G.R. No. 164301

G.R. No. 164301 – BANK OF THE PHILIPPINE ISLANDS (BPI), petitioner –versus– BPI EMPLOYEES UNION-DAVAO CHAPTER FEDERATION OF UNIONS IN BPI UNIBANK, respondent.

Promulgated: August 10, 2010

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DISSENTING OPINION

BRION, J.:

I dissent.

Out at outset, I wish to clarify what this case is all about and what it is not about.

The case is simply about the interpretation and application, in a merger situation, of union security clauses in the petitioner’s collective bargaining agreement (CBA) with the respondent union. To be exact, the basic underlying issue of the case is about the effects of merger on the merging corporations’ employees – an issue that arose soon after the merger and one that is still current despite the execution of two subsequent CBAs. It is not an issue, therefore, that simply must be resolved because it will recur, as the ponencia posits; it must be resolved because it is a live dispute that now exists between the parties.

The case is not about the constitutional validity of union security provisions in CBAs or their application. No constitutional issue has been raised either in the petition or in the respondent’s comment, although I invoked the Constitution in this Dissenting Opinion for interpretative purposes. Justice Antonio T. Carpio, in his own dissent, injects a constitutional issue by positing that the employees absorbed by the surviving corporation in the merger have the constitutional right not to join any union, and cannot be compelled to join, under the union, security clauses whose interpretation and application are disputed.

The Bank of the Philippine Islands (BPI or successor corporation) merged with the Far East Bank and Trust Company (FEBTC or merged corporation) pursuant to an Article and Plan of Merger (Merger Plan) that saw all the assets and liabilities of FEBTC transferred to, and absorbed by, BPI, with the latter as the surviving as well as the successor corporate entity. No specific provision in the Merger Plan referred to the FEBTC employees, specifically, what their situation would be under the merger. BPI, however, absorbed all the FEBTC employees (absorbed employees) as its own employees with their status of employment, tenure, salaries and benefits under the FEBTC maintained.

The BPI Employees Union–Davao Chapter Federation of Unions in BPI Unibank (the union or respondent union) is the exclusive bargaining agent of BPI’s rank-and-file employees in Davao City. The absorbed employees in Davao City did not belong to any labor union while they were with the FEBTC. The union now claims that the absorbed employees whose positions fall within the bargaining unit it represents should now join the union as members pursuant to the following provisions of the existing CBA:

ARTICLE I

Section 1. Recognition and Bargaining Unit. The BANK recognizes the UNION as the sole and exclusive bargaining representative of all rank-and-file employees of the Bank offices in Davao City.

x x x x

ARTICLE II

Section 1. Maintenance of Membership. All employees within the bargaining unit who are members of the Union on the date of the effectivity of this Agreement as well as employees within the bargaining unit who subsequently join or become members of the Union during the lifetime of this Agreement shall, as a condition of their continued employment with the Bank, maintain their membership in the Union in good standing. [Emphasis supplied.]

Section 2. Union Shop. New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union as a condition of their continued employment. It is understood that membership in good standing is a condition of their continued employment with the Bank. [Emphasis supplied.]

Some of the absorbed employees refused to join the union while BPI failed to act on the grievance filed by the union after it had asked BPI to dismiss the refusing absorbed employees. BPI took the position that the absorbed employees are not “new” employees who, under the terms of the union security provisions, are under obligation to join the union to maintain their employment.

When settlement of the disagreement at the grievance machinery was not reached, the union referred the matter to voluntary arbitration. The voluntary arbitrator ruled in favor of the refusing absorbed employees and BPI, holding that the refusing employees are not new employees to whom the union shop provision of the CBA applies. On appeal, the Court of Appeals reversed and set aside the voluntary arbitrator’s ruling.

