Asian Alcohol v NLRC

GR 131108 March 25, 1999

FACTS

The Parsons family who owned controlling stocks in Asian Alcohol Corporation suffered
major business losses prompting it to sell the corporation to Prior Holding which took over
its management and operation.

Prior Holding implemented re-organizational plan and other cost-saving measures for the
company. As a result 117 employees were separated. Of 72 of them occupied redundant
positions, 21 were held by union members and 51 by non-union members.

6 private respondents were members of the union whose positions were abolished due to
redundancy. Private respondents Carias, Martines, and Sendon were water pump
tenders, Amacio was a machine shop mechanic, Verayo was plant operator while Tormo
was a plant helper under him.

They received individual notices of termination; were paid the equivalent of one month
salary for every year of service as separation pay. The money value of their unused sick
vacation, emergency, and seniority leave credits, 13
th
month pay, medicine allowance,
tax refunds and good will cash bonuses for those with at least 10 years of service. All of
them executed sworn releases, waivers and quitclaims.

Private respondents filed with the NLRC complaints for illegal dismissal with a prayer for
reinstatement and backwages. Moral damages and attorneys fees. They alleged that
Asian Alcohol used the retrenchment to dismiss them because they were members of the
union. They also alleged that Asian Alcohol was not bankrupt as it has engaged in
aggressive scheme in contractual hiring.

Labor Arbiter: Dismissed the complaint. The dismissal of the respondents on the ground
of redundancy/retrenchment is valid or legal. The fact that the Asian Alcohol incurred
losses in its business operations was not seriously challenged by the complainants. The
facts of business losses incurred in its business operations prior to the implementation of
the retrenchment program was sufficiently supported by documents indicating a deficit of
26, 117,889.

NLRC: Revered. Illegal dismissal. The positions of the respondents were not redundant
because casuals replaced them. The company was not in the state of reverses at the
time of retrenchment.

ISSUE

Whether or not there is a valid retrenchment thus making the dismissal of private respondents
illegal.

RULING:

There was a valid dismissal.

The right of management to dismiss workers during periods of business recession and to
install labor saving devices to prevent losses is governed by Art. 283 (Please see Art
283 of Labor Code)

Under the said provision, retrenchment and redundancy are just cause for the employer
to terminate the services to preserve the viability of the business. In exercising its right,
however management must faithfully comply with the substantive and procedural
requirements laid down by law and jurisprudence.

The requirements for a valid retrenchment which must be proved by clear and convincing
evidence are (1) the retrenchment is reasonably necessary and likely to prevent business
loses which, if already incurred are not merely diminish but substantial, serious, actual
and real or if only expected are reasonably imminent as perceived objectively in good
faith by the emploter (2) that the employer served written notice both the emplyees and
to the DOLE at least one month prior to the intended date of retrenchment. (3) that the
employer pays the retrenched employees separation pay equivalent to one month pay or
at least month pay for every year of service, whichever is higher. (4) that the employer
exercise its prerogative to retrench empoyees in good faith for the (5) that the employers
used fair and reasonable criteria in ascertaining who would be retained among the
employess.

An important requirement would also to state the condition of the business losses. This is
normally shown by audited financial documents like yearly balance sheets and profit and
loss statements as well as annual income tax return.

In the case at bar, private respondents never contested the veracity of the audited
financial documents proferred by Asian Alcohol before the LA. Documents show that the
petitioner has an accumulated losses amounting to 306, 764, 349

In rejecting the petitioners claim the NLRC stated that the alleged deficits of the
corporation did not prove anything for the petitioner since they were incurred before the
take over of Prior Holdings. Under Art 283 of the Labor Code, retrenchment to prevent
losesse means that retrenchment must be undertaken by the employer before loses are
actually sustained. The employer need not keep his employees until after loses shall
materialize.

The law gives the new management every right to undertake measures to save the
company from bankruptcy. In this case, when Prior Land bought the corporation and took
over the management of it there were no signs that the loses would end, hence Prior land
undertook re-organizational plan which retrenched number of employees because
ultimately they will absorb all the loses that the prior corporation incurred.

In the issue of redundancy, when the service capability of work force is in excess of what
is reasonably needed to meet the demands on the enterprise. Under this condition the
employer has no legal obligation to keep in its payroll more employees than necessary
for the operation of its business. For the implementation of redundancy program to be
valid it must (1) written notice served on both the employees and the DOLE (2) payment
of separation pay at least one month pay for every year of service, whichever is higher,
(3) good faith in abolishing the redundant positions and (4) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly abolished.

In this case, when the company made introduction of the services of an independent
contractor it was justified when the latter is undertaken in order to effectuate more
economic and sufficient methods of production. Respondent failed to prove that company
acted in malicious or arbitrary manner to operate the Laura wells.