Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=81989:g-r-no-174912,-july-24,-2013-bpi-employees-union-davao-city-fubu-bpieu-davao-city-fubu-,-petitioner,-v-bank-of-the-philippine-islands-bpi-,-and-bpi-officers-claro-m-reyes,-cecil-conanan-and-gemma-velez,-respondents&catid=1572&Itemid=566
Timestamp: 2019-04-20 08:24:28+00:00

Document:
G.R. No. 174912, July 24, 2013 - BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITY-FUBU), Petitioner, v. BANK OF THE PHILIPPINE ISLANDS (BPI), AND BPI OFFICERS CLARO M. REYES, CECIL CONANAN AND GEMMA VELEZ, Respondents.
BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITY-FUBU), Petitioner, v. BANK OF THE PHILIPPINE ISLANDS (BPI), AND BPI OFFICERS CLARO M. REYES, CECIL CONANAN AND GEMMA VELEZ, Respondents.
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the April 5, 2006 Decision1 and August 17, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 74595 affirming the December 21, 20013 and August 23, 20024 Resolutions of the National Labor Relations Commission (NLRC) in declaring as valid and legal the action of respondent Bank of the Philippine Islands-Davao City (BPI-Davao) in contracting out certain functions to BPI Operations Management Corporation (BOMC).
BOMC, which was created pursuant to Central Bank5 Circular No. 1388, Series of 1993 (CBP Circular No. 1388, 1993), and primarily engaged in providing and/or handling support services for banks and other financial institutions, is a subsidiary of the Bank of Philippine Islands (BPI) operating and functioning as an entirely separate and distinct entity.
A service agreement between BPI and BOMC was initially implemented in BPI’s Metro Manila branches. In this agreement, BOMC undertook to provide services such as check clearing, delivery of bank statements, fund transfers, card production, operations accounting and control, and cash servicing, conformably with BSP Circular No. 1388. Not a single BPI employee was displaced and those performing the functions, which were transferred to BOMC, were given other assignments.
On January 1, 1996, the service agreement was likewise implemented in Davao City. Later, a merger between BPI and Far East Bank and Trust Company (FEBTC) took effect on April 10, 2000 with BPI as the surviving corporation. Thereafter, BPI’s cashiering function and FEBTC’s cashiering, distribution and bookkeeping functions were handled by BOMC. Consequently, twelve (12) former FEBTC employees were transferred to BOMC to complete the latter’s service complement.
During the LMC, BPI invoked management prerogative stating that the creation of the BOMC was to preserve more jobs and to designate it as an agency to place employees where they were most needed. On the other hand, the Union charged that BOMC undermined the existence of the union since it reduced or divided the bargaining unit. While BOMC employees perform BPI functions, they were beyond the bargaining unit’s coverage. In contracting out FEBTC functions to BOMC, BPI effectively deprived the union of the membership of employees handling said functions as well as curtailed the right of those employees to join the union.
BPI then filed a petition for assumption of jurisdiction/certification with the Secretary of the Department of Labor and Employment (DOLE), who subsequently issued an order certifying the labor dispute to the NLRC for compulsory arbitration. The DOLE Secretary directed the parties to cease and desist from committing any act that might exacerbate the situation.
The Bank created a Task Force Committee on November 20, 2000 composed of six (6) former FEBTC employees to handle the Cashiering, Distributing, Clearing, Tellering and Accounting functions of the former FEBTC branches but the “task force” conducts its business at the office of the BOMC using the latter’s equipment and facilities.
On December 21, 2001, the NLRC came out with a resolution upholding the validity of the service agreement between BPI and BOMC and dismissing the charge of ULP. It ruled that the engagement by BPI of BOMC to undertake some of its activities was clearly a valid exercise of its management prerogative.11 It further stated that the spinning off by BPI to BOMC of certain services and functions did not interfere with, restrain or coerce employees in the exercise of their right to self-organization.12 The Union did not present even an iota of evidence showing that BPI had terminated employees, who were its members. In fact, BPI exerted utmost diligence, care and effort to see to it that no union member was terminated.13 The NLRC also stressed that Department Order (D.O.) No. 10 series of 1997, strongly relied upon by the Union, did not apply in this case as BSP Circular No. 1388, series of 1993, was the applicable rule.
As to the applicability of D.O. No. 10, the CA agreed with the NLRC that the said order did not apply as BPI, being a commercial bank, its transactions were subject to the rules and regulations of the BSP.
Not satisfied, the Union filed a motion for reconsideration which was, however, denied by the CA.
THE PETITION BEFORE THE COURT OF APPEALS INVOLVED QUESTIONS OF LAW AND ITS DECISION DID NOT ADDRESS THE ISSUE OF WHETHER BPI’S ACT OF OUTSOURCING FUNCTIONS FORMERLY PERFORMED BY UNION MEMBERS VIOLATES THE CBA.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT DOLE DEPARTMENT ORDER NO. 10 DOES NOT APPLY IN THIS CASE.
