Central Azucarera del Danao v.
CA (1985) to have been overpaid, and Bana-ay is not entitled to separation pay for
Doctrines:
Change of ownership or management of a business establishment or
enterprise is not one of the just causes for lawful termination under the law,
and cannot be construed as synonymous with nor analogous to closing or
cessation of operation of an establishment or enterprise and therefore cannot
exempt the transferor from liability for separation pay.
Facts:
Private respondents Bana-ay, Coscolluela, and Palma were among the
regular and permanent employees of Central Azucarera del Danao (Central
Danao), owner-operator of a sugar mill in Negros Occidental. Central Danao
sold its sugar mill properties and other assets to Danao Development
Corporation (Dadeco), a duly organized corporation composed of sugar
planters. Immediately thereafter, Dadeco took over the management and
operation of the properties pursuant to the terms and conditions of the Deed
of Sale.
Although the deed made no express mention of the continued employment
status of the old employees of Central Danao upon the consequent change
of its ownership and management, Dadeco nevertheless hired Central
Danaos regular and permanent employees but in accordance with its own
hiring and selection policies.
During the period of their new employment with Dadeco, Bana-ay,
Cosculleula, and Palma were terminated. They filed separate complaints for
recovery of termination pay with damages against Dadeco and Central
Danao as common defendants with the CFI of Negros Occidental. They
alleged among other things, that Dadeco maliciously and fraudulently
dismissed them without justifiable cause or any advance notice of separation.
Dadeco denied liability for the termination pay asserting lack of cause of
action since it was not private respondents employer for the period in
question. It averred that Central Danao, as previous owner and employer
should shoulder the liability.
Central Danao invoked the defense of lack of cause of action, prescription,
and laches in denying liability and by way of cross-claim, shifted the burden
to Dadeco. It claimed that Dadeco assumed liability for termination pay upon
the sale of the assets. Thus, at the time of private respondents termination,
Dadeco was already their employer.
CFI ruled in favor of Bana-ay, Coscolluela, and Palma, ordering Central
Danao to pay them. However, complaints against Dadeco were dismissed
(Coscullela actually received some amount from Dadeco, Palma was found
being a temporary laborer only). CA affirmed. Central Danaos MR was
denied. Hence, this petition to review.
Issue:
1. W/N a change of ownership or management of an establishment or
corporation by virtue of the sale or disposition of all or substantially all of its
properties and assets operate to insulate the selling corporation (Central
Danao) from its obligation to its employees under the Termination Pay Law.
Held/Ratio:
NO. An employee may be terminated with or without just cause. Under the
Termination Pay Law, if there is just cause, the employer is not required to
serve notice nor pay termination pay to employees concerned. If withoutjust
cause, the employer must serve timely notice to the employee; otherwise, the
employer is obliged to pay termination pay, except where there are other
applicable statutes that provide a remedy for unfair labor practice. In the
exercise of its management prerogative, the employer may merge or
consolidate its business with another, or sell or dispose of all or substantially
all of its assets and properties which may bring about the dismissal or
termination of its employees in the process. Such dismissal or termination
should not however be interpreted in such a manner as to permit the
employer to escape payment of termination pay.
The sale or disposition must be motivated by good faith as an element of
exemption from liability. An innocent transferee of a business establishment
has no liability to the employees of the transferor to continue employing
them. Nor is the transferee liable for past unfair labor practices of the
previous owner, except when the liability therefor is assumed by the new
employer under the contract of sale, or when liability arises because of the
new owners participation in defeating the rights of the employees.
The Deed of Sale does not contain any express stipulation to the continued
employment by Dadeco of the former employees of Central Danao. Also,
there is no law requiring the purchaser to absorb the employees of the selling
company. The most that the former could do is to give preference to the
qualified separated employees of the selling company. In reality then, the
employees herein were rehired by Dadeco, their new employer.
The records also reveal that negotiations for the sale were made behind the
back of the employees who were taken by surprise upon its consummation.
Technically then, the employees were terminated on the date of the sale.
Worse, they were not even given the required notice of termination.