Case Summary (G.R. No. 229396)
Petitioner
Nippon Paint Philippines, Inc. (the Company), which historically paid its employees 200% of daily rate for unworked regular holidays and 300% for worked holidays. It alleges that payments for Eidul Adha in 2010–2011 resulted from a payroll system glitch and were neither deliberate nor contractual.
Respondent
NIPPEA, asserting that the two‐year payment of Eidul Adha premium pay ripened into a vested company practice under the principle of non‐diminution of benefits, such that the Company could no longer withdraw it unilaterally.
Key Dates
• 2007–2011: First Collective Bargaining Agreement (2007 CBA) enumerated legal holidays and provided additional premium pay.
• December 11, 2009: RA 9849 declared Eidul Adha a national holiday.
• 2010–2011: Employees received Eidul Adha holiday premiums.
• March 21, 2012: Renewal CBA (2012 CBA) omitted Eidul Adha from the list of enumerated regular holidays.
• October 31, 2014: Voluntary Arbitrator’s (VA) Decision ruled no company practice and no refund required.
• July 18, 2016 & November 28, 2016: Court of Appeals (CA) Decision and Resolution set aside VA ruling and remanded for computation of benefits.
• June 30, 2021: Supreme Court Decision under the 1987 Constitution.
Applicable Law
• 1987 Constitution, Art. II, Sec. 18 and Art. XIII, Sec. 3(3) (Labor as a primary social economic force; protection of workers’ rights).
• Labor Code, Art. 94 (right to holiday pay), Art. 100 (prohibition against elimination or diminution of benefits), and Arts. 86–89 (overtime, rest day, night shift, and other premium pay).
• Omnibus Rules Implementing the Labor Code, Book III, Rule IV, Sections 4–6 (holiday work compensation and qualifications).
• Jurisprudential principle: Employees’ vested rights over voluntary and customary employer‐granted benefits that have ripened into company practice (see Vergara Jr. v. Coca-Cola Bottlers, Sevilla Trading Co. v. Semana).
Collective Bargaining Agreement and Company Practice
The 2007 CBA explicitly listed legal holidays and guaranteed additional premium pay: 200% for unworked holidays, 300% for worked holidays. Despite the absence of any provision automatically incorporating future holidays, the Company’s payroll system in 2010–2011 applied the same additional premium to Eidul Adha once it was nationally recognized, reflecting a de facto practice.
Dispute and Voluntary Arbitration Ruling
When employees were not paid the Eidul Adha premium in 2012 under the renewed CBA, the union filed for arbitration. The VA concluded that earlier payments were due solely to a payroll error, did not constitute voluntary employer practice, and required no refunds, given the absence of any contractual intention to include Eidul Adha.
Court of Appeals Ruling
The CA held that the Company’s two‐year practice of paying Eidul Adha premiums, despite its omission from the renewed CBA, vested a non‐diminishable benefit. The CA set aside the VA decision and remanded for computation of unpaid premiums for 2012–2013, emphasizing the rule that voluntary employer benefits cannot be unilaterally withdrawn.
Issues for Review
- Whether the CA erred in awarding employees an additional 100% premium pay for Eidul Adha in 2012 and 2013.
- Whether the CA erred in denying the Company’s claim for refund of payments made in 2010 and 2011 on grounds of payroll system error.
Applicable Legal Principles
• Holiday pay is a constitutional and statutory labor right, ensuring workers’ income protection during mandated rest days.
• Under Labor Code Art. 100 and related jurisprudence, voluntary and consistent employer‐granted benefits that have ripened into company practice become vested and cannot be diminished.
• Four requisites for non‐diminution of benefits: (1) founded on policy or long‐established practice; (2) consistency and deliberateness; (3) not due to error or doubtful law; (4) unilateral withdrawal by employer.
Company Practice Determination
Jurisprudence does not prescribe a minimum duration for company practice; benefits granted consistently over even two years may suff
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Antecedents / Facts
- In 2007, petitioner and respondent executed a Collective Bargaining Agreement (CBA) effective January 1, 2007 to December 31, 2011, enumerating regular holidays and granting premium pay: 200% of daily rate if unworked, 300% if worked.
- Republic Act No. 9849 (approved December 11, 2009) declared Eidul Adha a regular holiday.
- In 2010 and 2011, petitioner’s payroll system automatically paid employees holiday remuneration for Eidul Adha at premium rates.
- The 2012 CBA (signed March 21, 2012) renewed the 2007 CBA’s terms but did not mention Eidul Adha among the listed holidays.
- In 2012, petitioner ceased additional holiday pay for Eidul Adha, attributing prior payments to a payroll system error (“glitches”).
- Respondent contended that the two-year grant of Eidul Adha pay ripened into a company practice and that its withdrawal was arbitrary, illegal, and a diminution of benefits.
- Petitioner maintained that the 2010–2011 payments were unintended errors, corrected in 2012, and that Eidul Adha was never meant to be covered.
Voluntary Arbitrator’s Decision
- The dispute was referred to Voluntary Arbitrator Delia T. Uy in VA Case No. A890-IVA-LAG-02-004-2014.
- In the October 31, 2014 Decision, the VA found that:
- No established grant of additional premium for Eidul Adha had ripened into a benefit.
- The overpayments resulted from a payroll system error.
- No refund of amounts paid in 2010–2011 was required.
- The 2007 CBA’s list of holidays was clear and unambiguous; Eidul Adha’s exclusion precluded its coverage.
Court of Appeals’ Decision
- Respondent filed a Petition for Review under Rule 43 before the CA.
- The CA Decision dated July 18, 2016 (CA-G.R