Termination Ppt Cases

Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION

G.R. NO. 146779

January 23, 2006

RENATO S. GATBONTON, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, MAPUA INSTITUTE OF TECHNOLOGY and JOSE CALDERON, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court which seeks to set aside the Decision1 dated November 10, 2000 of the Court of Appeals (CA) in CA-G.R. SP No. 57470, affirming the decision of the National Labor Relations Commission (NLRC); and the CA Resolution dated January 16, 2001, denying the motion for reconsideration.2

Petitioner Renato S. Gatbonton is an associate professor of respondent Mapua Institute of Technology (MIT), Faculty of Civil Engineering. Some time in November 1998, a civil engineering student of respondent MIT filed a letter-complaint against petitioner for unfair/unjust grading system, sexual harassment and conduct unbecoming of an academician. Pending investigation of the complaint, respondent MIT, through its Committee on Decorum and Investigation placed petitioner under a 30-day preventive suspension effective January 11, 1999. The committee believed that petitioner’s continued stay during the investigation affects his performance as a faculty member, as well as the students’ learning; and that the suspension will allow petitioner to "prepare himself for the investigation and will prevent his influences to other members of the community."3

Thus, petitioner filed with the NLRC a complaint for illegal suspension, damages and attorney’s fees,4 docketed as NLRC-NCR Case No. 01-00388-99.

Petitioner questioned the validity of the administrative proceedings with the Regional Trial Court of Manila in a petition for certiorari but the case was terminated on May 21, 1999 when the parties entered into a compromise agreement wherein respondent MIT agreed to publish in the school organ the rules and regulations implementing Republic Act No. 7877 (R.A. No. 7877) or the Anti-Sexual Harassment Act; disregard the previous administrative proceedings and conduct anew an investigation on the charges against petitioner. Petitioner agreed to recognize the validity of the published rules



and regulations, as well as the authority of respondent to investigate, hear and decide the administrative case against him.5

On June 18, 1999, the Labor Arbiter rendered a decision, the dispositive portion of which reads:

Wherefore, premises considered, the thirty day preventive suspension of complainant is hereby declared to be illegal. Accordingly, respondents are directed to pay his wages during the period of his preventive suspension.

The rest of complainant’s claims are dismissed.

SO ORDERED.6

Both respondents and petitioner filed their appeal from the Labor Arbiter’s Decision, with petitioner questioning the dismissal of his claim for damages. In a Decision dated September 30, 1999, the NLRC granted respondents’ appeal and set aside the Labor Arbiter’s decision. His motion for reconsideration having been denied by the NLRC on December 13, 1999, petitioner filed a special civil action for certiorari with the CA.

On November 10, 2000, the CA promulgated the assailed decision affirming the NLRC decision, the dispositive portion of which reads:

WHEREFORE, foregoing premises considered, the petition is hereby DENIED DUE COURSE and ORDERED DISMISSED, and the challenged decision and order of public respondent NLRC AFFIRMED.

SO ORDERED.7

Petitioner filed a motion for reconsideration which the CA denied in its Resolution dated January 16, 2001.

Hence, the present petition based on the following grounds:

A

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE NLRC WAS NOT GUILTY OF GRAVE ABUSE OF DISCRETION IN RENDERING BOTH THE APPEAL DECISION AND THE NLRC RESOLUTION.

B

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DISMISSAL OF PETITIONER’S CLAIM FOR DAMAGES.8

Petitioner finds fault in the CA’s decision, arguing that his preventive suspension does not find any justification in the Mapua Rules and Regulations considering that at the time of his preventive suspension on January 11, 1999, the rules have not been promulgated yet as it was published only on February 23, 1999. Petitioner also contests the lack of award of damages in his favor.9

The petition is partly meritorious.

Preventive suspension is a disciplinary measure for the protection of the company’s property pending investigation of any alleged malfeasance or misfeasance committed by the employee. The employer may place the worker concerned under preventive suspension if his continued employment poses a serious and imminent threat to the life or property of the employer or of his co-workers.10 However, when it is determined that there is no sufficient basis to justify an employee’s preventive suspension, the latter is entitled to the payment of salaries during the time of preventive suspension.11

R.A. No. 7877 imposed the duty on educational or training institutions to "promulgate rules and regulations in consultation with and jointly approved by the employees or students or trainees, through their duly designated representatives, prescribing the procedures for the investigation of sexual harassment cases and the administrative sanctions therefor."12 Petitioner’s preventive suspension was based on respondent MIT’s Rules and Regulations for the Implemention of the Anti-Sexual Harassment Act of 1995, or R.A. No. 7877. Rule II, Section 1 of the MIT Rules and Regulations provides:

Section 1. Preventive Suspension of Accused in Sexual Harassment Cases. Any member of the educational community may be placed immediately under preventive suspension during the pendency of the hearing of the charges of grave sexual harassment against him if the evidence of his guilt is strong and the school head is morally convinced that the continued stay of the accused during the period of investigation constitutes a distraction to the normal operations of the institution or poses a risk or danger to the life or property of the other members of the educational community.

It must be noted however, that respondent published said rules and regulations only on February 23, 1999. In Tañada vs. Tuvera,13 it was ruled that:

… all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity is fixed by the legislature.

Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution. Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation.

Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and not the public, need not be published. Neither is publication required of the so-called letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties.

…

We agree that the publication must be in full or it is no publication at all since its purpose is to inform the public of the contents of the laws. (Emphasis supplied)

The Mapua Rules is one of those issuances that should be published for its effectivity, since its purpose is to enforce and implement R.A. No. 7877, which is a law of general application.14 In fact, the Mapua Rules itself explicitly required publication of the rules for its effectivity, as provided in Section 3, Rule IV (Administrative Provisions), which states that "[T]hese Rules and Regulations to implement the Anti-Sexual Harassment Act of 1995 shall take effect fifteen (15) days after publication by the Committee." Thus, at the time of the imposition of petitioner’s preventive suspension on January 11, 1999, the Mapua Rules were not yet legally effective, and therefore the suspension had no legal basis.

Moreover, even assuming that the Mapua Rules are applicable, the Court finds that there is no sufficient basis to justify his preventive suspension. Under the Mapua Rules, an accused may be placed under preventive suspension during pendency of the hearing under any of the following circumstances:

(a) if the evidence of his guilt is strong and the school head is morally convinced that the continued stay of the accused during the period of investigation constitutes a distraction to the normal operations of the institution; or

(b) the accused poses a risk or danger to the life or property of the other members of the educational community.

In petitioner’s case, there is no indication that petitioner’s preventive suspension may be based on the foregoing circumstances. Committee Resolution No. 1 (Re: Preventive Suspension of Engr. Renato Gatbonton) passed by the Committee on Decorum and Investigation states the reasons for petitioner’s preventive suspension, to wit:

Whereas, the committee believe[s] that the continued stay of the respondent during the period of investigation,

1. Affects the respondent’s performance as a faculty member and laboratory head considering the psychological effects depression and/or emotional stress during investigation;lavvphil.ne+

2. Affects the student[’s] learning and other members of the Mapua Institute of Technology community.

Whereas, the committee believe[s] that this preventive suspension will allow the respondent to prepare himself for the investigation and will prevent his influences to other members of the community.15

Said resolution does not show that evidence of petitioner’s guilt is strong and that the school head is morally convinced that petitioner’s continued stay during the period of investigation constitutes a distraction to the normal operations of the institution; or that petitioner poses a risk or danger to the life or property of the other members of the educational community.

Even under the Labor Code, petitioner’s preventive suspension finds no valid justification. As provided in Section 8, Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code:

Sec. 8. Preventive Suspension. The employer may place the worker concerned under preventive suspension if his continued employment poses a serious threat to the life or property of the employer or of his co-workers.

As previously stated, there is nothing on record which shows that respondent MIT imposed the preventive suspension on petitioner as his continued employment poses a serious threat to the life or property of the employer or of his co-workers; therefore, his preventive suspension is not justified.16 Consequently, the payment of wages during his 30-day preventive suspension, i.e., from January 11, 1999 to February 10, 1999, is in order.

With regard to petitioner’s claim for damages, the Court finds the same to be without basis. While petitioner’s preventive suspension may have been unjustified, this does not automatically mean that he is entitled to moral or other damages. In Cocoland Development Corp. vs. NLRC,17 the Court ruled:lavvphil.ne+

In Primero vs. Intermediate Appellate Court, this Court held that "… an award (of moral damages) cannot be justified solely upon the premise (otherwise sufficient for redress under the Labor Code) that the employer fired his employee without just cause or due process. Additional facts must be pleaded and proven to warrant the grant of moral damages under the Civil Code, these being, to repeat, that the act of dismissal was attended by bad faith or fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy; and of course, that social humiliation, wounded feelings, grave anxiety, etc., resulted therefrom." This was reiterated in Garcia vs. NLRC, where the Court added that exemplary damages may be awarded only if the dismissal was shown to have been effected in a wanton, oppressive or malevolent manner.

This the private respondent failed to do. Because no evidence was adduced to show that petitioner company acted in bad faith or in a wanton or fraudulent manner in dismissing the private respondent, the labor arbiter did not award any moral and exemplary damages in his decision. Respondent NLRC therefore had no factual or legal basis to award such damages in the exercise of its appellate jurisdiction. …

The records of this case are bereft of any evidence showing that respondent MIT acted in bad faith or in a wanton or fraudulent manner in preventively suspending petitioner, thus, the Labor Arbiter was correct in not awarding any damages in favor of petitioner.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated November 10, 2000 and Resolution dated January 16, 2001 of the Court of Appeals in CA-G.R. SP No. 57470 as well as the NLRC Decision dated September 30, 1999 together with its Resolution dated December 13, 1999, are hereby SET ASIDE and the Labor Arbiter’s Decision dated June 18, 1999 is REINSTATED.

SO ORDERED.



The award of backwages to ee is proper if the dismissal was illegal due to absence without leave due to causes unrelated to the work of the employee.

Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION

G.R. No. 158458

Back wages awarded even if the employee did not appeal in the order of e CA. hence, as to the general rule that only those who seek affirmative relief can be benefited by e judgment has an exception which is the awarding of backwages which is a substantial right of e employee,

December 19, 2007

ASIAN TERMINALS, INC. and ATTY. RODOLFO G. CORVITE, JR., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, DOMINADOR SALUDARES, and ROMEO L. LABRAGUE, respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court from the January 23, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 53869, affirming with modification the April 30, 1999 Decision2 of the National Labor Relations Commission (NLRC); and the May 23, 2003 CA Resolution,3 denying the motion for reconsideration.

The facts not in dispute are as follows:



Romeo Labrague (respondent) was a stevedore antigo employed with Asian Terminals, Inc. since the 1980's. Beginning September 9, 1993, respondent failed to report for work allegedly because he was arrested and placed in detention for reasons not related to his work.4

After respondent had been absent for more than one year, Asian Terminals, Inc., through Atty. Rodolfo G. Corvite, Jr., (petitioners) sent him (respondent) a letter, dated December 27, 1994, at his last known address at Area H, Parola, Tondo, Manila, requiring him to explain within 72 hours why he should not suffer disciplinary penalty for his prolonged absence.5 The following month, petitioner sent respondent another notice of similar tenor.6

Finally, on February 8, 1995, petitioner issued a memorandum stating:

For having incurred absence without official leave (AWOL) from 03 September 1993 up to the present after you were put behind bars due to your involvement in a killing incident, your employment is hereby terminated for cause effective IMMEDIATELY.7

Though addressed to respondent, the foregoing memorandum does not indicate whether it was sent to the latter at his last known address.

Following his acquittal and release from detention, respondent reported for work on July 3, 1996 but was advised by petitioners to file a new application so that he may be rehired.8 Thus, respondent filed with the NLRC a complaint for illegal dismissal, separation pay, non-payment of labor standard benefits, damages and attorney's fees.9

In a Decision dated September 29, 1998, the Labor Arbiter (LA) held:

WHEREFORE, premises considered, judgment is hereby entered ordering respondents, jointly and severally, to pay the total sum of P152,700.00 as separation pay, 13th month and service incentive leave pay of complainant. Other issues or claims are hereby ordered DISMISSED for want of substantial evidence.

SO ORDERED.10

Petitioners appealed but the NLRC issued the April 30, 1999 Decision which merely modified the LA decision, viz.:

WHEREFORE, premises considered, the Decision appealed from is MODIFIED. Respondents are ordered to pay complainant his separation pay in the sum of P124,800.00. The awards representing 13th month pay and service incentive leave pay are DELETED.

SO ORDERED.11

Petitioners' motion for reconsideration was denied by the NLRC in its Resolution12 on June 15, 1999.

It should be noted that respondent did not appeal from the NLRC decision deleting from the LA decision the award of 13th month pay and service incentive leave pay.

Petitioners went on to file a petition for certiorari13 with the CA which, however, the latter denied in the January 23, 2003 Decision now assailed before us, to wit:

WHEREFORE, the assailed decision of the NLRC is AFFIRMED with MODIFICATION in that:

(a) Labrague's separation pay should be computed on the basis of the aforequoted Section 2 of the collective bargaining agreement (CBA); and

(b) the petitioners are further ordered to pay Labrague his backwages from the time of his illegal dismissal in July 1996 up to the date of finality of this decision, computed also in accordance with Section 2 of the same CBA.

SO ORDERED.14

Respondent did not question the recomputation of his separation pay. Only petitioners filed a motion for reconsideration but the CA denied the same.

Hence, the present petition on the sole ground that:

The Honorable Court of Appeals erred in declaring the dismissal of respondent Romeo L. Labrague from employment illegal notwithstanding his long and unauthorized absences from work which is contrary to law and existing jurisprudence.15

The petition lacks merit.

In declaring the dismissal of respondent illegal, the concurrent view of the CA, NLRC and LA is that the latter's prolonged absence was excusable, for it was brought about by his detention for almost three years for a criminal charge that was later declared baseless. They held that his prolonged absence was not coupled with an intention to relinquish his employment, and therefore did not constitute abandonment. The CA elaborated:

Verily, the Supreme Court ruled in the Magtoto case, involving detention for seven (7) months by military authorities, pursuant to an Arrest, Search and Seizure Order (ASSO), relied upon by the Arbiter, viz.:

"Equitable considerations favor the petitioner. While the respondent employer may have shed no tears over the arrest of one of its employees, there is likewise no showing that

it had any role in the arrest and detention of Mr. Magtoto. But neither was the petitioner at fault. The charges which led to his detention was later found without basis. x x x."16

Petitioners argue that they were justified in dismissing respondent after the latter incurred a three-year absence without leave, and refused to report for work despite several notices.17 Petitioners argue that respondent's prolonged absence was not justified or excused by his so-called detention, which remained a mere allegation that was never quite substantiated by any form of official documentation.18 It being uncertain whether respondent was ever placed in detention, petitioners doubt whether the CA correctly applied the ruling in Magtoto v. National Labor Relations Commission. 19

The foregoing arguments of petitioners are specious.

It cannot be gainsaid that respondent was in detention during the entire period of his absence from work and, more importantly, that his situation was known to petitioners. It is of record that in the February 8, 1995 termination notice it issued, petitioners expressly acknowledged that respondent began incurring absences without leave "after [he was] put behind bars due to [his] involvement in a killing incident."20 It clearly indicates that petitioners knew early on of the situation of respondent. It also explains why in its reply21 before the LA, appeal22 before the NLRC and petition for certiorari23 before CA, petitioners never questioned the truth about respondent's detention. Petitioners' skepticism about respondent's detention is a mere afterthought not proper for consideration in a petition for review under Rule 45, which bars reappraisal of facts not disputed before the lower courts or already settled in their proceedings, and unanimously at that.24

It is beyond dispute then that the underlying reason for respondent's absences was his detention. The question is whether the CA erred in holding that such absences did not amount to abandonment as to furnish petitioners cause to dismiss respondent.

To justify the dismissal of respondent for abandonment, petitioners should have established by concrete evidence the concurrence of two elements: first, that respondent had the intention to deliberately and without justification abandon his employment or refuse to resume his work; and second, that respondent performed overt acts from which it may be deduced that he no longer intended to work. 25

Petitioners failed to discharge such burden of proof. Respondent's absences, even after notice to return to work, cannot be equated with abandonment,26 especially when we take into account that the latter incurred said absences unwillingly and without fault.27

Absences incurred by an employee who is prevented from reporting for work due to his detention to answer some criminal charge is excusable if his detention is baseless, in that the criminal charge against him is not at all supported by sufficient evidence. In Magtoto v. National Labor Relations Commission as well as Pedroso v. Castro,28 we declared such absences as not constitutive of abandonment, and held the dismissal of

the employee-detainee invalid. We recently reiterated this ruling in Standard Electric Manufacturing Corporation v. Standard Electric Employees Union-NAFLU-KMU,29 viz.:

The facts in Pedroso v. Castro are similar to the set of facts in the present case. The petitioners therein were arrested and detained by the military authorities by virtue of a Presidential Commitment Order allegedly for the commission of Conspiracy to Commit Rebellion under Article 136 of the RPC. As a result, their employer hired substitute workers to avoid disruption of work and business operations. They were released when the charges against them were not proven. After incarceration, they reported back to work, but were refused admission by their employer. The Labor Arbiter and the NLRC sustained the validity of their dismissal. Nevertheless, this Court again held that the dismissed employees should be reinstated to their former positions, since their separation from employment was founded on a false or non-existent cause; hence, illegal.

Respondent Javier's absence from August 9, 1995 cannot be deemed as an abandonment of his work. Abandonment is a matter of intention and cannot lightly be inferred or legally presumed from certain equivocal acts. To constitute as such, two requisites must concur: first, the employee must have failed to report for work or must have been absent without valid or justifiable reason; and second, there must have been a clear intention on the part of the employee to sever the employer-employee relationship as manifested by some overt acts, with the second element being the more determinative factor. Abandonment as a just ground for dismissal requires clear, willful, deliberate, and unjustified refusal of the employee to resume his employment. Mere absence or failure to report for work, even after notice to return, is not tantamount to abandonment.

Moreover, respondent Javier's acquittal for rape makes it more compelling to view the illegality of his dismissal. The trial court dismissed the case for "insufficiency of evidence," and such ruling is tantamount to an acquittal of the crime charged, and proof that respondent Javier's arrest and detention were without factual and legal basis in the first place.30

Similarly, respondent herein was prevented from reporting for work by reason of his detention. That his detention turned out to be without basis, as the criminal charge upon which said detention was ordered was later dismissed for lack of evidence, made the absences he incurred as a consequence thereof not only involuntary but also excusable. It was certainly not the intention of respondent to absent himself, or his fault that he was detained on an erroneous charge. In no way may the absences he incurred under such circumstances be likened to abandonment. The CA, therefore, correctly held that the dismissal of respondent was illegal, for the absences he incurred by reason of his unwarranted detention did not amount to abandonment.

His dismissal being illegal, respondent is entitled to backwages as a matter of right provided by law.31 The CA granted him backwages from July 1996, when he reported back for work but was informed of his dismissal, up to the date of finality of its decision.

It is noted that the LA and NLRC decisions did not award backwages and respondent did not appeal from said decision. Nonetheless, such award of backwages may still be sustained consistent with our ruling in St. Michael's Institute v. Santos,[32] to wit:

On the matter of the award of backwages, petitioners advance the view that by awarding backwages, the appellate court "unwittingly reversed a time-honored doctrine that a party who has not appealed cannot obtain from the appellate court any affirmative relief other than the ones granted in the appealed decision." We do not agree.

The fact that the NLRC did not award backwages to the respondents or that the respondents themselves did not appeal the NLRC decision does not bar the Court of Appeals from awarding backwages. While as a general rule, a party who has not appealed is not entitled to affirmative relief other than the ones granted in the decision of the court below, the Court of Appeals is imbued with sufficient authority and discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal justice.

Article 279 of the Labor Code, as amended, mandates that an illegally dismissed employee is entitled to the twin reliefs of (a) either reinstatement or separation pay, if reinstatement is no longer viable, and (b) backwages. Both are distinct reliefs given to alleviate the economic damage suffered by an illegally dismissed employee and, thus, the award of one does not bar the other. Both reliefs are rights granted by substantive law which cannot be defeated by mere procedural lapses. Substantive rights like the award of backwages resulting from illegal dismissal must not be prejudiced by a rigid and technical application of the rules. The order of the Court of Appeals to award backwages being a mere legal consequence of the finding that respondents were illegally dismissed by petitioners, there was no error in awarding the same.33 (Emphasis supplied.)

However, as to whether petitioner Atty. Rodolfo G. Corvite, Jr. should be held jointly and severally liable with petitioner Asian Terminals, Inc., we agree with the latter's view that, absent a distinct finding of bad faith or evident malice on the part of petitioner Atty. Rodolfo G. Corvite, Jr. in terminating the employment of respondent, the former should not be held solidarily liable for the payment of whatever monetary award is due respondent.34

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated January 23, 2003 and the May 23, 2004 Resolution of the Court of Appeals are AFFIRMED with the further MODIFICATION that the solidary liability of petitioner Atty. Rodolfo G. Corvite, Jr. is DELETED.

No costs.

SO ORDERED.

Employee was illegally dismissed because there was no 30 day notice accorded to him at that time



Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION

G.R. No. 170525

Due to illegal dismissal by abandonment, not proven that ee has deemed abandoned his position when after his illegal dismissal he immediately filed for a case alleging reinstatement

October 2, 2009

BARON REPUBLIC THEATRICAL, MAJOR CINEMA, WILSON PASCUAL and RODRIGO SALAZAR, Petitioners, vs. NORMITA P. PERALTA and EDILBERTO H. AGUILAR, Respondents.

D E C I S I O N

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court which seeks the reversal of the Decision1 of the Court of Appeals (CA) dated March 31, 2005 in CA-G.R. SP No. 57483 and its Resolution2 dated October 25, 2005, denying petitioners' Motion for Partial Reconsideration.3 The CA Decision in question set aside the April 16, 1999 Decision of the National Labor Relations Commission (NLRC) in NLRC NCR CA NO. 014340-984 and reinstated with modification the Decision of the Labor Arbiter dated August 15, 1997 in NLRC NCR CASE NO. 00-05-04048-94.5

The factual and procedural antecedents, as narrated by the CA, are as follows:

Petitioner [herein respondent], Normita P. Peralta ("PERALTA") was hired by BARON REPUBLIC THEATRICAL ("BARON") sometime in 1983 as a ticket seller and was later on promoted as General Manager. As General Manager she received a salary of Four Thousand Pesos (P4,000.00) a month.

On March 14, 1993, she was informed by the owner and operator of BARON, respondent [herein petitioner] Rodrigo Salazar ("SALAZAR") that her employment was already terminated effective that day. She was not given any reason why her services were being terminated. Thereafter, she filed a case for illegal dismissal with claim for reinstatement, payment of backwages, unpaid salary, 13th month pay, service incentive leave, damages and attorney's fees against her employer, BARON/SALAZAR.

As to petitioner [herein respondent] Edilberto H. Aguilar ("AGUILAR"), he was hired as electrician/air-conditioner operator at MAJOR CINEMA ("MAJOR") sometime in January of 1983. AGUILAR received a salary of NINETY-SEVEN PESOS (P97.00) per day and his salary was not increased even after the statutory minimum salary was increased.

In May 1994, he was informed by the owner-operator of MAJOR, [herein petitioner] Wilson Pascual ("PASCUAL"), that his employment was terminated effective that day. No explanation was given to AGUILAR why his service was being terminated. Hence, he filed a complaint against his employers, PASCUAL/MAJOR for illegal dismissal, payment of wage differentials as a result of underpayment, overtime pay, holiday and rest day/pay and service incentive leave pay.6

On August 15, 1997, the Labor Arbiter handling the case rendered a Decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Ordering respondent Rodrigo D. Salazar to pay complainant NORMITA P. PERALTA, the following amounts:

13th month pay ......................................... P12,000.00 Service incentive leave pay ..................... 1,999.95 One month pay in lieu of notice ............... 4,000.00 Separation pay (P2,000.00 x 4 years - November 21, 1988 to March 14, 1993) .... 8,000.00 5% attorney's fees ....................................... 1,300.00 TOTAL AWARD ............ P 27,299.95 2. Declaring the dismissal of complainant EDILBERTO H. AGUILAR by respondent WILSON PASCUAL to be illegal and ordering the latter to reinstate the former to his former position without loss of seniority rights and other privileges and pay him the following amount:

Backwages until reinstatement, computed as of August 15, 1997 ................................. P149,158.50 13th month pay (P140,158.50 over 12) ........ 11,679.90 Salary differentials (underpayment) ............ 2,740.40 13th month pay for the underpayment .......... 228.40 5 day per year SILP for 3 years .................... 1,860.00 5% attorney's fees ......................................... 7,833.75 TOTAL AWARD FOR AGUILAR P164,501.25 All other claims are DISMISSED for insufficiency of evidence and/or lack of merit.

SO ORDERED.7

The Labor Arbiter ruled that Peralta's dismissal was not illegal as the establishment where she was working closed due to business losses and closure of business or establishment is one of the authorized causes recognized by law in dismissing an employee. On the other hand, the Labor Arbiter held that Aguilar's dismissal was illegal for failure of Pascual to present evidence that the former's dismissal was for a just cause.

On appeal, the NLRC modified the Decision of the Labor Arbiter. The decretal portion of the NLRC Decision reads as follows:

WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby modified and a new one entered:

1. Ordering respondent Rodrigo D. Salazar to pay complainant NORMITA P. PERALTA, the following amounts:

One month pay in lieu of notice P 4,000.00 Separation pay (P2,000.00 x 4 yrs. Nov.21, 1998 to March 14, 1993) 8,000.00 -------------- TOTAL AWARD P12,000.00 2. Declaring that complainant EDILBERTO H. AGUILAR has voluntarily terminated his employment with respondent WILSON PASCUAL but ordering the latter to pay the former:

Salary differentials (underpayment) P 2,740.40 13th month pay for the underpayment 228.40 ------------- TOTAL AWARD FOR AGUILAR P 2,968.80 SO ORDERED.8

In its Decision, the NLRC reversed the Labor Arbiter's ruling that Aguilar was illegally dismissed. Instead, it gave credence to Pascual's representation that it was Aguilar who refused to return or report for work and was guilty of abandonment. The NLRC held that it is against logic for Pascual to terminate Aguilar on the spot without any substitute because his services are essential to Pascual's business. The NLRC ruled that, aside from his self-serving statements, Aguilar failed to show proof that he was indeed terminated.

Herein respondents filed a Motion for Reconsideration,9 but the NLRC denied it in its Resolution10 dated September 28, 1999.

Respondents then filed a petition for certiorari with the CA assailing the abovementioned Decision and Resolution of the NLRC.111avvphi1

On March 31, 2005, the CA rendered its Decision, disposing as follows:

WHEREFORE, except as to the order deleting the award of Service Incentive Leave pay to PERALTA and AGUILAR, the decision of the NLRC dated April 16, 1999 is hereby SET ASIDE and the Decision of Labor Arbiter Ernesto S. Dinopol dated August 15, 1996 is REINSTATED with the MODIFICATION that the award of service incentive leave pay in favor of PERALTA and AGUILAR is DELETED and should the order reinstating AGUILAR be not feasible, MAJOR CINEMA and/or PASCUAL is hereby

ORDERED to pay separation pay at the rate of one month for every year of service, with a fraction of at least six (6) months of service considered as one (1) year.

SO ORDERED.12

The CA held that as to Peralta, Salazar failed to discharge his burden of proving that he paid the former her 13th month pay. In the same manner, the appellate court ruled that Pascual failed to prove that Aguilar was guilty of abandonment. Moreover, the CA reinstated the award of attorney's fees holding that Peralta and Aguilar were both forced to litigate in order to protect their rights and interests. On the other hand, the CA affirmed the ruling of the NLRC which deleted the award of service incentive leave pay to Peralta and Aguilar.

Aggrieved, herein petitioners filed a Motion for Partial Reconsideration,13 but it was denied by the CA in its Resolution14 dated October 25, 2005.

Hence, this petition for review raising the following issues as grounds:

I

WHETHER OR NOT THE EMPLOYER HAS THE BURDEN OF PROVING THAT THE EMPLOYEE WAS DISMISSED FOR A JUST CAUSE ABSENT ANY SHOWING OF AN OVERT OR POSITIVE ACT PROVING THAT THE EMPLOYER HAD DISMISSED THE EMPLOYEE

II

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REINSTATING THE AWARD OF ATTORNEY'S FEES IN FAVOR OF PERALTA AND AGUILAR IN THE ABSENCE OF BAD FAITH ON THE PART OF THE PETITIONERS15

As to the first issue, petitioners contend that the CA erred in ruling that Pascual has the burden of proving that the dismissal of Aguilar was for a just cause; that the CA proceeded on the wrong premise that Aguilar was in fact dismissed from his employment; that petitioners' burden of proving the validity of Aguilar's dismissal comes only after the latter is able to prove that his alleged dismissal from employment was made through some overt or positive act on the part of petitioner Pascual indicating such dismissal; that Aguilar, in fact, refused to work and abandoned his job.

The Court is not persuaded.

It is a basic principle that in illegal dismissal cases, the burden of proof rests upon the employer to show that the dismissal of the employee is for a just cause and failure to do so would necessarily mean that the dismissal is not justified.16 In addition, in claims of abandonment by an employee, the settled rule is that the employer bears the burden of showing a deliberate and unjustified refusal by the employee to resume his employment

without any intention of returning.17 Moreover, in evaluating a charge of abandonment, the jurisprudential rule is that abandonment is a matter of intention that cannot be lightly presumed from equivocal acts.18 To constitute abandonment, two elements must concur: (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intent, manifested through overt acts, to sever the employer-employee relationship.19

In the present case, petitioner Pascual consistently denies that Aguilar was terminated from his employment and that, instead, he abandoned his work and never returned after his request for salary increase was rejected. However, denial, in this case, does not suffice; it should be coupled with evidence to support it.20 In the instant case, the Court finds no error in the ruling of the CA that petitioners failed to adduce evidence to prove abandonment and rebut Aguilar's claim of dismissal.

Contrary to petitioners' asseveration that Aguilar is guilty of abandoning his job, the Court finds no error in the finding of the Labor Arbiter, as affirmed by the CA, that there was no clear intention on Aguilar’s part to sever the employer-employee relationship. Considering that "intention" is a mental state, petitioners must show that respondent Aguilar’s overt acts point unerringly to his intent not to work anymore. In this regard, petitioners failed.

In fact, Aguilar’s filing of a complaint for illegal dismissal the day following his termination, as well as his subsequent prayer for reinstatement in his Position Paper,21 are indications which strongly speak against the petitioners' charge of abandonment. An employee who loses no time in protesting his layoff cannot by any reasoning be said to have abandoned his work for it is illogical for an employee to abandon his employment and, thereafter, file a complaint for illegal dismissal and pray for reinstatement.22

In a long line of cases, this Court has held that abandonment is negated where the immediate filing of a complaint for illegal dismissal was coupled with a prayer for reinstatement and that the filing of the complaint for illegal dismissal is proof enough of the desire to return to work.23 The prayer for reinstatement, as in this case, speaks against any intent to sever the employer-employee relationship.24

In addition, the Court takes note of the fact established by respondents that Aguilar has been in-charge of the air-conditioning system of Major Cinema since 1983, or a total of more than 11 years. No evidence was shown that he had any record of infraction of company rules. Hence, the Court finds it difficult to accept petitioner Pascual’s allegation that Aguilar simply walked away with the intent to abandon his job when his request for increase of wage was not granted. The Court agrees with the Labor Arbiter that abandonment after Aguilar’s long years of service and the consequent surrender of benefits earned from years of hard work are highly unlikely.

Furthermore, the Court agrees with respondents when they argued in their petition filed with the CA that if an employee's aim is to secure the benefits due him from his employer, abandonment would surely be an illogical and impractical recourse,

especially for simple laborers such as respondent Aguilar. Considering the difficult times in which our country is in it is illogical and even suicidal for an employee like Aguilar to abandon his work, knowing fully well of the widespread unemployment and underemployment problems as well as the difficulty of looking for a means of livelihood, simply because his employer rejected his demand for salary increase. Under the given facts, no basis in reason exists for the petitioners' theory that Aguilar abandoned his job.

With respect to the second issue, petitioners argue that attorney's fees are due only in cases where the plaintiff or complainant is compelled to litigate and that there must be a finding to this effect. Petitioners also assert that the totality of evidence does not support the claims of herein respondents that they were compelled to litigate.

The Court does not agree.

It is settled that in actions for recovery of wages or when the employee is illegally dismissed in bad faith or where an employee was forced to litigate and incur expenses to protect his rights and interests by reason of the unjustified acts of his employer, he is entitled to an award of attorney's fees.25 This award is justifiable under Article 111 of the Labor Code,26 Section 8, Rule VIII, Book III of its Implementing Rules;27 and paragraph 7, Article 2208 of the Civil Code.28

Moreover, in cases for recovery of wages, the award of attorney's fees is proper and there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages.29 There need only be a showing that the lawful wages were not paid accordingly.30

As to Peralta, it was established that she was denied her 13th month pay. Moreover, both the Labor Arbiter and the NLRC are in agreement that she was unceremoniously dismissed from her employment when her employer, Salazar, failed to serve her a written notice of her dismissal from employment at least 30 days prior to the supposed date of her termination. This is a clear evidence of bad faith on the part of Salazar. Hence, this circumstance, coupled with the denial of her benefits, prompted her to seek representation for the enforcement of her rights and the protection of her interests against the unjustified acts of her employer. Thus, the CA committed no grave abuse of discretion in sustaining the award of attorney's fees to Peralta.

With respect to Aguilar, it is clear that he was illegally terminated from his employment and that his wages and other benefits were withheld from him without any valid and legal basis. As a consequence, he is compelled to file an action for illegal dismissal and for the recovery of his lawful wages and other benefits and, in the process, incurred expenses. On these bases, the Court also finds that the CA did not commit grave abuse of discretion in upholding the grant of attorney's fees to Aguilar.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals, dated March 31, 2005, and its Resolution of October 25, 2005 in CA-G.R. SP No. 57483, are AFFIRMED.

SO ORDERED.





She was dismissed because she had to go leave of absence because her daughter undergo a Caesarian operation and no one would take care of her. She was advised not to work anymore because she was old but she insisted that she can still perform her work properly and don't want to stop work yet.

Republic of the Philippines SUPREME COURT

SECOND DIVISION

G.R. No. 150668 December 15, 2005

FORTUNY GARMENTS/JOHNNY CO., Petitioner, vs. ELENA J. CASTRO, Respondent.

D E C I S I O N

CALLEJO, SR., J.:

Assailed before the Court on petition for review on certiorari is the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 56153 granting the petition of Elena J. Castro and nullifying the rulings of the Labor Arbiter and the National Labor Relations Commission (NLRC).

Then 58-year old Elena J. Castro was employed as a sewer by the Fortuny Garments Corporation sometime in 1985. Petitioner Johnny Co was then its president. Elena was paid her salaries and other emoluments for the period up to December 21, 1996.2

On December 16, 1996, Elena’s daughter gave birth by caesarian operation. Since nobody would take care of her daughter, she then went on leave of absence.

When Elena reported to work on December 23, 1996, Elsa Co, co-manager of the company and wife of petitioner, told her that she had to stop working because "she was already old." Elena insisted that she could still work and perform her duties despite her age. She was told, this time, that she was already dismissed because of her failure to report for work for several days after her leave of absence. Nevertheless, Elena reported for work during the first week of January 1997, only to be informed again that she had already been dismissed.3

Elena forthwith filed a complaint against the corporation and Johnny Co, for illegal dismissal and payment of monetary benefits inclusive of unpaid overtime pay.

For his part, the petitioner averred that the complainant was not dismissed but that she resigned voluntarily, as evidenced by a cash voucher dated January 30, 1996.4

By way of reply, the complainant alleged that sometime in 1995, she and her co-workers were made to sign blank vouchers, allegedly as proof that their employer had paid their Social Security Service (SSS) premiums. She insisted that she could not have resigned on January 30, 1996 because she was still working for the corporation up to December 23, 1996 when she was illegally dismissed.5 She did not receive a centavo from the petitioner by way of separation pay, salary, allowance, bonus or overtime pay.

On December 21, 1998, the Labor Arbiter rendered judgment ordering the dismissal of the complaint, holding that Elena had voluntarily resigned.6 The Labor Arbiter reasoned out that:

… Moreover, complainant’s desire to resign was spurred by the giving birth of her child through caesarian operations, and obviously complainant cannot take care of her grandchild and attend to her job at the same time. In all probability, complainant gave priority to her family by opting to resign to give her time, love and care to her daughter and grandchild, but at the same time receiving separation benefits for the years she devoted to the company.

As regards complainant’s money claims, it is clear that she entered into a package deal with respondents. Basic [is] the fact that when one resigns, the worker forfeits whatever benefits she is entitled to on account of the past services she has rendered to the company, unless there is an agreement policy or practice in the company granting separation benefits to the resigning worker. In this regard, complainant failed to prove the existence of the same.

Upon the other hand, respondents presented a document whereby complainant admitted that "during her stay with Fortuny Garment Manufacturing Co., she was treated well and fairly; that she was given all her salaries, allowances, bonuses and overtime [pay] rendered from the time she started working up to the last day of her service. In addition, complainant acknowledge[d] receipt of the sum of P35,000.00. (Annex A, ibid).

In addition, as proof that complainant was paid her benefits like 13th month pay, and weekly salary, respondents attached samples of the payrolls (Annexes B, B-1 to B-23) to show compliance with the Labor Standard benefits.7

Elena appealed the decision to the NLRC, which rendered judgment on July 21, 1999 affirming the decision of the Labor Arbiter.8 This prompted Elena to file a petition for certiorari with the CA for the reversal of the decision. On June 28, 2001, the appellate court rendered judgment granting the petition and reversing the assailed decision. It held that the only documentary evidence presented to prove that the respondent had voluntarily resigned, in fact, belied the petitioner’s claim.9

The petitioner filed a motion for the reconsideration of the decision, alleging that it even issued a certification and filed the same with the SSS to the effect that the respondent was no longer connected with the company effective January 31, 1996.10 The appellate court denied the said motion.11

The petitioner thus filed the instant petition, alleging that

I

THE HONORABLE COURT A QUO COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT REVERSED THE NLRC AND THE LABOR ARBITER, THEREBY REPLACING THEIR FINDINGS OF FACTS WITH SPECULATIONS, SURMISES AND INFERENCES WHICH ARE MANIFESTLY MISTAKEN.

II

THE HONORABLE COURT A QUO COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED.

III

THE HONORABLE COURT A QUO COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN FINDING RESPONDENT TO BE ENTITLED TO HER MONEY CLAIMS, INCLUDING ATTORNEY’S FEES.12

The petition has no merit.

A perusal of the petition shows that the petitioner’s arguments are a mere reiteration of its arguments before the CA. The petitioner was burdened to prove its defense that the respondent had voluntarily resigned and was not dismissed from her employment, and relies principally on the cash voucher which the respondent purportedly signed, to wit:

R.C. No. ……. No. ______

Date ………… CASH VOUCHER

Place………… Date January 30, 1996

Paid to Elena Castro

Address _______________________________

P A R T I C U L A R S

I, Elena J. Castro voluntarily tendered my resignation as employee of Fortuny Garment Manufacturing. That during my stay with Fortuny Garment Mfg., I was treated well and fairly; that I was given all my salaries, allowances, bonuses and overtime rendered from the time I started working up to the last day of my service.

