FIRST DIVISION

G.R. No. 83751, September 29, 1989

MANILA ELECTRIC COMPANY, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION & RAMON L. MERIS, RESPONDENTS.

DECISION

GRINO-AQUINO, J.:

This petition for certiorari seeks to annul the decision dated May 18, 1988, of the
National Labor Relations Commission ordering the petitioner, Manila Electric
Company (Meralco), to reinstate the complainant, Ramon L. Meris, as a
probationary employee for a period of five (5) months with backwages from
March 23, 1987 to April 17, 1987.

In a complaint filed by respondent Ramon L. Meris against the petitioner on

March 30, 1987, the former charged the latter with illegal dismissal and prayed
for reinstatement with full backwages. Petitioner's defense to the charge was
that "the termination of the complainant's probationary
employment is sanctioned by Section 6, Rule 1, Book VI of the Rules and
Regulations implementing the Labor Code, which provides that “the service of
an employee who has been engaged on probationary basis may be terminated x
x x when he fails to qualify as a regular employee in accordance with the
reasonable standards prescribed by the employer."

The facts of the case as found by the Labor Arbiter and adopted by the NLRC
are as follows:

“x x x the complainant was hired by the respondent company as a probationary employee

under a probationary Employment Agreement for a period of five (5) months starting
November 17, 1986, wherein, he was assigned as a messenger and given a monthly salary of
P1,130,00 and an allowance of P580.00. His work among others, was to file pleadings in
court, serve summons for execution, verify or follow-up cases in court and other related matters
under the legal department. That on March 23, 1987 (after 4 months)*, he received a
memorandum dated March 19, 1987, from the personnel Administration Division advising
him of the termination of his probationary employment effective March 23, 1987.
"From the foregoing facts just stated, it behooves upon us to determine whether the dismissal of
complainant was for a just and valid cause or not.
"Respondent avers that the work activities of complainant were monitored by his supervisors
namely Guillermo F. Estabaya and Alfredo J. Fernandez, who ‘x x x observed and
determined that complainant could not meet the standard performance required and explained
to him;’ ‘that respondents' complaint in Civil Case No. 54326, entitled ‘Manila Electric
Company vs. Victoria Manufacturing Corp.,’ was ordered dismissed with prejudice due to the
failure of complainant to pay the sheriff's fee which was one of his functions x x x;’ ‘that there
were instances of late delivery, service and filing of urgent and vital documents outside company
premises; he frequently did not follow what wasinstructed for him to accomplish; his
performance was way below what was required of
him; notwithstanding efforts and instructions to make him work according to the level of
efficiency required of him, he failed or ignored the same;’ that there were instances that he failed
to report back at the close of the office hours after performing his official tasks;
that he does not follow instructions; that he usually takes taxis instead of jeepneys or buses at
company expenses; and that he does not cooperate with his co-employees with
an attitudeof answering back his superiors.
"It is apparent from the records that before complainant was terminated he
was never furnished with a written notice containing a statement of the causes for termination
and was likewise denied ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires, thus -- depriving complainant his right to due
process, which makes the dismissal illegal. While it may be true that complainant was hired on
a probationary basis, yet -- we cannot deny him the right to security of tenure which may be
terminated only for a just cause or when authorized by existing laws or when he fails to qualify
as a regular employee in accordance with reasonable standards made known to him upon his
engagement.
“As regards the claim of respondent that complainant usually comes late and that he often
fails to return after an official outside trip particularly on December 15 & 24 1986; January
2; 5; 17 (Sat) 19; 20; 26; and 29; February 12; 16; 18; 24; 26 and 27; and March 2,
1987, respondent failed to present complainant's daily attendance records allegedly because,
‘The daily attendance pads during the period November 20, 1986 to March 23, 1987
were not being retained as those are not being utilized for payroll preparation; hence these were
disposed of every end of the payroll period.’ The best proof to establish that complainant's daily
attendance leaves much to be desired would have been his daily time records, but respondent
was not able to submit these despite the issuance of a subpoena duces tecum to them upon the
request of complainant himself, which to our mind militates against respondent’s position that
complainant often comes late in the morning. What was submitted among others, were the time
sheets and overtime notices of complainant. x x x.” (pp. 162-164, Rollo.) (Underscoring
ours.)