The ponencia affirms the CA decision and reiterates that all absorbed employees falling within the bargaining unit should join the union pursuant to the CBA’s union security clauses. In so ruling, the ponencia holds that:

a. The absorbed employees are “new” BPI employees to whom the union shop provision of the CBA applies;[1]

b. The absorbed employees do not fall within the exceptions recognized by law and jurisprudence to be excluded from the application of union security provisions; thus, the only issue is whether the absorbed employees “are excluded by the express terms of the existing CBA between the petitioner and the respondent”;[2]

c. Unless expressly assumed, labor contracts, such as employment contracts and CBAs, are not enforceable against the transferee of an enterprise, labor contracts being in personam, thus binding only between the parties;[3]

d. BPI’s role as the employer of the former FEBTC employees was not by operation of law nor a legal consequence of the merger agreement;[4] BPI simply voluntarily hired or contracted with these absorbed employees;[5]

e. It is contrary to public policy to declare the absorbed employees a part of the assets or liabilities of FEBTC that were transferred to BPI through the Merger Plan. The transferred assets and liabilities should be deemed to refer only to property rights and obligations of FEBTC and do not include employment contracts of its personnel;[6] and

f. The constitutional associational right not to join the union does not apply to the absorbed employees because they fall within a collective bargaining unit and are covered by a CBA whose union security clauses are constitutionally valid.[7]

I disagree with points (a) to (e) and submit in point (f) that the constitutional issue raised is not material to the resolution of the issues raised.

Parenthetically, the non-involvement of affected employees at this level of the litigation (a new point the modified ponencia raised) is not a stumbling block to the present petition as the ponencia now posits. In interpreting a CBA provision, the real parties in interest are the bargaining parties – the company and the union – the agreement is between them. Hence, it matters not that the affected employees, mere necessary parties, are not direct parties in the present petition for review on certiorari. For ease of appreciation, I submit the following discussions topically presented, not necessarily in the order of the ponencia’s presentation of positions as shown above.

The Merger

A basic point of disagreement with the ponencia relates to the approach in resolving the issues raised. The ponencia appears to consider only the purely labor law aspect of the case in determining the relationships among BPI, FEBTC and the absorbed employees. More than anything else, however, the issues before us are rooted in the corporate merger that took place; thus, the first priority in resolving the issues before us should be to consider and analyze the nature and consequences of the BPI-FEBTC merger – essentially a matter under the Corporation Code. On the basis of this analysis, the application of labor law can follow.

Unlike the old Corporation Code that did not contain express provisions on mergers and consolidations, the present law now authorizes, under Section 76,[8] two or more corporations to merge under one of the participating constituent corporations, or to consolidate into a new single corporation called the consolidated corporation. In either case, no liquidation of the assets of the dissolved corporations takes place, and the surviving or consolidated corporation assumes ipso jure the liabilities of the dissolved corporations, regardless of whether the creditors consented to the merger or consolidation.[9]

The transaction between BPI and FEBTC was a merger under one of the modes provided under Section 76 –- i.e., the two corporations, BPI and FEBTC, merged with FEBTC fading away as a corporate entity and BPI surviving as FEBTC’s successor. Section 80 of the Corporation Code[10] provides for the legal effects of a merger. As applied to BPI and FEBTC, the effects were:

a. BPI and FEBTC became a single corporation with BPI as the surviving corporation;

b. The separate corporate existence of FEBTC ceased;

c. BPI now possesses all the rights, obligations, privileges, immunities, and franchises of both BPI and FEBTC;

d. All property, real or personal, and all receivables due on whatever choses in action, and all other interest of, belonging to, or due to FEBTC are deemed transferred to BPI;

e. BPI becomes responsible and liable for all the liabilities and obligations of FEBTC as if it had incurred these liabilities or obligations;

f. Any claim, action, or proceeding pending by or against FEBTC should be prosecuted by or against BPI; and

g. Neither the rights of creditors nor any lien on the property of FEBTC is impaired by the merger.

In short, FEBTC ceased to have any legal personality, and BPI stepped into everything that was FEBTC’s, pursuant to the law and the terms of their Merger Plan.

An overview of the whole range or levels of transfers of corporate assets and liabilities, as established by jurisprudence, is helpful and instructive for the full appreciation of the nature of the BPI-FEBTC merger. These levels of transfers are: (1) the assets-only level; (2) the business enterprise level; and (3) the equity level. Each has its own impact on the participating corporations and the immediately affected parties, among them, the employees.[11] Beyond and encompassing all these levels of transfers is total corporate merger or consolidation.

