Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

House BiliNo,__1557

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 concern, 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 employme it in ease of such
business overhauls only to redundancy. Plus it sets a presumption tha! if the transferee
employer or new company becomes a bigger entity than the prior one ther can be no
declaration of redundancy as the business can absorb the employees,

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

In view of the foregoing, the immediate passage of the bill is earnestly sv weht
Sy ~

HON. RAYMOND DEMOCRITO C. MENDOZA
TUCP Partylist Representative


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGR)
First Regular Sessio

1557

‘SS

House Bill No.

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

AN ACT
PROTECTING EMPLOYEES IN CASES OF MERGER OR
CONSOLIDATION, SALE OR TRAN: 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. — \t 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 consofidation 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 wine concem 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 fo 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:
1) "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 concern 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 Transferee 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. — Wve 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 qualificatios

\CTION 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 (o participate and thereafler, the winner shall have a fresh

mandate to represent the merged bargaining unit.

SECTION 8. Implementing Rules. — Wi

sixty (60) days after the effectivity

of this Act, the Sceretary of Labor and Employment is hereby mandated to issue its
Implementing Rules.

SECTION 9. Separability Clause. - 1 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.

CTION 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 Off

il Gazette of in a newspaper of general circulation in

the Philippines, whichever comes earlier.

APPROVED.