The Supreme Court ruled that Hongkong and Shanghai Banking Corporation (HSBC) could not unilaterally impose a credit-checking requirement on its employees’ salary loan applications when that requirement was not part of their Collective Bargaining Agreement (CBA). This decision underscores the importance of adhering to negotiated agreements and protecting workers from arbitrary changes to their benefits. The court emphasized that a CBA is the law between the parties and cannot be modified without mutual consent, safeguarding the rights of employees to participate in decisions affecting their welfare.

When a Bank’s Loan Plan Clashes with a Union’s Collective Bargaining: Who Prevails?

In this case, the Hongkong Bank Independent Labor Union (HBILU) challenged HSBC’s implementation of a credit-checking requirement for salary loans, arguing that it violated the existing CBA. The CBA, which governed the terms and conditions of employment between HSBC and its employees, did not include any provision for external credit checks as a prerequisite for loan approval. HSBC, however, contended that the credit check was part of its Financial Assistance Plan (Plan), which had been approved by the Bangko Sentral ng Pilipinas (BSP) and was therefore a valid condition for granting loans.

The heart of the dispute revolved around the interplay between the CBA, a negotiated agreement between the employer and employees, and the Plan, a policy implemented by the bank with the approval of the BSP. The Supreme Court was tasked with determining whether HSBC could unilaterally impose a condition not found in the CBA, even if that condition was part of a BSP-approved plan. To fully understand this issue, it is crucial to examine the facts of the case, the relevant legal framework, and the court’s reasoning.

The factual background reveals that in 2001, the BSP issued the Manual of Regulations for Banks (MoRB), which allowed banks to provide financial assistance to their employees, subject to BSP approval of the financing plans. HSBC subsequently submitted its Financial Assistance Plan to the BSP, which included a credit-checking proviso. The BSP approved this plan in 2003. Over the years, the plan underwent several amendments, all approved by the BSP. Meanwhile, HBILU and HSBC entered into a CBA covering the period from April 1, 2010, to March 31, 2012. Article XI of the CBA outlined the terms for salary loans, but it did not mention any requirement for external credit checks.

During negotiations for a new CBA, HSBC proposed amendments to Article XI to align it with the BSP-approved Plan. These amendments sought to include the phrase “Based on the Financial Assistance Plan duly approved by Bangko Sentral ng Pilipinas (BSP)” in the loan provisions and to explicitly subject loan availment to employees’ credit ratios. HBILU objected to these amendments, arguing that they would curtail its members’ access to salary loans and violate BSP regulations. Faced with the union’s opposition, HSBC withdrew its proposed amendments, and Article XI remained unchanged.

Despite withdrawing the proposal, HSBC sent an email to its employees on April 20, 2012, announcing the enforcement of the Plan, including the credit-checking provisions. This email stated that adverse findings from external credit checks could result in the disapproval of loan applications. Subsequently, in September 2012, HBILU member Vince Mananghaya applied for a loan under Article XI of the CBA. His application was denied due to adverse findings from the external credit check. HBILU then raised this denial as a grievance issue, arguing that the credit check was an additional requirement not sanctioned by the CBA.

The Supreme Court, in its analysis, emphasized the constitutional right of employees to collective bargaining and participation in decision-making processes affecting their benefits. According to Section 3, Article XIII of the 1987 Constitution, the State shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities. Furthermore, workers shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. These constitutional provisions underscore the importance of protecting workers’ rights to negotiate and participate in decisions that impact their employment terms.

The court also cited Article 253 of the Labor Code, which prohibits either party from terminating or modifying a CBA during its lifetime. This provision is crucial for maintaining stability and predictability in labor relations. The Court argued that tolerating HSBC’s conduct would be tantamount to allowing a blatant circumvention of Article 253 of the Labor Code. It would contravene the express prohibition against the unilateral modification of a CBA during its subsistence and even thereafter until a new agreement is reached. It would unduly license HSBC to add, modify, and ultimately further restrict the grant of Salary Loans beyond the terms of the CBA by simply adding stringent requirements in its Plan, and having the said Plan approved by BSP in the guise of compliance with the MoRB.

The Supreme Court found that HSBC’s enforcement of the credit-checking requirement was a unilateral modification of the CBA. The court emphasized that the Plan was never made part of the CBA, and HBILU had vehemently rejected its incorporation. Thus, the bank could not unilaterally impose new conditions on the availment of salary loans. This prohibition against unilateral modification is a cornerstone of labor law, designed to prevent employers from undermining the collective bargaining process.

The court further noted that even if the Plan had been approved by the BSP, it could not override the provisions of the CBA. The court stated that if it were true that said credit checking under the Plan covers salary loans under the CBA, then the bank should have negotiated for its inclusion thereon as early as the April 1, 2010 to March 31, 2012 CBA which it entered into with HBILU. However, the express provisions of said CBA inked by the parties clearly make no reference to the Plan. And even in the enforcement thereof, credit checking was not included as one of its requirements.

