Dear Atty. Maan,

My company has been consistently giving us a quarterly allowance ever since I started working there. However, last quarter, the management suddenly stopped giving it due to decrease in income. Is the company legally allowed to unilaterally remove this allowance, even if it has been regularly given in the past?

Claire

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Dear Claire,

As a rule, employees have a vested right over existing benefits voluntarily granted to them by their employer. Any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued, or eliminated by the employer. The principle of non-diminution of benefits under Article 100 of the Labor Code is actually founded on the constitutional mandate to protect the rights of workers, promote their welfare, and afford them full protection. In turn, Article 4 of the Labor Code states that “[a]ll doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be rendered in favor of labor.”

In Vergara Jr. v. Coca-Cola Bottlers Philippines Inc., the Court ruled that to establish the existence of a regular company practice, the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time and that it has been made consistently and deliberately, i.e., despite the employer’s knowledge that the payment of a benefit is not required by any law or agreement. The Court ruled:

To be considered as a regular company practice the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to the length of time that company practice should have been exercised in order to constitute voluntary employer practice. The common denominator in previously decided cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time. (Emphasis supplied; citations omitted.)

As to the absence of a hard-and-fast rule on the length of time by which a benefit is considered to have ripened into a company practice, the Court, on different occasions, found the existence of a company practice as to the benefits that have been given.

Thus, if the quarterly allowance was consistently granted over time without conditions, it may have already formed part of your regular or established company benefits. Under the rule of non-diminution of benefits, once a benefit has become a regular practice or policy, an employer cannot unilaterally withdraw it, even if such benefit was not written in the employment contract or company handbook, unless the said removal may be justified.

Hope this helps.

Atty. Mary Antonnette Baudi