That thru the generosity of my said employer, I was given the amount of THIRTY-FIVE THOUSAND PESOS (P35,000.00) for consideration and separation fee (sic).

RECEIVED from FORTUNY GARMENT MFG. the amount of PESOS THIRTY-FIVE THOUSAND ONLY (P35,000.00) in full payment of amount described above.

By: _____SIGNED)____

Signature (Illegible) ELENA J. CASTRO13

Approved

Thus, it appears in the cash voucher that the respondent resigned on January 30, 1996 which was approved by the petitioner, and that she received separation pay of P35,000.00 on the same date. The petitioner maintains that the respondent ceased reporting for work after January 30, 1996.

Resignation is the voluntary act of an employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and has no other choice but to dissociate from employment. Resignation is a formal pronouncement or relinquishment of an office, and must be made with the intention of relinquishing the office accompanied by the act of relinquishment.14 A resignation must be unconditional and with the intent to operate as such.15

Moreover, the intention to relinquish an office must concur with the overt act of relinquishment. The act of the employee before and after the alleged resignation must be considered to determine whether in fact, he or she intended to relinquish such employment. If the employer introduces evidence purportedly executed by an employee as proof of voluntary resignation and the employee specifically denies the authenticity and due execution of said document, the employer is burdened to prove the due execution and genuineness of such document.16

In the present case, no less than the petitioner adduced documentary evidence consisting of payrolls showing that the respondent reported for work and received her salary/wages up to December 21, 1996, or shortly before she went on leave of absence after her daughter gave birth on December 23, 1996. Based on the petitioner’s documentary evidence itself, the respondent did not resign or receive P35,000.00 on January 30, 1996. The records show that the respondent was still an employee of the petitioner as late as December 21, 1996. It was only in January 1997 when the petitioner terminated the respondent’s employment and told her not to report for work

again. The only reason why the petitioner terminated the respondent’s employment was because she failed to report for work after her daughter gave birth.

That the petitioner signed the cash voucher is undisputed. However, the Court is inclined to believe the respondent’s claim that she was made to sign the cash voucher only to make it appear that the petitioner had paid its share in the SSS premiums of its employees.

Incredibly, despite the documentary evidence to the contrary, the Labor Arbiter and the NLRC declared that the respondent had voluntarily resigned.

The Court notes that the respondent filed her complaint against the petitioner in the NLRC shortly after she was told by Elsa Co to stop reporting for work. Indeed, voluntary resignation is difficult to reconcile with the filing of a complaint for illegal dismissal.17

The Court concurs with the following ruling of the CA:

First, the fact is clear that the alleged resignation letter written on a "Cash Voucher" does not contain any reason, explanation or motive why the petitioner wanted to sever her employment from private respondents, which ordinarily and normally appears in a voluntary letter of resignation. Rather the said resignation letter contains statements which would exculpate private respondents from its obligation under the labor laws. This observation strengthens petitioner’s assertions that she, together with other coemployees, was made to sign blank vouchers and the private respondents merely filled up the column "PARTICULARS" and made it appear that said petitioner voluntarily resigned and was paid all her benefits. (Rollo, p. 21). The Labor Arbiter speculated that petitioner’s resignation was spurred by the giving birth of petitioner’s daughter through caesarian operation (Rollo, p. 31) disregarding the blatant facts on record that the alleged resignation occurred on January 30, 1996 (Rollo, p. 50) whereas, complainant’s daughter gave birth on December 16, 1996 (Rollo, p. 29) or barely less than one year after the alleged resignation.

More important is the fact that while the alleged letter of resignation was executed on January 30, 1996 (Rollo, p. 50), still, herein petitioner continued to receive her salaries for the month of September, 1996 (Rollo, pp. 71, 72, 73, 74), for the month of November 1996 (Rollo, p. 63) and for the month of December, 1996 (Rollo, p. 60). Again, this inconsistency, supports petitioner’s claim that she was engaged to work at private respondents’ company until December 23, 1996 (Rollo, p. 35) and, on the other hand, it completely destroys private respondents’ allegation that herein petitioner voluntarily resigned from her employment.18

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioner.

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION

G.R. No. 178083

July 22, 2008

FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP), Petitioner, vs. PHILIPPINE AIRLINES, INC., PATRIA CHIONG and COURT OF APPEALS, Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review on certiorari assails the Decision1 of the Court of Appeals (CA) dated August 23, 2006 in CA-G.R. SP No. 87956 which affirmed the National Labor Relations Commission’s (NLRC) decision setting aside the Labor Arbiter’s findings of illegal retrenchment and ordering the reinstatement of the retrenched Philippine Airlines, Inc. (PAL) employee-members of petitioner Flight Attendants and Stewards Association of the Philippines (FASAP), with payment of backwages, moral and exemplary damages, and attorney’s fees. Also assailed is the May 29, 2007 Resolution2 denying the motion for reconsideration.

Petitioner FASAP is the duly certified collective bargaining representative of PAL flight attendants and stewards, or collectively known as PAL cabin crew personnel. Respondent PAL is a domestic corporation organized and existing under the laws of the Republic of the Philippines, operating as a common carrier transporting passengers and cargo through aircraft.

On June 15, 1998, PAL retrenched 5,000 of its employees, including more than 1,400 of its cabin crew personnel, to take effect on July 15, 1998. PAL adopted the retrenchment scheme allegedly to cut costs and mitigate huge financial losses as a result of a downturn in the airline industry brought about by the Asian financial crisis. During said period, PAL claims to have incurred P90 billion in liabilities, while its assets stood at P85 billion.3

In implementing the retrenchment scheme, PAL adopted its so-called "Plan 14" whereby PAL’s fleet of aircraft would be reduced from 54 to 14, thus requiring the services of only 654 cabin crew personnel.4 PAL admits that the retrenchment is wholly premised upon

such reduction in fleet,5 and to "the strike staged by PAL pilots since this action also translated into a reduction of flights."6 PAL claims that the scheme resulted in "savings x x x amounting to approximately P24 million per month – savings that would greatly alleviate PAL’s financial crisis."7

Prior to the full implementation of the assailed retrenchment program, FASAP and PAL conducted a series of consultations and meetings and explored all possibilities of cushioning the impact of the impending reduction in cabin crew personnel. However, the parties failed to agree on how the scheme would be implemented. Thus PAL unilaterally resolved to utilize the criteria set forth in Section 112 of the PAL-FASAP Collective Bargaining Agreement8 (CBA) in retrenching cabin crew personnel: that is, that retrenchment shall be based on the individual employee’s efficiency rating and seniority.

PAL determined the cabin crew personnel efficiency ratings through an evaluation of the individual cabin crew member’s overall performance for the year 1997 alone.9 Their respective performance during previous years, i.e., the whole duration of service with PAL of each cabin crew personnel, was not considered. The factors taken into account on whether the cabin crew member would be retrenched, demoted or retained were: 1) the existence of excess sick leaves; 2) the crew member’s being physically overweight; 3) seniority; and 4) previous suspensions or warnings imposed.10

While consultations between FASAP and PAL were ongoing, the latter began implementing its retrenchment program by initially terminating the services of 140 probationary cabin attendants only to rehire them in April 1998. Moreover, their employment was made permanent and regular.11

On July 15, 1998, however, PAL carried out the retrenchment of its more than 1,400 cabin crew personnel.

Meanwhile, in June 1998, PAL was placed under corporate rehabilitation and a rehabilitation plan was approved per Securities and Exchange Commission (SEC) Order dated June 23, 1998 in SEC Case No. 06-98-6004.12

On September 4, 1998, PAL, through its Chairman and Chief Executive Officer (CEO) Lucio Tan, made an offer to transfer shares of stock to its employees and three seats in its Board of Directors, on the condition that all the existing Collective Bargaining Agreements (CBAs) with its employees would be suspended for 10 years, but it was rejected by the employees. On September 17, 1998, PAL informed its employees that it was shutting down its operations effective September 23, 1998,13 despite the previous approval on June 23, 1998 of its rehabilitation plan.

On September 23, 1998, PAL ceased its operations and sent notices of termination to its employees. Two days later, PAL employees, through the Philippine Airlines Employees Association (PALEA) board, sought the intervention of then President Joseph E. Estrada. PALEA offered a 10-year moratorium on strikes and similar actions

and a waiver of some of the economic benefits in the existing CBA. Lucio Tan, however, rejected this counter-offer.14

On September 27, 1998, the PALEA board again wrote the President proposing the following terms and conditions, subject to ratification by the general membership:

1. Each PAL employee shall be granted 60,000 shares of stock with a par value of P5.00, from Mr. Lucio Tan’s shareholdings, with three (3) seats in the PAL Board and an additional seat from government shares as indicated by His Excellency;

2. Likewise, PALEA shall, as far as practicable, be granted adequate representation in committees or bodies which deal with matters affecting terms and conditions of employment;

3. To enhance and strengthen labor-management relations, the existing LaborManagement Coordinating Council shall be reorganized and revitalized, with adequate representation from both PAL management and PALEA;

4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the ratification by the general membership, (to) the suspension of the PAL-PALEA CBA for a period of ten (10) years, provided the following safeguards are in place:

a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the regular rank-and-file ground employees of the Company;

b. The ‘union shop/maintenance of membership’ provision under the PAL-PALEA CBA shall be respected.

c. No salary deduction, with full medical benefits.

5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement forged by and between PAL and PALEA, to those employees who may opt to retire or be separated from the company.

6. PALEA members who have been retrenched but have not received separation benefits shall be granted priority in the hiring/rehiring of employees.

7. In the absence of applicable Company rule or regulation, the provisions of the Labor Code shall apply.15

In a referendum conducted on October 2, 1998, PAL employees ratified the above proposal. On October 7, 1998, PAL resumed domestic operations and, soon after, international flights as well.16

Meanwhile, in November 1998, or five months after the June 15, 1998 mass dismissal of its cabin crew personnel, PAL began recalling to service those it had previously

retrenched. Thus, in November 199817 and up to March 1999,18 several of those retrenched were called back to service. To date, PAL claims to have recalled 820 of the retrenched cabin crew personnel.19 FASAP, however, claims that only 80 were recalled as of January 2001.20

In December 1998, PAL submitted a "stand-alone" rehabilitation plan to the SEC by which it undertook a recovery on its own while keeping its options open for the entry of a strategic partner in the future. Accordingly, it submitted an amended rehabilitation plan to the SEC with a proposed revised business and financial restructuring plan, which required the infusion of US$200 million in new equity into the airline.

On May 17, 1999, the SEC approved the proposed "Amended and Restated Rehabilitation Plan" of PAL and appointed a permanent rehabilitation receiver for the latter.21

On June 7, 1999, the SEC issued an Order confirming its approval of the "Amended and Restated Rehabilitation Plan" of PAL. In said order, the cash infusion of US$200 million made by Lucio Tan on June 4, 1999 was acknowledged.22

On October 4, 2007, PAL officially exited receivership; thus, our ruling in Philippine Air Lines v. Kurangking23 no longer applies.

On June 22, 1998, FASAP filed a Complaint24 against PAL and Patria T. Chiong25 (Chiong) for unfair labor practice, illegal retrenchment with claims for reinstatement and payment of salaries, allowances and backwages of affected FASAP members, actual, moral and exemplary damages with a prayer to enjoin the retrenchment program then being implemented. Instead of a position paper, respondents filed a Motion to Dismiss and/or Consolidation with NCMB Case No. NS 12-514-97 pending with the Office of the Secretary of the Department of Labor and Employment and/or Suspension and Referral of Claims to the interim rehabilitation proceedings (motion to dismiss).26

On July 6, 1998, FASAP filed its Comment to respondents’ motion to dismiss. On July 23, 1998, the Labor Arbiter issued an Order27 denying respondents’ motion to dismiss; granting a writ of preliminary injunction against PAL’s implementation of its retrenchment program with respect to FASAP members; setting aside the respective notices of retrenchment addressed to the cabin crew; directing respondents to restore the said retrenched cabin crew to their positions and PAL’s payroll until final determination of the case; and directing respondents to file their position paper.

Respondents appealed to the NLRC which reversed the decision of the Labor Arbiter. The NLRC directed the lifting of the writ of injunction and to vacate the directive setting aside the notices of retrenchment and reinstating the dismissed cabin crew to their respective positions and in the PAL payroll.28

FASAP filed its Position Paper29 on September 28, 1999. On November 8, 1999, respondents filed their Position Paper30 with counterclaims against FASAP, to which

FASAP filed its Reply.31 Thereafter, the parties were directed to file their respective Memoranda.32

Meanwhile, instead of being dismissed in accordance with the Kurangking case, the FASAP case (NLRC-NCR Case No. 06-05100-98) was consolidated with the following cases:

1. Ramon and Marian Joy Camahort v. PAL, et al. (NLRC-NCR Case No. 00-07-05854-98);

2. Erlinda Arevalo and Chonas Santos v. PAL, et al. (NLRC-NCR Case No. 00-07-09793-98); and

3. Victor Lanza v. PAL, et al. (NLRC-NCR Case No.00-04-04254-99).

On July 21, 2000, Labor Arbiter Jovencio Ll. Mayor rendered a Decision,33 the dispositive portion of which reads, as follows:

WHEREFORE, premises considered, this Office renders judgment declaring that Philippine Airlines, Inc., illegally retrenched One Thousand Four Hundred (1,400) cabin attendants including flight pursers for effecting the retrenchment program in a despotic and whimsical manner. Philippine Airlines, Inc. is likewise hereby ordered to:

1. Reinstate the cabin attendants retrenched and/or demoted to their previous positions;

2. Pay the concerned cabin attendants their full backwages from the time they were illegally dismissed/retrenched up to their actual reinstatements;

3. Pay moral and exemplary damages in the amount of Five Hundred Thousand Pesos (P500,000.00); and

4. Ten (10%) per cent of the total monetary award as and by way of attorney’s fees.

SO ORDERED.34

Respondents appealed to the NLRC. Meanwhile, FASAP moved for the implementation of the reinstatement aspect of the Labor Arbiter’s decision. Despite respondents’ opposition, the Labor Arbiter issued a writ of execution with respect to the reinstatement directive in his decision. Respondents moved to quash the writ, but the Labor Arbiter denied the same. Again, respondents took issue with the NLRC.

Meanwhile, on May 31, 2004, the NLRC issued its Decision35 in the appeal with respect to the Labor Arbiter’s July 21, 2000 decision. The dispositive portion thereof reads:

WHEREFORE, premises considered, the Decision dated July 21, 2000 is hereby SET ASIDE and a new one entered DISMISSING the consolidated cases for lack of merit.

With respect to complainant Ms. Begonia Blanco, her demotion is hereby declared illegal and respondent PAL is ordered to pay her salary differential covering the period from the time she was downgraded in July 1998 up to the time she resigned in October 1999.

Respondent PAL is likewise ordered to pay the separation benefits to those complainants who have not received their separation pay and to pay the balance to those who have received partial separation pay.

The Order of the Labor Arbiter dated April 6, 2000 is also SET ASIDE and the Writ of Execution dated November 13, 2000 is hereby quashed.

Annexes "A" and "B" are considered part of this Decision.

SO ORDERED.36

FASAP moved for reconsideration but it was denied; hence it filed an appeal to the Court of Appeals which was denied in the herein assailed Decision.

FASAP’s motion for reconsideration was likewise denied; hence, the instant petition raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY CONTRARY TO LAW AND/OR APPLICABLE JURISPRUDENCE WHEN IT DENIED FASAP’S PETITION FOR CERTIORARI UNDER RULE 65 AND EFFECTIVELY VALIDATED THE RETRENCHMENT EXERCISED BY RESPONDENT PAL WHICH WAS INITIALLY DECLARED AS ILLEGAL BY THE LABOR ARBITER A QUO SINCE:

FIRST, the record shows that PAL failed or neglected to adopt less drastic cost-cutting measures before resorting to retrenchment. No less than the Supreme Court held that resort to less drastic cost-cutting measures is an indispensable requirement for a valid retrenchment x x x.

SECOND, PAL arbitrarily and capriciously singled out the year 1997 as a reference in its alleged assessment of employee efficiency. With this, it totally disregarded the employee’s performance during the years prior to 1997. This resulted in the unreasonable and unfair retrenchment or demotion of several flight pursers and attendants who showed impeccable service records during the years prior to 1997.

THIRD, seniority was totally disregarded in the selection of employees to be retrenched, which is a clear and willful violation of the CBA.

FOURTH, PAL maliciously represented in the proceedings below that it could only operate on a fleet of fourteen (14) planes in order to justify the retrenchment scheme. Yet, the evidence on record revealed that PAL operated a fleet of twenty two (22) planes. In fact, after having illegally retrenched the unfortunate flight attendants and pursers, PAL rehired those who were capriciously dismissed and even hired from the outside just to fulfill their manning requirements.

FIFTH, PAL did not use any fair and reasonable criteria in effecting retrenchment. If there really was any, the same was applied arbitrarily, if not discriminatorily.

FINALLY, and perhaps the worst transgression of FASAP’s rights, PAL used retrenchment to veil its union-busting motives and struck at the heart of FASAP when it retrenched seven (7) of its twelve (12) officers and demoted three (3) others.37 (Emphasis supplied)

These issues boil down to the question of whether PAL’s retrenchment scheme was justified.

It is a settled rule that in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during trial. However, there are several exceptions to this rule38 such as when the factual findings of the Labor Arbiter differ from those of the NLRC, as in the instant case, which opens the door to a review by this Court.39

Under the Labor Code, retrenchment or reduction of employees is authorized as follows:

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.

The law recognizes the right of every business entity to reduce its work force if the same is made necessary by compelling economic factors which would endanger its existence or stability.40 Where appropriate and where conditions are in accord with law

and jurisprudence, the Court has authorized valid reductions in the work force to forestall business losses, the hemorrhaging of capital, or even to recognize an obvious reduction in the volume of business which has rendered certain employees redundant. 41

Nevertheless, while it is true that the exercise of this right is a prerogative of management, there must be faithful compliance with substantive and procedural requirements of the law and jurisprudence, for retrenchment strikes at the very heart of the worker’s employment, the lifeblood upon which he and his family owe their survival. Retrenchment is only a measure of last resort, when other less drastic means have been tried and found to be inadequate.42

The burden clearly falls upon the employer to prove economic or business losses with sufficient supporting evidence. Its failure to prove these reverses or losses necessarily means that the employee’s dismissal was not justified.43 Any claim of actual or potential business losses must satisfy certain established standards, all of which must concur, before any reduction of personnel becomes legal.44 These are:

(1) That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;

(2) That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment;

(3) That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least one-half (½) month pay for every year of service, whichever is higher;

(4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and,

(5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.45

In view of the facts and the issues raised, the resolution of the instant petition hinges on a determination of the existence of the first, fourth and the fifth elements set forth above, as well as compliance therewith by PAL, taking to mind that the burden of proof in retrenchment cases lies with the employer in showing valid cause for dismissal;46 that legitimate business reasons exist to justify retrenchment.47

FIRST ELEMENT: That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer.

The employer’s prerogative to layoff employees is subject to certain limitations. In Lopez Sugar Corporation v. Federation of Free Workers,48 we held that:

Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bona fide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs than labor costs. An employer who, for instance, lays off substantial numbers of workers while continuing to dispense fat executive bonuses and perquisites or so-called "golden parachutes," can scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of providing "full protection" to labor, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means - e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc. - have been tried and found wanting.

Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.

The law speaks of serious business losses or financial reverses. Sliding incomes or decreasing gross revenues are not necessarily losses, much less serious business losses within the meaning of the law. The fact that an employer may have sustained a net loss, such loss, per se, absent any other evidence on its impact on the business, nor on expected losses that would have been incurred had operations been continued, may not amount to serious business losses mentioned in the law. The employer must show that its losses increased through a period of time and that the condition of the company will not likely improve in the near future,49 or that it expected no abatement of its losses in the coming years.50 Put simply, not every loss incurred or expected to be incurred by a company will justify retrenchment.51

The employer must also exhaust all other means to avoid further losses without retrenching its employees.52 Retrenchment is a means of last resort; it is justified only

when all other less drastic means have been tried and found insufficient.53 Even assuming that the employer has actually incurred losses by reason of the Asian economic crisis, the retrenchment is not completely justified if there is no showing that the retrenchment was the last recourse resorted to.54 Where the only less drastic measure that the employer undertook was the rotation work scheme, or the three-daywork-per-employee-per-week schedule, and it did not endeavor at other measures, such as cost reduction, lesser investment on raw materials, adjustment of the work routine to avoid scheduled power failure, reduction of the bonuses and salaries of both management and rank-and-file, improvement of manufacturing efficiency, and trimming of marketing and advertising costs, the claim that retrenchment was done in good faith to avoid losses is belied.55

Alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees; scheming employers might be merely feigning business losses or reverses in order to ease out employees.56

In establishing a unilateral claim of actual or potential losses, financial statements audited by independent external auditors constitute the normal method of proof of profit and loss performance of a company.57 The condition of business losses justifying retrenchment is normally shown by audited financial documents like yearly balance sheets and profit and loss statements as well as annual income tax returns. Financial statements must be prepared and signed by independent auditors; otherwise, they may be assailed as self-serving.58 A Statement of Profit and Loss submitted to prove alleged losses, without the accompanying signature of a certified public accountant or audited by an independent auditor, is nothing but a self-serving document which ought to be treated as a mere scrap of paper devoid of any probative value.59

The audited financial statements should be presented before the Labor Arbiter who is in the position to evaluate evidence. They may not be submitted belatedly with the Court of Appeals, because the admission of evidence is outside the sphere of the appellate court’s certiorari jurisdiction. Neither can this Court admit in evidence audited financial statements, or make a ruling on the question of whether the employer incurred substantial losses justifying retrenchment on the basis thereof, as this Court is not a trier of facts.60 Even so, this Court may not be compelled to accept the contents of said documents blindly and without thinking.61

The requirement of evidentiary substantiation dictates that not even the affidavit of the Assistant to the General Manager is admissible to prove losses, as the same is selfserving.62 Thus, in Central Azucarera de la Carlota v. National Labor Relations Commission,63 the Court ruled that the mere citation by the employer of the economic setback suffered by the sugar industry as a whole cannot, in the absence of adequate, credible and persuasive evidence, justify its retrenchment program,64 thus:

A litany of woes, from a labor strike way back in 1982 to the various crises endured by the sugar industry, droughts, the 1983 assassination of former Senator Benigno Aquino, Jr., high crop loan interests, spiraling prices of fertilizers and spare parts, the depression of sugar prices in the world market, cutback in the U.S. sugar quota, abandonment of productive areas because of the insurgency problem and the absence of fair and consistent government policies may have contributed to the unprecedented decline in sugar production in the country, but there is no solid evidence that they translated into specific and substantial losses that would necessitate retrenchment. Just exactly what negative effects were borne by petitioner as a result, petitioner failed to underscore.65

In Anino v. National Labor Relations Commission,66 the Court also held that the employer’s claim – that retrenchment was undertaken as a measure of self-preservation to prevent losses brought about by the continuing decline of nickel prices and export volume in the mining industry, as well as its allegation that the reduction of excise taxes on mining from 5% to 1% on a graduated basis as provided under Republic Act No. 7729 was a clear recognition by the government of the industry’s worsening economic difficulties – was a bare claim in the absence of evidence of actual losses in its business operations.67

In the instant case, PAL failed to substantiate its claim of actual and imminent substantial losses which would justify the retrenchment of more than 1,400 of its cabin crew personnel. Although the Philippine economy was gravely affected by the Asian financial crisis, however, it cannot be assumed that it has likewise brought PAL to the brink of bankruptcy. Likewise, the fact that PAL underwent corporate rehabilitation does not automatically justify the retrenchment of its cabin crew personnel.

Records show that PAL was not even aware of its actual financial position when it implemented its retrenchment program. It initially decided to cut its fleet size to only 14 ("Plan 14") and based on said plan, it retrenched more than 1,400 of its cabin crew personnel. Later on, however, it abandoned its "Plan 14" and decided to retain 22 units of aircraft ("Plan 22"). Unfortunately, it has retrenched more than what was necessary. PAL admits that:

[U]pon reconsideration and with some optimistic prospects for operations, the Company (PAL) decided not to implement "Plan 14" and instead implemented "Plan 22," which would involve a fleet of 22 planes. Since "Plan 14" was abandoned, the Company deemed it appropriate to recall back into employment employees it had previously retrenched. Thus, some of the employees who were initially laid off were recalled back to duty, the basis of which was passing the 1997 efficiency rating to meet the Company’s operational requirements.68

PAL decided to adopt "Plan 14" on June 12, 1998. Three days after, or on June 15, 1998, it sent notices of retrenchment to its cabin crew personnel to take effect on July 15, 1998. However, after allegedly realizing that it was going to retain 22 of its aircraft instead of 14, and after more than 1,400 of its cabin crew have been fired – during the

period from November 30, 1998 to December 15, 1998, it suddenly recalled to duty 202 of the retrenched cabin crew personnel.69

This only proves that PAL was not aware of the true state of its finances at the time it implemented the assailed massive retrenchment scheme. It embarked on the mass dismissal without first undertaking a well-considered study on the proposed retrenchment scheme. This view is underscored by the fact that previously, PAL terminated the services of 140 probationary cabin attendants, but rehired them almost immediately and even converted their employment into permanent and regular, even as a massive retrenchment was already looming in the horizon.

To prove that PAL was financially distressed, it could have submitted its audited financial statements but it failed to present the same with the Labor Arbiter. Instead, it narrated a litany of woes without offering any evidence to show that they translated into specific and substantial losses that would necessitate retrenchment, thus:

1. It is a matter of public knowledge that PAL had been suffering severe financial losses that reached its most critical condition in 1998 when its liabilities amounted to about P90,642,933,919.00, while its assets amounted to only about P85,109,075,351.00. The precarious situation prompted PAL to adopt cost-cutting measures to prevent it from becoming totally bankrupt, including the reduction of its flight fleet from 56 to 14 aircrafts and the retrenchment of unneeded employees.

x x x x

26. To save its business, PAL had every right to undergo a retrenchment program immediately. PAL did not need, by law, to justify or explain to FASAP the reasons for the retrenchment before it could implement it. Proof of actual financial losses incurred by the company is not a condition sine qua non for retrenchment.70

This bare and unilateral claim does not suffice. The Labor Arbiter’s finding that PAL "amply satisfied the rules imposed by law and jurisprudence that sustain retrenchment," is without basis, absent the presentation of documentary evidence to that effect. In Saballa v. National Labor Relations Commission,71 we ruled that where the decision of the Labor Arbiter did not indicate the specific bases for such crucial finding that the employer was suffering business reverses, the same was arbitrary. We ratiocinated therein that since the employer insisted that its critical financial condition was the central and pivotal reason for its retrenchment, there was no reason why it should have neglected or refused to submit its audited financial statements.

PAL’s assertion – that its finances were gravely compromised as a result of the 1997 Asian financial crisis and the pilots’ strike – lacks basis due to the non-presentation of its audited financial statements to prove actual or imminent losses. Also, the fact that PAL was placed under receivership did not excuse it from submitting to the labor authorities copies of its audited financial statements to prove the urgency, necessity and extent, of its retrenchment program. PAL should have presented its audited financial statements

for the years immediately preceding and during which the retrenchment was carried out. Law and jurisprudence require that alleged losses or expected imminent losses must be proved by sufficient and convincing evidence.

Likewise, PAL has not shown to the Court’s satisfaction that the pilots’ strike had gravely affected its operations. It offered no proof to show the correlation between the pilots’ strike and its alleged financial difficulties. In Guerrero v. National Labor Relations Commission,72 the Court held that where the employer failed to prove its claim with competent evidence that the employees’ strike paralyzed its operations and resulted in the withdrawal of its clients’ orders, the retrenchment of its employees must be declared illegal.73

Moreover, as the Court ruled in the case of EMCO Plywood Corporation,74 it must be shown that the employer resorted to other means but these proved to be insufficient or inadequate, such as cost reduction, lesser investment on raw materials, adjustment of the work routine to avoid scheduled power failure, reduction of the bonuses and salaries of both management and rank-and-file, improvement of manufacturing efficiency, and trimming of marketing and advertising costs. In the instant case, there is no proof that PAL engaged in cost-cutting measures other than a mere reduction in its fleet of aircraft and the retrenchment of 5,000 of its personnel.

The only manifestation of PAL’s attempt at exhausting other possible measures besides retrenchment was when it conducted negotiations and consultations with FASAP which, however, ended nowhere. None of the plans and suggestions taken up during the meetings was implemented. On the other hand, PAL’s September 4, 1998 offer of shares of stock to its employees was adopted belatedly, or only after its more than 1,400 cabin crew personnel were retrenched. Besides, this offer can hardly be considered to be borne of good faith, considering that it was premised on the condition that, if accepted, all existing CBAs between PAL and its employees would have to be suspended for 10 years. When the offer was rejected by the employees, PAL ceased its operations on September 23, 1998. It only resumed business when the CBA suspension clause was ratified by the employees in a referendum subsequently conducted.75 Moreover, this stock distribution scheme does not do away with PAL’s expenditures or liabilities, since it has for its sole consideration the commitment to suspend CBAs with its employees for 10 years. It did not improve the financial standing of PAL, nor did it result in corporate savings, vis-à-vis the financial difficulties it was suffering at the time.

Also, the claim that PAL saved P24 million monthly due to the implementation of the retrenchment program does not prove anything; it has not been shown to what extent or degree such savings benefited PAL, vis-à-vis its total expenditures or its overall financial position. Likewise, its claim that its liabilities reached P90 billion, while its assets amounted to P85 billion only – or a debt to asset ratio of more than 1:1 – may not readily be believed, considering that it did not submit its audited financial statements. All these allegations are self-serving evidence.

Interestingly, PAL submitted its audited financial statements only when the case was the subject of certiorari proceedings in the Court of Appeals by attaching in its Comment76 a copy of its consolidated audited financial statements for the years 2002, 2003 and 2004.77 However, these are not the financial statements that would have shown PAL’s alleged precarious position at the time it implemented the massive retrenchment scheme in 1998. PAL should have submitted its financial statements for the years 1997 up to 1999; and not for the years 2002 up to 2004 because these financial statements cover a period markedly distant to the years in question, which make them irrelevant and unacceptable.

Neither could PAL claim to suffer from imminent or resultant losses had it not implemented the retrenchment scheme in 1998. It could not have proved that retrenchment was necessary to prevent further losses, because immediately thereafter – or in February 199978 – PAL was on the road to recovery; this is the airline’s bare admission in its Comment to the instant petition.79 During that period, it was recalling to duty cabin crew it had previously retrenched. In March 2000, PAL declared a net income of P44.2 million. In March 2001, it reported a profit of P419 million. In March 2003, it again registered a net income of P295 million.80 All these facts are anathema to a finding of financial difficulties.

Finally, what further belied PAL’s allegation that it was suffering from substantial actual and imminent losses was the fact that in December 1998, PAL submitted a "standalone" rehabilitation plan to the SEC, and on June 4, 1999, or less than a year after the retrenchment, the amount of US$200 million was invested directly into PAL by way of additional capital infusion for its operations.81 These facts betray PAL’s claim that it was in dire financial straits. By submitting a "stand-alone" rehabilitation plan, PAL acknowledged that it could undertake recovery on its own and that it possessed enough resources to weather the financial storm, if any.

Thus said, it was grave error for the Labor Arbiter, the NLRC and the Court of Appeals, to have simply assumed that PAL was in grievous financial state, without requiring the latter to substantiate such claim. It bears stressing that in retrenchment cases, the presentation of proof of financial difficulties through the required documents, preferably audited financial statements prepared by independent auditors, may not summarily be done away with.

That FASAP admitted and took for granted the existence of PAL’s financial woes cannot excuse the latter from proving to the Court’s satisfaction that indeed it was bleeding financially. It was the airline’s obligation to prove that it was in such financial distress; that it was necessary to implement an appropriate retrenchment scheme; that it had to undergo a retrenchment program in proportion to or commensurate with the extent of its financial distress; and that, it was carrying out the scheme in good faith and without undermining the security of tenure of its employees. The Court is mindful that the characterization of an employee’s services as no longer necessary or sustainable, and therefore, properly terminable, is an exercise of business judgment on the part of the employer, and that the wisdom or soundness of such characterization or decision is not

subject to discretionary review, provided of course that violation of law or arbitrary or malicious action is not shown.82

The foregoing principle holds true with respect to PAL’s claim in its Comment that the only issue is the manner by which its retrenchment scheme was carried out because the validity of the scheme has been settled in its favor.83 Respondents might have confused the right to retrench with its actual retrenchment program, treating them as one and the same. The first, no doubt, is a valid prerogative of management; it is a right that exists for all employers. As to the second, it is always subject to scrutiny in regard to faithful compliance with substantive and procedural requirements which the law and jurisprudence have laid down. The right of an employer to dismiss an employee differs from and should not be confused with the manner in which such right is exercised.84

FOURTH ELEMENT: That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure.

Concededly, retrenchment to prevent losses is an authorized cause for terminating employment and the decision whether to resort to such move or not is a management prerogative. However, the right of an employer to dismiss an employee differs from and should not be confused with the manner in which such right is exercised. It must not be oppressive and abusive since it affects one's person and property.85

In Indino v. National Labor Relations Commission,86 the Court held that it is almost an inflexible rule that employers who contemplate terminating the services of their workers cannot be so arbitrary and ruthless as to find flimsy excuses for their decisions. This must be so considering that the dismissal of an employee from work involves not only the loss of his position but more important, his means of livelihood. Applying this caveat, it is therefore incumbent for the employer, before putting into effect any retrenchment process on its work force, to show by convincing evidence that it was being wrecked by serious financial problems. Simply declaring its state of insolvency or its impending doom will not be sufficient. To do so would render the security of tenure of workers and employees illusory. Any employer desirous of ridding itself of its employees could then easily do so without need to adduce proof in support of its action. We can not countenance this. Security of tenure is a right guaranteed to employees and workers by the Constitution and should not be denied on the basis of mere speculation.

On the requirement that the prerogative to retrench must be exercised in good faith, we have ruled that the hiring of new employees and subsequent rehiring of "retrenched" employees constitute bad faith;87 that the failure of the employer to resort to other less drastic measures than retrenchment seriously belies its claim that retrenchment was done in good faith to avoid losses;88 and that the demonstrated arbitrariness in the selection of which of its employees to retrench is further proof of the illegality of the employer’s retrenchment program, not to mention its bad faith.89

When PAL implemented Plan 22, instead of Plan 14, which was what it had originally made known to its employees, it could not be said that it acted in a manner compatible with good faith. It offered no satisfactory explanation why it abandoned Plan 14; instead, it justified its actions of subsequently recalling to duty retrenched employees by making it appear that it was a show of good faith; that it was due to its good corporate nature that the decision to consider recalling employees was made. The truth, however, is that it was unfair for PAL to have made such a move; it was capricious and arbitrary, considering that several thousand employees who had long been working for PAL had lost their jobs, only to be recalled but assigned to lower positions (i.e., demoted), and, worse, some as new hires, without due regard for their long years of service with the airline.

The irregularity of PAL’s implementation of Plan 14 becomes more apparent when it rehired 140 probationary cabin attendants whose services it had previously terminated, and yet proceeded to terminate the services of its permanent cabin crew personnel.

In sum, we find that PAL had implemented its retrenchment program in an arbitrary manner and with evident bad faith, which prejudiced the tenurial rights of the cabin crew personnel.

Moreover, the management’s September 4, 1998 offer to transfer PAL shares of stock in the name of its employees in exchange for the latter’s commitment to suspend all existing CBAs for 10 years; the closure of its operations when the offer was rejected; and the resumption of its business after the employees relented; all indicate that PAL had not acted in earnest in regard to relations with its employees at the time.

FIFTH ELEMENT: That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.

In selecting employees to be dismissed, fair and reasonable criteria must be used, such as but not limited to: (a) less preferred status (e.g., temporary employee), (b) efficiency and (c) seniority.90

In Villena v. National Labor Relations Commission,91 the Court considered seniority an important aspect for the validity of a retrenchment program. In Philippine Tuberculosis Society, Inc. v. National Labor Union,92 the Court held that the implementation of a retrenchment scheme without taking seniority into account rendered the retrenchment invalid, even as against factors such as dependability, adaptability, trainability, job performance, discipline, and attitude towards work.

In the implementation of its retrenchment scheme, PAL evaluated the cabin crew personnel’s performance during the year preceding the retrenchment (1997), based on the following set of criteria or rating variables found in the Performance Evaluation Form of the cabin crew personnel’s Grooming and Appearance Handbook:

A. INFLIGHT PROFICIENCY EVALUATION – 30%

B. JOB PERFORMANCE – 35%

· Special Award – +5

· Commendations – +2

· Appreciation – +1

· Disciplinary Actions – Reminder (-3), Warning/Admonition & Reprimands (-5), Suspension (-20), Passenger Complaints (-30), Appearance (-10)

C. ATTENDANCE – 35%

· Perfect Attendance – +2

· Missed Assignment – -30

· Sick Leaves in excess of allotment and other leaves in excess of allotment – -20

· Tardiness – -10 93

The appellate court held that there was no need for PAL to consult with FASAP regarding standards or criteria that the airline would utilize in the implementation of the retrenchment program; and that the criteria actually used which was unilaterally formulated by PAL using its Performance Evaluation Form in its Grooming and Appearance Handbook was reasonable and fair. Indeed, PAL was not obligated to consult FASAP regarding the standards it would use in evaluating the performance of the each cabin crew. However, we do not agree with the findings of the appellate court that the criteria utilized by PAL in the actual retrenchment were reasonable and fair.

This Court has repeatedly enjoined employers to adopt and observe fair and reasonable standards to effect retrenchment. This is of paramount importance because an employer’s retrenchment program could be easily justified considering the subjective nature of this requirement. The adoption and implementation of unfair and unreasonable criteria could not easily be detected especially in the retrenchment of large numbers of employees, and in this aspect, abuse is a very distinct and real possibility. This is where labor tribunals should exercise more diligence; this aspect is where they should concentrate when placed in a position of having to judge an employer’s retrenchment program.

Indeed, the NLRC made a detailed listing of the retrenchment scheme based on the ICCD Masterank and Seniority 1997 Ratings. It found the following:

1. Number of employees retrenched due to inverse seniority rule and other reasons -454

2. Number of employees retrenched due to excess sick leaves -- 299

3. Number of employees who were retrenched due to excess sick leave and other reasons -- 61

4. Number of employees who were retrenched due to other reasons -- 107

5. Number of employees who were demoted -- 552

Total -- 1,473.94

Prominent from the above data is the retrenchment of cabin crew personnel due to "other reasons" which, however, are not specifically stated and shown to be for a valid cause. This is not allowed because it has no basis in fact and in law.

Moreover, in assessing the overall performance of each cabin crew personnel, PAL only considered the year 1997. This makes the evaluation of each cabin attendant’s efficiency rating capricious and prejudicial to PAL employees covered by it. By discarding the cabin crew personnel’s previous years of service and taking into consideration only one year’s worth of job performance for evaluation, PAL virtually did away with the concept of seniority, loyalty and past efficiency, and treated all cabin attendants as if they were on equal footing, with no one more senior than the other.

