G.R. No. 164301, 10 August 2010


This case which involves the application of a… collective bargaining agreement with a union shop clause should be resolved principally from the standpoint of the clear provisions of our labor laws, and the express terms of the CBA in question, and not by inference from the general consequence of the merger of corporations… under the Corporation Code, which obviously does not deal with and, therefore, is silent on the terms and conditions of employment in corporations or juridical entities.

On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on January 20, 2000 by and between BPI, herein petitioner, and FEBTC. This Article and Plan of Merger was approved by the Securities and Exchange Commission… on April 7, 2000 pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to and absorbed by BPI as the surviving corporation.

FEBTC employees, including those in its different branches across the country, were hired by petitioner as its own… employees, with their status and tenure recognized and salaries and benefits maintained.

Respondent BPI Employees Union-Davao Chapter – Federation of Unions in BPI Unibank (hereinafter the “Union,” for brevity) is the exclusive bargaining agent of BPI’s rank and file employees in Davao City. The former FEBTC rank-and-file employees in Davao City did not belong to… any labor union at the time of the merger.

Prior to the effectivity of the merger, or on March 31, 2000, respondent Union invited said FEBTC employees to a meeting regarding the Union Shop Clause (Article II, Section 2) of the existing CBA between petitioner BPI and… respondent Union.

The parties both advert to certain provisions of the existing 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.


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. (Emphases supplied.)

After the meeting called by the Union, some of the former FEBTC employees joined the Union, while others refused. Later, however, some of those who initially joined retracted their membership.

Respondent Union then sent notices to the former FEBTC employees who refused to join, as well as those who retracted their membership, and called them to a hearing regarding the matter. When these former FEBTC employees refused to attend the hearing, the president of the union requested BPI to implement the Union Shop Clause of the CBA and to terminate their employment pursuant thereto.

After two months of management inaction on the request, respondent Union informed petitioner BPI of its decision to refer the issue of the implementation of the Union Shop Clause of the CBA to the Grievance Committee. However, the issue remained unresolved at this level and so… it was subsequently submitted for voluntary arbitration by the parties.

Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision[12] dated November 23, 2001, ruled in favor of petitioner BPI’s interpretation that the former FEBTC employees were not covered by the Union Security Clause of the CBA between the Union and the bank on the ground that the said employees were not new employees who were hired and subsequently regularized, but were absorbed employees “by operation of law” because the “former employees of FEBTC can be considered assets and liabilities of the absorbed… corporation.” The Voluntary Arbitrator concluded that the former FEBTC employees could not be compelled to join the Union, as it was their constitutional right to join or not to join any organization. Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the same in an Order Dissatisfied, respondent then appealed the Voluntary Arbitrator’s decision to the Court of Appeals.

The Court of Appeals pertinently ruled in its Decision:

A union-shop clause has been defined as a form of union security provision wherein non-members may be hired, but to retain employment must become union members after a certain period.

There is no question as to the existence of the union-shop clause in the CBA between the petitioner-union and the company. The controversy lies in its application to the “absorbed” employees.

This Court agrees with the voluntary arbitrator that the ABSORBED employees are distinct and different from NEW employees BUT only in so far as their employment service is concerned. The distinction ends there.

In the case at bar, the absorbed employees’ length of service… from its former employer is tacked with their employment with BPI.

Otherwise stated, the absorbed employees service is continuous and there is no gap in their service record.

This Court is persuaded that the similarities of “new” and “absorbed” employees far outweighs the distinction between them. The similarities lies on the following, to wit:

(a) they have a new employer;
(b) new working conditions;
(c) new terms of… employment and;
(d) new company policy to follow.

As such, they should be considered as “new” employees for purposes of applying the provisions of the CBA regarding the “union-shop” clause.

To rule otherwise would definitely result to a very awkward and unfair situation wherein the “absorbed” employees shall be in a different if not, better situation than the existing BPI employees. The existing BPI employees by virtue of the “union-shop” clause are required… to pay the monthly union dues, remain as members in good standing of the union otherwise, they shall be terminated from the company, and other union-related obligations.

On the other hand, the “absorbed” employees shall enjoy the “fruits of labor” of the petitioner-union… and its members for nothing in exchange.

Certainly, this would disturb industrial peace in the company which is the paramount reason for the existence of the CBA and the union.

The voluntary arbitrator’s interpretation of the provisions of the CBA concerning 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.


Whether or not the former FEBTC employees that were absorbed by petitioner upon the merger between FEBTC and BPI should be covered by the Union Shop Clause found in the existing CBA between petitioner and respondent Union.


When certain employees are obliged to join a particular union as a requisite for continued employment, as in the case of Union Security Clauses, this condition is a valid restriction of the freedom or right not to join any labor organization because it is in favor of… unionism. This Court, on occasion, has even held that a union security clause in a CBA is not a restriction of the right of freedom of association guaranteed by the Constitution.

Verily, we agree with the Court of Appeals that there are no substantial differences between a newly hired non-regular employee who was regularized weeks or months after his hiring and a new employee who was absorbed from another bank as a regular employee pursuant to a merger, for purposes of applying the Union Shop Clause. Both employees were hired/employed only after the CBA was signed. At the time they are being required to join the Union, they are both already regular rank and file employees of BPI.

They belong to the same bargaining… unit being represented by the Union. They both enjoy benefits that the Union was able to secure for them under the CBA. When they both entered the employ of BPI, the CBA and the Union Shop Clause therein were already in effect and neither of them had the opportunity… to express their preference for unionism or not. We see no cogent reason why the Union Shop Clause should not be applied equally to these two types of new employees, for they are undeniably similarly situated.

The effect or consequence of BPI’s so-called “absorption” of former FEBTC employees should be limited to what they actually agreed to, i.e. recognition of the FEBTC employees’ years of service, salary rate and other benefits with their previous employer. The effect should… not be stretched so far as to exempt former FEBTC employees from the existing CBA terms, company policies and rules which apply to employees similarly situated. 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.

In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop Clause, they are required to join the certified bargaining agent, which supposedly has gathered the support of the majority of workers within the bargaining unit in the appropriate… certification proceeding. Their joining the certified union would, in fact, be in the best interests of the former FEBTC employees for it unites their interests with the majority of employees in the bargaining unit. It encourages employee solidarity and affords… sufficient protection to the majority status of the union during the life of the CBA which are the precisely the objectives of union security clauses, such as the Union Shop Clause involved herein.

We are indeed not being called to balance the interests of individual… employees as against the State policy of promoting unionism, since the employees, who were parties in the court below, no longer contested the adverse Court of Appeals’ decision. Nonetheless, settled jurisprudence has already swung the balance in favor of unionism, in… recognition that ultimately the individual employee will be benefited by that policy. In the hierarchy of constitutional values, this Court has repeatedly held that the right to abstain from joining a labor organization is subordinate to the policy of encouraging unionism… as an instrument of social justice.

*Case Digest by Jelyn C. Ondong, Refresher, Andres Bonifacio College, SY: 2019-2020