[G.R. NO. 166760 : August 22, 2008]
EASTRIDGE GOLF CLUB, INC., Petitioner, v. EASTRIDGE GOLF CLUB, INC., LABOR UNION-SUPER, represented by LORENZO M. ESTEBAN, Union President and 13 others similarly situated, namely: REMEGIO PERU, ALEJANDRO RIVERA, ANTONIO ALVIZA, ELMER ANONICAL, GILBERT DARILAY, APOLINAR CAISIP, GERALDINE ARAGON, ANTONIO LLANTINO, ABSALON BARBON, ALVIN ZELLER, LUISITO TEVES, REYNALDO VICTORIOSO and LORENZO M. ESTEBAN, Respondents.
D E C I S I O N
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court of petitioner Eastridge Golf Club, Inc. from the October 13, 2004 Decision1 of the Court of Appeals (CA) which ordered the reinstatement of the individual respondents; and the January 19, 2005 Resolution2 of the CA which denied petitioner's motion for reconsideration.
The relevant facts are of record.
Petitioner employed respondents as kitchen staff in its Food and Beverage (F&B) Department. Effective October 1, 1999, petitioner terminated the employment of respondents on the ground that the operations of the F&B Department had been turned over to concessionaire Mother's Choice Meat Shop & Food Services.3 Petitioner filed with the Department of Labor and Employment (DOLE) an Establishment Termination Report,4 stating that it laid off the respondents due to company reorganization/downsizing and transfer of operations to a concessionaire.
Respondents filed with the National Labor Relations Commission (NLRC), Regional Arbitration Branch, a complaint for illegal dismissal, unfair labor practice and payment of 13th month pay. They claimed that their dismissal was not based on any of the causes allowed by law, and that it was effected without due process.5
Petitioner denied respondents' claims, pointing out that several months before their dismissal, it issued various office memoranda6 informing respondents that, to minimize company losses, the management decided to bid out a part of its operations, specifically the F&B Department, to a concessionaire.7 The partial cessation of operations was bonafide, as shown by such evidence as:
Petitioner further explained that the transfer of operations was not intended to displace its workers. In fact, a procedure was adopted by which the old F&B staff, such as respondents, could be rehired by the concessionaire. Several F&B staff were in fact rehired, as shown in Annexes "6"11 and "7"12 of its Position Paper. However, respondents failed to comply with the rehiring procedure; hence, they were considered resigned when the concessionaire took over operations on October 1, 1999.13
To controvert petitioner's claim that the partial cessation of operations was bona fide, respondents filed a Motion to Re-open Case14 in which they presented documentary evidence that there was no real transfer of operations, for even after October 1, 1999, petitioner remained the real employer of all the F&B staff. Their documentary evidence consists of the following:15
In a Decision dated March 22, 2002, the Labor Arbiter (LA) held:
On appeal, the NLRC, in a Decision dated May 21, 2003, reversed the LA, thus:
After their motion for reconsideration was denied by the NLRC,25 respondents filed with the CA a Petition for Certiorari26, which the appellate court granted in the October 13, 2004 Decision assailed herein, the dispositive portion of which reads:
Petitioner's motion for reconsideration was denied by the CA in its January 19, 2005 Resolution.28
Hence, petitioner's recourse to this Court, assailing the CA Decision and Resolution on the sole ground that these were rendered contrary to existing law and jurisprudence.29
Petitioner's recourse must fail.
The LA held the dismissal of respondents illegal in the light of evidence that petitioner did not actually cease the operation of its F&B Department:
The LA further held that even if it were true that petitioner ceased operation of its F&B Department, the same would not have warranted the dismissal of respondents because petitioner had not shown evidence that it was incurring financial losses. To quote the LA:
Contradicting the LA, the NLRC held that the evidence of respondents do not prove that petitioner acted in a malicious or arbitrary manner when it relinquished its F&B operations.32 The NLRC further held that the LA erred in requiring petitioner to prove that it ceased its F&B operations because of financial losses. No such requirement is imposed by Article 283 because petitioner's "decision, as authorized by the Board of Directors, to transfer the operation and Management of the F&B business to a concessionaire was a valid exercise of management prerogative 'to prevent losses' x x x. The employer's act of terminating the services of the affected employee is authorized before the anticipated losses are actually sustained or realized, for it is not the intention of the lawmakers to compel the employer to stay his hand and keep all his employees until after losses shall have in fact materialized."33
The CA discarded the view of the NLRC and reverted to the position of the LA, thus:
It is evident that the CA and LA differ in their factual assessment and legal conclusion from those of the NLRC on three planes: first, on the cause of the termination of the employment of respondents; second, on the legal requirements for the validity of the termination of respondents; and third, on petitioner's compliance with these requirements. Their differing views compelled the Court to scrutinize the records to satisfy itself on which view was more in accord with the facts and the law of the case.35
Petitioner argues that it has sufficient business autonomy to close its F&B operations, and that it need not justify its decision by presenting evidence that it has been incurring financial losses.36
Article 283 of the Labor Code allows various modes of termination of employment, to wit:
Only the last two modes are relevant here, i.e.: retrenchment to prevent losses and closure or cessation of operation of the establishment or undertaking.