In sum, PAL’s retrenchment program is illegal because it was based on wrongful premise (Plan 14, which in reality turned out to be Plan 22, resulting in retrenchment of more cabin attendants than was necessary) and in a set of criteria or rating variables that is unfair and unreasonable when implemented. It failed to take into account each cabin attendant’s respective service record, thereby disregarding seniority and loyalty in the evaluation of overall employee performance.

Anent the claim of unfair labor practices committed against petitioner, we find the same to be without basis. Article 261 of the Labor Code provides that violations of a CBA, except those which are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as grievances under the parties’ CBA. Moreover, "gross violations of CBA" under the same Article referred to flagrant and/or malicious refusal to comply with the economic provisions of such agreement, which is not the issue in the instant case.1avvphi1

Also, we fail to see any specific instance of union busting, oppression or harassment and similar acts of FASAP’s officers. The fact that majority of FASAP’s officers were either retrenched or demoted does not prove restraint or coercion in their right to organize. Instead, we see a simple retrenchment scheme gone wrong for failure to

abide by the stringent rules prescribed by law, and a failure to discharge the employer’s burden of proof in such cases.

Quitclaims executed as a result of PAL’s illegal retrenchment program are likewise annulled and set aside because they were not voluntarily entered into by the retrenched employees; their consent was obtained by fraud or mistake, as volition was clouded by a retrenchment program that was, at its inception, made without basis. The law looks with disfavor upon quitclaims and releases by employees pressured into signing by unscrupulous employers minded to evade legal responsibilities. As a rule, deeds of release or quitclaim cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel. The amounts already received by the retrenched employees as consideration for signing the quitclaims should, however, be deducted from their respective monetary awards.95

In Trendline Employees Association-Southern Philippines Federation of Labor v. NLRC, 96 we held that where the employer led its employees to believe that the employer was suffering losses and as a result thereof accept retrenchment by executing quitclaims and waivers, there was evident bad faith on the part of the employer justifying the setting aside of the quitclaims and waivers executed.

As to PAL’s recall and rehire process (of retrenched cabin crew employees), the same is likewise defective. Considering the illegality of the retrenchment, it follows that the subsequent recall and rehire process is likewise invalid and without effect.

A corporate officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident malice and bad faith in terminating their employment.97 We do not see how respondent Patria Chiong may be held personally liable together with PAL, it appearing that she was merely acting in accordance with what her duties required under the circumstances. Being an Assistant Vice President for Cabin Services of PAL, she takes direct orders from superiors, or those who are charged with the formulation of the policies to be implemented.

With respect to moral damages, we have time and again held that as a general rule, a corporation cannot suffer nor be entitled to moral damages. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life – all of which cannot be suffered by an artificial, juridical person.98 The Labor Arbiter’s award of moral damages was therefore improper.

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which affirmed the Decision of the NLRC setting aside the Labor Arbiter’s findings of illegal retrenchment and its

Resolution of May 29, 2007 denying the motion for reconsideration, are REVERSED and SET ASIDE and a new one is rendered:

1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

2. ORDERING Philippine Air Lines, Inc. to reinstate the cabin crew personnel who were covered by the retrenchment and demotion scheme of June 15, 1998 made effective on July 15, 1998, without loss of seniority rights and other privileges, and to pay them full backwages, inclusive of allowances and other monetary benefits computed from the time of their separation up to the time of their actual reinstatement, provided that with respect to those who had received their respective separation pay, the amounts of payments shall be deducted from their backwages. Where reinstatement is no longer feasible because the positions previously held no longer exist, respondent Corporation shall pay backwages plus, in lieu of reinstatement, separation pay equal to one (1) month pay for every year of service;

3. ORDERING Philippine Airlines, Inc. to pay attorney’s fees equivalent to ten percent (10%) of the total monetary award.

Costs against respondent PAL.

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

G.R. No. 181503

September 18, 2009

Mere decrease in sales by more than 100milkin is not enough to have a valid dismissal thru retrenchment. If only mere loss would entitle the employers to retrench employees, it would. Be subject to abuse. The statement of profit and loss was not signed and signified by. CPA. nor was ere any independent public accountant who can attest the validity of the statement.

BIO QUEST MARKETING INC. and/or JOSE L. CO, Petitioner, vs. Before retrenchment could be done some other EDMUND REY, Respondent. measures has to be undertaken and it iPad to be

D E C I S I O N

CARPIO MORALES, J.:

proved.

Edmund Rey (respondent) was hired by petitioner Bio Quest Marketing, Inc. on December 1, 1997 as its Area Collector in Quezon, Batangas and all the provinces of the Bicol region. As Area Collector, he was tasked to collect payment for various

veterinary products sold to feedmill companies, piggery and poultry farms within his area of assignment.

Allegedly as part of its cost cutting measures brought about by a decline in its sales receipts and collections, petitioner furnished the Department of Labor and Employment (DOLE) a copy of the retrenchment notice on September 3, 2003.1 And by letter of August 30, 2003 which was received by respondent, petitioner terminated his services on September 29, 2003.2

Claiming that he was dismissed without a valid cause and the observance of due process, respondent filed a complaint for illegal dismissal against petitioner.

Petitioner averred, however, that it furnished complainant a retrenchment notice3 in compliance with Art. 283 of the Labor Code;4 and that it had the prerogative to retrench its employees including respondent to forestall business losses,5 to prove which claim of business losses it submitted a comparative report of its sales and collections for 2001-2003.6

By Decision of March 10, 2004,7 the Labor Arbiter found that respondent was illegally dismissed and accordingly disposed:

WHEREFORE, premises considered, judgment is hereby rendered, ordering the respondents Bio [Q]uest Marketing, Inc. and/or Jose L. Co to:

1) reinstate complainant Edmund Rey to his former position without loss of seniority rights; and

2) pay complainant the amount of ONE HUNDRED EIGHT THOUSAND & TWO HUNDRED SEVENTEEN PESOS & 20/100 (P108,217.20) representing his backwages, holiday pay, 13th month pay and attorney’s fees.

All other claims are DISMISSED for lack of merit.8 (Emphasis in the original)

Except with respect to the award of holiday pay which it deleted, the NLRC affirmed the Labor Arbiter’s ruling by Decision of November 23, 2005.9 However, on petitioner’s Motion for Reconsideration, the NLRC, by Decision of June 19, 2006,10 held that petitioner was able to prove that it undertook a valid retrenchment program, as imminent and not actual losses suffices to justify such, but that "while [herein petitioner] may have exercised its sound judgment in doing away with the services of [herein respondent], the latter should be entitled to some form of reward for all the dedication, hard work and loyalty he has exhibited during his years of service with [herein petitioner]." It thus VACATED its Decision of November 23, 2005 and disposed as follows:

WHEREFORE, the respondent’s Motion for Reconsideration is hereby, GRANTED. Accordingly, the decision sought to be reconsidered is hereby, VACATED and SET ASIDE. A new one is hereby entered ordering the respondent to pay the complainant

separation pay equivalent to one (1) month salary for every year of service.11 (Underscoring supplied)

Respondent thus elevated the case via Certiorari12 to the Court of Appeals which, by Decision of September 28, 2007,13 held that herein petitioner "failed to prove convincingly that [herein respondent] was validly terminated on account of retrenchment" and accordingly reversed and set aside the decision of the NLRC, disposing as follows:

WHEREFORE, the foregoing considered, the instant petition is GRANTED and the assailed Decision is REVERSED and SET ASIDE. Accordingly, private respondents are ordered to:

Reinstate petitioner to his former position without loss of seniority rights and if this is no longer possible, to pay him:

(a) separation pay, in addition to;

(b) backwages equivalent to one-half month pay for every year of service from the time he was illegally dismissed up to the finality of this decision;

(c) his 13th month pay in the amount of Twenty-eight Thousand Five Hundred Seven Pesos and 68/100 (P28,507.68), as computed by the Labor Arbiter.

Let this case be REMANDED to the Labor Arbiter for the computation of the amounts due petitioner.14 (Emphasis in the original)

Petitioner’s motion for reconsideration15 having been denied by the appellate court by Resolution of January 23, 2008,16 petitioner comes before this Court via petition for review on certiorari, advancing the following argument:

THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN REVERSING AND SETTING ASIDE THE NLRC DECISION BY DECLARING THAT PETITIONER FAILED TO PROVE IT WAS SUFFERING FROM SUBSTANTIAL, ACTUAL OR IMMINENT LOSSES.

The petition is bereft of merit.

Retrenchment to avoid or minimize business losses is a justified ground to dismiss employees under Article 283 of the Labor Code. The employer, however, bears the burden to prove such ground with clear and satisfactory evidence, failing which the dismissal on such ground is unjustified.17 In discharging its burden, the employer must satisfy certain established standards, all of which must concur,18 viz:

1. That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual

and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;

2. That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment;

3. That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least one half (1/2) month pay for every year of service, whichever is higher;

4. That the employer exercises its prerogative to retrench employees in goof faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and

5. That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.19

Petitioner contends that contrary to the findings of the Labor Arbiter and the appellate court, the comparative report of its sales and collections for years 2001, 2002 and 2003 sufficiently proves that it was "suffering or [was] about to suffer imminent losses due to the gap between sales and collection, and/or poor collection efforts, coupled with declining sales;"20 and that although the report showed an increase of sales from 2001 to 2002, there was a sharp decline thereof in 2003 by more than P38 Million while collections from 2002 to 2003 decreased by almost P100 Million.

While the above-said comparative report of sales and collections indicates that there was a decrease in the amount of sales and collections from 2002 to 2003, the same does not suffice to prove that petitioner was suffering or about to suffer losses within the contemplation of Article 283 of the Labor Code.

Clarion Printing House, Inc. v. NLRC21 teaches that sliding incomes or decreasing gross revenues alone do not necessarily indicate business losses within the meaning of Article 283, for, in the nature of things, the possibility of incurring losses is constantly present in business operations.

The decline in petitioner’s sales and collections from 2002 to 2003 cannot thus be considered as the loss referred to in Article 283 of the Labor Code, petitioner having failed to prove the stringent requirement that it was substantial, continuing and without any immediate prospect of abating.22

To consider every loss incurred or expected to be incurred by a company as a justification of retrenchment23 would be susceptible to abuse by scheming employers who might be merely feigning business losses or reverses in their business ventures to ease out employees.24

As for the Statement of Profit and Loss submitted by petitioner, the same does not bear the signature of a certified public accountant. Neither is there a showing that it was audited by an independent auditor, hence, it is a self-serving document which ought to be treated as a mere scrap of paper devoid of any probative value.251avvph!1

At all events, even if the comparative report were to be considered, the Court is not persuaded on the necessity of resorting to retrenchment to prevent or minimize actual or imminent business losses on the part of petitioner. For retrenchment should only be resorted to when other less drastic means have been tried and found to be inadequate. 26 So Polymart Paper Industries, Inc. v. NLRC27 instructs:

. . . [E]ven if business losses were indeed sufficiently proven, the employer must still prove that retrenchment was resorted to only after less drastic measures such as the reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiency, reduction of marketing and advertising costs, faster collection of customer accounts, reduction of raw materials investment and others, have been tried and found wanting. (Emphasis supplied)

In the case at bar, petitioner did not adduce evidence to prove that retrenchment was resorted to because other measures were undertaken to abate actual or future business losses but thus failed.

WHEREFORE, the Petition is DENIED and the challenged Decision and Resolution of the Court of Appeals are AFFIRMED.

Costs against petitioner.

SO ORDERED.



There is no need to notify the DOLE in case of temporary closure of business operations. It is a management prerogative which the court cannot panghilabot

Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION

G.R. No. 148340

But the formal closure of business due to causes that they have realized when they temporarily close business operations, during the period of suspension, then subsequent closure as an afterthought is valid and considered in good faith. They have notified the employees and sent a notice to DOLE that ey have ceased formally business operations

January 26, 2004

J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and JOSE F. MASCARINAS, Respondents.

D E C I S I O N

QUISUMBING, J.:

For review are the Decision1 dated February 27, 2001 of the Court of Appeals in CAG.R. SP No. 60337, and its Resolution2 dated May 28, 2001, denying the motion for reconsideration. The Court of Appeals dismissed the petition for certiorari filed by petitioners and affirmed the Resolution3 of the National Labor Relations Commission (NLRC), Third Division, which affirmed the Decision4 of Labor Arbiter Jose G. De Vera in NLRC-NCR Case No. 00-03-02279-98, which found petitioners liable for illegal dismissal and ordered petitioners to pay private respondent Jose Mascarinas separation pay, backwages, legal holiday pay, service incentive leave pay and 13th month pay in the aggregate sum of P85,871.00.

The facts, as culled from the records, are as follows:

Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship engaged in the business of selling second-hand heavy equipment. JAT is owned by its namesake, co-petitioner Jesusa Adlawan Torobu. Sometime in April 1997, JAT hired private respondent Jose F. Mascarinas as helper tasked to coordinate with the cleaning and delivery of the heavy equipment sold to customers. Initially, private respondent was hired as a probationary employee and was paid P165 per day that was increased to P180 in July 1997 and P185 in January 1998.

In October 1997, the sales of heavy equipment declined because of the Asian currency crisis. Consequently, JAT temporarily suspended its operations. It advised its employees, including private respondent, not to report for work starting on the first week of March 1998. JAT indefinitely closed shop effective May 1998.

A few days after, private respondent filed a case for illegal dismissal and underpayment of wages against petitioners before the NLRC.

In his Complaint, private respondent alleged that he started as helper mechanic of JAT on January 6, 1997 with an initial salary rate of P165.00 per day, which was increased to P180.00 per day after six (6) months in employment. He related that he was one of those retrenched from employment by JAT and was allegedly required to sign a piece of paper which he refused, causing his termination from employment.

On December 14, 1998, JAT filed an Establishment Termination Report with the Department of Labor and Employment (DOLE), notifying the latter of its decision to close its business operations due to business losses and financial reverses.

After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999, finding the dismissal of herein private respondent unjustified and ordering JAT to pay private respondent separation pay and backwages, among others. The decretal portion of the decision reads as follows:

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the respondents [herein petitioners] to pay complainant the aggregate sum of P85,871.00.

SO ORDERED.5

The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas’ dismissal was unjustified because of petitioners’ failure to serve upon the private respondent and the DOLE the required written notice of termination at least one month prior to the effectivity thereof and to submit proof showing that petitioners suffered a business slowdown in operations and sales effective January 1998; (2) private respondent may recover backwages from March 1, 1998 up to March 1, 1999 or P66,924.006 and separation pay, in lieu of reinstatement, at the rate of one (1) month pay for every year of service, or P10,296.00;7 (3) the payrolls submitted by JAT showed that effective May 1, 1997, private respondent’s wages did not conform to the prevailing minimum wage, hence, private respondent is entitled to salary differentials from May 1, 1997 to January 6, 1998, in the amount of P1,066.00;8 (4) that private respondent be awarded legal holiday pay in the amount of P1,850.00,9 service incentive leave pay in the amount of P925.0010 and 13th month pay for 1997 in the amount of P4,810.00.11

On appeal, the NLRC affirmed the decision of the labor arbiter.12 The NLRC found that the financial statements submitted on appeal were questionable, unreliable and inconsistent with petitioners’ allegations in the pleadings, particularly as to the date of the alleged closure of operation; hence, they cannot be used to support private respondent’s dismissal. The NLRC also affirmed the monetary awards because petitioners failed to prove the payment of benefits claimed by private respondent.

Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court of Appeals, which the latter dismissed. The decretal portion of the decision reads as follows:

WHEREFORE, foregoing premises considered, the instant petition, having no merit in fact and in law, is hereby DENIED DUE COURSE, and ordered DISMISSED, and the assailed decision of the National Labor Relations Commission AFFIRMED, with costs to petitioners.

SO ORDERED.13

The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal dismissal of the private respondent. The appellate court held that the petitioners failed to prove by clear and convincing evidence their compliance with the requirements for valid retrenchment. It cited the findings of the NLRC on the belated submission of the financial statements during appeal that could not be given sufficient weight, and that the petitioners’ late submission of notice of closure is indicative of their bad faith.

Petitioners filed a Motion of Reconsideration, which was denied by the Court of Appeals.

Hence, the present petition alleging that the:

A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) IS NECESSARY IN CASE OF TEMPORARY SUSPENSION OF BUSINESS;

B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO BACKWAGES DESPITE THE FACT THAT PRIVATE RESPONDENT WAS NOT DISMISSED FROM SERVICE AT THE TIME THE COMPLAINT WAS FILED;

C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS THE BURDEN OF PROVING THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES;

D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT FAILED TO COMPLY WITH THE ONE-MONTH PERIOD, THE LOWER COURT (sic) ERRED IN AWARDING BACKWAGES AND/OR SEPARATION PAY TO PRIVATE RESPONDENT EVEN FOR PERIOD AFTER PETITIONERS FILED A NOTICE OF ACTUAL CLOSURE OF THE COMPANY BEFORE THE LABOR DEPARTMENT.14

The relevant issues for our resolution are: (a) whether or not private respondent was illegally dismissed from employment due to closure of petitioners’ business, and (b) whether or not private respondent is entitled to separation pay, backwages and other monetary awards.

On the first issue, the petitioners claim that the Court of Appeals erroneously concluded that they are liable for illegal dismissal because of non-compliance of the procedural and substantive requirements of terminating employment due to retrenchment and cessation of business. They argued that there was no closure but only suspension of operation in good faith in March 1998, when private respondent claimed to have been illegally dismissed, due to the decline in sales and heavy losses incurred in its business arising from the 1997 Asian financial crisis. Petitioners assert that under Article 286 of the Labor Code, a bona fide suspension of the operation of a business for a period not exceeding six (6) months shall not terminate employment and no notice to an employee is required. However, petitioners relate that JAT was compelled to permanently close its operation eight (8) months later or on November 1998, when the hope of recovery became nil but only after sending notices to all its workers and DOLE. Thus, petitioners argue that it cannot be held liable for illegal dismissal in March 1998 since there was no termination of employment during suspension of operations and a notice to employee is not required, unlike in the case of permanent closure of business operation.

We need not belabor the issue of notice requirement for a suspension of operation of business under Article 28615 of the Labor Code. This matter is not pertinent to, much less determinative of, the disposition of this case. Suffice it to state that there is no termination of employment during the period of suspension, thus the procedural

requirement for terminating an employee does not come into play yet. Rather, the issue demanding a sharpened focus here concerns the validity of dismissal resulting from the closure of JAT.

A brief discussion on the difference between retrenchment and closure of business as grounds for terminating an employee is necessary. While the Court of Appeals defined the issue to be the validity of dismissal due to alleged closure of business, it cited jurisprudence relating to retrenchment to support its resolution and conclusion. While the two are often used interchangeably and are interrelated, they are actually two separate and independent authorized causes for termination of employment. Termination of an employment may be predicated on one without need of resorting to the other.

Closure of business, on one hand, is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of establishment, usually due to financial losses. Closure of business as an authorized cause for termination of employment aims to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped. On the other hand, retrenchment is reduction of personnel usually due to poor financial returns so as to cut down on costs of operations in terms of salaries and wages to prevent bankruptcy of the company. It is sometimes also referred to as down-sizing. Retrenchment is an authorized cause for termination of employment which the law accords an employer who is not making good in its operations in order to cut back on expenses for salaries and wages by laying off some employees. The purpose of retrenchment is to save a financially ailing business establishment from eventually collapsing.16

In the present case, we find the issues and contentions more centered on closure of business operation rather than retrenchment. Closure or cessation of operation of the establishment is an authorized cause for terminating an employee under Article 283 of the Labor Code, to wit:

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 Department of Labor and Employment at least one (1) month before the intended date thereof. … 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 to 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.

However, the burden of proving that such closure is bona fide falls upon the employer. 17 In the present case, JAT justifies its closure of business due to heavy losses caused

by declining sales. It belatedly submitted its 1997 Income Statement18 and Comparative Statement of Income and Capital for 1997 and 199819 to the NLRC to prove that JAT suffered losses starting 1997. However, as noted earlier, these were not given much evidentiary weight by the NLRC as well as the Court of Appeals, to wit:

The financial statements submitted by the respondents on appeal are questionable for the following reasons: (1) the figures in Annexes "D-2" and "E" of the appeal memorandum (which both refer to 1997) do not tally; (2) they (the respondents) allegedly closed on March 1, 1998. Yet, their 1998 financial statement (Annex "E") indicates operations up to and ending December 31, 1998. In view of the foregoing, the above-mentioned financial statements do not justify the complainant’s dismissal. …20

The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent reason to set it aside. While business reverses or losses are recognized by law as an authorized cause for terminating employment, it is an essential requirement that alleged losses in business operations must be proven convincingly. Otherwise, said ground for termination would be susceptible to abuse by scheming employers, who might be merely feigning business losses or reverses in their business ventures in order to ease out employees.21 In this case, the financial statements were not only belatedly submitted but were also bereft of necessary details on the extent of the alleged losses incurred, if any. The income statements only indicated a decline in sales in 1998 as compared to 1997. These fell short of the stringent requirement of the law that the employer prove sufficiently and convincingly its allegation of substantial losses. While the comparative income statement shows a net loss of P207,091 in 1998, the income statement of 1997 still shows JAT posting a net income of P19,361. Both statements need interpretation as to their impact on the company’s termination of certain personnel as well as business closure.

Having concluded that private respondent was not validly dismissed resulting from closure of business operations due to substantial losses, we now proceed to determine whether or not private respondent was validly dismissed on the ground of closure or cessation of operations for reasons other than substantial business losses.

A careful examination of Article 283 of the Labor Code shows that closure or cessation of business operation as a valid and authorized ground of terminating employment is not limited to those resulting from business losses or reverses. Said provision in fact provides for the payment of separation pay to employees terminated because of closure of business not due to losses, thus implying that termination of employees other than closure of business due to losses may be valid.

Hence, in one case,22 we emphasized that:

…Art. 283 governs the grant of separation benefits "in case of closures or cessation of operation" of business establishments "NOT due to serious business losses or financial reverses x x x." Where, however, the closure was due to business losses–as in the instant case, in which the aggregate losses amounted to over P20 billion–the Labor

Code does not impose any obligation upon the employer to pay separation benefits, for obvious reasons. There is no need to belabor this point. Even the public respondents, in their Comment filed by the Solicitor General, impliedly concede this point.

In another case,23 we held more emphatically that:

In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business operations or undertaking even if he is not suffering from serious business losses or financial reverses, as long as he pays his employees their termination pay in the amount corresponding to their length of service. It would, indeed, be stretching the intent and spirit of the law if we were to unjustly interfere in management’s prerogative to close or cease its business operations just because said business operation or undertaking is not suffering from any loss.

In the present case, while petitioners did not sufficiently establish substantial losses to justify closure of the business, its income statement shows declining sales in 1998, prompting the petitioners to suspend its business operations sometime in March 1998, eventually leading to its permanent closure in December 1998. Apparently, the petitioners saw the declining sales figures and the unsustainable business environment with no hope of recovery during the period of suspension as indicative of bleak business prospects, justifying a permanent closure of operation to save its business from further collapse. On this score, we agree that undue interference with an employer’s judgment in the conduct of his business is uncalled for. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what is clearly a management prerogatives. As long as the company’s exercise of the same is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of employees under the law or a valid agreement such exercise will be upheld.24

In the event, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business operations, namely: (a) service of a written notice to the employees and to the DOLE at least one (1) month before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment to the employees of termination pay amounting to at least one-half (1/2) month pay for every year of service, or one (1) month pay, whichever is higher.25

The closure of business operation by petitioners, in our view, is not tainted with bad faith or other circumstance that arouses undue suspicion of malicious intent. The decision to permanently close business operations was arrived at after a suspension of operation for several months precipitated by a slowdown in sales without any prospects of improving. There were no indications that an impending strike or any labor-related union activities precipitated the sudden closure of business. Further, contrary to the findings of the Labor Arbiter, petitioners had notified private respondent26 and all other workers through written letters dated November 25, 1998 of its decision to permanently close its business and had submitted a termination report to the DOLE.27 Generally, review of labor cases elevated to this Court on a petition for review on certiorari is confined merely to questions of law. But in certain cases, we are constrained to analyze or weigh

the evidence again if the findings of fact of the labor tribunals and the appellate court are in conflict, or not supported by evidence on record or the judgment is based on a misapprehension of facts.28

In this case, we are persuaded that the closure of JAT’s business is not unjustified. 1âwphi1 Further we hold that private respondent was validly terminated, because the closure of business operations is justified.

Nevertheless in this case, we must stress that the closure of business operation is allowed under the Labor Code, provided separation pay be paid to the terminated employee. It is settled that in case of closure or cessation of operation of a business establishment not due to serious business losses or financial reverses, the employees are always given separation benefits.29 The amount of separation pay must be computed from the time private respondent commenced employment with petitioners until the time the latter ceased operations.301âwphi1

Considering that private respondent was not illegally dismissed, however, no backwages need to be awarded. Backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to illegal dismissal.31 It is well settled that backwages may be granted only when there is a finding of illegal dismissal.32

The other monetary awards to private respondent are undisputed by petitioners and unrefuted by any contrary evidence. These awards, namely legal holiday pay, service incentive leave pay and 13th month pay, should be maintained.

WHEREFORE, the petition is given due course. The assailed Resolutions of the Court of Appeals in CA-G.R. SP No. 60337 are AFFIRMED with the MODIFICATION that the award of P66,924.00 as backwages is deleted. The award of separation pay amounting to P10,296.00 and the other monetary awards, namely salary differentials in the amount of P1,066.00, legal holiday pay in the amount of P1,850.00, service incentive leave pay in the amount of P925.00 and 13th month pay in the amount of P4,910, or a total of P29,047.00 are maintained. No pronouncement as to costs.

SO ORDERED.





Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION



G.R. No. 107302 & 107306

June 10, 1997

INDUSTRIAL TIMBER CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (5th Division), ITC BUTUAN LOGS LABOR UNION-WATU, OSCAR MONTEROSO and DODONG MORDENO, respondents.

G.R Nos. 108559-60

June 10, 1997

INDUSTRIAL TIMBER CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (5th Division), ITC BUTUAN LOGS LABOR UNION-WATU, OSCAR MONTEROSO and DODONG MORDENO, respondents.



KAPUNAN, J.:

Industrial Timber Corporation (ITC) is a corporation registered under Philippine laws and is engaged in the business of manufacturing and processing veneer and plywood products. It used to operate a veneer processing plant known as the Butuan Logs Plant and a veneer and plywood processing plant known as the Stanply Plant. Both plants occupied a single compound with a common point for ingress and egress and were both leased from Industrial Plywood Group Corporation. Both plants had also two (2) distinct bargaining units represented by separate labor unions and had separate collective bargaining agreements with their respective principals. ITC Butuan Logs Workers Union-WATU (Union) represented the rank and file employees of the Butuan Logs Plant.

Sometime in 1989, ITC decided to permanently stop and close its veneer production at its Butuan Logs Plant "due to impending heavy financial losses resulting from high production costs, erratic supply of raw materials and depressed prices and market conditions for its wood products." Accordingly, on November 9, 1989, ITC served a written notice to all its employees in the said plant and to the Butuan District Office of the Department of Labor and Employment (DOLE) stating that effective December 10, 1989 or thirty (30) days thereafter, it would cease operations at said plant.

After receiving the notice, the employees therein, through their union representative, filed a formal objection to the intended shutdown. Consequently, conciliation proceedings were conducted at the DOLE District Office pursuant to the provisions of

the Collective Bargaining Agreement (CBA) on grievances. The parties, however, failed to settle their differences.

On November 25, 1989, ITC formally notified the Union in a letter addressed to Oscar Monteroso, Union president, of the availability for release of separation pay and other CBA benefits consisting of the monetary value of unused vacation and sick leave credits, house repair benefits and the mandatory 13th month pay. Only sixty-three (63) employees availed of the foregoing and subsequently received said separation pay and other CBA benefits.

On November 29, 1989, the Union filed a notice of strike with the National Conciliation and Mediation Board which conducted a conciliation meeting. Again, conciliation failed. On December 17, 1989, the Union conducted a strike vote. Sixty-two (62) of the one hundred seventy-three (173) members voted in favor of staging a strike.

As scheduled, plant operations ceased on December 10, 1989 and it has not resumed operations since then.

On January 14, 1990 or a few days thereafter, the Union staged a strike at the common gate of the closed Butuan Logs Plant and the Stanply Plant which, incidentally, has resumed operations after annual maintenance servicing.

When the futility of their protest action dawned on them, the members of the Union, sought judicial redress. On January 18, 1990, a complaint for illegal shutdown against ITC was filed by the Union in representation of its members with the Sub-Regional Arbitration Branch of the National Labor Relations Commission (NLRC) at Butuan City, Branch X, where said case was docketed as NLRC Case No. SRAB-10-01-00024-90. The Union sought its members' reinstatement and recovery of backwages. It, likewise, charged ITC with violation of Republic Act No. 6727 for non-payment of wage increases. The complaint was subsequently amended to include claims for payment of CBA benefits and recovery of damages and attorney's fees.

On February 6, 1990, ITC for its part filed a complaint for illegal strike with a prayer for an award of damages against the union and its officers, likewise with the Sub-Regional Arbitration Branch mentioned above. Said case was docketed as NLRC Case No. SRAB- 10-02-00067-90.

On March 29, 1990, the labor arbiter rendered a consolidated decision of the two (2) cases, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, judgment is hereby entered in NLRC Case No. SRAB-10-01-00024-90 (Illegal shutdown, etc.) dismissing the complaint for illegal shutdown and violation of R.A. 6727 but ordering respondent Industrial Timber Corporation and the Manager Tomas Tangsoc, Jr. to jointly and severally pay its employees who did not opt to receive separation benefits, separation pay consisting of

one-half (1/2) month salary for every year of service, a period of at least six (6) months being considered one year and all the CBA benefits namely:

1. monetary value of unused vacation and sick leave;

2. house repairs benefits and

3. 13th month pay

4. fiesta subsidy

All the rest of the claims in this case are dismissed for lack of merit.

In NLRC Case No. SRAB-10-02-00067-90, the strike staged by the Workers Alliance Trade Union (WATU), ITC Butuan Logs Labor Union is hereby and so declared illegal and the Union and its members are hereby ordered to desist from conducting any strike or picket in the premises of both Stanply and Butuan Logs Plants.

The rest of the claims in this case are dismissed for lack of merit.

SO ORDERED. 1

Obviously aggrieved by the ruling, the Union appealed the decision of the labor arbiter to the NLRC.

In a resolution dated August 30, 1991, the NLRC issued the assailed resolution, the decretal portion of which reads:

WHEREFORE, the decision appealed from is Reversed and Set Aside and a new one entered declaring respondent ITC Butuan Logs, Inc. guilty of illegal shutdown while the strike staged by complainant union (ITC Butuan Logs Workers Union-WATU) and members is hereby declared valid and lawful exercise of their right to peaceful assembly and petition for redress of grievances. Accordingly, respondent corporation (ITC Butuan Logs, Inc.) is hereby ordered, through its corporate officers, to pay complainant workers the following:

1. Backwages equivalent to six (6) months based on their last salary as adjusted by R.A. 6727 and under the CBA effective December 11, 1989 without qualification or deduction;.

2.

Salary differential of P1.50 each effective July 1, 1989 up to December 10, 1989;

3. Separation pay equivalent to one (1) month salary each in lieu of reinstatement for every year of service based on their adjusted salary as set forth above plus all CBA fringe benefits; and

4. Assessed to pay attorney's fees fixed at the rate of ten (10%) percent equivalent to the aggregate monetary award.

The rest of the claims are dismissed. With costs against respondent corporation.

SO ORDERED. 2

A motion for reconsideration of the said resolution was filed by ITC but the same was denied for lack of merit in a Resolution dated August 25, 1992 which dispositively reads as follows:

WHEREFORE, the motion for reconsideration of respondent corporation is Denied for lack of merit. The application of complainant union to pierce the veil of corporate fiction of both respondent ITC and Industrial Plywood Group Corporation is likewise Denied as well as the rest of the claims of the union for lack of basis. The Acting Fiscal Examiner of this Commission is directed to compute the monetary benefits in favor of the terminated workers who are members of complainant union and to submit his report for approval. This order is final and no further motion will be entertained, except with respect to the manner of execution of the judgment of the Commission.

SO ORDERED. 3

Hence, the instant petition for certiorari anchored on the following assignment of errors attributed to the NLRC, thus:

5.1. The NLRC relied on mere conjectures and speculations absolutely without support from the evidence on record in holding that the closure of petitioner's Butuan Logs Plant was illegal.

5.2. The NLRC grossly violated and disregarded the law and settled jurisprudence upholding the inherent right of the employer to manage his business in holding that the closure of the Butuan Logs Plant was illegal.

5.3. Assuming arguendo that the NLRC correctly found that the closure of the Butuan Logs Plant was illegal and that petitioner violated R.A. 6727, the NLRC seriously erred nonetheless in awarding money claims to all complainants in general despite unrebutted evidence on record establishing that 179 out of 189 complainants have voluntarily entered into an amicable settlement with petitioner and accordingly withdrew from the case.

5.4. In refusing to declare the strike illegal, the NLRC ignored the fact that, as incontrovertibly established by the evidence on record, the Union did not comply with the legal requirements for a valid strike and the strikers, in concert with one another, committed illegal acts during the strike in furtherance of the objectives of the strike.

5.5. The NLRC erroneously applied Section 8, Chapter I of the Implementing Rules of R.A 6727 in finding that petitioner is liable to pay the P1.50 difference between the wage increase granted in the CBA and the wage increase legislated under R.A. 6727. 4

In fine, this Court is presented with the following issues for consideration and resolution, to wit: (a) whether or not petitioner ITC is guilty of illegal shutdown of its Butuan Logs Plant; (b) whether or not respondent Union and its members are guilty of staging an illegal strike; and (c) whether or not money claims should be awarded to the Union members.

Petitioner corporation asseverates that the closure of the Butuan Logs Plant was purely based on sound management decision arrived at after thorough and considerable assessment and evaluation of the company's impending economic predicament. The closure was the only remaining remedy available to the petitioner in order to prevent imminent heavy losses on account of high production costs, erratic supply of raw materials, depressed prices and poor market conditions for its wood products. To justify and substantiate its threatening economic difficulty, petitioner submitted a certification executed by an independent certified public accountant showing in detail the heavy losses petitioner would have to suffer should it continue operating its business, thus:

TO WHOM IT MAY CONCERN:

This is to certify that the manufacturing cost incurred by INDUSTRIAL TIMBER CORPORATION in producing plywood can be broken down as follows:

PER PANEL 5.00 MM

Logs used P 43.45 Glue cost 24.92 Log preparation 1.52 Peeling 4.58 Drying 2.83 Dry veneer preparation 9.68 Gluing & pressing 1.83 Sizing/Finishing 2.14 Crating 1.30 Electrical power/allocation 4.98 Steam power/allocation 4.18 Shipping 6.54 —— Total variable cost P107.95 Programmed 0.79 Committed 2.33 —— Total period cost 3.12

Administrative expenses 11.75 Other expenses (income) 0.00 11.75 —— ——

TOTAL MANUFACTURING COST ————

P 122.82

The current selling price of 5.00 mm is P110.00 per panel. The difference between the manufacturing cost and selling price (P12.82), at 8,000 panels per day production, or a net lost of P102,560.00 per day.

Based on the above premises and considering the fact of stoppage of operation from time to time due to low supply of Raw Materials (Logs) the Corporation will have to sustain additional expenses without any production. Hence continuance of operation will mean more losses to the Corporation. Thus closure of one plant is a wise move to save the Corporation.

(Sgd.)

VIRGINIA P. CANLAS PTR No. 1123448 January 30, 1990 Mandaluyong, M.M. 5

In addition, petitioner contends that the Butuan Logs Plant was merely a veneering plant which produced veneer, an essential component of plywood manufactured by the Stanply Plant which, incidentally, has also the capacity and capability to produce veneer.

Respondent Union, on the other hand, claims that the closure of the plant was just a smoke screen to mask the true intention of the petitioner which was to bust the Union. It alleges that petitioner's pretended avowals of economic distress were negated by the latter's good and robust economic status at the time of the closure though it submitted no evidence to prove its allegation. Concomitantly, respondent Union avers that the certification executed by an independent public accountant showing the company's impending financial debacle did not constitute as substantial proof sufficient to discharge it of the burden of proving its plight as required by law. On its part, respondent Union neither rebutted the contents of the certification nor presented any evidence to the contrary.

The petition is impressed with merit.

At the outset, we reiterate the rule that in certiorari proceedings under Rule 65, this Court does not assess and weigh the sufficiency of evidence upon which the labor arbiter and public respondent NLRC based their resolutions. Our query is limited to the determination of whether or not public respondent acted without or in excess of its

jurisdiction or with grave abuse of discretion in rendering the assailed resolutions. 6 However, where the findings of the NLRC contradict those of the labor arbiter, this Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings, 7 as in the case at bar.

Article 283 of the New Labor Code provides thusly:

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 as one (1) whole year.

The foregoing article clearly provides inter alia that the employer may terminate the employment of his employees to prevent losses. Closure or cessation of operations for economic reasons is, therefore, recognized as a valid exercise of management prerogative. The determination to cease operations is a prerogative of management which the State does not usually interfere with, as no business or undertaking must be required to continue operating at a loss simply because it has to maintain its workers in employment. Such an act would be tantamount to a taking of property without due process of law. 8

However, the burden of proving that such closure is bona fide falls upon the employer. In this case, petitioner corporation presented the analysis of an independent certified public accountant, 9 showing in detail the imminent losses it would suffer should it continue its operations. It is understandable that no audited financial statements or other similar documents were presented as the company is claiming impending future losses, not past or actual ones. Moreover, the fact that petitioner company has ceased operations and has not resumed to do so only reinforces its claim to a valid closure, not to mention the other established fact that its Stanply Plant has also the capacity and capability to produce veneer, the product it solely manufactured in its now closed plant.

At any rate, we held in a recent case that an employer may close or cease his business operations even if he were not suffering from business losses or financial reverses, thus:

In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business operations or undertaking even if he is not suffering from serious business losses or financial reverses, as long as he pays his employees their termination pay in the amount corresponding to their length of service. It would, indeed, be stretching the intent and spirit of the law if we were to unjustly interfere in management's prerogative to close or cease its business operations just because said business operation or undertaking is not suffering from any loss. This Court, in the case of Maya Farms Employees Organization, et al. v. NLRC, et al. held that:

The rule is well-settled that labor law discourage interference with an employer's judgment in the conduct of his business. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. As long as the company's exercise of the same is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of employees under the laws or valid agreements, such exercise will be upheld.

In Dangan v. NLRC, this Court had occasion to reiterate management's prerogative to close or abolish a department or section of the employer's establishment for economic reasons. We reasoned out that since the greater right to close the entire establishment and cease operations due to adverse economic conditions is granted an employer, the closure of a part thereof to minimize expenses and reduce capitalization should similarly be recognized.

Likewise, this Court held in the case of Special Events & Central Shipping Office Workers Union v. San Miguel Corp., that the determination of the usefulness of a section, being a company prerogative, the closure may not be questioned, specially in this case where it is impelled by economic reasons due to the continuous losses sustained in its operation, coupled with the lack of demand for the services of such section. 10

The foregoing notwithstanding, petitioner corporation complied with the requirements mandated by law to effectuate valid termination of employment on account of closure. Under the law, for an employer to validly terminate the service of his employees under the aforesaid ground, he has to comply with two (2) requirements, namely: (a) serving a written notice on the workers and the DOLE at least one (1) month before the effective date of the closure and (b) payment of separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher, with a fraction of at least six (6) months to be considered one (1) whole year.

