Hazel Serrano

LABLLEG-348
BSBA-HRM 2

GREGORIO V. TONGKO, Petitioner, vs. THE MANUFACTURERS LIFE INSURANCE

CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, Respondents.

Facts:
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation
engaged in life insurance business.Renato A. Vergel De Dios was, during the period
material, its President and Chief Executive Officer. Gregorio V. Tongko started his
professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent's
Agreement (Agreement) he executed with Manulife. In the Agreement, it is provided
that: It is understood and agreed that the Agent is an independent contractor and
nothing contained herein shall be construed or interpreted as creating an employer-
employee relationship between the Company and the Agent. The Company may
terminate this Agreement for any breach or violation of any of the provisions hereof by
the Agent by giving written notice to the Agent within fifteen (15) days from the time of
the discovery of the breach. No waiver, extinguishment, abandonment, withdrawal or
cancellation of the right to terminate this Agreement by the Company shall be construed
for any previous failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without
cause, by giving to the other party fifteen (15) days’ notice in writing. In 1983, Tongko
was named as a Unit Manager in Manulife's Sales Agency Organization.In 1990, he
became a Branch Manager. As the CA found, Tongko's gross earnings from his work at
Manulife, consisting of commissions, persistency income, and management overrides.
The problem started sometime in 2001, when Manulife instituted manpower
development programs in the regional sales management level. Relative thereto, De
Dios addressed a letter dated November 6, 2001 to Tongko regarding an October 18,
2001 Metro North Sales Managers Meeting. Stating that Tongko’s Region was the
lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of
today, continues to remain one of the laggards in this area.
Other issues were: "Some Managers are unhappy with their earnings and would want to
revert to the position of agents." And "Sales Managers are doing what the company
asks them to do but, in the process, they earn less." Tongko was then terminated.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against
Manulife for illegal dismissal in the Complaint. In a Decision dated April 15, 2004, Labor
Arbiter dismissed the complaint for lack of an employer-employee relationship. The
NLRC's First Division, while finding an employer-employee relationship between
Manulife and Tongko applying the four-fold test, held Manulife liable for illegal dismissal.
Thus, Manulife filed an appeal with the CA. Thereafter, the CA issued the assailed
Decision dated March 29, 2005, finding the absence of an employer-employee
relationship between the parties and deeming the NLRC with no jurisdiction over the
case.

Issues:
1.) Whether or not Tongko was an employee of Manulife; 2.) Whether or not Tongko
was illegally dismissed.

Ruling:
On the first Issue:
Yes. In the instant case, Manulife had the power of control over Tongko that would
make him its employee. Several factors contribute to this conclusion. In the Agreement
dated July 1, 1977 executed between Tongko and Manulife, it is provided that: The
Agent hereby agrees to comply with all regulations and requirements of the Company
as herein provided as well as maintain a standard of knowledge and competency in the
sale of the Company's products which satisfies those set by the Company and
sufficiently meets the volume of new business required of Production Club
membership.Under this provision, an agent of Manulife must comply with three (3)
requirements: (1) compliance with the regulations and requirements of the company; (2)
maintenance of a level of knowledge of the company's products that is satisfactory to
the company; and (3) compliance with a quota of new businesses. Among the company
regulations of Manulife are the different codes of conduct such as the Agent Code of
Conduct, Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct
Agreement, which demonstrate the power of control exercised by the company over
Tongko. The fact that Tongko was obliged to obey and comply with the codes of
conduct was not disowned by respondents. Thus, with the company regulations and
requirements alone, the fact that Tongko was an employee of Manulife may already be
established. Certainly, these requirements controlled the means and methods by which
Tongko was to achieve the company's goals.
More importantly, Manulife's evidence establishes the fact that Tongko was tasked to
perform administrative duties that establishes his employment with Manulife.
Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a
certain number of agents, in addition to his other administrative functions, leads to no
other conclusion that he was an employee of Manulife.
On the second Issue:
In its Petition for Certiorari dated January 7, 2005[26] filed before the CA, Manulife
argued that even if Tongko is considered as its employee, his employment was validly
terminated on the ground of gross and habitual neglect of duties, inefficiency, as well as
willful disobedience of the lawful orders of Manulife. Manulife stated: In the instant case,
private respondent, despite the written reminder from Mr. De Dios refused to shape up
and altogether disregarded the latter's advice resulting in his laggard performance
clearly indicative of his willful disobedience of the lawful orders of his superior. As
private respondent has patently failed to perform a very fundamental duty, and that is to
yield obedience to all reasonable rules, orders and instructions of the Company, as well
as gross failure to reach at least minimum quota, the termination of his engagement
from Manulife is highly warranted and therefore, there is no illegal dismissal to speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed to
cite a single iota of evidence to support its claims. Manulife did not even point out which
order or rule that Tongko disobeyed.
More importantly, Manulife did not point out the specific acts that Tongko was guilty of
that would constitute gross and habitual neglect of duty or disobedience. Manulife
merely cited Tongko's alleged "laggard performance," without substantiating such claim,
and equated the same to disobedience and neglect of duty. Apropos thereto, Art. 277,
par. (b), of the Labor Code mandates in explicit terms that the burden of proving the
validity of the termination of employment rests on the employer. Failure to discharge this
evidential burden would necessarily mean that the dismissal was not justified, and,
therefore, illegal. The Labor Code provides that an employer may terminate the services
of an employee for just cause and this must be supported by substantial evidence. The
settled rule in administrative and quasi-judicial proceedings is that proof beyond
reasonable doubt is not required in determining the legality of an employer's dismissal
of an employee, and not even a preponderance of evidence is necessary as substantial
evidence is considered sufficient. Substantial evidence is more than a mere scintilla of
evidence or relevant evidence as a reasonable mind might accept as adequate to
support a conclusion, even if other minds, equally reasonable, might conceivably opine
otherwise. Here, Manulife failed to overcome such burden of proof. It must be reiterated
that Manulife even failed to identify the specific acts by which Tongko's employment
was terminated much less support the same with substantial evidence.
To repeat, mere conjectures cannot work to deprive employees of their means of
livelihood. Thus, it must be concluded that Tongko was illegally dismissed. Moreover, as
to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not being
its employee is not entitled to such notices. Since we have ruled that Tongko is its
employee, however, Manulife clearly failed to afford Tongko said notices. Thus, on this
ground too, Manulife is guilty of illegal dismissal.
 ANGELINA FRANCISCO, Petitioner, versus NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON
ESCUETA, Respondents., G.R. No. 170087, 2006 Aug 31.

