Industrial Timber Corp v Ababon

Industrial Timber Corp v Ababon January 25, 2006 | Ynares-Santiago, J. Two consolidated petitions (GR 164518 assailing CA decision setting aside May 24, 1995 NLRC decision + CA Resolution denying MR; GR 164965 assailing CA Resolution denying partial MR) FACTS:  Industrial Plywood Group Corp (IPGC) leased to Industrial Timber Corporation (ITC) a plywood plant in Butuan City for a period of 5 years  ITC commenced operation and hired 387 workers  On Mar 16, 1990, ITC notified the DOLE and its workers that effective Mar 19, 1990, it will undergo a no plant operation due to lack of raw materials and will resume only after it secures logs for milling  Meanwhile, IPGC notified ITC of the expiration of the lease contract in Aug 1990 and its intention not to renew  On Jun 26, 1990, ITC notified the DOLE and its workers of the plant's shutdown due to the non-renewal of anti-pollution permit that expired in Apr 1990.  On Aug 17, 1990 ITC gave final notice of its closure or cessation of business operations, with an advice for all workers to collect benefits due them under the law and CBA  On Oct 15, 1990, IPGC took over the plywood plant after it was issued a Wood Processing Plant Permit by DENR, coincidentally on the same day the ITC ceased operation of the plant.  Virginio Ababon, et al. then filed a complaint against ITC and IPGC for illegal dismissal, ULP and damages, alleging that the cessation of business ops was intended to bust the union and that both corp are one and the same  LA rendered decision refusing to pierce the veil of corp fiction for lack of evidence to prove that it was used to perpetuate fraud or illegal act; upholding validity of closure, and ordering ITC to pay separation pay.  On appeal, NLRC set aside the LA decision and ordered reinstatement plus payment of full backwages, damages and AF (May 20, 1993 decision). ITC and IPGC's MR was dismissed for being filed out of time (3 days late). Petition for Relief filed and treated as second MR but was dismissed for lack of merit.  Petitioners then filed a Notice of Appeal with SC and also filed a MR/Second Petition for Relief with NLRC. SC dismissed Notice of Appeal for being a wrong mode of appeal from NLRC decision. However, NLRC granted the Second Petition for Relief and set aside all its prior decision and resolutions (May 24, 1995 decision).  Virgilio Ababon, et al. filed a Petition for Certiorari with the SC; petition was referred to CA (as per St. Martins Funeral Home ruling) which set aside the May 24, 1995 NLRC decision and reinstated the May 20, 1993 NLRC decision. MR of both parties were denied, hence the consolidated petitions. ISSUE/HOLDING/RATIO: W/N Ababon, et al. were illegally dismissed due to the closure of ITC's business. NO 

The right to close the operation of an establishment or undertaking is one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for the purpose of circumventing the provisions on termination of employment embodied in the LC

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(See Article 2831) A reading of the law shows that a partial or total closure or cessation of operations of establishment or undertaking may either be due to serious business losses or financial reverses or otherwise. Under the first kind, the ER must sufficiently and convincingly prove its allegation of substantial losses, while under the second kind, the ER can lawfully close shop anytime as long as cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive to circumvent tenurial rights of EEs, and as long as he pays termination pay. Just as no law forces anyone to go into business, no law can compel anybody to continue the same

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Under Art 283, 3 requirements are necessary for a valid cessation of business ops: 1. Service of written notice to EEs and to DOLE at least one month before the intended date 2. Cessation of business must be bona fide in character 3. Payment of EEs of termination pay amounting to 1 mo pay or at least 1/2 mo pay for every year of service, whichever is higher In this case, SC found that ITC's closure was done in good faith and for valid reasons. The records reveal that the decision to permanently close business was arrived at after a suspension of operation for several months precipitated by lack of raw materials used for milling operations, the expiration of the anti-pollution permit and the termination of the lease contract with IPGC. Consequently, Ababon, et al. could not have been illegally dismissed to be entitled to full backwages. However, they are entitled to separation pay.

NOTE: Nevertheless, for failure to comply with the notice requirement [ITC gave final notice to its workers of its closure on the same day closure was to take effect], SC awarded nominal damages to each EE

1 Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.