UNION CARBIDE PHIL., INC., PETITIONER, VS. HON. SECRETARY OF LABOR, NATIONAL LABOR RELATIONS COMMISSION, AND UNION CARBIDE LABOR UNION (NLU) RESPONDENTS.

What we are called upon to review in this proceeding on certiorari
is an extra-legal direction by public respondents for the payment by petitioner
Union Carbide to its dismissed employees (private respondents herein) of
separation pay in an amount exceeding the maximum fixed by the Termination Pay
Law then in force, Republic Act No. 1052, as amended by Republic Act No. 1787:^[1]
i.e., at the rate of 45 days per year of service, instead of one-half
month, for every year of service.

The law contained the following pertinent provisions:^[2]

“SECTION 1. In cases of employment, without a definite period,
in a commercial, industrial, or agricultural establishment or enterprise, the
employer or the employee may terminate at any time the employment with just
cause; or without just cause in the case of an employee by serving written
notice on the employer at least one month in advance, or in the case of an
employer, by serving such notice to the employee at least one month in
advance or one-half month for every year of service of the employee, whichever,
is longer, a fraction of at least six months being considered as one whole
year.

” * * *.

“The employee, upon whom no such notice was served in case of
termination of employment without just cause shall be entitled to compensation
from the date of termination of his employment in an amount equivalent to his
salaries or wages corresponding to the required period of notice.“

In January, 1973, Union Carbide applied with the Department of
Labor and Employment for clearance to terminate the services of 21 of its
employees, for economic reasons. 
Conciliation by officials of the Department resulted in an agreement for
withdrawal of the application for clearance, and for the transfer instead of
the employees concerned to lower positions at reduced wages.  Implementation of the agreement followed; but
it evidently did not relieve Union Carbide of the financial difficulties which
had impelled it in the first place to apply for clearance to terminate some of
its employees.  Not long afterwards it
renewed its application for clearance to separate the same 21 employees from
work.

Understandably, the latter reacted by filing, with the assistance
of their union, a complaint for unfair labor practice against Union Carbide,
accusing it of bad faith for reneging on their agreement.  The National Labor Relations Commission
however found Union Carbide innocent of the charge, and that it was indeed in
dire financial straits.  The Commission
sought to end the controversy through a “compromise settlement,” by
rendering what it no doubt deemed a Solomonic
verdict:  granting clearance for the
dismissal of the 21 employees, on the one hand, pursuant to Section 1, Republic
Act No. 1052 (as amended, supra), and, on the other, requiring payment
to them as aforestated of their salaries and wages,
not at the rate of 15 days for every year of service, as prescribed by the law,
but at 45 days for every year of service.

Union Carbide’s response to this extraordinary disposition was to
file a manifestation declaring that since the Commission had seen fit to award
separation pay of 45 days for every year of service to the employees concerned
“on the basis of a compromise settlement,” despite the fact that it
had never entered into any such compromise agreement with its dismissed
workers, it was construing the decision as an order to give termination pay
at the rate thus set as a compromise settlement unilaterally determined by
the Commission itself, and as based on the current wage rates
of the employees.

This prompted the workers affected to seek clarification.  They of course took the position that the
basis for their termination pay should be their salaries at the time of Union
Carbide’s first application for clearance to dismiss — or prior to their
acceptance of lower salaries — and not those being received by them at the
time of actual separation from employment.

The issue was decided in the latter’s favor by the NLRC.  It declared that “for purposes of
ascertaining the amount of the separation pay of the complainants, the salary
which they were receiving at the date of the application for clearance to
dismiss shall be the basis.”

Union Carbide’s motion for reconsideration was adversely resolved
by the Secretary of Labor.  He said:

” ** (W)e affirm the Commission’s Resolution for the reason
that since the application for clearance was filed and granted by this Office,
the effective date thereof retroacts from the date of its filing.  Consequently, the salary of the employees concerned
at the time of the filing of respondent Company’s application for clearance to
dismiss should correctly serve as the basis for computing their separation
pay.  In insisting on the dismissal of
the employees concerned, respondent Company has to rely necessarily on its
original application filed on January
5, 1973.  If such is the
case, then the employees concerned are justified in insisting that the basis
for computing their separation pay should be their salary at the time the
application for clearance was filed.”