The asset-only transfer affects only the corporate seller’s raw assets and properties; the purchaser is not interested in the seller’s corporate personality – its goodwill, or in other factors affecting the business itself. In this transaction, no complications arise affecting the employer-employee relationship, except perhaps the redundancy of employees whose presence in the selling company is affected by the sale of the chosen assets and properties, but this is a development completely internal to the selling corporation.[12]

In the business enterprise level transaction, the purchaser’s interest goes beyond the assets and properties and extends into the seller corporation’s whole business and “earning capability,” short of the seller’s juridical personality. Thus, a whole business is sold and purchased but the parties retain their respective juridical personalities. In this type of transaction, employer-employee and employer liability complications arise, as can be seen from a survey of the cases on corporate transfers that this Court has already passed upon.[13]

A transaction at the equity level does not disturb the participating corporations’ separate juridical personality as both corporations continue to remain in existence; the purchaser corporation simply buys the underlying equity of the selling corporation which thus retains its separate corporate personality. The selling corporation continues to run its business, but control of the business is transferred to the purchaser corporation whose control of the selling corporation’s equity enables it to elect the members of the selling corporation’s board of directors.[14]

As pointed out above, a total merger or consolidation goes way beyond all three levels of dealings in corporate business, assets and property. In a total merger, the merged corporation transfers everything – figuratively speaking, its “body and soul” – to the surviving corporation. This was what happened in the BPI-FEBTC merger.

Corporate Assets and Employment Contracts

A corporation possesses tangible and intangible assets and properties that, operated on and managed by the corporation’s human resources, become an operating business. The intangibles consist, among others, of the corporate goodwill, credits and other incorporeal rights. The human resources that the corporation relies upon to run its business, strictly speaking, are not corporate assets because the corporation does not “own” the people running its business. But corporations are bound to their managers and employees by various forms of contracts of service, such as individual employment contracts, consultancies and other instruments evidencing personal service. In this sense, a corporation has rights over the human resources it has contracted to run and serve its business. These contractual rights, because they are exercised over those who enable the company to fulfill its goal of production, can be classified as corporate assets. But unlike the usual assets, they are unique and special, as contracts of personal service embody rights in personam, i.e., intransferable rights demandable by the parties only against one another.[15]

An employment contract or contract of service essentially has value because it embodies work – the means of adding value to basic raw materials and the processes for producing goods, materials and services that become the lifeblood of corporations and, ultimately, of the nation. Viewed from this perspective, the employment contract or contract of service is not an ordinary agreement that can be viewed in strictly contractual sense. It embodies work and production and carries with it a very significant element of public interest; thus, the Constitution, no less, accords full recognition and protection to workers and their contribution to production. Section 18, Article II of the Constitution provides:

SECTION 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.

Another recognition of the value of work, production and labor to the national economy is reflected in Article XII on National Economy and Patrimony whose Section 1 states:

The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged to broaden the base of their ownership. [Emphasis supplied.]

From the point of view of labor itself, Article XIII, Section 3 commands:

The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. [Emphasis supplied.]

These constitutional statements and directives, aside from telling us to consider work, labor and employment beyond purely contractual terms, also provide us directions on how our considerations should be made, i.e., with an eye on the interests they represent – the individual, the corporate, and more importantly, the national.

In a corporate merger situation – where one corporation totally surrenders itself, giving up to another corporation even the human resources that enable its business to operate – the terms of the Constitution bar us from looking at the corporate transaction purely as a contract that should be analyzed purely on the basis of the law on contracts, in the way the ponencia suggested. Nor can we accept as valid the ponencia’s pronouncement, apparently in line with its purely contractual analysis, that the transfer of all assets and liabilities in a merger situation, as in this case, refers only to FEBTC’s property rights and obligations and does not include the employment contracts of its personnel.

To my mind, due consideration of Section 80 of the Corporation Code, the constitutionally declared policies on work, labor and employment, and the specific FEBTC-BPI situation – i.e., a merger with complete “body and soul” transfer of all that FEBTC embodied and possessed and where both participating banks were willing (albeit by deed, not by their written agreement) to provide for the affected human resources by recognizing continuity of employment – should point this Court to a declaration that in a complete merger situation where there is total takeover by one corporation over another and there is silence in the merger agreement on what the fate of the human resource complement shall be, the latter should not be left in legal limbo and should be properly provided for, by compelling the surviving entity to absorb these employees. This is what Section 80 of the Corporation Code commands, as the surviving corporation has the legal obligation to assume all the obligations and liabilities of the merged constituent corporation.

