G.R. No. L-60337 August 21, 1987
Universal Corn Products (A Division of Universal Robina Corporation), petitioner, vs. The National Labor Relations Commission and Jose Armas, et al., respondents.

FACTS

Petitioner company and the Universal Corn Products Workers Union entered into a Collective Bargaining Agreement (CBA) effective June 1, 1971, which included a provision granting a Christmas bonus equivalent to seven days’ wages to regular workers with at least one year of continuous service. This CBA expired on June 1, 1974, and due to disagreements, it was not immediately renewed. The parties later executed an addendum in 1979 covering wage increases for 1974-1977 and a new CBA for 1979-1981, both of which were silent on the Christmas bonus.
Petitioner, invoking Presidential Decree No. 851 (the 13th-month pay law), argued that its payment of the mandated 13th-month pay from 1975 onwards satisfied its obligation, precluding any further payment of the CBA-stipulated Christmas bonus for the years 1975 to 1978. The union filed a complaint for non-payment of the seven-day bonus for those years. The Labor Arbiter ruled for the company, but the NLRC reversed, ordering payment of the bonus.

ISSUE

Whether the payment of the 13th-month pay under P.D. No. 851 exempts the employer from paying the separate Christmas bonus stipulated in the 1972 CBA for the years 1975 to 1978.

RULING

No. The Supreme Court affirmed the NLRC decision, ordering the petitioner to pay the seven-day Christmas bonus. The legal logic is anchored on the distinct nature and purpose of the two benefits. The 13th-month pay is a mandatory statutory benefit intended as a general additional income for all qualified employees. In contrast, the CBA Christmas bonus was a contractual obligation, negotiated by the union, granted specifically as a reward for loyalty to workers with at least one year of continuous service—a purpose not found in P.D. 851.
Crucially, Section 10 of the Implementing Rules of P.D. 851 prohibits the elimination or diminution of existing benefits enjoyed by employees at the time of the decree’s promulgation. The Christmas bonus was already being enjoyed under the 1972 CBA. Therefore, the law could not be used to supplant or credit this pre-existing, separately bargained benefit. The expiration of the 1972 CBA did not extinguish the obligation for the contested years, as the agreement itself provided that its terms remained in force during negotiation deadlock until a new agreement was executed. The subsequent silence of the 1979 agreements did not retroactively nullify the company’s obligation for the prior period where the old CBA’s terms were still operative by its own stipulation.