Retrenchment or lay-off is the termination of employment initiated by the employer, through no fault of the employees and without prejudice to the latter, 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.37 It is an exercise of management prerogative which the Court upholds if compliant with certain substantive and procedural requirements,38 namely:
The employer must prove compliance with all the foregoing requirements.45
Failure to prove the first requirement will render the retrenchment illegal and make the employer liable for the reinstatement of its employees and payment of full backwages.46 However, were the retrenchment undertaken by the employer is bona fide, the same will not be invalidated by the latter's failure to serve prior notice on the employees and the DOLE; the employer will only be liable in nominal damages,47 the reasonable rate of which the Court En Banc has set at
Closure or cessation of business is the complete or partial49 cessation of the operations and/or shut-down of the establishment of the employer. It is carried out to either stave off the financial ruin50 or promote the business interest of the employer.51
Unlike retrenchment, closure or cessation of business, as an authorized cause of termination of employment, need not depend for validity on evidence of actual or imminent reversal of the employer's fortune. Article 283 authorizes termination of employment due to business closure, regardless of the underlying reasons and motivations therefor, be it financial losses or not.52
In the case under review, the cause invoked by petitioner in terminating the employment of respondents is not retrenchment but cessation of a single aspect of its business undertaking, i.e., the F&B Department. This is evident in the notices of termination it sent to respondents where petitioner indicated that it had withdrawn from the direct operation of the F&B Department and had transferred the management thereof to the concessionaire.53 Also, in the various office memoranda it posted, petitioner explained that the underlying reason for the cessation of its F&B undertaking was that the economic depression had affected its sales and operations and resulted in increased overhead expenses and decreased incomes.54
Cessation of its F&B operations being the cause invoked by petitioner to terminate the employment of respondents, it need not present evidence of financial losses to justify such business decision. Thus, the Court agrees with petitioner that the CA erred when it declared that, for lack of evidence of financial losses, petitioner's cessation of its F&B operations was not a valid cause to terminate the employment of respondents.
But petitioner is not out of the woods yet.
The decision to close business is a management prerogative exclusive to the employer, the exercise of which no court or tribunal can meddle with, except only when the employer fails to prove compliance with the requirements of Art. 283, to wit: a) that the closure/cessation of business is bona fide, i.e., its purpose is to advance the interest of the employer and not to defeat or circumvent the rights of employees under the law or a valid agreement; b) that written notice was served on the employees and the DOLE at least one month before the intended date of closure or cessation of business; and c) in case of closure/cessation of business not due to financial losses, that the employees affected have been given separation pay equivalent to - month pay for every year of service or one month pay, whichever is higher.55
It should be borne in mind that where the closure of business is found to be in bad faith, the dismissal of the employees shall be declared illegal and the employer held liable for their reinstatement and payment of full backwages,56 unless reinstatement is no longer feasible in which case the employer shall be liable for full backwages as well as separation pay at the rate of one month salary for every year of service, with a fraction of at least six months being considered as one year.57
If the closure of business due to serious business losses or financial reverses is shown to be in good faith, the resultant dismissal of the employees shall be upheld, with no separation benefits due them.58 If the closure of business is not due to serious business losses or financial reverses but it is shown to be in good faith, the resultant dismissal of the employees will still be upheld but the latter shall be entitled to separation pay at the rate of - month pay for every year of service or one month pay, whichever is higher.59
Both the CA and the LA found that the cessation of petitioner's F&B operations was a mere subterfuge in view of evidence that the latter continued to act as the real employer by paying for the salaries and insurance contributions of the employees of the F&B Department even after the concessionaire allegedly took over its operations. The NLRC saw otherwise, holding that the said evidence did not establish that the cessation of petitioner's F&B operations was in bad faith.