Not to be forgotten is that the affected employees managed, operated and worked on the transferred assets and properties as their means of livelihood; they constituted a basic component of their corporation during its existence. In a merger and consolidation situation, they cannot be treated without consideration of the applicable constitutional declarations and directives, or, worse, be simply disregarded. If they are so treated, it is up to this Court to read and interpret the law so that they are treated in accordance with the legal requirements of mergers and consolidation, read in light of the social justice, economic and social provisions of our Constitution. Hence, there is a need for the surviving corporation to take responsibility for the affected employees and to absorb them into its workforce where no appropriate provision for the merged corporation’s human resources component is made in the Merger Plan.

This recognition is not to objectify the workers as assets and liabilities, but to recognize – using the spirit of the law and constitutional standards – their necessary involvement and need to be provided for in a merger situation. Neither does this step, directly impacting on the employees’ individual employment contracts, detract from the in personam character of these contracts. For in a merger situation, no change of employer is involved; the change is in the internal personality of the employer rather than through the introduction of a new employer which would have novated the contract. This conclusion proceeds from the nature of a merger as a corporate development regulated by law and the merger’s implementation through the parties’ merger agreement.

In the context of this case, BPI’s relationship with the absorbed employees cannot be equated with a situation involving voluntary hiring, as the ponencia posited. Note that voluntary hiring, as the basis of the relationship, presupposes that employment with FEBTC had been terminated – a development that, as explained above, did not take place; the employment of the absorbed employees simply continued by operation of law, specifically by the combined operation of the Corporation Code and the Labor Code under the backdrop of the labor and social justice provisions of the Constitution.

An individual employee can, at any time, in a consensual and in personam employment contract, walk away from it, subject only to the adjustment of the obligations he has incurred under the contractual relationship that binds him; a contrary rule would violate the involuntary service provision of the Constitution.[16] Ordinarily, walking away would be an act of voluntary resignation that entitles the employee only to benefits that have been earned and accrued; a merger situation is differentiated by the separation pay[17] that the Merger Plan should at least provide under the combined application of the Corporation Code,[18] as well as the just and authorized causes for termination of employment under the Labor Code.[19] Otherwise, the employee has the right to be secure in his tenure without loss of seniority, benefits and level of pay.[20]

The above view reconciles the terms of the Constitution, the Corporation Code, and the Labor Code, and directly conflicts with the ponencia’s views that: (1) BPI’s role as employer of the absorbed FEBTC employees was not by operation of law or a legal consequence of the merger, but by BPI’s voluntary act of hiring the employees after the merger; (2) the employees’ contracts are purely in personam and are binding only between the parties; and (3) it is contrary to public policy to declare the absorbed employees to be part of the assets or liabilities of FEBTC that were transferred to BPI under the Merger Plan since the transferred assets and liabilities should be deemed to refer only to property rights and obligations of FEBTC and do not include the employment contracts of its personnel.

To encapsulate the discussions above in relation with the ponencia’s, BPI was the successor of FEBTC in the latter’s employment relationships, and the succession occurred both by contract and by operation of law. The two corporations decided to merge; necessarily, their merger – made through a merger agreement – is governed by the Corporation Code that recognizes the merger and its terms, including the “body and soul” succession to BPI of everything that was FEBTC’s.

This succession included FEBTC’s employment contracts, subject to the right of the employees to reject or accept the succession because employment contracts are essentially in personam. It is immaterial that BPI’s assumption of the role of employer was not embodied in the merger agreement; in the absence of clear agreement terms, the law – specifically, Section 80 of the Corporation Code – takes over and governs. What appeared to be BPI’s voluntary act of “hiring” the former FEBTC employees is legally insignificant as BPI was in fact obliged under the law to assume the role of employer to the FEBTC employees in the absence of an agreement on how the merging parties would treat the employment contracts and the employees they cover.

In support of its position, the ponencia cites the American Law Reports on “the consequences of voluntary mergers on the right to employment and seniority rights” with the view that these are “persuasive and illuminating.” The first case cited is Carver v. Brien,[21] which relates to the recognition of seniority in a consolidation of operations situation. Another is Moore v. International Brotherhood of Teamsters,[22] which refers to the absorption by a trucker of the business of another private trucker or common carrier, and holds that the seniority of affected employees depends on the agreement between the trucker and the unions involved.

