G.R. No. 200746 , August 6, 2014.
BENSON INDUSTRIES EMPLOYEES UNION-ALU-TUCP and/or VILMA GENON, EDISA HORTELANO, LOURDES ARANAS, TONY FORMENTERA, RENEBOY LEYSON, MA. ALONA ACALDO, MA. CONCEPCION ABAO, TERESITA CALINAWAN, NICIFORO CABANSAG, STELLA BARONGO, MARILYN POTOT, WELMER ABANID, LORENZO ALIA, LINO PARADERO, DIOSDADO ANDALES, LUCENA ABESIA, and ARMANDO YBAÑEZ, Petitioners, vs. BENSON INDUSTRIES, INC., Respondent.

FACTS

Respondent Benson Industries, Inc. informed its employees, including petitioners, of their intended termination effective March 15, 2008, on the ground of closure/cessation of business operations. Petitioners, through their union, initially filed a notice of strike but later amicably settled, accepting Benson’s payment of separation pay computed at 15 days for every year of service. Subsequently, petitioners claimed additional separation pay at the rate of four (4) days for every year of service, invoking Section 1, Article VIII of their existing Collective Bargaining Agreement (CBA), which stipulated that an employee terminated without fault shall receive separation pay “equivalent to not less than nineteen (19) days’ pay for every year of service.” Benson opposed, arguing the payment already made exceeded legal requirements. The issue was referred to voluntary arbitration. The Voluntary Arbitrator ruled in favor of petitioners, ordering Benson to pay the additional four days’ pay per year of service, finding the CBA provision controlling and that Benson’s closure was due to serious business losses. The Court of Appeals reversed the VA, deleting the additional award, holding that Benson could not be compelled to pay per the CBA due to its financial status.

ISSUE

Whether or not the Court of Appeals correctly deleted the award to petitioners of additional separation benefits equivalent to four (4) days of work for every year of service.

RULING

No. The Supreme Court reversed the Court of Appeals and reinstated the Voluntary Arbitrator’s Decision. The Court held that while Article 297 of the Labor Code exempts an employer from paying separation pay in cases of closure due to serious business losses, this exemption applies only to the statutory obligation. The obligation in this case arose from the CBA, a contract between the parties. The CBA provision unqualifiedly covenanted the payment of separation pay at not less than 19 days per year of service for termination without employee fault. Since the terms of the CBA were clear, unambiguous, and not contrary to law, morals, public order, or public policy, they have the force of law between the parties and must be complied with in good faith. The financial losses of the employer do not excuse compliance with a contractual obligation that does not condition payment on the absence of such losses. Therefore, Benson was obligated to pay the full 19 days per year of service as stipulated in the CBA, and since it had already paid 15 days, it must pay the balance of 4 days per year of service.