In 1997, Home Credit gave its employee her first service vehicle. Later, the employee purchased the vehicle from Home Credit at its depreciated value.
In 2003, Home Credit granted the employee’s request for a second service vehicle. However, Home Credit required the employee to pay for additional equity in excess of the maximum limit of Php660,000.00. In 2008, the employee again purchased the vehicle at its depreciated value.
In 2009, the employee applied for a third service vehicle. This time, Home Credit informed the employee that she must pay the equity more than Php550,000.00. Home Credit likewise adopted a cost sharing scheme where the employer must shoulder 40% of the acquisition price.
Aggrieved, the employee filed a complaint against Home Credit for violation of Article 100 of the Labor Code on non-diminution of benefits.
Was the employee’s benefit diminished?
The Supreme Court ruled that no diminution of benefits occurred.
According to the Court, employees generally have a vested right over existing benefits that the employer voluntarily granted them.1University of the East v. University of the East Employees Association, G.R. No. 179593, September 14, 2011, 673 PHIL 273-290 These benefits cannot be reduced, diminished, discontinued or eliminated2Eastern Telecommunications Philippines, Inc. v. Eastern Telecoms Employees Union, G.R. No. 185665, February 8, 2012, 681 PHIL 519-536; and Tiangco v. Leogardo, Jr., G.R. No. L-57636, May 16, 1983, 207 PHIL 235-247 consistent with the constitutional mandate to protect the rights of workers and promote their welfare.3CONSTITUTION, Art.II, Sec. 18; and Art. XIII, Sec. 3. Article 100 of the Labor Code of the Philippines, provides:
ART. 100. Prohibition against Elimination or Diminution of Benefits. — Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code. (Emphasis Supplied.)
Jurisprudence4Arco Metal Products, Co., Inc. v. Samahan ng mga Manggagawa sa Arco Metal-NAFLU, G.R. No. 170734, May 14, 2008, 577 PHIL 1-12, citing CONSTITUTION, Article II, Section 18 and Article XIII, Section 3. dictates that the principle of non-diminution of benefits is founded on the constitutional mandate to “protect the rights of workers and promote their welfare” and “to afford labor full protection.” The Court clarified that the basis for non-diminution rule is not Article 100 which refers solely to “benefits enjoyed at the time of the promulgation of the Labor Code,” thus:
x x x Article 100 refers solely to the non-diminution of benefits enjoyed at the time of the promulgation of the Labor Code. Employer-employee relationship is contractual and is based on the express terms of the employment contract as well as on its implied terms, among them, those not expressly agreed upon but which the employer has freely, voluntarily and consistently extended to its employees. Under the principle of mutuality of contracts embodied in Article 1308 of the Civil Code, the terms of a contract — both express and implied — cannot be withdrawn except by mutual consent or agreement of the contracting parties.
The Court added that the non-diminution rule applies only if the benefit is based on an express policy, a written contract, or has ripened into a practice.5Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-NLU, G.R. No. 188949, July 26, 2010, 639 PHIL 633-642
In the present case, the Court found that the employee’s claim that the car plan was part of her hiring package was unsubstantiated. Record shows that Home Credit had no existing car plan at the time of the employee’s hiring. Her employment contract did not even contain any express provision on her entitlement to a service vehicle at full company cost.
The Court also found that that the car plan had not ripened into a company practice. According to the Court, a “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.6Makati Stock Exchange, Inc. v. Campos, G.R. No. 138814, April 16, 2009, 603 PHIL 121-134 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.7Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, April 1, 2013, 707 PHIL 255-266 The burden to establish that the benefit has ripened into a company practice rests with the employee.8Galang v. Boie Takeda Chemicals, Inc., G.R. No. 183934, July 20, 2016, 790 PHIL 582-604
In the present case, the Court found that Home Credit’s act of giving service vehicles to the employee had 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. The Court reiterated that the only time the employee 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 the employee never questioned this. She willingly paid for the equity in excess of said limit. Thus, the elements of consistency and deliberateness were not present.
Further reading:
- Home Credit Mutual Building and Loan Association v. Prudente, G.R. No. 200010, August 27, 2020.