FACTS:
1995, Petitioner was hired by Kasei Corporation during its incorporation stage. She was
designated as Accountant and Corporate Secretary and was assigned to handle all the
accounting needs of the company. She was also designated as Liaison Officer to the
City of Makati to secure business permits, construction permits and other licenses for
the initial operation of the company.
Although she was designated as Corporate Secretary, she was not entrusted with the
corporate documents; neither did she attend any board meeting nor required to do so.
She never prepared any legal document and never represented the company as its
Corporate Secretary. 1996, petitioner was designated Acting Manager. Petitioner was
assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government
agencies, especially with the BIR, SSS and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant which is
owned and operated by Kasei Corporation.
January 2001, petitioner was replaced by a certain Liza R. Fuentes as Manager. Kasei
Corporation reduced her salary, she was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did not
receive her salary from the company. She made repeated follow-ups with the company
cashier but she was advised that the company was not earning well. Eventually she was
informed that she is no longer connected with the company.
Since she was no longer paid her salary, petitioner did not report for work and filed an
action for constructive dismissal before the labor arbiter. Private respondents averred
that petitioner is not an employee of Kasei Corporation. They alleged that petitioner
was hired in 1995 as one of its technical consultants on accounting matters and act
concurrently as Corporate Secretary. As technical consultant, petitioner performed her
work at her own discretion without control and supervision of Kasei Corporation.
Petitioner had no daily time record and she came to the office any time she wanted and
that her services were only temporary in nature and dependent on the needs of the
corporation.
The Labor Arbiter found that petitioner was illegally dismissed, NLRC affirmed with
modification the Decision of the Labor Arbiter. On appeal, CA reversed the NLRC
decision. CA denied petitioner’s MR, hence, the present recourse.
ISSUES:
WON there was an employer-employee relationship between petitioner and private
respondent; and if in the affirmative,
Whether petitioner was illegally dismissed.

RULING:
Generally, courts have relied on the so-called right of control test where the person for
whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end. In addition to the
standard of right-of-control, the existing economic conditions prevailing between the
parties, like the inclusion of the employee in the payrolls, can help in determining the
existence of an employer-employee relationship.
There are instances when, aside from the employer’s power to control the employee,
economic realities of the employment relations help provide a comprehensive analysis
of the true classification of the individual, whether as employee, independent contractor,
corporate officer or some other capacity.
It is better, therefore, to adopt a two-tiered test involving: (1) the employer’s power to
control; and (2) the economic realities of the activity or relationship.
The control test means that there is an employer-employee relationship when the
person for whom the services are performed reserves the right to control not only the
end achieved but also the manner and means used to achieve that end.
There has to be analysis of the totality of economic circumstances of the worker. Thus,
the determination of the relationship between employer and employee depends upon
the circumstances of the whole economic activity, such as: (1) the extent to which the
services performed are an integral part of the employer’s business; (2) the extent of the
worker’s investment in equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the
amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the relationship between
the worker and the employer; and (7) the degree of dependency of the worker upon the
employer for his continued employment in that line of business. The proper standard of
economic dependence is whether the worker is dependent on the alleged employer for
his continued employment in that line of business
By applying the control test, it can be said that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura,
the corporation’s Technical Consultant. She reported for work regularly and served in
various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager
and Corporate Secretary, with substantially the same job functions, that is, rendering
accounting and tax services to the company and performing functions necessary and
desirable for the proper operation of the corporation such as securing business permits
and other licenses over an indefinite period of engagement. Respondent corporation
had the power to control petitioner with the means and methods by which the work is to
be accomplished.
Under the economic reality test, the petitioner can also be said to be an employee of
respondent corporation because she had served the company for 6 yrs. before her
dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month
pay, bonuses and allowances, as well as deductions and Social Security contributions
from. When petitioner was designated General Manager, respondent corporation made
a report to the SSS. Petitioner’s membership in the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation. The
coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.
The corporation constructively dismissed petitioner when it reduced her. This amounts
to an illegal termination of employment, where the petitioner is entitled to full backwages
A diminution of pay is prejudicial to the employee and amounts to constructive
dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of
work resorted to when continued employment becomes impossible, unreasonable or
unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an
employee. Petition is GRANTED.
 ABS-CBN BROADCASTING CORPORATION vs. MARLYN NAZARENO et al.
G.R. No. 164156
September 26, 2006

