G.R. No. 164301, August 10, 2010
627 SCRA 590
642 Phil. 47
Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS IN BPI UNIBANK, respondent.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
Labor Law, Labor Unions, Union Security Clauses; Words and Phrases: “Union Security, “Maintenance of Membership,” Explained.-“Union security” is a generic term which is applied to and comprehends “closed shop”, “union shop,” “maintenance of membership” or any other form of agreement which imposes upon employees the obligation to acquire or retain union membership as condition affecting employment. There is union shop when all new regular employees are required to join the union within a certain period for their continued employment. There is maintenance of membership shop when employees, who are union members as of the effective date of the agreement, or who thereafter become members, must union maintain membership as a condition for continued employment until they are promoted or transferred out of the bargaining unit or the agreement is terminated. A closed-shop, on the other hand, may be defined as an enterprise in which, by agreement between the employer and his employees or their representatives, no person may be employed in any or certain agreed departments of the enterprise unless he or she is, becomes, and, for the duration of the agreement, remains member in good standing of a union entirely comprised of or of which the employees in interest are a part.
Same; Same; Same; It is the policy of the State to promote unionism to enable the workers to negotiate with management on the same level and with more persuasiveness than if they were to individually and independently bargain for the improvement of their respective conditions-the purpose of a union shop or other union security arrangement is to guarantee the continued existence of the union through enforced membership for the benefit of the workers. In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc., 180 SCRA 668 (1989), we ruled that: It is the policy of the State to promote unionism to enable the workers to negotiate with management on the same level and with more persuasiveness than if they were to individually and independently bargain for the improvement of their respective conditions. To this end, the Constitution guarantees to them the rights “to self organization, collective bargaining and negotiations and peaceful concerted actions including the right to strike in accordance with law.” There is no question that these purposes could be thwarted if every worker were to choose to go his own separate way instead of joining his co-employees in planning collective action and presenting a united front when they sit down to bargain with their employers. It is for this reason that the law sanctioned stipulations for the union shop and the closed shop as a means of encouraging the workers to join and support the labor union of their own choice as their representative in the negotiation of their demands and the protection of their interest vis-à-vis the employer. (Emphasis ours.) In other words, the purpose of a union shop or other union security arrangement is to guarantee the continued existence of the union through enforced membership for the benefit of the workers.
Same; Same; Same; All employees in the bargaining unit covered by a Union Shop Clause in their Collective Bargaining Agreement with (CBA) management are subject to its terms; Exceptions.-All employees in the bargaining unit covered by a Union Shop Clause in their CBA with management are subject to its terms. However, under law and jurisprudence, the following kinds of employees are exempted from its coverage, namely, employees who at the time the union shop agreement takes effect are bona fide members of religious organization which prohibits its members from joining labor unions on religious employees already grounds; in service and already members of a union other than the majority at the time the union shop agreement took effect; confidential employees who are excluded from the rank and file bargaining unit; and employees excluded from the union shop by express terms of the agreement.
Same: Same: Same: Right of Association; When certain employees are obliged to join a particular union as a requisite for continued employment, as in the case of Union Security Clauses, this condition is a valid restriction of the freedom or right not to join any labor organization because it is in favor of unionism.-When certain employees are obliged to join a particular union as a requisite for continued employment, as in the case of Union Security Clauses. this condition is valid restriction of the freedom or right not to join any labor organization because it is in favor of unionism. This Court, on occasion, has even held that a union security clause in a CBA is not a restriction of the right of freedom of association guaranteed by the Constitution. Moreover, a closed shop agreement is an agreement whereby an employer binds himself to hire only members of the contracting union who must continue to remain members in good standing to keep their jobs. It is “the most prized achievement of unionism.” It adds membership and compulsory dues. By holding out to loyal members a promise of employment in the closed shop, it wields group solidarity.
Same; Corporation Law; Corporate Mergers, Words and Phrases; In legal parlance, human beings are never embraced in the term “assets and liabilities”: The Corporation Code does not mandate the absorption of the employees of the non-surviving corporation by the surviving corporation in the case of a merger.-In legal parlance, however, human beings are never embraced in the term “assets and liabilities.” Moreover, BPI’s absorption of former FEBTC employees was neither by operation of law nor by legal consequence of contract. There was no government regulation or law that compelled the merger of the two banks or the absorption of the employees of the dissolved corporation by the surviving corporation. Had there been such law or regulation, the absorption of employees of the non surviving entities of the merger would have been mandatory on the surviving corporation. In the present case, the merger was voluntarily entered into by both banks presumably for some mutually acceptable consideration. In fact, the Corporation Code does not also mandate the absorption of the employees of the non-surviving corporation by the surviving corporation in the case of a merger.