I do not believe that these cited cases are relevant to the present case, particularly for the purposes the ponencia cites them; these cited cases can neither be “persuasive nor illuminating” as they do not even approximate the factual situation of the present case so that their rulings can be applied to the latter. No corporate merger was involved in the cited cases, in the same sense as in the present case; in fact, what was involved in Carver was merely a consolidation of operations, while Moore merely related to the absorption of the business of one corporation by another, not to a merger. As painstakingly explained above, these are dealings in corporate interests and properties that are lesser in extent and scope than total merger or consolidation and should be distinguished from the latter under the terms of Section 80 of our Corporation Code. Thus, the cited cases and rulings should not at all be considered in resolving the issues posed in the present case.

From another perspective, the differing consequences, discussed above,[23] arising from the different modes of transfers of corporate assets and liabilities and corporate consolidations, apparently escape the ponencia. Thus, it has no hesitation at all in citing American cases that do not at all involve fact situations equivalent to the merger envisioned by Sections 76 and 80 of the Corporation Code. This is a fatal error, leading no less to the ponencia’s conclusion that the issue before us is purely a labor law issue, divorced from its corporation law context.

That an employment contract is in personam cannot be disputed as this is the essence of such contract and what this contract should be in light of the constitutional prohibition against involuntary servitude.[24] But as above pointed out, this is not wholly and strictly how an employment contract is to be viewed under our Constitution. While these contracts are binding only between the parties, they resonate with public interest that the Constitution and our laws have seen fit to regulate; employment contracts translate to service which itself translates to productive work that the economy and the nation need.

In the BPI-FEBTC situation, these employment contracts are part of the obligations that the merging parties have to account and make provisions for under the Constitution and the Corporation Code; in the absence of any clear agreement, these employment contracts subsist, subject to the right of the employees to reject them as they cannot be compelled to render service but can only be made to answer in damages if the rejection constitutes a breach.[25] In other words, in mergers and consolidations, these contracts should be held to be continuing, unless rejected by the employees themselves or declared by the merging parties to be subject to the authorized causes for termination of employment under Sections 282 and 283 of the Labor Code. In this sense, the merging parties’ control and business decision on how employees shall be affected, in the same manner that the affected employees’ decision on whether to abide by the merger or to opt out, remain unsullied. Unfortunately, this is another dimension of a merger situation that escapes the ponencia’s short-sighted reading of corporate mergers in general, and of the merger between BPI and FEBTC in particular.

From these perspectives, it appears clearly that the ponencia has not fully appreciated how mergers operate and how they affect employment contracts when it viewed employment contracts as strictly contractual and binding only between the parties, with no effective legal intervention from the law in terms of the combined operation of the Constitution, the Corporation Code and the Labor Code.

BPI’s Assumption of Role as Employer

As soon as the BPI-FEBTC merger took effect, FEBTC completely faded out as employer and BPI succeeded to this role. BPI’s assumption of this role is not in the sense of a novation, i.e., that a change of employer took place as the employment contracts were transferred to BPI. As stated above, instead of the clear change or substitution of an employer for another that would have taken place in a novated employment contract (e.g., such that would have taken place if only a business enterprise level of transfer took place where the whole business is transferred, accompanied by a substitution of the employer running the business), what took place in the BPI-FEBTC total merger was an internal change; BPI succeeded to everything that was FEBTC’s, thereby assuming the latter’s identity and role as employer. In this sense, BPI simply expanded its role as an employer to encompass the employees who were previously identified as FEBTC employees.

The effect of this development on the internal BPI employment situation in a non-unionized environment would not have posed any difficulty, as there would simply be an adjustment of working conditions based on the premise that the absorbed employees would not suffer any diminution of the terms and conditions of employment under their contracts.

Where a union is present in a merger situation, complications arise as the adjustment will not only involve the assumption of the role of the merged corporation as employer and the non-diminution of the terms and conditions of employment; existing terms and conditions of the relationship with the union must as well be observed and respected. This union scenario gave rise to the present case and at its core asks: what terms and conditions of relationship with the union must be observed in light of BPI’s expanded role as an employer.

Union presence at the workplace is generally most effective when it has a current CBA with the employer. This agreement necessarily implies that a bargaining unit has been properly defined and delineated in the organized portion of the employer’s establishment. In the present case, the establishment is BPI’s Davao Branch and the defined bargaining unit covers the rank-and-file positions in the Branch. At the minimum, the absorbed employees working within BPI’s Davao Branch who are classified as rank-and-file employees and who are not expressly excluded from coverage should be covered by the collective bargaining unit and by the CBA. Note that this coverage by the bargaining unit is separate from compulsory union membership which is provided under the union security clauses discussed below. Employees may come within the coverage of the bargaining unit, but may still be exempt from compulsory union membership under the union security clauses. [26]

The CBA’s Union Security Clauses

The CBA at BPI contains two union security provisions whose respective roles are to protect and to compel union membership within the effective term of the CBA.