Facts:
Petitioner, ABS-CBN Broadcasting Corporation (ABS-CBN), employed the services of
Respondents, Nazareno, Gerzon and Lerasan as Production Assistants (PAs) on
various dates. Respondents were assigned to the news and public affairs section for
various radio programs in the Cebu Broadcasting Station. ABS-CBN and Rank-and-File
Employees executed a Collective Bargaining Agreement dated December 19,1996,
effective during the period from December 11, 1996 to December 11, 1999. However,
ABS-CBN refused to recognize PAs as part of this bargaining unit, thus respondents
were not including in the CBA.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular
Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay,
Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the
petitioner before the NLRC. The Labor Arbiter directed the parties to submit their
respective position papers. However, upon failure to do so, the petition was denied.
Respondents then filed an Earnest Motion to Refile Complaint with Motion to Admit
Position Paper and Motion to Submit Case for Resolution. The Labor Arbiter rendered
judgment in favor of the respondents, and declared that they were regular employees of
petitioner as such, they were awarded monetary benefits. NLRC affirmed the decision of
the Labor Arbiter. Petitioner filed a motion for reconsideration but CA dismissed it.

Issue:
Whether or not the respondents should be considered as regular employees of
petitioner, ABS-CBN.
Case for Complainant Employee:
Respondents in this case employed as PAs of petitioner, a broadcasting network,
maintained that they should be entitled to the benefits therein reflected in the CBA for
they are considered to be regular employees. Respondents insisted that they belonged
to a work pool from which petitioner chose persons to be given specific assignments at
its discretion, and were thus under its direct supervision and control regardless of
nomenclature.
Case for Respondent Company:
ABS-CBN alleged in its position paper that the respondents were PAs who basically
assist in the conduct of a particular program ran by an anchor or talent. Among their
duties include monitoring and receiving incoming calls from listeners and field reporters
and calls of news sources; generally, they perform leg work for the anchors during a
program or a particular production. They are considered in the industry as program
employees in that, as distinguished from regular or station employees, they are
basically engaged by the station for a particular or specific program broadcasted by the
radio station.

Ruling:
The Supreme Court denied the petition for lack of merit.
Ratio Decidendi:
The Supreme Court through Justice Callejo, Sr. declared that the respondents are
regular employees of ABS-CBN. It was held that a person who has rendered at least
one year of service, regardless of the nature of the activity performed orwhether work is
continuous or intermittent, should be considered as regular as long as the activity for
which that person is employed exists. The reason for this being that a customary
appointment is not indispensable before one may be formally declared as having
attained regular status.
The Court further held that the presumption should be that when the work done is an
integral part of the regular business of the employer and when the worker, relative to the
employer, does not furnish an independent business or professional service, such work
is a regular employment of such employee and not an independent contractor. As
regular employees, respondents are entitled to the benefits granted to all other regular
employees of petitioner under the CBA. Besides, only talent-artists were excluded from
the CBA and not production assistants who are regular employees of the respondents.
Moreover, under Article 1702 of the New Civil Code: “In case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent
living of the laborer.”
 Columbian Rope vs TALE, 6 SCRA 425

Facts:
This is a petition for review by certiorari of the decision of the Court of Industrial
Relations.
Respondents Braulio Malpas, Felipe Superable, Jose de la Rosa and Andres Macamay
were the complainants below against petitioner Columbian Rope Company of the
Philippines (Tacloban Branch), alleging that they were employees of the latter who were
dismissed by reason of their membership in the Tacloban Association of Laborers and
Employees (CIR Case No. 16-ULP-Cebu). Superable was dismissed on September
17,1954; Malpas on November 17, 1954; de la Rosa on December 1, 1954; and
Macamay on February 8, 1955. After trial and pending decision of the court, the
Company filed an "urgent petition" for permission to close down its Tacloban branch
effective October 15, 1955, on the ground of continuing losses in its local business.
Acting on the petition, the court on September 29, 1955 issued an order stating that
"there being no provision in Republic Act No. 875 or in any other act to the effect that an
employer could not close his or its business without first securing authority from this
Court if there is a pending certification or unfair practice case involving said business,
the granting of such authority is unnecessary," but that "should the Tacloban branch of
respondent Company be actually closed as planned, such closing should be without
prejudice to the results of the two pending cases (Cases 16-ULP-Cebu and 28MC-
Cebu) involving said Company and the Tacloban Association of Laborers and
Employees." On September 22, 1958 the Industrial Relations Court rendered its
decision declaring that the dismissal of the complainants was violative of Section 4 (a),
subsections 1, 2 and 4 of Republic Act 875 and requiring the company "to cease and
desist from committing unfair labor practice; to pay back wages to the complainants
from the time of their dismissal until they are made whole; and to maintain the terms
and conditions of employment at the time of their dismissal and not to disturb their
seniority."

