In a significant ruling concerning the rights of employees terminated due to the restructuring of the National Power Corporation (NPC), the Supreme Court clarified the scope and enforcement of its prior decision declaring certain National Power Board (NPB) resolutions void. The Court emphasized that its decision applied to all NPC employees affected by the nullified resolutions, not just a select few. Moreover, it addressed the liability of the Power Sector Assets and Liabilities Management Corporation (PSALM) concerning the financial obligations arising from the illegal terminations, underscoring the importance of adhering to legal processes and protecting employee rights during corporate restructuring.

Navigating Corporate Restructuring: Who Bears the Burden of Unlawful Dismissal?

The legal saga began when the NPC implemented NPB Resolutions No. 2002-124 and No. 2002-125, leading to the termination of numerous employees as part of a restructuring effort. The NPC Drivers and Mechanics Association (NPC DAMA) and the NPC Employees & Workers Union (NEWU) challenged these resolutions, arguing their implementation was unlawful. The Supreme Court initially declared these resolutions void, prompting further disputes over the extent of the ruling and the obligations arising from it. This case highlights the complexities that arise when government corporations undertake restructuring initiatives, especially concerning employee rights and the assumption of liabilities by successor entities like PSALM.

The central issue before the Supreme Court was whether its initial decision applied to all NPC employees terminated under the void resolutions or only to a limited group of top-level executives. The NPC argued that only sixteen top-level employees were directly affected by the resolutions, while the petitioners contended that the ruling encompassed all employees terminated as a result of the restructuring. The Supreme Court sided with the petitioners, emphasizing that its prior decisions were intended to protect all employees whose terminations resulted from the unlawful resolutions.

In arriving at its decision, the Court considered the original intent behind the legal challenge and the language of the nullified resolutions. NPB Resolution No. 2002-124 explicitly stated that “all NPC personnel shall be legally terminated on January 31, 2003.” This broad language indicated that the resolution aimed to terminate all NPC employees, not just a select few. The Court also noted that the NPC itself had previously acknowledged the far-reaching implications of nullifying the resolutions, estimating a substantial financial liability for back wages and benefits affecting thousands of employees.

Furthermore, the Supreme Court addressed the NPC’s attempt to introduce a new resolution, NPB Resolution No. 2007-55, to rectify the deficiencies of the earlier voided resolutions. The NPC argued that this subsequent resolution effectively mooted the legal issues. However, the Court rejected this argument, asserting that void acts cannot be ratified. The Court clarified that NPB Resolution No. 2007-55 could only have prospective effect, meaning it could not retroactively validate the unlawful terminations that had already occurred.

The Court then turned to the critical question of PSALM’s liability for the financial obligations arising from the unlawful terminations. PSALM, created under the Electric Power Industry Reform Act of 2001 (EPIRA), argued that it should not be held responsible for NPC’s liabilities to its employees. PSALM contended that its mandate was limited to managing and privatizing NPC assets to liquidate NPC’s financial obligations and stranded contract costs and that employee-related liabilities were not among the obligations transferred to it.

The Court interpreted Sections 49 and 50 of the EPIRA Law, which define PSALM’s role and responsibilities, stating:

SEC. 49. Creation of Power Sector Assets and Liabilities Management Corporation. – There is hereby created a government-owned and -controlled corporation to be known as the “Power Sector Assets and Liabilities Management Corporation,” hereinafter referred to as the “PSALM Corp.,” which shall take ownership of all existing NPC generation assets, liabilities, IPP contracts, real estate and all other disposable assets. All outstanding obligations of the NPC arising from loans, issuances of bonds, securities and other instruments of indebtedness shall be transferred to and assumed by the PSALM Corp. within one hundred eighty (180) days from the approval of this Act.

SEC. 50. Purpose and Objective, Domicile and Term of Existence. – The principal purpose of the PSALM Corp. is to manage the orderly sale, disposition, and privatization of NPC generation assets, real estate and other disposable assets, and IPP contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner.

