G.R. No. L-39607 - Union Carbide Phil., Inc. vs. Secretary of Labor

Union Carbide applied for clearance to dismiss 21 employees for economic reasons in January 1973.
Initial conciliatory efforts led to an agreement whereby instead of dismissal, the employees would be transferred to lower positions at reduced wages.
Despite this arrangement, Union Carbide’s financial difficulties prompted the company to reapply for clearance to dismiss the same 21 employees.

The Department of Labor and Employment was involved in overseeing the clearance process.
The affected employees, assisted by their union, filed a complaint for unfair labor practices, contending that Union Carbide had acted in bad faith by reneging on the transfer agreement.
The National Labor Relations Commission (NLRC) found Union Carbide innocent of illegal dismissal, recognizing the company’s dire financial situation.

In an effort to settle the dispute, the NLRC rendered what appeared to be a Solomonic compromise settlement:

Granting clearance for dismissal pursuant to the Termination Pay Law (Republic Act No. 1052, as amended).
Requiring that separation pay be computed at 45 days’ pay for every year of service rather than the statutory one-half month.

Union Carbide interpreted the NLRC’s decision as a unilateral imposition, claiming that it never consented to such a compromise agreement.
The controversy extended to the basis for computation of separation pay: whether it should be based on the salary at the time of filing the clearance application or at the actual date of termination.
The NLRC ultimately ruled in favor of determining the separation pay on the basis of the salary at the time the clearance application was filed.

Union Carbide filed a motion for reconsideration, arguing that the NLRC's formula for separation pay was unprecedented and exceeded the statutory limit; it also contended that the case was moot due to the execution of individual releases by the employees.
The Secretary of Labor denied Union Carbide’s motion, emphasizing that the retroactive effect of the clearance application meant that the salary at the time of filing should be used for computing separation pay.
The NLRC and the Secretary of Labor enforced the decision without delving into the merits of the dispute, leading to significant financial obligations for Union Carbide.

Whether the formula for awarding separation pay at the rate of 45 days’ salary for every year of service had any basis in law or jurisprudence.
Whether this extra-legal imposition exceeded the maximum set by the Termination Pay Law (Republic Act No. 1052, as amended).

Whether the separation pay should be computed based on the employees’ salary at the time of filing the clearance application or at the time of actual termination of service.

Whether the execution of individual release papers by the 21 employees, upon receipt of the extra separation pay computed by Union Carbide’s theory, rendered the dispute moot.