Case: BPI v BPI Employees Union, G.R. No.

164301, Aug 10 2010

Topic: Right against involuntary Servitude

DOCTRINE: This Court believes that it is contrary to public policy to declare the former FEBTC
employees as forming part of the assets or liabilities of FEBTC that were transferred and
absorbed by BPI in the Articles of Merger. Assets and liabilities, in this instance, should be
deemed to refer only to property rights and obligations of FEBTC and do not include the
employment contracts of its personnel. A corporation cannot unilaterally transfer its employees
to another employer like chattel. Certainly, if BPI as an employer had the right to choose who
to retain among FEBTC’s employees, FEBTC employees had the concomitant right to choose
not to be absorbed by BPI. Even though FEBTC employees had no choice or control over the
merger of their employer with BPI, they had a choice whether or not they would allow
themselves to be absorbed by BPI. Certainly nothing prevented the FEBTC’s employees from
resigning or retiring and seeking employment elsewhere instead of going along with the
proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC

employee without the consent of the employee is in violation of an individual’s freedom to
contract. It would have been a different matter if there was an express provision in the articles
of merger that as a condition for the merger, BPI was being required to assume all the
employment contracts of all existing FEBTC employees with the conformity of the employees.
In the absence of such a provision in the articles of merger, then BPI clearly had the business
management decision as to whether or not employ FEBTC’s employees. FEBTC employees
likewise retained the prerogative to allow themselves to be absorbed or not; otherwise, that
would be tantamount to involuntary servitude.

PETITIONER RESPONDENT

Bank of the Philippine Islands (BPI) BPI Employees Union-Davao Chapter-

Federation of Unions in BPI Unibank

ACTION SEQUENCE:

FACTS
On March 23, 2000, BSP approved the Articles of Merger executed by and between BPI and
FEBTC. This Article and Plan of Merger was approved by thesec. Pursuant to the Article and
Plan of Merger, all the assets and liabilities of FEBTC were transferred to and absorbed by BPI
as the surviving corporation. FEBTC employees, including those in its different branches across
the country, were hired by petitioner as its own employees, with their status and tenure
recognized and salaries and benefits maintained.

Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank

(Union) is the exclusive bargaining agent of BPI's rank and file employees in Davao City. The
former FEBTC rank-and-file employees in Davao City did not belong to any labor union at the
time of the merger. Prior to the effectivity of the merger, respondent Union invited said FEBTC
employees to a meeting regarding the Union Shop Clause (Article II, Section 2) of the existing
CBA between petitioner BPI and respondent Union.
 ARTICLE I
Section 1. Recognition and Bargaining Unit - The BANK recognizes the UNION as the sole and
exclusive collective bargaining representative of all the regular rank and file employees of the
Bank offices in Davao City.
Section 2. Exclusions
Section 3. Additional Exclusions
Section 4. Copy of Contract

ARTICLE II
Section 1. Maintenance of Membership - All employees within the bargaining unit who are
members of the Union on the date of the effectivity of this Agreement as well as employees within
the bargaining unit who subsequently join or become members of the Union during the lifetime
of this Agreement shall as a condition of their continued employment with the Bank, maintain
their membership in the Union in good standing.
Section 2. Union Shop - New employees falling within the bargaining unit as defined in Article I
of this Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30)
days after they become regular employees, join the Union as a condition of their continued
employment. It is understood that membership in good standing in the Union is a condition of
their continued employment with the Bank.

After the meeting called by the Union, some of the former FEBTC employees joined the Union,
while others refused. Later, some of those who initially joined retracted their membership.
Respondent Union then sent notices to the former FEBTC employees who refused to join, as
well as those who retracted their membership, and called them to a hearing regarding the
matter. When these former FEBTC employees refused to attend the hearing, the president of
the Union requested BPI to implement the Union Shop Clause of the CBA and to terminate their
employment pursuant thereto.

After 2 months of management inaction on the request, respondent Union informed petitioner
BPI of its decision to refer the issue of the implementation of the Union Shop Clause of the CBA
to the Grievance Committee. However, the issue remained unresolved at this level and so it
was subsequently submitted for voluntary arbitration by the parties.

After the meeting called by the Union, some of the former FEBTC employees joined the Union,
while others refused. Later, some of those who initially joined retracted their membership.
Respondent Union then sent notices to the former FEBTC employees who refused to join, as
well as those who retracted their membership, and called them to a hearing regarding the
matter. When these former FEBTC employees refused to attend the hearing, the president of
the Union requested BPI to implement the Union Shop Clause of the CBA and to terminate their
employment pursuant thereto.

After 2 months of management inaction on the request, respondent Union informed petitioner
BPI of its decision to refer the issue of the implementation of the Union Shop Clause of the CBA
to the Grievance Committee. However, the issue remained unresolved at this level and so it
was subsequently submitted for voluntary arbitration by the parties.