Issue:
The decision of respondent Court is set aside and the case is remanded for further
proceedings-specifically to receive evidence on, and decide the questions of (1)
whether or not the Tacloban branch of petitioning Company was closed on September
30,1955 or on any other date thereafter; (2) whether such closure was for a justifiable
cause, as alleged by said company, or was resorted to in order to circumvent any
decision requiring reinstatement which the said court might render, as alleged by
respondent employees and (3) if the closure was true and justified, whether or not, on
the basis of the evidence, to order the reinstatement of said employees in the
Company's other branches or to put them on a preferential list for that purpose, on the
basis of the exigencies of its business. Without costs.
Ruling:
A motion for reconsideration was denied by the court en banc, with a separate
concurring and dissenting opinion by judge Emiliano C. Tabigne.
In the instant petition, petitioner does not question the Industrial Relations Court's
finding of unfair labor practice and the right of the complaining employees to back
wages from the dates of their respective dismissals up to the time petitioner closed its
Tacloban branch, allegedly on September 30, 1955. The sole issue now presented is:
May an employer, found guilty of unfair labor practice in dismissing four employees, be
ordered to reinstate them after the closure of its branch office where they were
employed, and to pay the dismissed employees back wages from the date of such
closure until they are actually reinstated?
On this question this Court's ruling in Durable Shoe Factory vs. Court of Industrial
Relations, L-7783 May 31, 1956, is in point:
"Underground (4), petitioner complains in the first place against the award of back
wages beyond December 6, 1962, when, according to petitioner, it closed operations.
As to this complaint, we think it only fair to rule that the back wages should not extend
beyond the date of closure of business where such closure was due to legitimate
business reasons and not merely to an attempt to defeat the order of reinstatement."
Apropos of a similar question of reinstatement under circumstances analogous to those
claimed by petitioner, it is stated in Erlanger & Galinger, Inc. vs. Court of Industrial
Relations, L-15118, December 29, 1960:
"The unfavorable conditions in the company's business and the consequent reduction of
its collectible accounts, as held by the lower court, may not justify reinstatement, but
they certainly are not sufficient grounds to deny back wages to respondent Flores who
was illegally dismissed on account of union activities."
Even in the absence of any finding that an employer has been guilty of unfair labor
practice a business recession may affect the right of an employee to reinstatement. So
in Philippine American Drug Co. vs. Court of Industrial Relations, involving the dismissal
of an employee because of business losses suffered by the employer, it was held:
"Unquestionably, petitioner had suffered a business recession which rendered
unjustified Cuadra's reinstatement in March 1957 a remedy to which he would ordinarily
have been entitled. So he was merely given a priority right to be employed should
petitioner subsequently employ additional personnel." (L-15162, April 18, 1962).
The same view is held in American Jurisprudence:
"Nor may an employer be compelled by an order of reinstatement to give employment to
a greater number of persons than the economic operation of his business requires.
Thus, if between the time of the occurrence of the wrongful discharge and the proposed
order of reinstatement, the employer's commercial or financial circumstances * * * have
changed, the Board, despite the employer's unfair labor practices, cannot compel the
employer to reinstate such a number of employees as may exceed his needs under the
altered conditions. While the Board, under such circumstances, may not be empowered
to order present reinstatement, it does have the right to order that such employees be
given precedence in future hiring." Rothenberg on Labor Relations, p. 574.
"Implicit in the reinstatement provision of the Board's order was a condition of the
continued operation by the offending employer of the refinery to the employment of
which the illegally discharged employees were to be restored. Such operation might
have continued under the old business form or under a disguise intended to evade this
provision. If there was merely a change in name or in apparent control there is no
reason to grant the petitioner relief from the Board's order of reinstatement; instead,
there is added ground for compelling obedience. Whether there was a bona fide
discontinuance and a true change of ownership which would terminate the duty of
reinstatement created by the Board's order or merely a disguised continuance of the old
employer, does not clearly appear, and accordingly is a question of fact properly to be
resolved by the Board on direct resort to it, or by the court if contempt proceedings are
instituted." Southport Petroleum Company vs. National Labor-Relations Board, 315 U.S.
100-109; 86 L. ed. 719.
Respondents contend that even if it be true that the Tacloban Branch of petitioning
Company has been closed for the reason alleged by it, they could still be reinstated in
its other branches. There is indeed authority for the proposition that in such case the
employer must offer the discharged employees substantially equivalent employment, if
available:
"A provision of a Board order requiring that employees directed to be reinstated for
whom no work is presently available be put on one preferential list covering all company
plants in Ohio, Michigan and Pennsylvania, thus making reinstatement possible at other
than the plant where the employee formerly worked, was held to be within the power of
the Board, and, so far as appears, not an abuse of discretion." Bufford on the Wagrter
Act, p. 848.
"A reinstatement order may issue although that branch of the employer's business in
which the employee was engaged has been abandoned or his former position has been
abolished, where the employer can offer his substantially equivalent employment." 56
C.J.S. 388, Citing Williams Motor Co. vs. National Labor Relations Board, 128 F. 2d
960.

Reinstatement under this circumstance does not necessarily have to be immediate:

"There was no positive requirement to re-employ these men immediately. The
requirements as to employment were alternative and conditioned upon the actual
situation. If there were substantially equivalent positions or any other available positions
for which they are qualified, an offer of immediate reinstatement therein was required. If
there were no such positions available, they were to be placed on a preferential list and
to be first offered employment 'in any position for which they are qualified as such
employment becomes available' and, if the body and fender shop be reopened, they
were to be offered immediate employment therein. There was no requirement to
discharge employed men to make places for these three; no requirement to employ
them unless such services were needed; and no requirement to reopen the body and
fender shop in order to furnish them employment. No compulsory change in petitioner's
business was contemplated. Petitioner was permitted to conduct its business as it
wished with the one requirement that these men should be offered such employment as
they were qualified to undertake whenever there was need immediate or in the future of
such service by petitioner. In short, the effect of the order is to restore these men to
their previous status as nearly as this could be done without in any way 'dislocating'
petitioner's business or its method of conducting such business." Williams Motor Co. vs.
National Labor Relations Board, supra.
The views so far expounded assume that the employer has legitimately closed its
business. In the present case the lower court has made no finding on this point. No
evidence one way or another was presented at the trial.
All that appears is that petitioner asked for permission to close its Tacloban branch, and
that its allegation of actual closure on September 30, 1955, contained in the
memorandum submitted in support of its motion for reconsideration in the court below,
has not been categorically denied by respondents in their written opposition to the
motion.
In the Durable Shoe Factory case, supra, where a similar question was raised, namely,
whether the employer's business closed on December 6, 1952, the lower court's
decision not containing any express finding thereon, this Court, in order to "avoid any
injustice that may be committed through any assumption that petitioner continued
operations even after December 6, 1952," ruled that the Industrial Relations Court
should require evidence on that particular question of fact and therefore remanded the
case for that purpose.
 G.R. No. 107302 & 107306 - INDUSTRIAL TIMBER CORP. vs. NATIONAL LABOR
RELATIONS COMMISSION, ET AL.

