Title
Wise and Co., Inc. vs. Wise and Co., Inc. Employees Union
Case
G.R. No. 87672
Decision Date
Oct 13, 1989
Wise & Co. excluded union members from profit-sharing, citing CBA terms. The Supreme Court ruled no discrimination, upholding management prerogative and CBA binding terms.
profit sharing benefits
discrimination
voluntary arbitration
A

Case Summary (G.R. No. 87672)

Factual Background

The facts were treated as undisputed. On April 3, 1987, management issued a memorandum circular introducing a profit sharing scheme for its managers and supervisors, with the initial distribution scheduled to take effect on March 31, 1988.

On July 3, 1987, the respondent union, through its president, requested participation in the profit sharing scheme. Petitioner denied the request on the ground that it had to adhere strictly to the CBA. During this period, the parties were engaged in negotiations for the early renewal of the CBA, which was due to expire on April 30, 1988 and which negotiations began earlier than the stipulated freedom period.

On November 11, 1987, petitioner informed the union that it was prepared to consider including employees covered by the CBA in the profit sharing scheme beginning 1987, provided that the ongoing negotiations were concluded before December 1987. However, negotiations reached a deadlock on the issue of the scope of the bargaining unit. Conciliation efforts on March 29, 1988 did not produce settlement.

On March 30, 1988, petitioner distributed the profit sharing benefits not only to managers and supervisors but also to other rank-and-file employees not covered by the CBA. As a result, the respondent union filed a notice of strike, alleging unfair labor practice due to discrimination against union members in the grant of profit sharing benefits. Petitioner then refused to proceed with CBA negotiations unless the last notice of strike was first resolved. The union agreed to postpone discussions on the profit sharing demand until a new CBA was concluded.

After a series of conciliation conferences, the parties agreed to resolve the dispute through voluntary arbitration. Position papers and related pleadings were submitted. On March 20, 1989, the voluntary arbitrator issued an award ordering petitioner to extend the 1987 profit sharing scheme benefits to the members of the respondent union.

CBA Coverage and the Alleged Discrimination

The Court examined the relevant CBA provisions. Under the CBA in force during the period from May 1, 1985 to April 30, 1988, the bargaining unit covered by the CBA consisted of “all regular or permanent employees, below the rank of assistant supervisor.” The CBA expressly excluded from the term “appropriate bargaining unit” regular rank-and-file employees in specified offices, namely those in the office of the president, vice-president, and the other offices of the company including the personnel office, security office, corporate affairs office, accounting and treasury department.

The Court treated the profit sharing privilege as extended by petitioner precisely to the class of employees excluded from the bargaining unit and therefore described as employees who did not derive benefits from the CBA. From this premise, the Court reasoned that the comparison urged by the union did not establish discrimination because the union members and the non-union employees were not similarly situated.

The Petition and the Parties’ Contentions

Petitioner challenged the award on the theory that the voluntary arbitrator committed grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioner argued that the arbitrator ordered extension of profit sharing benefits to CBA-covered employees despite what petitioner characterized as a patent lack of factual and legal basis. Petitioner’s main contentions were that discrimination was not unlawful because the employees were not similarly situated; that the CBA terms had the force and effect of law between the parties; and that the union’s negotiation position regarding inclusion in the profit sharing scheme implied an absence of entitlement for 1987. Petitioner further claimed that the arbitrator made a clearly baseless conclusion that petitioner acted with intent to defeat or prejudice employees’ basic rights.

Respondent union, on the other hand, maintained that petitioner’s grant of profit sharing benefits to non-union employees during a deadlock in the CBA negotiations was discriminatory and was motivated to prejudice union members. It also relied on the circumstances surrounding negotiations and asserted that petitioner, through its president, had agreed to include union members in the 1987 profit sharing benefit provided the union would accept earlier renewal negotiations of the CBA that had expired in 1988. The union thus anchored its claim on the allegation of unfair labor practice and discrimination.

Legal Basis and Reasoning of the Court

The Court granted the petition and reversed the voluntary arbitrator’s award. The Court emphasized that discrimination, in the legal sense invoked by the union, was not automatic. It held that discrimination per se was not unlawful and that there could be no discrimination when the employees concerned were not similarly situated.

In the Court’s view, the respondent union could not successfully argue grave abuse of discretion based on alleged discriminatory conduct because petitioner extended benefits to a group outside the CBA coverage. These employees, being not covered by the CBA, did not derive and enjoy benefits under the CBA’s terms. Consequently, the union members and the non-union employees were two distinct groups lacking the requisite similarity for an unlawful discrimination claim. The Court further found that the union’s claim that petitioner’s motive was to discourage union membership was not supported by the record. Petitioner denied any such accusation, and the Court noted petitioner’s assertion that non-union workers actually joined the union after the benefit grant.

The Court also addressed the union’s argument that petitioner agreed to include its members in the coverage of the 1987 profit sharing benefit upon the union’s consent to earlier negotiations for CBA renewal. Even assuming that the agreement existed in principle, the Court held that petitioner did not have a duty to extend the profit sharing benefit to union members because the CBA negotiations had in fact reached a deadlock and were not resolved within the period expected for consummation.

The Court then placed the grant of profit sharing benefits under management prerogative. It reiterated the established rule that labor law did not authorize the substitution of the employer’s judgment in the conduct of its business. While management prerogative may be exercised without liability when done in good faith for the advancement of the employer’s interests and not for the purpose of defeating or circumventing employees’ rights under special laws or valid agreement, the Court also acknowledged that management acts are not immune where they are discriminatory, malicious, harsh, oppressive, vindictive, wanton, or motivated by malice or spite.

Applying these standards, the Court concluded that petitioner’s grant of profit sharing to employees outside the bargaining unit fell within t

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