The Supreme Court ruled that when an employer has a long-standing, consistent practice of granting benefits to employees, that practice can create a vested right to those benefits. Even if a subsequent written policy attempts to limit or eliminate those benefits, the employer cannot unilaterally take them away from employees who had a reasonable expectation of receiving them. This decision reinforces the importance of consistent conduct in establishing employment benefits, even beyond formal written policies.

Beyond the Contract: When Company Practice Dictates Retirement Benefits

This case revolves around a dispute between Metropolitan Bank and Trust Company (Metrobank) and two of its former employees, Felipe Patag and Bienvenido Flora, regarding their retirement benefits. Patag and Flora, who retired in 1998, sought additional retirement benefits based on an improved benefits memorandum issued by Metrobank after their retirement. The core issue is whether Metrobank was obligated to pay Patag and Flora these higher benefits, even though a condition in the memorandum stated that the improved benefits applied only to officers still employed as of June 15, 1998. The resolution hinges on the legal principle of ‘company practice’ and whether Metrobank’s historical actions established an implied right to these benefits.

The central question is whether a company’s consistent past practice of providing certain benefits to its employees, even if not explicitly stated in a contract or retirement plan, can create a legally binding obligation. Metrobank argued that its officers, having retired before the issuance of the 1998 Improved Benefits Memorandum, were ineligible for the higher retirement benefits. They also pointed to the express condition in the memorandum requiring officers to be in service as of June 15, 1998. However, Patag and Flora contended that Metrobank had a consistent company practice of granting improved benefits to its officers whenever a new Collective Bargaining Agreement (CBA) with rank-and-file employees was concluded. This practice, they argued, had ripened into a vested right that could not be unilaterally withdrawn.

The Court examined the evidence presented, focusing on Metrobank’s actions over a significant period. From 1986 to 1997, Metrobank had consistently issued memoranda granting similar or better benefits to its managerial employees or officers, retroactive to January 1st of the first year of effectivity of the CBA. These memoranda coincided with the approval of various CBAs with the rank-and-file employees. The crucial point was that these improved benefits were always made retroactive, effective every January 1 of the year of issuance of said memoranda, and without any condition regarding the term or date of employment. The condition requiring the managerial employee or bank officer to still be employed by petitioner as of a certain date was imposed for the first time in the 1998 Officers’ Benefits Memorandum.

Building on this historical precedent, the Court emphasized that to be considered a company practice, the giving of the benefits should have been done over a long period, and must be shown to have been consistent and deliberate. This rationale requires an indubitable showing that the employer agreed to continue giving the benefits, knowing fully well that said employees are not covered by the law requiring payment thereof. Citing previous cases such as Davao Fruits Corporation v. Associated Labor Unions and Sevilla Trading v. Semana, the Court highlighted that the regularity and deliberateness of the grant of benefits over a significant period of time are key factors in determining whether a company practice exists.

In this case, Metrobank’s consistent, deliberate, and voluntary granting of improved benefits to its officers after the signing of each CBA with its rank and file employees, retroactive to January 1^st of the same year as the grant of improved benefits, and without the condition that the officers should remain employees as of a certain date, from 1986 to 1997 constitutes voluntary employer practice which cannot be unilaterally withdrawn or diminished by the employer without violating the spirit and intent of Art. 100 of the Labor Code.

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.

The Supreme Court rejected Metrobank’s argument that respondents should be deemed estopped from claiming additional benefits, noting that there was nothing in the receipts or vouchers signed by respondents to indicate that they acknowledged full receipt of all amounts due them or that they are waiving their right to claim any deficiency in their benefits. Consistent acts of demanding improved benefits before and after the receipt of benefits suggest that the employees never intended to waive their right to benefits. This further solidifies the ruling in favor of the retirees, reinforcing the established company practice.

The ruling reinforces the principle that employers cannot unilaterally diminish or eliminate benefits that have become established company practices. This has significant implications for both employers and employees. Employers must be mindful of their conduct and ensure that any changes to benefits are implemented fairly and transparently, with due consideration for employees’ vested rights. Employees, on the other hand, can rely on established company practices as a source of rights and benefits, even if those practices are not explicitly codified in formal agreements.

FAQs

What was the key issue in this case?	The central issue was whether a company’s consistent past practice of providing certain benefits to its employees can create a legally binding obligation, even if it’s not explicitly stated in a contract.
What did the 1998 Officers’ Benefits Memorandum state?	The 1998 Officers’ Benefits Memorandum provided for improved benefits to officers, but with a condition that the benefits would only extend to those who remained in service as of June 15, 1998.
What did the retirees argue?	The retirees argued that Metrobank had a consistent company practice of granting improved benefits to its officers whenever a new CBA with rank-and-file employees was concluded, irrespective of their employment status as of a specific date.
How did the Supreme Court rule?	The Supreme Court ruled in favor of the retirees, affirming that Metrobank’s consistent past practice had created a vested right to the improved retirement benefits, which could not be unilaterally withdrawn.
What constitutes a company practice?	For a benefit to be considered a company practice, it must have been consistently and deliberately provided over a long period, showing that the employer agreed to continue giving the benefit even without a legal obligation.
What is the significance of Art. 100 of the Labor Code?	Art. 100 of the Labor Code prohibits the elimination or diminution of employee benefits that are being enjoyed at the time of the promulgation of the Code, which supports the court’s ruling in this case.
What was the impact of the condition imposed in the 1998 memorandum?	The condition requiring employees to be still in service as of June 15, 1998, effectively reduced benefits for those who had already retired, despite the fact that no such condition was imposed in the past.
Did the retirees waive their rights by accepting the initial retirement benefits?	No, the Court found that the retirees did not waive their rights because there was no clear indication in the receipts that they acknowledged full receipt of all amounts due or that they waived their right to claim any deficiency.

In conclusion, the Metropolitan Bank and Trust Company case provides a valuable lesson on the significance of company practices in determining employees’ rights and benefits. Employers should be aware that consistent conduct can create legally binding obligations, even in the absence of explicit contractual provisions, while employees should be aware of their right to benefits that have been consistently provided over time. This ruling promotes fairness and stability in employment relationships, ensuring that employers act with transparency and consistency in their treatment of employees.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Metropolitan Bank and Trust Company v. NLRC, G.R. No. 152928, June 18, 2009