Merger of Companies does not result in Implied Dismissal of Employees; Hence, there is no Separation Pay

Merger of Companies does not result in Implied Dismissal of Employees; Hence, there is no Separation Pay

The merger of Unocal Corporation with Blue Merger and Chevron does not result in an implied termination of the employment of union members.

Assuming the company is a party to the merger, its employment contracts are deemed to subsist and continue by “the combined operation of the Corporation Code and the Labor Code under the backdrop of the labor and social justice provisions of the Constitution.

The union insists that this is contrary to its freedom to contract, considering its members did not enter into employment contracts with the surviving corporation. However, it is not precluded from leaving the surviving corporation.

Although the absorbed employees are retained as employees of the merged corporation, the employer retains the right to terminate their employment for a just or authorized cause.

Likewise, the employees are not precluded from severing their employment through resignation or retirement.

The freedom to contract and the prohibition against involuntary servitude is still, thus, preserved in this sense. This is the manner by which the consent of the employees is considered by the law.

Hence, assuming the company is a party to the merger, the merger still does not operate to effect a termination of the employment of its employees.

Should the employees be unhappy with the surviving corporation, they may retire or resign from employment.

Given these considerations, the Court ruled that the union is not entitled to the separation benefits it claims from the company. Separation benefits are not granted to employees by law in case of voluntary resignation.

Related: Payment of Separation Pay

(The Geothermal, Employees Union vs. Unocal Philippine, Inc., G.R. No. 190187, September 28, 2016)

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