On December 28, 1987, the labor arbiter rendered judgment, disposing as

follows:

'WHEREFORE, premises considered, respondent Manila Electric Company, with main

office and postal address at Lopez Building, Meralco Center, Ortigas Avenue, Pasig, Metro
Manila, is hereby
ORDERED to REINSTATE complainant RAMON L. MERIS to his former position
as a regular employee with all the benefits and privileges appertaining thereto and to PAY
him the amount of TEN THOUSAND TWO HUNDRED SIXTY PESOS
(P10,260.00) by way of six (6) months backwages without any qualification nor deduction."
(pp. 129-130, Rollo; emphasis supplied.)

This was affirmed on appeal by Meralco to the NLRC, but with the
modification that "appellant is ordered to reinstate
complainant as a probationary employeefor a period of five (5) months with
backwages from March 23, 1987 to April 17, 1987."

The basis for the termination of private respondent's probationary employment

was his inability to meet the standard of performance required of him. Thus, the
legality or illegality of the dismissal hinges on whether or not that ground
existed.

In finding that private respondent was illegally dismissed, the NLRC, in its
decision of May 18, 1988, said:

"It goes without saying that it behooves upon appellant to exercise and give more freedom to
probationary employees new as they are in the company and unaware of the nuances of their
work and work habits. They need more attention. And they should, within the period of
probation, be made aware of whatever mistakes they commit in the performance of their duties.
The supervisor should personally confront them if they commit mistakes. And discipline them
when warranted. It cannot be gainsaid that for the period of five (5)*months,
appellee as probationary employee could not cope up with his work. If he could not, then the
dismissal could have come earlier and respondent should not have waited for five (5)* months
to terminate his services. As it is everybody, except appellee, was informed of his evaluation."
(p. 167, Rollo.)
On the other hand, the Office of the Solicitor General in its comment stated as
follows:

"Private respondent was dismissed without prior hearing on March 23, 1986, close to a
month prior to the expiration of his probationary term on April 17, 1986. He was dismissed
on the ground that he failed to meet the required standard performance. As to what was the
standard of performance which private respondent was required to meet, petitioner has not
disclosed. Nor had petitioner advised private respondent of such required standard of
performance at the time it hired private respondent.
"Even a probationary employee is covered by the security of tenure guarantee of the Constitutio
n (Euro-Lima, Phil., Inc. vs. NLRC, 156 SCRA 78). A probationary employee cannot be
dismissed before the end of his probationary employment on the basis alone of a
sweeping statement that he failed to meet the required standard performance. He is
entitled to know what standards of performance he did not meet before he could be dismissed
prior to the expiration of his contract (Biboso vs. Victorias Milling, 76SCRA 250). (pp.
235-236, Rollo.)

The petitioner assails these findings of the labor arbiter and the NLRC. It
contends that the dismissal of the private respondent was not illegal because it
was done during his probationary employment period after he was found unfit
for the position of messenger that he was occupying in the petitioner’s legal
department. Petitioner invokes Art. 280 of the Labor Code which provides that:

"Probationary Employment - Probationary

employment shall not exceed six months from the date the employee started working, unless it
is covered by an apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a probationary basis may be terminated for a
just cause or when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his engagement."

