AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, PETITIONER, VS. AMERICAN WIRE AND CABLE CO., INC. AND THE COURT OF APPEALS, RESPONDENTS.

American Wire and Cable Daily Rated Employees Union versus American Wire and Cable

The Case

This is a special civil action for certiorari brought by the American Wire and Cable Daily Rated Employees Union against American Wire and Cable Company and the Court of Appeals. The union complains that the company unilaterally withdrew benefits its members had long enjoyed: a service award, a thirty five percent premium pay for work on selected days of the Holy Week and Christmas season, the Christmas party and its incidental benefits, and a promotional increase for fifteen members given new job classifications. The union says this withdrawal violated Article 100 of the Labor Code, the prohibition against elimination or diminution of benefits. The case matters because it draws the dividing line between a bonus that generosity creates and a benefit that practice has turned into a demandable obligation.

Procedural History

The two unions of the company, the monthly rated and the daily rated, filed an original action for voluntary arbitration before the National Conciliation and Mediation Board of the Department of Labor and Employment. The parties signed a submission agreement, and Angel Ancheta was assigned as voluntary arbitrator. He rendered a decision declaring the company not guilty of violating Article 100, though he directed it to grant the service award to deserving employees in amounts and extent at its discretion, in consultation with the unions on grounds of equity and fairness. Both unions moved for reconsideration, and the arbitrator denied the motion, affirming his decision in full.

The daily rated union then appealed to the Court of Appeals under Rule 43 of the 1997 Rules of Civil Procedure. The Special Eighth Division dismissed the petition for lack of merit and affirmed the arbitrator. The union's motion for reconsideration was denied. The union then came to the Supreme Court through a special civil action for certiorari, alleging grave abuse of discretion amounting to lack of jurisdiction. The company objected that the proper mode was a petition for review on certiorari under Rule 45, not certiorari under Rule 65. The Court set the technical objection aside, holding that sound policy dictates it is far better to dispose of a case on the merits rather than on technicality, and that the petition raised an issue of paramount importance for the future guidance of the bench and bar.

Facts

American Wire and Cable Company manufactures wires and cables, and it had two unions: the monthly rated employees union and the daily rated employees union. For years the company gave its daily rated workers certain extras beyond what the law required. It held Christmas parties with raffles and prizes. It gave service awards accompanied by cash incentives. It paid an additional thirty five percent premium for work rendered on Holy Monday, Holy Tuesday, Holy Wednesday, and on December 23, 26, 27, 28 and 29. Fifteen members were also given new job classifications, and the union claimed these were promotions that called for salary increases.

In February 2001 the unions filed for voluntary arbitration, alleging that the company, without valid cause, suddenly and unilaterally withdrew these benefits. The company answered that the grants had never ripened into a practice giving rise to a demandable right. It said the benefits were conditional on its financial performance, and that conditions had substantially changed because political turmoil and instability had wounded the national economy. It also insisted that the fifteen employees were not promoted; there was merely a realignment of positions.

The records showed that the benefits were never embodied in any express agreement and were never incorporated in the collective bargaining agreement. The union had in fact made proposals to include the service award and the premium pay in the agreement. The amounts of the service award trended downward over the years, and the Christmas parties moved from paid venues to a venue free of charge, evidently to cut costs. The premium pay had been granted for only two years, and the company's owner had expressly reserved that it could not continue in view of the company's financial situation.

Issues

• Whether or not the company violated Article 100 of the Labor Code when it withdrew the service award, the Christmas party and its incidental benefits, and the thirty five percent premium pay for selected days of the Holy Week and Christmas season.
• Whether or not these benefits are bonuses, and if so, whether they had become demandable and enforceable obligations that could not be withdrawn unilaterally.
• Whether or not the fifteen members given new job classifications were promoted, entitling them to a promotional increase.

Applicable Provisions

Article 100 of the Labor Code provides:

Article 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.

This is the provision the union invokes, and the whole case turns on whether the withdrawn grants fall within the benefits it protects.

Ruling

On the first issue, the Court held that the company did not violate Article 100. The benefits in question are all bonuses, given by the company out of generosity and munificence. The additional premium pay, the Christmas parties with raffles, and the cash incentives given with the service awards are all in excess of what the law requires each employer to give its employees. Being above what is strictly due, their grant was a management prerogative which management may withdraw whenever it sees necessity, unless they have been made part of the wage, salary or compensation of the employees.

On the second issue, the Court held that these bonuses had not become demandable. It laid down the test in these words:

For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties, or it must have had a fixed amount and had been a long and regular practice on the part of the employer.

None of these circumstances was present. The benefits were never the subject of any express agreement and were never incorporated in the collective bargaining agreement; the union itself had proposed their inclusion. The Christmas parties and the cash incentives had no fixed amounts, and the downtrend in the service award and in the party arrangements showed nothing consistent. To be a regular practice, the giving of the bonus must have been done over a long period of time and must be shown to have been consistent and deliberate. The premium pay was granted for only two years and with the owner's express reservation that it could not continue given the company's financial situation. The Court added that to hold an employer bound to distribute bonuses it granted out of kindness is to penalize him for his past generosity. Since the benefits were neither demandable nor enforceable, it was no longer necessary to examine the company's revenues and profitability analysis, and the union's argument about the lack of an independent audit became immaterial.

On the third issue, the Court held that no promotion was established. The union failed to adduce proof that a promotion indeed occurred with respect to the fifteen employees, so the claim for a promotional increase had no basis.

Doctrine

A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity, a management prerogative, something given in addition to what is ordinarily received by or strictly due the recipient. A bonus is not a demandable and enforceable obligation, except when it is made part of the wage, salary or compensation of the employee.

For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties, or it must have had a fixed amount and must have been a long and regular practice on the part of the employer. A regular practice means one followed over a long period of time, shown to be consistent and deliberate. A downtrend in the grant, the absence of a fixed amount, the failure to incorporate the benefit in the collective bargaining agreement, and an express reservation by the employer all negate the ripening of a grant into a demandable right under Article 100.

Disposition

The petition was denied and the decision and resolution of the Court of Appeals were affirmed, so the company prevailed, with no pronouncement as to costs.

Remember This

Memorize the test: a bonus becomes demandable only if it was expressly agreed upon and promised, or if it had a fixed amount and was a long, consistent and deliberate practice. Examiners use this case to test the Article 100 prohibition against diminution of benefits, the distinction between a bonus and a demandable benefit, and the rule that an employer is not penalized for past generosity.