[UNFAIR LABOR PRACTICE – Acts Violative of CBA - 21 BPI Employees Union o After submission of position papers, UNION filed
position papers, UNION filed an Urgent Omnibus
v. BPI Gross Violation of CBA]
21 BPI Employees Union v. BPI
July 24, 2013 | Mendoza, J.
BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITY-FUBU),
petitioner, vs. BANK OF THE PHILIPPINE ISLANDS (BPI), and BPI OFFICERS
CLARO M. REYES, CECIL CONANAN and GEMMA VELEZ, respondents.
Facts:
 BPI Operations Management Corporation (BOMC) is a subsidiary but a “separate
and distinct entity” of BPI primarily engaged with providing support services for
banks and other financial institutions.
 BOMC and Respondent BPI had a service agreement where BOMC will provide
cashiering, bookkeeping, and distributing services of BPI. Not a single BPI
employee was displaced. Those performing the said functions were given
other assignments. Neither were there demotions nor deductions in salaries,
benefits, or other privileges.
 BPIEU-Metro Manila-FUBU (Manila chapter of BPI Employees Union) filed a
complaint for ULP. LA favored them, but NLRC reversed, and CA denied their
petition. The transfer of employees from BPI to BOMC was held to be in pursuit of
legitimate business.
 The same service agreement was implemented in Davao City. After BPI and
Far East Bank and Trust Co. (FEBTS) merged, with BPI as the surviving
corporation, 12 former employees of FEBTC from its cashiering, distribution,
and bookkeeping services were transferred to BOMC.
 Petitioner BPIEU-Davao-FUBU (UNION) objected the transfer and wrote to the Co-
Respondents BPI VPs Reyes and Conanan, arguing that the UNION was
effectively deprived of membership due to the transfer. Pursuant to the union
shop clause in the CBA, the 12 employees should have been absorbed by
BPI, not BOMC, as they would form part of the bargaining unit represented
by the UNION.
 UNION then filed a formal protest, requesting to submit the issue under the
grievance machinery under the CBA. BPI, however, did not considered it as
“grievable”; hence, the parties proceeded with a labor management
conference instead.
o In the LMC, BPI asserted its management prerogative to justify the
transfer, whereas the UNION argued that the contracting out of services
to BOMC not only deprived the union of its membership but also curtailed
the employees’ rights to join the union.
 As the LMC was unsuccessful (perhaps it was a stalemate), UNION demanded
submission to grievance machinery but BPI ignored the demand. Thus, the
UNION filed a notice of strike before the NCMB on the following grounds:
o Contractingoutofservices/functionswhichinterferedwith,restrained,
and/orcoerced the employees in their exercise of right to self-
organization
o Violation of duty to bargain
o Unionbusting
 BPI petitioned the SOLE to assume jurisdiction. SOLE certified the dispute to
the NLRC for compulsory arbitration and directed the parties to cease and desist
from committing any act that may exacerbate the situation.
Motion to Cease and Desist, with prayer that BPI Davao be held in
contempt for the following:
 Formation of a task force composed of 6 former FEBTC
employees to handle the cashiering, distributing, clearing,
tellering, and accounting functions of former FEBTC branches
BUT conducted its business in BOMC, using the latter’s
equipment and facilities
 While BPI transactions (checks) were cleared by BPI
employees, FEBTC transactions were cleared by BOMC
employees at the Clearing House. Also, checks coming from BPI
or FEBTC were brought to BOMC, instead of the Processing
Center of BPI with BPI employees, which was not the case
before the corporate merger and the labor dispute.
 These acts caused BOMC to encroach upon the work
supposedly exclusive to BPI employees.
 NLRC upheld the validity of the service agreement, dismissed the ULP charge,
and held that BPI’s activities are clearly a valid exercise of management
prerogative.
o The UNION did not even present an iota of evidence showing that
BPI had terminated employees. In fact, BPI exercised utmost
diligence, care, and effort, to see to it that no union member was
terminated.
o NLRC also stressed that BSP Circular No. 1388 s. 1993 (Circ 1388),
not DOLE Dept. Order No. 10 s. 1997 (DO 10), was the applicable
rule. (To be discussed later)
 CA affirmed the NLRC, finding no GAD, as the factual findings were supported by
substantial evidence.
o CA also stressed that the UNION did not become the bargaining
agent of the FEBTC employees by mere fact of merger. The merged
employees still need to elect whether they wish to be represented.
o CA also agreed that DO 10 does not apply to commercial banks, like BPI,
which are subject to BSP rules and regulations.
o Hence, this petition for review on certiorari.