We find merit in the petition. The very findings of fact of the labor arbiter and
respondent NLRC reveal that the private respondent’s superiors in the
petitioner's legal department where he was employed as a messenger, were
dissatisfied with his performance. He was neglectful of his duties. He frequently
"played hookey,” taking the rest of the day off and not returning to the office
after having performed his errands.
The NLRC gravely abused its discretion in holding that the dismissal of the
private respondent after a probationary period of five (5) months instead of six
(6), as provided in Art. 280 of the Labor Code, was illegal, and in ordering his
reinstatement as probationary employee for a period of five (5) months, or a
total of nine (9) months of probationary employment. The provision of Art. 280
that "probationary employment shall not exceed six (6) months" means that the
probationary employee may be dismissed for cause at any time before the
expiration of six (6) months after hiring. If after working for less than six (6)
months, he is found to be unfit for the job, he can be dismissed. But if he
continues to be employed longer than six (6) months, he ceases to be a
probationary employee and becomes a regular or permanent employee.

The records show that private respondent's superiors did exert reasonable
efforts to instruct him and apprise him of "the standard of performance
required and explained to him" but “he frequently did not follow what was
instructed for him to accomplish." "Notwithstanding efforts and instructions x x
x his performance was very below what was required of him." He was also
uncooperative toward his co-employees; and disrespectful to his superiors.
Under the circumstances, we find there was sufficient cause for terminating his
probationary employment after only four (4) months.

However, as he was never apprised of the charges against him before he was
actually discharged, and no administrative investigation was undertaken so he
could have presented his side and defended himself, the company is liable to
indemnify him for damages for its breach of the legal procedure. In Wenphil vs.
NLRC, G.R. No. 80587, Feb. 8, 1989, we ruled that said damages shall be in the
sum of P1,000.

WHEREFORE, the petition for certiorari is granted. The decision of the

National Labor Relations Commission ordering the reinstatement of the private
respondent as a probationary employee for a period of five (5) months with
backwages is hereby set aside. However, the petitioner is ordered to indemnify
the private respondent for damages in the sum of P1,000. No costs.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Medialdea, JJ., concur.

 FIRST DIVISION
G.R. No. 121434, June 02, 1997
ELENA F. UICHICO, SAMUEL FLORO, VICTORIA F. BASILIO,
PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION,
LUZVIMINDA SANTOS, SHIRLEY PORRAS, CARMEN ELIZARDE, ET.
AL., RESPONDENTS.

DECISION

HERMOSISIMA, JR., J.:

Sought to be reversed in this special civil action for certiorari and
prohibition are the Resolutions of public respondent National Labor
Relations Commission (NLRC, for brevity), dated September 30, 1993,
December 7, 1995, and May 24, 1995, holding petitioners herein liable
for the illegal dismissal of private respondents and ordering them to
pay the latter separation pay plus backwages.

Private respondents were employed by Crispa, Inc. for many years in

the latter's garments factory located in Pasig Boulevard, Pasig City.
Sometime in September, 1991, private respondents' services were
terminated on the ground of retrenchment due to alleged serious
business losses suffered by Crispa, Inc. in the years immediately
preceding 1990. Thereafter, respondent employees, on November,
1991, filed before the NLRC, National Capital Region, Manila, three
(3) separate complaints for illegal dismissal and diminution of
compensation against Crispa, Inc., Valeriano Floro , and the
petitioners. Valeriano Floro was a major stockholder, incorporator and
Director of Crispa, Inc., while the petitioners were high ranking
officers and directors of the company. Said complaints were
consolidated in order to expedite the proceedings. The case was
assigned to Labor Arbiter Raul Aquino.

On July 20, 1992, after due hearing, Labor Arbiter Aquino rendered a
decision dismissing the complaints for illegal dismissal but at the same
time ordering Crispa, Inc., Floro and the petitioners to pay respondent
employees separation pays equivalent to seventeen (17) days for every
year of service, viz:

"WHEREFORE, premises considered, the instant complaint for

illegal dismissal is hereby DISMISSED for lack of merit. However, as
discussed in this decision, respondents is (sic) hereby directed to pay
the separation pay of the complainants equivalent to seventeen (17)
days for every year of service and computed as follows:

xxx xx
x xxx

All other claims are hereby dismissed for lack of merit. Respondent is
hereby ordered to pay 10% attorney's fees based on the award.

