The Supreme Court affirmed that employers cannot unilaterally alter or suspend provisions of a Collective Bargaining Agreement (CBA) without the consent of the employees’ labor organization. This decision underscores the principle that a CBA, like any contract, is binding and must be respected in good faith by both parties. Unilateral changes undermine the collective bargaining process and disrupt the stability and predictability of labor relations.

Double Retirement or Single Standard? Wesleyan’s Benefit Dispute

Wesleyan University-Philippines and its faculty and staff association entered into a CBA effective from June 1, 2003, to May 31, 2008. A dispute arose when the university, through its President, Atty. Guillermo T. Maglaya, issued a memorandum on August 16, 2005, altering the guidelines on vacation and sick leave credits, as well as vacation leave commutation. The association contested these changes, arguing they violated existing practices and the CBA. The university also announced a plan to implement a one-retirement policy, which was met with resistance from the association, which claimed the practice was to give two retirement benefits: one from the Private Education Retirement Annuity Association (PERAA) and another from the CBA Retirement Plan. The core legal question centered on whether the university could unilaterally change these benefits and practices without the consent of the faculty and staff association.

The Voluntary Arbitrator ruled against the university, declaring both the one-retirement policy and the memorandum contrary to law, ordering the university to reinstate the previous scheme for leave credits and to continue providing retirement benefits under both the CBA and the PERAA Plan. The Court of Appeals (CA) affirmed this decision, finding that the changes unilaterally amended the CBA without the association’s consent. The university then appealed to the Supreme Court, raising issues regarding the substantiality of evidence supporting the practice of granting two retirement benefits and the validity of the memorandum.

The Supreme Court, in its analysis, focused on the **Non-Diminution Rule** enshrined in Article 100 of the Labor Code. This rule explicitly prohibits employers from eliminating or reducing benefits received by employees if such benefits are based on an express policy, a written contract, or have ripened into a practice. The Court emphasized that to be considered a practice, it must be consistently and deliberately made by the employer over a long period. An exception exists if the practice stems from an error in interpreting a doubtful or difficult question of law, but this error must be corrected promptly upon discovery.

In this case, the respondent presented affidavits demonstrating that the university had been granting two retirement benefits since as early as 1997. The Court found these affidavits to be substantial evidence, noting that the retired employees had no personal stake in the outcome of the case and, therefore, no reason to provide false testimony. This contrasted with the university’s failure to present any evidence rebutting the affidavits or supporting its claim that the CBA Retirement Plan and the PERAA Plan were one and the same. The Court underscored that any ambiguity in the interpretation of the CBA should be resolved in favor of the employees.

“The Non-Diminution Rule found in Article 100 of the Labor Code explicitly prohibits employers from eliminating or reducing the benefits received by their employees. This rule, however, applies only if the benefit is based on an express policy, a written contract, or has ripened into a practice.”

Moreover, the university’s own actions undermined its position. An announcement during a Labor Management Committee meeting regarding the implementation of a “one-retirement plan” and a letter-memorandum from the university’s legal counsel discussing defenses to justify abolishing the “double retirement policy” suggested that the two-retirement policy was indeed a practice. Consequently, the Court found that the university could not unilaterally eliminate the two-retirement policy without violating the non-diminution rule.

Regarding the memorandum dated August 16, 2005, the Court agreed with the CA that it contradicted the existing CBA. Sections 1 and 2 of Article XII of the CBA provide that employees are entitled to 15 days of sick leave and 15 days of vacation leave with pay annually, with unused vacation leave convertible to cash after the second year of service. However, the memorandum stated that leave credits were not automatic and would be earned on a month-to-month basis, effectively limiting an employee’s available leave credits at the start of the school year. As this imposed a limitation not agreed upon by the parties nor stated in the CBA, the Court affirmed that it must be struck down.

“When the provision of the CBA is clear, leaving no doubt on the intention of the parties, the literal meaning of the stipulation shall govern. However, if there is doubt in its interpretation, it should be resolved in favor of labor, as this is mandated by no less than the Constitution.”

This ruling reinforces the importance of collective bargaining and the need for employers to honor the terms of CBAs. **CBAs are the law between the parties**, and any changes must be made through mutual agreement, not unilateral action. This ensures fairness, protects workers’ rights, and fosters a stable and productive labor environment. Furthermore, this decision demonstrates the application of the Non-Diminution Rule, providing clarity on what constitutes an established practice and the circumstances under which benefits cannot be unilaterally reduced or eliminated.

FAQs

What was the key issue in this case?	The key issue was whether Wesleyan University-Philippines could unilaterally alter the terms of the Collective Bargaining Agreement (CBA) regarding retirement benefits and leave credits without the consent of the Wesleyan University-Philippines Faculty and Staff Association.
What is the Non-Diminution Rule?	The Non-Diminution Rule, as stated in Article 100 of the Labor Code, prohibits employers from eliminating or reducing benefits received by employees, provided those benefits are based on an express policy, a written contract, or have ripened into a company practice.
What constitutes an established company practice?	To be considered an established company practice, the benefit must be consistently and deliberately provided by the employer over a significant period of time. This consistency and deliberateness distinguish it from occasional or erroneous grants.
What was the university’s argument regarding the retirement benefits?	The university argued that there was only one retirement plan, encompassing both the CBA Retirement Plan and the PERAA Plan, and that any instances of providing two retirement benefits were due to error or oversight.
What evidence did the employees present to support their claim of two retirement benefits?	The employees presented affidavits from retired employees attesting to the consistent practice of receiving retirement benefits from both the CBA Retirement Plan and the PERAA Plan.
What was the university’s justification for the August 16, 2005 Memorandum?	The university claimed that the Memorandum, which altered the guidelines on vacation and sick leave credits, was in accordance with existing policy and was therefore valid.
How did the Court rule on the August 16, 2005 Memorandum?	The Court ruled that the Memorandum was contrary to the existing CBA because it imposed limitations on leave credits that were not agreed upon by the parties nor stated in the CBA.
What is the significance of a Collective Bargaining Agreement (CBA)?	A CBA is a contract between an employer and a labor organization that governs the terms and conditions of employment. It has the force of law between the parties and should be complied with in good faith.
How does the Constitution protect labor rights in the context of CBAs?	The Constitution mandates that if there is doubt in the interpretation of a CBA, it should be resolved in favor of labor, affirming the State’s commitment to protecting workers’ rights and promoting their welfare.

In conclusion, the Supreme Court’s decision underscores the importance of upholding collective bargaining agreements and protecting employees’ rights against unilateral changes. Employers must honor the terms of CBAs and any established practices that have ripened into benefits for employees. This ruling serves as a reminder that labor relations should be governed by good faith and mutual agreement, fostering a fair and stable working environment.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Wesleyan University Philippines vs. Wesleyan University-Philippines Faculty and Staff Association, G.R. No. 181806, March 12, 2014