
BPI outsourced functions to BOMC under Central Bank Circular No. 1388; union alleged ULP and CBA violation. SC upheld BPI's management prerogative, ruling outsourcing valid and no ULP proven.
service agreement
outsourcing
collective bargaining agreement

Case Summary (G.R. No. 174912)

Factual Background

The respondent bank caused certain operational functions to be performed by BPI Operations Management Corporation (BOMC), a separate subsidiary created pursuant to CBP Circular No. 1388, Series of 1993, which permitted banks to engage bank service corporations for enumerated ancillary services. BOMC initially provided services in Metro Manila branches and, on January 1, 1996, the service agreement was implemented in Davao City. After the BPI–FEBTC merger effective April 10, 2000, BOMC handled cashiering, distribution and bookkeeping functions previously performed by FEBTC. Twelve former FEBTC employees were transferred to BOMC to complete its service complement.

Union Protest and Strike Notice

The Union objected to the contracting out of functions and to the transfer of the twelve former FEBTC employees, asserting that the functions fell within the bargaining unit and that the transfers reduced union membership and interfered with employees’ right to self-organization. The Union sought to submit the matter to the CBA grievance machinery; BPI declined and proposed a Labor Management Conference. After the LMC proved unsuccessful, the Union filed a notice of strike with the National Conciliation and Mediation Board alleging contracting out of union jobs, violation of the duty to bargain, and union busting.

Compulsory Arbitration and NLRC Proceedings

BPI filed for assumption of jurisdiction and certification with the Secretary of Labor and Employment, and the Secretary certified the dispute to the NLRC for compulsory arbitration, directing the parties to cease acts that might exacerbate the dispute. The Union filed motions alleging continued encroachment of BOMC into functions formerly performed by BPI and sought contempt sanctions against BPI officers for activities such as creation of a task force and consolidation of clearing operations.

NLRC Resolution

On December 21, 2001, the NLRC dismissed the charge of unfair labor practice and upheld the validity of the BPI–BOMC service agreement. The NLRC ruled that engagement of BOMC was a valid exercise of management prerogative, that the transfer of functions did not interfere with employees’ exercise of their right to self-organization, and that the Union had not produced evidence of terminations of union members. The NLRC further held that D.O. No. 10, Series of 1997 did not apply because BSP Circular No. 1388, Series of 1993 governed banking transactions.

Court of Appeals Decision

The Court of Appeals dismissed the Union’s petition for lack of proper remedy because the petition raised primarily factual issues and found the NLRC’s factual findings supported by substantial evidence. The CA modified the NLRC resolution by deleting the enumeration of functions listed under CBP Circular No. 1388 but affirmed the NLRC’s denial of unfair labor practice, reasoning that BPI acted within its management prerogative in determining tasks and manpower needs after the merger, and that the Union’s right to represent merged employees arises only after those employees choose representation.

Issues Presented to the Supreme Court

The Union assigned errors contending that the CA erred in holding that the outsourcing violated neither the CBA nor the labor laws and that D.O. No. 10 applied. The central legal question before the Supreme Court was whether BPI’s outsourcing of cashiering, distribution and bookkeeping functions to BOMC, and the transfer of twelve former FEBTC employees to BOMC rather than to BPI, violated the CBA or constituted an unfair labor practice.

Union’s Contentions

The Union argued that the outsourcing breached the union-shop clause of the CBA because the contracted-out jobs formed part of the existing bargaining unit, that the merger should have resulted in absorption of FEBTC employees into BPI and thus into the union, and that the transfers reduced the bargaining unit and interfered with the right to self-organization. The Union relied on precedent such as Shell Oil Workers Union v. Shell Company of the Philippines, Ltd., to assert that outsourcing bargaining-unit positions is an unfair labor practice.

Bank’s Contentions

BPI defended the service agreement on three grounds: it complied with CBP Circular No. 1388, Series of 1993; it fell within management prerogative to streamline operations and focus on core banking activities; and the CBA itself recognized the bank’s exclusive management prerogatives including hiring, promotion and transfers. BPI argued that the Union produced no substantial evidence of bad faith, anti-union motive, terminations, diminution of pay and benefits, or diminution of existing union membership.

Supreme Court’s Legal Analysis — Nature of Alleged Violation and Article 261

The Court emphasized the import of Article 261 of the Labor Code, which treats non-gross violations of CBAs as grievances to be resolved under the CBA rather than as unfair labor practices, and defined gross violations as flagrant or malicious refusal to comply with economic provisions. The Court held that the Union’s claim—an alleged breach of a union-shop clause and diminution of union membership—did not constitute a violation of an economic provision of the CBA and, therefore, was not an unfair labor practice under Article 261. The Court reiterated that only gross violations of economic provisions may be treated as ULPs.

Supreme Court’s Analysis — Management Prerogative, Good Faith and Evidence

The Court reiterated that contracting out services is an exercise of business judgment and management prerogative, not illegal per se. The Court stated that judicial interference is unwarranted absent proof of malicious or arbitrary conduct that infringes security of tenure or denies statutory benefits. The Union failed to present substantial evidence that BPI acted in bad faith or with anti-union purpose in transferring the twelve former FEBTC employees to BOMC. The NLRC’s factual findings that no union member had been terminated and that there was no diminution of salaries, benefits, or union membership were supported by substantial evidence and were entitled to respect.

Supreme Court’s Analysis — Applicability of D.O. No. 10 and Harmonization with BSP Circular

The Court addressed the contention that D.O. No. 10, Series of 1997 should govern permissible contracting out. The Court found no conflict between D.O. No. 10 and CBP Circular No. 1388 and applied the rule of harmonization, interpretare et concordare leges legibus est optimus interpretandi modus. The Court explained that while the Labor Department issues general guidelines on contracting out, the Bangko Sentral determines which banking functions may be outsourced given the speciali

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