466

Manatad v Philippine Telegraph & Telephone Corporation

548 SCRA 64 (2008)
Closure of Establishment & Reduction of Personnel

FACTS
Petitioner was employed in respondent company as junior clerk and
was later promoted as Account Executive, the position she held until
she was temporarily laid off from employment. Her temporary
separation was pursuant to the Temporary Staff Reduction Program
adopted by respondent company due to serious business reverses.
In 1998, she received a letter from respondent inviting her to avail
herself of the program package. However, she did not opt to avail
herself of such. In 1999, she received a Notice of Retrenchment from
respondent permanently dismissing her from employment.

She filed for illegal dismissal averring that the retrenchment program
is invalid as the respondent company was gaining profits for the
period of 1997-1998. Furthermore, she presented a document
granting an increase in the salaries of the employees under Grade 8
and 9. Therefore, petitioner was showing that it was still
economically viable for respondent to continue its business
operations without downsizing its workforce.

The Labor Arbiter ruled in favor of the petitioner. NLRC affirmed the
challenged decision. On certiorari, the Court of Appeals reversed the
NLRC and the Labor Arbiter Decisions and upheld the validity of the
respondents retrenchment program.

ISSUE
Whether or not the retrenchment program implemented by
respondent was valid

RULING
Retrenchment is the termination of employment initiated by the
employer through no fault of the employees and without prejudice to
the latter, resorted to by management during periods of business
recession; industrial depression; or seasonal fluctuations, 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 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. In the discharge of these
requirements, it is the employer who bears the onus, being in the
nature of affirmative defense.

For a valid retrenchment, the following requisites must be complied
with: (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 month prior to the intended date of retrenchment;
and (c) payment of separation pay equivalent to one-month pay or
at least one-half month pay for every year of service, whichever is
higher.

In the instant case, upon examination of the evidence adduced by
both parties, the Court was convinced that, indeed, respondent
experienced serious financial crises as shown in the financial
statements audited by independent auditors, SGV & Co. and Alba
Ledesma & Co. It is unlikely therefore that respondent was just
feigning business losses in order to ease out employees.

No evidence can best attest to a companys economic status other
than its financial statement. Being guided accordingly, we find that
respondent was fully justified in implementing a retrenchment
program since it was undergoing business reverses, not only for a
single fiscal year, but for several years prior to and even after the
program.

Even granting arguendo that respondent was not experiencing
losses, it is still authorized by Article 283 of the Labor Code to cease
its business operations. Explicit in the said provision is that closure
or cessation of business operations is allowed even if the business is
not undergoing economic losses. The owner, for any bona fide
reason, can lawfully close shop anyone. Just as no law forces
anyone to go into business, no law can compel anybody to continue
in it. It would indeed be stretching the intent and spirit of the law if we
were to unjustly interfere with the managements prerogative to close
or cease its business operations, just because said business
operations are not suffering any loss or simply to provide the
workers continued employment.

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. In spite of
overwhelming support granted by the social justice provisions of our
Constitution in favor of labor, the fundamental law itself guarantees,
even during the process of tilting the scales of social justice towards
workers and employees, "the right of enterprises to reasonable
returns of investment and to expansion and growth." To hold
otherwise would not only be oppressive and inhuman, but also
counter-productive and ultimately subversive of the nation's thrust
towards a resurgence in our economy which would ultimately benefit
the majority of our people. 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.

The Court also finds that the respondent complied with the requisite
notices to the employee and the DOLE to effect a valid
retrenchment.

The petition is denied and the Decision of the Court of Appeals is
affirmed.













467
NORTH DAVAO MINING CORPORATION VS. NLRC
254 SCRA 721
CLOSURE OF ESTABLISHMENT AND REDUCTION OF
PERSONNEL
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 May 31, 1992, petitioner North
Davao completely ceased operations due to serious business
reverses. 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.
Respondent Wilfredo Guillema is one among several employees of
North Davao who were separated by reason of the companys
closure. Subsequently, a complaint was filed with respondent labor
arbiter by respondent Wilfredo Guillema and 271 other seperated
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.
ISSUE:
Whether or not 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
RULING:
NO. Art. 283 governs the grant of seperation 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, however, the companys practice of giving
one months pay for every year of service could no longer be
continued precisely because the company could not afford it
anymore.
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.

468.
Cama vs. Jonis food food services inc.
425 scra 259
CLOSURE OF ESTABLISHMENT AND REDUCTION OF
PERSONNEL
Facts:
Respondent Jonis Food Services, Inc., (hereafter JFSI) is a
corporation duly organized and operated in accordance with
Philippine laws engaged in the coffee shop and restaurant business,
with several branches or outlets.
Petitioners were employees of JFSI having been hired on
various dates. The financial records of the company showed that
JFSI incurred a total net loss of P2,541,537.70 as of December 31,
1998. As a result, JFSI shut down more outlets, leaving it with just
three operating outlets at the end of 1998 out of 8 outlets. However,
One month before the target closure date of its remaining outlets,
JFSI sent notices of closure to the Department of Labor and
Employment (DOLE) and to the complainants who were then
employed in the remaining branches or outlets.
Petitioners filed a complaint for illegal dismissal, separation pay,
service incentive leave pay, 13
th
month pay, attorneys fees,
remittance of SSS and Pag-Ibig contributions, and refund of excess
withholding taxes against JFSI.
Both the Labor Arbiter and the NLRC ruled that the losses were not
so severe as to prevent the respondent from paying separation pay
to the petitioners. The Court of Appeals ruled to the contrary.

ISSUE:
WHETHER OR NOT HEREIN PETITIONERS ARE ENTITLED TO
SEPARATION PAY

HELD:
NO. It was pronounced that since the closure was due to serious
losses duly proven by clear evidence, the employees affected were
not entitled to separation pay. In this case, the supreme court to
determine the veracity of the claim of the company that it has
suffered extreme losses, scrutinized the balance sheets and income
statements by using such basic accounting tools as the working
capital ratio. Accordingly, it concluded that indeed, the company was
suffering from serious losses and therefore trhe employer is not
obligated to pay separation benefits.


469.

Industrial Timber Corporation v. Ababon:

480 SCRA 171

CLOSURE OF ESTABLISHMENT AND REDUCTION OF
PERSONNEL
FACTS:

Industrial Plywood Group Corporation (IPGC) is the owner of
a plywood plant located in Butuan City, leased to Industrial Timber
Corporation (ITC) on August 30, 1985 for a period of five years.
Thereafter, ITC commenced operation of the plywood plant and hired
387 workers (94 are petitioners). 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. On October 15, 1990, IPGC took
over the plywood plant after it was issued a Wood Processing Plant
Permit 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.

ISSUE:
Whether or not Ababon, et al. were illegally dismissed due to the
closure of ITCs business and whether they are entitled to separation
pay, backwages, and other monetary awards

HELD:
No they are not illegally dismissed but are entitled to separation pay
with additional P50,000.00 as nominal damages

In these consolidated cases, the SC find that ITCs 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 in Butuan City. The SC 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. But still,
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. However, although the closure was done in good faith and for
valid reasons, 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,
however, the law requires that it must notify the DOLE and its
employees at least one month before the intended date of closure.
So the SC deem it wise and reasonable to award P50,000.00 to
each employee as nominal damages.

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.