In a precedent-setting decision, the Supreme Court (SC) has ruled that corporations cannot invoke their merger with another corporation as a valid ground to exempt its “absorbed employees” from the coverage of a union-shop clause contained in its existing collective bargaining agreement (CBA) with its own certified labor union.

The ruling was made in the petition filed by the Bank of the Philippine Islands (BPI), questioning a decision of the Court of Appeals (CA) requiring former employees of the Far East Bank and Trust Company (FEBTC) – which the BPI had absorbed, following the merger of the two banks in April, 2000 – to become members of the BPI employees’ union.

The respondent in the petition is the BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank, the exclusive bargaining agent of BPI’s rank-and- file employees in Davao City.

The CA, in a decision dated Sept. 30, 2003, reversed an earlier ruling by a voluntary arbitrator and held that former FEBTC employees who were absorbed by BPI after the merger should be covered by union-shop clause found in Article II, Section 2 of the CBA between the BPI and the employees’ union.

The CBA covers the period from April 1, 1996 to Mar. 31, 2001.

Under the provision, new employees who may later on be regularly employed by the bank, within 30 days after they become regular workers, have to join the union as a condition of their continued employment.

The appellate court then required former FEBTC workers to join the BPI union or if they refuse, the company should dismiss them.

While the FEBTC employees chose not to elevate the matter to the SC, the BPI management did otherwise.

In its petition for review, the BPI argued that the former FEBTC workers are not new employees of the bank for purposes of applying the union-shop clause, and that the CA ruling contradicted the High Court’s strict and restrictive enforcement of union security agreements.

The SC did not agree with the BPI and affirmed the 2003 decision of the CA.

It, nevertheless, ruled that the FEBTC employees should be given 30 days from notice of finality of the SC decision to join the union before the latter demands the BPI to terminate their employment under the union-shop clause, “assuming said clause has been carried over in the present CBA and there has been no material change in the situation of the parties.”

The High Court also ordered that “former FEBTC employees who opt not to become union members, but who qualify for retirement shall receive their retirement benefits in accordance with law, the applicable retirement plan, or the CBA, as the case may be.”

In upholding the CA ruling, the SC pointed out that the union-shop clause in the existing CBA between the BPI management and the union is silent on how one becomes a regular employee of the BPI for the first time.

“There is nothing in the provision which requires that a ‘new’ regular employee first undergo a temporary or probationary status before being deemed as such under the union shop clause of the CBA,” n a 41-page decision penned by Associate Justice Teresita Leonardo-De Castro said.

The High Tribunal also pointed out that “the purpose of a union shop or other union security arrangement is to guarantee the continued existence of the union through enforced membership for the benefit of the workers.”

It said all employees in the bargaining unit covered by a union-shop clause in their CBA with management are subject to its terms. “When certain employees are obliged to join a particular union as a requisite for continued employment, as in the case of union security clauses, this condition is a valid restriction of the freedom or right not to join any labor organization because it is in favor of unionism.”

The High Court, however, said that under the law and jurisprudence, there are kinds of workers who are exempted from its coverage.

These are employees who, at the time the union shop agreement takes effect, are bona fide members of a religious organization which prohibits its members from joining labor unions on religious grounds; those who are already in the service and already members of a union other than the majority at the time the union shop agreement took effect; confidential employees who are excluded from the rank and file bargaining unit; and workers excluded from the union shop by express terms of the agreement.

The Court said situation of the former FEBTC employees does not fall within the four exceptions to the application of the union-shop clause.

Moreover, the SC said there is nothing in the Corporation Law and the merger agreement between BPI and FEBTC mandating the automatic employment as regular employees by the surviving corporation in the merger.

It threw out the contention of BPI that it absorbed the former FEBTC employees as a legal consequence of a merger and as being included in the “assets and liabilities” of the dissolved corporation – assets because they help the company in its operation and liabilities because redundant employees may be terminated and company benefits will be paid to them, thus reducing the bank’s financial status.

The SC explained that in the legal parlance “human beings are never embraced in the term ‘assets and liabilities.’”

“In fact, the Corporate Code does not also mandate the absorption of the employees of the non-surviving corporation by the surviving corporation in the case of a merger,” it added.

The Court said the BPI was under no obligation to hire or absorb all employees of FEBTC and even if it does “there is still no basis to conclude that the terms and conditions of employment under a valid CBA in force in the surviving corporation should not be made to apply to the absorbed employees.”

Besides, the Court said the BPI became the employer of the absorbed employees only at some point after the effectivity of the merger, notwithstanding the fact that the absorbed employees’ years of service with FEBTC were voluntarily recognized by BPI.

“Even assuming for the sake of argument that we consider the absorbed FEBTC employees as ‘old employees’ of BPI who are not members of any union, this does not necessarily exclude them from the union security clause in the CBA,” it said.

The Court also noted that there was “no substantial distinction under the CBA between regular employees hired after probationary status and regular employees hired after the merger.”

It added that the non-application of the union-shop clause would be contrary to the policy of the Labor Code and inimical to industrial peace.

“Indeed, a union security clause in a CBA should be interpreted to give meaning and effect to its purpose, which is to afford protection to the certified bargaining agent and ensure that the employer is dealing with a union that represents the interests of the legally mandated percentage of the members of the bargaining unit.”

Also, the Court ruled that “the right of an employee to join a union is not absolute and must give way to the collective good of all members of the bargaining unit.” (Edmer F. Panesa)