c. Non-diminution of Benefits

Conditions for a valid exercise by the Employer of its right to transfer Employees

The transfer should:

• Not be unreasonable, inconvenient, or prejudicial to the Ee; and
• Not involve a demotion in rank, diminution in salaries, benefits and other privileges concerning the transfer.

Non-Diminution of Benefits

There is diminution of benefits when:

• The grant or benefit is founded on a policy or has ripened into a practice over a long period of time
• The practice is consistent and deliberate
• The practice is not due to error in the construction or application of a doubtful or difficult question of law, and
• The diminution or discontinuance is done unilaterally by the employer. (TSPIC v. TSPIC Employee Union, G.R. No. 163419, 2008).
• The “benefits” refer to monetary benefits or privileges given to the employee with monetary equivalents. (Royal Plant Workers Union vs. Coca-Cola Bottlers Philippines, Inc.-Cebu Plant, G.R. 198783, 2013).

Non-Diminution Rule

General Rule: Nothing in the Labor Code shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of the Labor Code. Benefits being given to employees shall not be taken back or reduced unilaterally by the employer because the benefit has become part of the employment contract, written or unwritten. (Labor Code, Art. 100)

Exception: An employer may correct a benefit granted through an error in the construction or application of a doubtful or difficult question of law; the erroneous grant does not, merely through its duration, become a demandable company practice. (TSPIC Corp. v. TSPIC Employees Union, G.R. No. 163419)

When Non-Diminution Rule Applicable

The rule is applicable if it is shown that:

• The practice is consistent and deliberate (Metrobank v. NLRC, G.R. No. 152928, 2009)
• The diminution or discontinuance is done unilaterally by the employer (Steel Corporation v. Nagkakaisang Manggagawang Supreme Independent Union, G.R. No. 185556, 2011);
• The grant of the benefit is founded on a policy or has ripened into a practice over a long period (Phil. Appliance Corp. v. CA, G.R. No. 149434, 2004); and
• The practice is not due to error in the construction or application of a doubtful or difficult question of law (Vergara, Jr., v. Coca Cola, G.R. No. 176985, 2013)

When not applicable

• At least one of the requisites is absent
• Mistake in the application of the law (Globe Mackay v. NLRC, G.R. No. 82511, 1988)
• Negotiated benefits (Azucena) – the bargaining parties may agree to modify them, subject to applicable law, but the employer cannot diminish them unilaterally.
• Reclassification of Positions – e.g. loss of some benefits by promotion.
• Contingent or Conditional Benefits – the rule does not apply to a benefit whose grant depends on the existence of certain conditions, so that the benefit is not demandable if those preconditions are absent.

Invalid Side Agreement

An agreement that diminishes an Ee’s pay and benefits as contained in the POEA-approved contract is void, unless such subsequent agreement is approved by the POEA. (Azucena, 2016)

Past Errors

If it is a past error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under Art. 100 may be said to have resulted by virtue of the correction (TSPIC Corp. v. TSPIC Employees Union, G.R. No. 163419, 2008)

Benefits initiated through negotiation between Employee and Employer, e.g. CBA, can only be eliminated or diminished bilaterally. A union is not prohibited from offering and agreeing to reduce wages and benefits of the employees during CBA negotiations. (Insular Hotel Employees Union v. Waterfront, G.R. 174040-41, 2010)

In Relation to Collective Bargaining Agreements and Employer-Employee Agreements

Nothing in the Rules shall prevent the employer and employee from entering into any agreement with terms more favorable to the employees than those granted therein, or be used to diminish any benefit granted to the employees under existing laws, agreement AND voluntary employer practice. (Sec. 6, Rule VI, Book 3, IRR)

The rule is without prejudice to existing, future collective bargaining agreements. (Sec. 7, Rule VI, Book 3, IRR)