SO ORDERED."[1]

Dissatisfied, private respondents appealed before the public

respondent NLRC. In a Resolution dated September 30, 1993, the
Second Division of the NLRC found Crispa, Inc., Valeriano Floro,
together with the petitioners liable for illegal dismissal and modified
the award of separation pay in the amount of one (1) month for every
year of service instead of seventeen (17) days, to wit:

"WHEREFORE, the assailed Decision is hereby Affirmed with

Modification in so far as the award of separation pay is concerned to
the effect that respondents are ordered to pay complainants one
month for every year of service, instead of 17 days.

All other rulings are hereby AFFIRMED."[2]

Petitioners filed a Motion for Reconsideration on November 12, 1993
but the same was denied by the NLRC in a Resolution dated
December 7, 1993, thus:

"After due consideration of the Motion for Reconsideration filed by

respondents on November 12, 1995, from the Resolution of
September 30, 1993, the Commission (Second Division) RESOLVED
to deny the same for lack of merit."[3]

On August 8, 1994, private respondents sought a clarification of public

respondent NLRC's Resolution dated September 30, 1993 insofar as
the computation of separation pay by the Examination and
computation division was concerned as well as the failure of the
Resolution to award them full backwages despite the finding of illegal
dismissal.

On April 21, 1995, the NLRC, treating the Motion to Clarity Judgment
as an Appeal, granted the same in this wise:

"ACCORDINGLY, in view of the foregoing, the complainants-

appelles Motion to Clarify Judgment is partially GRANTED and Mr.
Ricardo Atienza, Acting Chief of the Examination and computation
Division is hereby directed to include in the computation, six months
backwages as provided for in the September 30, 1993 Resolution of
the Division, which was however omitted in the dispositive portion
thereof.

SO ORDERED."[4]

Petitioners filed a Motion for Reconsideration of the April 21, 1995

Resolution, which was denied in another Resolution[5] dated May 24,
1995.

Hence, this petition.

We shall dismiss the petition. The law recognizes the right of every
business entity to reduce its work force if the same is made necessary
by compelling economic factors which would endanger its existence or
stability. In spite of overwhelming support granted by the social justice
provisions of our Constitution in favor of labor, the fundamental law
itself guarantees, even during the process of tilting the scales of social
justice towards workers and employees, "the right of enterprises to
reasonable returns of investment and to expansion and growth."[6] To
hold otherwise would not only be oppressive and inhuman,[7] but also
counter-productive and ultimately subversive of the nation's thrust
towards a resurgence in our economy which would ultimately benefit
the majority of our people. Where appropriate and where conditions
are in accord with law and jurisprudence, the Court has authorized
valid reductions in the work force to forestall business losses,[8] the
hemorrhaging of capital, or even to recognize an obvious reduction in
the volume of business which has rendered certain employees
redundant.[9]Thus, Article 283 of the Labor Code, which covers
retrenchment, reads as follows:

"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 worker 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 year of
service, whichever is higher. A fraction of at least six (6) months shall
be considered as one (1) whole year."

Retrenchment, or "lay-off" in layman's parlance, is the termination of

employment initiated by the employer through no fault of the
employee's and without prejudice to the latter, resorted to by the
management during periods of business recession, industrial
depression, or seasonal fluctuations, or during lulls occasioned by lack
of orders, shortage of materials, conversion of a plant for a new
production program or the introduction of new methods or more
efficient machinery, or of automation.[10] Simply put, it is an act of
employer of dismissing employees because of losses in the operation
of a business, lack of work, and considerable reduction on the volume
of his business, a right consistently recognized and affirmed by this
court.[11] Nevertheless, while it is true that retrenchment is a
management prerogative, it is still subject to faithful compliance with
the substantive and procedural requirements laid down by law and
jurisprudence. And since retrenchment strikes at the very core of an
individual's employment, which may be the only lifeline on which he
and his family depend for survival,[12] the burden clearly falls upon the
employer to prove economic or business losses with appropriate
supporting evidence.[13] Any claim of actual or potential business losses
must satisfy certain established standards before any reduction of
personnel becomes legal, viz:
"1. The losses expected and sought to be avoided must be substantial
and not merely de minimis in extent;

