Nippon Paint Philippines, Inc. v. NIPPEA (2021)
Nippon Paint Philippines, Inc. v. NIPPEA (2021)
See: Original Decision
Nippon Paint Philippines, Inc. v. NIPPEA, G.R. No. 229396, June 30, 2021, Per Inting, J.:
1. Background
• In 2007, petitioner and Nippon Paint Philippines Employees Association (respondent) entered into a Collective Bargaining Agreement6 (CBA) effective January 1, 2007 until December 31, 2011 (2007 CBA). Section 1, Article 13 of the 2007 CBA provided that petitioner agreed to pay all of its employees their holiday remuneration pay every year on regular holidays listed therein. It further granted all union members premium pay in the amount equivalent to 200% of their regular daily rate during a holiday even if no work was rendered; and those, in the meantime, who are required to work on a regular holiday will be paid the amount equivalent to three times of their regular daily rate, or 300% thereof.
• In 2009, Republic Act No. (RA) 98498 was enacted into law declaring the celebration of Eidul Adha as a regular holiday.
• Petitioner’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 CBA9 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, respondent 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 petitioner could no longer recover as it would be arbitrary, illegal, and tantamount to diminution of benefits.
• For its part, petitioner averred that starting 2012, its employees were no longer entitled to the additional holiday pay for the Eidul Adha. It explained that the overpayments made in 2010 and 2011 were only glitches, or errors in its payroll system that automatically adjusted or increased the employees’ salaries even if Eidul Adha was not listed in the 2007 CBA as a regular holiday. The error was already corrected in 2012; thus, for that year, no additional holiday remuneration was given for the Eidul Adha holiday.
2. SC Decision / Resolution
• In the present case, for a considerable period of time, petitioner has been granting its employees holiday pay which is more than what is provided by law. Specifically, petitioner has been paying its employees an amount equivalent to either 200% of their regular daily rate as premium on unworked regular holidays, or 300% of their regular daily rate on worked regular holidays.
• As a rule, employees have a vested right over existing benefits voluntarily granted to them by their employer. Any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued, or eliminated by the employee The principle of non-diminution of benefits under Article 100 of the Labor Code is actually founded on the constitutional mandate to protect the rights of workers, promote their welfare, and afford them full protection. In turn, Article 4 of the Labor Code states that “[a]ll doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be rendered in favor of labor.”
• There is diminution of benefits “when the following requisites are present: (1) the grant or benefit is founded on a policy or has ripened into a practice over a long period of time; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.”
• In Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., the Court ruled that to establish the existence of 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, i.e., despite the employer’s knowledge that the payment of a benefit is not required by any law or agreement. The Court ruled:
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. 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. 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. (Emphasis supplied; citations omitted.)
• As to the absence of a hard-and-fast rule on the length of time by which a benefit is considered to have ripened into a company practice, the Court, on different occasions, found the existence of a company practice as to the benefits that have been given for six years, three years and nine months, three years and four months, and as will be discussed below, at least two years.
• Here, the Court finds that petitioner’s grant of additional holiday pay for Eidul Adho to its employees for a period of two years ripened into a company practice. Thus, petitioner can no longer withdraw the grant of such additional holiday pay without violating the principle of non-diminution of benefits.
• Similar to the Court’s ratiocination in Sevilla Trading, the Court is not convinced that petitioner merely erred in granting the additional holiday pay for Eidul Adha considering that companies such as petitioner have a meticulous financial audit every year. Thus, a yearly audit of petitioner’s finances particularly in the years 2010 and 2011 as reflected in its financial statements should have made the purported error evident to petitioner. And yet, petitioner did not immediately rectify the purported error as it took two years for petitioner to stop the grant of the additional holiday pay for Eidul Adha. Further, petitioner’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 petitioner’s employees would receive additional holiday pay. The source of the entitlement of petitioner’s employees to the subject additional benefit is not the CBA but company practice.
• All told, the Court finds that petitioner’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 petitioner. Thus, petitioner has the obligation to pay its employee; additional holiday pay for Eidul Adha.
