G.R. No. L-74007; July 31, 1987
University of the East, petitioner, vs. Hon. Minister of Labor and U.E. Faculty Association, respondents.

FACTS

The University of the East (UE) announced the phase-out of its College of Secretarial Education and High School Department for the 1983-1984 school year, citing financial losses and lack of economic viability. The UE Faculty Association opposed the move, alleging union busting and UE’s failure to substantiate the claimed losses. Conciliation efforts failed, leading the Minister of Labor to assume jurisdiction over the resulting dispute.
The Minister of Labor ruled the phase-out was arbitrary, finding UE presented no evidence that these specific departments contributed most to the losses or that their closure would reverse the financial trend. The Minister also found UE violated the Labor Code by not serving the required one-month termination notice. Consequently, the Minister ordered UE to pay affected faculty members separation pay under the Termination Pay Law, plus an additional month’s pay in lieu of notice, and also to pay retirement benefits to those eligible under the Collective Bargaining Agreement (CBA).

ISSUE

Whether the Minister of Labor committed grave abuse of discretion in awarding both separation pay and retirement benefits to the faculty members affected by the phase-out.

RULING

The Supreme Court upheld the Minister of Labor’s order. The legal logic is twofold. First, the award of separation pay was justified because UE failed to prove the termination was for an authorized cause, such as retrenchment due to serious financial losses, as required by Articles 278 and 284 of the Labor Code. Since UE did not substantiate its claim that the phased-out departments caused the losses, the termination was effectively without a valid cause, entitling the employees to separation pay and pay in lieu of notice.
Second, the concurrent award of CBA retirement benefits was proper. The Court distinguished this case from Soberano v. Secretary of Labor, where retirement was a mutually agreed mode of termination under a CBA, precluding separation pay. Here, the faculty members were not voluntarily retired under the CBA but were involuntarily separated by UE’s unilateral phase-out. The CBA-provided retirement benefits are a separate contractual entitlement that accrues based on an employee’s eligibility, regardless of the cause of separation. The Court cited Batangas Laguna Tayabas Bus Co. v. Court of Appeals and Philippine Overseas Drilling and Oil Development Corporation v. Ministry of Labor, which established that an employer’s contractual or policy-based benefits can be granted in addition to statutory separation pay when the benefits are provided for independently and do not expressly exclude each other. Therefore, the faculty members were entitled to both statutory separation pay due to UE’s invalid termination and contractual retirement benefits earned under the CBA.