G.R. No. 88168 , August 30, 1990
Traders Royal Bank, petitioner, vs. National Labor Relations Commission & Traders Royal Bank Employees Union, respondents.

FACTS

The Traders Royal Bank Employees Union filed a complaint against Traders Royal Bank (TRB) alleging diminution of benefits. The union claimed that TRB’s computation of holiday pay decreased the employees’ daily salary rate, thereby reducing overtime pay. It also asserted that the bank unilaterally reduced the mid-year bonus from two months’ gross pay to two months’ basic pay and the year-end bonus from three months’ gross pay to only two months. The union contended these benefits had been enjoyed since time immemorial, ripening into a company practice. The case was certified to the NLRC for resolution.
During the pendency of the case, the parties negotiated and executed a Collective Bargaining Agreement (CBA). The CBA stipulated that bonuses given in previous years were not demandable, only a guaranteed two-month bonus was deemed part of regular compensation, and additional bonuses were dependent on bank income. Despite this, the union pursued its claims, arguing the CBA applied only prospectively. The NLRC ruled in favor of the employees, ordering TRB to pay holiday pay differentials and bonus differentials for 1986. TRB’s motion for reconsideration was denied, prompting this petition for certiorari.

ISSUE

Whether the National Labor Relations Commission committed grave abuse of discretion in ordering Traders Royal Bank to pay mid-year and year-end bonus differentials to its employees for the year 1986.

RULING

The Supreme Court granted the petition, modifying the NLRC decision by deleting the award for bonus differentials. The Court held that a bonus is fundamentally a gratuity or an act of liberality, not a demandable right as part of labor standards like salaries or holiday pay. It is a management prerogative contingent upon the company’s financial profitability and cannot be forced upon an employer. The Court cited established jurisprudence, including Aragon vs. Cebu Portland Cement Co. and Kamaya Point Hotel vs. NLRC, which define a bonus as something given in addition to what is strictly due.
The Court found no legal basis for the union’s claim that the past practice of granting bonuses had crystallized into a vested right. The bank’s financial condition had significantly declined; it was placed under sequestration by the PCGG and its income had decreased. The Court reasoned that the bank could not be compelled to distribute bonuses it could no longer afford, thereby penalizing its past generosity. The reduction in bonus amounts did not constitute an illegal diminution of benefits because bonuses are not part of the employees’ standard or regular compensation. The NLRC’s order for bonus differentials was a grave abuse of discretion as it compelled the payment of a non-demandable benefit. However, the award for holiday pay differentials, not contested in this petition, was affirmed.