HONGKONG BANK INDEPENDENT LABOR UNION v. HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED: Agreements must be kept; the CBA governs the relationship of employers and their employees.
By: Pio Vincent R. Buencamino[1]
I. CBA is the law between the parties.
A collective bargaining agreement (CBA) is the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work, and other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms, and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.[2]
The right to collective bargaining and negotiations as well as to participate in policy and decision-making processes affecting the rights and benefits of employees are guaranteed by the Constitution which states that: “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.”[3]
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.”
Thus, Article 253 of the Labor Code states that: “When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor modify such agreement during its lifetime. x x x It shall be the duty of both parties to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the 60-day period and/or until a new agreement is reached by the parties.”[4] (Emphases supplied)
This provision evinces the intent of the lawmakers to safeguard the rights and security of workers. Therefore, it is important for the Court to protect this constitutionally guaranteed right. Thus, the Court is tasked to strike down any acts of employers that would derogate and violate the rights of workers under the CBA.
Thus, it was ruled in Faculty Association of Mapua Institute of Technology (FAMJT) v. Court of Appeals[5] that the provisions of the CBA must be respected since its terms and conditions constitute the law between the parties. Until a new CBA is executed by and between the parties, they are bound to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement. Any unilateral modification of the provisions of the CBA violates not only Art. 253 of the Labor Code, but also the Constitution. Accordingly, such modification is legally ineffective and invalid.
II. Summary
In 2001, the Bangko Sentral ng Pilipinas (BSP) issued the Manual of Regulations for Banks (MoRB). Relevant to the instant case is Section X338 thereof which reads: “Banks may provide financial assistance to their officers and employees, as part of their fringe benefits program, to meet housing, transportation, household and personal needs of their officers and employees. Financing plans and amendments thereto shall be with prior approval of the BSP.”
Respondent Hongkong and Shanghai Banking Corporation Limited (HSBC), on March 12, 2003, submitted its Financial Assistance Plan (Plan) to the BSP for approval. The Plan allegedly contained a credit checking proviso stating that “repayment defaults on existing loans and adverse information on outside loans will be considered in the evaluation of loan applications.” The BSP approved the Plan on May 5, 2003. Said Plan were later amended thrice and were approved by the BSP.
Meanwhile, petitioner Hongkong Bank Independent Labor Union (HBILU), the incumbent bargaining agent of HSBC’s rank-and-file employees, entered into a CBA with the bank covering the period from April 1, 2010 to March 31, 2012, but such CBA did not contain any provision citing the approved Plan.
When the CBA was about to expire, the parties started negotiations for a new one to cover the period from April 1, 2012 to March 31, 2017. During the said negotiations, HSBC proposed amendments to the CBA to align the wordings of the CBA with its BSP-approved Plan by inserting stipulations that make external credit checking as well as the financial assistance plan approved by the BSP as prerequisites before a salary loan will be granted to an employee. HBILU vigorously objected to the proposed amendments, claiming that their insertions would curtail its members’ availment of salary loans. In view of HBILU’s objection, HSBC withdrew its proposed amendments. Thus, the CBA remained unchanged.
Despite the withdrawal of the proposal, HSBC sent an e-mail to its employees on April 20, 2012 concerning the enforcement of the Plan, including the Credit Checking provisions thereof. Thereafter, in September 2012, HBILU member Vince Mananghaya (Mananghaya) applied for a loan under the provisions of the CBA. His first loan application in March 2012 was approved, but adverse findings from the external checks on his credit background resulted in the denial of his September application. HBILU then raised the denial as a grievance issue with the National Conciliation Mediation Board (NCMB). It argued that the imposition of an additional requirement—the external credit checking prior to approval of any loan application the CBA—is not sanctioned under the CBA.
Ruling in favor of the respondent, the NCMB stated that an employer has the right to issue and implement guidelines for the availment of loan accommodations under the CBA as part of its management prerogative. Aggrieved, HBILU elevated the case to the Court of Appeals (CA). The CA sustained the findings and conclusions of the NCMB-PVA in toto on the ratiocination that HSBC was merely complying with Section X338 of the MoRB when it submitted the Plan to BSP. Petitioner moved for reconsideration but it was denied.
Hence this petition raising the issue of whether HSBC could validly enforce the credit-checking requirement under its BSP-approved Plan in processing the salary loan applications of covered employees even when the said requirement is not recognized under the CBA.
The Court ruled in the negative and stated that although jurisprudence recognizes the validity of the exercise by an employer of its management, this prerogative is not absolute and is subject to limitations imposed by law, the collective bargaining agreement, and the general principles of fair play and justice. The CBA, being the law between the parties, binds both parties and pursuant to Art. 253 of the Labor Code[6], imposes upon them the duty to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement,thus, any unilateral modification thereof contravenes the Labor Code and is invalid.
