Monthly Archives: April 2015

Bank of the Philippine Islands v. BPI Employees Union Davao Chapter – Federation of Unions in BPI Unibank, G.R. No. 164301, October 19, 2011.



In the present incident, petitioner Bank of the Philippine Islands (BPI) moves for reconsideration of our Decision dated August 10, 2010, holding that former employees of the Far East Bank and Trust Company (FEBTC) “absorbed” by BPI pursuant to the two banks’ merger were covered by the Union Shop Clause in the then existing collective bargaining agreement (CBA) of BPI with respondent BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank (the Union).


Whether or not employees are absorbed in a merger of the two corporations.




It is more in keeping with the dictates of social justice and the State policy of according full protection to labor to deem employment contracts as automatically assumed by the surviving corporation in a merger, even in the absence of an express stipulation in the articles of merger or the merger plan. In his dissenting opinion, Justice Brion reasoned that:

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.

By upholding the automatic assumption of the non-surviving corporation’s existing employment contracts by the surviving corporation in a merger, the Court strengthens judicial protection of the right to security of tenure of employees affected by a merger and avoids confusion regarding the status of their various benefits which were among the chief objections of our dissenting colleagues.  However, nothing in this Resolution shall impair the right of an employer to terminate the employment of the absorbed employees for a lawful or authorized cause or the right of such an employee to resign, retire or otherwise sever his employment, whether before or after the merger, subject  to existing contractual obligations.  In this manner, Justice Brion’s theory of automatic assumption may be reconciled with the majority’s concerns with the successor employer’s prerogative to choose its employees and the prohibition against involuntary servitude.

Notwithstanding this concession, the Court finds no reason to reverse our previous pronouncement that the absorbed FEBTC employees are covered by the Union Shop Clause.

[See the original Decision dated August 10, 2010, reversing the ruling on the absorption of employees in a merger.]


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Bank of the Philippine Islands v. BPI Employees Union Davao Chapter – Federation of Unions in BPI Unibank, G.R. No. 164301, August 10, 2010.



Bangko Sentral ng Pilipinas approved the Articles of Merger executed by and between BPI, herein petitioner, and Far East Bank and Trust Company (FEBTC) and was approved by the Securities and Exchange Commission.  The Articles of Merger and Plan of Merger did not contain any specific stipulation with respect to the employment contracts of existing personnel of the non-surviving entity which is FEBTC. Pursuant to the said Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to and absorbed by BPI as the surviving corporation. FEBTC employees, including those in its different branches across the country, were hired by petitioner as its own employees, with their status and tenure recognized and salaries and benefits maintained.


Whether or not employees are ipso jure absorbed in a merger of the two corporations.


NO. [H]uman beings are never embraced in the term “assets and liabilities.”Moreover, BPI’s absorption of former FEBTC employees was neither by operation of law nor by legal consequence of contract.  There was no government regulation or law that compelled the merger of the two banks or the absorption of the employees of the dissolved corporation by the surviving corporation.  Had there been such law or regulation, the absorption of employees of the non-surviving entities of the merger would have been mandatory on the surviving corporation. In the present case, the merger was voluntarily entered into by both banks presumably for some mutually acceptable consideration.  In fact, the Corporation Code does not also mandate the absorption of the employees of the non-surviving corporation by the surviving corporation in the case of a merger.

[The] Court cannot uphold the reasoning that the general stipulation regarding transfer of FEBTC assets and liabilities to BPI as set forth in the Articles of Merger necessarily includes the transfer of all FEBTC employees into the employ of BPI and neither BPI nor the FEBTC employees allegedly could do anything about it.  Even if it is so, it does not follow that the absorbed employees should not be subject to the terms and conditions of employment obtaining in the surviving corporation.

Furthermore, [the] Court believes that it is contrary to public policy to declare the former FEBTC employees as forming part of the assets or liabilities of FEBTC that were transferred and absorbed by BPI in the Articles of Merger.  Assets and liabilities, in this instance, should be deemed to refer only to property rights and obligations of FEBTC and do not include the employment contracts of its personnel.  A corporation cannot unilaterally transfer its employees to another employer like chattel.  Certainly, if BPI as an employer had the right to choose who to retain among FEBTC’s employees, FEBTC employees had the concomitant right to choose not to be absorbed by BPI.  Even though FEBTC employees had no choice or control over the merger of their employer with BPI, they had a choice whether or not they would allow themselves to be absorbed by BPI.  Certainly nothing prevented the FEBTC’s employees from resigning or retiring and seeking employment elsewhere instead of going along with the proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee without the consent of the employee is in violation of an individual’s freedom to contract.  It would have been a different matter if there was an express provision in the articles of merger that as a condition for the merger, BPI was being required to assume all the employment contracts of all existing FEBTC employees with the conformity of the employees.  In the absence of such a provision in the articles of merger, then BPI clearly had the business management decision as to whether or not employ FEBTC’s employees. FEBTC employees likewise retained the prerogative to allow themselves to be absorbed or not; otherwise, that would be tantamount to involuntary servitude.

[Note: The decision as to absorption of employees upon merger is reversed in the Resolution of MR dated October 19, 2011]


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