The Union is of the position that the outsourcing of jobs included in the existing bargaining unit to BOMC is a breach of the union-shop agreement in the CBA. In transferring the former employees of FEBTC to BOMC instead of absorbing them in BPI as the surviving corporation in the merger, the number of positions covered by the bargaining unit was decreased, resulting in the reduction of the Union’s membership. For the Union, BPI’s act of arbitrarily outsourcing functions formerly performed by the Union members and, in fact, transferring a number of its members beyond the ambit of the Union, is a violation of the CBA and interfered with the employees’ right to self organization. The Union insists that the CBA covers the agreement with respect, not only to wages and hours of work, but to all other terms and conditions of work. The union shop clause, being part of these conditions, states that the regular employees belonging to the bargaining unit, including those absorbed by way of the corporate merger, were required to join the bargaining union “as a condition for employment.” Simply put, the transfer of former FEBTC employees to BOMC removed them from the coverage of unionized establishment. While the Union admitted that BPI has the prerogative to determine what should be done to meet the exigencies of business in accordance with the case of Sime Darby Pilipinas, Inc. v. NLRC,19 it insisted that the exercise of management prerogative is not absolute, thus, requiring good faith and adherence to the law and the CBA. Citing the case of Shell Oil Workers’ Union v. Shell Company of the Philippines, Ltd.,20 the Union claims that it is unfair labor practice for an employer to outsource the positions in the existing bargaining unit.
BPI argues that the case of Shell Oil Workers’ Union v. Shell Company of the Philippines, Ltd.,22 cited by the Union, is not on all fours with the present case. In said case, the company dissolved its security guard section and replaced it with an outside agency, claiming that such act was a valid exercise of management prerogative. The Court, however, ruled against the said outsourcing because there was an express assurance in the CBA that the security guard section would continue to exist. Having failed to reserve its right to effect a dissolution, the company’s act of outsourcing and transferring security guards was invalidated by the Court, ruling that the unfair labor practice strike called by the Union did have the impression of validity. In contrast, there is no provision in the CBA between BPI and the Union expressly stipulating the continued existence of any position within the bargaining unit. For BPI, the absence of this peculiar fact is enough reason to prevent the application of Shell to this case.
BPI likewise invokes settled jurisprudence,23 where the Court upheld the acts of management to contract out certain functions held by employees, and even notably those held by union members. In these cases, the decision to outsource certain functions was a justifiable business judgment which deserved no judicial interference. The only requisite of this act is good faith on the part of the employer and the absence of malicious and arbitrary action in the outsourcing of functions to BOMC.
On the issue of the alleged curtailment of the right of the employees to self-organization, BPI refutes the Union’s allegation that ULP was committed when the number of positions in the bargaining was reduced. It cites as correct the CA ruling that the representation of the Union’s prospective members is contingent on the choice of the employee, that is, whether or not to join the Union. Hence, it was premature for the Union to claim that the rights of its prospective members to self-organize were restrained by the transfer of the former FEBTC employees to BOMC.
Clearly, only gross violations of the economic provisions of the CBA are treated as ULP. Otherwise, they are mere grievances.
As far as the twelve (12) former FEBTC employees are concerned, the Union failed to substantially prove that their transfer, made to complete BOMC’s service complement, was motivated by ill will, anti-unionism or bad faith so as to affect or interfere with the employees’ right to self-organization.
It is to be emphasized that contracting out of services is not illegal per se. It is an exercise of business judgment or management prerogative. Absent proof that the management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.32 In this case, bad faith cannot be attributed to BPI because its actions were authorized by CBP Circular No. 1388, Series of 199333 issued by the Monetary Board of the then Central Bank of the Philippines (now Bangko Sentral ng Pilipinas). The circular covered amendments in Book I of the Manual of Regulations for Banks and Other Financial Intermediaries, particularly on the matter of bank service contracts. A finding of ULP necessarily requires the alleging party to prove it with substantial evidence. Unfortunately, the Union failed to discharge this burden.
Much has been said about the applicability of D.O. No. 10. Both the NLRC and the CA agreed with BPI that the said order does not apply. With BPI, as a commercial bank, its transactions are subject to the rules and regulations of the governing agency which is the Bangko Sentral ng Pilipinas.34 The Union insists that D.O. No. 10 should prevail.
The Court is of the view, however, that there is no conflict between D.O. No. 10 and CBP Circular No. 1388. In fact, they complement each other.
In the case at bench, the Union submits that while the Central Bank regulates banking, the Labor Code and its implementing rules regulate the employment relationship. To this, the Court agrees. The fact that banks are of a specialized industry must, however, be taken into account. The competence in determining which banking functions may or may not be outsourced lies with the BSP. This does not mean that banks can simply outsource banking functions allowed by the BSP through its circulars, without giving regard to the guidelines set forth under D.O. No. 10 issued by the DOLE.
Thus, the subject functions appear to be not in any way directly related to the core activities of banks. They are functions in a processing center of BPI which does not handle or manage deposit transactions. Clearly, the functions outsourced are not inherent banking functions, and, thus, are well within the permissible services under the circular.
Please take notice that on July 24, 2013 a Decision, copy attached herewith, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on July 29, 2013 at 1:45 p.m.
(f) providing general support services, such as purchasing of bank forms, equipment and supplies; messengerial, janitorial and services; necessary budget and expense accounting, and other similar services.
6. The bank shall continue to comply with all laws and regulations, covering the activities performed by the Service Bureau for and in its behalf such as, but may not be limited to, keeping of records and preparation of reports, signing authorities, internal control, and clearing regulations."
"(11) Bank service corporations all of the capital of which is owned by one or more banks and organized to perform for and in behalf of banks the services enumerated in Section 1177."
45 Id.; Art. 106, Labor Code of the Philippines.

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