The records bear out that petitioner had sufficiently complied with the aforecited requirements. It informed its employees and the DOLE District Office at Butuan of the termination of service of the employees effective December 10, 1989 in a Letter dated November 9, 1989. The employees were, likewise, informed of the availability for release of the funds for their separation pay and other CBA benefits. Unfortunately, only 63 employees availed of the benefits. The rest chose to file the instant action.

Anent the issue of whether or not the strike staged within the premises of the petitioner on January 14, 1990 was legal or not, we adopt the findings and conclusions made by the labor arbiter, substantiated as they are by the evidence on record, thus:

At first impression, this forum is readily tempted to opine that the issues of illegal strike has become moot and academic. The records reveal that it has become undisputed that the Union staged a strike only on January 15, 1990 and for a few days thereafter, as of now, the Union has disbanded and appearances would indicate that whatever concerted action it took has passed into the diplomatic and legal province, such that it is precisely why this Branch is now called upon to compulsorily adjudicate on the issues.

The company in trying to obtain a judicial declaration that the strike conducted by the Union on January 15, 1990 and for a few days thereafter was illegal relies on two grounds namely:

1. That the Union failed to garner the majority vote requirements to sustain a valid strike vote. At the time the notice of strike was filed, the rank and file employees at Butuan Logs plant numbered 176. This notwithstanding only 62 of the said employees voted on December 27, 1989, a number less than the majority required by law.

2. That the Union by the use of intimidation, force of numbers, harassment had successfully prevented the company's supervisory and administrative personnel from reporting to work at its Stanply Plant Operation. Which had resulted in the temporary stoppage of work at said plant. That the Union had in fact barricaded the common gate of Stanply and Butuan Logs plants. To substantiate this allegations, the company submitted in evidence as annexes "6", "7", "8", "9" and "10" of its position paper, the affidavits of Romeo Burdeous, and Hermilondo Paque, Stanply Plant Supervisors, Alejandra Perlita P. Yayon, Quality Control Supervisor and Engr. Jaime C. Gacula, Plant Engineer.

The company then states that it suffered losses amounting to 2 million pesos daily owing to the fact that its Stanply plant remained non-operational. These losses were incurred because the supervisory and administrative personnel could not enter the Stanply working premises thereby penalyzing the plant and in the process causing administrative expenses.

The company then asks for the following reliefs and remedies, to wit:

WHEREFORE, it is most respectfully prayed of this Honorable Labor Arbiter to issue an Order:

1.

Declaring the strike staged by all the herein respondents as ILLEGAL;

2. Condemning all of them to pay IN SOLIDUM damages in the amount of P2 Million daily covering the periods that the Stanply operation had been non-operational,

as well as the administrative expenses which petitioner is bound to pay to its workers at its Stanply operations who reported for work but did not actually work; and

3. Declaring to have lost the employment status of all the strikers with petitioners' Butuan Logs plant.

The Union, brushing aside the allegations of the company in its manifestations dated February 25, 1990 maintains that the strike vote constituted a majority of the union members. It alleges that at the time the strike vote was taken, the remaining work force numbered only 98 because the others had opted to receive separation benefits. That 98 should therefore be the basis for the determination of the majority and because 62 had voted "yes" the requirement of the law was therefore complied with.

The Union in assailing the allegations of the company of intimidation, harassment and the putting up of barricade to prevent egress and ingress in the stanply plant, likewise states that it did not really stage a strike in the legal meaning of the word. What is really conducted was only a peaceful exercise of the constitutional right of assembly and expression. To air their grievance and announce their tragic plight. That actually a strike was an exercise in futility because it could serve no purpose at all. The Butuan Logs plant had already stopped operations and therefore a strike which has for its purpose a temporary stoppage of work could not attain such as objective considering that the establishment struck against was already closed. In a Nutshell the Union says that whatever a strike could hope to accomplish was already preempted by the company.

The Union, however, is steadfast in maintaining that the "strike" was conducted in accordance with law and emphatically states that:

35. Let it be emphasized however that the concerted action staged by the Union on January 15, 1990 was all within the bounds of law, propriety, decency and public order as may be shown by the following:

a) "S";

b)

c)

d)

e)

Ingress and egress were observed and provided for as shown by Annexes "J" to The concerted action was peaceful and not marred by violence or intimidation; No injury to persons nor damage to property has been inflicted; No violation of personal and property rights was committed; No disturbance to public peace was made.

and to evidence such orderly, demonstration of public display of grievances presented as evidence, Annex "M", "N", "O", "P", "Q", "R" and "S" which are photographs depicting the untrammelled and unblocked working place of the company, particularly the gates thereof.



To summarize therefore, the Union contends that its concerted action which was not really a "strike" in the real and legal meaning of the word was nonetheless carried out with due observance of the law, both in the formalities and its actual conduct.

Under the circumstances, what then is this Branch to do? The Union says that it conducted a perfectly legal strike and in the same breath says that it did not. That what it did while being a concerted action was only a public display of grievances.

Be that as it may, this Branch finds and so holds that the strike was illegal. It cannot agree to the contention of the Union that the majority of its members voted "yes" to the strike. It must be borne in mind that there was 178 union members at the time the plant was still operating. The fact that more than 60 of them opted to receive separation benefits did not automatically sever their employee-employer relationship. While this is a legal nicety, it is undisputed that the Union itself recognize this legal propositions, as it in fact seeks the reinstatement of all its members. In other words, the Union contending that the shutdown was illegal and that its members were illegally dismissed cannot now say that the more than 60 members were legally dismissed. It cannot have its cake and eat it too. It cannot say that in the illegal shutdown case, its members were illegally dismissed but in the illegal strike case maintain that they were legally dismissed so as to cause the non-appreciation of their votes or non-voting. This intransigence and illogical culpability which is self-serving cannot be tolerated by this Branch. In fine, consistency must be upheld in all the legal ramifications of these cases and consequently, this Branch finds that no majority vote as demanded by the law was obtained. 178 members divided by 2 plus 1 equals 89 and this is the number which is the necessary majority to give legality to the strike. This Branch also take note of the fact that this inconsistent stand is also displayed by the Union in its notion of a "strike". After undergoing the rigorous formalities of a strike and defending its legality, it suddenly contradicts itself by saying it did not strike. This Branch cannot fathom nor countenance this legal "somersaults".

There is no need therefore to belabor the issue as to whether the strike was conducted in the manner delineated by law. The strike, whatever it was, was illegal from its inception and the events thereafter cannot cure it from its legal abnormality. 11

In view of the foregoing, we find that respondent NLRC gravely abused its discretion in issuing the challenged resolutions.

WHEREFORE, herein petitions are hereby GRANTED. The assailed resolutions of respondent National Labor Relations Commission dated August 30, 1991 and August 25, 1992 are hereby REVERSED and SET ASIDE and the decision of the labor arbiter dated March 29, 1990 is hereby REINSTATED.

The case is remanded to the NLRC to determine with reasonable dispatch whether or not 179 out of 189 of herein complainants have voluntarily executed quitclaims or waivers in favor of petitioner corporation and, corollarily, who among the remaining

employees are still entitled to separation pay and other benefits granted in the decision of the labor arbiter and, thereafter, make appropriate dispositions thereon.

SO ORDERED.





Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION

G.R. No. 122876

February 17, 2000

CHENIVER DECO PRINT TECHNICS CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CFWMAGKAKAISANG LAKAS NG MGA MANGGAGAWA SA CHENIVER DECO PRINT TECHNIC CORPORATION, EDGARDO VIGUESILLA, respondents.

QUISUMBING, J.:

This special civil action for certiorari seeks to annul the resolution of public respondent promulgated on May 31, 1995, in NLRC NCR CA 007946-94, and its resolution dated August 14, 1995, which denied petitioner's motion for reconsideration.

Petitioner is a duly organized corporation operating its printing business in Visita St., Barangay Sta. Cruz, Makati. Private respondent CFW-Magkakaisang Lakas ng mga Manggagawa sa Cheniver Deco Print Technic Corporation is a registered labor union affiliated with the Confederation of Free Workers (CFW). Private respondent Edgardo Viguesilla and twenty two (22) others are members of aforesaid union and former employees of petitioner.

The records disclose that on June 5, 1992, petitioner informed its workers about the transfer of the company from its site in Makati to Sto. Tomas, Batangas. Petitioner decided to relocate its business in view of the expiration of the lease contract on the premises it occupied in Makati and the refusal of the lessor to renew the same. Earlier, the local authorities also took action to force out petitioner from Makati because of the alleged hazards petitioner's plant posed to the residents nearby.1âwphi1.nêt

In view of the impending transfer, petitioner gave its employees up to the end of June 1992 to inform management of their willingness to go with petitioner, otherwise, it would hire replacements. On June 27, 1992, petitioner reminded its workers of the following schedule to be followed:

June 29, 1992 — last day of operation in Makati

July 1-31, 1992 — temporary shutdown to give way to transfer of operation

August 1, 1992 — start of operation at new site in Sto. Tomas, Batangas.

On August 4, 1992, petitioner wrote its employees to report to the new location within seven days, otherwise, they would be considered to have lost interest in their work and would be replaced. Five days later, the union advised petitioner that its members are not willing to go along with the transfer to the new site. Nonetheless, petitioner gave its workers additional time within which to report to the new work place. Later on, the labor federation informed petitioner that the employees decided to continue working for petitioner. However, not one reported for work at petitioner's new site. It appears that several employees namely, Edgar Paquit, Dexter Mitschek, Nicanor Quebec, Maricris Polvorosa, Vicente Solis, Eugene De la Cruz, Rodel Gomez, Marylin Macaraig, Diomedis Poblio, Albert Pimentel, Marieta Ramos, Gilbert Saquibal, Marlon Tafalla, Eduardo Jolbitado, Solitario Andres, Maria Cecilia Perez and Wilfredo Flores, decided not to work at the new site but just opted to be paid financial assistance offered by petitioner.

On the other hand, the remaining workers (private respondents herein) filed a complaint against petitioner for unfair labor practice, illegal dismissal, underpayment of wages, non-payment of legal holiday pay, 13th month pay, incentive leave pay and separation pay. On October 27, 1994, the labor arbiter rendered a decision declaring the transfer of petitioner's operation valid and absolving petitioner of the charges of unfair labor practice and illegal dismissal. However, the labor arbiter directed petitioner to pay private respondents their separation pay and other money claims as well as attorney's fees, decreeing as follows:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring respondent company not guilty of unfair labor practice. (ULP);

2. Declaring respondent company not guilty of illegal dismissal and illegal lay-off but directing it to pay the individual complaints their separation pay, to wit:

a) Adeser, Tarcisio b) Albino, Silveria c) Arizala, Imelda d) Canares, Danilo e) Carin, Elena

— — — — —

P20,280.00 36,816.00 18,408.00 36,816.00 12,272.00

f) Cabanatan, Lourdes — 9,204.00 g) Dizon, Juanito — 12,272.00 h) Domingo, Salome — 24,544.00 i) Esguerra, Bonifacio — 21,476.00 j) Familiaran, Benjamin — 27,612.00 k) Gabucan, Amelia — 15,340.00 l) Ibardolaza, Hadjie — 21,476.00 m) Jores, Nelita — 18,408.00 n) Largadas, Mario — 9,204.00 o) Mitschek, Dexter — 33,748.00 p) Paquit, Edgar — 15,340.00 q) Panotes, Roel — 12,272.00 r) Pedrigosa, Lerma — 18,408.00 s) Pedrigosa, Liza — 18,408.00 t) Ulzoron, Yolanda — 9,204.00 u) Viguesilla, Edgardo — 21,476.00 v) Viray, Ruel — 9,204.00 P422,188.00 3. Directing respondent company to pay complainants the sum of P280,010.00 as to their other money claims aforestated, distributed as follows:

a) Adeser, Tarcisio — P5,330.00 b) Albino, Silveria — 13,080.00 c) Arizala, Imelda — 13,080.00 d) Canares, Danilo — 13,080.00 e) Carin, Elena — 13,080.00 f) Cabanatan, Lourdes — 13,080.00 g) Dizon, Juanito — 13,080.00 h) Domingo, Salome — 13,080.00 i) Esguerra, Bonifacio — 13,080.00 j) Familiaran, Benjamin — 13,080.00 k) Gabucan, Amelia — 13,080.00 l) Ibardolaza, Hadjie — 13,080.00 m) Jores, Nelita — 13,080.00 n) Largadas, Mario — 13,080.00 o) Mitschek, Dexter — 13,080.00 p) Paquit, Edgar — 13,080.00 q) Panotes, Roel — 13,080.00 r) Pedrigosa, Lerma — 13,080.00 s) Pedrigosa, Liza — 13,080.00 t) Ulzoron, Yolanda — 13,080.00 u) Viguesilla, Edgardo — 13,080.00 v) Viray, Ruel — 13,080.00 P280,010.00 4. Directing respondent company to pay complainants attorney's fees of ten (10%) percent based on the totality of the monetary award.

Other claims are hereby dismissed for lack of factual and legal basis.

SO ORDERED.1

On appeal, respondent NLRC affirmed with modification the decision of the labor arbiter by deleting the award of attorney's fees, thus:

For all of the foregoing the decision appealed from is hereby AFFIRMED with modification that the award of attorney's fees be deleted for lack of legal and factual basis.

SO ORDERED.2

Its motion for reconsideration having been denied, petitioner filed the instant petition alleging that public respondent committed grave abuse of discretion in:

I

AFFIRMING THE LABOR ARBITER'S AWARD OF SEPARATION PAY TO PRIVATE RESPONDENTS;

II

AFFIRMING THE AWARD OF OTHER MONEY CLAIMS TO PRIVATE RESPONDENTS WITHOUT BASIS IN FACT AND [IN] LAW AS SHOWN BY LACK OF COMPUTATION OF THE SAME.3

Petitioner contends that the transfer of its business is neither a closure nor retrenchment, hence, separation pay should not be awarded to the private respondents. It also avers that private respondents were not terminated from the service but they resigned from their job because they find the new work site too far from their residences.

The foregoing contention lacks factual and legal basis, hence, bereft of merit.

Broadly speaking, there appears no complete dissolution of petitioner's business undertaking but the relocation of petitioner's plant to Batangas, in our view, amounts to cessation of petitioner's business operations in Makati. It must be stressed that the phrase "closure or cessation of operation of an establishment or undertaking not due to serious business losses or reverses" under Article 283 of the Labor Code includes both the complete cessation of all business operations and the cessation of only part of a company's business.4 In Philippine Tobacco Flue-Curing & Redrying Corp. vs. NLRC,5 a company transferred its tobacco processing plant in Balintawak, Quezon City to Candon, Ilocos Sur. The company therein did not actually close its entire business but merely relocated its tobacco processing and redrying operations to another place. Yet,

this Court considered the transfer as closure not due to serious business losses for which the workers are entitled to separation pay.

There is no doubt that petitioner has legitimate reason to relocate its plant because of the expiration of the lease contract on the premises it occupied. That is its prerogative. But even though the transfer was due to a reason beyond its control, petitioner has to accord its employees some relief in the form of severance pay. Thus, in E. Razon, Inc. vs. Secretary of Labor and Employment,6 petitioner therein provides arrastre services in all piers in South Harbor, Manila, under a management contract with the Philippine Ports Authority. Before the expiration of the term of the contract, the PPA cancelled the said contract resulting in the termination of employment of workers engaged by petitioner. Obviously, the cancellation was not sought, much less desired by petitioner. Nevertheless, this Court required petitioner therein to pay its workers separation pay in view of the cessation of its arrastre operations.

Now, let it be noted that the termination of employment by reason of closure or cessation of business is authorized under Article 283 of the Labor Code which provides:

Art. 283. Closure of establishment and reduction of personnel. — The employer may 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 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.

Consequently, petitioner herein must pay his employees their termination pay in the amount corresponding to their length of service. Since the closure of petitioner's business is not on account of serious business losses, petitioner shall give private respondents separation pay equivalent to at least one (1) month or one-half (1/2) month pay for every year of service, whichever is higher.

Petitioner's contention that private respondents resigned from their jobs, does not appear convincing. As public respondent observed, the subsequent transfer of petitioner to another place hardly accessible to its workers resulted in the latter's untimely separation from the service not to their own liking, hence, not construable as resignation.7 Resignation must be voluntary and made with the intention of relinquishing the office, accompanied with an act of relinquishment.8 Indeed, it would have been

illogical for private respondents herein to resign and then file a complaint for illegal dismissal. Resignation is inconsistent with the filing of the said complaint.9

As to petitioner's assertion that private respondents resorted to forum shopping, the same deserves scant consideration. As noted by the Solicitor General, private respondents' claims in this case are based on underpayment of wages, legal holiday pay, service incentive leave pay and 13th month pay. On the other hand, the other cases separately filed in different fora by Danilo Canares, Aurelia Gabucan, Dexter Mitschek and Ruel Viray involved different issues which are distinct and have no bearing on the case at bar.10 The case pursued by Canares is for diminution of salary on account of his demotion which was decided in his favor with finality by this Court;11 Gabucan's case involves reinstatement to her job; Mitschek's case pertains to diminution of his salary; and Viray's complaint was dismissed without prejudice for failure to prosecute. Thus, there is no basis for petitioner's forum shopping charge as the instant case and the others do not raise identical causes of action, subject matter and issues.12

Lastly, petitioner alleges that claims of other private respondents have already been paid upon the enforcement of the order dated February 26, 1992 in case number NRC-00-9112-CI-001. This is not correct. As correctly pointed out by the Solicitor General, the aforesaid order refers to the enforcement of Wage Order No. NCR-02 mandating P2.00 wage increase.13 Certainly, the wage differential received by private respondents by virtue of the mandated wage increase is different from the monetary benefits herein being claimed by private respondents. Hence, public respondent cannot be faulted for grave abuse of discretion on this score.

WHEREFORE, the instant petition is DENIED, and the assailed RESOLUTIONS of public respondent are AFFIRMED. Costs against petitioner.1âwphi1.nêt

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION

G.R. Nos. 100264-81

January 29, 1993

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs. THE NATIONAL LABOR RELATIONS COMMISSION, ONG PENG, ET. AL., respondents.

The Chief Legal Counsel for Development Bank of the Philippines.

Muñoz Law Office for private respondents.

GUTIERREZ, JR., J.:

In this petition for certiorari, petitioner Development Bank of the Philippines (DBP) asserts its preferential right as a foreclosing creditor over private respondents' claims for separation pay against Republic Hardwood, Inc. (RHI).

On November 14, 1986, the private respondents filed with the Provincial Extension Office of the Department of Labor and Employment (DOLE) in Daet, Camarines Norte seventeen individual complaints against RHI for unpaid wages and separation pay. These complaints were thereafter endorsed to the Regional Arbitration Branch (Branch V of Legaspi City) of the National Labor Relations Commission (NLRC) since the petitioners had already been terminated from employment.

In its position paper dated March 1987, RHI alleged that it had ceased to operate in 1983 due to the government ban against tree-cutting. It further alleged that in May 24, 1981, its sawmill was totally burned resulting in enormous losses and that due to its financial setbacks, RHI failed to pay its loan with the DBP. RHI contended that since DBP foreclosed its mortgaged assets on September 24, l985, then any adjudication of monetary claims in favor of its former employees must be satisfied against DBP.

On April 29, 1987, the private respondents filed a motion to implead DBP. On July 13, 1987, DBP filed its opposition to said motion.

On October 28, 1988, Executive Labor Arbiter Gelacio Rivera rendered a joint decision on the complaints, the relevant and dispositive portions of which read:

To say that workers of bankrupt or insolvent employers must first file an insolvency or bankruptcy proceeding against the latter before their unpaid workers may be satisfied will cause additional burden, unnecessary expenses, unwanted hardship which are conditions not so intended under the Social Justice policy of the State. . . . .

. . . To require petitioners to file insolvency proceedings against RHI and later file against DBP their claims is to prolong the agony of petitioners. To give a technical and legal meaning to the words of Art. 110 is to subvert the rights of the petitioners. We hold therefore that as against the contention of respondent DBP, Art. 4 of the Labor Code is the answer. The social justice clause of the Constitution is our guide.

xxx

xxx

xxx

WHEREFORE, premises considered, judgment is hereby rendered in favor of petitioners and adversely against respondent Republic Hardwood, Inc. and Development Bank of the Philippines, ordering the latter to jointly and severally pay petitioners the amount of P59,610.00 as separation pay within ten (10) days upon receipt of this Decision through this Regional Arbitration Branch. Further, respondents are ordered to pay the amount of P308.00 as deposit fee pursuant to PD 1177 under Budget Circular No. 304 and Secs. 4 and 8 of Batas Pambansa Blg. 230. (Rollo, pp. 38, 40-41)

DBP appealed to the NLRC which rendered a decision on April 15, 1991 affirming the labor arbiter's judgment. DBP filed a motion for reconsideration which was likewise dismissed by the NLRC on May 17, 1991.

Hence, this petition for certiorari.

The petitioner alleges that the NLRC committed grave abuse of discretion in issuing the assailed decision dated April 15, 1991 and its resolution of May 17, 1991 and raises the following issues:

1. Whether or not the Joint Decision of Executive Labor Arbiter Gelacio L. Rivera is violative of procedural due process on the part of DBP;

2. Whether or not the complainant-private respondents are entitled to separation pay;

3. Whether or not there was retroactive application of Executive Order No. 81 in this case;

4. Whether or not Executive Labor Arbiter Gelacio L. Rivera and the NLRC correctly applied Article 110 of the Labor Code in this case; and

5. Whether or not there is a basis for the NLRC (Labor Arbiter Rivera) to order the payment of deposit fee. (Rollo, pp. 17-18)

DBP asserts that it was deprived of due process since there was no formal order impleading it in the complaints against RHI. Moreover, DBP points out, the cases were never set for hearing thus depriving it of the opportunity to peruse the documentary evidence of the complainants and to confront the complainants' witnesses. Additionally, DBP was not given an opportunity to present its own evidence.

There is no merit to this contention of DBP. Denial of due process means the total lack of opportunity to be heard. There is no denial of due process where a party is given an opportunity to be heard and to present his case. The petitioner in this case filed an

opposition to the motion to implead it as a party defendant. It likewise filed a motion for reconsideration of the labor arbiter's decision. Thereafter, DBP filed an appeal with the NLRC and, later on, a motion for reconsideration of the NLRC decision. The petitioner, thus, was given ample opportunity to present its case. It was not denied due process.

There is no merit to DBP's contention that the workers are not entitled to separation pay. Despite the enormous losses incurred by RHI due to the fire that gutted the sawmill in 1981 and despite the logging ban in 1983, the uncontroverted claims for separation pay show that most of the private respondents still worked up to the end of 1985 (See Rollo, p. 39). RHI would still have continued its business had not the petitioner foreclosed all of its assets and properties on September 24, 1985. Thus, the closure of RHI's business was not primarily brought about by serious business losses. Such closure was a consequence of DBP's foreclosure of RHI's assets. We therefore apply Article 283 which provides:

. . . 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. . . .

However, because of the petitioner's assertion that the labor arbiter and respondent NLRC incorrectly applied the provisions of Article 110 of the Labor Code, we are constrained to grant the petition for certiorari.

Article 110, prior to its amendment by Republic Act No. 6715, reads:

Art. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to a share in the assets of the employer.

Section 10, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code states:

Sec. 10. Payment of wages in case of bankruptcy. — Unpaid wages earned by the employees before the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first preference and shall be paid in full before other creditors may establish any claim to a share in the assets of the employer.

In Republic v. Peralta, 150 SCRA 37 (1987), the Court held that the term "wages" includes separation pay. But the Court declared:

Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather, Article 110 must be read in relation to the provisions of the Civil Code

concerning the classification, concurrence and preference of credits, which provisions find particular application in insolvency proceedings where the claims of all creditors, preferred or non-preferred, may be adjudicated in a binding manner.

We have repeatedly stressed that before the workers' preference provided by Article 110 may be invoked, there must first be a declaration of bankruptcy or a judicial liquidation of the employer's business. (See DBP v. Minister of Labor, 195 SCRA 463 [1991]; DBP v. NLRC, 186 SCRA 841 [1990]; DBP v. NLRC, 183 SCRA 328 [1990]; DBP v. Secretary of Labor, 179 SCRA 630 [1989]; DBP v. Santos, 171 SCRA 138 [1989]; Republic v. Peralta, supra).

In DBP v. Santos, supra, the Court discussed the import of Article 110 and Section 10 of Rule VIII, Book III and stated:

It is quite clear from the provisions that a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the respondents in this case absent a formal declaration of bankruptcy or a liquidation order.

xxx

xxx

xxx

Moreover, the reason behind the necessity for a judicial proceeding or a proceeding in rem before the concurrence and preference of credits may be applied was explained by this Court in the case of Philippines Savings Bank v. Lantin (124 SCRA 476 [1983]). We said:

The proceedings in the court below do not partake of the nature of the insolvency proceedings or settlement of a decedent's estate. The action filed by Ramos was only to collect the unpaid cost of the construction of the duplex apartment. It is far from being a general liquidation of the estate of the Tabligan spouses.

Insolvency proceedings and settlement of a decedent's estate are both proceedings in rem which are binding against the whole world. All persons having interest in the subject matter involved, whether they were notified or not, are equally bound. Consequently, a liquidation of similar import or other equivalent general liquidation must also necessarily be a proceeding in rem so that all interested persons whether known to the parties or not may be bound by such proceeding.

In the case at bar, although the lower court found that "there were no known creditors other than the plaintiff and the defendant herein", this can not be conclusive. It will not bar other creditors in the event they show up and present their claims against the petitioner bank, claiming that they also have preferred liens against the property involved. Consequently, Transfer Certificate of Title No. 101864 issued in favor of the bank which is supposed to be indefeasible would remain constantly unstable and questionable. Such could not have been the intention of Article 2243 of the Civil Code

although it considers claims and credits under Article 2242 as statutory liens. Neither does the De Barreto case . . . .

The claims of all creditors whether preferred or non-preferred, the identification of the preferred ones and the totality of the employer's asset should be brought into the picture. There can then be an authoritative, fair, and binding adjudication instead of the piece meal settlement which would result from the questioned decision in this case. (At pp. 144-145).

The NLRC, therefore, committed grave abuse of discretion when it affirmed the labor arbiter's ruling that the workers' preference espoused in Article 110 may be applied even in the absence of a declaration of bankruptcy or a liquidation order.

We must also emphasize that DBP's lien on RHI's mortgaged assets, being a mortgage credit, is a special preferred credit under Article 2242 of the Civil Code while the workers' preference is an ordinary preferred credit under Article 2244.

Thus, in DBP v. NLRC, (supra) it was held:

4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the judgment debtor.

In the words of Republic v. Peralta, supra.

Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the extent that such claims for unpaid wages are already covered Article 2241, number 6: "claims for laborers" wages, on the goods manufactured or the work done; or by Article 2242, number 3: "claims of laborers and other workers engaged in the construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works. To the extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242, number 3, they would come within the ambit of the category of ordinary preferred credits under Article 2244.

5. The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor

may be, to the fulfillment of the obligation for whose security it was constituted (Article 2176, Civil Code). It creates a real right which is enforceable against the whole world. It is a lien on an identified immovable property, which a preference is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on classification of credits. The preference given by Article 110, when not falling within Article 2241 (6) and Article 2242 (3) of the Civil Code and not attached to any specific property, is an ordinary preferred credit although its impact is to move it from second priority to first priority in the order of preference established by Article 2244 of the Civil Code (Republic v. Peralta, supra).

Clearly, even if DBP and the private respondents assert their preferred credits in a judicial proceeding, the former's claim must first be satisfied.

Article 110 of the Labor Code has been amended by R.A. No. 6715 and now reads:

Art. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages, and monetary claims shall be paid in full before the claims of the Government and other creditors may be paid. (Emphasis ours.)

We ruled in DBP v. NLRC, supra, that the amendment "expands worker preference to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate." Hence, under the new law, even mortgage credits are subordinate to workers' claims.

In this connection, respondent NLRC ruled:

Lastly, while we are cognizant of the pronouncement of the Supreme Court with respect to Art. 110 and while we hold in respect said pronouncements, we are of the earnest view that considering that Art. 110 has been amended by RA 6715, complainants' preference over government claims and other creditors be adhered to. (Rollo, p. 65)

R.A. No. 6715, however, took effect only on March 21, 1989. The amendment cannot therefore be retroactively applied to, nor can it affect, the mortgage credit which was secured by the petitioner several years prior to its effectivity.

This was our pronouncement in DBP v. NLRC, supra:

6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean "absolute preference," the same should be given only prospective effect in line with the cardinal rule that laws shall have no retroactive effect, unless the contrary is provided (Article 4, Civil Code). Thereby, any infringement on the constitutional guarantee on non-impairment of the obligation of contracts (Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by several years the

amendatory law, RA No. 6715. To give Article 110 retroactive effect would be to wipe out the mortgage in DBP's favor and expose it to a risk which it sought to protect itself against by requiring a collateral in the form of real property.

The public respondent, therefore, committed grave abuse of discretion when it retroactively applied the amendment introduced by R.A. No. 6715 to the case at bar.

With the foregoing discussion, we no longer find it necessary to discuss the two other issues raised by the petitioner.

WHEREFORE, the petition is hereby GRANTED. The assailed decision of public respondent National Labor Relations Commission dated April 15, 1991 and its resolution dated May 17, 1991 are SET ASIDE. The temporary restraining order issued by the Court on July 29, 1991 is made PERMANENT.







Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION

G.R. No. 117174

November 13, 1996

CAPITOL WIRELESS, INC., petitioner, vs. HONORABLE SECRETARY MA. NIEVES R. CONFESOR and KILUSANG MANGGAGAWA NG CAPWIRE KMC-NAFLU, respondents.



BELLOSILLO, J.:

Petitioner Capitol Wireless, Inc., and respondent Kilusang Manggagawa ng Capwire KMC-AFLU (Union) entered into a Collective Bargaining Agreement (CBA) on 15 November 1990 covering a period of five (5) years. Towards the end of the third year of their CBA the parties renegotiated the economic aspects of the agreement. On 18 July

1993 when the negotiations were on-going petitioner dismissed on the ground of redundancy eight (8) out of its eleven (11) couriers who were Union members.

As a consequence, respondent Union filed a notice of strike with National Concillation and Mediation Board (NCMB) on the ground of bargaining deadlock and unfair labor practice, specifically, for illegal dismissal and violations of the CBA. Conciliation proceedings were conducted by the NCMB but the same yielded negative results. On 20 August 1993 respondent Union went on strike. On the same day, respondent Secretary assumed jurisdiction over the controversy.

In the coference held on 14 September 1993 the parties agreed to confine the scope of the dispute to the following issues: (a) unfair labor practice, consisting of CBA violations and acts inimical to the worker's right to self-organization; (b) redundancy, affecting the dismissed employes; and (c) CBA deadlock, which includes all items covered by respondent Union's proposals.

On 2 May 1994 respondent Secretary of Labor resolved the controversy in this manner: (1) the parties were ordered to modify the fourth and fifth years ofthe CBA in accordance with the dispositions she found just and equitable 1 the same to be retroactive to 1 July 1993 and effective until 30 June 1995 or until superseded by a new agreement; (2) all other provisions of the existing CBA were deemed retained but all new demands of respondent Union that were not passed upon by her were deemed denied; (3) the dismissal of the eight (8) employees on teh ground of redundancy was uphled, but due to defective implementation by petitioner the leatter was ordered to pay each of the former an indemnity equivalent to two (2) month's salary based on their adjusted rate for the fourth year in addition to the separation benefits due to them under the law and the CBA, and if still unpaid, petitioner to pay the same immediately; and, (4) the charge of unfair labor practice was dismissed for lack of merit. 2

On 28 July 1994 the motion for reconsideration of petitioner was denied. 3

Petitioner imputes grave abuse of discretion on respondent Secretary of Labor for holding that it failed to accord due process to the dismissed employees; in not applying to the letter the ruling in Wenphil Corp. v. NLRC; 4 and, in awarding retirement benefits beyond those granted by R.A. 7641. 5

Petitioner argues that what it implemented was not retrenchment but redundancy program, as such, respondent Secretary of Labor should not have relied upon Asiaworld Publishing House Inc. v. Ople 6 in holding that the dismissed employees were not accorded procedural due process. The additional requirements enumerated in Asiaworld are inapplicable to the present case because that case involved retrenchment, and petitioner's basis in deciding those to be covered by the redundancy program was the area serviced by the couriers. All areas outside the vicinity of its bead office, which were the areas of delivery of the dismissed employees, were declared redundant.



Petitioner misses the point. Its violation of due process consists in its failure, as found by respondent Secretary of Labor, to apprise respondent Union of any fair and reasonable criteria for implementation of its redundancy program. In Asiaworld we laid down the principle that in selecting the employees to be dismissed a fair and reasonable criteria must be used, such as but not limited to: (a) less preferred status (e.g., temporary employee), (b) efficiency and (c) seniority. Although the case of Asiaworld dealt with retrenchment, still the principle is applicable to the present case because in effecting the dismissals petitioner had to select from among its employees.

We agree with respondent Secretary of Labor in her observation and conclusion that the implementation by petitioner of its redundancy program was inconsistent with established principles of procedural due process. She elaborated on this point in her resolution of the motion for reconsideration. Thus —

Whether it is redundancy or retrenchment, no employee may be dismissed without observance of the rudiments of good faith. This is the point of our assailed order. If the Company (were) really convinced of the reasons for dismissal, the least it could have done to the employees affected was to observe fair play and transparency in implementing the decision to dismiss. To stress, the redundancy was implemented without the Company so much apprising the Union of any fair and reasonable criteria for implementation.

As a matter of fact, this Office called the parties to a conference on 14 March 1994, at which the Company was given an opportunity to clarify the criteria it used in effecting redundancy. Represented by Ms. Ma. Lourdes Mendoza of Mercado and Associates, its counsel of record, the Company submitted quitclaims which do not contain any amounts purportedly executed by five of the eight dismissed employees. More importantly, the minutes of the conference show that within two days thereafter, the Company committed to submit a pleading to explain the criteria it used in effecting the redundancy; where no such submission is made by 17 March 1994, the case shall be deemed submitted for resolution. The Company never complied within this commitment.

As has been made clear, even this Office recognized that an authorized cause for dismissal did exist; what it could not countenance is the means employed by the Company in making the cause effective. But no matter what kind of justification the Company presents now, this has become moot, academic and irrelevant. The same should have been communicated to the affected employees prior to or simultaneously with the implementation of the redundancy, or at the very least, before the assailed order was rendered.

In any event, the explanation being advanced by the Company now purportedly based on areas of assignment — loses significance from the more compelling viewpoint of efficiency and seniority. For instance, during the period covered by the Company's own time and motion analysis, Rogelio Varona delivered 96 messages but was dismissed;

Resurrecion Bordeos delivered only an average of 75 but was retained. In terms of seniority, the Company itself states the "Ms. Bordeos holds the same position/area as Rogelio Varona, however, she was retained because she is more senior than the latter." The Company should look at its own evidence again. Bordeos had only 16 years of service. Varona had 19, Nieves 18, and Valle, Basig and Santos 17, yet all five were dismissed.

One should also consider that the redundancy was implemented at the height of bargaining negotiations. The bargaining process could have been the best opportunity for the Company to apprise the Union of the necessity for redundancy. For unknown reasons, the Company did not take advantage of it. Intended or not, the redundancy reinforced the conditions for a deadlock, giving the Union members the impression that it was being used by the Company to obtain a bargaining leverage. 7

Petitioner argues next that granting that procedural due process was not afforded the dismissed employees, still, the award of two (2) months salary for each of them is not in accord with existing jurisprudence. The Wenphil doctrine teaches, as in other cases, that where the dismissal of an employee is for a just cause but without due process, the employer must indemnify the dismissed employee.

Petitioner must have failed to read the full text of Wenphil or simply chose to ignore the sentence immediately succeeding the P1,000.00 indemnity enunciated therein. The case is explicit that the measure of the award depends on the facts of each case and the gravity of the omission committed by the employer. In fact, in the recent case of Reta v. NLRC, 8 the Court saw fit to impose P10,000.00 as penalty for the employer's failure to comply with the due process requirement. The ratiocination of respondent Secretary of Labor should have put petitioner's argument at rest —

. . . Wenphil, however, simply provides the authority to impose the indemnity; it is not meant to be definitive as to the amount of indemnity applicable in all cases, this being dependent on the particular circumstances of a case. Indeed, in the later case of Maritime Seahorse v. NLRC, G.R. No. 84712, 5 May 1989, the Supreme Court applied the Wenphil doctrine but awarded an indemnity of P5,000.00. Clearly, there is a recognition that the amount of indemnity to be awarded is subject to the discretion of the agency making the award, considering all attendant circumstances. 9

Lastly, petitioner argues that the retirement benefits granted by respondent Secretary of Labor are in excess of what is required of it under the law and what the Union demands. In particular, R.A. 7641 grants to the employee retirement pay equivalent to 21.82 days per year of service only but respondent Secretary of Labor granted the equivalent of 22.5 days. To this, six (6) more days were granted for compulsory retirement and three (3) days for optional retirement. The existing provisions of the CBA, the respective proposals of the parties, and the award of respondent Secretary of Labor are reproduced hereunder —

EXISTING PROVISIONS OF THE CBA

a.

Normal Retirement —

Compulsory upon reaching 60 years of age or after 35 years of continuous service, whichever comes first, provided that those who reach 55 or have 10 years of uninterrupted service may be retired at employee's or Company's option.

PETITIONER'S PROPOSAL

a. Normal Retirement —

60 years old — R.A. 7641

b. Optional Retirement —

55 years old or 10 years of continuous service 1/2 month's basic salary for every year of continuous service plus 1 day equivalent pay

UNION'S PROPOSAL

a. Normal Retirement —

150% of basic salary

b. Optional Retirement —

50% of basic salary commencing in the 5th year of service.

SECRETARY'S AWARD

a. Compulsory Retirement —

An employee shall be compulsorily retired upon reaching the age of sixty (60), or after thirty-five (35) years of continuous service, whichever comes first.

An employee shall be entitled to a retirement benefit of 1/2 month salary plus six (6) days multiplied by the number of years in service.

b.

Optional Retirement —

At his option, an employee may entire upon reaching the age of fifty-five (55) or more if he has served for at least five (5) years; provided, however, that any employee who is under fifty-five (55) years old may retire if he has rendered at least ten (10) years of continuous service.

Such an employee shall be entitled to a retirement benefit of 1/2 month salary plus three (3) days multiplied by the number of years in service.

For purposes of computing compulsory and optional retirement benefits and to align the current retirement plan with the minimum standards of Art. 287 of the Labor Code, as amended by R.A. 7641, and Sec. 5 (5.2) of its implementing rules, "1/2 month salary" means 22.5 days salary, exclusive of leave conversion benefits.

Article 287 of the Labor Code, as amended by R.A. 764l, provides —

Art. 287. Retirement. — Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: provided, however, That an employee's retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term "one-half (1/2) month salary" shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves . . . . (emphasis supplied).