Facts:
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]
Issue:
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.

Ruling:
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) Ingress and egress were observed and provided for as shown by Annexes 'J' to 'S';
b) The concerted action was peaceful and not marred by violence or intimidation;
c) No injury to persons nor damage to property has been inflicted;
d) No violation of personal and property rights was committed;
e) 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 I 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.
Insular Lumber vs CA, 29 SCRA 371T

Facts:
Petition to Review the joint decision 1 of the then Court of Appeals dated June 23, 1975
in three (3) separate cases for "Recovery of Termination Pay with Damages" under R.A.
1052, as amended by R.A. 1787, which affirmed the three (3) separate decisions of the
defunct Court of First Instance of Negros Occidental-Branch II, ordering petitioner
Central Azucarera del Danao to pay termination pay to private respondents Nonelon
Bana-ay, Jose A. Cosculluela, and Gorgonio Palma.
Private respondents Nonelon Bana-ay, Jose Cosculluela, and Gorgonio Palma were
among the regular and permanent employees of Central Azucarera del Danao (Central
Danao, for short), owner-operator of a sugar mill in Danao milling district of Toboso,
Negros Occidental. Nonelon Bana-ay started working with petitioner Central Danao on
October 15, 1939 as a railroad repair man until 1941. He was promoted as locomotive
conductor in 1946. 2 Jose Cosculluela, on the other hand, was hired on October 10,
1935 as superintendent of the transportation department, 3 whereas, Gorgonio Palma
was employed as machinist on August 1, 1931. 4
On July 7, 1961, Central Danao sold its sugar mill properties and other assets to Danao
Development Corporation (Dadeco, for short), a duly organized corporation composed
of sugar planters of the milling district of Central Danao. Immediately thereafter, or on
July 8, 1961, Dadeco actually took over the management and operation of the
purchased sugar mill properties pursuant to the terms and conditions of the Deed of
Sale. 5
Although the document of sale 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, the purchasing corporation, however hired
Central Danao's regular and permanent employees but in accordance with its own hiring
and selection policies.
Nonelon Bana-ay was hired by the new management on August 1, 1961, or after the
lapse of 23 days from the date of sale; Jose Cosculluela on July 8, 1961, or immediately
the day after the date of sale; and Gorgonio Palma, only on August 1, 1961.
During the period of their new employment with Dadeco, Nonelon Bana-ay was
terminated on December 15, 1961; Gorgonio Palma oii July 10, 1966, and Jose
Cosculluela, on February 1, 1967.
As a consequence thereof, Nonelon Bana-ay, along with eight others, 6 Jose
Cosculluela, and Gorgonio Palma, filed separate complaints for recovery of termination
pa3 with damages against Dadeco and Central Danao as common defendants with the
then Court of First Instance of Negros Occidental, Bacolod City—Branch II. Said cases
were docketed therein as Civil Case Nos. 8214, 8255, and 8353. the complaints
respectively alleged among other things, that Dadeco malicious 13, and fraudulently
dismissed theni without justifiable cause or any advance notice of separation.
Controverting said complaints, Dadeco denied liability for termination pay, asserting lack
of cause of action since Dadeco was not their employer for the period in question and
prior to the time it took ovet the management and operation of the sugar central on July
8, 1961. By way of cross-claim, Dadeco

contended that the liability for the termination pay corresponding to complainants' (now
private respondents) years of employment until the date of sale on July 7, 1961 should
be shouldered by Central Danao, private respondents' previous owner and employer.
On the other hand, 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. Central Danao claimed that Dadeco assumed the liability to pay the
termination pay corresponding to the alleged years of employment prior to July, 8, 1961,
contending, that the assets of Central Danao had already been sold to Dadeco pursuant
to the Deed of Sale of July 7, 1961; and that at the time of their alleged termination,
Dadeco was already ttleir employer.
After the issues were joined, pre-trial conferences were held on different dates, after
which, a "Stipulation of Facts" was eitered intc in each of the three (3) cases which may
be briefly summarized as follows:
1. On July 7. 1961, the Central Danao sold its Danao mill (sugar mill) properties to
Dadeco under the Deed of Sale dated July 7, 1961, Annex A of the complaints;
2. On July 8, 1961. Dadeco started its actual operation and marageinent of the mill
properties of Central Danao by virtue Of the aforesaid Deed of Sale;
3. That plaintiff Nonelon Bana-ay started 'Working kith Dadeco on August 1, 1961 in the
Transportation Department and he last reported for work on December 15, 1961: that
plaintiff Jose Cosculluela prior to February, 1967, was employed as Superintendent of
the Transportation Department with a monthly salary of P1,028.00 and that as of
February, 1967. He was employed in the sugar central, while plaintiff Gorgonio Palnia s
arted working also with the sugar central on August 1, 1961 and last reported for work
with Dadeco on July 10, 1966. He received from Dadeco the amount of P790.50 as
separation pay; whether he resigned or not remain to be proved;