The first is the Maintenance of Membership provision whose role is to protect the union’s current membership. By its express terms, it covers and renders continued union membership compulsory for: (1) those who were already union members at the time the CBA was signed; and (2) the new employees who will become regular during the life of the CBA. The first classification of union members directly implies that BPI employees who were not members of the union, at the time of the signing of the CBA, are not compelled to be union members.

Thus, on the basis of this union security clause and the compulsory membership it compels, there are three kinds of employees at BPI, namely – (1) those who are not compelled to be union members because they were not union members at the time the CBA was signed; (2) those who are compelled to continue membership because they were already union members when the CBA was signed; and (3) those who, previously non-regular employees, are compelled to be union members after they attain regular status.

As applied to the absorbed employees, the maintenance of membership clause would apply to them only if they voluntarily joined the union after the BPI-FEBTC merger; they would thereafter have to maintain their union membership under pain of dismissal.

The second union security provision is entitled Union Shop whose role is to compel the membership of those who are not yet union members. To quote its direct terms, it refers to “[N]ew employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be regularly employed by the Bank.”[27] Strictly speaking, this definition is defective as it speaks of new non-regular employees who are not therefore members of the bargaining unit yet. The provision should properly read: new employees occupying positions falling within the bargaining unit.

Read closely, this reference to “new employees” is not a definition that specifies who are new. It simply refers to those employees whose positions fall within the bargaining unit and who are subsequently given regular status; they must join the union as a condition of their continued employment.

By its reference to employees who are as yet on non-regular status, what is clearly a requirement for the application of the union shop clause, as framed by this provision, is the grant of regular status. In other words, it applies to those recently given regular employment and who, by necessary implication, were hired as non-regular employees and were thereafter accorded regular status.

In contrast with the non-regular employees that the CBA clearly referred to, absorbed FEBTC employees did not undergo the process of waiting for the grant of regular status; their regular employment simply continued from FEBTC to BPI without any break because BPI only succeeded to the role of FEBTC as employer in a merger, where the same employment was maintained and only the employer’s personality changed. Thus, they cannot be “new” under the terms of the union security clause. For that matter, they are not even “new” under the ordinary meaning of this word which connotes something that recently came into existence, use, or a particular state or relation.[28]

Even granting the validity of the ponencia’s position that the union shop provision as written does not distinguish between non-regular employees, who subsequently became regular, and those who were hired and immediately granted regular status without passing through a non-regular phase, still the union security clause would not cover the absorbed employees because they do not fall under either classification.

An intrinsic distinction exists between the absorbed employees and those who are hired as immediate regulars, which distinction cannot simply be disregarded because it establishes how the absorbed employees came to work for BPI. Those who are immediately hired as regulars acquire their status through the voluntary act of hiring done within the effective term or period of the CBA. The absorbed employees, on the other hand, merely continued the employment they started with FEBTC; they came to be BPI employees by reason of a corporate merger that changed the personality of their employer but did not at all give them any new employment. Thus, they are neither “new” employees nor employees who became regular only during the term of the CBA in the way that newly regularized employees become so. They were regular employees under their present employment long before BPI succeeded to FEBTC’s role as employer.

It may well be asked: what then is the classification under the CBA of the absorbed employees whose positions fall within the bargaining unit? As discussed above, they cannot be new employees. In fact, they are more similar to the “old” employees, if their continuity of service will be considered. This characterization, nevertheless, is clearly inapt since they cannot also be treated in exactly the same way as the pre-merger BPI employees. Besides, being “old” employees will not compel them to join the union under the maintenance of membership provision as they never had any union membership to maintain.

Ultimately, the absorbed employees are best recognized for what they really are – a sui generis group of employees whose classification will not be duplicated until BPI has another merger where it would be the surviving corporation and no provision would be made to define the situation of the employees of the merged constituent corporation. Significantly, this classification – obviously, not within the contemplation of the CBA parties when they executed their CBA – is not contrary to, nor governed by, any of the agreed terms of the existing CBA on union security, and thus occupies a gap that BPI, in the exercise of its management prerogative, can fill.