Petitioner insists that the documentary evidence presented by respondents hardly establish that it remained the employer of the F&B staff even after the turn over of its operations to the concessionaire. Said evidence was even controverted by the quitclaims and release forms executed by the individual respondents which show that petitioner had paid separation benefits to those employees absorbed by the concessionaire,60 Petitioner reasons out that if it had not given up its F&B operations, it would not have paid those employees separation benefits.61
Petitioner fails to persuade the Court.
In Me-Shurn Corporation v. Me-Shurn Workers Union-FSM,62 the corporation shut down its operations allegedly due to financial losses and paid its workers separation benefits. Yet, barely one month after the shutdown, the corporation resumed operations. In light of such evidence of resumption of operations, the Court held that the earlier shutdown of the corporation was in bad faith.
With a similar outcome was the closure of the brokerage department of the corporation in Danzas Intercontinental, Inc. v. Daguman.63 In view of evidence consisting of a mere letter written by the corporation to its clientele that its brokerage department was still operating but with a new staff, the Court declared the earlier closure of the corporation's brokerage department not bona fide and ordered the reinstatement of its former staff, despite the latter having signed quitclaims and release forms acknowledging payment of separation benefits.
The closure of a high school department in St. John Colleges, Inc. v. St. John Academy Fculty and Employees Union64 was likewise annulled upon evidence that barely one year after the announced closure, the school reopened its high school department. The Court found the closure of the high school in bad faith notwithstanding payment to the affected teachers of separation benefits.
In Capitol Medical Center, Inc. v. Meris65 the hospital justified the closure of a unit and the dismissal of its head doctor by claiming that there was a dwindling demand for the unit's services. However, upon examination of the records, the Court found that service demand had in fact been rising, thus negating the very reason proffered by the hospital in closing down the unit. On that score, the Court declared the action of the hospital in bad faith.
The evidence presented by respondents overwhelmingly shows that petitioner did not cease its F&B operations but merely simulated its transfer to the concessionaire. The payslips alone, the authenticity of which petitioner did not dispute,66 bear the name of petitioner's Eastridge Golf Club, Food and Beverage Department.67 The payroll register for the Food and Beverage Department is verified correct by petitioner's Chief Accountant, Nestor Rubis.68 The Philhealth and Social Security System (SSS) remittance documents are likewise certified correct by the same Chief Accountant.69 These pieces of documentary evidence convincingly, even conclusively, establish that petitioner remained the employer of the F&B staff even after the October 1, 1999 alleged take-over by the concessionaire.
Even petitioner's own evidence adds weight to respondents' evidence. The quitclaims and release forms which petitioner required respondents to sign at the time of the alleged cessation of petitioner's F&B operations all bear the signature of its Chief Accountant. It was that same Chief Accountant who certified and verified as correct the payroll register and Philhealth/SSS remittance documents issued many months after the alleged cessation of the F&B operations.
Moreover, the documents which petitioner attached to prove that the concessionaire took over the F&B operations are of doubtful veracity. For one, the October 1, 1999 Agreement (Food & Beverages Concessionaire) with Mother's Choice Meat Shop & Food Services is not notarized,70 which is an unusual omission by a business entity such as petitioner. It is also curious that the Certificate of Registration of Business Name as well as the Mayor's Permit are all in the name of Bilibiran Food Services, not Mother's Choice Meat Shop & Food Services.71
There is no doubt, therefore, that the CA was correct in ruling that the cessation of petitioner's F&B operations and transfer to the concessionaire were a mere subterfuge, and that the dismissal of respondents by reason thereof was illegal.
Finally, it is noted that in reinstating the decision of the LA, the CA in effect affirmed the finding of unfair labor practice. In its petition and memorandum, petitioner offered no argument in refutation of the said finding, except for its claim that the cessation of its F&B operation was justified, which claim has been revealed to be spurious. The Court must therefore also sustain the judgment of the CA on the existence of unfair labor practice.
WHEREFORE, the petition is DENIED.
Costs against petitioner.
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