Traders Royal Bank v. National Labor Relations Commission & Traders Royal Bank Employees Union
REITERATIONFacts
The Antecedents: The Traders Royal Bank Employees Union (Union) filed a complaint against Traders Royal Bank (TRB) alleging diminution of benefits. Specifically, the Union claimed that TRB withheld the basis of computation for holiday pay, which allegedly decreased the employees' daily salary rate, overtime rate, and take-home pay. The Union also alleged a diminution in mid-year and year-end bonuses, from two months' gross pay to two months' basic pay for the mid-year bonus, and from three months' gross pay to two months' gross pay for the year-end bonus. Additionally, the Union complained about TRB's refusal to recall active union members from transferred branches without prior notice. Procedural History: The complaint was initially filed with the Conciliation Division of the Bureau of Labor Relations but was certified to the National Labor Relations Commission (NLRC) by the Secretary of Labor due to jurisdictional issues. While negotiations for a Collective Bargaining Agreement (CBA) were ongoing, the parties agreed that the whole of bonuses given in previous years was not demandable if less than that given in previous years, and that only two months' bonus was guaranteed as part of regular compensation, with subsequent bonuses dependent on the bank's income. Despite the CBA terms, the Union insisted on pursuing the case, arguing prospective application of the CBA. TRB maintained it paid holiday pay and that bonuses were dependent on profitability. The NLRC rendered a decision in favor of the employees, ordering TRB to pay holiday differential and mid-year/year-end bonus differential for 1986. TRB's motion for reconsideration was denied. The Petition: TRB filed a petition for certiorari with the Supreme Court, seeking to nullify the NLRC decision, arguing that the NLRC gravely abused its discretion in ordering the payment of bonus differentials.
Issue(s)
Whether the NLRC gravely abused its discretion in ordering TRB to pay mid-year/year-end bonus differentials for 1986; whether the decrease in mid-year and year-end bonuses constituted a diminution of employees' salaries; and whether the granting of bonuses had ripened into a company practice that could not be adjusted to the bank's prevailing financial condition.
Ruling
The petition for certiorari is granted. The decision of the National Labor Relations Commission is modified by deleting the award of bonus differentials to the employees for 1986. In other respects, the decision is affirmed. Costs against the respondent union.
Ratio Decidendi
On the issue of bonus differentials, diminution of benefits, and company practice: The Supreme Court granted the petition, modifying the NLRC decision by deleting the award of bonus differentials for 1986. The Court reiterated the established doctrine that a bonus is a gratuity or an act of liberality, which the recipient has no right to demand as a matter of right. It is something given in addition to what is ordinarily received or strictly due. The granting of a bonus is fundamentally a management prerogative, and an employer cannot be compelled to assume the onerous burden of granting bonuses or other benefits beyond the employee's basic salaries or wages. The Court emphasized that the matter of giving bonuses over and above lawful salaries and allowances is entirely dependent on the profits realized by the bank from its operations during the past year. In this case, the bank's income had decreased from 1979-1985, and in 1986, despite a decline in income, the bank still gave out bonuses based on two months' basic mid-year and two months' gross year-end bonuses. The Court found that the Union's contention that the granting of bonuses had ripened into a company practice had no legal or moral basis, especially considering the bank's weakened fiscal condition due to political developments and sequestration. The Court concluded that the bank, facing financial decline, could not be forced to distribute bonuses it could no longer afford to pay and should not be penalized for its past generosity. Furthermore, the Court clarified that the decrease in mid-year and year-end bonuses did not constitute a diminution of employees' salaries because bonuses are not considered labor standards in the same category as salaries, cost of living allowances, holiday pay, and leave benefits, which are mandated by the Labor Code. The Court also noted that the claim for holiday differential for the period earlier than November 11, 1983, had prescribed, and the charge of unfair labor practice was dismissed for lack of merit.
Main Doctrine
A bonus is a gratuity or act of liberality which the recipient has no right to demand as a matter of right. The granting of a bonus is a management prerogative, and an employer may not be obliged to grant bonuses if its financial condition has declined, especially if the bonus is not part of labor standards provided by the Labor Code.