Furthermore, the Courtalso noted that the external credit check, as well as the manner of its enforcement, is a new imposition by HSBC because the bank did not attempt to rebut HBILU’s evidence that the former’s requirements for the grant of salary loans changed only after the April 20, 2012 email blast.The petitioners were able to prove that before the email blast, HSBC only required four documents in applying for a loan: 1) Application for Personal Loan Form; 2) Authority to Deduct Form; 3) Set-Off of Retirement Fund Form; and 4) Promissory Note Form. Thereafter, the management imposed a new set of requirements, which includes the “Authority to Conduct Checks Form.
Based on the evidence and arguments presented, the Plan was never made part of the CBA. Thus, no other conclusion can be had other than the fact that HSBC’s enforcement of credit checking on salary loans under the CBA invalidly modified the latter’s provisions thereon through the imposition of additional requirements which cannot be found anywhere in the CBA.
Respondent argues that the credit checking requirement under the MoRB should be deemed written into the CBA by citing Sec. X304.1 of the 2011 MoRB in maintaining that financial institutions must look into the obligor’s repayment history, among other things, before approving a loan application. Said provision reads:
§ X304.1 General guidelines. Consistent with safe and sound banking practices, a bank shall grant loans or other credit accommodations only in amounts and for the periods of time essential for the effective completion of the operation to be financed. Before granting loans or other credit accommodations, a bank must ascertain that the borrower, co-maker, endorser, surety, and/or guarantor, if applicable, is/are financially capable of fulfilling his/their commitments to the bank. For this purpose, a bank shall obtain adequate information on his/their credit standing and financial capacities x x x.
However, the Court ruled that such provision is a general one, and it should be interpreted in conjunction with Section X338.3, the provision which specifically applies to salary loans under the fringe benefit program of the bank which states that:
All loans or other credit accommodations to bank officers and employees, EXCEPT those granted under the fringe benefit program of the bank, shall be subject to the same terms and conditions imposed on the regular lending operations of the bank. Loans or other credit accommodations granted to officers shall, in addition, be subject to the provisions of Section 36 of R.A. No. 8791 and Sections X326 to X336 but not to the individual ceilings where such loans or other credit accommodations are obtained under the bank’s fringe benefits program.
Thus, the Court ruled that Sec. X338.3 clearly excluded loans and credit accommodations under the bank’s fringe benefits program from the operation of Sec. X304.1, thus, salary loans in the present case are not covered by the credit checking requirement under the MORB.
Section 40 of the General Banking Law clearly exclude salary loans from its application
The Court stated that indeed, Section 40 of Republic Act No. 8791[7] (General Banking Law of 2000) requires HSBC to conduct a credit check on all of its borrowers. However, a reading of the same law reveals that loan accommodations to employees are not covered by said statute. Nowhere in the law does it state that its provisions shall apply to loans extended to bank employees which are granted under the latter’s fringe benefits program. Had the law intended otherwise, it could have easily specified such, similar to what was done for directors, officers, stockholders and their related interests under Section 36 thereof. This conclusion is supported by the very wording of Subsection X338.3 of the MORB. To reiterate:
Subsection X338.3 Other conditions/limitations
The investment by a bank in equipment and other chattels under its fringe benefits program for officers and employees shall be included in determining the extent of the investment of the bank in real estate and equipment for purposes of Section 51 of R.A. No. 8791.
XXX
All loans or other credit accommodations to bank officers and employees, except those granted under the fringe benefit program of the bank, shall be subject to the same terms and conditions imposed on the regular lending operations of the bank. Loans or other credit accommodations granted to officers shall, in addition, be subject to the provisions of Section 36 of R.A. No. 8791 and Sections X326 to X336 but not to the individual ceilings where Such loans or other credit accommodations are obtained under the bank’s fringe benefits program.
Therefore, the Court concluded that even though the provision covers loans extended to both bank officers and employees, the last paragraph thereof singled out loans and credit accommodations granted to officers when it provided for the applicability of RA 8791. Accordingly, what the law does not include, it excludes.
The Court also stated are other ways of securing payment of said salary loans other than ascertaining whether the borrowing employee has the capacity to pay the loan. BSP Circular 423, Series of 2004 itself provides for such which states:
Subsection X338.1 Mechanics. The mechanics of such financing plan shall have the following minimum features: Participation shall be limited to full-time and permanent officers and employees of the bank; x x x The bank shall adopt measures to protect itself from losses such as by incorporating in the plan or contract provisions requiring co-makers or co-signor, chattel, or real estate mortgages, fire insurance, mortgage redemption insurance, assignment of money value of leave credits, pension or retirement benefits.