Same: Same; Same: The rule is that unless expressly assumed, labor contracts such as employment contracts and collective bargaining agreements are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between the parties, -The Articles of Merger and Plan of Merger dated April 7, 2000 did not contain any specific stipulation with respect to the employment contracts of existing personnel of the non-surviving entity which is THE BTC. Unlike the Voluntary Arbitrator, this Court cannot uphold the reasoning that the general stipulation regarding transfer of DEBTS assets and liabilities to BPT as set forth in the Articles of Merger necessarily includes the transfer of all FEBTC employees into the employ of BPI and neither BPI nor the FEBTC employees allegedly could do anything about it. Even if it is so, it does not follow that the absorbed employees should not be subject to the terms and conditions of employment obtaining in the surviving corporation. The rule is that unless expressly assumed, labor contracts such as employment contracts and collective bargaining agreements are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between the parties. A labor contract merely creates an action in personam and does not create any real right which should be respected by third parties. This conclusion draws its force from the right of an employer to select his employees and to decide when to engage them as protected under our Constitution, and the same can only be restricted by law through the exercise of the police power.
Same; Same; Same; Involuntary Servitude: The Court believes that it is contrary to public policy to declare the former employees of the absorbed bank as forming part of the assets or liabilities that were transferred and absorbed by the other bank in the Articles of Merger-assets and liabilities, in this instance, should be deemed to refer only to property rights and obligations of the absorbed bank and do not include the employment contracts of its personnet: The employees of the absorbed bank retained the prerogative to allow themselves to be absorbed or not, otherwise, that would be tantamount to involuntary servitude. – This Court believes that it is contrary to public policy to declare the former FEBTC employees as forming part of the assets or liabilities of FEBTC that were transferred and absorbed by BPI in the Articles of Merger. Assets and liabilities, in this instance, should be deemed to refer only to property rights and obligations of FEBTC and do not include the employment contracts of its personnel. A corporation cannot unilaterally transfer its employees to another employer like chattel. Certainly, if BPI as an employer had the right to choose who to retain among FEBTC’s employees, FEBTC employees had the concomitant right to choose not to be absorbed by BPI. Even though FEBTC employees had no choice or control over the merger of their employer with BPI, they had a choice whether or not they would allow themselves to be absorbed by BPI. Certainly nothing prevented the FEBTC’s employees from resigning or retiring and seeking employment elsewhere instead of going along with the proposed absorption. Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee without the consent of the employee is in violation of an individual’s freedom to contract. It would have been a different matter if there was an express provision in the articles of merger that as a condition for the merger, BPI was being required to assume all the employment contracts of all existing FEBTC employees with the conformity of the employees. In the absence of such a provision in the articles of merger, then BPI clearly had the business management decision as to whether or not employ FEBTC’s employees. FEBTC employees likewise retained the prerogative to allow themselves to be absorbed or not; otherwise, that would be tantamount to involuntary servitude.
From the tenor of local and foreign authorities, in voluntary mergers, absorption of the dissolved corporation’s employees or the recognition of the absorbed employees’ service with their previous employer may be demanded from the surviving corporation if required by provision of law or contract. The dissent of Justice Arturo D. Brion tries to make a distinction as to the terms and conditions of employment of the absorbed employees in the case of a corporate merger or consolidation which will, in effect, take away from corporate management the prerogative to make purely business decisions on the hiring of employees or will give it an excuse not to apply the CBA in force to the prejudice of its own employees and their recognized collective bargaining agent. In this regard, we disagree with Justice Brion.
Same; Same; Same; Although in a merger it is as if there is no change in the personality of the employer, there is in reality a change in the situation of the employee-once an employee is absorbed, there are presumably changes in his condition of employment even if his previous tenure and salary rate is recognized by the absorbing company.-That BPI is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to adjudicate rights and obligations between and among the merged corporations and the persons that deal with them. Although in a merger it is as if there is no change in the personality of the employer, there is in reality a change in the situation of the employee. Once an FEBTC employee is absorbed, there are presumably changes in his condition of employment even if his previous tenure and salary rate is recognized by BPI. It is reasonable to assume that BPI would have different rules and regulations and company practices than FEBTC and it is incumbent upon the former FEBTC employees to obey these new rules and adapt to their new environment. Not the least of the changes in employment condition that the absorbed FEBTC employees must face is the fact that prior to the merger they were employees of an unorganized establishment and after the merger they became employees of a unionized company that had an existing collective bargaining agreement with the certified union. This presupposes that the union who is party to the collective bargaining agreement is the certified union that has, in the appropriate certification election, been shown to represent a majority of the members of the bargaining unit.
