In a crucial decision, the Supreme Court resolved the long-standing dispute between the National Power Corporation (NPC) and its employees, ruling that the nullified National Power Board (NPB) Resolutions No. 2002-124 and No. 2002-125, which directed the termination of all NPC employees, were indeed void. Consequently, affected employees are entitled to reinstatement or separation pay, along with backwages and other benefits, accruing from the date of their illegal termination up to September 14, 2007. This landmark ruling underscores the importance of protecting employee rights during corporate restructuring and ensuring that such actions comply with existing laws and regulations, particularly the Electric Power Industry Reform Act of 2001 (EPIRA).

Navigating the Aftermath: Can Terminated NPC Employees Claim Reinstatement Despite Voided Resolutions?

The core legal question revolved around the validity of the NPB Resolutions that led to the termination of NPC employees and whether these employees were entitled to reinstatement and compensation despite the restructuring of the NPC. The case, NPC Drivers and Mechanics Association (NPC DAMA) vs. National Power Corporation (NPC), initially centered on enjoining the implementation of NPB Resolutions No. 2002-124 and No. 2002-125, which sought to terminate all NPC employees as part of a restructuring plan. The Supreme Court declared these resolutions void, sparking a series of motions and manifestations regarding the execution of the decision, particularly concerning reinstatement, backwages, and the liability of the Power Sector Assets and Liabilities Management Corporation (PSALM).

The Supreme Court’s decision hinged on the illegality of the NPB resolutions, finding that they violated Section 48 of the EPIRA Law. This section mandates that specific individuals must personally exercise their judgment and discretion, a requirement not met in the issuance of the resolutions. As the court noted, “An illegal act is void and cannot be validated.” The subsequent NPB Resolution No. 2007-55, which attempted to ratify the earlier voided resolutions, was deemed to have only prospective effect, not retroactively validating the illegal terminations.

A key point of contention was whether the Supreme Court’s decision applied to all NPC employees or only a select few. NPC argued that only 16 top-level employees were affected, while the petitioners contended that all employees terminated as a result of the voided resolutions were covered. The Court sided with the petitioners, emphasizing that the original intent and understanding of the case involved all NPC employees whose services were terminated. The Court referenced NPB Resolution No. 2002-124, which stated that “all NPC personnel shall be legally terminated on January 31, 2003.” This underscored the comprehensive scope of the termination initially contemplated and, therefore, the scope of the Court’s protection.

Furthermore, the Court addressed the issue of PSALM’s liability. PSALM, created under the EPIRA Law to manage the assets and liabilities of NPC, argued that it should not be held liable for NPC’s obligations to its employees. The Court, however, interpreted Sections 49 and 50 of the EPIRA Law, stating that while PSALM primarily assumes ownership of NPC’s assets and liabilities, this transfer must be viewed in light of PSALM’s purpose and objective. The Court reasoned:

It would be absurd to interpret the word “existing” as referring to the assets and liabilities of NPC only existing at the time when the EPIRA Law took effect (26 June 2001). It is more sensible and equitable that the word “existing” applies only to “NPC generation assets” because of the intent and purpose of the EPIRA Law which is to privatize NPC generation assets, real estate, and other disposable assets and IPP contracts.

Thus, the Court concluded that PSALM could be held liable for NPC’s obligations, particularly those arising from the illegal terminations that occurred during the restructuring process mandated by the EPIRA Law. This ensures that employees are not left without recourse due to the transfer of assets and liabilities to PSALM.

The decision outlined the specific periods for calculating backwages and other benefits. The computation should cover the period from the date of illegal termination, as defined in NPC Circular No. 2003-09, up to September 14, 2007, when NPB Resolution No. 2007-55 was issued. This resolution, while not retroactively validating the illegal terminations, effectively set a new date for the legal termination of NPC employees, thereby capping the period for which backwages and benefits could be claimed.

