UNIVERSAL CORN PRODUCTS (A DIVISION OF UNIVERSAL ROBINA CORPORATION), PETITIONER, VS. THE NATIONAL LABOR RELATIONS COMMISSION AND JOSE ARMAS, ENGRACIO ASIS, AUSTERINAO, ELEUTERI…

Universal Corn Products versus National Labor Relations Commission

The Case

This is a petition brought by Universal Corn Products, a division of Universal Robina Corporation, against the National Labor Relations Commission and its workers led by Jose Armas and others. The company asks the Supreme Court to set aside the labor commission's ruling that it must pay its employees a seven-day Christmas bonus under a collective bargaining agreement for the years 1975 to 1978, even though it had been paying the statutory thirteenth-month pay. The case matters because it draws the line between a bonus owed by contract and the thirteenth-month pay owed by law, and it tells us when one may be credited against the other.

Procedural History

The union went to the labor arbiter to compel payment of the seven-day Christmas bonus for 1975 to 1978 under the 1972 collective bargaining agreement. The labor arbiter ruled that the payment of thirteenth-month pay precluded the payment of a further Christmas bonus. The union appealed to the National Labor Relations Commission, which set aside the arbiter's decision and directed the company to pay the members of the union their seven-day wage bonus under the 1972 agreement from 1975 to 1978. The company then came to the Supreme Court by petition, invoking the earlier sugar workers case against Ovejera, and the Court issued a temporary restraining order while it studied the matter.

Facts

In May 1972, the company and the Universal Corn Products Workers Union entered into a collective bargaining agreement. Among its terms, the company agreed to grant all regular workers in the bargaining unit with at least one year of continuous service a Christmas bonus equivalent to their regular wages for seven working days, effective December 1972, to be given in the second week of December. The bonus was to be prorated where a worker's service was not continuous. The agreement ran for three years, from June 1971 to June 1974.

Because of differences on economic issues, that agreement expired without being renewed. In June 1979 the parties signed an addendum granting wage increases for 1974 to 1977, and at the same time entered into a new collective bargaining agreement for 1979 to 1981. Neither the addendum nor the new agreement mentioned the Christmas bonus; they dealt only with salary adjustments. The company says the new agreements deliberately excluded the bonus because Presidential Decree No. 851, the thirteenth-month pay law, had been enacted in December 1975, and that since 1975 it had been paying thirteenth-month pay under the decree.

For the company's failure to pay the seven-day Christmas bonus for 1975 to 1978 under the 1972 agreement, the union sought relief. The labor arbiter denied the claim, but the labor commission reversed, holding that crediting the bonus to the thirteenth-month pay would violate the rule against reducing or eliminating benefits, and that the bonus was not a mere gratuity but a benefit won through bargaining. The commission also noted that the 1979 agreement no longer provided the bonus, which it read as an agreement to discontinue the privilege.

Issues

• Whether or not the thirteenth-month pay required by Presidential Decree No. 851 may be credited against the seven-day Christmas bonus stipulated in the 1972 collective bargaining agreement, so as to excuse the company from paying the bonus for 1975 to 1978.
• Whether or not the silence of the later agreements on the Christmas bonus, and the lapse of any agreement during the bargaining impasse, removed the contractual basis for the workers' claim to the bonus.

Applicable Provisions

Section 10 of the Rules and Regulations Implementing Presidential Decree No. 851 provides:

Section 10. Prohibition against reduction or elimination of benefits. Nothing herein shall be construed to authorize any employer to eliminate, or diminish in any way, supplements, or other employee benefits or favorable practice being enjoyed by the employee at the time of promulgation of this issuance.

This is the provision the labor commission relied on, and it bears on the case because it forbids using the thirteenth-month pay law to take away a benefit the workers already enjoyed.

The 1972 collective bargaining agreement provided on its duration:

If no agreement and negotiations are continued, all the provisions of this Agreement shall remain in full force up to the time a new agreement is executed.

This clause bears on the case because it kept the 1972 terms alive during the years when no new agreement was in force.

Ruling

On the first issue, the Court held that the Ovejera case does not apply, and applied instead the recent ruling in the textile workers case against Valenzuela. There the Court reasoned that if the Christmas bonus had been included in the thirteenth-month pay, there would have been no need for a specific bonus provision in the agreement; that the bonus was graduated according to length of service, showing an intent that it be in addition to the legal requirement; and that a bonus under a collective bargaining agreement is an obligation created by contract while the thirteenth-month pay is mandated by law. Following that reasoning, the Court found the seven-day bonus here to be in addition to the legal requirement. Although the agreement was entered into as early as 1972, before the decree, that was no bar, because the bonus rewarded loyalty, as shown by the grant to workers with at least one year of continuous service, a purpose not found in the decree.

On the second issue, the Court rejected the claim that the bargaining impasse from 1974 to 1979 left no agreement in force. It was undisputed that under the 1972 agreement all its provisions remained in full force until a new agreement was executed. The silence of the new agreements on the seven-day bonus therefore did not defeat the claim, for the 1972 agreement was basis enough, the whole writing being, in the Court's words, instinct with an obligation, imperfectly expressed.

Doctrine

A Christmas bonus stipulated in a collective bargaining agreement is a contractual obligation, while thirteenth-month pay is a statutory obligation under Presidential Decree No. 851; the two are distinct, and payment of the one does not discharge the other. Where the contractual bonus is graduated by length of service and rewards loyalty, a purpose not found in the decree, the intent is that the bonus be in addition to the legal requirement. Under Section 10 of the implementing rules, the thirteenth-month pay law may not be used to eliminate or diminish benefits already enjoyed by employees at the time of its promulgation. And a clause keeping all provisions of an expired agreement in full force until a new agreement is executed preserves the workers' contractual claims despite later silence.

Disposition

The petition was dismissed, the labor commission's decision and resolution were affirmed, and the temporary restraining order was lifted, with the decision declared immediately executory and no pronouncement as to costs.

Remember This

Memorize the line that a bonus under a collective bargaining agreement is an obligation created by contract while thirteenth-month pay is mandated by law, so the two stand side by side. Examiners use this case to test the credit-and-waiver question under Presidential Decree No. 851 and the effect of a hold-over clause in an expired collective bargaining agreement.