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LEPANTO CERAMICS INC v LEPANTO CERAMICS EMPLOYEES ASSOCIATION

2 March 2010 | Carpio, J.

FACTS

1998, P (engaged in buying and selling ceramic tiles and similar products) gave 3k bonus to employees
who are members of R, a legitimate labor organization.

1999, CBA: Grants Christmas package/bonus for members of R. The Christmas bonus was one
of the enumerated existing benefit, practice of traditional rights which shall remain in full force and
effect.

Section 8. All other existing benefits, practice of traditional rights consisting of


Christmas Gift package/bonus, reimbursement of transportation expenses in case of
breakdown of service vehicle and medical services and safety devices by virtue of
company policies by the UNION and employees shall remain in full force and effect.

Section 1. EFFECTIVITY. This agreement shall become effective


on September 1, 1999 and shall remain in full force and effect without change for
a period of four (4) years or up to August 31, 2004 except as to the
representation aspect which shall be effective for a period of five (5) years. It
shall bind each and every employee in the bargaining unit including the present
and future officers of the Union.

1999, 2000 and 2001, the bonus was not in cash. Instead, P gave each of the members of R Tile
Redemption Certificates equivalent to P3,000.00 (OMG so useful <3). The bonus for the year 2002 is the
root of the present dispute. P gave a year-end cash benefit of P600 and offered a cash advance to
interested employees equivalent to one (1) month salary payable in one year. The R objected and argued
that this was in violation of the CBA it executed with the petitioner.

Settlement, mediation failed. In voluntary arbitration, R noted that in a speech during the Christmas
celebration, one of the companys top executives assured the employees of said bonus. However, the
Human Resources Development Manager informed them that the traditional bonus would not be given as
the companys earnings were intended for the payment of its bank loans.

Ps arguments:
1. Extra compensation was based on available resources for a given year and the workers are not entitled
to a bonus if the company does not make profits.
2. P incurred net losses for the years 2001 and 2002 totaling to P1.5 billion; and since 1999, when the
CBA was signed, the companys accumulated losses amounted to over P2.7 billion.
3. Grant of a one (1) month salary cash advance was not meant to take the place of a bonus but was
meant to show the companys sincere desire to help its employees despite its precarious financial
condition.
4. CBA provision on a Christmas gift/bonus refers to alternative benefits.
5. Even if CBA contained an unconditional obligation to grant the bonus, the present difficult economic
times had already legally released it therefrom pursuant to Article 1267 of the Civil Code.

Voluntary arbitrator, CA, and now SC all rule for R.

ISSUE

WON P required to pay Rs Christmas bonus YES

RULING
A bonus is a gratuity or act of liberality. It is given in addition to what is ordinarily received by or strictly
due the recipient. It is granted to an employee for his industry and loyalty which contributed to the
success of the employers business and made possible the realization of profits. It helps to spur the
employee to greater efforts.

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it
must have been promised by the employer and expressly agreed upon by the parties. Given that the
bonus in this case is integrated in the CBA, it is now a demandable obligation. By its incorporation in the
CBA, the Christmas bonus due is more than just an act of generosity but a contractual obligation. In labor
law the CBA is the law between the parties and they are obliged to comply with its provisions.

CBA reveals that the same provides for the Christmas gift package/bonus without qualification. Terse
and clear, the said provision did not state that the bonus depends on the petitioners financial standing.

It is noteworthy that in 1998 and 1999 Financial Statements, P took note that the 1997 financial crisis in
the Asian region adversely affected the Philippine economy. It is clear P was aware of the imminence and
possibility of business losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss of
14M. Yet it gave a 3k bonus.

All given, business losses are a feeble ground to repudiate obligation under CBA. The rule is settled that
any benefit and supplement enjoyed by employees cannot be reduced, diminished, discontinued or
eliminated by the employer. The principle of non-diminution of benefits is founded on the constitutional
mandate to protect the rights of workers and to promote their welfare and to afford labor full protection.

The Court is fully aware that implementation to the letter of the subject CBA provision may further deplete
petitioners resources. Petitioners remedy though lies not in the Courts invalidation of the provision but
in the parties clarification of the same in subsequent CBA negotiations.

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