Hence, this petition for certiorari by Union Carbide,
which seeks to make two (2) essential points:

1)      the NLRC’s formula for payment of separation pay at the rate of
45 working days for every year of service is “unprecedented or without
basis in law or jurisprudence”; hence, payment at that rate on the basis
of the salaries at the time of actual termination should be deemed to
constitute full and final settlement of the case without, in the NLRC’s words, “delving into the merits of this
case”; and

2) in any event, the case had become moot by reason of the
execution by the 21 employees of individual releases upon receipt of separation
pay reckoned in accordance with Union Carbide’s theory of the case.1

In vindication of the challenged decision, the Solicitor General
points out that Union Carbide did renege on the “agreement” — that
instead of the employees being dismissed outright, they would be assigned to
other positions at reduced pay — for it later proceeded with the dismissal
anyway; and while Union Carbide would hold its employees and their union bound
by that portion of the agreement as to reduction in pay, it would consider
itself free to disregard that part by which it undertook to discontinue its
plan to dismiss the workers.  The Solicitor
General also suggested that while the practice was for separation pay to be
computed on the basis of wages at time of termination of services,1
the rule was not inflexible, and the present case should provide an occasion
for this Court to apply the beneficent spirit of the labor laws and the
constitutional exhortation on protection to labor.  As to the alleged release papers executed by
the employees, the Solicitor General dismissed them by the declaration that
employees are usually at a gross disadvantage in their dealings with the employer
and the State should step in to protect them.

The case is obviously sui generis.  It
treats of a judgment based on a compromise; but the compromise was never agreed
upon by the parties, but unilaterally imposed on them by the NLRC.  The judgment obliges the employer to give
separation pay to his employees in accordance with the Termination Pay Law; but
payment is required at a rate very much in excess — 300% — of that prescribed
by the invoked statute.

The fact is that under the law then in force, Union Carbide, in
common with any other employer, had the prerogative to terminate the services
of an employee even without just cause, provided it gave the latter written
notice of such termination “at least one month in advance or one-half
month for every year of service **, whichever was longer;” otherwise, the
employer was bound to give to the employee “compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.”2

The fact is, moreover, that Union Carbide had been required to
assume an obligation more burdensome than that fixed by law as a
“compromise settlement” to which it had never consented; this,
notwithstanding that it had not been found by the NLRC to have acted illegally
at all but on the contrary that its decision to separate its employees from the
service (despite an initial undertaking not to do so) was practically forced
upon it by its continuing financial troubles.

The fact is, too, that Union Carbide had already given separation
pay to the respondent employees, computed at the rate of 45 days’ salary for
every year of service based on their salary at the time of actual termination
of their employment, inclusive of the value of their vacation and sick leave,
as well as accrued salaries for eleven days. 
There is no dispute about this, nor about the further fact that the
amounts thus received by the employees were considerably more than those due
them at the rate laid down by the Termination Pay Law, i.e., one-half month for
every year of service (about 300% more, on the average), as quite graphically
demonstrated by the table annexed to the petitioner’s “Compliance and
Reply,” found at pages 100 to 108 of the rollo.

These circumstances cannot be ignored.  The Court cannot close its eyes to them, as
the respondent officials did.  They show
that the NLRC and the Secretary of Labor had acted in excess of the power
conferred on them by law, and had without rhyme or reason refused to take
account of established actualities on record. 
Considerations of law and the extrication of the employer from the
extremely onerous situation in which it had been improperly placed by the
dispositions of the Labor officials.

WHEREFORE, the petition is granted, and the writ of certiorari
prayed for issued, annulling and setting aside the resolution of the National
Labor Relations Commission dated October
12, 1973 and the Decision of the Secretary of Labor dated September 12, 1974, dismissing the
claims of the private respondents, and absolving the petitioner from any
further liability to them.  No costs.

SO ORDERED.

Cruz, Gancayco, Griño-Aquino,
and Medialdea,
JJ., concur.

^[1] Eff. June 21, 1957:  the law in force during the time material to
the case at bar

^[2]
Italics supplied.  N.B. The Termination
Pay Law has since been superseded by the Labor Code (P.D. No. 442) eff. May 1, 1974

1
Infra, pp. 4-5

1
The law in fact declares the employee “entitled to compensation from the
date of termination of his employment” (Sec. 1, RA
1052, as amended).  Section 10, Rule 1,
Book VI of the Implementing Rules and Regulations of the Labor Code now in
force, provides that the computation of the termination pay ** shall be based
on his latest salary rate, unless the same was reduced by the employer to
defeat the intention of the Code, in which case the basis of computation shall
be the rate before its deduction.“ Italics supplied.

2
SEE footnote 1 and related text,, pp. 1-2, supra