G.R. No. 179593; September 14, 2011
UNIVERSITY OF THE EAST, Petitioner, vs. UNIVERSITY OF THE EAST EMPLOYEES’ ASSOCIATION, Respondent.

FACTS

Petitioner University of the East (UE) is an educational institution, and respondent University of the East Employees’ Association (UEEA) is a duly registered labor union of its rank-and-file employees. Prior to school year (SY) 1983-1984, the distribution of the 70% incremental proceeds from tuition fee increases, as mandated by Presidential Decree No. 451 (P.D. No. 451), as amended, was based on the average number of academic and non-academic personnel. This distribution scheme was formalized in a Tripartite Agreement dated October 18, 1983, signed by UE management, the faculty association, and UEEA. Starting SY 1994-1995, UE changed the distribution formula to a percentage-of-salary basis.
UEEA, through its president, objected to this new scheme in a letter dated December 22, 1994, sent to the UE President. UEEA argued that the change was a unilateral departure from the long-standing practice of equal sharing based on a tripartite agreement, which it claimed was incorporated into their Collective Bargaining Agreement (CBA). UEEA sent a follow-up letter on February 23, 1995, requesting a tripartite conference. A tripartite meeting was held on June 19, 1995, where it was agreed that the distribution for SY 1994-1995 would be based on a percentage of salary (9.96% of salaries as of May 31, 1994). Minutes of this meeting were signed by attending UEEA officers.
On April 27, 1999, UEEA filed a complaint with the National Labor Relations Commission (NLRC) against UE for non-payment/underpayment of the rank-and-file employees’ share of the tuition fee increases under P.D. No. 451 and Republic Act No. 6728. UEEA alleged that the percentage-based scheme, implemented starting SY 1994-1995, reduced the shares of rank-and-file employees while increasing those of management, and was done arbitrarily and unilaterally. UE countered that the change was not unilateral, as it was discussed and agreed upon in the June 19, 1995 tripartite meeting, and that UEEA’s claim was barred by prescription.
The Labor Arbiter ruled in favor of UEEA, ordering UE to pay its members a specific sum representing the alleged underpayments from SY 1994-1995 to May 31, 2002. The NLRC reversed this decision. The Court of Appeals (CA) then set aside the NLRC’s ruling, reinstating the Labor Arbiter’s decision. UE elevated the case to the Supreme Court via a petition for review.

ISSUE

Whether the Court of Appeals erred in ruling that UE unilaterally changed the distribution scheme for the 70% incremental tuition fee proceeds, thereby violating the law and the existing CBA with UEEA.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Decision of the Court of Appeals. The Court held that the change in the distribution scheme from an equal-sharing basis (per the 1983 Tripartite Agreement) to a percentage-of-salary basis was a unilateral act by UE that violated the existing Collective Bargaining Agreement (CBA).
The Court found that the equal-sharing scheme had ripened into a company practice, which under Article 100 of the Labor Code, cannot be unilaterally withdrawn or diminished by the employer. This practice was also incorporated into the CBA between UE and UEEA through a “maintenance of benefits” clause (Article XX, Section 5), which stated that UE agreed to continue implementing all benefits enjoyed by employees not embodied in the CBA, provided they were not inconsistent with its provisions or the Labor Code. The 1983 Tripartite Agreement, which established the equal-sharing scheme, constituted such a benefit.
The Court rejected UE’s argument that the June 19, 1995 tripartite meeting constituted consent or ratification by UEEA. The minutes of that meeting merely recorded an agreement on the percentage (9.96%) for that specific school year, but did not establish UEEA’s consent to a permanent, fundamental change from the equal-sharing principle to a salary-based formula. UEEA’s subsequent acceptance of benefits under the new scheme did not constitute estoppel, as it was done under protest to mitigate losses, and the union consistently and formally objected to the change from the outset.
Furthermore, the Court ruled that UEEA’s money claim had not prescribed. The cause of action accrued from the date of each underpayment (every payday), and the complaint filed in 1999 was within the three-year prescriptive period for claims dating back to 1996. Claims prior to 1996 were deemed waived due to prescription.
Finally, the Court emphasized that while Republic Act No. 6728 grants school authorities discretion in distributing the 70% incremental proceeds, this discretion must be exercised within the bounds of law and existing agreements, and cannot be used to unilaterally withdraw benefits that have become part of the CBA or a company practice.