G.R. No. 85867 May 13, 1993
E. RAZON, INC. [formerly known as Metro Services, Inc.], petitioner, vs. THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT (DOLE) and MARINA PORT SERVICES, INC. (MARINA), respondents.

FACTS

Petitioner E. Razon, Inc. (ERI), later known as Metro Port Services, Inc. (MPSI), had a management contract with the Philippine Ports Authority (PPA) to operate arrastre services in Manila. On July 19, 1986, PPA cancelled this contract and took over the operations. Two days later, on July 21, 1986, PPA issued a permit to operate to respondent Marina Port Services, Inc. (MARINA). This permit contained a condition (Paragraph 7) stating that the labor and personnel of the previous operator, except those in positions of trust and confidence, “shall be absorbed by grantee” and that labor or employee benefits under the existing Collective Bargaining Agreement (CBA) “shall likewise be honored.” MARINA required the workers of ERI/MPSI to fill out information sheets and later hired the bulk of them as new employees effective July 21, 1986. The workers demanded separation pay from both MARINA and ERI/MPSI, leading to a labor dispute. To resolve the impending strike, an Agreement was forged on November 3, 1987, among PPA, MARINA, ERI, and worker representatives, stipulating that separation benefits would be computed at one month for every year of service. The Secretary of Labor assumed jurisdiction and, in an order dated May 31, 1988, directed ERI/MPSI to pay the remaining balance of the separation pay. ERI/MPSI’s motion for reconsideration was denied on November 21, 1988. Hence, E. Razon, Inc. filed this petition for certiorari, arguing that MARINA, as the successor-employer under Paragraph 7 of the permit, should be liable for the separation pay.

ISSUE

Whether the Secretary of Labor committed grave abuse of discretion in holding petitioner E. Razon, Inc. (ERI/MPSI), and not respondent Marina Port Services, Inc. (MARINA), liable for the payment of separation benefits to the employees affected by the cancellation of the management contract and the takeover of arrastre operations.

RULING

The Supreme Court DISMISSED the petition and AFFIRMED the assailed orders of the Secretary of Labor. The Court ruled that the obligation to pay separation pay rests on ERI/MPSI, the employer for whom the employees had rendered service, and not on MARINA. The cancellation of ERI/MPSI’s management contract with PPA constituted a cessation of operations under Article 283 of the Labor Code, making ERI/MPSI liable for separation pay. The Court held that Paragraph 7 of MARINA’s permit, which required the absorption of the previous operator’s employees and the honoring of the existing CBA, should be applied prospectively. It did not mean that MARINA assumed the responsibility for ERI/MPSI’s past obligations, such as separation pay arising from the termination of the previous employment. This interpretation was supported by Paragraph 14 of the same permit, which made MARINA responsible for obligations arising from transactions “as of the actual date of transfer.” Furthermore, there was no privity of contract between ERI/MPSI and MARINA that would make MARINA a successor-employer burdened with the former’s liabilities. The collective bargaining agreement is a contract in personam, binding only on the parties to it. When MARINA rehired the employees, it had the right to consider them as new employees. Consequently, ERI/MPSI remained liable to grant its separated employees their benefits under the law and the CBA.