24 ARCO METAL PRODUCTS v 4.
Voluntary Arbitrator: Ruled in favor of petitioner and found that the giving
G.R. No. 170734 | 14 May 2008 | Tinga | Santos
PETITIONER: Arco Metal Products, Co., Inc, Salvador Uy
RESPONDENTS: Samahan ng Mga Manggagawa sa Arco Metal-NAFLU
RECIT-READY: Petitioner Arco Metal Products paid the 13th month pay, bonus,
leave encashment of three union members in amounts proportional to the service
they actually rendered in a year, which is less than a full 12 months. Respondent
union argued that on several occasions petitioner did not prorate the payment of
the same benefits to 7 employees who had not served for the full 12 months. The
prorated scheme violates the rule against diminution of payments under Art. 100
of the LC. The SC ruled in favor of respondent union as the grant of petitioner
has ripened into company practice. The principle of non-dimunition of benefits is
founded on the Constitutional mandate to protect the rights of workers and
promote their welfare and to afford labor full protection. Under it, any benefit and
supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer. Jurisprudence is replete with case
which recognize the right of employees to benefits which were voluntarily given
by the employer which ripened into company practice. In this case, particularly in
6 instances, petitioner granted full benefits to employees who have not served a
full year. It is evident petitioner adopted a policy of freely, voluntarily, and
consistently granting full benefits to its employees regardless of the length of
service they rendered.
DOCTRINE: Art. 100. Prohibition against elimination or diminution of benefits.
Nothing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.
FACTS:
1. Petitioner Arco Metal Products is a company engaged in the manufacture of
metal products while respondent is the labor union of petitioner’s rank and
file employees.
2. Around Dec. 2003, petitioner paid the 13th month pay, bonus, leave
encashment of three union members in amounts proportional to the service
they actually rendered in a year, which is less than a full 12 months.
3. Respondent union protested the prorated scheme. It argued that on several
occasions petitioner did not prorate the payment of the same benefits to 7
employees who had not served for the full 12 months. The prorated scheme
violates the rule against diminution of payments under Art. 100 of the LC.
- Respondent union filed a complaint before the NCMB. The parties
submitted the case for voluntary arbitration.
of the contested benefits in full, irrespective of the actual service rendered
within one year has not ripened into practice. He interpreted the phrase “for
each year of service” in the CBA that an employee must have rendered at
least 1 year of service to be entitled to the full benefits provided in the CBA.
CA: Reversed VA. Petitioner had an existing voluntary practice of paying the
benefits in full to its seven employees. It questioned why it took 11 years
before it was able to discover the alleged error. With respect to the CBA, the
CA held that the CBA did not intend to foreclose the application of prorated
payments of leave benefits to covered employees.
5. Petitioner argues before the SC that its grant of 13 th month pay, bonus, leave
encashment in full regardless of actual service rendered does not constitute
voluntary employer practice and does not violate the principle of non-
diminution of benefits under Art. 100 of the LC.
- It points out that the payments had been erroneously made and they
occurred in isolated cases in the years ‘92, ‘93, ‘94, ‘99, ‘02, and ‘03. It
was only in 2003 that the accounting department discovered the error
and this was corrected by implementing the pro-rata payment of
benefits pursuant to law and the CBA.
- Petitioner asserts that for a grant of benefit to be considered practive, it
should heave been practice for over a long period of time and must be
shown to be consistent, deliberate, and intentional – which they allege
did not happen in this case since it was only an error.
ISSUES: 1. W/N the intent of the subject CBA provisions is to grant full benefits
regardless of service actually rendered by an employee to the company? – NO
2. W/N petitioner violated the principle of non-diminution of benefits? – YES
RULING:
1. The Court held that there is a one-year cut off in the entitlement to the benefits
provided in the CBA. The provisions under Vacation Leave, Sick Leave, Emergency
Leave require that “employees/workers who are covered under this agreement who
have rendered at least 1 year of service shall be entitled to xxx”. However, for the 13 th
month pay and bonus, the provisions did not give any meaning different from that
given by law. It should then be computed at 1/12 of the total compensation which an
employee receives for the whole calendar year. Clearly, in order to be entitled to the
full monetization of vacation and sick leave (CBA required 16 days for both, while EL
required 7 days), one must have rendered at least one year of service.
2. It must be noted that petitioner granted, in several instances, full benefits to
employees who have not served a full year. The principle of non-diminution of
benefits is founded on the Constitutional mandate to protect the rights of workers and
promote their welfare and to afford labor full protection. Under it, any benefit and
supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer. Jurisprudence is replete with case which
recognize the right of employees to benefits which were voluntarily given by the
employer which ripened into company practice.

In this case, particularly in 6 instances, petitioner granted full benefits to employees

who have not served a full year. It is evident petitioner adopted a policy of freely,
voluntarily, and consistently granting full benefits to its employees regardless of the
length of service they rendered.

Although there were only 7 employees who benefited from such practive, it still
ripened into established practice. Jurisprudence has not laid down any rule
specifiying a minimum number of years within which a company practice must
exercise in order to constitute coluntary company practice. It can be 6 years, 3 7ears,
or even as short as 2 years.

 Separate Opinion of Justice Brion – “I concur separately to clarify that the

basis for the prohibitition against Art. 100. Art. 100 refers solely to the non-
diminution of benefits enjoyed at the time of the promulgation of the LC [May
1, 1974]. Employer-employee relationship is contractual. Under the principle
of mutuality of contracts, the terms of a contract, both express and implied,
cannot be withdrawn except by mutual consent or agreement of the parties.
In this case, the lack of consent or agreement was the basis for the
employees’ complaint.”