G.R. NO.

164301
BANK OF THE PHILIPPINE ISLANDS v BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS

May a corporation invoke its merger with another corporation as a valid ground to exempt its
absorbed employees from the coverage of a union shop contained in its exising Collective Bargaining
Agreement (CBA) with its own certified labor union? That is the question we shall endeavor to answer
in this petition for review filed by an employer after the Court of Appeals decided in favor of
respondent union, whish is the employees recognized collective bargaining representative.

FACTS:
January 20, 2000 > Articles of Merger was executed between Bank of the Philippine Islands
(BPI) and Far East Bank and Trust Company (FEBTC)
March 23, 2000 > Bangko Sentral ng Pilipinas approved the Articles of Merger
April 27, 2000 > Article and Plan of Merger was approved by the SEC

All assets and liabilities of FEBTC were transferred to and absorbed by BPI
FEBTC employees from all over the country were hired by BPI as its own employee
Status of tenure recognized, and salaries and benefits maintained
BPI Employees Union-Davao Chapter Federation of Unions in BPI Unibank is the
exclusive bargaining agent of BPIs rank and file employees in Davao City
Union called absorbed FEBTC employees to discuss provisions of the CBA

ARTICLE I of CBA
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 of CBA
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.xlii[8] (Emphases supplied.)

Some FEBTC employees joined the Union, others refused. Later on, those who initially
joined retracted their membership.
Union sent notices to FEBTC employees to attend a hearing regarding membership; the latter
refused.
Union requested BPI to implement the UNION SHOP CLAUSE (Art. II, Sec. II) of the CBA, and
 to terminate the employment of those who refused.
Two months of inaction from BPI, issue was submitted to Grievance
committee but remained unresolved.Submitted for Voluntary Arbitration
(VA).

Voluntary Arbitor Ruling

FEBTC employees cannot be compelled to join union, on the ground that absorbed
employees are not NEW employees
By operation of law, former employees of FEBTC are considered part of the assets and
liabilities of the absorbed corporation.
MR denied.

CA Ruling
Controversy lies in the application of Union-shop clause to absorbed employees
Agreed with VA that absorbed employees are not new employees
SIMILARITIES of new and absorbed employees FAR OUTWEIGH their DISTINCTION
Similarities:
New employer
New working conditions
New terms of employment
New company policy to follow
As such, they should be considered new employees in the application of the provisions of
the CBA
Citing SC ruling on Manila Mandarin Employees Union vs NLRC:
A closed-shop agreement is an agreement whereby an employer binds himself to hire
only members of the contracting union who must continue to remain members in good
standing to keep their jobs. It is THE MOST PRIZED ACHIEVEMENT OF UNIONISM. IT
ADDS MEMBERSHIP AND COMPULSORY DUES. By holding out to
loyal members a promise of employment in the closed-shop, it wields group solidarity.

CA reversed and set aside the ruling of VA. Requires absorbed employees to join the
union or be dismissed.
ISSUES:

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FORMER
FEBTC EMPLOYEES SHOULD BE CONSIDERED NEW EMPLOYEES OF BPI FOR PURPOSES OF
APPLYING THE UNION SHOP CLAUSE OF THE CBA

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
VOLUNTARY ARBITRATORS INTERPRETATION OF THE COVERAGE OF THE UNION SHOP
CLAUSE IS AT WAR WITH THE SPIRIT AND THE RATIONALE WHY THE LABOR CODE ITSELF
ALLOWS THE EXISTENCE OF SUCH PROVISION
SC Ruling
SC does not concur with BPI's contention that new employees who have been regularized are
those who went through a temporary of probationary status. It is not stipulated in the union
shop clause of the CBA
 Kinds of UNION SECURITY:
UNION SHOP: All new regular employees are required tojoin the union within a
certain period for their continued employment.
MAINTAINANCE OF MEMBERSHIP SHOP: Existing members as of the effectivity of the
agreement, or those who join thereafter, MUST maintain union membership for
continued employment.
CLOSED SHOP: No person may be employed in any or agreed departments of the
enterprise unless he/she becomes a member for the duration of the agreement,
remains in good standing.
Purpose of Union shop/Union security is to guarantee the continued existence of the
union through enforced membership
SC on Liberty Flour Mills Employees v Liberty Flour Mills, Inc:
It is the policy of the State to promote unionism to enable workers to regotiate with
management on the same level and with more persuasiveness than if they were to
individually and indepedently bargain for the improvement of their respective
conditions.
FEBTC employees do not fall under any of the exceptions on Union shop coverage
EXCEPTIONS (XPN):
Employees who are bona fide members of the religious organization which prohibits
its members to join labor unions on religious grounds
XPN to the XPN
Employees who are already members of another union upon the time when the union
shop took effect
Confidential employees who are excluded from the rank and file bargaining unit
Employees excluded from the Union shop by express terms of the agreement
FEBTC are neither Assets nor Liabilities
In legal parlance, human beings are never embraced in the terms
Absorption of employees were neither by operation of law nore by legal consequence of
contract.
No government intervention compelled the merger
The corporation does not mandate the absorption of the employees of the non-surviving
corporation by the surviving corporation (Section 80 of Corpo Code).
BPI and the absorbed employees have the option to accept or severe their ties
Articles of Merger and Plan of Merger did not contain any specific stipulation with
respect to employment contracts of FEBTC employees
Justice Brion dissented that absorbed employees should be part of the right and
obligations passed from non-surviving corp to surviving corp to protect labor
Ponente pointed out that conditions, i.e. redundancy, may happen in mergers
and superflous employees may terminated without violating their security of
tenure.
Empowering the Union Shop clause:
Art. 248 (e) of the Labor Code mandates that nothing in the said Code or any other law
should stop the parties from requiring membership in a recognized collective bargaining
agreement as a condition of employment
There is no substantial distinction under the CBA between Regular Employees HIRED
AFTER PROBATIONARY STATUS and Regular Employees HIRED AFTER THE MERGER
Non-application of Union Shop Clause is contrary to Labor Code policy and inimical
 (disruptive) to industrial peace
Unions are purposely made to give employees a collective voice to deal with employers.
If non- membership is allowed, there will come a time when the union will be
outnumbered and overpowered by non-members that its purpose is extinguished.
Employees who are enjoying the benefits of the CBA should also be subject to the
obligations imposed by the CBA
Right of an employee not to join a Union is NOT ABSOLUTE
Especially in a closed shop clause, where all employees are required to join the union as a
condition of employment/continued employment, except for those mentioned in the
amendment of Section 4(a)(4) of the Industrial Peace Act by RA 3350.
The right to abstain from joining a labor organization is subordinate to the policy
encouraging unionism as an instrument of social justice.
WHEREFORE, the petition is hereby DENIED, and the Decision of the CA is AFFIRMED,
subject to 30 day notice requirement imposed herein. Former FEBTC employees who opt
not to become union members but who qualify for retirement shall receiver their
retirement benefits in accordance with law, the applicable retirement plan, or the CBA, as
the case may be.