BPI EMPLOYEES UNION-DAVAO CITY-FUBU v.

BANK OF THE PHILIPPINE ISLANDS management to submit the BOMC issue to the grievance procedure under the
G.R. No. 174912. July 24, 2013 – BARREDO CBA, but BPI did not consider it as "grievable." Instead, BPI proposed a Labor
Management Conference between the parties.
Petitioner: BPI Employees Union-Davao City-FUBU (BPIEU-Davao City-FUBU)  During the LMC, BPI invoked management prerogative stating that the creation
Respondents: Bank of the Philippine Islands (BPI), and BPI Officers Claro M. Reyes, Cecil of the BOMC was to preserve more jobs and to designate it as an agency to
Conanan and Gemma Velez place employees where they were most needed.
 On the other hand, the Union charged that BOMC undermined the existence of
TOPIC: Managerial Prerogatives - change of work hours the union since it reduced or divided the bargaining unit. While BOMC
employees perform BPI functions, they were beyond the bargaining unit's
Employers Bank of the Philippine Islands coverage. In contracting out FEBTC functions to BOMC, BPI effectively deprived
Employee BPI Employees Union-Davao City-FUBU the union of the membership of employees handling said functions as well as
Unfair labor practice for employer to outsource the positions in the curtailed the right of those employees to join the union.
Labor Issue  Thereafter, the Union demanded that the matter be submitted to the grievance
existing bargaining unit
machinery as the resort to the LMC was unsuccessful. As BPI allegedly ignored
DOCTRINE: It is to be emphasized that contracting out of services is not illegal per se. It is the demand, the Union filed a notice of strike before the National Conciliation
an exercise of business judgment or management prerogative. Absent proof that the and Mediation Board.
management acted in a malicious or arbitrary manner, the Court will not interfere with  BPI then filed a petition for assumption of jurisdiction/certification with the
the exercise of judgment by an employer. Secretary of the Department of Labor and Employment, who subsequently
issued an order certifying the labor dispute to the NLRC for compulsory
FACTS: arbitration.
 BOMC, which was primarily engaged in providing and/or handling support
services for banks and other financial institutions, is a subsidiary of the Bank of CONTENTION OF PETITIONER:
Philippine Islands operating and functioning as an entirely separate and distinct  The outsourcing of jobs included in the existing bargaining unit to BOMC is a
entity. breach of the union-shop agreement in the CBA.
 A service agreement between BPI and BOMC was initially implemented in BPI's  In transferring the former employees of FEBTC to BOMC instead of absorbing
Metro Manila branches. In this agreement, BOMC undertook to provide services them in BPI as the surviving corporation in the merger, the number of positions
such as check clearing, delivery of bank statements, fund transfers, card covered by the bargaining unit was decreased, resulting in the reduction of the
production, operations accounting and control, and cash servicing, Union's membership.
conformably with BSP Circular No. 1388.  The CBA covers the agreement with respect, not only to wages and hours of
 Not a single BPI employee was displaced and those performing the functions, work, but to all other terms and conditions of work. The union shop clause, being
which were transferred to BOMC, were given other assignments. part of these conditions, states that the regular employees belonging to the
 The Manila chapter of BPI Employees Union then filed a complaint for unfair labor bargaining unit, including those absorbed by way of the corporate merger, were
practice. The Labor Arbiter decided the case in favor of the union. The decision required to join the bargaining union "as a condition for employment."
was, however, reversed on appeal by the NLRC. BPIEU-Metro Manila-FUBU filed a  While they admitted that BPI has the prerogative to determine what should be
petition for certiorari before the CA which denied it, holding that BPI transferred done to meet the exigencies of business, the exercise of management
the employees in the affected departments in the pursuit of its legitimate prerogative is not absolute, thus, requiring good faith and adherence to the law
business. The employees were neither demoted nor were their salaries, benefits and the CBA.
and other privileges diminished.  It is unfair labor practice for an employer to outsource the positions in the existing
 The service agreement was likewise implemented in Davao City. bargaining unit.
 Later, a merger between BPI and Far East Bank and Trust Company took effect
with BPI as the surviving corporation. CONTENTION OF RESPONDENTS:
 Thereafter, BPI's cashiering function and FEBTC's cashiering, distribution and  The service agreement with BOMC is valid on three (3) grounds: 1] that it was
bookkeeping functions were handled by BOMC. pursuant to the prevailing law at that time, CBP Circular No. 1388; 2] that the
 Consequently, twelve (12) former FEBTC employees were transferred to BOMC to creation of BOMC was within management prerogatives intended to streamline
complete the latter's service complement. the operations and provide focus for BPI's core activities; and 3] that the Union
 BPI Davao's rank and file collective bargaining agent, BPI Employees Union- recognized, in its CBA, the exclusive right and prerogative of BPI to conduct the
Davao City-FUBU, objected to the transfer of the functions and the twelve (12) management and operation of its business.
personnel to BOMC contending that the functions rightfully belonged to the BPI
employees and that the Union was deprived of membership of former FEBTC RULING OF THE LOWER TRIBUNAL:
personnel who, by virtue of the merger, would have formed part of the  NLRC – upheld the validity of the service agreement between BPI and BOMC
bargaining unit represented by the Union pursuant to its union shop provision in and dismissing the charge of ULP
the CBA. o The engagement by BPI of BOMC to undertake some of its activities was
 The Union then filed a formal protest addressed to BPI Vice Presidents Claro M. clearly a valid exercise of its management prerogative.
Reyes and Cecil Conanan reiterating its objection. It requested the BPI
 o The spinning off by BPI to BOMC of certain services and functions did not union membership. BPI also stresses that not a single employee or union member was or
interfere with, restrain or coerce employees in the exercise of their right to would be dislocated or terminated from their employment as a result of the Service
self-organization. Agreement. Neither had it resulted in any diminution of salaries and benefits nor led to
 CA – affirmed the NLRC's Resolution any reduction of union membership.
o Considering the ramifications of the corporate merger, it was well within
BPI's prerogatives "to determine what additional tasks should be It is to be emphasized that contracting out of services is not illegal per se. It is an exercise
performed, who should best perform it and what should be done to meet of business judgment or management prerogative. Absent proof that the management
the exigencies of business." acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of
judgment by an employer. In this case, bad faith cannot be attributed to BPI because
ISSUE: Whether the act of BPI to outsource the cashiering, distribution and bookkeeping its actions were authorized by CBP Circular No. 1388, Series of 1993 issued by the
functions to BOMC is in conformity with the law and the existing CBA. – YES. Monetary Board of the then Central Bank of the Philippines.

