G.R. No. L-39607 April 19, 1989
UNION CARBIDE PHIL., INC., petitioner, vs. HON. SECRETARY OF LABOR, NATIONAL LABOR RELATIONS COMMISSION, and UNION CARBIDE LABOR UNION (NLU), respondents.

FACTS

In January 1973, petitioner Union Carbide applied for clearance to terminate 21 employees due to economic reasons. Conciliation led to an agreement: the application was withdrawn, and the employees were transferred to lower positions at reduced wages. Financial difficulties persisted, prompting the company to renew its application to dismiss the same employees. The employees, through their union, filed an unfair labor practice complaint, alleging bad faith. The National Labor Relations Commission found Union Carbide innocent of bad faith and acknowledged its dire financial straits.
To resolve the dispute, the NLRC issued a “compromise settlement,” granting clearance for dismissal but ordering separation pay at the unprecedented rate of 45 days per year of service, exceeding the statutory maximum of one-half month per year under Republic Act No. 1052 . Union Carbide protested, stating it never consented to such a compromise. A subsequent issue arose regarding the salary basis for computing this pay. The NLRC and the Secretary of Labor ruled it should be based on the employees’ salaries at the time of the first application for clearance (pre-reduction), not at actual termination. Union Carbide filed this certiorari petition.

ISSUE

Whether the NLRC and the Secretary of Labor acted with grave abuse of discretion by: (1) imposing a separation pay rate of 45 days per year without legal basis and without the company’s consent to a compromise, and (2) ordering the computation based on the pre-reduction salary rate at the time of the first clearance application.

RULING

Yes. The Supreme Court granted the petition, annulling the resolutions of the NLRC and the Secretary of Labor. The Court held that the public respondents acted in excess of their jurisdiction and with grave abuse of discretion. The Termination Pay Law (RA 1052) explicitly fixed the maximum separation pay at one-half month for every year of service. The NLRC’s imposition of a 45-day rate, under the guise of a “compromise settlement,” was without legal foundation, especially since the employer never agreed to such terms. A compromise requires mutual consent; it cannot be unilaterally imposed by a quasi-judicial body.
Furthermore, the Court found the order to compute separation pay based on the pre-reduction salary rate to be unreasonable. The law entitles an employee to compensation from the date of termination, implying the salary rate at that time. The initial agreement for reduced wages was implemented, and the subsequent dismissal was based on a renewed application justified by continuing financial woes. The company had already paid separation pay at the 45-day rate based on the terminal salary, which amounted to about 300% more than the legal requirement. The Court could not ignore these established facts, and the labor officials’ refusal to consider them constituted an arbitrary exercise of power. The employer was thus absolved from any further liability.