BANK OF THE PHILIPPINE ISLANDS v BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS

IN BPI UNIBANK
G.R. No. 164301 | August 10, 2010 | LEONARDO-DE CASTRO, J.

FACTS
Pursuant to a merger between BPI and Far East Bank, all employees of the latter, including those in its
different branches across the country, were hired by BPI as its own employees. Their status and tenure
were recognized and salaries and benefits maintained.

The former Far East Bank rank-and-file employees were not part of any union. Before the merger, BPI
Employees Union invited Far East 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.

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.

Some former Far East employees refused to join and some who initially joined retracted their membership.
These employees were called to a hearing, which they refused to attend, so BPI Union president requested
BPI to implement the Union Shop Clause and to terminate the employees.

Voluntary Arbitrator: Former Far East employees are NOT new employees and they cannot be compelled
to join the union.
 VA ruled in favour of 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 by operation of law because the former employees of FEBTC can be
considered assets and liabilities of the absorbed corporation.
Court of Appeals: Reversed VA. Absorbed employees should be considered as NEW employees for the
purpose of applying the union-shop clause
 A union-shop clause has been defined as a form of union security provision wherein non-members
may be hired, but to retain employment must become union members after a certain period.
 Similarities of new and absorbed employees far outweighs the distinction between them. The
similarities lies on the following, to wit: (a) they have a new employer; (b) new working conditions;
(c) new terms of employment and; (d) new company policy to follow. As such, they should be
considered as new employees for purposes of applying the provisions of the CBA regarding the
union-shop clause.
 To rule otherwise would definitely result to a very awkward and unfair situation wherein the
absorbed employees shall be in a different if not, better situation than the existing BPI
employees. The existing BPI employees by virtue of the union-shop clause are required to pay the
monthly union dues, remain as members in good standing of the union otherwise, they shall be
terminated from the company, and other union-related obligations. On the other hand, the
absorbed employees shall enjoy the fruits of labor of the petitioner-union and its members for
nothing in exchange. Certainly, this would disturb industrial peace in the company which is the
paramount reason for the existence of the CBA and the union.

ISSUE
Whether or not the former Far East employees that were absorbed by petitioner upon the merger should
be covered by the Union Shop Clause found in the existing CBA between BPI and its Union. YES.

HELD: 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

RATIO

1. Former Far East employees do not fall under any of the employees exempted from coverage of a
Union-Shop Clause:
1. 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;
2. Employees already in the service and already members of a union other than the majority at the
time the union shop agreement took effect;
3. Confidential employees who are excluded from the rank and file bargaining unit;
4. Employees excluded from the union shop by express terms of the agreement.

2. Former Far East employees are neither assets not liabilities. Employees can choose to not be absorbed
 Human beings are never embraced in the terms assets and liabilities
 BPI’s absorption of Far East Bank was neither by operation of law or by contract. Had there been a
law, absorption of the employees would have been mandatory. Neither does the Corp Code
mandate the absorption of employees in the case of a merger
 Articles of the merger did not contain specific stipulations regarding employment contracts
  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 FEBTCs employees, FEBTC
employees had the concomitant right to choose not to be absorbed by BPI.
 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 individuals freedom to contract.
 For the employee to be absorbed by BPI, it requires the employees implied or express consent. It is
because of this human element in employment contracts and the personal, consensual nature
thereof that we cannot agree that, in a merger situation, employment contracts are automatically
transferable from one entity to another in the same manner that a contract pertaining to purely
proprietary rights such as a promissory note or a deed of sale of property is perfectly and
automatically transferable to the surviving corporation.

3. Absorbed employees are “NEW EMPLOYEES” under union-shop clause of the CBA, therefore they are
under its coverage
 According to BPI, term “new employees” refers to employees hired as non-regular who later qualify
for regular employment as well as those who are automatically deemed regular employees as a
consequence of a merger. However, the CBA does not make a distinction as to how a regular
employee attains such a status. There is nothing in the Section 2, Article II of the CBA that 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.
 There is nothing in the Corporation Law and the merger agreement mandating the automatic
employment as regular employees by the surviving corporation in the merger.
 BPI failed to point to any provision in the CBA expressly excluding from the Union Shop Clause new
employees who are absorbed as regular employees from the beginning of their employment.
 What is indubitable from the Union Shop Clause is that upon the effectivity of the CBA, BPI’s new
regular employees (regardless of the manner by which they became employees of BPI) are required
to join the Union as a condition of their continued employment.
 In law or even under the express terms of the CBA, there is no special class of employees called
absorbed employees. In order for the Court to apply or not apply the Union Shop Clause, we can
only classify the former FEBTC employees as either old or new. If they are not old employees, they
are necessarily new employees. If they are new employees, the Union Shop Clause did not
distinguish between new employees who are non-regular at their hiring but who subsequently
become regular and new employees who are absorbed as regular and permanent from the
beginning of their employment. The Union Shop Clause did not so distinguish, and so neither must
we.

