G.R. No. 127130 - People vs. Ebias

Petitioners: Composed of members of the Benson Industries Employees Union-ALU-TUCP and individual employees (Vilma Genon, Edisa Hortelano, Lourdes Aranas, Tony Formentera, Reneboy Leyson, Ma. Alona Acaldo, Ma. Concepcion Abao, Teresita Calinawan, Niciforo Cabansag, Stella Barongo, Marilyn Potot, Welmer Abanid, Lorenzo Alia, Lino Paradero, Diosdado Andales, Lucena Abesia, and Armando YbaAez).
Respondent: Benson Industries, Inc. – a domestic corporation engaged in the manufacture of green coils under the brand name Lion-Tiger Mosquito Killer.

On February 12, 2008, Benson Industries notified its employees, including the petitioners, of its intent to terminate them effective March 15, 2008 on the ground of closure and/or cessation of business operations.
Following the notice, the majority of the company’s employees resigned.
The Union, acting on behalf of the petitioners, filed a notice of strike contending that the alleged closure was a pretext aimed at replacing union members with lower-paid workers to boost profits.

Amid the labor dispute, an amicable settlement was reached during conciliation proceedings before the National Conciliation and Mediation Board (NCMB).
Under the Memorandum of Agreement dated April 9, 2008, petitioners accepted Benson’s payment of separation pay computed at 15 days for every year of service.
Despite the settlement, petitioners filed a claim for additional separation pay, seeking the award of benefits equivalent to an extra four (4) days of work for every year of service.

Petitioners invoked Section 1, Article VIII of the existing collective bargaining agreement (CBA) between Benson and the Union, which explicitly requires the payment of separation benefits equivalent to not less than nineteen (19) days’ pay for every year of service for employees terminated without fault.
Benson opposed the claim by arguing that the separation pay already disbursed (15 days per year) exceeded or satisfied the statutory requirement, and further raised the issue of its financial distress due to a state of insolvency.

The issue was referred to voluntary arbitration where the Voluntary Arbitrator (VA) issued a Decision dated October 24, 2008:

The VA ruled in favor of petitioners by ordering Benson to pay additional separation benefits equivalent to four (4) days for every year of service based on the employee’s latest rate of pay.
The arbitration decision held that the computation should use the clear provision of the CBA guaranteeing nineteen (19) days’ pay.
The VA also acknowledged Benson’s financial hardship but indicated that such insolvency was not a valid ground for waiving contractual obligations.

Benson, dissatisfied with the VA decision, appealed to the Court of Appeals (CA).
The CA, in its Decision dated September 27, 2011, reversed and set aside the VA ruling by deleting the award of the additional separation benefits.
Subsequent to the CA decision, petitioners sought reconsideration through a Resolution dated January 31, 2012, which was denied, prompting the present petition for review.

Whether the Court of Appeals correctly deleted the award of additional separation benefits equivalent to four (4) days of work for every year of service for petitioners.

The dispute centers on the interpretation and enforceability of the separation pay provision in the collective bargaining agreement (CBA).
The issue also examines whether Benson’s financial distress or state of insolvency can legally excuse its contractual obligation to pay the additional separation benefits.