Labor Unions; Union Security Clauses; Word and Phrases; The Court should not uphold an interpretation of the term “new employee” based on the general and extraneous provisions of the Corporation Code on merger that would defeat, rather than fulfill, the purpose of the union shop clause the provision of the Article 248(e) of the Labor Code in point mandates that nothing in the said Code or any other law should stop the parties from requiring membership in a recognized collective bargaining agent as a condition of employment. – Justice Brion himself points out that there is no clear, categorical definition of “new employee” in the CBA. In other words, the term “new employee” as used in the union shop clause is used broadly without any qualification or distinction. However, the Court should not uphold an interpretation of the term “new employee” based on the general and extraneous provisions of the Corporation Code on merger that would defeat, rather than fulfill, the purpose of the union shop clause. To reiterate, the provision of the Article 248(e) of the Labor Code in point mandates that nothing in the said Code or any other law should stop the parties from requiring membership in a recognized collective bargaining agent as a condition of employment.
By law and jurisprudence, a merger only becomes effective upon approval by the Secuties and Exchange Commission (SEC) of the articles of merger. – By law and jurisprudence, a merger only becomes effective upon approval by the Securities and Exchange Commission (SEC) of the articles of merger. In Associated Bank v. Court of Appeals, we held: The procedure to be followed is prescribed under the Corporation Code. Section 79 of said Code requires the approval by the Securities and Exchange Commission (SEC) of the articles of merger which, in turn, must have been duly approved by a majority of the respective stockholders of the constituent corporations. The same provision further states that the merger shall be effective only upon the issuance by the SEC of a certificate of merger. The effectivity date of the merger is crucial for determining when the merged or absorbed corporation ceases to exist; and when its rights, privileges, properties as well as liabilities pass on to the surviving corporation.
Petitioner limited itself to the argument that its absorbed employees do not fall within the term “new employees” contemplated under the Union Shop Clause with the apparent objective of excluding all, and not just some, of the former FEBTC employees from the application of the Union Shop Clause. However, in law or even under the express terms of the CBA, there is no special class of employees called “absorbed employees.” In order for the Court to apply or not apply the Union Shop Clause, we can only classify the former FEBTC employees as either “old” or “new.” If they are not “old” employees, they are necessarily “new” employees. If they are new employees, the Union Shop Clause did not distinguish between new employees who are non-regular at their hiring but who subsequently become regular and new employees who are “absorbed” as regular and permanent from the beginning of their employment. The Union Shop Clause did not so distinguish, and so neither must we.
Same; Same; Same; Same; Same; The effect or consequence of BPI’s so-called “adsorption” of former Far East Bank and Trust Company (FEBTC) employees should be limited to what they actually agreed to, ie. recognition of the FEBTC employees’ years of service, salary rate and other benefits with their previous employer-the effect should not be stretched so far as to exempt former FEBTC employees from the existing Collective Bargaining Agreement (CBA) terms, company policies and rules which apply to employees similarly situated. – We agree with the Court of Appeals that there are no substantial differences between a newly hired non-regular employee who was regularized weeks or months after his hiring and a new employee who was absorbed from another bank as a regular employee pursuant to a merger, for purposes of applying the Union Shop Clause. Both employees were hired/employed only after the CBA was signed. At the time they are being required to join the Union, they are both already regular rank and file employees of BPI. They belong to the same bargaining unit being represented by the Union. They both enjoy benefits that the Union was able to secure for them under the CBA. When they both entered the employ of BPI, the CBA and the Union Shop Clause therein were already in effect and neither of them had the opportunity to express their preference for unionism or not. We see no cogent reason why the Union Shop Clause should not be applied equally to these two types of new employees, for they are undeniably similarly situated. The effect or consequence of BPI’s so-called “absorption” of former FEBTC employees should be limited to what they actually agreed to, i.e. recognition of the FEBTC employees’ years of service, salary rate and other benefits with their previous employer. The effect should not be stretched so far as to exempt former FEBTC employees from the existing CBA terms, company policies and rules which apply to employees similarly situated. If the Union Shop Clause is valid as to other new regular BPI employees, there is no reason why the same clause would be a violation of the “absorbed” employees’ freedom of association.
It is but fair that similarly situated employees who enjoy the same privileges of a CBA should be likewise subject to the same obligations the CBA imposes upon them. A contrary interpretation of the Union Shop Clause will be inimical to industrial peace and workers’ solidarity. This unfavorable situation will not be sufficiently addressed by asking the former FEBTC employees to simply pay agency fees to the Union in lieu of union membership, as the dissent of Justice Carpio suggests. The fact remains that other new regular employees, to whom the “absorbed employees” should be compared, do not have the option to simply pay the agency fees and they must join the Union or face termination.