4. The non-application of the Union Shop Clause is contrary to the Policy of the Labor Code and inimical
to industrial Peace
 It is but fair that similarly situated employees who enjoy the same privileges of a CBA should be
likewise subject to the same obligations the CBA imposes upon them.
 Justice Brion’s dissent argues that absorbed employees may simply pay agency fees in lieu of
membership. No. Other new regular employees, to whom the absorbed employees should be
compared, do not have the option to simply pay the agency fees and they must join the Union or
face termination. Treating these absorbed employees as a special class of new employees does not
encourage worker solidarity in the company since another class of new employees (i.e. those
 whose were hired as probationary and later regularized during the life of the CBA) would not have
the option of substituting union membership with payment of agency fees.
 Restrictive reading of the Union Shop Clause could also inadvertently open an avenue, which an
employer could readily use, in order to dilute the membership base of the certified union in the
collective bargaining unit
 The union shop clause offers protection to the certified bargaining agent by ensuring that future
regular employees who (a) enter the employ of the company during the life of the CBA; (b) are
deemed part of the collective bargaining unit; and (c) whose number will affect the number of
members of the collective bargaining unit will be compelled to join the union. Such compulsion has
legal effect, precisely because the employer by voluntarily entering in to a union shop clause in a
CBA with the certified bargaining agent takes on the responsibility of dismissing the new regular
employee who does not join the union.
 Plainly, the restrictive interpretation of the union shop clause would place the certified unions very
existence at the mercy and control of the employer. Relevantly, only BPI, the employer appears to
be interested in pursuing this case. The former FEBTC employees have not joined BPI in this appeal.

5. Right of an employee not to join a union is not absolute and must give way to the collective good of all
members of the bargaining unit
 The dissenting opinions place a premium on the fact that even if the former FEBTC employees are
not old employees, they nonetheless were employed as regular and permanent employees without
a gap in their service. However, an employee’s permanent and regular employment status in itself
does not necessarily exempt him from the coverage of a union shop clause.
 Even more stringent union security clauses can be made applicable to old/regular/permanent
employees who choose not to join a union.
 Juat v Court of Industrial Relations: an old employee who had no union may be compelled to join
the union even if the collective bargaining agreement (CBA) imposing the closed shop provision was
only entered into seven years after of the hiring of the said employee.
 There is nothing in law or jurisprudence to prevent an employer and a union from stipulating that
existing employees (who already attained regular and permanent status but who are not members
of any union) are to be included in the coverage of a union security clause.
 Time and again, this Court has ruled that the individual employees right not to join a union may be
validly restricted by a union security clause in a CBA and such union security clause is not a violation
of the employees constitutional right to freedom of association. (SC explained why the cases cited
in the dissent are not applicable in the case at hand)
 The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon
the individual employees right or freedom of association, is not to protect the union for the
unions sake. Laws and jurisprudence promote unionism and afford certain protections to the
certified bargaining agent in a unionized company because a strong and effective union
presumably benefits all employees in the bargaining unit since such a union would be in a better
position to demand improved benefits and conditions of work from the employer.
 Their joining the certified union would, in fact, be in the best interests of the former FEBTC
employees for it unites their interests with the majority of employees in the bargaining unit. It
encourages employee solidarity and affords sufficient protection to the majority status of the union
during the life of the CBA which are the precisely the objectives of union security clauses
 Employees who refuse to join still have benefits: BPI expressly recognized under the merger the
length of service of the absorbed employees with FEBTC. Should some refuse to become members
of the union, they may still opt to retire if they are qualified under the law, the applicable
retirement plan, or the CBA, based on their combined length of service with FEBTC and BPI.