Separation pay due to merger

Merger is not one of the circumstances where the employees may claim separation pay. The only instances where separation pay may be awarded to petitioner are: (a) reduction in workforce as a result of redundancy; (b) retrenchment or installation of labor-saving devices; or (c) closure and cessation of operations.

Redundancy has been defined by the Supreme Court as follows:

[W]e believe that redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. The employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.[1] (Citations omitted)

Retrenchment, on the other hand, is the reduction of personnel to save on costs on salaries and wages due to a considerable decline in the volume of business.[2]

Cessation and closure of business contemplates the stopping of business operations of the employer whether on the employer's prerogative or on account of severe business losses.[3]

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[1] Wiltshire File Co., Inc. v. National Labor Relations Commission, 271 Phil. 694, 703 (1991) [Per J. Feliciano, Third Division].

[2] Manila Polo Club Employees' Union v. Manila Polo Club, Inc., 715 Phil. 18, 25 (2013) [Per J. Peralta, Third Division].

[3] Id.