The records fail to disclose that petitioner bothered to inform the Court how it arrived at 21.82 days as basis in the computation of the retirement pay. Anyway, it is clear in the law that the term "one-half (1/2) month salary" means 22.5 days: 15 days plus 2.5 days representing one-twelfth (1/12) of the 13th month pay plus 5 days of service incentive leave. In this regard, there is no reason for petitioner to complain that the retirement benefits granted by respondent Secretary of Labor exceeded the requirements of the law.

With respect to the additional six (6) days for compulsory retirement and three (3) days for optional retirement, these may appear in excess of the requirements of the law and the demand of respondent Union. Yet, it should be noted that the law merely establishes the minimum retirement benefits as it recognizes that an employee may receive more under existing laws and any CBA or other agreements. Besides, respondent Secretary

of Labor had to break the bargaining deadlock. After taking into account all the circumstances, public respondent found it expedient to strike a reasonable middle ground between the parties' respective positions. Unless there are cogent reasons, and we do not find any, this Court will not alter, modify or reverse the factual findings of the Secretary of Labor because, by reason of her official position, she is considered to have acquired expertise as her jurisdiction is confined to specific matters. 10

As we perceive it, by design or otherwise, petitioner's arguments only scratch the surface, so to speak. They do not extend beneath, as our studies of jurisprudence and the law disclose. Otherwise, the baselessness of the instant petition and the absence of any abuse of discretion, much less grave, would have earlier been exposed.

WHEREFORE, the petition is DISMISSED. The Order of 2 May 1994 of respondent Secretary of Labor and her Resolution of 28 July 1994 are AFFIRMED.

SO ORDERED.







Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION

G.R. No. 169780

February 16, 2009

ALFREDO A. MENDROS, JR., Petitioner, vs. MITSUBISHI MOTORS PHILS. CORPORATION (MMPC), Respondent.

D E C I S I O N

VELASCO, JR., J.:

This is an appeal, via a petition for review under Rule 45, from the Decision1 dated November 18, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 84790 which reversed and set aside the Resolutions dated September 23, 20022 and January 30, 2004 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No.

028205-01, and reinstated the February 27, 2001 Decision3 of the Labor Arbiter in NLRC Case No. RAB-IV-9-11454-99-R.

The Facts

From the petition and its annexes, the respondent’s comment thereto, and the parties’ respective memoranda, the Court gathers the following facts:

In April 1994, respondent Mitsubishi Motors Philippines Corporation (MMPC) hired petitioner Alfredo A. Mendros, Jr. as regular body prepman, later promoting him as assembler major in the company’s manufacturing division.

Due to the severe drastic slump of its vehicle sales brought about by the financial crisis that hit the country and other Asian economies in 1997, MMPC, per its audited financial statements, sustained a financial loss of PhP 470 million in 1997 and PhP 771 million in 1998. In the face of these setbacks and in a bid to cushion the impact of its business reversals and continue operations, MMPC implemented various cost-cutting measures, such as but not limited to: cost reduction on the use office supplies and energy, curtailment of representation and travel expenses, employment-hiring freeze, separation of casuals and trainees, manpower services (guards and janitorial services) reduction, intermittent plant shutdowns, and reduced work week for managerial and other monthlysalaried personnel.

In February 1998, MMPC finally instituted the first stage of its retrenchment program affecting around 531 hourly manufacturing employees, a step which later proved not adequate enough to stem business reverses. Hence, after holding special labormanagement meetings with the hourly union, MMPC launched a temporary lay-off program to cover some 170 hourly employees. This batch included Alfredo who, sometime in January 1999, received a letter dated December 19, 1998, informing him of the temporary suspension of his employment, inclusive of benefits. As there indicated, the temporary lay-off scheme, initiated due to continuing business contraction, was for six months from January 4 to July 2, 1999.

In the interim, MMPC updated the temporarily-suspended Alfredo, et al. of its business condition.

As later events unfolded, the temporary lay-off move was still not enough to avert further losses. In fact, the market situation even slid down. This development impelled MMPC to embark on another retrenchment program affecting the hourly employees. Accordingly, on May 31, 1999, MMPC sent separate notices to Alfredo and other affected personnel advising them of their permanent lay-off, but with retrenchment benefits, effective July 2, 1999. The drop in company sales and market share was the stated reason for MMPC’s latest move. As in the first instance, a copy of the audited financial statements (AFS) was not appended to the letter-notice to substantiate, as Alfredo would later bemoan, the acute business losses MMPC claimed to have suffered.

It may be mentioned at this juncture that the July 1999 retrenchment of 170 hourly employees was preceded by the retrenchment of monthly-salaried MMPC employees. In effect, therefore, the lay-off of the 170 employees was the second retrenchment implemented by MMPC in 1999 and the third since 1998.

On June 1, 1999, a letter dated May 31, 1999 and addressed to Director Alex Maraan was filed with the Department of Labor and Employment (DOLE), advising him that the temporary lay-off of the 170 MMPC hourly employees is being made permanent effective July 2, 1999 due to continuing adverse market conditions.

In September 1999, Alfredo filed a case for illegal dismissal and damages before the NLRC’s Regional Arbitration Branch No. IV, docketed as NLRC Case No. RABIV-9-11454-99-R.

The Ruling of the Labor Arbiter

Conciliation efforts having failed, hearings were held, followed by a directive for the submission of position papers. In its position paper, MMPC defined the criteria used in considering employees for retrenchment. And among the documents it filed together with its pleadings were its 1997-1996 and 1998-1997 Financial Statements prepared by SGV & Co. On February 27, 2001, Labor Arbiter Enrico Portillo rendered a Decision finding for MMPC and against Alfredo, his complaint for illegal temporary lay-off and retrenchment being dismissed.4

From the arbiter’s ruling, Alfredo appealed to the NLRC, its appeal docketed as NLRC NCR CA No. 028205-01.

The Ruling of the NLRC

The NLRC saw things differently. By Resolution dated September 23, 2002, the NLRC’s First Division reversed and set aside the decision of Labor Arbiter Portillo, disposing as follows:

IN VIEW THEREOF, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one ENTERED declaring the temporary lay-off / retrenchment as illegal and ordering the respondent [MMPC] to immediately reinstate the complainant [Alfredo] to his former position without loss of seniority rights and other benefits accorded the regular employees pursuant to their Collective Bargaining Agreement, with full backwages which as of September 16, 2002 amounts to P447,349.99.

A ten percent (10%) attorney’s fee is likewise adjudged.

The computation submitted by the Computation and Examination Unit is hereby adopted as Annex "A" and an integral part hereof.

SO ORDERED.5



While it agreed with the labor arbiter’s holding on MMPC’s compliance with the substantive and procedural requirements for retrenchment, the NLRC deemed the merit rating system adopted by MMPC as additional and dominant criterion for retrenchment to be erroneous and arbitrary, being against the parties’ then prevailing Collective Bargaining Agreement (CBA). The CBA, according to the NLRC, listed only "seniority" and "needs of the company" as determinative factors in the selection of who shall be laid off. To the NLRC, MMPC’s arbitrary way and the fact that it did not notify Alfredo beforehand of the additional criterion, not to mention the findings of the merit valuation, vitiated the retrenchment proceedings.

By Resolution of January 30, 2004, the NLRC denied MMPC’s motion for reconsideration, sending the company to the CA on a petition for certiorari, its recourse docketed as CA-G.R. SP No. 84790.

The Ruling of the CA

On November 18, 2004, the appellate court rendered the appealed Decision finding for MMPC, the dispositive portion of which reads, as follows:

WHEREFORE, finding merit in the petition, We hereby GRANT the same. The assailed Resolutions of public respondent National Labor Relations Commission (NLRC) are hereby REVERSED and SET ASIDE and the Decision of the Labor Arbiter dated February 27, 2001 is hereby REINSTATED.

SO ORDERED.6

In reinstating the labor arbiter’s ruling and setting aside that of the NLRC, the appellate court addressed two central issues: first, whether MMPC used fair and reasonable criteria in ascertaining who would be retrenched; and second, whether MMPC should have had furnished Alfredo copies of its AFS and the findings of its merit evaluation. It resolved the first issue in the affirmative and the second in the negative.1avvphi1

Following the denial of his motion for reconsideration, per the CA’s resolution of September 13, 2005, Alfredo interposed this petition.

The Issues

Petitioner Alfredo, through his Memorandum, raises the following issues for our consideration:

I.

WHETHER OR NOT PETITIONER’S RETRENCHMENT WAS ILLEGAL.

A.



WHETHER OR NOT MERIT RATING AND RANKING ARE PART OF THE CBA MANDATED CRITERIA IN DETERMINING THE REGULAR EMPLOYEE TO BE RETRENCHED.

B.

WHETHER OR NOT [MMPC] CAN VALIDLY ADOPT MERIT RATING AND RANKING AS PART OF THE CRITERIA IN DETERMINING THE REGULAR EMPLOYEE TO BE RETRENCHED.

C.

WHETHER OR NOT [MMPC] SHOULD HAVE DISCLOSED IN ITS NOTICE OF RETRENCHMENT TO PETITIONER, THE LATTER’S LOW MERIT RATING AND RANKING AS THE PRINCIPAL REASON FOR HIS RETRENCHMENT AND FURNISHED PETITIONER WITH THE CORRESPONDING [AFS] TO SUBSTANTIATE ITS CLAIM OF LOSSES.

D.

WHETHER OR NOT PETITIONER’S RETRENCHMENT CAN BE DEEMED VALID JUST BECAUSE [MMPC’S] EARLIER RETRENCHMENT OF HIS OTHER COEMPLOYEES HAD BEEN ADJUDGED BY OUR COURTS TO BE VALID.

II.

WHETHER OR NOT THE [CA] CORRECTLY FOUND THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN REVERSING AND SETTING ASIDE THE DECISION OF LABOR ARBITER PORTILLO AND ORDERING THE REINSTATEMENT x x x.7

The fundamental issues tendered actually boil down to the legality and/or validity of Alfredo’s temporary lay-off and eventual retrenchment.

The Court’s Ruling

We deny the petition.

The right of management to retrench or to lay-off workers to meet clear and continuing economic threats or during periods of economic recession to prevent losses is recognized8 by Article 283 of the Labor Code, as amended, partly providing:

Art. 283. Closure of establishment and reduction of personnel.––The employer may also terminate the employment of any employee due to x x x retrenchment to prevent losses or the closing or cessation of operations of the establishment x x x by serving a written

notice on the worker and the [DOLE] at least one month before the intended date thereof. x x x In case of retrenchment to prevent losses, the separation pay shall be equivalent to one (1) month pay or at least one-half month pay for every year of service whichever is higher. x x x (Emphasis ours.)

Decisional law teaches that the requirements for a valid retrenchment are: (1) that the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, and real, or only if expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) that the employer serves written notice both to the employees concerned and the DOLE at least a month before the intended date of retrenchment; (3) that the employer pays the retrenched employee separation pay in an amount prescribed by the Code; (4) that the employer exercises its prerogative to retrench in good faith; and (5) that it uses fair and reasonable criteria in ascertaining who would be retrenched or retained.9

In F.F. Marine Corporation v. National Labor Relations Commission, the Court expounded on the concept, requisites, and justification of retrenchment in the following wise:

Retrenchment is the termination of employment initiated by the employer through no fault of the employees x x x resorted to by management during periods of business recession, industrial depression, or seasonal fluctuations or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery, or of automation. Retrenchment is a valid management prerogative. It is, however, subject to faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence.

There are three (3) basic requisites for a valid retrenchment to exist, to wit: (a) the retrenchment is necessary to prevent losses and such losses are proven; (b) written notice to the employees and to the DOLE at least one (1) month prior to the intended date of retrenchment; and (c) payment of separation pay x x x.

Jurisprudential standards to justify retrenchment have been reiterated by this Court in a long line of cases to forestall management abuse of this prerogative, viz:

. . . . Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bonafide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences x x x. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses.

The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs than labor costs. An employer who, for instance, lays off substantial numbers of workers while continuing to dispense fat executive bonuses and perquisites or so-called "golden parachutes", can scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of providing "full protection" to labor, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means—e.g., reduction of both management and rank-andfile bonuses and salaries, going on reduced time, x x x costs, etc.—have been tried and found wanting.

Lastly, x x x alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees.10 (Emphasis supplied.)

Given the foregoing legal perspective, the resolution of the basic core issue should be in the affirmative. We are one with the appellate court in finding that the essential requisites for a valid retrenchment laid down by law and jurisprudence are obtaining.

First, there can hardly be any dispute that MMPC suffered substantial and heavy losses in FY 1997 and continued to bleed in 1998. Even the NLRC conceded this reality. To be precise, MMPC, as duly shown in its AFS for those fiscal years,11 incurred an aggregate loss of PhP 1.242 billion for its two-year operation. To be sure, the AFS in question and necessarily the figures appearing therein cannot be assailed as selfserving, as these documents were prepared and signed by SGV & Co., a firm of reputable independent external auditors. Any suggestion that a billion peso plus loss is de minimis in extent has to be dismissed for sheer absurdity.

Alfredo’s lament about not being furnished a copy of the 1997-1996 and 1998-1997 AFS and other financial documents, as well as the finding of the merit evaluation rating, at the time he was notified of his lay-off cannot be accorded tenability. The CA explained succinctly why:

x x x There is no law or rule that requires an employer to furnish an employee to be retrenched copies of its [AFS] and other documents (e.g. finding of its merit evaluation). The law only requires that the employer serve a written notice of the retrenchment on the employee concerned and the [DOLE] at least one (1) month before the intended date thereof. [Alfredo’s] contention that he should have been notified of his merit rating in order for him to seek a clarification and even a reconsideration of the same from [MMPC] is without merit. The appropriate forum for an employee to contest the reality or good faith character of the retrenchment asserted as ground for dismissal from employment is before the [DOLE].12 (Citation omitted.)

Second, Alfredo cannot plausibly feign ignorance that MMPC was in dire straights in 1997 and 1998. Neither can he impugn the bona fides of MMPC’s retrenchment strategy. Recall that MMPC, while experiencing business reverses, implemented expense-cutting measures starting from reduction on the use of utilities and office supplies, curtailing of representation and travel expenses and deferring the implementation of set projects and programs. It froze hiring and letting its casual employees and trainees go. And as the records show, a reduced work week was set in place for managerial employees who, doubtless at management’s behest, agreed to a 5% salary cut. In fine, the retrenchment of Alfredo’s batch on July 2, 1999 was not a spur-of-the-moment decision, but was resorted to after cutbacks to minimize operational expenses have been explored, but failed to forestall business losses. In fact, MMPC risked and in fact faced suits by effecting two earlier retrenchment actions, itself an indicium that it imposed the retrenchment on Alfredo in good faith, not to circumvent his security of tenure.

Third, it bears to state that the aforequoted Art. 283 of the Code uses the phrase "retrenchment to prevent losses." The phrase necessarily implies that retrenchment may be effected even in the event only of imminent, impending, or expected losses.13 The employer need not wait for substantial losses to materialize before exercising ultimate and drastic option to prevent such losses. In the case at bench, MMPC was already financially hemorrhaging before finally resorting to retrenchment.

Fourth, MMPC had complied with the prior written notice and separation pay requirements. Alfredo was duly apprised of his fate a month before the effectivity of his retrenchment, and the DOLE duly informed likewise a month before the July 2, 1999 effectivity through a letter dated May 31, 1999 sent on June 1, 1999. And as determined by the labor arbiter, it appears that the retrenched employees have already received their separation benefits of one-month salary for every year of service,14 except perhaps those who opted to challenge their retrenchment.

Finally, as the Court sees it, the merit rating system MMPC adopted as one of the criteria for selecting who are to be eased out was fair and reasonable under the premises. Alfredo, of course, latches the success of his cause principally on the propriety of the criteria thus adopted, faulting the CA in the manner it construed Art. V of the CBA then governing the employer-employee relationship between MMPC and the hourly employees.lawphil.net

For clarity, we reproduce the pertinent provisions of Art. V of the CBA on lay-off and other personnel/employee movements, specifically Sections 1 to 6, to wit:

ARTICLE V PROMOTIONS, TRANSFERS, LAY-OFFS AND RECALLS

SECTION 1. FACTORS TO BE FOLLOWED IN EMPLOYEE MOVEMENTS –– In the exercise of customary functions of Management as regards promotions, transfer, lay-off and recall, the COMPANY shall be guided by the following: Seniority, Efficiency and

Attitude, Job Knowledge and Potential, and Attendance and the COMPANY shall exercise just and fair evaluation of such factors. It is understood that this provision is applicable only to members of the bargaining unit and to movements within the bargaining unit.

SECTION 2. In the application of the foregoing criteria, the following definition shall be observed

(a) SENIORITY; Defined:

1. Department Seniority — starts from the day of permanent assignment to a Production Department or Non-Production Department.

2. Job Security — starts from the day of permanent assignment to the job in Production or Non-Production Department.

3. Corporate Seniority — starts as of the first day of the probationary period of a regular employee.

(b) EFFICIENCY AND ATTITUDE — is defined as follows:

1. Ability to perform good work in accordance with COMPANY standards.

2. Ability to cooperate with supervisory staff and fellow employees.

3. Readiness to accept supervisor’s instructions and to perform them properly.

4. Compliance with COMPANY policies, rules and regulations.

5. Physical fitness.

(c) JOB KNOWLEDGE AND POTENTIAL — as defined as follows:

1. Knowledge and ability to perform the job in accordance with COMPANY standards.

2. Possession of broad knowledge of various types of work which will assure satisfactory performance of other work assignments.

3. Adaptability to learn new work procedures.

4. Ability to improve work methods.

(d) ATTENDANCE is defined as follows:

Promptness in reporting to work; in other words, prompt observance of time signals, scheduled starting time, morning and afternoon breaktime, lunch time and quitting time. x x x

SECTION 3. PROMOTIONS — Promotion is the movement of a qualified employee to a higher job classification or lateral movement to a higher level within the same job classification and shall entitle such employee to the appropriate wage range applicable to the new position or job level.

x x x x

SECTION 4. TRANSFERS –– Transfers are considered movements from one job assignment to another, either on a temporary or permanent basis. In all cases of transfers, whether temporary or permanent, the COMPANY will be guided by the factors mentioned in Section 1 above.

x x x x

SECTION 5. LAY-OFFS – Lay-Offs shall be guided by the following factors:

(a) TEMPORARY LAY-OFF — is the adjustment or reduction in work force due to x x x and other causes that will necessitate the temporary reduction of work force.

(b) PERMANENT LAY-OFF — is a reduction in work force due to decrease in COMPANY business.

(c) LAY-OFF PROCEDURE –– in case of lay-off whether in the Production or NonProduction Departments, all temporary, casual and probationary employees will be laidoff first. Regular employees will be laid-off taking into consideration corporate seniority (last-in, first-out) and the needs of the COMPANY.

(d) No employee will be upgraded due to lay-off.

SECTION 6. RECALLS TO WORK –– When there is a need to increase the work force after a lay-off, preference shall be given to retrenched employees on the basis of corporate seniority and provided they are qualified for the job opening. (Emphasis ours.)

Alfredo argues that since Art. V, Sec 5(c) of the CBA provides for only two factors, i.e., (1) seniority (last-in, first-out) and (2) the needs of the company, to be considered in retrenching MMPC employees, the company is bereft of authority to arbitrarily impose other factors or criteria in effecting his retrenchment.

We are not persuaded.

Evaluation Method Used by MMPC in Determining the Employees to be Retrenched Is in Accord with the CBA



It is well-entrenched that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of the stipulations shall control.15 Courts, in appropriate cases, will intervene only when the terms of the contract are ambiguous or uncertain and only to construe them to seek the real intent of the parties and not to alter them.16lawphil.net

Just as settled is the rule that contracts should be so construed as to harmonize and give effect to the different provisions of these contracts.17 Under Art. 137418 of the Civil Code, contracts cannot be construed by parts; stipulations and clauses must be considered in relation to one another to give effect to the whole. The legal effect of a contract is not determined alone by any particular provision disconnected from all others, but from the whole read together.19

Following the above rules, the aforequoted Secs. 1 and 2 should be read as qualifying the factors mentioned in the succeeding Sec. 5(c). It may be that Sec. 5(c) mentions only "seniority" and "needs of the company" as factors to be considered in the retrenchment selection process. But these twin factors cannot plausibly be given exclusivity for Sec. 1 is clear in that the factors or criteria provided therein, i.e., seniority, efficiency and attitude, job knowledge and potential, and attendance, are to be considered in the exercise of management as regards lay-off, among other personnel movements. Sec. 5 ought not to be treated alone, isolated from kindred provisions.

Sec. 1, Art. V of the CBA, to reiterate, allows MMPC, in the exercise of its customary management functions and prerogatives on matters of promotions, transfer, lay-off, and recall, to consider as guiding norms the following factors or criteria: "Seniority, Efficiency and Attitude, Job Knowledge and Potential, and Attendance." And to complement this prerogative, the company, in the same section, is given the discretion to "exercise just and fair evaluation of such factors," meaning that the company is accorded a reasonable latitude to assign a corresponding weight to each factor. On the other hand, Sec. 2 merely defines or describes the factors or criteria mentioned in Sec. 1.

As couched, Sec. 1 is explicit in providing the criteria or factors for all employee movements. A reading of the other provisos would show the following: Sec. 3 on PROMOTIONS does not specifically mention any criterion or factor, logically implying that the factors expressly mentioned in Sec. 1 shall apply to promotional appointments; Sec. 4 on TRANSFERS, on the other hand, provides that the factors mentioned in Sec. 1 apply; Sec. 5 on LAY-OFFS provides the factors of seniority and needs of the company; while Sec. 6 on RECALLS TO WORK provides the sole factor of seniority. Given the way the provisions were couched relative to Sec. 1, it is clear to our mind, despite the seeming limited factors provided in Secs. 5 and 6, that the factors or criteria provided in Sec. 1, as defined in Sec. 2, encompass and apply to all employee movements.

Alfredo’s posture that the Sec. 1 criteria are to be viewed as a general standard and must be made to yield to those specifically provided in Sec. 5(c) is specious at best and does not commend itself for concurrence.

As aptly noted by the CA, the Sec. 5(c) "needs of the company" factor, if viewed by its lonesome self without linking it to the Sec. 1 criteria, would be a meaningless, if not unreasonable, standard. Worse still, it may well-nigh give MMPC a carte blanche and unchecked license to determine what the needs of the company would be relative to the lay-off, retrenchment, or retention of any employee. Such construal as espoused by Alfredo cannot be allowed for Sec. 1 expressly mandates the use of salient criteria to be considered in lay-off situation and other personnel movements. In all, there is really no irreconcilable conflict between Secs. 1 and 5; they can and ought to be harmonized and read in conjunction with each other.

The proper view, therefore, is that the Sec. 1 criteria qualify the factors of "seniority and needs of the company" in Sec. 5(c). Stated a bit differently, Sec. 5(c) should be understood in the light of Sec. 1 which, to stress, provides seniority, efficiency and attitude, job knowledge and potential, and attendance as among the factors that should guide the company in choosing the employees to be laid-off or kept. All other things being equal, a company would necessarily need to retain those who had rendered dedicated and highly efficient service and whose knowledge, attendance, and potential hew with company standards. Any other measure would be senseless in the business viewpoint. Accordingly, the merit rating used by MMPC based on Sec. 5 in conjunction with and as qualified by the factors provided under Sec. 1 is fair and reasonable, and, to be sure, well within the contemplation of the parties’ CBA. In fact, Alfredo, shorn of the contention that the merit rating is against the CBA, has not shown any arbitrariness on the part of MMPC in the evaluation, selection, and retrenchment of employees.

We end this ponencia by taking stock that 60 of the first batch of 531 hourly employees retrenched in February 1998 challenged the legality of their retrenchment on the very same issue of arbitrariness in the implementation of the rating evaluation system. The labor arbiter, the NLRC, and effectively the CA were one in their ruling that the retrenchment program and the evaluation method used by MMPC passed the test of reasonableness and were arrived at in good faith; thus, the retrenchment was held legal and valid. In G.R. No. 155406, the Court found no reversible error in the CA judgment and dismissed the petition of the retrenched employees, thereby upholding the validity of retrenchment undertaken by respondent company.20 The same result obtains in the instant petition.

WHEREFORE, the instant petition is hereby DENIED for lack of merit. Accordingly, the Decision dated November 18, 2004 of the CA and its Resolution of September 13, 2005 in CA-G.R. SP No. 84790 are hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

EN BANC

G.R. No. 112546

March 13, 1996

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION TRUST, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ANTONIO M. VILLANUEVA and WILFREDO GUILLEMA, respondents.



PANGANIBAN, J.:p

Is a company which is forced by huge business losses to close its business, legally required to pay separation benefits to its employees at the time of its closure in an amount equivalent to the separation pay paid to those who were separated when the company was still a going concern? This is the main question brought before this Court in this petition for certiorari under Rule 65 of the Revised Rules of Court, which seeks to reverse and set aside the Resolutions dated July 29, 1993 1 and September 27, 1993 2 of the National Labor Relations Commission 3 (NLRC) in NLRC CA No. M-00139593.

The Resolution dated July 29, 1993 affirmed in toto the decision of the Labor Arbiter in RAB-11-08-00672-92 and RAB-11-08-00713-92 ordering petitioners to pay the complainants therein certain monetary claims.

The Resolution dated September 27, 1993 denied the motion for reconsideration of the said July 29, 1993 Resolution.

The Facts

Petitioner North Davao Mining Corporation (North Davao) was incorporated in 1974 as a 100% privately-owned company. Later, the Philippine National Bank (PNB) became part owner thereof as a result of a conversion into equity of a portion of loans obtained by North Davao from said bank. On June 30, 1986, PNB transferred all its loans to and equity in North Davao in favor of the national government which, by virtue of Proclamation No. 50 dated December 8, 1986, later turned them over to petitioner Asset

Privatization Trust (APT). As of December 31, 1990 the national government hold 81.8% of the common stock and 100% of the preferred stock of said company. 4

Respondent Wilfredo Guillema is one among several employees of North Davao who were separated by reason of the company's closure on May 31, 1992, and who were the complainants in the cases before the respondent labor arbiter.

On May 31, 1992, petitioner North Davao completely ceased operations due to serious business reverses. From 1988 until its closure in 1992, North Davao suffered net losses averaging three billion pesos (P3,000,000,000.00) per year, for each of the five years prior to its closure. All told, as of December 31, 1991, or five months prior to its closure, its total liabilities had exceeded its assets by 20,392 billion pesos, as shown by its financial statements audited by the Commission on Audit. When it ceased operations, its remaining employees were separated and given the equivalent of 12.5 days' pay for every year of service, computed on their basic monthly pay, in addition to the commutation to cash of their unused vacation and sick leaves. However, it appears that, during the life of the petitioner corporation, from the beginning of its operations in 1981 until its closure in 1992, it had been giving separation pay equivalent to thirty (30) days' pay for every year of service. Moreover, inasmuch as the region where North Davao operated was plagued by insurgency and other peace and order problems, the employees had to collect their salaries at a bank in Tagum, Davao del Norte, some 58 kilometers from their workplace and about 2 1/2 hours' travel time by public transportation; this arrangement lasted from 1981 up to 1990.

Subsequently, a complaint was filed with respondent Labor Arbiter by respondent Wilfredo Guillema and 271 other separated employees for: (1) additional separation pay of 17.5 days for every year of service; (2) back wages equivalent to two days a month; (3) transportation allowance; (4) hazard pay; (5) housing allowance; (6) food allowance; (7) post-employment medical clearance; and (8) future medical allowance, all of which amounted to P58,022,878.31 as computed by private respondent. 5

On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner North Davao to pay the complainants the following:

(a)

Additional separation pay of 17.5 days for every year of service;

(b) Backwages equivalent to two (2) days a month times the number of years of service but not to exceed three (3) years;

(c) Transportation allowance at P80 a month times the number of years of service but not to exceed three (3) years.

The benefits awarded by respondent Labor Arbiter amounted to P10,240,517.75. Attorney's fees equivalent to ten percent (10%) thereof were also granted. 6

On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davao's motion for reconsideration was likewise denied. Hence, this petition.

The Parties' Submissions and the Issues

In affirming the Labor Arbiter's decision, respondent NLRC ruled that "since (North Davao) has been paying its employees separation pay equivalent to thirty (30) days pay for every year of service," knowing fully well that the law provides for a lesser separation pay, then such company policy "has ripened into an obligation," and therefore, depriving now the herein private respondent and others similarly situated of the same benefits would be discriminatory. 7 Quoting from Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, 8 it said that petitioners "may not pay separation benefits unequally for such discrimination breeds resentment and ill-will among those who have been treated less generously than others." It also cited Abella vs. NLRC, 9 as authority for saying that Art. 283 of the Labor Code protects workers in case of closure of the establishment.

To justify the award of two days a month in backwages and P80 per month of transportation allowance, respondent Commission ruled:

As to the appellants' claim that complainants-appellees' time spent in collecting their wages at Tagum, Davao is not compensable allegedly because it was on official time can not be given credence. No iota of evidence has been presented to back up said contention. The same is true with appellants' assertion that the claim for transportation expenses is without basis since they were incurred by the complainants. Appellants should have submitted the payrolls to prove that complainants appellees were not the ones who personally collected their wages and/or the bus/jeep trip tickets or vouchers to show that the complainants-appellees were provided with free transportation as claimed.

Petitioner, through the Government Corporate Counsel, raised the following grounds for the allowance of the petition:

1. The NLRC acted with grave abuse of discretion in affirming without legal basis the award of additional separation pay to private respondents who were separated due to serious business losses on the part of petitioner.

2. The NLRC acted with grave abuse of discretion in affirming without sufficient factual basis the award of backwages and transportation expenses to private respondents.

3. There is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of the law.

and the following issues:

1. Whether or not an employer whose business operations ceased due to serious business losses or financial reverses is obliged to pay separation pay to its employees separated by reason of such closure.

2. Whether or not time spent in collecting wages in a place other than the place of employment is compensable notwithstanding that the same is done during official time.

3. Whether or not private respondents are entitled to transportation expenses in the absence of evidence that these expenses were incurred.

The First Issue: Separation Pay

To resolve this issue, it is necessary to revisit the provision of law adverted to by the parties in their submissions, namely, Art. 283 of the Labor Code, which reads as follows:

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. (emphasis supplied)

The underscored portion of Art. 283 governs the grant of separation benefits "in case of closures or cessation of operation" of business establishments "NOT due to serious business losses or financial reverses . . . ". Where, however, the closure was due to business losses — as in the instant case, in which the aggregate losses amounted to over P20 billion — the Labor Code does not impose any obligation upon the employer to pay separation benefits, for obvious reasons. There is no need to belabor this point. Even the public respondents, in their Comment 10 filed by the Solicitor General, impliedly concede this point.

However, respondents tenaciously insist on the award of separation pay, anchoring their claim solely on petitioner North Davao's long-standing policy of giving separation pay benefits equivalent to 30-days' pay, which policy had been in force in the years prior to its closure. Respondents contend that, by denying the same separation benefits to private respondent and the others similarly situated, petitioners discriminated against them. They rely on this Court's ruling in Businessday Information Systems and Services,

Inc. (BISSI) vs. NLRC, (supra). In said case, petitioner BISSI, after experiencing financial reverses, decided "as a retrenchment measure" to lay-off some employees on May 16, 1988 and gave them separation pay equivalent to one-half (1/2) month pay for every year of service. BISSI retained some employees in an attempt to rehabilitate its business as a trading company. However, barely two and a half months later, these remaining employees were likewise discharged because the company decided to cease business operations altogether. Unlike the earlier terminated employees, the second batch received separation pay equivalent to a full month's salary for every year of service, plus a mid-year bonus. This Court ruled that "there was impermissible discrimination against the private respondents in the payment of their separation benefits. The law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. . . ."

In resolving the present case, it bears keeping in mind at the outset that the factual circumstances of BISSI are quite different from the current case. The Court noted that BISSI continued to suffer losses even after the retrenchment of the first batch of employees: clearly, business did not improve despite such drastic measure. That notwithstanding, when BISSI finally shut down, it could well afford to (and actually did) pay off its remaining employees with MORE separation benefits as compared with those earlier laid off; obviously, then, there was no reason for BISSI to skimp on separation pay for the first batch of discharged employees. That it was able to pay one-month separation benefit for employees at the time of closure of its business meant that it must have been also in a position to pay the same amount to those who were separated prior to closure. That it did not do so was a wrongful exercise of management prerogatives. That is why the Court correctly faulted it with "impermissible discrimination." Clearly, it exercised its management prerogatives contrary to "general principles of fair play and justice."

In the instant case however, the company's practice of giving one month's pay for every year of service could no longer be continued precisely because the company could not afford it anymore. It was forced to close down on account of accumulated losses of over P20 billion. This could not be said of BISSI. In the case of North Davao, it gave 30-days' separation pay to its employees when it was still a going concern even if it was already losing heavily. As a going concern, its cash flow could still have sustained the payment of such separation benefits. But when a business enterprise completely ceases operations, i.e., upon its death as a going business concern, its vital lifeblood — its cashflow — literally dries up. Therefore, the fact that less separation benefits ware granted when the company finally met its business death cannot be characterized as discrimination. Such action was dictated not by a discriminatory management option but by its complete inability to continue its business life due to accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land.

As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses. In the case before us, the basis for the claim of the additional separation benefit of 17.5 days is alleged discrimination,

i.e., unequal treatment of employees, which is proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under the facts and circumstances of the present case, the grant of a lesser amount of separation pay to private respondent was done, not by reason of discrimination, but rather, out of sheer financial bankruptcy — a fact that is not controlled by management prerogatives. Stated differently, the total cessation of operation due to mind-boggling losses was a supervening fact that prevented the company from continuing to grant the more generous amount of separation pay. The fact that North Davao at the point of its forced closure voluntarily paid any separation benefits at all — although not required by law — and 12.5-days worth at that, should have elicited admiration instead of condemnation. But to require it to continue being generous when it is no longer in a position to do so would certainly be unduly oppressive, unfair and most revolting to the conscience. As this Court held in Manila Trading & Supply Co. vs. Zulueta, 11 and reiterated in San Miguel Corporation vs. NLRC 12 and later, in Allied Banking Corporation vs. Castro, 13 "(t)he law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer."

At this juncture, we note that the Solicitor General in his Comment challenges the petitioners' assertion that North Davao, having closed down, no longer has the means to pay for the benefits. The Solicitor General stresses that North Davao was among the assets transferred by PNB to the national government, and that by virtue of Proclamation No. 50 dated December 8, 1986, the APT was constituted trustee of this government asset. He then concludes that "(i)t would, therefore, be incongruous to declare that the National Government, which should always be presumed to be solvent, could not pay now private respondents' money claims." Such argumentation is completely misplaced. Even if the national government owned or controlled 81.8% of the common stock and 100% of the preferred stock of North Davao, it remains only a stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder as a rule is not directly, individually and/or personally liable for the indebtedness of the corporation. The obligation of North Davao cannot be considered the obligation of the national government, hence, whether the latter be solvent or not is not material to the instant case. The respondents have not shown that this case constitutes one of the instances where the corporate veil may be pierced. 14 From another angle, the national government is not the employer of private respondent and his co-complainants, so there is no reason to expect any kind of bailout by the national government under existing law and jurisprudence.

The Second and Third Issues: Back Wages and Transportation Allowance

Anent the award of back wages and transportation allowance, the issues raised in connection therewith are factual, the determination of which is best left to the respondent NLRC. It is well settled that this Court is bound by the findings of fact of the NLRC, so long as said findings are supported by substantial evidence 15.

As the Solicitor General pointed out in his comment:



It is undisputed that because of security reasons, from the time of its operations, petitioner NDMC maintained its policy of paying its workers at a bank in Tagum, Davao del Norte, which usually took the workers about two and a half (2 1/2) hours of travel from the place of work and such travel time is not official.

Records also show that on February 12, 1992, when an inspection was conducted by the Department of Labor and Employment at the premises of petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out that petitioners had violated labor standards law, one of which is the place of payment of wages (p. 109, Vol. 1, Record)

Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that:

Sec. 4. Place of payment. — (a) As a general rule, the place of payment shall be at or near the place of undertaking. Payment in a place other than the workplace shall be permissible only under the following circumstances:

(1) When payment cannot be effected at or near the place of work by reason of the deterioration of peace and order conditions, or by reason of actual or impending emergencies caused by fire, flood, epidemic or other calamity rendering payment thereat impossible;

(2) and

When the employer provides free transportation to the employees back and forth;

(3) Under any analogous circumstances; provided that the time spent by the employees in collecting their wages shall be considered as compensable hours worked.

(b) xxx xxx xxx

(Emphasis supplied)

Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the Regional Director, Regional Office No. XI, Department of Labor and Employment, Davao City, ordered petitioner NDMC, among others, as follows:

WHEREFORE, . . . . Respondent is further ordered to pay its workers salaries at the plantsite at Amacan, New Leyte, Maco, Davao del Norte or whenever not possible, through the bank in Tagum, Davao del Norte as already been practiced subject, however to the provisions of Section 4 of Rule VIII, Book III of the rules implementing the Labor Code as amended.

Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly held that:

From the evidence on record, we find that the hours spent by complainants in collecting salaries at a bank in Tagum, Davao del Norte shall be considered compensable hours worked. Considering further the distance between Amacan, Maco to Tagum which is 2 1/2 hours by travel and the risks in commuting all the time in collecting complainants' salaries, would justify the granting of backwages equivalent to two (2) days in a month as prayed for.

Corollary to the above findings, and for equitable reasons, we likewise hold respondents liable for the transportation expenses incurred by complainants at P40.00 round trip fare during pay days.

(p. 10, Decision; p. 207, Vol. 1, Record)

On the contrary, it will be petitioners' burden or duty to present evidence of compliance of the law on labor standards, rather than for private respondents to prove that they were not paid/provided by petitioners of their backwages and transportation expenses.

Other than the bare denials of petitioners, the above findings stand uncontradicted. Indeed we are not at liberty to set aside findings of facts of the NLRC, absent any capriciousness, arbitrariness, or abuse or complete lack of basis. In Maya Farms Employees Organizations vs. NLRC, 16 , we held:

This Court has consistently ruled that findings of fact of administrative agencies ad quasi-judicial bodies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality and are binding upon this Court unless there is a showing of grave abuse of discretion, or where it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record.

WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution by SETTING ASIDE and deleting the award for "additional separation pay of 17.5 days for every year of service", and AFFIRMING it in all other aspects. No costs.

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION



G.R. No. 103575. April 5, 1993.

BUSINESSDAY INFORMATION SYSTEMS AND SERVICES, INC., AND RAUL LOCSIN, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, NEMESIO MOYA ALFREDO AMANTE, EDWIN BERSAMINA, SAMUEL CUELA, ROMEO DELA CRUZ, MANUEL DE JESUS, SEVERINO DELA CRUZ, DANILO ESPIRITU, ANGEL FLORES, DANILO FRANCISCO, FLORENCIO GLORIOSO, GERARDO MANUEL, ARMANDO MENDOZA, PEDRO MORELOS, ALEXON ORBETA, ROMEO PEREZ, ALFREDO SABANDO, NESTOR SANTOS, ALFREDO SEPTRIMO, OSCAR SEVILLA, EDUARDO SIOSON, REYMUNDO TIONGCO, TERESITA REYES, CARMENCITA CARPIO, GENARO NABUTAS, DANILO NAMPLATA, AND ROLANDO GAMIT, respondents.

