BPI v. BPI EU Davao-Chapter G.R. No.

164301
August 10, 2010 Leonardo-De Castro, J.
TOPIC IN SYLLABUS: ILO Convention No. 87
SUMMARY: BPI and FEBTC merged with the former as the surviving corp. FEBTC’s employees were absorbed by BPI.
BPI-EU of Davao Chapter invited the said employees to join the union pursuant to a union shop clause in the existing
CBA between the union and BPI. The employees refused membership; hence, the union requested that they be terminated.
BPI, however, did not act upon the request. VA ruled in BPI’s favor, stating that the absorbed employees are not covered
by the union shop clause since they were not “new” employees that needed to be regularized. Rather, they were part of
the assets and liabilities it assumed pursuant to the merger. CA reversed, stating that they are covered by the clause. SC
affirmed. The individual employee’s right to refrain from joining a union is not absolute and may be limited by a union
security clause.

FACTS:
 BSP, as well as SEC, approved the Articles and Plan of Merger between BPI and FEBTC, with the former as the
surviving corporation absorbing all the assets and liabilities of the latter. FEBTC employees were hired by BPI as its
own employees, with their status and tenure recognized, and salaries and benefits maintained.
 Prior to the effectivity of the Merger, respondent Union, SEBA of BPI’s RF employees in Davao, invited the absorbed
employees who did not belong to any union at the time, to a meeting re: Union Shop Clause 1 of the existing CBA
between BPI and BPI-EU. Some of the absorbed employees joined the Union, while some didn’t. Subsequently, those
who joined retracted their membership.
 The Union then sent notices to these employees and called a hearing, but they refused to attend the same. Thus, the
Union President requested BPI to implement the Union Shop Clause and to terminate the employment of the said
employees.
 After 2 months of mgmt. inaction, Union referred the issue to the Grievance Committee, and thereafter, to voluntary
arbitration. The VA ruled in favor of BPI’s interpretation that the former FEBTC employees were not covered by the
Union Security Clause in the CBA since these employees were not new employees who were hired and subsequently
regularized; rather, they were absorbed employees “by operation of law” because these employees can be considered
assets and liabilities of the absorbed corporation. Hence, these employees cannot be compelled to join the Union since
they had a constitutional right to join or not to join any organization. MR denied.
 CA reversed. “Absorbed” and “new” employees’ distinction extends only as regards their employment service (service
is continuous). Their similarities far outweigh their differences (new employer, working conditions, terms of
employment and company policy to follow), and as such, these absorbed employees should be considered “new”
employees for the purpose of applying the Union Shop Clause.

ISSUES: WoN absorbed employees should be covered by the Union Shop Clause.

PETITIONER’S ARGUMENT/S: Absorbed employees are not “new employees” for purposes of applying the Clause,
since the said term is qualified by phrases “who may hereafter be regularly employed” and “after they become regular
employees”. Such only applies to employees hired initially on a temporary or probationary status for possible regular
employment at some future date.

HELD:
1. Yes.
 Sec. 2, Art. II of the CBA is silent as to how one becomes a “regular employee” of BPI for the first time. Nothing
therein requires that “new” regular employees must first undergo a temporary/probationary status before being
deemed as such under the Union Shop Clause.

