Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular esa

633
House Bill No.

Introduced by TUCP Partylist Representative
HON. RAYMOND DEMOCRITO C. MENDOZA.

EXPLANATORY NOTE

‘The Trade Union Congress of the Philippines, as the largest aggrupation of labor
federations and labor unions in the country, has consistently advocated, not merely for
job generation, but more importantly, job protection and preservation.

An employment that has been zealously earned, industriously worked for, valued and
treasured, should be secured. The protection should extend to remunerations and
benefits, with all the enhancements thereon, merited due to years of arduous service.

This is most especially in this interesting time and age of globalization. Competition
among businesses has become tremendously intense that the dictum “bigger is
better” has obtained zealous advocates the world over, including our country’s
multinational companies.

Because of the need to become bigger and more competitive, the incidence of
mergers, consolidations and acquisitions, including the sale or transfer of all or
substantial assets, business enterprise or a going concer, has become very rampant.

Yet some employers device these schemes not really for the purpose of obtaining
competitiveness. A few utilize such corporate mechanism with the end in view of
violating their worker’s security of tenure, among other rights of employees.

This plethora of previously unfamiliar corporate occurrences creates a trail of novel
issues. With respect to labor, an issue that arises is the rules on the rights of
employees and liabilities of the employers, if any, during such happenings. This is
particularly when the issue of the security of tenure, diminution of wages and benefits
and other employment terms and conditions comes to fore.

This bill seeks to oblige the acquiring or transferee employers to continue the
employment of the transferor employer’s employees during such instances. It likewise
mandates that merger, consolidation or transfer of business shall not diminish the
wages, benefits and other employment terms and conditions of the affected
employees.


Moreover, the bill aims to limit the ground for termination of employment in case of
such business overhauls only to redundancy. Plus it sets a presumption that if the
transferee employer or new company becomes a bigger entity than the prior one, there
can be no declaration of redundancy as the business can absorb the employees.

Finally, it sets out rules on recognition of existing bargaining agents and agreements.
This will not only protect the unions, but also the benefits worked hard for by them as
embodied in the Collective Bargaining Agreements.

In view of the foregoing, the immediate passage of the bill is earnestly sought.

IN. RAYMOND DEMOCRITO C. MENDOZA
TUCP Partylist Representative


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No._2633

Introduced by TUCP Partylist Representative
HON. RAYMOND DEMOCRITO C. MENDOZA.

AN ACT
PROTECTING EMPLOYEES IN CASES OF MERGER OR
CONSOLIDATION, SALE OR TRANSFER OF ALL OR
SUBSTANTIALLY ALL ASSETS OR BUSINESSES OF THEIR
EMPLOYERS AND OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled.

SECTION 1. Declaration of Policy. — It shall be the policy of the State to extend
‘utmost protection to the security of tenure, wages, benefits and other employment
terms and conditions of employees in cases of merger or consolidation of the business
of their employer with other entities. The protection shall extend in case an employer
acquire, transfer, sell, assign, convey or lease all or substantially all assets, business
enterprise or going concern to another employer or business entity.

SECTION 2. Definition of Terms. — As defined under this Act, the following terms
shall have the following meaning:

a) "Employer" - shall include any person or entity, natural or juridical,
acting in the interest of an employer as defined under the Labor Code or
Presidential Decree No. 442, as amended.

b)

"Merger and/or Consolidation" - shall not merely refer to the process of
merger and/or consolidation of two or more corporations under Section 76
of the Corporation Code, but likewise to the merger and/or consolidation
of businesses, enterprises or operations, of all other juridical entities



©) “Transfer of Business” shall refer to the transfer, sale, assignment,
conveyance or lease of an employer of all or substantially all assets,
business enterprise or a going concer of the employer to another entity;

4) “Going Concern” - shall refer to a branch, division, section, group, class,
part or parcel of the entire business or enterprise of an employer;

¢) "Transferor Employer" - shall refer to the employer which sells, assigns,
conveys or transfers its assets or business to another employer, or one of
the corporations or entities that is a party to a consolidation, or the
corporation which was merged into another corporation;

f) "Transferee Employer" - means the employer which buys, acquires,
receives, gains or leases the assets or business from another employer, or
the corporation into which one or more corporation was merged, or the
consolidated corporation;

2) “Lease” - shall not merely refer to the agreement allowing use of the
property by another for a specified period of time for consideration, as
defined under the Civil Code of the Philippines, but also to lease of the
business itself, a going concem or other aspects of the enterprise.