Quisumbing, Torres & Evangelista for petitioners.

Reynaldo M. Maraan for private respondents.

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; EMPLOYER MAY NOT, IN THE GUISE OF EXERCISING MANAGEMENT PREROGATIVES, PAY SEPARATION BENEFITS UNEQUALLY; CASE AT BAR. — Petitioners' right to terminate employees on account of retrenchment to prevent losses or closure of business operations, is recognized by law, but it may not pay separation benefits unequally for such discrimination breeds resentment and ill-will among those who have been treated less generously than others. "Granting that the 16 May 1988 termination was a retrenchment scheme, and the 31 July 1988 and the 28 February 1989 were due to closure, the law requires the granting of the same amount of separation benefits to the affected employees in any of the cases. The respondent argued that the giving of more separation benefit to the second and third batches of employees separated was their expression of gratitude and benevolence to the remaining employees who have tried to save and make the company viable in the remaining days of operations. This justification is not plausible. there are workers in the first batch who have rendered more years of service and could even be said to be more efficient than those separated subsequently, yet, they did not receive the same recognition. Understandably, their being retained longer in their job and be not included in the batch that was first terminated, was a concession enough and may already be considered as favor granted by the respondents to the prejudice of the complainants. As it happened, there are workers in the first batch who have rendered more years in service but received lesser separation pay, because of that arrangement made by the respondents in paying their termination benefits . . ." Clearly, there was impermissible discrimination against the private respondents in the payment of their separation benefits. The law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. Management prerogatives are not absolute prerogatives but

are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice (UST vs. NLRC, 190 SCRA 758). Article 283 of the Labor Code, as amended, protects workers whose employment is terminated because of closure of the establishment or reduction of personnel (Abella vs. NLRC, 152 SCRA 141, 145).

2. ID.; ID.; CORPORATE OFFICER NOT PERSONALLY LIABLE FOR MONEY CLAIMS OF DISCHARGED CORPORATE EMPLOYEES; EXCEPTION. — A corporate officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident malice and bad faith in terminating their employment. There is no evidence in this case that Locsin acted in bad faith or with malice in carrying out the retrenchment and eventual closure of the company (Garcia vs. NLRC, 153 SCRA 640), hence, he may not be held personally and solidarily liable with the company for the satisfaction of the judgment in favor of the retrenched employees.

3. ID.; GRANT OF BONUS; A PREROGATIVE, NOT AN OBLIGATION, OF EMPLOYER; ENTIRELY DEPENDENT ON FINANCIAL CAPABILITY OF EMPLOYER TO GIVE IT. — It is settled do trine that the grant of a bonus is a prerogative, not an obligation, of the employer (Traders Royal Bank vs. NLRC, 189 SCRA 274). The matter of giving a bonus over and above the worker's lawful salaries and allowances is entirely dependent on the financial capability of the employer to give it. The fact that the company's business was no longer profitable (it was in fact moribund) plus the fact that the private respondents did not work up to the middle of the year (they were discharge in May 1988) were valid reasons for not granting them a mid-year bonus. Requiring the company to pay a mid-year bonus to them also would in effect penalize the company for its generosity to those workers who remained with the company "till the end" of its days. (Traders Royal Bank vs. NLRC, supra.) The award must therefore be deleted.

D E C I S I O N

GRIÑO-AQUINO, J p:

In this petition for certiorari, the Businessday Information Systems and Services Inc. (or BSSI for brevity) and its president/manager, Raul Locsin, seek to annul and set aside the decision dated February 13, 1991 of the National Labor Relations Commission (NLRC) which affirmed the Labor Arbiter's finding that they (petitioners) are liable to pay the private respondents separation pay differentials and mid-year bonus.

BSSI was engaged in the manufacture and sale of computer forms. Due to financial reverses, its creditors, the Development Bank of the Philippines (DBP) and the Asset Privatization Trust (APT), took possession of its assets, including a manufacturing plant in Marilao, Bulacan.

As a retrenchment measure, some plant employees, including the private respondents, were laid off on May 16, 1988, after prior notice, and were paid separation pay equivalent to one-half (1/2) month pay for every year of service. Upon receipt of their

separation pay, the private respondents signed individual releases and quitclaims in favor of BSSI.

BSSI retained some employees in an attempt to rehabilitate its business as a trading company.

However, barely two and a half months later, these remaining employees were likewise discharged because the company decided to cease business operations altogether. Unlike the private respondents, that batch of employees received separation pay equivalent to a full month's salary for every year of service plus mid-year bonus.

Protesting against the discrimination in the payment of their separation benefits, the twenty-seven (27) private respondents filed three (3) separate complaints against the BSSI and Raul Locsin. These cases were later consolidated.

At the conciliation proceedings before Labor Arbiter Manuel P. Asuncion, petitioners denied that there was unlawful discrimination in the payment of separation benefits to the employees. They argued that the first batch of employees was paid "retrenchment" benefits mandated by law, while the remaining employees were granted higher "separation" benefits because their termination was on account of the closure of the business.

Based on the pleadings of the parties, Labor Arbiter Asuncion rendered a decision on April 25, 1989 in favor of the complainants, now private respondents, the dispositive portion of which reads:

"WHEREFORE, the respondents are hereby ordered to pay the complainants their separation pay differentials and mid-year bonus for the year 1988." (p- 38, Rollo).

Upon appeal by the company to the NLRC, the Second Division on February 13, 1991, affirmed the decision of the Labor Arbiter.

Petitioners' motion for reconsideration of the resolution having been denied, they have taken the present recourse.

In case of retrenchment of a company to prevent losses and closure of business operation, the law provides:

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 operations 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 (l /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." (Labor Code; emphasis supplied.)

Undoubtedly, petitioners' right to terminate employees on account of retrenchment to prevent losses or closure of business operations, is recognized by law, but it may not pay separation benefits unequally for such discrimination breeds resentment and ill-will among those who have been treated less generously than others.

The following observations of the Commission are relevant:

"The respondents cited financial business difficulties to justify their termination of the complainants' employment on 16 May 1988. They were given one-half (1/2) month of their salary for every year of service. Due to continuing losses, which is a sign that business, after the termination did not improve, they closed operations on 31 July 1989, where they dismissed the second batch of employees who were given one (1) month pay for every year they served. The third batch of employees were terminated on 28 February 1989, who were likewise given one (1) monthly pay for every year of service. The business climate obtaining on 16 May 1988 when the complainants were terminated did not at all defer (sic) improvement-wise, with that of 31 July 1988 nor to 28 February 1989. The internal between the dates of termination was so close to each other, so that, no improvement in business maybe likely expected. In fact, the respondents suffered continuous losses, hence, there is no difference in the circumstances of the business to distinguish.

"Granting that the 16 May 1988 termination was a retrenchment scheme, and the 31 July 1988 and the 28 February 1989 were due to closure, the law requires the granting of the same amount of separation benefits to the affected employees in any of the cases. The respondent argued that the giving of more separation benefit to the second and third batches of employees separated was their expression of gratitude and benevolence to the remaining employees who have tried to save and make the company viable in the remaining days of operations. This justification is not plausible. There are workers in the first batch who have rendered more years of service and could even be said to be more efficient than those separated subsequently, yet they did not receive the same recognition. Understandably, their being retained longer in their job and be not included in the batch that was first terminated, was a concession enough and may already be considered as favor granted by the respondents to the prejudice of the complainants. As it happened, there are workers in the first batch who have rendered more years in service but received lesser separation pay, because of that arrangement made by the respondents in paying their termination benefits . . ."

(pp. 36-37, Rollo)



Clearly, there was impermissible discrimination against the private respondents in the payment of their separation benefits. The law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. Management prerogatives are not absolute prerogatives but are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice (UST vs. NLRC, 190 SCRA 758). Article 283 of the Labor Code, as amended, protects workers whose employment is terminated because of closure of the establishment or reduction of personnel (Abella vs. NLRC, 152 SCRA 141, 145).

With regard to the private respondents' claim for the mid-year bonus, it is settled doctrine that the grant of a bonus is a prerogative, not an obligation, of the employer (Traders Royal Bank vs. NLRC, 189 SCRA 274). The matter of giving a bonus over and above the worker's lawful salaries and allowances is entirely dependent on the financial capability of the employer to give it. The fact that the company's business was no longer profitable (it was in fact moribund) plus the fact that the private respondents did not work up to the middle of the year (they were discharged in May 1988) were valid reasons for not granting them a mid-year bonus. Requiring the company to pay a midyear bonus to them also would in effect penalize the company for its generosity to those workers who remained with the company till the end" of its days. (Traders Royal Bank vs. NLRC, supra.) The award must therefore be deleted.

There is merit in the contention of petitioner Raul Locsin that the complaint against him should be dismissed. A corporate officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident malice and bad faith in terminating their employment. There is no evidence in this case that Locsin acted in bad faith or with malice in carrying out the retrenchment and eventual closure of the company (Garcia vs. NLRC, 153 SCRA 640), hence, he may not be held personally and solidarily liable with the company for the satisfaction of the judgment in favor of the retrenched employees.

WHEREFORE, the resolution of the NLRC ordering the petitioner company to pay separation pay differentials to the private respondents is AFFIRMED. However, the award of mid-year bonus to them is hereby deleted and set aside. Petitioner Raul Locsin is absolved from any personal liability to the respondent employees. No costs.

SO ORDERED.





The Constitution, while affording full protection to labor, nonetheless, recognizes "the right of enterprises to reasonable returns on investments, and to expansion and growth."14 In line with this protection afforded to business by the fundamental law, Article 283 of the Labor Code clearly makes a policy distinction. It is only in instances 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" that employees whose employment has been terminated as a result are entitled to separation pay. In other words, Article 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to serious losses.15 To require an employer to be generous when it is no longer in a position to do so, in our view, would be unduly oppressive, unjust, and unfair to the employer. Ours is a system of laws, and the law in protecting the rights of the working man, authorizes neither the oppression nor the self-destruction of the employer. Hence, we find that the Court of Appeals did not err when it decreed that petitioners herein are not entitled to separation pay under Article 283 of the Labor Code.

WHEREFORE, the petition is DENIED for lack of merit. The decision of the Court of Appeals, dated January 29, 2002, in CA-G.R. SP No. 65164, as well as its resolution of April 16, 2002, is AFFIRMED. No pronouncement as to costs.

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION

G.R. No. 164518

January 25, 2006

INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN, Petitioners vs. VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL ABREA, BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, ARTURO ADVINCULA, GERTRUDES AMPARO, VIRGILIO ANTONIO, MILA ARQUITA, PRUDENCIO ARQUITA, ALBERT ATON, WARLITA AUTIDA, ALICIA AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO BANATE, LOLITA BATAN, RAMIL BUTALON, CARMILITA CAINGLES, VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO CARILLO, NILA CARILLO, ALGER CORBETA, GREGORIO DABALOS, TERESITA DABALOS, VENERANDO DALAUTA, RICARDO DANGCULOS, MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO,

EDITHA DUMANON, ALFREDO FAELNAR, RAUL FORTUN, MAXIMO GALLA, ANGELES GALUPO, PERFECTO GAMBE, VERGINITA GANGCA, RUPERTO GORGONIO, ROMEO HERRERO, SERGIO HORO-HORO, FRANCISCO IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA LAMBANG, ERNESTO LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR., ESCARLITO MADLOS, MARCOS MAKINANO, REMEGIO MAKINANO, VICENTE MAKINANO, REYNALDO MASUHAY, HELEN MARATAS, ELIZABETH MENDOZA, GUILBERTA MONTEROSO, GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO NUÑEZ, JR., ELISEO ORONGAN, ARMANDO OROPA, ASUNCION OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN, BARTOLOME PAGALAN, DAMASO PALOMA, MANALO PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL, HERMINIA PUBLICO, ROMULO QUINTOS, FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC RODRIGUEZ, SAMUEL SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO TAMADA, MINDA TUMAOB and ROBERTO TUTOR, Respondents.

x--------------------------------------x

G.R. No. 164965 January 25, 2006

VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL ABREA, BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, ARTURO ADVINCULA, GERTRUDES AMPARO, MILA ARQUITA, VIRGILIO ANTONIO, PRUDENCIO ARQUITA, ALBERT ATON, WARLITA AUDITA, ALICIA AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO BANATE, LOLITA BATAN, RAMIL BUTALON, CARMELITA CAINGLES, VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO CARILLO, NILA CARILLO, ALGIER CORBETA, GREGORIO DABALOS, TERESITA DABALOS, VENERANDO DALAUTA, RICARDO DANGCULOS, MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO, EDITHA DUMANON, ALFREDO FAELNAR, RAUL FORTUN, MAXIMO GALLA, ANGELES GALUPO, PERFECTO GAMBE, VIRGINITA GANGCA, RUPERTO GORGONIO, ROMEO HERRERO, SERGIO HOR-HORO, FRANCISCO IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA LAMBANG, ERNESTO LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR., ESCARLITO MADLOS, MARCOS MAKINANO, REMEGIO MAKINANO, VICENTE MAKINANO, REYNALDO MAHUSAY, HELEN MARATAS, ELIZABETH MENDOZA, GUILBERTA MONTEROSO, GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO NUÑEZ, JR., ELISEO ORONGAN, ARMANDO OROPA, ASUNCION OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN, BARTOLOME PAGALAN, DAMASO PALOMA, MANALO PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL, HERMINIA PUBLICO, ROMULO QUINTOS, FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC RODRIGUEZ, SAMUEL SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO TAMADA, MINDA TUMAOB, and ROBERTO TUTOR, Petitioners,

vs. THE HONORABLE COURT OF APPEALS, INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN, Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

Before us are two petitions for review under Rule 45 of the Rules of Court. G.R. No. 164518 assails the October 21, 2002 Decision1 of the Court of Appeals, in CA-GR. SP No. 51966, which set aside the May 24, 1995 Decision2 of the National Labor Relations Commission (NLRC), as well as the July 16, 2004 Resolution3 denying its motion for reconsideration. G.R. No. 164965 assails only the July 16, 2004 Resolution of the Court of Appeals which denied their partial motion for reconsideration. These cases were consolidated because they arose out of the same facts set forth below.

Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant located at Agusan, Pequeño, Butuan City, leased to Industrial Timber Corporation (ITC) on August 30, 1985 for a period of five years.4 Thereafter, ITC commenced operation of the plywood plant and hired 387 workers.

On March 16, 1990, ITC notified the Department of Labor and Employment (DOLE) and its workers that effective March 19, 1990 it will undergo a "no plant operation" due to lack of raw materials and will resume only after it can secure logs for milling.5

Meanwhile, IPGC notified ITC of the expiration of the lease contract in August 1990 and its intention not to renew the same.

On June 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 April 1990.6 This fact and the alleged lack of logs for milling constrained ITC to lay off all its workers until further notice. This was followed by a final notice of closure or cessation of business operations on August 17, 1990 with an advice for all the workers to collect the benefits due them under the law and CBA.7

On October 15, 1990, IPGC took over the plywood plant after it was issued a Wood Processing Plant Permit No. WPR-1004-081791-042,8 which included the anti-pollution permit, by the Department of Environment and Natural Resources (DENR) coincidentally on the same day the ITC ceased operation of the plant.

This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for illegal dismissal, unfair labor practice and damages. They alleged, among others, that the cessation of ITC’s operation was intended to bust the union and that both corporations are one and the same entity being controlled by one owner.

On January 20, 1992, after requiring both parties to submit their respective position papers, Labor Arbiter Irving A. Petilla rendered a decision which refused to pierce the veil of corporate fiction for lack of evidence to prove that it was used to perpetuate fraud or illegal act; upheld the validity of the closure; and ordered ITC to pay separation pay of ½ month for every year of service. The dispositive portion of the decision reads:

PREMISES CONSIDERED, judgment is hereby rendered ordering respondent Industrial Timber Corporation (ITC) to pay herein ninety-seven individual complainants their separation pay at the rate of one-half (1/2) month’s pay for every year of service, a fraction of at least six (6) months to be considered as one whole year, reckoned until August 1990.

All other claims of complainants are hereby ordered DISMISSED for want of merit.

SO ORDERED.9

Ababon, et al. appealed to the NLRC. On May 20, 1993, the NLRC set aside the decision of the Labor Arbiter and ordered the reinstatement of the employees to their former positions, and the payment of full back wages, damages and attorney’s fees.10

ITC and IPGC filed a Motion for Reconsideration through JRS, a private courier, on June 24, 1993.11 However, it was dismissed for being filed out of time having been filed only on the date of actual receipt by the NLRC on June 29, 1993, three days after the last day of the reglamentary period.12 Thus, they filed a Petition for Relief from Resolution,13 which was treated as a second motion for reconsideration by the NLRC and dismissed for lack of merit in a Resolution dated September 29, 1994.14

From said dismissal, petitioners filed a Notice of Appeal with the Supreme Court.15 Subsequently, they filed a Motion for Reconsideration/Second Petition for Relief with the NLRC.16

On December 7, 1994, the Supreme Court dismissed the Notice of Appeal for being a wrong mode of appeal from the NLRC decision.17 On the other hand, the NLRC granted the Second Petition for Relief and set aside all its prior decision and resolutions. The dispositive portion of the May 24, 1995 decision reads:

WHEREFORE, the decision of this Commission dated May 10, 1993 and its subsequent resolutions dated June 22, 1994 and September 29, 1994 are Set Aside and Vacated. Accordingly, the appeal of complainants is Dismissed for lack of merit and the decision of the Labor Arbiter dated January 20, 1992 is Reinstated and hereby Affirmed.

SO ORDERED.18

On October 2, 1995, Virgilio Ababon, et al. filed a Petition for Certiorari with the Supreme Court, which was docketed as G.R. No. 121977.19 However, pursuant to our

ruling in St. Martin’s Funeral Home v. NLRC, we referred the petition to the Court of Appeals for appropriate action and disposition.20

On October 21, 2002, the Court of Appeals rendered a decision setting aside the May 24, 1995 decision of the NLRC and reinstated its May 20, 1993 decision and September 29, 1993 resolution, thus:

WHEREFORE, the petition is GRANTED. The decision dated May 24, 1995 of the National Labor Relations Commission is ANNULLED and SET ASIDE, with the result that its decision dated May 20, 1993 and resolution dated September 29, 1994 are REINSTATED.

SO ORDERED.21

Both parties filed their respective motions for reconsideration which were denied, hence, the present consolidated petitions for review based on the following assigned errors:

In G.R. No. 164518

THE COURT OF APPEALS ERRED IN LIBERALLY APPLYING THE RULES OF PROCEDURE WITH RESPECT TO RESPONDENTS BUT BEING RIGID IN ITS APPLICATION AS REGARDS PETITIONERS.22

In G.R. No. 164965

WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT REFUSED TO APPLY SECTION 279 OF THE LABOR CODE AS AMENDED BY RA 6715 TO MODIFY THE DECISION OF 20 MAY 1993 WITH RESPECT TO BACKWAGES FOR PETITIONERS.23

ITC and IPGC contend that the Court of Appeals erred in reversing the May 24, 1995 decision of the NLRC since its May 20, 1993 decision had become immutable for their failure to file motion for reconsideration within the reglementary period. While they admit filing their motion for reconsideration out of time due to excusable negligence of their counsel’s secretary, however, they advance that the Court of Appeals should have relaxed the rules of technicality in the paramount interest of justice, as it had done so in favor of the employees, and ruled on the merits of the case; after all, the delay was just three days.

Ordinarily, once a judgment has become final and executory, it can no longer be disturbed, altered or modified. However, this rule admits of exceptions in cases of special and exceptional nature as we held in Industrial Timber Corporation v. National Labor Relations Commission:24

It is true that after a judgment has become final and executory, it can no longer be modified or otherwise disturbed. However, this principle admits of exceptions, as where

facts and circumstances transpire which render its execution impossible or unjust and it therefore becomes necessary, ‘in the interest of justice, to direct its modification in order to harmonize the disposition with the prevailing circumstances.’

A careful scrutiny of the facts and circumstances of these consolidated cases warrants liberality in the application of technical rules and procedure. We agree with the NLRC that substantial justice is best served by allowing the petition for relief despite procedural defect of filing the motion for reconsideration three days late, for to rule otherwise, a greater injustice would be done to ITC by ordering it to reinstate the employees to their former positions that no longer exist due to valid and legitimate cessation of business and pay huge judgment award.25

Moreover, under Article 218 (c) of the Labor Code, the NLRC may, in the exercise of its appellate powers, correct, amend, or waive any error, defect or irregularity whether in substance or in form. Further, Article 221 of the same code provides that in any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process.26

Also, the rule under Section 14 of Rule VII of the New Rules of Procedure of the NLRC that a motion for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within 10 calendar days from receipt of the order, resolution or decision should not be interpreted as to sacrifice substantial justice to technicality. It should be borne in mind that the real purpose behind the limitation of the period is to forestall or avoid an unreasonable delay in the administration of justice, from which the NLRC absolved ITC and IPGC because the filing of their motion for reconsideration three days later than the prescribed period was due to excusable negligence. Indeed, the "Court has the power to except a particular case from the operation of the rule whenever the purposes of justice requires it because what should guide judicial action is that a party is given the fullest opportunity to establish the merits of his action or defense rather than for him to lose life, honor, or property on mere technicalities."27

We now come to the main issues of whether Ababon, et al. were illegally dismissed due to the closure of ITC’s business; and whether they are entitled to separation pay, backwages, and other monetary awards.

Work is a necessity that has economic significance deserving legal protection. The social justice and protection to labor provisions in the Constitution dictate so. On the other hand, employers are also accorded rights and privileges to assure their selfdetermination and independence, and reasonable return of capital. This mass of privileges comprises the so-called management prerogatives. Although they may be

broad and unlimited in scope, the State has the right to determine whether an employer's privilege is exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor. One of the rights accorded an employer is the right to close an establishment or undertaking.28

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 Labor Code.

Article 283 of the Labor Code provides:

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.1awphi1.net 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 to 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.

A reading of the foregoing 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 employer must sufficiently and convincingly prove its allegation of substantial losses,29 while under the second kind, the employer can lawfully close shop anytime30 as long as cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees,31 and as long as he pays his employees their termination pay in the amount corresponding to their length of service.32 Just as no law forces anyone to go into business, no law can compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court interferes with management's prerogative to close or cease its business operations just because the business is not suffering from any loss or because of the desire to provide the workers continued employment.33

In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business operations: (a) service of a written notice to the employees and to the DOLE at least one month before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment to the employees of

termination pay amounting to one month pay or at least one-half month pay for every year of service, whichever is higher.

In these consolidated cases, we find that ITC’s closure or cessation of business was done in good faith and for valid reasons.

The records reveal that the decision to permanently close business operations 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 in April 1990, and the termination of the lease contract with IPGC in August 1990 over the plywood plant at Agusan, Pequeño, Butuan City. We quote with approval the observation of the Labor Arbiter:

As borne out from the records, respondent ITC actually underwent ‘no plant operation’ since 19 March 1990 due to lack of log supply. This fact is admitted by complainants (Minutes of hearing, 28 October 1991). Since then several subsequent incidents prevented respondent ITC to resume its business operations e.g. expiration and nonrenewal of the wood processing plant permit, anti-pollution permit, and the lease contract on the plywood plant. Without the raw materials respondent ITC has nothing to produce. Without the permits it cannot lawfully operate the plant. And without the contract of lease respondent ITC has no option but to cease operation and turn over the plant to the lessor.34 (Emphasis supplied)

Moreover, the lack of raw materials used for milling operations was affirmed in Industrial Timber Corporation v. National Labor Relations Commission35 as one of the reasons for the valid closure of ITC’s Butuan Logs Plant in 1989. In said case, we upheld the management prerogative to close the plant as the only remedy available in order to prevent imminent heavy losses on account of high production costs, erratic supply of raw materials, depressed prices and poor market conditions for its wood products.

In Shoppers Gain Supermarket v. National Labor Relations Commission,36 we held that the non-renewal of petitioner corporation’s lease contract and its consequent closure and cessation of operations may be considered an event beyond petitioner’s control, in the nature of a force majeure situation. As such, it amounts to an authorized cause for termination of the private respondents.

Having established that ITC’s closure of the plywood plant was done in good faith and that it was due to causes beyond its control, the conclusion is inevitable that said closure is valid. Consequently, Ababon, et al. could not have been illegally dismissed to be entitled to full backwages. Thus, we find it no longer necessary to discuss the issue regarding the computation of their backwages. However, they are entitled to separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher.

Although the closure was done in good faith and for valid reasons, we find that ITC did not comply with the notice requirement. While an employer is under no obligation to

conduct hearings before effecting termination of employment due to authorized cause, 37 however, the law requires that it must notify the DOLE and its employees at least one month before the intended date of closure.

In the case at bar, ITC notified its employees and the DOLE of the ‘no plant operation’ on March 16, 1990 due to lack of raw materials. This was followed by a ‘shut down’ notice dated June 26, 1990 due to the expiration of the anti-pollution permit. However, this shutdown was only temporary as ITC assured its employees that they could return to work once the renewal is acted upon by the DENR. On August 17, 1990, the ITC sent its employees a final notice of closure or cessation of business operations to take effect on the same day it was released. We find that this falls short of the notice requirement for termination of employment due to authorized cause considering that the DOLE was not furnished and the notice should have been furnished both the employees and the DOLE at least one month before the intended date of closure.1awphi1.net

In Ariola v. Philex Mining Corporation,38 we held:

In Agabon v. National Labor Relations Commission and Jaka Food Processing Corporation v. Pacot, the Court sustained the dismissals for just cause under Article 282 and for authorized cause under Article 283 of the Labor Code, respectively, despite noncompliance with the statutory requirement of notice and hearing. The grounds for the dismissals in those cases, namely, neglect of duty and retrenchment, remained valid because the non-compliance with the notice and hearing requirement in the Labor Code did not undermine the validity of the grounds for the dismissals. Indeed, to invalidate a dismissal merely because of a procedural defect creates absurdity and runs counter to public interest. We explained in Agabon:

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences.

This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy.

Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employer’s exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon

the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.39

In light of the factual circumstances of the cases at bar, we deem it wise and reasonable to award P50,000.00 to each employee as nominal damages.

WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-GR. SP No. 51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004 Resolution denying ITC’s motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the decision of the Labor Arbiter finding the closure or cessation of ITC’s business valid, is AFFIRMED with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one month pay or to at least one-half month pay for every year of service, whichever is higher, and P50,000.00 as nominal damages to each employee.

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION

G.R. No. 164518

March 30, 2006

INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN, Petitioners, vs. VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL ABREA, BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, ARTURO ADVINCULA, GERTRUDES AMPARO, VIRGILIO ANTONIO, MILA ARQUITA, PRUDENCIO ARQUITA, ALBERT ATON, WARLITA AUTIDA, ALICIA AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO BANATE, LOLITA BATAN, RAMIL BUTALON, CARMILITA CAINGLES, VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO CARILLO, NILA CARILLO, ALGER CORBETA, GREGORIO DABALOS, TERESITA DABALOS, VENERANDO DALAUTA, RICARDO DANGCULOS, MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO, EDITHA DUMANON, ALFREDO FAELNAR, RAUL FORTUN, MAXIMO GALLA, ANGELES GALUPO, PERFECTO GAMBE, VERGINITA GANGCA, RUPERTO GORGONIO, ROMEO HERRERO, SERGIO HORO-HORO, FRANCISCO IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA LAMBANG, ERNESTO LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR., ESCARLITO MADLOS, MARCOS

MAKINANO, REMEGIO MAKINANO, VICENTE MAKINANO, REYNALDO MASUHAY, HELEN MARATAS, ELIZABETH MENDOZA, GUILBERTA MONTEROSO, GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO NUÑEZ, JR., ELISEO ORONGAN, ARMANDO OROPA, ASUNCION OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN, BARTOLOME PAGALAN, DAMASO PALOMA, MANALO PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL, HERMINIA PUBLICO, ROMULO QUINTOS, FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC RODRIGUEZ, SAMUEL SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO TAMADA, MINDA TUMAOB and ROBERTO TUTOR, Respondents.

x - - - - - - - - - - - - - - - - x

G.R. No. 164965 March 30, 2006

VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL ABREA, BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, ARTURO ADVINCULA, GERTRUDES AMPARO, MILA ARQUITA, VIRGILIO ANTONIO, PRUDENCIO ARQUITA, ALBERT ATON, WARLITA AUDITA, ALICIA AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO BANATE, LOLITA BATAN, RAMIL BUTALON, CARMELITA CAINGLES, VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO CARILLO, NILA CARILLO, ALGIER CORBETA, GREGORIO DABALOS, TERESITA DABALOS, VENERANDO DALAUTA, RICARDO DANGCULOS, MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO, EDITHA DUMANON, ALFREDO FAELNAR, RAUL FORTUN, MAXIMO GALLA, ANGELES GALUPO, PERFECTO GAMBE, VIRGINITA GANGCA, RUPERTO GORGONIO, ROMEO HERRERO, SERGIO HOR-HORO, FRANCISCO IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA LAMBANG, ERNESTO LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR., ESCARLITO MADLOS, MARCOS MAKINANO, REMEGIO MAKINANO, VICENTE MAKINANO, REYNALDO MAHUSAY, HELEN MARATAS, ELIZABETH MENDOZA, GUILBERTA MONTEROSO, GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO NUÑEZ, JR., ELISEO ORONGAN, ARMANDO OROPA, ASUNCION OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN, BARTOLOME PAGALAN, DAMASO PALOMA, MANALO PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL, HERMINIA PUBLICO, ROMULO QUINTOS, FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC RODRIGUEZ, SAMUEL SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO TAMADA, MINDA TUMAOB, and ROBERTO TUTOR, Petitioners, vs. THE HONORABLE COURT OF APPEALS, INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN, Respondents.

R E S O L U T I O N

YNARES-SANTIAGO, J.:

On January 25, 2006, the Court rendered judgment disposing of the case as follows:

WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-G.R. SP No. 51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004 Resolution denying ITC’s motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the decision of the Labor Arbiter finding the closure or cessation of ITC’s business valid, is AFFIRMED with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher, and P50,000.00 as nominal damages to each employee.

SO ORDERED.1

On March 14, 2006, respondents in G.R. No. 164518 who are also petitioners in G.R. No. 164965 filed a Motion for Reconsideration seeking to set aside the above-stated Decision and reinstate the October 21, 2002 Decision of the Court of Appeals, with the modification that they be awarded full backwages, with the additional award of P50,000.00 as nominal damages for each worker.

They insist that the holding in International Timber Corporation v. National Labor Relations Commission2 that the closure of ITC’s Butuan Plant was valid should not have been applied in the instant cases which pertain to ITC’s Stanply Plant. They further claim that the findings by the Labor Arbiter that there was a shortage of raw materials; that the wood processing plaint permit has expired; that the lease contract with IPGC was terminated; and that ITC and IPGC were not business conduits, were all debunked by the NLRC.

The arguments raised have been amply discussed; at any rate, they are inconsequential as to affect the assailed Decision.

On the other hand, petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 also filed a Motion for Partial Reconsideration seeking to delete or reduce the nominal damages awarded to each employee, considering that since August 17, 1990 it had ceased operation of its business and that the award involves a huge amount considering that there are 97 workers.3

While we ruled in this case that the sanction should be stiffer in a dismissal based on authorized cause where the employer failed to comply with the notice requirement than a dismissal based on just cause with the same procedural infirmity, however, in instances where the execution of a decision becomes impossible, unjust, or too

burdensome, modification of the decision becomes necessary in order to harmonize the disposition with the prevailing circumstances.

In the determination of the amount of nominal damages which is addressed to the sound discretion of the court, several factors are taken into account: (1) the authorized cause invoked, whether it was a retrenchment or a closure or cessation of operation of the establishment due to serious business losses or financial reverses or otherwise; (2) the number of employees to be awarded; (3) the capacity of the employers to satisfy the awards, taken into account their prevailing financial status as borne by the records; (4) the employer’s grant of other termination benefits in favor of the employees; and (5) whether there was a bona fide attempt to comply with the notice requirements as opposed to giving no notice at all.

In the case at bar, there was valid authorized cause considering the closure or cessation of ITC’s business which was done in good faith and due to circumstances beyond ITC’s control. Moreover, ITC had ceased to generate any income since its closure on August 17, 1990. Several months prior to the closure, ITC experienced diminished income due to high production costs, erratic supply of raw materials, depressed prices, and poor market conditions for its wood products. It appears that ITC had given its employees all benefits in accord with the CBA upon their termination.

Thus, considering the circumstances obtaining in the case at bar, we deem it wise and just to reduce the amount of nominal damages to be awarded for each employee to P10,000.00 each instead of P50,000.00 each.

WHEREFORE, premises considered, the Motion for Reconsideration of respondents in G.R. No. 164518 who are also petitioners in G.R. No. 164965 is DENIED. The Motion for Partial Reconsideration of petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 is GRANTED. The amount of nominal damages awarded to each employee is reduced from P50,000.00 to P10,000.00.

SO ORDERED.





Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION

G.R. No. 157133

January 30, 2006

BUSINESS SERVICES OF THE FUTURE TODAY, INC. and RAMON F. ALLADO, Petitioners, vs. COURT OF APPEALS, GILBERT C. VERUASA and MA. CELESTINA A. VERUASA, Respondents.

D E C I S I O N

QUISUMBING, J.:

For review on certiorari is the Decision1 dated April 16, 2002, as well as the Resolution2 dated January 15, 2003, of the Court of Appeals in CA-G.R. SP No. 66733. The appellate court had reversed the Resolution3 dated March 15, 2001, of the National Labor Relations Commission in NLRC CA No. M-005830-2000, which earlier reversed the Decision4 dated June 1, 2000, of the Labor Arbiter in Case No. RAB-11-09-01053-99.

These are the antecedent facts:

Mailboxes, Etc. (Davao) is the local franchisee of Mailboxes, Etc. (MBE), a US-based corporation operating business support and communication service centers worldwide. It is operated locally by petitioner Business Services of the Future Today, Inc. (BSFTI), whose stockholders are petitioner Ramon Allado and his nominees.

On January 8, 1996, Allado hired private respondents, spouses Gilbert and Ma. Celestina Veruasa, as manager and assistant manager, respectively, of Mailboxes, Etc. (Davao) for a compensation package of P15,000 monthly. Due to lack of funds from BSFTI, however, they were not paid their salaries amounting to P142,613.93 from March 1997 to January 8, 1998.

On January 8, 1998, Allado personally gave notices of termination effective immediately to the spouses. They gave as reason, the negative cashflow and BSFTI’s failure to infuse additional capital to the business. No written notice of closure of business was given to the Department of Labor and Employment (DOLE). Allado then padlocked the offices of Mailboxes, Etc. (Davao), confiscated all its business records, and appropriated for himself all the transferable rights and equipment of the office.

On or about March 20, 1998, Allado gave the spouses P13,125 as partial payment of their salaries. Despite repeated demands, the petitioners did not pay the balance of P129,488.93 due to the spouses.

On their part, petitioners had a different story. They claim that on or about April 5, 1995, Allado and Leo G. Dominguez invited Gilbert Veruasa to invest in a business under the franchise of MBE. At that time, Allado had already organized BSFTI although its registration was still pending with the Securities and Exchange Commission (SEC). Gilbert submitted his counter-proposal stating, among others, that he would: (1) manage

the business; and (2) contribute as equity, the assets and goodwill of his former business enterprise, Fax Business Shop, worth P300,000. Allado and Dominguez accepted the counter-proposal.

According to petitioners, Gilbert Veruasa then laid the groundwork and periodically submitted reports of his activities, accomplishments, and concerns to Allado and Dominguez. On September 26 and October 13, 1995, Gilbert submitted a report seeking confirmation of his investment in BSFTI. The parties then signed a Shareholders’ Agreement which recognized Gilbert’s P300,000 contribution. Petitioners, however, aver that all signed copies, which were entrusted to Gilbert, could no longer be located. The parties also agreed that Gilbert’s wife, Celestina, would assist in the management of the business for which they would receive compensation of P15,000 monthly.

During its first year of operations, BSFTI suffered losses amounting to P1,145,461.43. The following year, it experienced further cash problems. The owners failed to attract other investors. As the owners were no longer willing to infuse additional capital, Gilbert Veruasa and petitioners decided to close shop.

Although all employees were informed of the company’s closure and their termination, Gilbert failed to inform the DOLE. Instead, he took possession of important company records as well as the properties which he contributed earlier to BSFTI.

Thereafter, the Veruasa spouses instituted a complaint for illegal dismissal. The Labor Arbiter ruled the dismissal of the spouses illegal. The Labor Arbiter ruled that the spouses were employees of BSFTI since all the elements of an employer-employee relationship were present. Neither was there any showing that the spouses were stockholders. Further, the Labor Arbiter said it was unlikely that petitioners did not have a copy of the alleged Shareholders’ Agreement, if indeed there was such an agreement evidencing the spouses’ participation in the business. Nor did BSFTI’s articles of incorporation show that the spouses were incorporators. Thus, their dismissal of the spouses should have been in accordance with the Labor Code. Although the employees were given notices of termination, DOLE was not provided a notice of closure. The Labor Arbiter awarded the spouses P496,897.46 representing their separation pay, backwages, and 13th month pay, plus 10% attorney’s fees.

Upon appeal by both parties, the National Labor Relations Commission (NLRC) dismissed the case5 and ruled that, (1) Gilbert was both a BSFTI employee and stockholder as evidenced by his communications to BSFTI’s other stockholders; (2) BSFTI was not obliged to pay separation benefits to the spouses since there was a valid closure of business due to serious financial losses; (3) the spouses were not entitled to backwages since as manager, it was Gilbert’s duty to notify the DOLE of the closure; (4) there was no basis for awarding 13th month pay; and (5) there was no basis for the claim for unpaid salaries since there were petty cash vouchers showing full payment of the spouses’ salaries.

On appeal, the Court of Appeals reversed6 the NLRC and reinstated the decision of the Labor Arbiter with modification. The decretal portion of the decision reads:

WHEREFORE, the assailed resolutions dated March 15, 2001 and August 22, 2001 issued by public respondent National Labor Relations Commission, 5th Division, in NLRC CA No. M-0055830-2000 are hereby REVERSED and SET ASIDE, and the decision dated June 1, 2000 of Labor Arbiter Miriam A. Libron-Barroso in NLRC RAB 11-09-001053-99 is AFFIRMED with MODIFICATION, to delete the award of separation pay, to wit:

1. 13th Month pay - P 12,787.50 2. Backwages - 467,512.50

TOTAL - P480,300.00

Less: Excess in advance P 18,084.05

PARTIAL NET - P462,215.95

Add: 10% of total award

as attorney’s fees - P 46,221.59

TOTAL NET - P508,437.54

SO ORDERED.7

The appellate court held that the spouses were employees of BSFTI since all the essential elements of an employer-employee relationship were present. According to the appellate court, there was no evidence that Gilbert was a stockholder other than the petitioners’ bare allegation that the parties had entered into a Shareholders’ Agreement. It likewise ruled that it was not Gilbert’s duty, but petitioners’ to notify the DOLE of the closure. Absent such notice, the dismissal was without effect. Nevertheless, it disallowed the payment of separation pay since the closure was due to serious financial losses. Instead, it ordered the payment of backwages and unpaid salaries, for lack of proof that the salaries were paid.