RULING + RATIO:
The Union claims that a union shop agreement is stipulated in the existing CBA, citing the
case of Shell Oil Workers' Union v. Shell Company of the Philippines, Ltd.; however, the
Union's reliance on the case is misplaced. The rule now is covered by Article 261 of
the Labor Code,which took effect on November 1, 1974. Article 261 provides:
ART. 261. Jurisdiction of Voluntary Arbitrators or panel of
Voluntary Arbitrators. — . . . Accordingly, violations of a Collective
Bargaining Agreement, except those which are gross in
character, shall no longer be treated as unfair labor practice and
shall be resolved as grievances under the Collective Bargaining
Agreement. For purposes of this article, gross violations of
Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such
agreement. [Emphases supplied]

Clearly, only gross violations of the economic provisions of the CBA are treated as ULP.
Otherwise, they are mere grievances.

In the present case, the alleged violation of the union shop agreement in the CBA, even
assuming it was malicious and flagrant, is not a violation of an economic provision in the
agreement. The provisions relied upon by the Union were those articles referring to the
recognition of the union as the sole and exclusive bargaining representative of all rank-
and-file employees, as well as the articles on union security, specifically, the
maintenance of membership in good standing as a condition for continued
employment and the union shop clause. It failed to take into consideration its
recognition of the bank's exclusive rights and prerogatives, likewise provided in the CBA,
which included the hiring of employees, promotion, transfers, and dismissals for just
cause and the maintenance of order, discipline and efficiency in its operations.

The Union, however, insists that jobs being outsourced to BOMC were included in the
existing bargaining unit, thus, resulting in a reduction of a number of positions in such
unit. The reduction interfered with the employees' right to self-organization because the
power of a union primarily depends on its strength in number.

It is incomprehensible how the "reduction of positions in the collective bargaining unit"