May companies stop paying bonuses and 13th month pay?

WHAT MATTERS MOST - Atty. Josephus B. Jimenez - The Freeman

No, even if the reason is financial losses, still the answer is a big no, if it is the thirteenth month pay because it is mandated by law. The answer is yes, if it is merely a bonus that has not ripened into a company benefit. That means that we should know the difference between a thirteenth month pay and a bonus. The former is mandatory, the latter is discretionary. The problem with many Filipinos is that they equate the bonus with the thirteenth month pay or vice-versa.

The thirteenth month pay is mandated by a law, Presidential Decree 851 since 1975. All rank-and-file employees should get it and all employers should pay it. No ifs and no buts. Only rank-and-file workers are entitled to it. But if management, by mistake, or by tolerance, supervisors, managers and executives had been given thirteenth month, and that practice has ripened into a company practice or even formalized in a policy, it can no longer be withdrawn. For management to withdraw the benefit unilaterally would be to violate Article 100 of the Labor Code, which contains the Non-Withdrawal, Non-Diminution Rule. This has been explicitly declared over and over again by the highest court of the land, including the case of Central Azucarera de Tarlac, GR 188949.

On bonus, however, the rule is different. A bonus is not mandated by law. It is granted voluntarily by employers as a gesture of grace and gratitude, appreciation, or compassion. Therefore, employers are not forced to give them because they are management prerogatives. The Supreme Court said so in so many cases one of which is the case of Traders Royal Bank, 189 SCRA 274. But then again, when the grant of the bonus has ripened into a long-repeated company practice, and the same has become embedded into the terms and conditions of employment, the grant of the bonus can no longer be stopped unilaterally, not even diminished in amounts and frequency. This was pronounced by the High Court in the Globe Mackay case, decided on June 29, 1981.

In the case of Producers Bank, decided on March 28, 2001, the Supreme Court held that a Christmas bonus, unlike the thirteenth month pay, is not mandatory. Is a voluntary act of generosity. And the court declared that: "No company should be compelled to act liberally and confer upon its employees additional benefits over and above those mandated by law, when it is plagued by economic difficulties and principal losses. No act of enlightened generosity and self-interest can be exacted from near-empty coffers." In other words, as the Supreme Court held in the case of North Davao Mining, one cannot draw blood from stone (GR 112546, 13 March 1996).

In the case of Eastern Telecom (GR 185665, Feb, 8, 2012), the Supreme Court compelled the company to pay its employees fourteenth, fifteenth, and sixteenth month bonuses because they were obligations assumed by management in a collective bargaining agreement with the union. Financial losses is not a justification to deny the same. Said the court: "The parties to the contract must be presumed to have assumed the risks of unfavorable developments xxx the Court determines that the company's claimed depressed financial state will not release it from the binding effect of the collective bargaining agreement." This is a big blow to the company which claimed to have suffered millions in losses.

The Supreme Court, in this case of Eastern Telecom, said: "The rule is settled that any benefit being 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 m andate to protect the rights of workers and to promote their welfare and to afford the latter full protection". Employers are not supposed to ask: How about protection for management? There is none in the Labor Code.


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