The petitioners now come to this Court alleging that:

1) The requirement of filing of written notice of closure of business with the Department of Labor and Employment is not applicable and unnecessary in the case of respondents because they were stockholders and managers of petitioner corporation who took part in the decision to close the business;

2) Even assuming arguendo the dismissal of respondents was ineffectual, they are not entitled to backwages and 13th month pay from the time of their dismissal until finality of

the decision because the business of petitioner ceased to operate simultaneously with their dismissal; and

3) Petitioner submitted documents to prove that respondents were paid their salaries in full and were even overpaid.8

Briefly, the key issues in this petition are: (1) Were the spouses employees or stockholders of BSFTI? (2) If they were employees, were they validly dismissed? and (3) Are they entitled to 13th month pay, backwages, separation pay as well as unpaid salaries?

Preliminarily, it bears stressing that the prior existence of an employer-employee relationship is an indispensable precondition for a claim of illegal dismissal to prosper.9 Here, both parties admitted that Gilbert and Celestina were hired as BSFTI’s manager and assistant manager, respectively, with P15,000 monthly salary. The petitioners would have us believe, however, that Gilbert was also a stockholder, hence, there was no need to notify DOLE of the closure since as stockholder, he was presumed to have taken part in the decision to close the business.

Notice of closure to the DOLE is mandatory. It allows the DOLE to ascertain whether the closure and/or dismissals were done in good faith and not a pretext for evading obligations to the employees. This requirement protects the workers’ right to security of tenure. Failure to comply with this requirement taints the dismissal.10 This rule, however, admits of exceptions. If the employee consented to his retrenchment due to the closure or cessation of operation, the required prior notice to the DOLE is not necessary as the employee thereby acknowledges the existence of a valid cause for termination of his employment.11

Did respondent Gilbert Veruasa consent to his dismissal?

The evidence shows that he did not. Although only his correspondences with the petitioners suggest that he was a stockholder of BSFTI,12 there is no showing that he participated in the alleged stockholders’ meeting where the company’s closure was discussed. The self-serving Joint Affidavit of Allado and Dominguez attesting that Gilbert participated in the meeting discussing the closure is insufficient.13 The minutes of such meeting would have been better. Further, the SEC certification dated November 9, 1999, provided that BSFTI did not submit any communication signifying the termination of its corporate life nor its non-operation for 1998,14 giving rise to serious doubts that such meeting ever took place. Hence, there is no convincing evidence to show that Gilbert consented to his dismissal and for these reasons the petitioners should have submitted a written notice of BSFTI’s closure to the DOLE.

Were private respondents validly dismissed?

Article 283 of the Labor Code is the applicable law. It states,

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 worker 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 as one (1) whole year.

For the cessation of business operations due to serious business losses or financial reverses to be valid, the employer must give the employee and the DOLE written notices 30 days prior to the effectivity of his separation.

In Agabon v. National Labor Relations Commission,15 we ruled that where the dismissal is for an authorized cause, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee, in the form of nominal damages, for the violation of his right to statutory due process.16 The amount of such damages is addressed to the sound discretion of the Court, taking into account the relevant circumstances.17 In Jaka Food Processing Corporation v. Pacot,18 we noted that the sanction should be stiffer because the dismissal process was initiated by the employer’s exercise of its management prerogative.

The NLRC and the Court of Appeals were unanimous in finding that BSFTI’s closure was bona fide. The records before us revealed that it suffered losses from 1996 to 1998.19 Juxtaposing the facts of this case vis the applicable law and jurisprudence, P40,000 as nominal damages would be sufficient to vindicate each respondent’s right to due process. A violation of that right suffices to support an award of nominal damages. 20

In view of the valid dismissal, there is, thus, no basis for awarding the spouses P12,787.50 as 13th month pay.

Lastly, the Labor Arbiter21 and the NLRC22 found that the spouses’ advances exceeded their unpaid salaries by P43,402.54. The NLRC even noted that Annexes 18 to 341 of the petitioners’ Position Paper contained the petty cash vouchers evidencing payment of their salaries up to December 29, 1997.23 Interestingly, the spouses argued in their Position Paper24 that they were not paid their monthly salary of P15,000 from March 1997 to January 8, 1998. Their total claim for unpaid salaries therefore amounted to P129,488.93, minus the P13,125 which Allado paid to them. Yet, in their Motion for

Partial Clarification/Reconsideration,25 they admitted that their total advances amounted to P178,075.95. Hence, based on their admitted advances, they were overpaid by P48,587.02. This is even a larger amount than what was arrived at by the Labor Arbiter and the NLRC. Said amount of P48,587.02 should be paid back to petitioners, to prevent unjust enrichment.

WHEREFORE, the instant petition is PARTIALLY GRANTED. Accordingly, the assailed Decision dated April 16, 2002, as well as the Resolution dated January 15, 2003, of the Court of Appeals in CA-G.R. SP No. 66733, are SET ASIDE, and a new one entered upholding the legality of the dismissal. Petitioners are ORDERED to pay each of the private respondents the amount of P40,000, or a total of P80,000 for the spouses representing nominal damages. Private respondents, however, are also ORDERED to refund to petitioners the amount of P48,587.02, which is the amount of admitted advances taken by the Veruasa spouses exceeding the amount of their unpaid salaries.

SO ORDERED.





Republic of the Philippines SUPREME COURT

THIRD DIVISION

G.R. No. 157611. August 9, 2005

ALABANG COUNTRY CLUB INC., ROBERTO ANONAS, CATALINO SANTOS, ERNESTO CAYETANO and ROGELIO MANALO, Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, ALABANG COUNTRY CLUB INDEPENDENT EMPLOYEES UNION, MARILOU ABADIANO, ERNESTO BANAL, BENEDICTO CATALAN, ABNER CAVESTANY, ROMULO DALAYGON, ELENA DELA CRUZ, RONALDO IBARRA, MA. ISABELITA PIZARRO, FELIX ARISME, EDILBERTO BANTILLES, BERNARDO DE CHAVEZ, MEDARDO ENRIQUEZ, ERNESTO DEREZA, DOMINGO IBALLAR, GINA DUMALAON, JOSE MASAGCA, MARIO FRANCHE, SHARON DANTES-PLATERO, ANNALISSA GARCIA, JULIET TENORIO, ROLANDO GANNABAN, EMERSON ARGOSO, ANICETO GLEAN, FELIPE CADENA, PERLITA HENARES, JOSEPH TAYONG, JAIME HIDALGO, ROSANNA ROSARIAL, LEODEGARIO HUMIRANG, EFREN ABIADA, FILIPINO DIZON, ELPIDIO IBUOS, JR., ROBERTO LANON, ARNOLD LAYUG, JOEL LINAOGO, EDUARDO LLENAS, JOSELITO LORINO, FERDINAND MABITASAN, GEORGE MARASIGAN, PERLA MARGES, CYNTHIA MATHAY, WERLITO NAVARRO, CRISTINA OLEGARIO, CRISTINA OMAYAO, NENEN ORTIGOZA, ELEONOR PALIMA, MARIA PANTALITA,

EDUARDO PERALTA, RICHARD PEREZ, JOVITO PIDLAOAN, PACITA PILONGO, BENJAMIN PINTOR, NARCISO QUIZANA, AGRIFINO REYES, DENNIS REYES, EDUARDO RUBINA, ARISTEO SANTOS, ROBERTO SOLANTE, ARMANDO SUAREZ, DOLORES VALIENTE, REMEDIOS UMALI, INGERSOL POMIDA, and FLORO MACABIT, Respondents.

D E C I S I O N

CARPIO-MORALES, J.:

Petitioner Alabang Country Club Inc. (ACCI), a stock, non-profit corporation that operates and maintains a country club and various sports and recreational facilities for the exclusive use of its members, seeks to set aside the appellate court’s Decision1 of August 14, 2002 as well as its Resolution2 of March 6, 2003 denying petitioner’s motion for reconsideration. The appellate court reversed and set aside the National Labor Relation Commission’s (NLRC) Decision3 of March 15, 2002, and ordered the reinstatement of herein sixty-three (63) respondents-members of a duly registered labor organization - Alabang Country Club Independent Employees Union (the Union), without loss of seniority rights and other privileges, and the payment of their full backwages including attorney’s fees.

Sometime in 1993, Francisco Ferrer, then President of ACCI, requested its Internal Auditor, Irene Campos-Ugalde, to conduct a study on the profitability of ACCI’s Food and Beverage Department (F & B Department).4 Ugalde made use of the audited figures in the financial statements5 prepared by Sycip Gorres Velayo & Co. (SGV&Co.) for the years 1989-1993 in reflecting the total revenue and costs and expenses of the F & B Department. However, while SGV&Co. deducted the entire "undistributed operating costs and expenses" consisting of "general and maintenance costs" from the total income of ACCI,6 Ugalde allocated a percentage of these expenses and charged the same against the total revenue of the F & B Department.7 Consequently, her report showed that from1989 to 1993, F & B Department had been incurring substantial losses in the aggregate amount of Eight Million Seven Hundred Twenty-Seven Thousand One Hundred Thirty-Five Pesos (P8,727,135.00).8 Her report further showed that:

1. It was only in 1993 when the losses dropped as compared to the 1992 figures. This was the result of an effective joint management employee undertaking in 1993 towards cost-cutting and efficient resource administration; and

2. The endeavor succeeded only in reducing losses but not totally raising the figures upward to at least a break-even level;

3. ACCI can generate income from F & B Department if its operation will be transferred to a concessionaire;

4. Actual breakages alone w[ere] approximately P298,000 [from] January 1, 1994 to May 15, 1994 or an average of P60,000 a month.9



Realizing that it was no longer profitable for ACCI to maintain its own F & B Department, the management decided to cease from operating the department and to open the same to a contractor, such as a concessionaire, which would be willing to operate its own food and beverage business within the club.10

ACCI’s Labor Committee Chairman Catalino Santos thus met on November 11, 1994 with the Union officers and members and discussed the financial standing of the F & B Department.11

ACCI subsequently entered on December 1, 1994 into an agreement with La Tasca Restaurant Inc. (La Tasca), for it to operate the F & B Department.12 Under the agreement, La Tasca would pay ACCI fifteen (15%) percent of its gross sales net of sales tax plus the expenses for light and water in the amount of five (5%) percent of monthly gross sales net of sales tax.13

Also on December 1, 1994, ACCI sent its F & B Department employees individual letters informing them that their services were being terminated effective January 1, 1995;14 and that they would be paid separation pay equivalent to one hundred twenty five (125%) percent of their monthly salary for every year of service.15 ACCI also informed them that La Tasca agreed to absorb all affected employees immediately with the status of regular employees without need of undergoing a probationary period, and that all affected employees would receive the same salary they were receiving from ACCI at the time of their termination.16

On December 11, 1994, the Union, with the authority of individual respondents, filed before the NLRC a complaint for illegal dismissal, unfair labor practice, regularization and damages with prayer for the issuance of a writ of preliminary injunction against ACCI.17

The Union then filed a notice of strike.18 ACCI, finding that the requirements under the Labor Code had not been complied with, suspended on December 28, 1994 those who participated in the strike.19

The Union averred, however, that no strike was actually held and that it was caught by surprise when, upon reporting for work on December 28, 1994, employees of La Tasca "brought their equipment and took over the posts held by most of [the individual respondents]."20

As scheduled, ACCI ceased operating its F & B Department by January 1, 1995 as La Tasca began operating its own F & B business at the Alabang Country Club.

Meanwhile, in the proceedings before the Labor Arbiter, respondent union and individual respondents informed that the F & B Division had been reporting gaining profits as shown by the Statement of Income and Deficit prepared by SGV&Co.21 They thus

argued that compliance with the standards for losses in Lopez Sugar Corporation v. Federation of Free Workers22 to justify their retrenchment were not met by ACCI.

ACCI averred, however, that it may exercise management prerogatives to adopt a costsaving and cost-consciousness program to improve efficiency in its operations,23 prevent losses, and concentrate on core businesses,24 and to lay-off workers and contract out their jobs.25

During the pendency of the complaint for illegal dismissal before the Labor Arbiter, fortyseven (47) of the individual respondents accepted separation benefits from ACCI at 125% of their monthly salary for every year of service, on account of which they executed Waivers and Quitclaims in favor of ACCI: Marilou Abadiano, Ernesto Banal, Benedicto Catalan, Abner Cavestany, Romulo Dalaygon, Elena dela Cruz, Ernesto Dereza, Gina Dumalaon, Mario Franche, Annalissa Garcia, Rolando Gannaban, Aniceto Glean, Perlita Henares, Jaime Hidalgo, Leodegario Humirang, Elpidio Ibuos, Jr., Roberto Lanon, Arnold Layug, Joel Linaogo, Eduardo Llenas, Joselito Lorino, Ferdinand Mabitasan, George Marasigan, Perla Marges, Cynthis Mathay, Werlito Navarro, Cristina Olegario, Cristina Omayao, Nenen Ortigoza, Eleonor Palima, Maria Pantalita, Eduardo Peralta, Richard Perez, Jovito Pidlaoan, Pacita Pilongo, Benjamin Pintor, Narciso Quizana, Agrifino Reyes, Dennis Reyes, Eduardo Rubina, Aristeo Santos, Roberto Solante, Armando Suarez, Dolores Valiente, Remedios Umali, Ingersol Pomida and Floro Macabit.26

By decision of April 30, 1999, the Labor Arbiter dismissed the complaint for illegal dismissal on the ground that a business entity has the right to reduce its work force if necessitated by compelling economic factors which endanger its existence or stability. 27 The Labor Arbiter in fact found that the study made by Ugalde which was a more detailed version of the financial statements prepared by SGV&Co. clearly established that the F & B Department was incurring losses, thus justifying ACCI to exercise its inherent prerogative to retrench its workers to prevent further losses.28

On appeal, the NLRC acknowledged the right of ACCI to regulate, according to its own discretion and judgment, all aspects of employment including the lay-off of workers because of losses in the operation of its business, lack of work and considerable reduction in the volume of business.29 It thus dismissed the appeal.

Private respondents’ motion for reconsideration of the NLRC’s dismissal of the appeal was denied by Resolution30 of April 28, 2000.

Private respondents thereupon brought their case, via petition for certiorari,31 before the Court of Appeals, alleging that the Labor Arbiter and the NLRC committed grave abuse of discretion and utter ignorance of the law in completely disregarding the audited financial statements prepared by SGV&Co. showing that ACCI’s F & B Department had been consistently earning profits.32

During the pendency of the petition before the appellate court, fifteen (15) of the individual respondents received their separation package equivalent to 125% of their monthly salary for every year of service, on account of which they executed Waivers and Quitclaims in favor of ACCI: Ronaldo Ibarra, Ma. Isabelita Pizarro, Felix Arisme, Edilberto Bantilles, Bernardo de Chavez, Medardo Enriquez, Domingo Iballar, Jose Masagca, Sharon Dantes-Platero, Juliet Tenorio, Emerson Argoso, Felipe Cadena, Joseph Tayong, Rosanna Rosarial, and Efren Abadia.33

By decision of August 14, 2002, the Court of Appeals reversed those of the NLRC and the Labor Arbiter. It held that due to ACCI’s failure to prove by sufficient and competent evidence that its alleged losses were substantial, continuing and without any immediate prospect of abating them, the bona fide nature of the retrenchment appeared doubtful. 34 Passing on ACCI’s financial status, the appellate court, citing Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC35 and Dela Salle University v. Dela Salle University Employees Association,36 held that financial statements audited by independent external auditors, and not a mere study report of an internal auditor of a company, constitute the normal method of proof of the profit and loss of the company.37

ACCI’s motion for reconsideration38 having been denied by the appellate court by Resolution39 of March 6, 2003, it comes before this Court via petition for review on certiorari, advancing the following arguments:

A.

CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE, THE COURT OF APPEALS GRAVELY DISREGARDED THE CLUB’S RIGHT TO TERMINATE ITS EMPLOYEES FOR AN AUTHORIZED CAUSE, PARTICULARLY TO SECURE ITS CONTINUED VIABILITY AND EXISTENCE.

B.

CONSISTENT WITH ESTABLISHED LAW AND JURISPRUDENCE, INASMUCH AS BOTH FINDINGS OF PUBLIC RESPONDENT NLRC AND THE LABOR ARBITER A QUO THAT THE CLUB’S F & B EMPLOYEES WERE VALIDLY TERMINATED, ARE SUPPORTED BY AUDITED FINANCIAL STATEMENTS AND OTHER SUBSTANTIAL EVIDENCE, THE PETITION BELOW SHOULD HAVE BEEN DISMISSED.

C.

THE ORDER FOR REINSTATEMENT, PAYMENT OF BACKWAGES, AND THE AWARD OF ATTORNEY’S FEES ARE NOT PROPER SINCE RESPONDENTS WERE TERMINATED FOR AN AUTHORIZED CAUSE AND AFTER COMPLIANCE WITH DUE PROCESS.

D.

THE COURT OF APPEALS SHOULD HAVE RECOGNIZED THAT SIXTY-TWO OUT OF THE SIXTY THREE PETITIONERS INDICATED IN THE PETITION BELOW HAVE ALREADY ACKNOWLEDGED RECEIPT OF THE MONETARY AWARD AFFIRMED IN THE COMISSION’S DECISION DATED 15 MARCH 2000 IN FULL SATISFACTION THEREOF.40

The petition is impressed with merit.

ACCI, hereinafter referred to as petitioner, justifies the closure of its F & B Department based on business losses incurred for the past years as reflected in its letter to its employees dated December 1, 1994, to wit:

As you probably have known, our Food and Beverage Division has been losing for the past several years. Your management tried to remedy the situation through changes and innovations but to no avail. This being so and to prevent further losses, management has deemed it necessary to concessionize (sic) our Food and Beverage operations. Since La Tasca won in the bidding and pursuant to our agreement with the same, La Tasca shall, effective January 1, 1995, be operating all our Food and Beverage outlets. As a consequence thereof, please be informed that effective January 1, 1995, your services shall be terminated as effective said date ACCI shall cease to operate all Food and Beverage outlets. x x x41 (Underscoring supplied).

In Lopez Sugar Corporation v. Federation of Free Workers42 cited by respondents, this Court held that retrenchment on the ground of serious business losses is allowed subject to the conditions that (1) the losses expected should be substantial and not merely de minimis in extent; (2) the substantial losses apprehended must be reasonably imminent as such imminence can be perceived objectively in good faith by the employer; (3) retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (4) the alleged losses, if already realized and the expected imminent losses sought to be forestalled, must be proven by sufficient and convincing evidence.43

This Court, however, views the case as one involving closure of a business undertaking, not retrenchment. While retrenchment and closure of a business establishment or undertaking are often used interchangeably and are interrelated, they are actually two separate and independent authorized causes for termination of employment.44

Retrenchment is the reduction of personnel for the purpose of cutting down on costs of operations in terms of salaries and wages45 resorted to by an employer because of losses in operation of a business occasioned by lack of work and considerable reduction in the volume of business.46

Closure of a business or undertaking due to business losses is the reversal of fortune of the employer whereby there is a complete cessation of business operations to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped.47



One of the prerogatives of management is the decision to close the entire establishment or to close or abolish a department or section thereof for economic reasons, such as to minimize expenses and reduce capitalization.48

While the Labor Code provides for the payment of separation package in case of retrenchment to prevent losses, it does not obligate the employer for the payment thereof if there is closure of business due to serious losses.49

In the present case, when petitioner decided to cease operating its F & B Department and open the same to a concessionaire, it did not reduce the number of personnel assigned thereat. It terminated the employment of all personnel assigned at the department.

As in the case of retrenchment, however, for the closure of a business or a department due to serious business losses to be regarded as an authorized cause for terminating employees, it must be proven that the losses incurred are substantial and actual or reasonably imminent; that the same increased through a period of time; and that the condition of the company is not likely to improve in the near future.50

As did the appellate court, this Court finds that the study report submitted by the internal auditor of petitioner, the only evidence submitted to prove its alleged losses, is selfserving51 and falls short of the stringent requirement of the law that the employer prove sufficiently and convincingly its allegation of substantial losses.

In contrast, part of the evidence presented by respondents are audited financial statements prepared by SGV&Co. for 1989 to 1993 which show a positive net income for the F & B Department ranging from P959,533 - P2,911,810 and, except for the year 1992, marked increases in annual net income per year.52 Moreover, for the year 1994, its last year of operation, the F & B Department posted an annual net income of P1,562,385.53

In claiming that the F & B Department had been losing, petitioner’s internal auditor deducted from the department’s annual income the undistributed operating costs and expenses. However, the study report failed to provide the necessary details on how the undistributed operating costs and expenses charged to the F & B Department was arrived at, including the basis, for example, of allocating association dues and real estate tax directly to the F & B Department as expenses.

Petitioner’s failure to prove that the closure of its F & B Department was due to substantial losses notwithstanding, this Court finds that individual respondents were dismissed on the ground of closure or cessation of an undertaking not due to serious business losses or financial reverses, which is allowed under Article 283 of the Labor Code:

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 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 worker and the Ministry of Labor and Employment at least one (1) month before its 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 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 the 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 (½) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year. (Emphasis in the original)

The closure of operation of an establishment or undertaking not due to serious business losses or financial reverses includes both the complete cessation of operations and the cessation of only part of a company’s activities.54

For any bona fide reason, an employer can lawfully close shop anytime. Just as no law forces anyone to go into business, no law can compel anybody to continue the same.55 It would be stretching the intent and spirit of the law if a court interferes with management’s prerogative to close or cease its business operations just because the business is not suffering from any loss or because of the desire to provide the workers continued employment.56

While petitioner did not sufficiently establish substantial losses to justify closure of its F & B Department on this ground, there is basis for its claim that the continued maintenance of said department had become more expensive through the years. An evaluation of the financial figures appearing in the audited financial statements prepared by the SGV&Co. shows that ninety one to ninety six (91% - 96%) percent of the actual revenues earned by the F & B Department comprised the costs and expenses in maintaining the department.57 Petitioner’s decision to place its F & B operations under a concessionaire must then be respected, absent a showing of bad faith on its part.

In fine, management’s exercise of its prerogative to close a section, branch, department, plant or shop58 will be upheld as long as it is done in good faith to advance the employer’s interest and not for the purpose of defeating or circumventing the rights of employees under the law or a valid agreement.59

While the closure of F & B Department is found to be justified, petitioner is, under the above-quoted provision of Art. 283 of the Labor Code, mandated to pay separation pay computed from the time individual respondents commenced their employment until the time the department ceased operations, in an amount equivalent to one (1) month pay or at least one-half (½) month pay for every year of service, whichever is higher. In petitioner’s case, it in fact voluntarily doled out to some of individual respondents

separation pay equivalent to one month and a quarter (1¼) for every year of service, a fraction of a year being considered as one year.60

Respondents not having been illegally dismissed, they are not entitled to backwages.

By petitioner’s information, it had paid, during the pendency of the case, the separation package of sixty-two (62) of the sixty-three (63) individual respondents on account of which they executed Releases, Waivers and Quitclaims in its favor.61

A waiver or quitclaim is a valid and binding agreement between the parties, provided that it constitutes a credible and reasonable settlement and the one accomplishing it has done so voluntarily and with a full understanding of its import.62 As the waivers and quitclaims executed by individual respondents who had been given their separation pay were duly notarized, the certificate of acknowledgement in each of them serves as prima facie evidence of their due execution.63 Not one of individual respondents who executed the waivers or quitclaims has come forward to challenge the reasonableness of the settlement and/or voluntariness of the execution of the documents.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision of August 14, 2002 and the Resolution of March 6, 2003 of the Court of Appeals are hereby REVERSED and SET ASIDE.

Petitioner, Alabang Country Club, Inc., is hereby ORDERED to pay the remaining individual respondent, Filipino Dizon, who does not appear to have received separation package equivalent to one month and a quarter (1¼) for every year of service, as agreed upon by petitioner.

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION

G.R. No. 160325

October 4, 2007

ROQUE S. DUTERTE, petitioner, vs. KINGSWOOD TRADING CO., INC., FILEMON LIM and NATIONAL LABOR RELATIONS COMMISSION, respondents.

D E C I S I O N

GARCIA, J.:

By this petition for review on certiorari, petitioner Roque S. Duterte seeks the review and setting aside of the decision1 dated June 20, 2003 of the Court of Appeals (CA) in CA-G.R. SP No. 71729, as reiterated in its resolution2 of October 5, 2003, affirming an earlier resolution3 of the National Labor Relations Commission (NLRC) which ruled that petitioner was not illegally dismissed from employment due to disease under Article 284 of the Labor Code.

The facts:

In September 1993, petitioner was hired as truck/trailer driver by respondent Kingswood Trading Company, Inc. (KTC) of which co-respondent Filemon Lim is the President. Petitioner was on the 6:00 a.m. – 6:00 p.m. shift. He averaged 21 trips per month, getting P700 per trip. When not driving, petitioner was assigned to clean and maintain respondent KTC’s equipment and vehicles for which he was paid P125 per day. Regularly, petitioner would be seconded by respondent Filemon Lim to drive for one of KTC’s clients, the Philippine National Oil Corporation, but always subject to respondents’ convenience.

On November 8, 1998, petitioner had his first heart attack and was confined for two weeks at the Philippine Heart Center (PHC). This was confirmed by respondent KTC which admitted that petitioner was declared on sick leave with corresponding notification.

A month later, petitioner returned to work armed with a medical certificate signed by his attending physician at the PHC, attesting to petitioner’s fitness to work. However, said certificate was not honored by the respondents who refused to allow petitioner to work.

In February 1999, petitioner suffered a second heart attack and was again confined at the PHC. Upon release, he stayed home and spent time to recuperate.

In June 1999, petitioner attempted to report back to work but was told to look for another job because he was unfit. Respondents refused to declare petitioner fit to work unless physically examined by the company physician. Respondents’ promise to pay petitioner his separation pay turned out to be an empty one. Instead, petitioner was presented, for his signature, a document as proof of his receipt of the amount of P14,375.00 as first installment of his Social Security System (SSS) benefits. Having received no such amount, petitioner refused to affix his signature thereon and instead requested for the necessary documents from respondents to enable him to claim his SSS benefits, but the latter did not heed his request.

On November 11, 1999, petitioner filed against his employer a complaint for illegal dismissal and damages.



In a decision4 dated September 26, 2000, the labor arbiter found for the petitioner. However, while categorically declaring that petitioner’s dismissal was illegal, the labor arbiter, instead of applying Article 2795 of the Labor Code on illegal dismissals, applied Article 284 on Disease as ground for termination on the rationale that since the respondents admitted that petitioner could not be allowed back to work because of the latter’s disease, the case fell within the ambit of Article 284. We quote the fallo of the labor arbiter’s decision:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring complainant to have been terminated from employment on the ground that he has been suffering from a disease.

Respondents are hereby directed to pay complainant as follows:

1. Separation pay equivalent to one-half (1/2) month salary for every year of service computed at six (6) years of service in the amount of Forty-Two Thousand (P42,000.00) Pesos.

2. Holiday pay for three (3) years in the amount of Twenty-One Thousand (P21,000.00) Pesos; and

3. Service Incentive Leave pay for three (3) years in the amount of Ten Thousand (P10,000.00) Pesos.

All other claims herein sought are hereby denied for lack of merit and factual basis.

SO ORDERED.

On respondents’ appeal, the NLRC, in its Resolution6 of April 24, 2002, set aside the labor arbiter’s decision, ruling that Article 284 of the Labor Code has no application to this case, there being "no illegal dismissal to speak of." The NLRC accordingly dismissed petitioner’s complaint for illegal dismissal, thus:

WHEREFORE, the decision appealed from is VACATED and SET ASIDE.7 A new one is hereby entered DISMISSING the instant case for lack of merit.

Therefrom, petitioner went on certiorari to the CA in CA-G.R. SP No. 71729. In the herein assailed decision dated June 20, 2003, the CA upheld the NLRC Resolution, saying that the Commission committed no grave abuse of discretion in holding that petitioner was not illegally dismissed and could not be granted any relief. With his motion for a reconsideration having been denied by the CA in its resolution of October 5, 2003, petitioner is now with this Court via the present recourse.

We REVERSE.

At bottom, this case involves the simple issue of the legality of one’s termination from employment made complicated, however, by over analysis. Simply put, the question at hand pivots on who has the onus of presenting the necessary medical certificate to justify what would otherwise be classified as legal or illegal, as the case may be, dismissal from the service. The following may be another formulation of the issue: For purposes of Article 284 of the Labor Code, would the dismissal of an employee on the ground of disease under the said Article 284 still require the employer to present a certification from a competent public health authority that the disease is of such a nature that it could not be cured within a period of six months even with proper medical treatment? To both the NLRC and the CA, a dismissal on the ground of disease under Article 284 of the Code is illegal only if the employee himself presents the required certification from the proper health authority. Since, as in this case, petitioner failed to produce such certification, his dismissal could not be illegal.

In the precise words of the NLRC which the CA effectively affirmed:

Neither can it be gainsaid that Article 284 of the Labor Code applies in the instant case since the complainant [petitioner] failed to establish that he is suffering from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees nor was he able to prove that his illness is of such nature or at such stage that it cannot be cured within a period of six months even with proper treatment.8

In order for the complainant to be covered by Article 284 of the Labor Code, he must first present a certification by a competent public health authority that his continued employment will result in the aforesaid consequences, but unfortunately for the complainant, we find none in the instant case. For the respondents to require the complainant to submit a medical certificate showing that he is already physically fit as a condition of his continued employment under the prevailing circumstance cannot be considered as neither harsh nor oppressive. xxx

Prescinding from the above, there is no illegal dismissal to speak of. This finding is further strengthened by the fact that no termination letter or formal notice of dismissal was adduced to prove that complainant’s services have been terminated. Considering that no illegal dismissal took place, the complainant’s claim that his right to due process of law had been violated finds no application to the case at bar. (Emphasis added).

The Court disagrees with the NLRC and CA.

Article 284 of the Labor Code explicitly provides:

Art. 284. DISEASE AS GROUND FOR TERMINATION. -- An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every

year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.

Corollarily, in order to validly terminate employment on the basis of disease, Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code requires:

Disease as a ground for dismissal. -- Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health. (Book VI, Rule 1, Sec. 8 of the Implementing Rules)

In a very real sense, both the NLRC and the appellate court placed on the petitioner the burden of establishing, by a certification of a competent public authority, that his ailment is such that it cannot be cured within a period of six months even with proper medical treatment. And pursuing their logic, petitioner could not claim having been illegally dismissed due to disease, failing, as he did, to present such certification.

To be sure, the NLRC’s above posture is, to say the least, without basis in law and jurisprudence. And when the CA affirmed the NLRC, the appellate court in effect placed on the petitioner the onus of proving his entitlement to separation pay and thereby validated herein respondents’ act of dismissing him from employment even without proof of existence of a legal ground for dismissal.

The law is unequivocal: the employer, before it can legally dismiss its employee on the ground of disease, must adduce a certification from a competent public authority that the disease of which its employee is suffering is of such nature or at such a stage that it cannot be cured within a period of six months even with proper treatment.

Here, the record does not contain the required certification. And when the respondents asked the petitioner to look for another job because he was unfit to work, such unilateral declaration, even if backed up by the findings of its company doctors, did not meet the quantum requirement mandated by the law, i.e., there must be a certification by a competent public authority.9

For sure, the posture taken by both the NLRC and the CA is inconsistent with this Court’s pronouncement in Tan v. National Labor Relations Commission,10 thus:

Consistent with the Labor Code state policy of affording protection to labor and of liberal construction of labor laws in favor of the working class, Sec. 8, Rule 1, Book VI, of the Omnibus Rules Implementing the Labor Code provides – Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his

health or to the health of his co-employees, the employer shall not terminate his employment, unless there is a certification by a competent public authority that the disease is of such nature or at such a stage, that it cannot be cured within a period of six (6) months even with proper medical treatment.. There is absolutely nothing on record to show that such a certification was ever obtained by [the employer] much less that one was issued by a competent public authority …[o]n the contrary, what appears on record is a Medical Certificate dated May 5, 1999 issued by Dr. Lenita C. de Castro certifying to the contrary, i.e., that [the employee] was in fact already fit to return to work. However, [the employer] did not accept the certificate and insisted that [the employee] present one issued by a government physician. For his failure to present such a certificate, [the employee] was penalized with dismissal. Obviously, the condition imposed by [the employer] finds no basis under the law. To reiterate, contrary to [the employer’s] insistence that [the employee] first obtain a medical certificate attesting that he was already cured of pulmonary tuberculosis, the abovequoted Sec. 9, Rule 1, Book VI, of the Omnibus Rules is clear that the burden is upon [the employer] not [the employee] to justify the dismissal with a certificate public authority that [the employee’s] disease is at such stage or of such nature that it cannot be cured within six (6) months even with proper medical treatment. For [the employer’s] blatant failure to present one, we can only rule that [the employee’s] dismissal, like that of Garrido, is illegal, invalid and unjustified. (Emphasis and words in brackets supplied.)

In Triple Eight Integrated Services, Inc. v. NLRC,11 the Court explains why the submission of the requisite medical certificate is for the employer’s compliance, thus:

The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employee’s illness and thus defeat the public policy on the protection of labor.

In thus ruling out an illegal dismissal situation in the instant case, the CA effectively agreed with the NLRC’s view that the fact of dismissal must be evidenced by positive and overt acts, citing Veterans Phil. Scout Security Agency v. NLRC.12 Said case, however, is not on all fours with the present one. In Veterans, the employer offered the complainant-employee a monthly cash allowance and other benefit pending a new assignment. Therein, the employee was not forthrightly nor constructively dismissed. In fact, the employee in Veterans was found to be in bad faith as he filed his complaint for illegal dismissal the day immediately after he accepted the company’s offer of employment benefits. Hence, the Court’s ruling in Veterans that the fact of dismissal must be evidenced by positive and overt acts indicating the intention to dismiss. These considerations do not obtain here. Petitioner was not allowed back to work. Neither did he receive any monetary assistance from his employer, and, worse, respondents refused to give him the necessary documents to enable him to claim his SSS benefits.

Much was made by the NLRC – and the CA – about petitioner’s refusal to comply with respondents’ order to submit a medical certificate – irresistibly implying that such refusal is what constrained them to refuse to take petitioner back in.

We are not persuaded.

Even assuming, in gratia argumenti, that petitioner committed what may be considered an act of insubordination for refusing to present a medical certificate, such offense, without more, certainly did not warrant the latter’s placement in a floating status, a veritable dismissal, and deprived of his only source of livelihood.

We are not unmindful of the connection between the nature of petitioner’s disease and his job as a truck/trailer driver. We are also fully aware that petitioner’s job places at stake the safety of the public. However, we do not agree with the NLRC that petitioner was validly dismissed because his continued employment was prohibited by the basic legal mandate that reasonable diligence must be exercised to prevent prejudice to the public, which justified respondents in refusing work to petitioner. Petitioner could have been admitted back to work performing other tasks, such as cleaning and maintaining respondent company’s machine and transportation assets.

As a final consideration, the Court notes that the NLRC, as sustained by the CA, considered the petitioner as a field worker and, on that basis, denied his claim for benefits under Articles 9413 to 9514 of the Labor Code, such as holiday pay and service incentive leave pay. Article 82 of the Code lists personnel who are not entitled to the benefits aforementioned.15 Among the excluded group are "field personnel," referring to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. As a general proposition, field personnel are those whose job/service are not or cannot be effectively monitored by the employer or his representative, their workplace being away from the principal office and whose hours and days of work cannot be determined with reasonable certainty. Field personnel are paid specific amount for rendering specific service or performing specific work.

If required to be at specific places at specific times, employees, including drivers, cannot be said to be field personnel despite the fact that they are performing work away from the principal office of the employer. Thus, to determine whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in the field can be determined with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or not the employee’s time and performance are constantly supervised by the employer.16

Guided by the foregoing norms, petitioner was definitely a regular employee of respondent company and not its field personnel, as the term is used in the Labor Code. As it were, he was based at the principal office of the respondent company. His actual work hours, i.e., from 6:00 a.m. to 6:00 p.m., were ascertainable with reasonable certainty. He averaged 21 trips per month. And if not driving for the company, he was paid P125.00 per day for cleaning and maintaining KTC’s equipment. Not falling under

the category of field personnel, petitioner is consequently entitled to both holiday pay and service incentive leave pay, as mandated by Articles 94 and 95 of the Labor Code.

All told, we rule and so hold that petitioner’s dismissal did not comply with both the substantive and procedural aspects of due process. Clearly, his dismissal is tainted with invalidity.17

WHEREFORE, the assailed decision of the CA in CA-G.R. SP No. 71729 is REVERSED and SET ASIDE. Respondents are declared guilty of illegal dismissal and are ordered to pay petitioner separation pay equivalent to one (1) month pay for every year of service, in lieu of his reinstatement, plus his full backwages from the time his employment was terminated up to the time this Decision becomes final. For this purpose, let this case be REMANDED to the labor arbiter for the computation of petitioner’s separation pay, backwages and other monetary awards due him.

Costs against respondents.

SO ORDERED.



THIRD DIVISION [G.R. No. 112965. January 30, 1997]

PHILIPPINES TODAY, INC., BETTY GO-BELMONTE, MAXIMO V. SOLIVEN, ARTURO A. BORJAL, and ISAAC G. BELMONTE petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and FELIX R. ALEGRE, JR., respondents. D E C I S I O N PANGANIBAN, J.:

May a "Memorandum for File" which did not mention the words "resign" and/or "resignation" nonetheless juridically constitute voluntary resignation? In answering this question, the Court took into account not merely the literal meaning of the words and phrases used but, more importantly, the peculiar circumstances attendant to its writing as well as antecedent, contemporaneous and subsequent actions, which were inconsistent with the desire for continued employment of the writer, an intelligent executive occupying a position of trust in the Philippine Star and gifted with an unusual writing ability.

These circumstances and actions are explained by this Court in re- solving this petition for certiorari assailing the Decision [1] of the National Labor Relations Commission (Second Division) [2] in NLRC NCR CA 001863-91 entitled "Felix R. Alegre, Jr. vs. Philippines Today, Inc." promulgated on September 30, 1993, which reversed the decision of Labor Arbiter Pablo C. Espiritu, Jr., dated May 15; 1991. In a Resolution dated November 16, 1993, petitioners' motion for reconsideration was denied. [3]

The Facts

The undisputed facts are as follows: Petitioner Philippines Today, Inc. (PTI) is the owner of the Philippine Star, a daily newspaper of national and international circulation, while the individual petitioners are officers and members of the board of directors of PTI, namely, Betty Go-Belmonte, chairman of the board; Arturo A. Borjal, president; Maximo V. Soliven, publisher and chairman, editorial board; and Isaac G. Belmonte, treasurer. Private Respondent Felix R. Alegre, Jr. was employed by PTI in July 1986 as a senior investigative reporter of the Philippine Star with a monthly salary of eight thousand pesos (P8,000.00). He later became chief investigative writer and then assistant to the publisher. His monthly compensation was correspondingly increased to ten thousand pesos (P10,000.00).

On October 20, 1988, Respondent Alegre filed a request for a thirty-day leave of absence effective on the same date, citing the advice of his personal physician for him to undergo further medical consultations abroad. [4] Four days later, on October 24, 1988, he wrote a "Memorandum for File" [5] addressed to Petitioner Betty Go-Belmonte with copies furnished to members of the board of directors of PTI, the text of which is reproduced below:

"MEMORANDUM FOR FILE.

