UNIVERSITY OF THE EAST, PETITIONER, VS. UNIVERSITY OF THE EAST EMPLOYEES’ ASSOCIATION, RESPONDENT.

University of the East versus University of the East Employees' Association

The Case

This is a labor case between the University of the East, an educational institution, and the University of the East Employees' Association, the duly registered labor union of its rank-and-file employees. The University asks the Supreme Court to reverse the Court of Appeals, which had set aside the National Labor Relations Commission's ruling in the University's favor. The dispute is over how the seventy percent incremental proceeds of tuition fee increases should be distributed among employees. The case matters because it settles two things every labor lawyer must know: when a second motion for reconsideration may be entertained, and when a long-standing benefit has ripened into a company practice that cannot be diminished.

Procedural History

The union filed a complaint for non-payment and underpayment of the rank-and-file employees' share of tuition fee increases before the National Labor Relations Commission. The Labor Arbiter ruled for the union, ordering the University to pay the withheld amounts. The University appealed. The National Labor Relations Commission dismissed the appeal and affirmed the Labor Arbiter. The University moved for reconsideration, which was denied, with a warning that no further motion for reconsideration would be entertained. Undeterred, the University filed a second motion for reconsideration. The Commission gave it due course, reversed itself, and declared the salary-percentage distribution valid. The union moved for reconsideration, which was denied. The union then went to the Court of Appeals on certiorari. The appellate court granted the petition, holding that the second motion for reconsideration was a prohibited pleading and did not interrupt the reglementary period, so the earlier denial had become final and executory. The University's motion for reconsideration was denied. Hence, this petition for review on certiorari under Rule 45 before the Supreme Court.

Facts

Before school year 1983-1984, the University distributed the seventy percent incremental proceeds from tuition fee increases in proportion to the average number of academic and non-academic personnel. This scheme was embodied in an Agreement dated October 18, 1983, signed by management, the faculty association, and the union. Starting school year 1994-1995, the University changed the formula and distributed the proceeds based on percentage of salary.

The union objected. Its president wrote letters dated December 22, 1994 and February 23, 1995 to the University President, questioning the new scheme and asking for a tripartite meeting. On June 19, 1995, a tripartite meeting was held among representatives of management, the faculty union, and the employees' association. It was agreed that distribution would be based on percentage of salary. The minutes were signed and attested to by union officers who attended.

On April 27, 1999, the union filed its complaint. The Labor Arbiter ruled for the union, and the Commission initially affirmed. After the Commission reversed itself on the University's second motion for reconsideration, the Court of Appeals set aside that reversal. The University elevated the matter to the Supreme Court.

Issues

• Whether or not the University's second motion for reconsideration before the National Labor Relations Commission is a prohibited pleading.
• Whether or not the change in the scheme of distributing the incremental proceeds from tuition fee increases, from equal sharing to percentage of salary, amounts to a diminution of benefits.

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 Court uses it to test whether the old equal-sharing scheme had ripened into a benefit that could not be withdrawn.

Section 5 of Republic Act Number 6728, as discussed in the decision, provides:

Assistance under paragraph (1), subparagraphs (a) and (b) shall be granted and tuition fees under subparagraph (c) may be increased, on the condition that seventy percent (70%) of the amount subsidized allotted for tuition fee or of the tuition fee increases shall go to the payment of salaries, wages, allowances and other benefits of teaching and non-teaching personnel except administrators who are principal stockholders of the school.

This provision fixes where the seventy percent must go, but, as the Court notes, it is silent on the manner of distribution, leaving that discretion to school authorities.

Article 291 of the Labor Code, on prescription of money claims, is applied by the Court to bar the union's claim.

Ruling

On the first issue, the Court held that while a second motion for reconsideration is generally a prohibited pleading, the Court may suspend the rules in cases of extraordinarily persuasive reasons, such as when a decision is a patent nullity. The rules of procedure are tools to secure, not override, substantial justice, and their rigid application must be avoided where it frustrates justice.

On the second issue, the Court ruled for the University. The change from equal sharing to percentage of salary is not a diminution of benefits. The equal-sharing scheme did not ripen into a company practice because it was not characterized by a deliberate and voluntary act. The Court stressed that the grant of benefits through an erroneous application of the law, due to the absence of clear administrative guidelines, is not a voluntary act that cannot be unilaterally discontinued. The law is silent on the manner of distribution, and the school has discretion. The Court also found that the change was not peremptory, since the union was consulted in the tripartite meeting and its officers signed the minutes. The 1983 Agreement covered only school year 1982-1983 and was superseded by the 1995 agreement. Finally, the Court held that the union's claim had prescribed under Article 291, because the cause of action accrued at the June 19, 1995 meeting, and the complaint was filed only on April 27, 1999, beyond the three-year period.

Doctrine

A second motion for reconsideration is generally a prohibited pleading, but it may be allowed in cases of extraordinarily persuasive reasons, such as when the decision is a patent nullity, because procedural rules must serve substantial justice. The prohibition against diminution of benefits under Article 100 applies only when the grant is founded on an express policy or has ripened into a practice over a long period, characterized by regularity and the employer's voluntary and deliberate intent. A benefit granted through an erroneous application of the law, absent clear administrative guidelines, is not a voluntary act and does not ripen into a vested right. Money claims arising from an employer-employee relationship prescribe in three years from accrual.

Disposition

The petition was granted. The Court of Appeals decision and resolution were reversed and set aside, and the National Labor Relations Commission decision of February 28, 2005 was reinstated, upholding the salary-percentage distribution scheme.

Remember This

Memorize this line: a benefit granted through an erroneous application of the law is not a voluntary act, so it never ripens into a company practice that cannot be diminished. Examiners use this case to test the requisites of a company practice under Article 100 and the narrow exception allowing a second motion for reconsideration.