GR 170734 Ab; (May, 2008) (Digest)
G.R. No. 170734, May 14, 2008
ARCO METAL PRODUCTS CO. INC. AND MRS. SALVADOR UY vs. SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL – NAFLU (SAMARM-NAFLU)
FACTS
The dispute centered on the company’s practice of computing 13th month pay and bonus based on an enhanced formula, which included allowances, rather than on the basic salary alone. The company sought to revert to the basic salary computation, claiming the enhanced payments were “clear oversights” supported only by an affidavit from a company officer. The employees contested this unilateral withdrawal, arguing the practice had ripened into a company practice and an established benefit.
The labor union filed a complaint, asserting that the consistent grant of the enhanced benefit over several years created a vested right. The company maintained its right to correct what it termed an error in computation, thereby seeking to diminish the benefit received by the employees under the long-standing practice.
ISSUE
Whether the employer may unilaterally withdraw the enhanced computation for 13th month pay and bonus after having consistently granted it over a significant period.
RULING
No, the employer cannot unilaterally withdraw the benefit. Justice Brion, in his separate concurring opinion, agreed with the main decision that the enhanced computation had ripened into an established practice. The company’s claim of oversight, supported only by a self-serving affidavit, could not overcome the undisputed evidence of its consistent and voluntary grant over many years. Any doubt in interpretation must be resolved in favor of labor under Article 4 of the Labor Code.
Justice Brion clarified the legal basis for this prohibition against diminution. He emphasized that it is not anchored on Article 100 of the Labor Code, which applies only to benefits existing at the time of the Code’s promulgation. Instead, the foundation is the contractual nature of employment and the principle of mutuality of contracts under Article 1308 of the Civil Code. The terms of employment, including those implied from the employer’s voluntary, consistent, and deliberate practice, become part of the contractual relationship. These terms cannot be modified or withdrawn unilaterally without the mutual consent of both parties. Since the employees did not consent to the withdrawal, the company’s action was invalid. The established benefit, having been integrated into the employment contract by practice, was thus protected from unilateral diminution.