Company practice

1. Concept

As a rule, “practice” or “custom” is not a source of a legally demandable or enforceable right. In labor cases, however, benefits which were voluntarily given by the employer, and which have ripened into company practice, are considered as rights and are subject to the non-diminution rule. To be considered a company practice, the benefit must be consistently and deliberately granted by the employer over a long period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employee is not covered by any provision of law or agreement for its payment. (Home Credit Mutual Building and Loan Association v. Prudente, G.R. No. 200010, 27 August 2020)

2. Requisites

1) Regularity

2) Voluntary

3) Deliberate intent

In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, 01 April 2013)

a. Regularity

1) No set length of time

Jurisprudence has not laid down any hard-and-fast rule as to the length of time that company practice should have been exercised in order to constitute voluntary employer practice. The common denominator in previously decided cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring payment thereof. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, 01 April 2013)

With regard to the length of time the company practice should have been exercised to constitute voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the company practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez, the employer, for three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer carried on the practice of giving a fixed monthly emergency allowance from November 1976 to February 1980, or three (3) years and four (4) months. In all these cases, this Court held that the grant of these benefits has ripened into company practice or policy which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the computation of their 13th-month pay for at least two (2) years. This, [the Supreme Court rules] likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code. (Sevilla Trading Company v. A.V.A. Tomas E. Semana, G.R. No. 152456, 28 April 2004)

b. Voluntariness

There must be an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring the grant thereof. (Yushi Kondo v. Toyota Boshoku [Phils.], G.R. No. 201396, 11 September 2019)

Nippon Paint Philippines, Inc. v. NIPPEA

G.R. No. 229396, 30 June 2021

[BACKGROUND]

In 2009, Republic Act No. (RA) 98498 was enacted into law declaring the celebration of Eidul Adha as a regular holiday.

[The Company’s] employees regularly received their holiday pay for the enumerated regular holidays in 2010 and 2011. Apparently, the employees received an additional holiday pay for the Eidul Adha. Still, upon the execution of a new CBA on March 21, 2012 (2012 CBA) which was a renewal of the 2007 CBA, the Eidul Adha was not mentioned as one of the regular holidays. Therefore, in 2012, all the employees were not given the holiday pay corresponding to the Eidul Adha.

Thus, [the Union] argued that consistent with the company practice, the employees were entitled to 200% of their regular daily rate for regular holidays, if unworked, and 300%, if worked. It claimed that the additional holiday pay for the Eidul Adha has ripened into a company practice which [the Company] could no longer recover as it would be arbitrary, illegal, and tantamount to diminution of benefits.

[RESOLUTION]

[The Supreme Court] is not convinced that [the Company] merely erred in granting the additional holiday pay for Eidui Adha considering that companies such as [the Company] have a meticulous financial audit every year. Thus, a yearly audit of [the Company’s] finances particularly in the years 2010 and 2011 as reflected in its financial statements should have made the purported error evident to [the Company]. And yet, [the Company] did not immediately rectify the purported error as it took two years for [the Company] to stop the grant of the additional holiday pay for Eidul Adha. Further, [the Company’s] allegation that it only discovered the error in the payment of additional holiday pay for Eidul Adha is unsubstantiated by any evidence.

The Court finds as immaterial to the case the fact that Eidul Adha was not included in the 2012 CBA’s list of regular holidays for which [the Company’s] employees would receive additional holiday pay. The source of the entitlement of [the Company’s] employees to the subject additional benefit is not the CBA but company practice.

All told, the Court finds that [the Company’s] payment of additional holiday pay for Eidul Adha in favor of its employees has ripened into a company practice which can no longer be withdrawn by [the Company]. Thus, [the Company] has the obligation to pay its employee; additional holiday pay for Eidul Adha.

c. Deliberate intent

In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, 01 April 2013)

Philippine Journalists, Inc. v. De Guzman

G.R. No. 208027 01 April 2019

[BACKGROUND]

[The Complainants] are both employees of [the Company]. De Guzman started with the company on 11 May 1994 and left the company on 15 November 2008. She was an Ad Taker/Account Executive with a salary of Php23,000.00 plus commission. On the other hand, Quirante was employed since 05 September 1989 and was the HRD Supervisor at the time of the cessation of her employment on 15 March 2009 with a salary of Php25,522.20.

On 28 October 2008 and 23 January 2009 respectively, [the Complainants], in separate letters, informed the company of their desire to avail of the company’s optional retirement plan as embodied in the Collective Bargaining Agreement.

[ISSUE: Whether or not the grant of optional retirement benefits in the past, constituted company practice.]