Additionally, both the BSP Circular 423, Series of 2004 and Section X338.3 of the MoRB provide for a safeguard in order to protect the funds of the Bank’s depositors while allowing the Bank to extend such benefits to its employees, in that both require that: “The aggregate outstanding loans and other credit accommodations granted under the bank’s fringe benefits program, inclusive of those granted to officers in the nature of lease with option to purchase, shall not exceed five percent (5%) of the bank’s total loan portfolio.”
The Court held that the evidence presented justifies the conclusion that the credit checking requirement imposed by HSBC under the questioned Plan which effectively and undoubtedly modified the CBA provisions on salary loans was a unilateral imposition violative of HSBC’s duty to bargain collectively and, therefore, invalid.
The Court also emphasized that in resolving issues concerning CBAs, the foremost consideration therein is upholding the intention of both parties as stated in the agreement itself, or based on their negotiations.
III. CBA CANNOT BE MODIFIED UNILATERALLY
In this case, the Court gave importance to and emphasized the rights of the workers which are guaranteed by the Constitution as well as by the Labor Code. Central to this case is the right of the workers, as mandated by the Constitution, to collective bargaining and negotiations and to participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.[8]
Pursuant to such guarantee, Article 211 of the Labor Code, as amended[9], declares it a policy of the State: (a) To promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary arbitration, mediation, and conciliation, as modes of settling labor or industrial disputes; x x x (d) To promote the enlightenment of workers concerning their rights and obligations as union members and as employees; x x x (g) To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare.
Additionally, Art 255 of the same Code[10] provides: “Any provision of law to the contrary notwithstanding, workers shall have the right, subject to such rules and regulations as the Secretary of Labor and Employment may promulgate, to participate in policy and decision-making process of the establishment where they are employed insofar as said processes will directly affect their rights, benefits and welfare.”
In this case, the union and the bank already had an existing CBA. Furthermore, it contained provisions regarding the grant of salary loans which also set forth the requirements and qualifications for the grant thereof. The bank sought to impose other requirements that were not included in the CBA such as external credit checking. It claimed they could rightfully impose such because it was part of the plan approved by the BSP and such was customarily done by banks. The union rejected such provision during the negotiations for the new CBA.
The Court ruled that the acts of the bank were invalid as it constitutes a unilateral modification of the CBA between the union and the bank which violates Art. 253 of the Labor Code. This is so because it was proven that the external credit checking was never intended to be part of the salary loan grant under the CBA because it was never previously done by the bank when the employees applied for salary loans, moreover, they did not include it in its negotiation for the first CBA.
IV. CHANGING TIMES: WORKER’S RIGHTS RECOGNIZED
“Do not bite the hand that feeds you.” This saying is commonly used to remind employees not to go against their employers, or to give way to decisions, procedures, and the requirements of employers, even if at the expense of the employee. However, justice demands that employees get what they are entitled to.
This case shows that even a huge institution cannot escape from the arms of the law when they commit acts that violate the rights of their workers. While HSBC is a banking institution imbued with public interest with the duty to protect with extraordinary diligence the money of its depositors, they cannot invoke such principle when they violate the provisions of the CBA. Therefore, in this case, the Court categorically held that banks cannot unilaterally impose requirements that are not included in their CBA.
Under the Constitution, the State affirms labor as a primary social economic force. It shall protect the rights of the workers and promote their welfare.[11] With the changing times, the present set of laws, availability of the Courts, and prevalence of social media, employers can no longer violate the rights of their workers with impunity. Employees are now given more opportunities to assert their rights against erring employers. Accordingly, the Courts will not hesitate to punish the acts of employers when they violate the rights of their employees. Therefore, employers must keep in mind that they should follow the laws carefully enacted in favor of their employees. After all, the success of the business of the employers highly depends on the performance, motivation, and productivity of their employees. Employees can only do so when they know that all the benefits and rights granted to them by law are respected and given to them by their employers.
[1] 2C – Understudy
[2] Goya, Inc. v. Goya, Inc. Employees Union-FFW, 689 SCRA 1, 15-16, (2013).
[3] CONST. Art. XIII, Sec. 3.
[4] LABOR CODE, P.D. 442 as amended, art. 253.
[5] Faculty Association of Mapua Institute of Technology (FAMJT) v. Court of Appeals, 524 SCRA 709 (2007).
[6] LABOR CODE, P.D. 442 as amended, art. 253.
[7] An Act Providing for the Regulation of the Organization and Operation of Banks, Quasi Banks, Trust Entities and for other purposes, Republic Act 8791, sec. 40 (2000).
[8] CONST. Art. XIII, Sec. 3.
[9] LABOR CODE, P.D. 442 as amended, art. 211.
[10] LABOR CODE, P.D. 442 as amended, art. 255.
[11] CONST., Art. II, Sec. 18.
Cover Photo by Joshua Lawrence on Unsplash