HSBC argued that the credit-checking requirement was a long-standing policy applied to all employees, but the court found this unconvincing. The court noted that HSBC failed to provide sufficient evidence to support this claim. In contrast, HBILU presented evidence that the requirements for salary loans changed only after the April 20, 2012, email blast. This email announced the strict enforcement of the credit-checking requirement, indicating that it was a new imposition rather than a continuation of an existing policy. Thus, no other conclusion can be had in this factual milieu other than the fact that HSBC’s enforcement of credit checking on salary loans under the CBA invalidly modified the latter’s provisions thereon through the imposition of additional requirements which cannot be found anywhere in the CBA.

The court also addressed the argument that the credit-checking requirement was mandated by banking regulations. The dissenting opinion cited Section X304.1 of the MoRB, which requires banks to ascertain that borrowers are financially capable of fulfilling their commitments. However, the court clarified that this provision is a general guideline and must be interpreted in conjunction with Section X338.3, which specifically applies to salary loans under the fringe benefit program of the bank. Section X338.3 excludes loans under the fringe benefit program from the general requirements of Section X304.1. In specifying that “[a]ll loans or other credit accommodations to bank officers and employees, except those granted under the fringe benefit program of the bank, shall be subject to the same terms and conditions imposed on the regular lending operations of the bank,” Sec. X338.3 clearly excluded loans and credit accommodations under the bank’s fringe benefits program from the operation of Sec. X304.1.

The court also rejected the argument that Republic Act No. 8791 (General Banking Law of 2000) required a credit check on all borrowers. The court stated that A reading of RA 8791, however, reveals that loan accommodations to employees are not covered by said statute. Nowhere in the law does it state that its provisions shall apply to loans extended to bank employees which are granted under the latter’s fringe benefits program. The court further noted that BSP Circular 423, Series of 2004, provides alternative measures to protect the bank from losses, such as requiring co-makers, chattel mortgages, or assignment of retirement benefits.

The Supreme Court’s decision in this case underscores the importance of upholding the integrity of collective bargaining agreements. It clarifies that employers cannot unilaterally impose new conditions on employee benefits that are not part of the CBA, even if those conditions are part of a company policy or a plan approved by a regulatory agency. This decision reaffirms the constitutional right of workers to participate in decision-making processes affecting their rights and benefits, and it reinforces the principle that a CBA is the law between the parties and cannot be modified without mutual consent.

FAQs

What was the key issue in this case?	The central issue was whether HSBC could unilaterally impose a credit-checking requirement for employee salary loans when the CBA did not include such a requirement. The Supreme Court ruled against HSBC, emphasizing that the CBA terms must prevail.
What is a Collective Bargaining Agreement (CBA)?	A CBA is a negotiated contract between a labor union and an employer that outlines the terms and conditions of employment for the employees represented by the union. It covers aspects such as wages, working hours, and benefits.
What is the significance of Article 253 of the Labor Code?	Article 253 of the Labor Code prevents either party from unilaterally terminating or modifying a CBA during its lifetime. This ensures stability and predictability in labor relations, protecting employees from arbitrary changes.
What was HSBC’s justification for the credit-checking requirement?	HSBC argued that the credit check was part of its Financial Assistance Plan (Plan), which had been approved by the Bangko Sentral ng Pilipinas (BSP). They claimed the Plan should be considered a valid condition for granting loans.
Why did the Supreme Court rule against HSBC’s justification?	The Court emphasized that the Plan was never integrated into the CBA and that the union had rejected its inclusion. Therefore, HSBC could not unilaterally impose it on employees without violating the CBA.
Does this ruling mean that banks can never conduct credit checks?	No, the ruling does not prohibit credit checks in general. It specifically addresses the situation where a CBA exists and the credit check is not part of that agreement.
What are the implications of this ruling for other companies?	This ruling serves as a reminder to all companies that they must honor the terms of their CBAs and cannot unilaterally impose new conditions on employee benefits without negotiation and agreement from the union.
What is the role of the Bangko Sentral ng Pilipinas (BSP) in this case?	The BSP is the central bank of the Philippines, and it approves financial assistance plans for banks. However, the court clarified that BSP approval does not override the terms of a CBA.
How does this ruling affect the balance between management prerogative and worker’s rights?	This ruling clarifies that management’s prerogative is not absolute and is subject to the limitations imposed by law and collective bargaining agreements. It reinforces the importance of protecting workers’ rights to participate in decisions affecting their benefits.

This case serves as a significant reminder to employers of the importance of upholding collective bargaining agreements and respecting the rights of workers to participate in decisions that affect their welfare. The Supreme Court’s decision reinforces the principle that a CBA is a binding contract that cannot be unilaterally modified, ensuring stability and fairness in labor relations.

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: HONGKONG BANK INDEPENDENT LABOR UNION (HBILU) VS. HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, G.R. No. 218390, February 28, 2018