Issues:
a) whether or not plaintiffs are entitled to Termination Pay Law, R.A. 1052, as amended;
b) in case plaintiffs are entitled to termination pay, who should be liable for its payment,
Central Danao or Dadeco?
Ruling:
After trial, the Court of First Instance of Negros Occidental, Branch 11, rendered three
(3) separate decisions, all in favor of plaintiffs (now private respondents), ordering
Central Danao—
1) in Civil Case No. 8214, to pay Nonelon Bana-ay the sum of Pl,320.00 plus 6%
interest per annum from the date of filing of the complaint and to pay the costs;
2) in Civil Case No. 8353, to pay Gorgonio Palma the sum of P2,790.00 plus legal
interests from the date of filing of the complaint.
The complaints were dismissed as against the defendant, now private respondent
Dadeco. The trial court found that Jose Cosculluela actually received from Dadeco the
amount of P2,006.06 after deducting the amount of P9,622.58 representing his
accounts and advances from the amount of Pl1,628.64 representing his retirement
gratuity based on the number of ears of service with Dadeco. Gorgonio Palma was
found to have been actually overpaid by Dadeco of the separation due him for his
almost 5 years of service, having received P750.50 instead of only P465.00; while
Nonelon Bana-ay is not entitled to separation pay since he did not render continuous
service being considered only a temporary laborer of Dadeco.
From the three (3) decisions, Central Danao appealed to the then Court of Appeals
which, on June 23, 1975, affirmed the decisions of the Court of First Instance of Negros
Occidental but modified the award of termination pay to Jose Cosculluela so as to cover
only the years of service from 1935 to July 7, 1961, the date when the sugar mill
properties were sold to Dadeco.
Central Danao's motion for reconsideration having been denied 7 it now filed the instant
petition seeking a consolidated review of the joint decision of the then Court of Appeals,
now Intermediate Appellate Court, in the three (3) cases, contending that the trial court
erred: 8
I
IN HOLDING THAT PETITIONER IS LIABLE TO PAY EMPLOYEES SEPARATION
PAYS FROM 1935 to 1961;
II
IN HOLDING THAT CLAIMANTS EMPLOYMENT WITH PETITIONER WAS
TERMINATED WHEN DADECO PURCHASED AND ASSUMED OPERATION OF
PETITIONER'S MILL PROPERTIES; and
III
IN HOLDING THAT EMPLOYEES WERE NOT GUILTY OF LACHES.

Petitioner Central Danao argues that it cannot be held accountable to the three private
respondents for the latter's termination pay since the responsibility therefor should be
borne by Dadeco, the purchasing corporation. In support of its theory, Central Danao
contends that when it sold all its sugar mill properties and assets to Dadeco on July 7,
1961, the employees were not terminated as would entitled them to termination pay.
Instead they were absorbed, re-employed and in fact, continued working in the sugar
mill upon Dadeco's takeover of the management and operation. Private respondents
(employees) therefore should have directed their claims solely against their present
employer, Dadeco, because at the time they were allegedly terminated, there was no
employer-employee relationship between them and Central Danao; that assuming
arguendo, that they were terminated by Central Danao when the latter sold the sugar
mill properties and assets to Dadeco on July 7, 1961, Central Daiao is not liable to pay
termination pay because their termination was for a just cause-closing or cessation of
employer's business under Sec. 1, R.A. 1052, as amended by R.A. 1787; and assuming
further, that there was in fact no closure or cessation of employer's business since
Dadeco continued to operate the mill properties, still, the purchase and takeover by
Dadeco of the mill properties can be considered analogous to closing or cessation of
the operation of the establishment conformably with paragraph (f) of Section 1, R.A.
1052, as amended by R.A. 1787; and finally, that the claim, s for termination pay are
barred by laches inasmuch as they were filed almost six (6) years after their (private
respondents termination from the service.
We disagree.
There can be no question that the closing or cessation of operation of an establishment
or enterprise may be considered as a ust cause for termination of employment without a
definite period.9 But the closing or cessation of operation referred to, niust riot be to
defeat the purpose of the law. The situation we have in the case at bar however stops
short of "closing or cessation of operation." that the record indubitably disclosed is a
sale or disposition of all or substantially all the properties and assets of Central Danao
to the purchasing corporation Dadeco and not a cessation of operation by Central
Danao. But while it is true that what s authorized as a just cause for termination of
employment, is the closing or cessation of operation, still it has to be conceded that the
Termination Pay Law also recognizes the right of an employer to seu dispose or lease
his business enterprise provided such disposition is not intended to desecrate the law or
adversely affect public interest.
In the instant case, the sale by Central Danao of its sugar mill properties and assets to
Dacedo on July 7, 1961 is not disputed. And, as a consequence of that sale or
disposition of its corporate properties and assets, the ownership or management of the
sugar mill properties and assets were transferred from Central Danao to Dadeco.
Likewise not assailed is the fact that immediately thereafter, Dadeco, as the purchasing
corporation, continued the integral business operation of its predecessor in an
essentially unchanged manner ... that is, milling of sugar cane and manufacture of
centrifugal sugar. In short, there was a change of ownership or management of the
sugar mill properties and assets.
Change of ownership or management of a business establishment or enterprise
however, is not one of the just causes enumerated by the Termination Pay Law to
terminate employment without a definite period. Neither can it be construed as
synonymous with nor analogous to closing or cessation of operation of an establishment
or enterprise contemplated under par. (a), Section 1, R.A. 1052, as amended by R.A.
1787. That the Termination Pay Law should be strictly interpreted and construed
against the employer finds expression in the decisions of this Court starting from the
1968 case of Wenceslao vs. Zaragosa, Inc., 24 SCRA 554, then Insular Lumber Co. vs.
Court of Appeals, 29 SCRA 371 (1969), followed by another Insular Lumber Co. vs.
Court of Appeals, 80 SCRA 28 (1977), Cortez vs. Frias, 81 SCRA 342 (1978), and more
recently, Duay vs. Court of Industrial Relations, 122 SCRA 834 (1983). Decided on the
basis of the particular facts of each case, this Court has interpreted strictly "closing or
cessation of operation of the establishment or enterprise" against the employer.
The issue that arises then is, whether or not a change of ownership or management of
an establishment or corporation by virtue of the sale or disposition of all or substantially
all of properties and assets operates to insulate the selling corporation (Central Danao)
from its obligation to its employees ilder the Termination Pay Law. 10
Under the Termination Pay Law—then enforced prior to the activity of the New labor
Code on November 1, 1974—an employee may be terminated with or without lust
cause. If 'here is just cause, the employer is not requires to serve any notice nor pay
termination pay to employees concerned. If the termination -is without just cause, the
employer must serve rliyriely notice to the employee, otherwise the employer is obto
pay termination pay, except where other applicable statutes provide a different remedy
as in unfair labor practice. 11 The purpose of the Termination Pay Law, as a regulatory
measure,12 is to give the employer the opportunity o find replacement or substitute; and
other place of employment or source of livelihood in the case of an employee. 13 The
law should be interpreted with the aim in view of advancing the beneficient purpose
thereof to give protection to the laborers so dismissed and their families.14
There can be no controversy for it is a principle well-recognized, that it is within the
employer's legitimate sphere f management control of the business to adopt economic
policies or make some changes or adjustments in their organization or operations that
would insure profit to itself or protect the investment of its stockholders. As in the
exercise of such management prerogative, the employer may merge or consolidate its
business with another, or sell or dispose 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. For such a
situation is not envisioned in the law. It strikes at the very concept of social justice. 15

