A Comprehensive Discussion Under Philippine Labor Law

I. Introduction

In the Philippines, company reorganizations, mergers, or even simple name changes often raise concerns among employees—particularly about security of tenure and entitlement to separation pay. A frequent question arises: If a company changes its name, are employees automatically entitled to separation pay?

The short answer is no, but the answer depends on the nature and extent of the change. This article explores the legal framework governing this issue under the Labor Code of the Philippines, relevant Department of Labor and Employment (DOLE) issuances, and Supreme Court jurisprudence.

II. Legal Basis: Separation Pay under the Labor Code

Under Article 298 (formerly Article 283) and Article 299 (formerly Article 284) of the Labor Code of the Philippines, separation pay is due only in specific circumstances, such as:

Installation of labor-saving devices
Redundancy
Retrenchment to prevent losses
Closure or cessation of business operations not due to serious losses
Termination due to disease (Article 299)

The law does not provide separation pay for all changes in a company’s structure or identity—only when these changes result in a legitimate termination of employment for authorized causes.

III. Change of Company Name vs. Change of Ownership

A mere change in the company’s name does not affect its corporate personality. The entity remains the same; only its name changes. The rights, obligations, and liabilities—including employment contracts—continue uninterrupted.

This principle is consistent with Section 18 of the Corporation Code (now the Revised Corporation Code), which provides that a corporation’s change of name “shall not affect its rights or obligations, or those of its members.”

Thus, employees cannot claim separation pay merely because of a name change. The employment relationship continues, and so does their tenure and benefits.

IV. Change of Ownership or Management

However, when a company’s ownership or management changes hands, the situation may differ.

1. Sale or Transfer of Assets

If only the company’s assets (not its corporate identity) are sold to another entity, the buyer is not automatically obliged to absorb the employees. In such a case:

The seller company may terminate the employees due to closure or cessation of business.
The employees are entitled to separation pay equivalent to one month’s pay or one-half month’s pay per year of service, whichever is higher, as provided in Article 298.
The buyer may hire them as new employees at its discretion.

2. Sale or Transfer of Shares (Change in Ownership but Same Entity)

If only the ownership of shares changes, but the corporate personality remains the same, there is no termination of employment. Employees continue under the same employer, and therefore, no separation pay is due.

V. Relevant Supreme Court Rulings

1. SME Bank, Inc. v. De Guzman, G.R. No. 184517, October 8, 2013

The Supreme Court ruled that in a transfer of ownership, employees may be separated if the new owner decides not to retain them. The separation pay, however, must be borne by the selling employer, as it was the act of sale that caused the termination.

2. Manlimos v. NLRC, G.R. No. 113337, August 4, 1995

The Court clarified that a change in business name does not sever employer-employee relationships. Employees’ tenure is preserved because the employer’s legal identity remains unchanged.

3. Gaco v. NLRC, G.R. No. 104690, February 23, 1994

The Court reiterated that corporate continuity is preserved despite changes in name or management structure, unless there is clear evidence of closure or retrenchment.

VI. DOLE Guidelines and Practice

The Department of Labor and Employment (DOLE) requires employers to notify both DOLE and employees in writing 30 days prior to termination for authorized causes. However, no notice is necessary for mere name changes or rebranding, since these do not constitute termination.

When a company changes its name, it must simply register the change with the Securities and Exchange Commission (SEC), BIR, and SSS, and update employment records. Employees continue under the same employer entity.

VII. Practical Implications for Employers and Employees

For Employers:

Ensure continuity of employment when changing the company name.
Avoid misrepresenting the change as a new entity to evade obligations.
Comply with DOLE and SEC registration updates to reflect the new corporate name.

For Employees:

A name change does not terminate employment or entitle one to separation pay.
However, if the company truly ceases operations or is acquired and the new owner refuses to absorb employees, separation pay is warranted.
Employees should confirm whether the change involves only a name or an ownership transfer.

VIII. Conclusion

Under Philippine labor law, a mere change of company name does not entitle employees to separation pay, since there is no termination of employment and the employer’s corporate personality remains intact.

Separation pay arises only when the employment relationship is severed due to authorized causes such as closure, retrenchment, or redundancy—not because of cosmetic or administrative corporate changes.

In short:

No separation pay is due when only the company name changes. Separation pay becomes due only when there is actual termination arising from authorized causes under the Labor Code.

References: Labor Code of the Philippines (Articles 298–299); Revised Corporation Code (Section 18); SME Bank, Inc. v. De Guzman, G.R. No. 184517 (2013); Manlimos v. NLRC, G.R. No. 113337 (1995); Gaco v. NLRC, G.R. No. 104690 (1994).