[RESOLUTION]

The grant of optional retirement benefits to two management employees in the past was voluntary, deliberate, and done with sufficient regularity as would indicate that this had become a company practice within [the Company], which [the Company] now refuse to apply in the case of respondents, on the pretext that the company was losing money at that time. But [the Company] was not incurring losses, and was in fact exhibiting conduct inconsistent with the claim. What is clear is that it engaged in unfair labor activities and took an anti-labor stance at the expense of its employees, including respondents. [the Company] has shown that its employees’ interests take a backseat to the perks and prerogatives of management. This cannot be countenanced.

3. Test

To be considered a company practice, the giving of the benefits should have been done over a long period of time, and must be shown to have been consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof. (Societe Internationale de Telecommunications Aeronautiques v. Huliganga, G.R. No. 215504, 20 August 2018)

___________________

Societe Internationale de Telecommunications Aeronautiques v. Huliganga

G.R. No. 215504, 20 August 2018

[RESOLUTION]

To prove that the giving of the benefits claimed by [the Complainant] had been a company practice, he presented the affidavit of [D. Beaniza] who was the Administrative Assistant to the Country Manager/Representative stating that [the Company] had adopted the formulation provided in the CBA to its managerial employees. The NLRC, however, is correct in ruling that the said affidavit deserves scant consideration because Beaniza lacks the competency to determine what is considered as a company practice, thus:

In her affidavit, Ms. Beaniza stated that respondent [the Company] had consistently adopted the policy to extend to managerial and confidential employees all favorable benefits agreed upon in the CBA with union members. However, as correctly held by the Labor Arbiter, the said affidavit deserves scant consideration considering that Ms. Beaniza had been retired from service since 1997 or 12 years ago. She, therefore, lacks the competency to determine with accuracy what is considered a company practice. It was also held by the Labor Arbiter that even if Ms. Beaniza’s retirement was based on the rate provided in the then prevailing CBA, this does not convert the concession into a company practice.

We also have noted that though Ms. Beaniza stated that company policies have been implemented as early as the time when SITA Employees’ Union was formed in the 1970s, she was employed by [the Company] only in September 1980. Accordingly, she cannot testify on matters or circumstances that happened before she was employed by [the Company].

Ms. Beaniza attested that she and other previous retirees have availed of the company practice. However, she failed to name or identify any other employee who had availed of the said company practice and given retirement benefits under the CBA. If indeed Ms. Beaniza was given retirement benefits above the amount she is entitled to, this could be interpreted to be based merely on the generosity on the part of [the Company].

It is noted that Ms. Beaniza retired sometime in 1997. She, therefore, has no knowledge of circumstances that transpired after her retirement to present. She was in no position and had no authority to say that there was an established long standing company policy of extending CBA benefits to managerial employees.1awp++i1

In the same affidavit, Ms. Beaniza was supposed to have communicated to [the Company’s] office based in Singapore stating that [the Company’s] practice in the grant of retirement benefits was lifted from the CBA provisions existing at the time. Even if such communication was sent, it does not categorically prove or establish that CBA benefits were actually granted to managerial and confidential employees.

[The Company], therefore, failed to substantially establish that there is an established company practice of extending CBA concessions to managerial employees. Again, to be considered a company practice or policy, the act of extending benefits of the CBA to managerial employees must have been practiced for a long period of time and must be shown to be consistent and deliberate.

4. Substantial evidence

To be considered as a regular company practice, the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, 01 April 2013)

___________________

Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc.

G.R. No. 176985, 01 April 2013

[ISSUE: Whether or not a sales incentive included in the retirement benefits of previous emails, constitute as a company practice.]

[RESOLUTION]

Upon review of the entire case records, [the  Supreme Court finds] no substantial evidence to prove that the grant of  SMI [Sales Management Incentives] to all retired DSSs [Direct Sales Supervisors] regardless of whether or not they qualify to the same had ripened into company practice. Despite more than sufficient opportunity given him while his case was pending before the NLRC, the CA, and even to this Court, [the Complainant] utterly failed to adduce proof to establish his allegation that SMI has been consistently, deliberately and voluntarily granted to all retired DSSs without any qualification or conditions whatsoever. The only two pieces of evidence that he stubbornly presented throughout the entirety of this case are the sworn statements of [R. Hidalgo] and [R. Velazquez] (Velasquez), former DSSs of [the Company] who retired in 2000 and 1998, respectively. They claimed that the SMI was included in their retirement package even if they did not meet the sales and collection qualifiers. However, juxtaposing these with the evidence presented by [the Company] would reveal the frailty of their statements.