The Court clarified that the term “existing” in Section 49 primarily qualifies “NPC generation assets” rather than “liabilities.” This interpretation ensures that PSALM’s responsibilities align with its mandate to liquidate all of NPC’s financial obligations, including those that arise during the privatization stage. Holding PSALM accountable for these liabilities prevents the absurdity of PSALM acquiring NPC’s assets without assuming the corresponding obligations, especially when those obligations stem directly from the restructuring process mandated by the EPIRA Law itself.

The Court emphasized that its interpretation was consistent with the principle that courts should avoid interpretations leading to absurd or unjust outcomes. Drawing from established jurisprudence, the Court cited Belo v. Philippine National Bank, 405 Phil. 851, 874 (2001), highlighting that if the words of a statute are susceptible of more than one meaning, the absurdity of the result of one construction is a strong argument against its adoption, and in favor of such sensible interpretation.

Addressing PSALM’s argument that it was not a party to the case, the Supreme Court invoked Section 19, Rule 3 of the 1997 Revised Rules of Civil Procedure, which deals with the transfer of interest in legal actions. It held that PSALM had acquired a substantial interest in NPC’s assets through the EPIRA Law. Therefore, the Court ordered the Clerk of Court to implead PSALM as a party-respondent, allowing the petitioners to pursue the levied properties to satisfy their judgment, while also ensuring that PSALM had the opportunity to protect its interests.

Ultimately, the Supreme Court directed the NPC to provide a comprehensive list of all affected employees, ensuring accurate calculation of their benefits from the date of their illegal termination until September 14, 2007, when NPB Resolution No. 2007-55 was issued. The Court also authorized the Clerk of Court of the Regional Trial Court and Ex-Officio Sheriff of Quezon City to execute the judgment, underscoring the importance of prompt and effective enforcement of court orders.

FAQs

What was the key issue in this case?	The key issue was whether the Supreme Court’s prior decision nullifying NPB resolutions applied to all NPC employees terminated due to restructuring or only to a select few. The Court clarified that the decision covered all affected employees.
Why were the original NPB resolutions deemed void?	The NPB Resolutions No. 2002-124 and No. 2002-125 were deemed void because they violated Section 48 of the EPIRA Law, which requires specific individuals to personally exercise their judgment and discretion, which was not followed. This made the termination of employees illegal.
Can void acts be ratified?	No, the Supreme Court explicitly stated that void acts cannot be ratified. Thus, the subsequent NPB Resolution No. 2007-55 could not retroactively validate the illegal terminations.
What is PSALM’s role in this case?	PSALM (Power Sector Assets and Liabilities Management Corporation) took ownership of NPC’s assets and certain liabilities under the EPIRA Law. The court determined that PSALM is liable for the financial obligations resulting from the illegal terminations during the restructuring of NPC.
What does the EPIRA Law say about PSALM’s liabilities?	The EPIRA Law mandates PSALM to manage and privatize NPC assets to liquidate NPC’s financial obligations. The Supreme Court interpreted this to include liabilities arising from the restructuring process, ensuring that PSALM assumes responsibility for these obligations.
How did the court address PSALM’s claim of not being a party to the case?	The Court invoked Rule 3, Section 19 of the Rules of Civil Procedure, recognizing PSALM’s transferred interest in NPC’s assets. It ordered PSALM to be impleaded as a party-respondent, allowing the levied properties to be pursued while protecting PSALM’s interests.
When should the benefits be calculated up to?	The benefits due to the employees should be calculated from the date of their illegal termination until September 14, 2007, when NPB Resolution No. 2007-55 was issued. This resolution marked a new legal basis for the restructuring.
Who is responsible for executing the Supreme Court’s judgment?	The Clerk of Court of the Regional Trial Court and the Ex-Officio Sheriff of Quezon City are directed to execute the Supreme Court’s judgment. They are responsible for enforcing the orders and ensuring compliance.

This Supreme Court resolution reinforces the principle that corporate restructuring must respect employee rights and adhere to legal processes. It clarifies the responsibilities of successor entities like PSALM in assuming liabilities arising from unlawful terminations and underscores the importance of proper implementation of restructuring initiatives to avoid legal challenges and protect the interests of affected employees.

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