Atty. Gregorio B. Austral, CPA
When kindness becomes mandatory
During Christmas season, employees expect to receive their thirteenth (13th) month pay. Some employees who are more fortunate get to receive Christmas bonus and gift packages from their employers. Thirteenth (13th) month pay is a mandatory benefit demandable from employers while Christmas bonus on top of the 13th month pay or any gift packages given during Christmas is generally voluntary and not demandable from employers. Many companies practice the giving of bonuses to their employees to reward the latter for their contribution to the success of the employer’s business resulting in the realization of profits.
Although the giving of bonus is an act of generosity from the employer, most companies set standards or targets before a bonus is given. If bonus is awarded only if a certain level of productivity is achieved, then the bonus is not considered part of the wages and in that case it is given as a prize or an inducement for efficiency. The rule is that if there is no profit, there would be no bonus as the latter is dependent on the realization of profit. This rule was applied in Traders Royal Bank vs. NLRC, et.al., G.R. No. 88168, August 30, 1990 where the employees union complained about “diminution of benefits” because their bonus, which they had been receiving since time immemorial, has been reduced from two months gross pay to two months basic pay for the mid-year bonus, and from three months gross to only two months for the year-end. The bank explained that the reduction in the bonuses was due to the decrease in the bank’s income. The Court ruled that the matter of giving bonuses over and above the lawful salaries is entirely dependent on the profits realized and is basically a management prerogative which cannot be forced upon the employer. The Court rejected the union’s contention that the granting of bonuses to employees had ripened into a company practice that may not be adjusted to the prevailing financial condition of the bank. There is no legal and moral bases to compel the bank to distribute bonuses which it can no longer afford to pay and to do so would amount to penalizing it for its past generosity to its employees.
But can a bonus or a Christmas gift, which is essentially discretionary, become legally demandable?
In some cases, the Supreme Court answered in the affirmative.
In Philippine Education Co., Inc. vs. Court of Industrial Relations, et.al. (92 SCRA 381) where bonuses had been given to the employees at least in three previous years, an amount has been set aside for payment as bonus to the company’s employees, and the employees who were expecting the bonus staged a strike when the same was withheld, the Court said that justice and equity demand that bonus already set aside for its employees be paid to them. In this case, the Court used equity as a justification for requiring the payment of bonus which has been traditionally viewed as discretionary.
The Court likewise ruled that the Christmas gift package/bonus of the employees is legally demandable from the employer if the payment of the same is stipulated in the Collective Bargaining Agreement (CBA) without any qualification. In Lepanto Ceramics, Inc. vs. Lepanto Ceramics Employees Union, G.R. No. 180866, March 2, 2010, Lepanto refused to pay the employees’ bonus because it was debt-ridden and suffered a net loss for 2001 and 2002 in the amount of P1.5 billion. Although the Court agreed with Lepanto that a bonus is a gratuity or an act of liberality which cannot be forced upon the employer, the Court declared that the bonus of the employees can be demanded from Lepanto because its payment has become more than just an act of generosity of the employer but a contractual obligation it has undertaken pursuant to the CBA.