Without the union shop clause or with the restrictive interpretation thereof as proposed in the dissenting opinions, the company can jeopardize the majority status of the certified union by excluding from union membership all new regular employees whom the Company will “absorb” in future mergers and all new regular employees whom the Company hires as regular from the beginning of their employment without undergoing a probationary period. In this manner, the Company can increase the number of members of the collective bargaining unit and if this increase is not accompanied by a corresponding increase in union membership, the certified union may lose its majority status and render it vulnerable to attack by another union who wishes to represent the same bargaining unit. Or worse, a certified union whose membership falls below twenty percent (20%) of the total members of the collective bargaining unit may lose its status as a legitimate labor organization altogether, even in a situation where there is no competing union. In such a case, an interested party may file for the cancellation of the union’s certificate of registration with the Bureau of Labor Relations. Plainly, the restrictive interpretation of the union shop clause would place the certified union’s very existence at the mercy and control of the employer. Relevantly, only BPI, the employer appears to be interested in pursuing this case. The former FEBTC employees have not joined BPI in this appeal.
Labor Unions; Union Security Clauses; Social Justice; The constitutional guarantee given the right to form unions and the State policy to promote unionism have social justice considerations. – It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in Article XIII on Social Justice. The constitutional guarantee given the right to form unions and the State policy to promote unionism have social justice considerations. In People’s Industrial and Commercial Employees and Workers Organization v. People’s Industrial and Commercial Corporation, we recognized that “[l]abor, being the weaker in economic power and resources than capital, deserve protection that is actually substantial and material.”
The right of association – The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the individual employee’s right or freedom of association, is not to protect the union for the union’s sake. Laws and jurisprudence promote unionism and afford certain protections to the certified bargaining agent in a unionized company because a strong and effective union presumably benefits all employees in the bargaining unit since such a union would be in a better position to demand improved benefits and conditions of work from the employer. This is the rationale behind the State policy to promote unionism declared in the Constitution, which was elucidated in the above-cited case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc. 180 SCRA 668 (1989)
Hierarchy of Rights; In the hierarchy of constitutional values, this Court has repeatedly held that the right to abstain from joining a labor organization is subordinate to the policy of encouraging unionism as an instrument of social justice. – In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop Clause, they are required to join the certified bargaining agent, which supposedly has gathered the support of the majority of workers within the bargaining unit in the appropriate certification proceeding. Their joining the certified union would, in fact, be in the best interests of the former FEBTC employees for it unites their interests with the majority of employees in the bargaining unit. It encourages employee solidarity and affords sufficient protection to the majority status of the union during the life of the CBA which are the precisely the objectives of union security clauses, such as the Union Shop Clause involved herein. We are indeed not being called to balance the interests of individual employees as against the State policy of promoting unionism, since the employees, who were parties in the court below, no longer contested the adverse Court of Appeals’ decision. Nonetheless, settled jurisprudence has already swung the balance in favor of unionism, in recognition that ultimately the individual employee will be benefited by that policy. In the hierarchy of constitutional values, this Court has repeatedly held that the right to abstain from joining a labor organization is subordinate to the policy of encouraging unionism as an instrument of social justice.
MOTION FOR RECONSIDERATION
G.R. No. 164301. October 11, 2011
658 SCRA 828,
674 Phil. 609
Labor Law; Merger; Social Justice; It is more in keeping with the dictates of social justice and the State policy of according full protection to labor to deem employment contracts as automatically assumed by the surviving corporation in a merger, even in the absence of an express stipulation in the articles of merger or the merger plan. Taking a second look on this point, we have come to agree with Justice Brion’s view that it is more in keeping with the dictates of social justice and the State policy of according full protection to labor to deem employment contracts as automatically assumed by the surviving corporation in merger, even in the absence of an express stipulation in the articles of merger or the merger plan.
Same; Same; Security of Tenure; By upholding the automatic assumption of the non surviving corporation’s existing employment contracts by the surviving corporation in a merger, the Court strengthens judicial protection of the right to security of tenure of employees affected by a merger and avoids confusion regarding the status of their various benefits.-By upholding automatic assumption of the non-surviving corporation’s existing employment contracts by the surviving corporation in merger, the Court strengthens judicial protection of the right to security of tenure of employees affected by a merger and avoids confusion regarding the status of their various benefits which were among the chief objections of our dissenting colleagues. However, nothing in this Resolution shall impair the right of an employer to terminate the employment of the absorbed employees for a lawful or authorized cause or the right of such an employee to resign, retire or otherwise sever his employment, whether before or after the merger, subject to existing contractual obligations.
Same; Same; Same: Even as we now recognize the right to continuous, unbroken employment of workers who are absorbed into a new company pursuant to a merger, it is but logical that their employment may be terminated for any causes provided for under the law or in jurisprudence without violating their right to security of tenure. The fundamental guarantee of security of tenure and due process dictates that no worker shall be dismissed except for a just and authorized cause provided by law and after due process is observed. Even as we now recognize the right to continuous, unbroken employment of workers who are absorbed into a new company pursuant to a merger, it is but logical that their employment may be terminated for any causes provided for under the law or in jurisprudence without violating their right to security of tenure.
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