UNION:
 Outsourcing of jobs included in the existing bargaining unit breached the union-
shop provision in the CBA.
 Transfer of employees from FEBTC to BOMC instead of absorbing them in BPI
reduced UNION membership since the employees in BOMC were not part of the
existing bargaining unit.
 BPI’s acts constituted a violation of the CBA and interference with the right
to self- organization and, therefore, ULP, citing the case of Shell Oil Workers’
Union v. Shell Company of the Philippines., Ltd.
BPI:
 Service agreement was pursuant to Circ1388.
 Outsourcing to BOMC was within management prerogatives.
 UNION recognized in its CBA the exclusive right and prerogative of BPI to conduct
management and operation of its business
 Shell is not applicable because the finding of ULP therein was predicated upon the
express assurance in the CBA that the security guard section of the respondent
company (which was replaced with an outside agency) would continue. In this case
at bar, there is no such provision.
 The right to self-organization could not have been curtailed since the
representation of the prospective members of the UNION (the former FEBTC
employees) is contingent upon their choice whether they wish to join the UNION.
the business of banks – such as cashiering, distribution and
bookkeeping.
o The core activities / main business / inherent functions of banks are
DEPOSIT and LOAN functions, the outsourcing of which is also
prohibited by Circ 1388.
o The UNION even acknowledged BPI has a “Processing Center” which
implies that the said functions of cashiering, distribution and bookkeeping
are not directly relative to the core activities of banks.

Issue:  Farming out of activities, whether peripheral or core in nature, is a

WON BPI’s act of transferring and outsourcing constituted ULP? NO. management prerogative.
o What is of primordial importance is that the service agreement does not
Held: violate the employee’s right to security of tenure and payment of
 UNION reliance on Shell is misplaced. LC 261 is now the rule, which provides benefits.
that CBA violations, excepting those which are gross in character, shall no o Outsourcing must not squarely fall under labor-only contracting
longer be treated as unfair labor practice and shall be resolved as grievances where the contractor or sub-contractor merely recruits, supplies or places
under the CBA. workers to perform a job, work or service for a principal or if any of the
o Gross violation = flagrant and/or malicious refusal to comply with following elements are present:
the economic provisions of such agreement.  The contractor or subcontractor does not have substantial
 IN THIS CASE, the alleged violation of the union shop agreement was NOT a capital or investment which relates to the job, work or service to
violation of an economic provision. The provisions referred to by the UNION be performed and the employees recruited, supplied or placed
concerned the representation aspect. by such contractor or subcontractor are performing activities
o The UNION did not even consider CBA provisions relating to the rights which are directly related to the main business of the principal;
and prerogatives exclusive to BPI such as hiring, promotions, transfers, or
and dismissals for just cause, and the maintenance of order, discipline,  The contractor does not exercise the right to control over the
and efficiency in its operations. performance of the work of the contractual employee.
 Reduction of positions in the bargaining unit does not interfere with the right to self-
organization since NO EMPLOYEE was transferred or dismissed, and neither Dispositive
were there any demotions or deductions. The UNION failed to present proof Petition DENIED.
of ill will, anti-unionism, or bad faith. No ULP committed. Transfer and outsourcing was in accordance with law.
 Bad faith cannot be attributed to BPI since its actions were authorized by
Circ 1388.
o Circ 1388 allowed BPI to engage with a bank service corporation (like Notes
BOMC) to perform services, such as check-clearing processing,
collection and delivery of checks not included in the Philippine Clearing
House System, as well as recording of the same (Sec 1177[d], Book I,
Manual of Regulations for Banks and Other Financial Intermediaries, as
amended by Circ 1388).
 There is no conflict between DO 10 and Circ 1388; rather, they complement
each other. This is consisted with the maxim interpretare et concodare leges
legibus est optimus interpretandi modus. (To interpret and harmonize laws is
the best method of interpretation.) It is only when harmonization is impossible
that it is proper to resort to choosing which law would apply.
o DO 10 enumerates the permissible contracting or subcontracting
activities, but in general terms, such as works or services not directly
related or not integral to the main business or operation of the principal
(Sec 6[d], DO 10).
o This does not limit or prohibit BSP to issue rules to specifically determine
services which may be contracted out. DO 10 is simply the guideline.
o BUT even if DO 10 is considered, BPI does NOT violate DO 10
because Circ 1388 specified functions which are merely ancillary to