COMPANY PRACTICE EXISTS IF THE ACT OF EXTENDING BENEFITS HAS BEEN PRACTICED FOR A LONG PERIOD OF TIME AND SHOWN TO BE CONSISTENT AND DELIBERATE

Company practice or policy to exist, it must be proven that the act of extending benefits of the CBA to managerial employees must have been practiced for a long period of time and must be shown to be consistent and deliberate.

Thus, the SC held in the following case:

Societe Internationale De Telecommunications Aeronautiques (SITA), et al. vs. Theodore L. Huliganga
G.R. No. 215504, August 20, 2018

Retirement; Company practice; For company practice to exist, the act extending benefits of the CBA to managerial employees must have been practiced for a long period of time and must be shown to be consistent and deliberate; Managerial employee; Competent to testify

Facts:

Theodore Huliganga (Huliganga) was hired by Societe International De Aeronautiques (SITA) on April 16, 1980 as Technical Assistant to the Representative-Manager. Eventually, he became the Country Operating Officer, the highest accountable officer of SITA in the Philippines and his current position at the time of his retirement on December 31, 2008. He received his retirement benefits computed at 1.5 months of basic pay for each year of service, or the total amount of P7,495,102.84 in retirement and other benefits.

However, Huliganga believed that the coefficient/payment factor that should have been applied to him was 2 months and not 1.5 months for every year of service in accordance with the 2005-2010 Collective Bargaining Agreement. Thus, Huliganga filed a Complaint against SITA, SITA Information Networking Computing B. V. (SITA, INC.) and Equant Services, Inc. (EQUANT) for unfair labor practices, underpayment of salary/wages, moral and exemplary damages, attorney’s fees, underpayment of sick and vacation leave and retirement benefits.

According to Huliganga, the coefficient/payment factor as provided under the 2005-2010 is the applicable rate because it is already a well-established company practice of SITA to adopt, update and apply the new and/or additional economic benefits arising from the CBA as amendments to the Employee Regulations manual. SITA, INC. is a foreign corporation created by SITA in 2003 to concentrate on providing Air Transpmi Industry application whereas EQUANT was created by SITA in the mid-1990s to cater to its non-airline customers. Further, that he was required by EQUANT to represent and manage its Philippine operations and was given the additional task of managing SITA, INC. but was not compensated for his work at EQUANT and SITA, INC.

SITA, et al. however, countered that Huliganga has already received from SITA the full amount of his retirement and other monetary benefits; thus, his claim for any supposed deficiency has simply no basis. There is no employer-employee relationship between Huliganga, SITA, INC. and EQUANT which will entitle the former to a claim for salary and other monetary benefits from said entities. Having received the full amount of his retirement and other benefits from his employer SITA, Huliganga has no right to claim moral and exemplary damages and attorney’s fees.

LA Ruling:

The Labor Arbiter rendered a Decision dismissing the complaint against SITA for lack of merit.

Huliganga appealed the said decision.

NLRC Ruling:

The NLRC rendered a Decision denying the appeal for lack of merit and affirming the Decision of the Labor Arbiter.

After the denial of Huliganga’s motion for reconsideration, he filed a petition for certiorari with the CA.

CA Ruling:

The CA partly granted the petition in its decision.

The CA ruled that Huliganga was able to prove that the new and/or additional economic benefits arising from the CBA as amendments to the Employee Regulations Manual has ripened into a company practice. It added that at the time of Huliganga’s retirement, the applicable CBA provides that the coefficient/payment factor in the computation of retirement benefits for employees who have rendered 25 years or more of service was 2 months for every year of service and not 1.5 months for every year of service.

The CA, however, held that Huliganga is not entitled to salaries and emoluments from SITA, INC. and EQUANT.

Hence, the petition before the SC.

Issue/s:

Whether or not the new and/or additional economic benefits arising from the CBA as amendments to the Employee Regulations Manual has ripened into a company practice entitling even managerial employees to the CBA based benefits

Whether or not a former employee who was retired 12 years before the new CBA benefit granting 2.5 factor is competent to testify to prove practice applying the CBA benefit to managerial employees

SC Ruling:

The SC found the petition meritorious.

The SC held that it is an indisputable fact that Huliganga was a managerial employee of SITA and, as such, he is not entitled to retirement benefits exclusively granted to the rank-and-file employees under the CBA. Under Article 245 of the Labor Code, managerial employees are not eligible to join, assist or form any labor organization.

Learn more about the rules, doctrines and labor principles involving managerial employees from the book Guide to Valid Dismissal of Employees, Second Edition

To be entitled to the benefits under the CBA, the employees must be members of the bargaining unit, but not necessarily of the labor organization designated as the bargaining agent. The SC found that the Labor Arbiter did not commit any error when it applied the said provisions and ruled that Huliganga failed to sufficiently establish that there is an established company practice of extending the benefits of the CBA to managerial employees.

To be considered a company practice, the giving of the benefits should have been done over a long period of time, and must be shown to have been consistent and deliberate. The test or rationale of this rule on long practice 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.

To prove that the giving of the benefits claimed by Huliganga had been a company practice, he presented the affidavit of Delia M. Beaniza who was the Administrative Assistant to the Country Manager/Representative stating that SITA had adopted the formulation provided in the CBA to its managerial employees. However, the said affidavit deserves scant consideration because Beaniza lacks the competency to determine what is considered as a company practice.

Ms. Beaniza stated that respondent SITA had consistently adopted the policy to extend to managerial and confidential employees all favorable benefits agreed upon in the CBA with union members. However, the said affidavit deserves scant consideration considering that Ms. Beaniza had been retired from service since 1997 or 12 years ago. She, therefore, lacks the competency to determine with accuracy what is considered a company practice. Ms. Beaniza stated that company policies have been implemented as early as the time when SITA Employees’ Union was formed in the 1970s, she was employed by respondent SITA only in September 1980.

Accordingly, Ms. Beaniza cannot testify on matters or circumstances that happened before she was employed by SITA. Ms. Beaniza attested that she and other previous retirees have availed of the company practice. However, she failed to name or identify any other employee who had availed of the said company practice and given retirement benefits under the CBA.

If indeed Ms. Beaniza was given retirement benefits above the amount she is entitled to, this could be interpreted to be based merely on the generosity on the part of SITA. Ms. Beaniza retired sometime in 1997. She, therefore, has no knowledge of circumstances that transpired after her retirement to present. She was in no position and had no authority to say that there was an established long-standing company policy of extending CBA benefits to managerial employees.

Huliganga, according to the SC, failed to substantially establish that there is an established company practice of extending CBA concessions to managerial employees. To be considered a company practice or policy, the act of extending benefits of the CBA to managerial employees must have been practiced for a long period of time and must be shown to be consistent and deliberate.