SECTION 3. Maintenance of Employer-Employee Relationship. - in the
abovementioned cases of merger, consolidation or transfer of business, the transferee
employer shall have the obligation to continue the employment of the transferor
employer's employees, without loss of seniority rights and other privileges.

SECTION 4. Protection on Wages and Other Benefits. — The occurrences of
merger, consolidation or transfer of business shall not diminish the wages, benefits
and other employment terms and conditions of the affected employees. In case of
differences in the employment levels, wage and benefit scales, and other employment
terms or conditions, the superior or most favorable to the employees shall prevail.

SECTION 5. Liability of Transferce employer. ~ The transferor employer shall be
liable to such money claims pertaining to the period when the transferee employer
was still the employer.

SECTION 6. Termination of Employment, — The employment of any employee of
the transferee employer, or in some instances, the transferor employer, may be
terminated only due to redundancy. In such a case, the transferee employer shall be
liable for separation pay or other benefits as prescribed under the Labor Code.


However, if in terms of finances, assets, among other economic indicators, the
transferee employer becomes a bigger entity than the transferor employer, the
presumption is that the business can absorb the employees and there can be no
declaration of redundancy.

An employee declared to be redundant in a certain position shall always be granted
the first opportunity for employment in a newly created position, if he or she
possesses the minimum qualifications.

SECTION 7. Recognition of Existing Bargaining Agents. - In cases of mergers,
consolidations, or transfer of business, where both the transferor employer and the
transferee employer are organized establishments:

a) The union members or all other employees enjoying benefits under their
respective and prevailing Collective Bargaining Agreements shall continue
to enjoy the benefits thereon. If one CBA expires, while the other is still
in effect, the respective union shall be allowed to negotiate on the
economic provisions of their expired CBA. During the freedom period of
the CBA with a later expiration term, a certification election would be
conducted between the two labor organizations, and other participating
labor organizations, if any. Thereafter, the winner shall have a fresh
‘mandate to represent the merged bargaining unit

b)

With majority vote of both unions voting separately, even pending the
term of either or both their CBAs, a certification election may immediately
be conducted after the merger, consolidation or transfer of business to
determine who shall have a fresh mandate to represent the merged
bargaining unit

In cases of mergers, consolidations, or transfer of business where either of the
transferee or transferor employer is unorganized, and a CBA is still in effect in the
organized establishment, a petition for certification election for the transferor
employer may be filed only by the legitimate labor organization existing in the
organized establishment. Thereafter, if said labor organization wins, it shall be the
bargaining agent for the merged bargaining unit, but only for the remaining term of
the said CBA. In case no petition for certification election is filed, employees
concerned shall be assessed agency fees in order to enjoy the benefits of the said
CBA. In case the petition for certification elections is filed during the freedom period
of the said CBA, then other labor organizations shall be allowed to participate and
thereafter, the winner shall have a fresh mandate to represent the merged bargaining
unit.


SECTION 8. Implementing Rules. — Within sixty (60) days after the effectivity of
this Act, the Secretary of Labor and Employment is hereby mandated to issue its
Implementing Rules.

SECTION 9. Separability Clause. - | f any provision of this Act, or any parts thereof,
is declared unconstitutional, the same shall not affect the validity and effectivity of the
other portions.

SECTION 10. Repealing Clause. - All laws, executive orders, presidential decrees,
proclamations, rules, regulations, issuances and enactments of parts thereof
inconsistent with this Act are hereby repealed or modified accordingly.

SECTION 11. Effectivity. - This Act shall take effect fifteen (15) days from its
complete publication in the Official Gazette of in a newspaper of general circulation
in the Philippines, whichever comes earlier.

APPROVED,