In the meantime, whether to join or not to join the union is a choice that these absorbed employees will have to make after the next CBA, when their status becomes subject to the results of the collective negotiations.

In a resulting purely maintenance of membership regime, those who would not opt to join the union carry no obligation to maintain any union membership. In a union shop regime, the absorbed employees may remain non-union members until an agreed specified time when union membership is declared obligatory as a condition for continued employment. With the same effect would be the stricter closed shop clause that compels management to hire only union members. In any of these regimes, of course, compulsory membership shall depend on the terms of the CBA on who would be subject to compulsion and how compulsion would operate. As a cautionary note to avoid similar problems in the future, it may be best for the parties to incorporate terms expressly providing for the situation of employees absorbed by reason of merger.

The Constitutional Question

The constitutional question, as framed by Justice Antonio T. Carpio, arises under the view that the absorbed employees cannot be covered by the union security clause and thereby be compelled to join the union. As indicated at the beginning of this Opinion, this question was never posed nor discussed by any of the parties and, hence, is not a question presented for our consideration in the present case. Besides, this is a question that may only arise when and if the absorbed employees are considered bound under the union security clauses to join the union. For these reasons, I see no need to confront and resolve this constitutional issue.

In light of these considerations, I vote to GRANT the petition.

ARTURO D. BRION

Associate Justice

[8] Section 76 of the Corporation Code reads:

Section 76. Plan of merger or consolidation. - Two or more corporations may merge into a single corporation which shall be one of the constituent corporations or may consolidate into a new single corporation which shall be the consolidated corporation.

[9] Villanueva, Philippine Corporate Law, 2001 ed., pp. 606-607.

[10] Section 80. Effects of merger or consolidation. - The merger or consolidation x x x shall have the following effects:

1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the plan of merger; and, in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation;

2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation;

3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account including subscriptions to shares and other choses in action, and all and every other interest of, or belonging to, or due to each constituent corporation, shall be taken and deemed to be transferred to and vested in such surviving or consolidated corporation without further act or deed; and

5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities and obligations of each of the constituent corporations in the same manner as if such surviving or consolidated corporation had itself incurred such liabilities or obligations; and any claim, action or proceeding pending by or against any of such constituent corporations may be prosecuted by or against the surviving or consolidated corporation, as the case may be. Neither the rights of creditors nor any lien upon the property of any of each constituent corporations shall be impaired by such merger or consolidation.

[11] Villanueva, Phillippine Corporate Law, 2001 ed., pp. 592–633.

[13] Id. at 594, 620-624, citing Central Azucarera de Danao v. Court of Appeals, 221 SCRA 647 (1985) and San Felipe Neri School of Mandaluyong, Inc v. National Labor Relations Commission, G.R. No. 78350, September 11, 1991, 201 SCRA 478.

[15] Sundowner Development Corporation v. Drilon, G.R. No. 82341, December 6, 1989, 180 SCRA 14, 18.

[16] Article III, Section 18(2) of the Constitution states that:

Section 18. (1) x x x

(2) No involuntary servitude in any form shall exist except as a punishment for a crime whereof the party shall have been duly convicted.

[17] Glory Philippines, Inc. v. Vergara, G.R. No. 176627, August 24,2007, 531 SCRA 253, 264; F.F. Marine Corporation v. National Labor Relations Commission, G.R. No. 152039, April 8, 2005, 455 SCRA 154, 172; Torillo v. Leogardo, 274 Phil. 758, 765-767 (1991).

[19] Sections 282, 283 and 284 of the Labor Code.

[24] Article III, Section 18(2) of the Constitution.

[26] Note that confidential employees may occupy rank and file positions but are not covered by the bargaining unit because of express exclusion. Rank and file employees who are not union members because they are “old” employees not covered by the maintenance of membership clause are covered by the CBA but are not union members; they simply pay “agency fees” to avoid being “free riders” to the CBA.

[27] Rollo, p. 17. The CBA provides that“[n]ew employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be regularly employed by the Bank, shall, within thirty (30) days after they become regular employees, join the Union as a condition of their continued employment. It is understood that membership in good standing in the Union is a condition of their continued employment with the Bank.”

[28] Webster’s Third New International Dictionary, 1993 ed.