1
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.
 “Union Security” is a generic term for agreements which impose upon employees the obligation to acquire or retain
union membership as a condition affecting employment. The purpose thereof is to guarantee the continued existence
of the union through enforced membership for the benefit of the workers.
Union Shop: all Maintenance of Membership Shop: Closed Shop: by agreement between the
new regular employees, who are union members as of employer and his employees or their
employees are the effective date of the agreement, or representatives, no person may be employed
required to join the who thereafter become members, must in any or certain agreed departments of the
union within a maintain union membership as a enterprise unless he or she is, becomes, and,
certain period for condition for continued employment until for the duration of the agreement, remains a
their continued they are promoted or transferred out of member in good standing of a union entirely
employment. the bargaining unit or the agreement is comprised of or of which the employees in
terminated. interest are a part.
 GR: All employees in a bargaining unit covered by a Union Shop Clause are subject to its terms. EXC: 1)
Employees who are bona fide members of religious organizations which prohibit members from joining labor
unions; 2) Employees already in the service and members of a union other than the majority at the time the union
shop agreement took effect; 3) confidential employees; and 4) Employees expressly excluded from the union shop
agreement. Absorbed employees do not fall under any of the exceptions.
 Absorbed employees are neither assets nor liabilities. Human beings are not embraced in such terms. Moreover, the
absorption was neither by operation of law nor by legal consequence of contract. No government regulation or law
compelled the merger or the absorption. Likewise, the Articles and Plan of Merger did not contain any specific
stipulation with respect to employment contracts of existing personnel of the non-surviving corp.
 Furthermore, it is contrary to public policy to declare the former FEBTC employees as forming a part of the assets
and liabilities. These only refer to property rights and obligations and do not include employment contracts of its
personnel. Employees cannot be unilaterally transferred like chattel. Employment is a personal consensual contract
and absorption of an employee without the latter’s consent violates an individual’s freedom to contract. The same
would amount to involuntary servitude.
 Based on local and foreign jurisprudence, in voluntary mergers, the surviving corp is not required to absorb the
dissolved corp.’s employees nor recognize their service to the same. It is only when absorption is required by
provision of law or contract that the same may be demanded from the surviving corp. assuming arguendo that there
is an obligation to absorb said employees, there is still no basis to conclude that the T+C of employment under a
valid CBA in force in the surviving corp. should not be made to apply to the absorbed employees.
 While, by legal fiction, BPI and FEBTC is the same entity after the merger, and that there is no change in the
personality of the employer, in reality, there is a change in the situation of the employee. They are subject to new
RRs and company practices. In fact, there was a change from an unorganized establishment to a unionized company.
Moreover, there are benefits under the CBA that the absorbed employees did not enjoy with FEBTC, which, as BPI
employees, they now enjoy by virtue of the absorption. Hence, they are not under exactly the same T+C as stated in
their previous contracts of employment.
 It is of no moment that the absorbed employees retained their regular status upon absorption. This fact would not
remove them from the scope of the phrase “new employees” as contemplated by the union shop clause. Every new
regular employee, regardless of the manner by which they became employees of BPI, is required to join the Union as
a condition of their continued employment.
 The absorbed employees are not “old employees” either. Based on law and jurisprudence, a merger only becomes
effective upon approval by the SEC of the Articles of Merger. Thus, BPI could have only become the employer of
the absorbed employees after approval of the merger. Assuming arguendo, that they are “old employees”, they are
still not excluded from the union shop clause since the subject employees were hired by FEBTC during the
effectivity of the CBA.
 No substantial differences between newly hired employees and absorbed employees. Both are employed only after
the CBA was signed, both belong to the same bargaining unit, both are required to join the union once they are
regular employees, and both entered BPI’s employ during the effectivity of the Clause. The effect of absorption
should only be limited to what has been agreed upon, i.e., recognition of years of service and other benefits. It should
not be extended so far as to exempt them from existing CBA terms, company policies and rules. If the Union Shop
Clause is valid as to other new regular BPI employees, there is no reason why the same clause would be a violation
of the “absorbed” employees’ freedom of association.
 The non-application of the union shop clause is contrary to the policy of the labor code and inimical to industrial
peace. It could be used to dilute the membership base of a certified union in the CBU, leading to the loss of its
 majority status, which would be no different from a union busting scheme. A union security clause in a CBA should
be interpreted to give meaning and effect to its purpose, which is to afford protection to the certified bargaining agent
and ensure that the employer is dealing with a union that represents the interests of the legally mandated percentage
of the members of the bargaining unit.
 The right not to join a union is not absolute. Nothing in law or jurisprudence prevents an employer and a union from
stipulating that existing employees are to be included in the coverage of a union security clause. Even Art 248(e) of
LC only expressly exempts old employees who already have a union from inclusion in the clause.
Reyes v. Trajano: GR: Freedom of Juat v. CIR: EXC: right to refrain Victoriano v. Elizalde Rope WU:
association includes the right not to from joining a union is not absolute. EXC to EXC: religious
associate or join a union. It may be limited by a union freedom/prohibition was upheld
security clause. over the closed shop clause.
 The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the individual
employee’s right or freedom of association, is not to protect the union for the union’s 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. (Liberty Flour Mills
Employees v. Liberty Flour Mills, Inc.)
 In sum, the Union Shop Clause of the CBA covers the former FEBTC employees who were hired/employed by BPI
during the effectivity of the CBA in a manner which petitioner describes as “absorption”. A contrary appreciation of
the facts of this case would, undoubtedly, lead to an inequitable and very volatile labor situation which this Court has
consistently ruled against. However, in the interest of fairness, said employees should be given a fresh 30 days from
notice of finality of the decision to join the union before the Union demands their termination. Their refusal to join
may be based on their honest belief that they were not covered by said clause.

Dissent, Carpio, J.
 “Self-organization” means voluntary association without compulsion, threat of punishment, or threat of loss of
livelihood. Compulsory membership is anathema to “self-organization”. The right to self-organize includes the right not
to exercise such right. Freedom to associate necessarily includes the freedom not to associate. Thus, freedom to join
unions necessarily includes the freedom not to join unions.
 The merger of two corporations does not authorize the surviving corporation to terminate the employees of the absorbed
corporation in the absence of just or authorized causes as provided in Arts. 282 and 283, LC.
 To compel the absorbed employees to join the Union at the risk of losing their jobs is violative of their constitutional
freedom to associate.
 We cannot exalt union rights over and above the freedom and right of employees to join or not to join a union

Dissent, Brion, J.
 In a complete merger situation where there is total takeover by one corp. over another and there is silence in the
agreement re: the fate of the human resource complement, the latter should not be left in legal limbo and should be
properly provided for, by compelling the surviving entity to absorb these employees.
 Those who are immediately hired as regulars acquire their status through the voluntary act of hiring done within the
effective term or period of the CBA, while the absorbed employees merely continued the employment they started with
the absorbed corporation. Absorbed employees are neither “new” employees nor employees who became regular only
during the term of the CBA in the way that newly regularized employees become so. These absorbed employees are sui
generis.