The declarations of Hidalgo and Velazquez were sufficiently countered by [the Company] through the affidavits executed by [N. Biola] (Biola), [M. Escasura] (Escasura), and [M. Balles] (Balles). Biola pointed out the various stop-gap measures undertaken by [the Company] beginning 1999 in order to arrest the deterioration of its accounts receivables balance, two of which relate to the policies on the grant of SMI and to the change in the management structure of [the Company] upon its re-acquisition by San Miguel Corporation. Escasura represented that he has personal knowledge of the circumstances behind the retirement of Hidalgo and Velazquez. He attested that contrary to [the Complainant’s] claim, Hidalgo was in fact qualified for the SMI. As for Velazquez, Escasura asserted that even if he (Velazquez) did not qualify for the SMI, [the Company’s] General Manager in its Calamba plant still granted his (Velazquez) request, along with other numerous concessions, to achieve industrial peace in the plant which was then experiencing labor relations problems. Lastly, Balles confirmed that [the Complainant] failed to meet the trade receivable qualifiers of the SMI. She also cited the cases of [E. Valencia] (Valencia) and [E. Gutierrez] (Gutierrez), both DSSs of [the Company] who retired on January 31, 2002 and December 30, 2002, respectively. She noted that, unlike Valencia, Gutierrez also did not receive the SMI as part of his retirement pay, since he failed to qualify under the policy guidelines. The verity of all these statements and representations stands and holds true to Us, considering that [the Complainant] did not present any iota of proof to debunk the same.

Therefore, [the Company’s] isolated act of including the SMI in the retirement package of Velazquez could hardly be classified as a company practice that may be considered an enforceable obligation. To repeat, the principle against diminution of benefits is applicable only if the grant or benefit is founded on an express policy or has ripened into a practice over a long period of time which is consistent and deliberate; it presupposes that a company practice, policy and tradition favorable to the employees has been clearly established; and that the payments made by the company pursuant to it have ripened into benefits enjoyed by them. Certainly, a practice or custom is, as a general rule, not a source of a legally demandable or enforceable right. Company practice, just like any other fact, habits, customs, usage or patterns of conduct, must be proven by the offering party who must allege and establish specific, repetitive conduct that might constitute evidence of habit or company practice.

5. Burden of proof: employee

The burden to establish that the benefit has ripened into a company practice rests with the employee. (Home Credit Mutual Building and Loan Association v. Prudente, G.R. No. 200010, 27 August 2020)

___________________

Home Credit Mutual Building and Loan Association v. Prudente

G.R. No. 200010, 27 August 2020

[BACKGROUND]

In 1997, [the Company] gave its employee [the Complainant] her first service vehicle. Later, [the Complainant] purchased the vehicle from [the Company] at its depreciated value. In 2003, [the Company] granted [the Complainant’s] request for a second service vehicle. However, [the Company] required [the Complainant] to pay for additional equity in excess of the maximum limit of P660,000.00. In 2008, [the Complainant] again purchased the vehicle at its depreciated value.

In 2009, [the Complainant] applied for a third service vehicle. This time, [the Company] informed [the Complainant] that she must pay the equity more than P550,000.00. [The Company] likewise adopted a cost sharing scheme where [the Complainant] must shoulder 40% of the acquisition price. Aggrieved, [the Complainant] filed a complaint against [the Company] for violation of Article 100 of the Labor Code on non-diminution of benefits before the Labor Arbiter (LA).

On October 30, 2009, the LA dismissed [the Complainant’s] complaint and held that [the Company’s] new 60%-40% cost sharing scheme on the acquisition of service vehicle did not constitute diminution of benefit. The LA explained that what ripened into a company practice is the employer’s act of granting transportation facility to its employees. However, as to the specific details of the grant, i.e., the covered employees, period of depreciation, car model, company share or participation, may vary as these call for the exercise of management prerogative…

[RESOLUTION: The employer was not held liable; there was no company practice established.]

[The Supreme Court finds] that the car plan has not ripened into a company practice. As a rule, “practice” or “custom” is not a source of a legally demandable or enforceable right. In labor cases, however, benefits which were voluntarily given by the employer, and which have ripened into company practice, are considered as rights and are subject to the non-diminution rule. To be considered a company practice, the benefit must be consistently and deliberately granted by the employer over a long period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employee is not covered by any provision of law or agreement for its payment. The burden to establish that the benefit has ripened into a company practice rests with the employee.

Here, the labor tribunals correctly held that [the Company’s] act of giving service vehicles to [the Complainant] has been a company practice – but not as to the non-participation aspect. There was no substantial evidence to prove that the car plan at full company cost had ripened into company practice. Notably, the only time [the Complainant] was given a service vehicle fully paid for by the company was for her first car. For the second vehicle, the company already imposed a maximum limit of P660,000.00 but [the Complainant] never questioned this. She willingly paid for the equity in excess of said limit. Thus, the elements of consistency and deliberateness are not present.

Disclaimer: All information is for educational and general information only. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.

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