Atty. Julius Gregory Delgado
HOME CREDIT MUTUAL BUILDING AND LOAN ASSOCIATION, ET AL. VS. PRUDENTE,
G.R. No. 200010 (August 27, 2020): Restatement of the Doctrine of Company Practice in Labor Cases
In the field of Labor Law, there is the so-called Company Practice Doctrine pertaining to benefits, while not mandated by law or under any Collective Bargaining Agreement, the Company, nevertheless, grants the same unilaterally and consistently such that it will ripen into a due and demandable obligation from the Company and cannot be withdrawn without violating the principle of non-diminution of benefits.
In the case of Home Credit Mutual Building and Loan Association, et al. vs. Prudente, G.R. No. 200010 (27 August 2020), in 1997, petitioner Home Credit Mutual Building and Loan Association (“petitioner Home Credit”) gave its employee, respondent Rollette Prudente (“respondent Prudente”), her first service vehicle which the latter purchased from the former at a depreciated value. In 2003, petitioner Home Credit granted respondent Prudente’s request for a second service vehicle. However, petitioner Home Credit required respondent Prudente to pay for additional equity in excess of the maximum limit of Php660,000.00. In 2008, respondent Prudente again purchased the vehicle at its depreciated value. In 2009, respondent Prudente applied for a third service vehicle. This time, petitioner Home Credit informed respondent Prudente that she must pay the equity for more than Php550,000.00. Petitioner Home Credit likewise adopted a cost sharing scheme wherein respondent Prudente must shoulder 40% of the acquisition cost.
Feeling aggrieved, respondent Prudente filed a case before the Labor Arbiter which dismissed her complaint ruling that the new 60-40% cost sharing scheme did not constitute diminution of benefit. The Labor Arbiter held that what ripened into company practice is employer’s act of granting transportation facility to its employees. The specific details of the grant, i.e., covered employees, period of depreciation, car model, company share or participation, may vary as these call for the exercise of management prerogative. The National Labor Relations Commission (“NLRC”) affirmed the ruling of the Labor Arbiter. However, the Court of Appeals reversed the ruling of the NLRC and held that the car plan at full company cost or on a non-participation basis has evolved into a company practice that petitioner Home Credit cannot unilaterally withdraw or reduce the same.
When the case reached the Supreme Court, it was held that the non-diminution rule of the Labor Code only applies if the benefit is based on an express policy, a written contract, or has ripened into a practice. In Home Credit Mutual Building and Loan Association, et al. vs. Prudente, supra, the Court held that while it is neither a Company policy nor expressly stated in the contract of the employee, giving of car to the employee has ripened into a “Company Practice” which has ripened into a due and demandable obligation, but not as to the non-participation of the employee:
“Similarly, we find that the car plan has not ripened into a company practice. As a rule, ‘practice’ or ‘custom’ is not a source of a legally demandable or enforceable right. In labor cases, however, benefits which were voluntarily given by the employer, and which have ripened into company practice, are considered as rights and are subject to the non-diminution rule. To be considered a company practice, the benefit must be consistently and deliberately granted by the employer over a long period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employee is not covered by any provision of law or agreement for its payment. The burden to establish that the benefit has ripened into a company practice rests with the employee.
Here, the labor tribunals correctly held that Home Credit’s act of giving service vehicles to Rollette has been a company practice – but not as to the non-participation aspect. There was no substantial evidence to prove that the car plan at full company cost had ripened into company practice. Notably, the only time Rollette was given a service vehicle fully paid for by the company was for her first car. For the second vehicle, the company already imposed a maximum limit of P660,000.00 but Rollette never questioned this. She willingly paid for the equity in excess of said limit. Thus, the elements of consistency and deliberateness are not present.
At this point, we emphasize that any employee benefit enjoyed cannot be reduced and discontinued. Otherwise, the constitutional mandate to afford full protection to labor is offended. But, even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives, like the adoption of a new car plan at a new cost sharing scheme, with a reduced maximum limit. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied, especially in this case wherein Home Credit is willing to give one hand by giving a service vehicle to Rollette but she wanted to grab the entire arm.” [Emphasis and underscoring supplied]
This case did not only restate the Company Practice Doctrine in Labor Law, it refined this doctrine in the sense that while the general benefit granted has ripened into a Company Practice, the nuances or details in the implementation thereof may not be considered as such as these are subject of management prerogative.