In a number of cases 16 on this point, the rule has been laid down that the sale or
disposition must be motivated by good faith as an element of exemption from liability.
Indeed, 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 owner's participation in thwarting or defeating the rights of the
employees.

A judicious examination of the pertinent Deed of Sale dated July 7, 1961 reveals no
express stipulation whatsoever relative to the continued employment by Dadeco of the
former employees of Central Danao. Their fate under the new owners appeared
unprovided for. And there is no law requiring that the purchaser should absorb the
employees of the selling company. 17 The most that the purchasing company may do,
for reasons of public policy and social justice, is to give preference to the qualified
separated employees of the selling company, who in their judgment are necessary in
the continued operation of the business establishment. In the instant case, while some
of the employees were hired the day after the sale, like private respondent Jose
Cosculluela, other employees were however hired only 23 days after. Clearly then,
there was in fact, an interruption of the employment of the private respondents in the
sugar central. In reality then, they were rehired anew by Dadeco, their new employer.

The records further reveal that the negotiations for the sale of the assets and properties
of Central Danao to Dadeco were held behind the back of the employees who were
taken by surprise upon the consummation of the sale. They were not formally notified of
the impending sell-out to Dadeco and its attendant consequences with respect to their
continued employment status under the purchasing company. As such, they were
uncertain of being retained, hired, or absorbed by the new owner and its management.
Technically then, the employees were actually terminated and/or separated from the
service on the date of the sale, or on July 7, 1961. Worse, they were not at all given the
required notice of their termination. Inasmuch as there was no notice of termination
whatsoever given to the employees of Central Danao coupled with the fact that no
efforts were exerted by Central Danao to apprise its employees of the consequences of
the sale or disposition of its assets to Dadeco, justice and equity dictate that private
respondents be entitled to their termination or separation pay corresponding to the
number of years of service with Central Danao until June 7, 1961. In Philippine Refining
Company, Inc. vs. Garcia, 18 this Court, speaking thru Justice J.B.L. Reyes, stated
thus: "Except where other applicable statutes provide differently, it is not the cause for
the dismissal but the employer's failure to serve notice upon the employee that renders
the employer answerable to the employee for termination pay." Hence, the untenability
of petitioner's contention that private respondents should have directed their claims for
termination pay solely against the Dadeco on the flimsy ground that at the time of their
alleged termination, there was no employee-employer relations between them and
Central Danao.
By way of reminder, employers should exercise caution and care in dealing with its
employees to prevent suspicion that the adoption of certain corporate combinations
such as merger or consolidation or outright sale or disposition of assets is but a scheme
to evade payment of termination pay to its employees.
We now come to tbo next issue of whether or not the claims for termination pay were
barred by laches.
Prescinding from the above discussion, private respondents were deemed terminated
as of July 7, 1961 when Central Danao sold all its assets and properties to Dadeco. It is
the contention of Central Danao that the actions for payment of termination pay were
filed on October 21, 1967, July 14, 1967 and October 10, 1967, or almost six years from
the date of termination, hence, barred by laches.
The contention is untenable. The doctrine of "laches" is a creation of equity applied only
to bring about equitable results, never to defeat justice. 19 It is addressed to the sound
discretion of the court. Central Danao cannot take refuge under the equitable doctrine of
laches to shield itself from an obligation created by law, R.A. 1787 which, undoubtedly,
is a social legislation intended to protect the workingman. From the time of the
enactment of its predecessor, R.A. 1052, it is a matter of public policy to accord
protection to the workingman once the requirements of the law are not complied with.
Since this is an obligation created by law, and as correctly ruled by the then Court of
Appeals, Article 1144(2) of the New Civil Code applies. The action to enforce
compliance with the obligation to pay termination pay may be instituted within the period
of 10 years from the time the right of action accrues. 20
Finally, considering that private respondents, with the exception of Nonelon Bana-ay,
had already been paid their termination or separation pay or its equivalent covering the
entire period of their service with Dadeco, Dadeco is under no obligation to pay further
any termination or separation pay to private respondents covering the period of their
employment with Central Danao. As correctly observed by the then Court of Appeals,
Jose Cosculluela is entitled to termination or separation pay only for the period of
employment with Central Danao or from October 10, 1935 up to July 7,1961.
WHEREFORE, and except as thus modified with respect to Jose Cosculluela, the
decision appealed from is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

