GR 170734; (May, 2008) (Digest)
G.R. No. 170734 ; May 14, 2008
ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners, vs. SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-NAFLU), respondent.
FACTS
Petitioner Arco Metal Products Co., Inc. paid the 13th month pay, bonus, and leave encashment of three union members in December 2003 in amounts prorated according to their actual service, which was less than twelve months. Respondent union protested this proration, claiming it violated Article 100 of the Labor Code on non-diminution of benefits. The union argued that the company had established a voluntary practice of paying these benefits in full regardless of actual service, citing seven instances from 1992 to 2004 where employees who did not serve a full year received full payments.
The parties submitted the case to voluntary arbitration. The arbitrator ruled for the company, finding no established practice of granting full benefits irrespective of service. He interpreted the Collective Bargaining Agreement (CBA) phrase “for each year of service” to require one full year of service for full entitlement. The union appealed to the Court of Appeals, which reversed the arbitrator. The appellate court found that the company had indeed established a voluntary practice of full payment, which could not be unilaterally withdrawn.
ISSUE
Whether the company’s past acts of granting full 13th month pay, bonus, and leave encashment to employees who did not render a full year of service have ripened into a voluntary employer practice that cannot be diminished.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic centers on the principle that a voluntary employer practice, once established, becomes part of the employees’ compensation and cannot be unilaterally withdrawn or diminished under Article 100 of the Labor Code. For a practice to be considered voluntary and established, it must be consistently and deliberately exercised over a long period.
The Court agreed with the appellate court’s finding that the company failed to substantiate its claim that the prior full payments were mere errors. The affidavit of a company officer stating it was a mistake was deemed insufficient, especially absent any corroborating evidence, such as records showing other employees receiving prorated benefits during the same extensive period. The company’s inaction for over a decade before “correcting” the alleged error undermined its claim. Consequently, the prior consistent grants of full benefits crystallized into a company practice that formed part of the employees’ rightful compensation. This practice could not be subsequently reduced by implementing a prorated scheme, as doing so would constitute an illegal diminution of benefits.