Case Digest : American Wire and Cable Daily Rated Employees Union v. American Wire and Cable, April 29, 2005

 

The Parties:

1. American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and cables.  There are two unions in this company, the American Wire and Cable Monthly-Rated Employees Union (Monthly-Rated Union) and the American Wire and Cable Daily-Rated Employees Union (Daily-Rated Union).

2. Daily-Rated Union, petitioner, one of the two unions of American Wire and Cable Co., Inc.

Topics Discussed:

1. Definition of a Bonus.  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 granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits.

In the case of Producers Bank of the Philippines v. NLRC we have characterized what a bonus is, viz.:

a) Payment for industry and loyalty which contributed to business success 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.

b) Act of Generosity It is an act of generosity granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits.

c) Management Prerogative The granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or strictly due the recipient. 

d) Not demandable and enforceable obligation Thus, a bonus is not a demandable and enforceable obligation, except when it is made part of the wage, salary or compensation of the employee. 

2. Rules for a bonus to be enforceable 1) it must have been promised by the employer and expressly agreed upon by the parties, OR 2) it must have had a fixed amount and had been a long and regular practice on the part of the employer.

3. Rules for a bonus to be considered as a regular practice To be considered a “regular practice,” the giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and deliberate.

The downtrend in the grant of the two bonuses over the years demonstrates that there is nothing consistent about it; hence not a "regular practice".

Facts:

1. On 16 February 2001, Monthly-Rated Union and Daily-Rated Union filed an original action for voluntary arbitration alleging that American Wire and Cable Co., the private respondent, without valid cause, suddenly and unilaterally withdrew and denied certain benefits and entitlements which they have long enjoyed.

a) Service Award;

b) 35% premium pay of an employee’s basic pay for the work rendered during selected days of Holy Week and December (Holy Monday, Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29);

c) Christmas Party; and

d) promotional increase for fifteen (15) of its members who were given or assigned new job classifications. According to petitioner, the new job classifications were in the nature of a promotion, necessitating the grant of an increase in the salaries of the said 15 members.

2) The petitioner contends that the withdrawal of the private respondent of the abovementioned benefits violated Article 100 of the Labor Code or the PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS.

• The grant of these benefits was a customary practice that can no longer be unilaterally withdrawn by private respondent without the tacit consent of the petitioner.
• The benefits in question were given by the respondent to the petitioner consistently, deliberately, and unconditionally since time immemorial.
• The benefits/entitlements were not given to petitioner due to an error in interpretation, or a construction of a difficult question of law, but simply, the grant has been a practice over a long period of time.
• As such, the benefits/entitlements cannot be withdrawn from the petitioner at respondent’s whim and caprice, and without the consent of the former.
• The benefits given by the respondent cannot be considered as a “bonus” as they are not founded on profit. Even assuming that it can be treated as a “bonus,” the grant of the same, by reason of its long and regular concession, may be regarded as part of regular compensation.

With respect to the fifteen (15) employees who are members of petitioner union that were given new job classifications, it asserts that a promotional increase in their salaries was in order. Salary adjustment is a must due to their promotion.

3) American Wire and Cable Co. avers that the grant of all subject benefits has not ripened into practice that the employees concerned can claim a demandable right over them.

• The grant of these benefits was conditional based upon the financial performance of the company and that conditions/circumstances that existed before have indeed substantially changed thereby justifying the discontinuance of said grants.
• The company’s financial performance was affected by the recent political turmoil and instability that led the entire nation to a bleeding economy.
• Hence, it only necessarily follows that the company’s financial situation at present is already very much different from where it was three or four years ago.

With respect to the 15 members of petitioner union, American Wire claims that they were not actually promoted. There was only a realignment of positions.

4. Ruling of the Voluntary Arbitrator (Angel A. Ancheta)  The Voluntary Arbitrator declared that the Company is not guilty of violating Article 100 of the Labor Code ; the Company however, is directed 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.

5. An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by the Daily-Rated Union before the Court of Appeals.

6. Ruling of the Court of Appeals The Court of Appeals AFFIRMED and UPHELD the decision of the Voluntary Arbitrator.

Issue:

Whether the benefits/entitlements are in the nature of a bonus or not. The benefits/ entitlements are in the nature of a bonus.

Whether the subject benefits/entitlements, which are bonuses, are demandable or not. Stated another way, can these bonuses be considered part of the wage or salary or compensation making them enforceable obligations? No, because the benefits/entitlements were not promised by the employer and expressly agreed upon by the parties, nor the amount for which have been fixed and had been a long and regular practice on the part of the employer.

Ruling:

The benefits/entitlements subjects of the instant case are all bonuses which were given by the private respondent out of its generosity and munificence.

In the case of Producers Bank of the Philippines v. NLRC we have characterized what a bonus is, viz:

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 granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. The granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus is not a demandable and enforceable obligation, except when it is made part of the wage, salary or compensation of the employee.

The additional 35% premium pay for work done during selected days of the Holy Week and Christmas season, the holding of Christmas parties with raffle, and the cash incentives given together with the service awards are all in excess of what the law requires each employer to give its employees.  Since they are above what is strictly due to the members of petitioner-union, the granting of the same was a management prerogative, which, whenever management sees necessary, may be withdrawn, unless they have been made a part of the wage or salary or compensation of the employees.

The benefits/entitlements cannot be considered part of the wage or salary or compensation making them enforceable obligations.

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.

The benefits/entitlements have not been subjects of any express agreement between the union and the company, and have not yet been incorporated in the CBA. In fact, the petitioner has not denied having made proposals with the private respondent for the service award and the additional 35% premium pay to be made part of the CBA.

The Christmas parties and its incidental benefits, and the giving of cash incentive together with the service award cannot be said to have fixed amounts.  In fact, there had been a downtrend in the amount given as service award. There was also a downtrend with respect to the holding of the Christmas parties in the sense that its location changed from paid venues to one which was free of charge, evidently to cut costs.

Also, the grant of these two aforementioned bonuses cannot be considered to have been the private respondent’s long and regular practice.  To be considered a “regular practice,” the giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and deliberate. The downtrend in the grant of these two bonuses over the years demonstrates that there is nothing consistent about it.

The additional 35% premium pay for work rendered during selected days of the Holy Week and Christmas season cannot be held to have ripened into a company practice that the petitioner herein have a right to demand.  There had been no evidence adduced that it had been a regular practice as observed by the Court of Appeals:

. . . [N]otwithstanding that the subject 35% premium pay was deliberately given and the same was in excess of that provided by the law, the same however did not ripen into a company practice on account of the fact that it was only granted for two (2) years and with the express reservation from respondent corporation’s owner that it cannot continue to grant the same in view of the company’s current financial situation.

To hold that an employer should be forced to distribute bonuses which it granted out of kindness is to penalize him for his past generosity.