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LEPANTO CERAMICS INC v LEPANTO CERAMICS EMPLOYEES ASSOCIATION 2 March 2010 | Carpio, J.

FACTS
1998 - P (engaged in buying and selling ceramic tiles and sim products) gave 3k as Xmas bonus to Rs, Labor Association.
1999, Lepanto and Association entered into CBA: Grants Christmas package/bonus for members of R. The Christmas bonus was one
of the enumerated existing benefit, practice of traditional rights which shall remain in full force and effect.
Section 8. All other existing benefits, practice of traditional rights consisting of Christmas Gift
package/bonus, reimbursement of transportation expenses in case of breakdown of service vehicle and medical services
and safety devices by virtue of company policies by the UNION and employees shall remain in full force and effect.
Section 1. EFFECTIVITY. This agreement is effective on September 1, 1999 and remain in full force and effect without
change for a period of 4 years or up to August 31, 2004 except as to the representation aspect which shall be effective for a period of
five (5) years.

1999, 2000 and 2001: the bonus was not in cash. Instead, P gave each of the members of R Tile Redemption Certificates equivalent to P3,000.
2002 (cause of present dispute): P gave a year-end cash benefit of P600 and offered a cash advance to interested employees equivalent to 1
month salary payable in 1 year. R objected that this was in violation of the CBA.

Amicable settlement failed. The union filed a Notice to Strike before the National Conciliation Mediation Board, for violation of the CBA.
Efforts to conciliate failed, and the case was referred to the Voluntary Arbitrator.

Union's Arguments: It has been practice that the Christmas bonus was worth PHP-3,000, either through cash (1998) or tile redemption certificates
(1999-2001).

Employer Lepanto's Arguments: The bonuses are obtained from the available financial resources of the company. However, Lepanto has been
debt-ridden since 1999. The one-month cash advance in 2002 was meant to show the companys sincere efforts to help the employees despite
Lepantos financial situation.

Voluntary Arbitrator: Employees are each entitled with PHP-2,400, since Lepanto has already given PHP-600. Rationale: The CBA has force of
law between parties, and financial losses of Lepanto, Inc. is not a ground to exempt Lepanto Inc. from giving the Christmas bonus. Since from
1998 to 2001, the Christmas bonus always amounted to PHP-3,000, this amount has become an existing practice or traditional right which
employees are entitled to.

Lepanto filed for MFR, wc was denied.


CA: denied the petition, and MFR. Rationale: Nowhere in the CBA was it stated that the Christmas bonus was contingent to corporate profit, ie
bonuses are given only if Lepanto incurs profit.

Hence, the present petition for certiorari.

ISSUE: WON P is required to pay Rs Christmas bonus. YES

RULING
General Rule: A bonus is a gratuity or act of liberality. It is given in addition to what is ordinarily received by or strictly due the recipient. It is
granted to an employee for his industry and loyalty which contributed to the success of the employers business and made possible the realization
of profits. It helps to spur the employee to greater efforts. I
A bonus is not a demandable and enforceable obligation. (EXCR) However, for a bonus to be enforceable, it must have been promised
by the employer and expressly agreed upon by the parties. Given that the bonus in this case is integrated in the CBA, it is now a demandable
obligation. By its incorporation in the CBA, the Christmas bonus due is more than just an act of generosity but a contractual obligation.
A CBA refers to a negotiated contract between a legitimate labor organization and the employer, concerning wages, hours of work and
all other terms and conditions of employment in a bargaining unit. As in all other contracts, the parties to a CBA may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public
policy.
All given, business losses are not ground to repudiate obligation under CBA (unless indicated so in the CBA). The rule is settled that
any benefit and supplement enjoyed by employees cannot be reduced, diminished, discontinued or eliminated by the employer. The principle of
non-diminution of benefits is founded on the constitutional mandate to protect the rights of workers and to promote their welfare and to afford
labor full protection.

In this case, CBA reveals that Lepanto provides for the Christmas gift package/bonus without qualification. It is clear that the said
CBA/provision did not state that the bonus depends on the petitioners financial standing.
It is noteworthy that in 1998 and 1999 Financial Statements, P took note that the 1997 financial crisis in the Asian region adversely
affected the Philippine economy. It is clear P was aware of the imminence and possibility of business losses owing to the 1997 financial
crisis. In 1998, petitioner suffered a net loss of 14M. Yet it gave a 3k bonus.
The Court is aware that implementation to the letter of subject CBA provision may further deplete Ps resources. Ps remedy though
lies not in Courts invalidation of the provision but in the parties clarification of the same in subsequent CBA negotiations. Art 253 is relevant:
Art. 253. Duty to bargain collectively when there exists a collective bargaining agreement. - When there is a collective
bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor modify such
agreement during its lifetime. However, either party can serve a written notice to terminate or modify the agreement at least sixty
(60) days prior to its expiration date. It shall be the duty of both parties to keep the status quo and to continue in full force and
effect the terms and conditions of the existing agreement during the sixty (60)-day period and/or until a new agreement is
reached by the parties.