Voluntary Arbitrator Rosalina Letrondo-Montejo ruled in favor of petitioner BPI's interpretation

that the former FEBTC employees were not covered by the Union Security Clause of the CBA
between the Union and the Bank on the ground that the said employees were not new
employees who were hired and subsequently regularized, but were absorbed employees. The
Voluntary Arbitrator concluded that the former FEBTC employees could not be compelled to
join the Union, as it was their constitutional right to join or not to join any organization.
Respondent Union filed a MR, but the Voluntary Arbitrator denied the same. Dissatisfied,
respondent then appealed the Voluntary Arbitrator's decision to the Court of Appeals. The
Court of Appeals reversed and set aside the Decision of the Voluntary Arbitrator. Likewise, the
Court of Appeals denied herein petitioner's Motion for Reconsideration.

ISSUE/S
Whether or not the former FEBTC employees that were absorbed by petitioner upon the merger
between FEBTC and BPI should be covered by the Union Shop Clause found in the existing
CBA between petitioner and respondent Union.

RULING
YES. THE FEBTC EMPLOYEES SHOULD BE COVERED BY THE UNION SHOP CLAUSE.

Petitioner argues that the term "new employees" in the Union Shop Clause of the CBA is
qualified by the phrases "who may hereafter be regularly employed" and "after they become
regular employees" which led petitioner to conclude that the "new employees" referred to in,
and contemplated by, the Union Shop Clause of the CBA were only those employees who were
"new" to BPI, on account of having been hired initially on a temporary or probationary status for
possible regular employment at some future date. BPI argues that the FEBTC employees
absorbed by BPI cannot be considered as "new employees" of BPI for purposes of applying the
Union Shop Clause of the CBA.

According to petitioner, the contrary interpretation made by the Court of Appeals of this
particular CBA provision ignores, or even defies, what petitioner assumes as its clear meaning
and scope which allegedly contradicts the Court's strict and restrictive enforcement of union
security agreements.

We do not agree. Section 2, Article II of the CBA is silent as to how one becomes a "regular
employee" of the BPI for the first time. There is nothing in the said 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.

"Union security" is a generic term which is applied to and comprehends "closed shop," "union
shop," "maintenance of membership" or any other form of agreement which imposes upon
employees the obligation to acquire or retain union membership as a condition affecting
employment. There is union shop when all new regular employees are required to join the union
within a certain period for their continued employment. There is maintenance of membership
shop when employees, who are union members as of the effective date of the agreement, or
who thereafter become members, must maintain union membership as a condition for continued
employment until they are promoted or transferred out of the bargaining unit or the agreement
is terminated. A closed-shop, on the other hand, may be defined as an enterprise in which, by
agreement between the employer and his employees or their representatives, no person may
be employed in any or certain agreed departments of the enterprise unless he or she is,
becomes, and, for the duration of the agreement, remains a member in good standing of a union
entirely comprised of or of which the employees in interest are a part.

In Liberty Flour Mills Employees v. Liberty Flour Mills, Inc., we ruled that it is the policy of the
State to promote unionism to enable the workers to negotiate with management on the same
level and with more persuasiveness than if they were to individually and independently bargain
for the improvement of their respective conditions.

All employees in the bargaining unit covered by a Union Shop Clause in their CBA with
management are subject to its terms. However, under law and jurisprudence, the following
kinds of employees are exempted from its coverage, namely, 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; employees 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 employees excluded from the union shop by express terms of the
agreement.

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. This Court,
on occasion, has even held that a union security clause in a CBA is not a restriction of the right
of freedom of association guaranteed by the Constitution.

In legal parlance, however, human beings are never embraced in the term "assets and
liabilities." Moreover, BPI's absorption of former FEBTC employees was neither by operation of
law nor by legal consequence of contract. Furthermore, this Court believes that it is contrary to
public policy to declare the former FEBTC employees as forming part of the assets or liabilities
of FEBTC that were transferred and absorbed by BPI in the Articles of Merger. Assets and
liabilities, in this instance, should be deemed to refer only to property rights and obligations of
FEBTC and do not include the employment contracts of its personnel.

DISPOSITIVE PORTION
WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of
the Court of Appeals is AFFIRMED, subject to the thirty (30) day notice requirement imposed
herein. 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.

NOTES
We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI),
that brought the case up to this Court via the instant petition for review; while the employees
actually involved in the case did not pursue the same relief, but had instead chosen in effect to
acquiesce to the decision of the Court of Appeals which effectively required them to comply
with the union shop clause under the existing CBA at the time of the merger of BPI with Far
East Bank and Trust Company (FEBTC), which decision had already become final and
executory as to the aforesaid employees. By not appealing the decision of the Court of Appeals,
the aforesaid employees are bound by the said Court of Appeals' decision to join BPI's duly
certified labor union. In view of the apparent acquiescence of the affected FEBTC employees
in the Court of Appeals' decision, BPI should not have pursued this petition for review. However,
even assuming that BPI may do so, the same still cannot prosper.