The Court of Appeals has reversed the decision of the Secretary of Labor that granted separation benefits to the employees of Unocal Philippines, Inc (UPI), a geothermal energy firm, ruling that they were “impliedly terminated” because of the merger of UPI’s parent company, Unocal Corp. and Chevron Texaco in April, 2005.

“Contrary to the view of the Secretary of Labor, there is absolutely no legal basis in the Labor Code, nor in their CBA or MOA that would sanction the payment of separation pay in such an instance,” the CA’s Eighth Division ruled in a decision written by Associate Justice Romeo F. Barza.

Associate Justices Josefina Guevara-Salonga and Arcangelita M. Romilla-Lontok concurred in the decision.

UPI, now operating as Chevron Geothermal Philippines Holdings, Inc., operates two geothermal steam fields owned by the National Power Corporation in Tiwi, Albay and Makiling, Laguna.

When the merger occurred in 2005, the union – Philippine Geothermal Inc., Employees’ Union (PGIEU) – demanded a separation pay claiming that the merger resulted in the closure of UPI since it is now doing business as a Chevron company.

The appellate court explained that there has been no change in the ownership of UPI as the change in the ownership of Unocal Corp. did not result in UPI being owned by Chevron Texaco because UPI is a wholly owned subsidiary of Unocal California which was not involved in the merger.

“It must be borne in mind that a subsidiary has an independent and separate juridical personality, distinct from that of its parent company,” the court added.

Likewise, the CBA provision that separation pay shall be given in the event of a reduction in the workforce as a result of redundancy, retrenchment, installation of labor savings devices or cessation of operations – according to the court finds no application in the present case.

The union did not present evidence to show that they were terminated nor lost their employment as a result of the merger. The CA found the UPI case “novel” where employees who were not terminated as a result of a merger are still asking for a separation pay pursuant to their CBA based on the argument that a change in ownership severed juridical ties between the employees and the employer.

“The Court finds it hard pressed to find any merit in such an argument,” the CA said.