Wiltshire File Co. vs NLRC, 193 SCRA 665

FACTS:
Private respondent Vicente T. Ong was the Sales Manager of petitioner Wiltshire File
Co., Inc. On 13 June 1985, upon private respondent’s return from a business and
pleasure trip abroad, he was informed by the President of petitioner Wiltshire that his
services were being terminated. Private respondent maintains that he tried to get an
explanation from management of his dismissal but to no avail. On 18 June 1985, when
private respondent again tried to speak with the President of Wiltshire, the company’s
security guard handed him a letter which formally informed him that his services were
being terminated upon the ground of redundancy.
Private respondent filed, on 21 October 1985, a complaint before the Labor Arbiter for
illegal dismissal alleging that his position could not possibly be redundant because
nobody (save himself) in the company was then performing the same duties.
Petitioner company alleged that the termination of respondent’s services was a cost-
cutting measure: that in December 1984, the company had experienced an unusually
low volume of orders: and that it was in fact forced to rotate its employees in order to
save the company. Despite the rotation of employees, petitioner alleged; it continued to
experience financial losses and private respondent’s position, Sales Manager of the
company, became redundant.
During pendency, petitioner closed its business.
LABOR ARBITER ruled that the dismissal was illegal
NLRC held that the termination was attended by malice and bad faith on the part of
petitioner, considering the manner of private respondent was ordered by the President
to pack up and remove his personal belongings from the office.

ISSUE:
WON his dismissal was illegal

HELD:
NO, his dismissal was VALID.
In the first place, we note that while the letter informing private respondent of the
termination of his services used the word “redundant“, that letter also referred to the
company having “incur[red] financial losses which [in] fact has compelled [it] to resort to
retrenchment to prevent further losses”. Thus, what the letter was in effect saying was
that because of financial losses, retrenchment was necessary, which retrenchment in
turn resulted in the redundancy of private respondent’s position.
In the second place, we do not believe that redundancy in an employer’s personnel
force necessarily or even ordinarily refers to duplication of work. That no other person
was holding the same position that private respondent held prior to the termination of
his services, does not show that his position had not become redundant. Indeed, in any
well-organized business enterprise, it would be surprising to find duplication of work and
two (2) or more people doing the work of one person. We believe that redundancy, for
purposes of our Labor Code, exists where the services of an employee are in excess of
what is reasonably demanded by the actual requirements of the enterprise. Succinctly
put, a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise.
Wiltshire, in view of the contraction of its volume of sales and in order to cut down its
operating expenses, effected some changes in its organization by abolishing some
positions and thereby effecting a reduction of its personnel. Thus, the position of Sales
Manager was abolished and the duties previously discharged by the Sales Manager
simply added to the duties of the General Manager, to whom the Sales Manager used
to report.
In the instant case, the ground for dismissal or termination of services does not relate to
a blameworthy act or omission on the part of the employee, there appears to us no
need for an investigation and hearing to be conducted by the employer who does not, to
begin with, allege any malfeasance or non-feasance on the part of the employee. In
such case, there are no allegations which the employee should refute and defend
himself from. Thus, to require petitioner Wiltshire to hold a hearing, at which private
respondent would have had the right to be present, on the business and financial
circumstances compelling retrenchment and resulting in redundancy, would be to
impose upon the employer an unnecessary and inutile hearing as a condition for legality
of termination.
This is not to say that the employee may not contest the reality or good faith character
of the retrenchment or redundancy asserted as grounds for termination of services. The
appropriate forum for such controversion would, however, be the Department of Labor
and Employment and not an investigation or hearing to be held by the employer itself. It
is precisely for this reason that an employer seeking to terminate services of an
employee or employees because of “closure of establishment and reduction of
personnel”, is legally required to give a written notice not only to the employee but also
to the Department of Labor and Employment at least one month before effectivity date
of the termination. In the instant case, private respondent did controvert before the
appropriate labor authorities the grounds for termination of services set out in
petitioner’s letter to him dated 17 June 1985.
NOTES:
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 of service, whichever is higher.
A fraction of at least six (6) months shall be considered one (1) whole year.