The Court also addressed the practical aspects of implementing the decision. Given that the case originated directly in the Supreme Court due to the EPIRA Law, the Court authorized the Clerk of Court of the Regional Trial Court and Ex-Officio Sheriff of Quezon City to execute the judgment. This was deemed appropriate because the principal office of NPC is located in Quezon City. The NPC was ordered to submit a list of all affected employees, along with the amounts due to each, to the Clerk of Court within ten days of receiving the resolution. The Clerk of Court was then directed to execute the judgment forthwith.

Moreover, the Supreme Court expressed its displeasure with the actions of the NPC and its counsel, ordering them to show cause why they should not be held in contempt of court. This stemmed from their attempt to limit the scope of the decision to only 16 employees, contrary to the clear intent and understanding of the Court. This directive underscores the importance of candor and honesty in legal proceedings and the serious consequences of attempting to mislead the Court.

The implications of this decision are far-reaching. It reinforces the principle that corporate restructuring cannot be used as a pretext to violate employee rights. It also clarifies the responsibilities of entities like PSALM in assuming the liabilities of government corporations undergoing privatization or restructuring. This ensures that employees are not left without recourse due to corporate maneuvering.

The court, in essence, balanced the interests of corporate restructuring with the need to protect employee rights, ensuring that any changes comply with the law and that affected employees receive fair compensation for any illegal terminations. The Supreme Court’s resolution serves as a reminder that corporate restructuring should not come at the expense of employee rights and that entities assuming assets and liabilities must also honor the obligations arising from employment relationships.

FAQs

What was the key issue in this case?	The key issue was whether the termination of NPC employees due to NPB Resolutions No. 2002-124 and No. 2002-125 was valid, and if not, what remedies were available to the affected employees. The Supreme Court ultimately ruled the terminations invalid and granted the employees reinstatement or separation pay, along with backwages and other benefits.
What did the Supreme Court decide?	The Supreme Court declared NPB Resolutions No. 2002-124 and No. 2002-125 void and without legal effect. It granted the petition for injunction, preventing the implementation of said resolutions and entitling the affected employees to reinstatement or separation pay, backwages, and other benefits.
Who is liable for the compensation of the illegally terminated employees?	Initially, the National Power Corporation (NPC) was liable. However, the Power Sector Assets and Liabilities Management Corporation (PSALM) was also deemed liable for the financial obligations of NPC to its employees because of the transfer of assets and liabilities from NPC to PSALM under the EPIRA Law.
What is the Electric Power Industry Reform Act of 2001 (EPIRA)?	The EPIRA is a law that restructured the electric power industry in the Philippines, aiming to promote competition and efficiency. It led to the creation of PSALM to manage the assets and liabilities of the National Power Corporation (NPC) and facilitate the privatization of the power sector.
What is the significance of NPB Resolution No. 2007-55?	NPB Resolution No. 2007-55 attempted to ratify the earlier voided resolutions. However, the Supreme Court ruled that it had only prospective effect, meaning it could not retroactively validate the illegal terminations. It effectively set a new date for the legal termination of NPC employees.
How are backwages and other benefits calculated?	Backwages and other benefits are calculated from the date of the employees’ illegal termination, as stated in NPC Circular No. 2003-09, up to September 14, 2007, when NPB Resolution No. 2007-55 was issued. This period defines the extent of compensation owed to the affected employees.
What was the role of PSALM in this case?	PSALM was created to manage the assets and liabilities of NPC, including those related to the termination of employees due to the restructuring. The Supreme Court ruled that PSALM could be held liable for NPC’s obligations because of the transfer of assets and liabilities under the EPIRA Law.
What does this case mean for employee rights?	This case reinforces the principle that corporate restructuring cannot be used as a pretext to violate employee rights. It emphasizes the importance of adhering to legal requirements during corporate changes and ensuring fair compensation for any illegal terminations.

This case illustrates the judiciary’s role in safeguarding employee rights amidst corporate restructuring. The Supreme Court’s decision ensures that employees are protected from illegal terminations and receive fair compensation when such terminations occur. It also highlights the importance of adhering to legal requirements and ethical considerations in corporate restructuring processes.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: NPC Drivers and Mechanics Association (NPC DAMA) vs. National Power Corporation (NPC), G.R. No. 156208, December 02, 2009