FOR : BETTY GO-BELMONTE

Chairman & CEO, The STAR Group of Publications

FROM : FELIX R. ALEGRE, JR.

DATE : 24 October 1988

SUBJECT : HAVING IT ALL

Truth like medicine hurts. But it cures.

The nice little chat we had last Thursday was most revealing. And certainly disconcerting.

What you had to tell me pained me, of course. But it has helped me just as much. It enabled me to see things clearly in their right perspectives. More importantly, it provided me with the answers to the questions that had long nagged me in my wakeful state.

For quite a time, I got this sinking feeling of being treated like a pariah of sorts by most of the senior executives around here. The frustration at my inability to put a finger at such a feeling somehow enhanced the angst within me. Until our chat. Now all the demons of my anxiety have been exorcised. And I am left alone to lick the wounds of

my betrayal. It isn't easy, I know. But I shall pull through. Your candor and demonstrated faith in my person have been most assuaging. And for that alone, I am most grateful.

It has never occurred to me that, in my acceptance of the invitation from no less than the publisher himself, to join him at the Philippines Today, Inc., and the STAR Group of Publications, I was unwittingly signing my own death warrant as well. The insults he had later on hurled at my person, the malicious innuendoes he had spread around, casting doubts on my personal and professional integrity, had mercilessly torn at my soul, causing metaphysical death.

My credentials as a working journalist, I'd like to believe, got me this job at the STAR in the first place. And my bylines in the series of articles in the STAR From Day One of my official affiliation with the Company, should establish that fact.

I was an investigative reporter at the Manila Times when the publisher offered me to work with him at the STAR in 1986. I was given the assignment as senior investigative reporter, then chief investigative writer, until I was given a fancy title of assistant to the publisher.

As a corporate guy assisting the publisher in his day-to-day official function—and this is where I feel very strongly about citing some specifics of the things I did in this area, to wit:

. . . (omitted are said "specifics" of Respondent Alegre's accomplishments as assistant to the publisher deemed by this Court as not relevant to the appreciation of this memorandum in relation to the consideration of the petition.)

As can be gleaned from this recital of some of the "things done" (despite my distaste for trumpeting one's deeds, but has to be said, to set the record straight, in this instance), one can see that I obviously don different hats at any one time, doing administration and operations functions, apart from my journalistic duties. That I work as a teamplayer, and trying hard to be good at (sic) it, cannot be denied.

FOR DOING ALL THESE in the best spirit of corporate team-upmanship, what did I get in RETURN?

1. A pittance, salary/compensation-wise

2. Being conveniently bypassed in promotions, pay hikes, and other perks

3. Hindered from active participation in corporate affairs, by shooting at my ideas that otherwise would have been workable and profitable for the Company and its people (CF. Item 2 of my memo dtd 06 September 88 which had you interested in and supportive of).

4. Personally and professionally maligned, and accused of being an NPA (nonperforming asshole, pardon my French).

By and large, all that I got are the twin demons of a civilized, unconscionable society: ECONOMIC INJUSTICE and PROFESSIONAL SABOTAGE.

When push comes to a shove . . . anything or everything comes crashing down. I'M HAVING IT ALL!

Since I am on leave, I guess I won't be able to see you for a while. I wish to take this opportunity to express my profound appreciation and sincere thanks for your genuine con-cren (sic) and honest initiatives to do a good turn on my behalf. You have been most candid and forthright with me. I can't be any less.

Thank you for everything. God bless.

Very sincerely,

(Sgd.) FELIX R. ALEGRE, JR.

copy furnished:

Members-of the Board, Phils. Today, Inc.

Dr. Ronaldo G. Asuncion

Mr. Antonio Roces"

On December 6, 1988, Respondent Alegre received from Petitioner Belmonte a letter, [6] as follows:

"November 9, 1988

MR. FELIX ALEGRE

Dear Jun,

During our board meeting yesterday, we discussed your letter dated October 24, 1988, and the Board decided to accept your resignation and that it would take effect on November 22, 1988 upon expiration of your one-month leave.

I would like to take this opportunity to say that we were happy to have had you with the STAR Group of Publications and that we would like to wish you the best of luck.

God bless. Thank you.

Very truly yours,

BETTY GO BELMONTE

Chairman of the Board The Philippine Star"

The following day, Respondent Alegre wrote Petitioner Belmonte expressing surprise over the acceptance of his "resignation" as stated in the above-quoted letter. His letter [7] partly stated:

"It certainly beats me to be told that my 'resignation' has been accepted, when in truth and in fact no such move, however implicit it may be, and no such letter has ever been made from my end.

xxx xxx

xxx

I am writing this letter not, certainly, to make any appeal, but simply to go on record that I did not resign. I filed a leave of absence. Yes. And that was dully (sic.,) approved. Then I sent you a memorandum for file expressing my sentiments on certain things, candid statements that came to b4 (sic) expressed inspired by your candor and sincerity in our last little chat. Now, if you read that memo to mean resignation, that is your responsibility. And I am not just about to contest it. x x x"

This was followed by another letter on January 2, 1989, wherein Alegre, through counsel, [8] reiterated that he never resigned. He accused petitioners of illegal dismissal as can be perceived allegedly from the discrimination against him in promotions, benefits and the ploy to oust him by considering his memorandum as a resignation. He claimed that as a result, he suffered mental anguish, social humiliation, besmirched reputation and moral shock. He thus demanded indemnification for "the material and moral losses he has incurred". He further wrote that he was not insisting to be taken back after being shown that he was no longer wanted in the company.

Counsel [9] for petitioners, in a reply on January 19, 1989, explained that the acceptance of Alegre's resignation was a collective decision of the board of directors since "nobody in his right mind would write a memorandum of the sort he wrote and still not resign. To them, the memorandum was tantamount to a resignation even if Mr. Alegre did not say so in so much words." With respect to his claim for damages, petitioners' counsel said, "he has not shown any specific fact or circumstance that would justify his claim, even remotely." Hence, "the Star cannot accede to the same."

On May 17, 1989, Respondent Alegre filed a complaint for illegal dismissal and damages against herein petitioners. [10] The labor arbiter dismissed said complaint in his decision of May 15, 1991. We quote significant portions of said decision:

"This office has minutely disected (sic) the letter and while it be said that nothing therein mentions about resigning from his position as Assistant to the Publisher, a perusal of the letter as a whole shows that the intention of the complainant was to resign from his post. The subject as — "Having it all" together with his frustrations and disappointment in the office coupled with his statement that "when push comes to a shove, everything comes crushing (sic) down" and that: he is "having it all" and with his concluding sentence of "Thank you for everything" are (sic) clear indications that he was in fact resigning.

As a journalist and a writer, complainant need not write his letter of resignation in black and white. He can do so in many other ways, words and actions to show his real intention of leaving his job.

xxx xxx

xxx

Complainant's subsequent overt acts particularly his failure to report to his job after the expiration of his leave of absence, his being gainfully employed with the Office of Senator Laurel (as Chief of Staff) and his act of clearing and removing his personal files, things and belongings from his desk prior to his (complainant) knowledge or receipt of the letter accepting his resignation(,) clearly indicates that complainant was not terminated from his job but rather he resigned from his job...

xxx xxx

xxx

WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for illegal dismissal and damages for lack of merit, and ordering respondent, Philippines Today, Inc., to pay complainant the amount of THIRTY THOUSAND (P30,000.00) PESOS by way of separation pay in the interest of compassionate labor justice and; dismissing Respondents (sic) counterclaim for damages for lack of merit. [11]

On appeal by Alegre, the above decision was set aside by the NLRC. Adopting the definition in Black's Law Dictionary (5th Edition) of resignation as a "formal renouncement or relinquishment of an office," it held that herein Respondent Alegre did not resign as there was no actual act of relinquishment to constitute complete and operative resignation. According to the NLRC, the request for a leave of absence by Respondent Alegre meant that he intended to return after the period of his absence. Such intent was bolstered by his filing of a request for an extension of his leave. Further, when he received the letter of Petitioner Belmonte dated November 9, 1988 informing him of the acceptance by the Board of his resignation, he immediately wrote a letter to Petitioner Belmonte, expressing in no uncertain terms that he did not resign. These circumstances led the NLRC to hold that Respondent Alegre was constructively dismissed without just cause and to order petitioners to pay him full backwages for three years from the time of dismissal, separation pay in lieu of reinstatement, moral and exemplary damages and attorney's fees. [12]

Issues

Petitioners argue that the NLRC committed grave abuse of discretion:

1. in finding them guilty of illegally dismissing Respondent Alegre;

2. in awarding Respondent Alegre moral and exemplary damages and attorney's fees without any factual and legal basis; and,

3. even assuming that Respondent Alegre was illegally dismissed, in contravening and disregarding this Court's ruling in Alex Ferrer, et al. vs. NLRC (Second Division) [13] by erroneously computing backwages, as it did not deduct the amounts earned by Respondent Alegre while he was admittedly employed in the office of Senator Sotero H. Laurel.

The pivotal question is whether the Memorandum for File of Respondent Alegre addressed to Petitioner Belmonte constitutes a letter of resignation.

In construing it so, petitioners advance these arguments: (1) Respondent Alegre had spoken openly to Petitioner Belmonte of his desire to leave the Philippine Star; (2) the contents of his memorandum indicate an intention on his part not to return to his job even if he did not categorically mention resignation; (3) he never returned to work after his authorized leave expired and even cleared his desk of his personal belongings; and, (4) he obtained employment as chief of staff of the office of Senator Sotero Laurel for which he was paid a higher salary. Having been led to believe that Alegre wanted to resign and in honestly perceiving his memorandum as a resignation letter, petitioners cannot be held liable for moral and exemplary damages because they believe their action was in accordance with law. Lastly, petitioners contend that, even assuming they were liable for illegal dismissal, the NLRC, in granting backwages, should have deducted the amount earned by Alegre from his subsequent employment.

Private respondent, on the other hand, maintains that he had no intention of resigning from PTI. He insists that: (1) in writing the memorandum, he was merely lamenting the work environment at PTI and apprising Petitioner Belmonte of the situation; (2) a resignation should be unequivocal in nature; (3) his non-return to work after his original leave expired is explained by his subsequent request for an extension thereof due to medical reasons; (4) and the letter of Petitioner Belmonte obviated any desire for him to return to his work since petitioners practically terminated his employment. He further contends that petitioners' tenacious resistance in admitting their mistake bespeaks of bad faith and shows their real intention to end his services, which entitles him to moral and exemplary damages. In representation of public respondent, the Solicitor General supported private respondent's position.

The Court's Ruling

The petition is meritorious.

Pivotal Issue: Did the Memorandum for File Constitute Voluntary Resignation?

After a thorough scrutiny of the Memorandum for File of Respondent Alegre and a careful deliberation on the peculiar circumstances attendant to its writing and the antecedent, contemporaneous and subsequent actions of private respondent, we hold that said memorandum juridically constituted a letter of resignation.

We see merit in the findings and conclusions drawn by the labor arbiter. They are more in accord with prudence, common sense and sound judgment. The labor arbiter correctly deduced from Alegre's memorandum and attendant actuations that he resigned. In contrast, the NLRC was too strict in its interpretation of what constitutes "resignation." It adhered literally to the dictionary meaning of the word without relating it to the peculiarity of the factual circumstances surrounding the case. Courts and quasijudicial bodies, in the exercise of their functions and in making decisions, must not be too dogmatic as to restrict themselves to literal interpretations of words, phrases and sentences. A complete and wholistic view must be taken in order to render a just and equitable judgment.

Incendiary words and sarcastic remarks negate alleged desire to improve relations

Alegre's choice of words and way of expression betray his allegation that the memorandum was simply an "opportunity to open the eyes of (Petitioner) Belmonte to the work environment in petitioners' newspaper with the end in view of persuading (her) to take a hand at improving said environment." Apprising his employer (or top-level management) of his frustrations in his job and differences with his immediate superior is certainly not done in an abrasive, offensive and disrespectful manner. A cordial or, at the very least, civil attitude, according due deference to one's superiors, is still observed, especially among high-ranking management officers. The Court takes judicial notice of the Filipino values of pakikisama and paggalang which are not only prevalent among members of a family and community but within organizations as well, including work sites. An employee is expected to extend due respect to management, the employer being the "proverbial hen that lays the golden egg," [14] so to speak. An aggrieved employee who wants to unburden himself of his disappointments and frustrations in his job or relations with his immediate superior would normally approach said superior directly or otherwise ask some other officer possibly to mediate and discuss the problem with the end in view of settling their differences without causing ferocious conflicts. No matter how the employee dislikes his. employer professionally, and even if he is in a confrontational disposition, he cannot afford to be disrespectful and dare to talk with an unguarded tongue and/or with a baleful pen. Here, respondent Alegre was anything but respectful and polite. His memorandum is too affrontive, combative and confrontational. It certainly causes resentment, even when read by an objective reader. His incendiary words and sarcastic remarks, to quote some:

"For quite a time, I got this sinking feeling of being treated like a pariah of sorts by most of the senior executives around here. The frustration at my inability to put a finger at such a feeling somehow enhanced the angst within me. . . .Now all the demons of my anxiety have been exorcised. And I am left alone to lick the wounds of my betrayal. x x x

It has never occurred to me that, in my acceptance of the invitation from no less than the publisher himself, to-join him . . . I was unwittingly signing my own death warrant as well. The insults he had later on hurled at my person, the malicious innuendoes he had spread around casting doubts on my personal and professional integrity, had mercilessly torn at my soul, causing metaphysical death."

negate any desire to improve work relations with Petitioner Soliven and other PTI executives. Such strongly worded letter constituted an act of "burning his bridges" with the officers of the company.

Seeking relief incompatible withwriting offensive letter

Any management officer, much so an immediate superior, would be offended, if not enraged, with the insults and innuendoes stated in said memorandum; more so because the memorandum was not directly addressed to him but to the chairman and CEO and copy furnished all other officers and members of the board of directors. Any discerning mind can perceive that the letter is not simply a recitation of respondent Alegre's gripes, disappointments, frustrations and heartaches against the company and its officers particularly Petitioner Soliven, as postulated by the Solicitor General in his comment. [15] If it were so, why was it not addressed directly to the person concerned? His memorandum clearly indicated that his problems involved, or were supposedly caused by only one person, Mr. Soliven, his immediate superior. But it was not even addressed to him! How can he expect amends in their relations if that was all he wanted? The Solicitor General was simply turning a blind eye to the obvious fact that said memorandum, for all intents and purposes, was intended, wittingly or unwittingly, to end employment relations.

Respondent Alegre a well-educated journalist

It should not escape our attention that respondent Alegre is a. professional journalist and persuasive writer. On top of that, he was a law graduate. He must have known the drilling effect of his bitter and sarcastic remarks upon the petitioners and must have intended the same. Ordinary words are to be construed in their ordinary meaning. Commonsense dictates that Alegre meant to resign when he wrote the memorandum. Otherwise, he should have used a more tempered language and a less confrontational tone. Moreover, he held a position of evident responsibility requiring the utmost confidence of his immediate superior. As assistant to the publisher doing, in his very own words, "administration and operations functions, apart from (my) journalistic duties," it is apparent that Alegre was not employed simply for his writing skills. Top management certainly reposed full trust and confidence in him and placed him in a position of considerable management influence.

PTI officers of uncommon intelligence and perception

Furthermore, his memorandum was addressed to the chairman and chief executive officer of PTI and furnished all members of the board of directors. These officers which include the likes of the late Betty Go-Belmonte, Maximo V. Soliven and Arturo A. Borjal, long-time and well-respected journalists acclaimed locally and internationally, are themselves people of uncommon perception and intellect. They will not miscomprehend the meaning and intent of Alegre's memorandum, which was not by any means a simple way of seeking relief but well a way to get out of the company. What else could he have meant with these concluding remarks:

"By and large, all that I got are the twin demons of a civilized, unconscionable society: ECONOMIC INJUSTICE and PROFESSIONAL SABOTAGE.

When push comes to a shove . . . . anything or everything comes crashing down. I'M HAVING IT ALL!"

Respondent Alegre, being a journalist himself and having worked with them for sometime, knew how his letter would be perceived and received. Besides, as discussed earlier, Alegre is likewise a well-educated man of more than average intelligence. The conclusion is inevitable that he had more than enough sense to anticipate the consequences and effects of his words and actions. Indeed, what a man sows, he reaps.

Trust and confidence breached

In addition, respondent Alegre is a highly confidential employee who holds his job at the pleasure of his employer or, stated otherwise, for as long as he enjoys the trust and confidence of his employer. Corollarily, he likewise must repose trust and confidence in his employer or, at the very least, his immediate superior. But any superior hurled with invectives from a confidential employee, much more one occupying a managerial position at the same time, will definitely lose trust and confidence in the latter. And there can be no way to interpret such letter other than as a withering of trust and confidence by the employee in his boss. The use of offensive language can only mean expression of disloyalty and disrespect. It renders the writer unworthy of the trust and confidence demanded by his position. It is beyond human nature to expect two persons with underlying mistrust in each other to continue to work together effectively, not to say, harmoniously.

Antecedent, Contemporaneous and Subsequent Actions Affirming Resignation

In addition to his memorandum and the circumstances attendant thereto which were just discussed, the Court notes some peculiar actions confirming Alegres' intention to terminate his employment with the Star.

(1) Medical reasons for leave of absence not proved

First, he claims that his leave of absence was due to medical reasons, for which he was supposed to seek relief abroad. However, the Court scoured the records but found nothing to show that he actually underwent any medical check-up. Much less, medical examination abroad. Nothing really backs up such claim except his bare statements which, evidentially, are at best self-serving.

(1) Cleared desk of personal belongings

Second, respondent Alegre cleared his desk of his personal belongings even before he knew of the acceptance of his resignation. [16] Such act certainly bares his intent to leave his job. Respondent Alegre has not refuted nor offered any sufficient explanation for this action. We cannot but-give due credit to the petitioners' contention that such act was expressive of his intent to resign.

(1) Did not report back to work

Third, respondent Alegre did not return to his job after his authorized leave of absence expired in November 1988. Although he sent another letter [17] requesting for an extension of his leave, there is no showing on record that the same was approved by petitioners. It is standard office procedure that applications for leave of absence are subject to the approval of the employer. These are not automatically granted upon filing. Except to cite in his request "travel log (sic) coupled with advice of my physician," respondent Alegre has not proven the emergency nature of the cause/s of his extended leave. Again, we cannot but give due credence to petitioners' contention that this was another operative evidence of Alegre's intent to resign.

His non-return to work, though, is not equivalent to abandonment of work. For in the latter, it is necessary to prove "clear and deliberate intent" coupled with unjustified. absence and overt acts unerringly pointing to the fact that the employee simply does not want to work anymore. [18] In the case at bench, Alegre voluntarily resigned through his memorandum albeit written in the guise of a grievance letter. The law and jurisprudence on abandonment have thus no application in the present case.

(4) Not deprived of chance to return to work

Fourth, if Respondent Alegre had really no intention to resign, he could have reported back to work. His contention that he was effectively deprived of any chance to return to his work because of the acceptance of his purported resignation cannot be sustained. He claims that he received the notice dated November 9, 1988 only on December 6, 1988. But this means that for about two weeks after his leave expired, he had all chances to return to his work. Yet he chose not to. The obvious reason is that he had actually no intention of doing so.

(5) Alegre expressly manifested intention to resign



Prior to sending his memorandum, Respondent Alegre informed Petitioner Belmonte of his intention to resign from the Philippine Star. This is shown by the testimony (cross examination) of the late Mrs. Belmonte before the labor arbiter on January 13, 1990 as follows:

"ATTY. BORRETA:

And you took that action, meaning the Board acted on this Memo for File which you considered as his letter of resignation without consulting or talking with the complainant first?

WITNESS:

The complainant had also applied for leave of absence and he talked with me that he was leaving for the United States. Actually I remember he requested a conversation but he did not specify what the conversation was about, Your Honor. He was telling me that he wanted to leave, has signed another job. And I told him that is not my prerogative and I am only Chairman of the Board; and he came upon the recommendation of our Publisher and he was at that time Assistant to the Publisher; that he should talk to the Publisher first and I even advised him to patch up whatever differences he might have. In that conversation, he said something about leaving and he even said to me that when he leaves, he would ask his two (2) sons who were working with us to leave too. And I think I made a comment, and that must be what he was referring to. I said; oh, but your sons are very hardworking. In fact I said the Publisher, Max Soliven, told me that 'sana you were as good as your sons' maybe that was his feeling. That is my way of trying to tell him that your sons are very hard-working because he said when I leave I am going to ask them to leave too. Maybe because of that he gave me the impression that he wanted to leave.

ATTY. BORRETA:

And this happened before he wrote this memo for file on October 24, 1988?

WITNESS:

Yes, sir

ATTY. BORRETA:

And because of that you got the impression that he had the intention to resign?

WITNESS:

Yes sir" [19]

(6) Assumed job in another office

Finally, the most telling of the actions undertaken by Respondent Alegre which evidently demonstrate his intent to resign was his immediate employment as chief of staff of the office of then Senator Sotero H. Laurel, with a much higher compensation at P14,600.00 per month plus P2,000.00 per month driver's allowance. He admitted in his testimony before the labor arbiter on November 6, 1989 that he was employed therein about a year before (the date of his testimony) or sometime in November 1988. [20] The date coincided with the period of his leave of absence or immediately thereafter. If he had no intention of resigning and was on leave for medical reasons as he alleged, why then did he commence a new job in another office at about the same period? His assumption of a new job prior to receiving Mrs. Belmonte's letter on December 6, 1988 is clearly inconsistent with any desire to remain in employment with PTI. This is particularly evident because both jobs required full-time work. Moreover, working in a newspaper which prides in its independence from partisan activities is incompatible with a concurrent political office held by respondent.

Side Issue: May a Resignation Be Unilaterally Withdrawn?

Having established that Respondent Alegre resigned, we now tackle the corollary issue of whether he can unilaterally withdraw his resignation. We hold that he cannot do so.

The case of Intertrod Maritime, Inc. vs. NLRC [21] is in point. The employee therein who was a ship engineer, while at Port Pylus, Greece, requested for relief due to "personal reasons." The master of the ship, who had authority to "sign off" an employee requesting relief, approved his request but informed the employee that repatriation expenses were for his account and that he had to give thirty days notice in view of clause 5 of the employment contract. When the vessel was at Port Said, Egypt four days later, the master "signed him off" and paid him in cash all amounts due him less repatriation expenses. On his return to the Philippines, the employee filed a complaint charging his employer with breach of employment contract and violation of the National Seamen Board rules and regulations. He claimed that his request for relief was only for the sole purpose of enabling him to take care of a fellow member of the crew who was hospitalized in Greece. Hence, after he was disallowed from disembarking thereat, the reason no longer existed and, consequently, he was illegally dismissed when he was forced to "sign off" in Egypt even as he signified his intention of continuing his work.

The Court ruled against the employee. It held that resignations, once accepted, may not be withdrawn without the consent of the employer. If the employer accepts the withdrawal, the employee retains his job. If the employer does not, the employee cannot claim illegal dismissal. To say that an employee who has resigned is illegally dismissed, is to encroach upon the right of employers to hire persons who will be of service to them.

Obviously, this is a recognition of the contractual nature of employment which requires mutuality of consent between the parties. An employment contract is consensual and

voluntary. Hence, if the employee "finds-himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service, then he has no other choice but to disassociate himself from his employment". [22] If accepted by the employer, the consequent effect of resignation is severance of the contract of employment.

A resigned employee who desires to take his job back has to re-apply therefor and he shall have the status of a stranger who cannot unilaterally demand an appointment. He cannot arrogate unto himself the same position which he earlier decided to leave. To allow him to do so would be to deprive the employer of his basic right to choose whom to employ. Such is tantamount to undue oppression of the employer. It has been held that an employer is free to regulate, according to his own discretion and judgment, all aspects of employment including hiring. [23] The law, in protecting the rights of the laborer, impels neither the oppression nor self-destruction of the employer. [24]

Consistent with our ruling in Intertrod, the resignation of respondent Alegre after its acceptance by petitioners can no longer be withdrawn without the consent of the latter. In fairness to the employer, an employee cannot backtrack on his resignation at his whim and without the conformity of the former.

The instant case is unlike Molave Tours Corporation vs. NLRC [25] and People's Security, Inc. vs. NLRC. [26] In Molave, acting on reports that the employee was on several occasions found drunk within work premises, the employer required him to explain in writing said charges. Notwithstanding his explanation and request for a confrontation with his accusers, the employee was made to sign a resignation letter. Two months after, he filed a complaint for illegal dismissal. The labor arbiter, affirmed by the NLRC, found that the employee was merely forced and intimidated into resigning. The Court reiterated that resignation must be voluntary on the part of the employee. It thus ordered the employer to reinstate the employee and award backwages and other benefits due him since there was no effective resignation.

Likewise in People's Security, there was a finding of involuntary resignation. The employees therein who were security guards were not given assignments by their employer after the latter's security services contract with Meralco expired. The employees requested for loans to be deducted from their security bond deposits, which requests were denied by the employer who insisted that they must turn in their resignations first before their security bond deposits could be released. Not having been given new work assignments and being in dire financial need, the employees submitted their resignation letters. Three months later, they filed money claims which were later amended to include illegal dismissal. The employer contended that the employees voluntarily severed their employment because they turned in their resignation letters and assumed jobs with another security agency. Again the Court held that resignation is a voluntary act of the employee. When the employees were told that they would not be granted loans unless they resigned, they had no choice since they desperately needed money to meet their respective families' needs. They were also forced to accept jobs at

another agency as a practical solution to their employment problems which were caused by the employer's refusal and failure to provide them with new assignments.

In the case of Indophil vs. NLRC, [27] on the other hand, the employee voluntarily submitted a resignation letter but later tried to retrieve the same. He contended though, that he was thereafter prevented by the company guard from entering the work premises because of his resignation. He sued for illegal dismissal. His employer claimed abandonment of work since he was required to report and to explain his unauthorized absences but did not. In holding that there was no dismissal, the Court regarded the employer's act of requiring the employee to report and explain his unauthorized absences as non-acceptance of the previous resignation of the employee. Thus, the employer still considered him as its employee in spite of the filed resignation letter. With respect to the latter's allegation that he was prevented by the company guard from entering the premises, the Court chided him for not having inquired into its veracity and for simply relying on the bare statement of the guard. It said that the employee should be more vigilant of his rights.

The above three cases are dissimilar to the case at bar. In the first two cases, there were involuntary resignations while in the third there was an unaccepted resignation. In the instant case, however, the resignation was voluntary and it was accepted by the employer. Thus, our grant of the petition.

Since we find no case of illegal dismissal, we will no longer pass upon the two other issues raised by petitioners which are mere consequences of the contrary finding made by the NLRC. Necessarily, there can be no award of any moral or exemplary damages, backwages and separation pay.

Epilogue

Both the Constitution and the Labor Code mandate a bias in favor of labor. Hence, this Court, as a matter of judicial policy, leans backwards to protect labor and the working class against the machinations and incursions of their more financially entrenched employers. In the present case, however, it is obvious to us that private respondent's memorandum could not have been intended merely to persuade management to improve the work environment at the Philippine Star. Rather, it was evidently a recitation of the facts and reasons why respondent Alegre could no longer continue working under what he believed were unbearable conditions in the work place. The offensive language used by a well-educated man endowed with unusual writing skill could not have been intended merely for the "suggestion box." That it was addressed and given to persons of uncommon perception themselves takes the letter out of ordinary employer employee communications. It is true that there was no direct mention of the word "resignation." However, the incendiary words employed denote a clear intent to end the writer's association of trust and confidence with his superiors and employer. This intent becomes even more manifest when viewed in light of attendant acts of Alegre, particularly his prolonged leave of absence, his clearing of his own desk of personal belongings, his failure to report back to work after the expiration of his approved leave,

his verbal expression of his intent to resign, and most notably, his assumption of a higher paying job in a political office which was incompatible with his work at the Star.

In deciding cases, this Court does not matter-of-factly apply and interpret laws in a vacuum. General principles do not decide specific cases. Rather, laws are interpreted always in the context of the peculiar factual situation of each case. Each case has its own flesh and blood and cannot be decided simply on the basis of isolated clinical classroom principles. The circumstances of time, place, event, person, and particularly attendant circumstances and actions before, during and after the operative fact should all be taken in their totality so that justice can be rationally and fairly dispensed.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision and Resolution of the NLRC are SET ASIDE. The temporary restraining order issued by this Court is made PERMANENT . No costs.

SO ORDERED.



Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION

G.R. No. 188154

October 13, 2010

LOURDES A. CERCADO, Petitioner, vs. UNIPROM, INC., Respondent.

D E C I S I O N

NACHURA, J.:

Assailed in this Petition for Review on Certiorari1 are the July 31, 2007 Decision2 and the May 26, 2009 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 87508, declaring as valid the unilateral retirement of petitioner by respondent.

The Facts

Petitioner Lourdes A. Cercado (Cercado) started working for respondent UNIPROM, Inc. (UNIPROM) on December 15, 1978 as a ticket seller assigned at Fiesta Carnival, Araneta Center, Quezon City. Later on, she was promoted as cashier and then as clerk typist.

On April 1, 1980, UNIPROM instituted an Employees’ Non-Contributory Retirement Plan4 which provides that any participant with twenty (20) years of service, regardless of age, may be retired at his option or at the option of the company.

On January 1, 2001, UNIPROM amended the retirement plan in compliance with Republic Act (R.A.) No. 7641.5 Under the revised retirement plan,6 UNIPROM reserved the option to retire employees who were qualified to retire under the program.

Sometime in December 2000, UNIPROM implemented a company-wide early retirement program for its 41 employees, including herein petitioner, who, at that time, was 47 years old, with 22 years of continuous service to the company. She was offered an early retirement package amounting to P171,982.90, but she rejected the same.

UNIPROM exercised its option under the retirement plan, and decided to retire Cercado effective at the end of business hours on February 15, 2001. A check of even date in the amount of P100,811.70, representing her retirement benefits under the regular retirement package, was issued to her. Cercado refused to accept the check.

UNIPROM nonetheless pursued its decision and Cercado was no longer given any work assignment after February 15, 2001. This prompted Cercado to file a complaint for illegal dismissal before the Labor Arbiter (LA), alleging, among others, that UNIPROM did not have a bona fide retirement plan, and that even if there was, she did not consent thereto.

For its part, respondent UNIPROM averred that Cercado was automatically covered by the retirement plan when she agreed to the company’s rules and regulations, and that her retirement from service was a valid exercise of a management prerogative.

After submission of the parties’ position papers, the LA rendered a decision7 finding petitioner to be illegally dismissed. Respondent company was ordered to reinstate her with payment of full backwages.

The National Labor Relations Commission (NLRC) affirmed the LA’s decision, adding that there was no evidence that Cercado consented to the alleged retirement plan of UNIPROM or that she was notified thereof.8

On certiorari, the CA set aside the decisions of the LA and the NLRC. The decretal portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The Decision of the Labor Arbiter and the assailed Resolutions of the NLRC are NULLIFIED and SET ASIDE. Judgment is hereby rendered declaring respondent’s retirement as valid and legal being in conformity with petitioners’ Retirement Plan.9

The CA ruled that UNIPROM’s retirement plan was consistent with Article 287 of the Labor Code, which provides that "any employee may be retired upon reaching the

retirement age established in the collective bargaining agreement or other applicable employment contract." The CA applied the doctrine laid down in Progressive Development Corporation v. NLRC10 wherein the phrase "may be retired" in Article 287 of the Labor Code was interpreted to mean that an option is given to an employer to retire an employee, and such option is within the discretion of the employer to exercise.

The CA further noted that Cercado cannot feign ignorance of the retirement plan considering that she was already working with the company when it took effect in 1980.

Cercado moved for reconsideration, but the same was denied.11 Hence, the instant recourse raising the following issues: 1) whether UNIPROM has a bona fide retirement plan; and 2) whether petitioner was validly retired pursuant thereto.

The petition is meritorious.

Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age, agrees to sever his or her employment with the former.12

Article 287 of the Labor Code, as amended by R.A. No. 7641,13 pegs the age for compulsory retirement at 65 years, while the minimum age for optional retirement is set at 60 years. An employer is, however, free to impose a retirement age earlier than the foregoing mandates. This has been upheld in numerous cases14 as a valid exercise of management prerogative.

In this case, petitioner was retired by UNIPROM at the age of 47, after having served the company for 22 years, pursuant to UNIPROM’s Employees’ Non-Contributory Retirement Plan,15 which provides that employees who have rendered at least 20 years of service may be retired at the option of the company. At first blush, respondent’s retirement plan can be expediently stamped with validity and justified under the all encompassing phrase "management prerogative," which is what the CA did. But the attendant circumstances in this case, vis-à-vis the factual milieu of the string of jurisprudence on this matter, impel us to take a deeper look.

In Pantranco North Express, Inc. v. NLRC,16 the Court upheld the retirement of private respondent pursuant to a Collective Bargaining Agreement (CBA) allowing Pantranco to compulsorily retire employees upon completing 25 years of service to the company. Interpreting Article 287, the Court ruled that the Labor Code permits employers and employees to fix the applicable retirement age lower than 60 years of age. The Court also held that there was no illegal dismissal involved, since it was the CBA itself that incorporated the agreement between the employer and the bargaining agent with respect to the terms and conditions of employment. Hence, when the private respondent ratified the CBA, he concurrently agreed to conform to and abide by its provisions. Thus, the Court stressed, "[p]roviding in a CBA for compulsory retirement of employees after twenty-five (25) years of service is legal and enforceable so long as the parties agree to be governed by such CBA."



Similarly, in Philippine Airlines, Inc. (PAL) v. Airline Pilots Association of the Philippines (APAP),17 the retirement plan contained in the CBA between PAL and APAP was declared valid. The Court explained that by their acceptance of the CBA, APAP and its members are obliged to abide by the commitments and limitations they had agreed to cede to management.

The foregoing pronouncements served as guiding principles in the recent Cainta Catholic School v. Cainta Catholic School Employees Union (CCSEU),18 wherein the compulsory retirement of two teachers was upheld as valid and consistent with the CBA provision allowing an employee to be retired by the school even before reaching the age of 60, provided that he/she had rendered 20 years of service.

In Progressive Development Corporation v. NLRC,19 although the retirement plan was not embodied in a CBA, its provisions were made known to the employees’ union. The validity of the retirement plan was sustained on the basis of the finding of the Director of the Bureau of Working Conditions of the Department of Labor and Employment that it was expressly made known to the employees and accepted by them.

It is axiomatic that a retirement plan giving the employer the option to retire its employees below the ages provided by law must be assented to and accepted by the latter, otherwise, its adhesive imposition will amount to a deprivation of property without due process of law.

In the above-discussed cases, the retirement plans in issue were the result of negotiations and eventual agreement between the employer and the employees. The plan was either embodied in a CBA, or established after consultations and negotiations with the employees’ bargaining representative. The consent of the employees to be retired even before the statutory retirement age of 65 years was thus clear and unequivocal.

Unfortunately, no similar situation obtains in the present case. In fact, not even an iota of voluntary acquiescence to UNIPROM’s early retirement age option is attributable to petitioner.

The assailed retirement plan of UNIPROM is not embodied in a CBA or in any employment contract or agreement assented to by petitioner and her co-employees. On the contrary, UNIPROM’s Employees’ Non-Contributory Retirement Plan was unilaterally and compulsorily imposed on them. This is evident in the following provisions of the 1980 retirement plan and its amended version in 2000:

ARTICLE III ELIGIBILITY FOR PARTICIPATION

Section 1. Any regular employee, as of the Effective Date, shall automatically become a Participant in the Plan, provided the Employee was hired below age 60.



Verily, petitioner was forced to participate in the plan, and the only way she could have rejected the same was to resign or lose her job. The assailed CA Decision did not really make a finding that petitioner actually accepted and consented to the plan. The CA simply declared that petitioner was deemed aware of the retirement plan on account of the length of her employment with respondent. Implied knowledge, regardless of duration, cannot equate to the voluntary acceptance required by law in granting an early retirement age option to an employer. The law demands more than a passive acquiescence on the part of employees, considering that an employer’s early retirement age option involves a concession of the former’s constitutional right to security of tenure.

We reiterate the well-established meaning of retirement in this jurisdiction: Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age, agrees to sever his or her employment with the former.20

Acceptance by the employees of an early retirement age option must be explicit, voluntary, free, and uncompelled. While an employer may unilaterally retire an employee earlier than the legally permissible ages under the Labor Code, this prerogative must be exercised pursuant to a mutually instituted early retirement plan. In other words, only the implementation and execution of the option may be unilateral, but not the adoption and institution of the retirement plan containing such option. For the option to be valid, the retirement plan containing it must be voluntarily assented to by the employees or at least by a majority of them through a bargaining representative.

The following pronouncements in Jaculbe v. Silliman University21 are elucidating:

[A]n employer is free to impose a retirement age less than 65 for as long as it has the employees’ consent. Stated conversely, employees are free to accept the employer’s offer to lower the retirement age if they feel they can get a better deal with the retirement plan presented by the employer.1avvphi1

We disagree with the CA’s conclusion that the retirement plan is part of petitioner’s employment contract with respondent. It must be underscored that petitioner was hired in 1978 or 2 years before the institution of UNIPROM’s retirement plan in 1980. Logically, her employment contract did not include the retirement plan, much less the early retirement age option contained therein.

We also cannot subscribe to respondent’s submission that petitioner’s consent to the retirement plan may be inferred from her signature in the personnel action forms22 containing the phrase: "Employee hereby expressly acknowledges receipt of and undertakes to abide by the provisions of his/her Job Description, Company Code of Conduct and such other policies, guidelines, rules and regulations the company may prescribe."

It should be noted that the personnel action forms relate to the increase in petitioner’s salary at various periodic intervals. To conclude that her acceptance of the salary increases was also, simultaneously, a concurrence to the retirement plan would be tantamount to compelling her to agree to the latter. Moreover, voluntary and equivocal acceptance by an employee of an early retirement age option in a retirement plan necessarily connotes that her consent specifically refers to the plan or that she has at least read the same when she affixed her conformity thereto.

Hence, consistent with the Court’s ruling in Jaculbe,23 having terminated petitioner merely on the basis of a provision in the retirement plan which was not freely assented to by her, UNIPROM is guilty of illegal dismissal. Petitioner is thus entitled to reinstatement without loss of seniority rights and to full backwages computed from the time of her illegal dismissal in February 16, 2001 until the actual date of her reinstatement. If reinstatement is no longer possible because the position that petitioner held no longer exists, UNIPROM shall pay backwages as computed above, plus, in lieu of reinstatement, separation pay equivalent to one-month pay for every year of service. This is consistent with the preponderance of jurisprudence24 relative to the award of separation pay in case reinstatement is no longer feasible.

WHEREFORE, the petition is GRANTED. The July 31, 2007 Decision and the May 26, 2009 Resolution of the Court of Appeals in CA- G.R. SP No. 87508 are hereby REVERSED and SET ASIDE. The October 30, 2002 Decision of the Labor Arbiter is REINSTATED, with the MODIFICATION that the award of backwages shall be computed from the time of her illegal dismissal until the actual date of her reinstatement. If reinstatement is no longer possible because the position that petitioner held no longer exists, respondent UNIPROM shall pay backwages as computed above, plus, in lieu of reinstatement, separation pay equivalent to one-month pay for every year of service.

SO ORDERED.