GR 190187; (September, 2016) (Digest)
G.R. No. 190187 . September 28, 2016
THE PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION, PETITIONER, VS. UNOCAL PHILIPPINES, INC. (NOW KNOWN AS CHEVRON GEOTHERMAL PHILIPPINES HOLDINGS, INC.), RESPONDENT.
FACTS
Petitioner Philippine Geothermal, Inc. Employees Union is the bargaining agent for the rank-and-file employees of respondent Unocal Philippines, Inc., a wholly-owned subsidiary of Unocal Corporation. On April 4, 2005, Unocal Corporation executed a merger agreement with Chevron Texaco Corporation and its subsidiary, Blue Merger Sub, Inc., whereby Unocal Corporation merged with and into Blue Merger, with Blue Merger as the surviving entity. Following this corporate restructuring at the parent company level, the Union demanded separation benefits from Unocal Philippines, arguing that the merger resulted in the implied termination of its members’ employment.
Unocal Philippines refused the demand, asserting it was not a party to the merger, never ceased operations, and did not terminate any employees. The dispute was elevated to the Secretary of Labor as Voluntary Arbitrator, who ruled in favor of the Union, finding implied termination and awarding separation pay. The Court of Appeals reversed this decision, prompting the Union to elevate the case to the Supreme Court via a Petition for Review on Certiorari.
ISSUE
Whether the merger of a parent corporation, to which the employer is a subsidiary, operates to terminate the employment of the subsidiary’s employees, thereby entitling them to separation benefits.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The Court held that a merger does not automatically terminate the employment of employees in an absorbed corporation. Under the Corporation Code, in a merger, the absorbed corporation ceases to exist but its rights and obligations are transferred to the surviving entity by operation of law. Critically, the employment contracts of the absorbed corporation’s employees are among these transferred obligations; thus, employment subsists without interruption. The constitutional policy of protecting labor mandates this continuity to prevent the erosion of security of tenure through corporate restructuring.
Applying these principles, the Court found no termination occurred. Respondent Unocal Philippines was not itself a party to the merger; only its ultimate parent company, Unocal Corporation, was absorbed. Unocal Philippines retained its separate juridical personality and continued its operations unchanged. The employees experienced no break in service, change in tenure, or alteration to their salaries and benefits. The subsequent execution of a new Collective Bargaining Agreement between the Union and Unocal Philippines further confirmed the ongoing employment relationship. Since there was no dismissal, actual or constructive, the claim for separation benefits under the CBA had no legal basis. The award of such benefits requires a valid ground for termination, which was absent in this case of a mere corporate merger upstream from the actual employer.