2. The substantial losses apprehended must be reasonably imminent, as

such imminence can be perceived objectively and in good faith by the
employer;

3. The retrenchment must be reasonably necessary and likely to

effectively prevent the expected losses.

4. The alleged losses. If already realized, and the expected imminent

losses sought to be forestalled, must be proved by sufficient and
convincing evidence."[14]

In sustaining the company's submission that it suffered serious

business losses in 1991, thus necessitating the retrenchment of
respondent employees, the Labor Arbiter found:

"On the ground invoke by respondent for closing its business, i.e.,
serious losses and financial straits, responded submitted Financial
Report wherein it incurred a net loss of Forty(sic) Three Million Four
Hundred Eighteen Thousand Two Hundred Seventy Two and Ninety
eight Centavos(P43,418,272.98) in 1991. Thus, based on all the
foregoing, we are constrained that respondent was, indeed, suffering
from financial reverses that would justify its decision to close down its
business. Hence, under Section 9 (b) Book VI, Rule III of Omnibus
Rules implementing the Labor Code, it provides:

'Section 9. (b) Where the termination of employment is due to

retrenchment to prevent losses and in case of closure or cessation of
operations of establishment or undertaking not due to serious business
losses or financial reverses, or where the employee suffers from a
disease and his continued employment is prohibited by law or is
prejudicial to his health or the health of his co-employees, the
employee shall be entitled to termination pay equivalent to at least one-
half month pay for every year of service, a fraction of at least six
months being considered as one whole year."'[15]

The NLRC, in its September 30, 1993 Resolution, however, reversed

the foregoing findings of the Labor Arbiter and adjudged Crispa, Inc.
as well as the petitioners liable for illegal dismissal. The NLRC ruled,
thus:

"We observed that the basis of the Labor Arbiter in sustaining the
argument of financial reverses is the Statement of Profit and Losses
submitted by the respondent (Supra.). The same however, does not
bear the signature of a certified public accountant or audited by an
independent auditor. Briefly stated, it has no evidentiary value. As such
the allege financial losses which cause the temporary closure of
respondent CRISPA, Inc. has not been sufficiently established. In the
case of Lopez Sugar Corp. vs. FFW, 189 SCRA 179, the Supreme
Court held that 'alleged losses if already realized and the expected
losses sought to be forestalled must be proved by sufficient and
commencing (sic) evidence. Consequently, there being no financial
reverses for (sic) men (sic) the termination of herein complainants
from their employment is perforce illegal."[16]

We are more in accord with the aforequoted observations made by the

NLRC. It is true that administrative and quasi-judicial bodies like the
NLRC are not bound by the technical rules of procedure in the
adjudication of cases.[17] However, this procedural rule should not be
construed as a license to disregard certain fundamental evidentiary
rules. While the rules of evidence prevailing in the courts of law or
equity are not controlling in proceedings before the NLRC, the
evidence presented before it must at least have a modicum of
admissibility for it to be given some probative value.[18] The Statement
of Profit and Losses submitted by Crispa, Inc. to prove its alleged
losses, without the accompanying signature of a certified public
accountant or audited by an independent auditor, are nothing but self-
serving documents which ought to be treated as a mere scrap of paper
devoid of any probative value. For sure, this is not the kind of
sufficient and convincing evidence necessary to discharge the burden
of proof required of petitioners to establish the alleged losses suffered
by Crispa, Inc. in the years immediately preceding 1990 that would
justify the retrenchment of respondent employees. In fact, petitioners,
as directors and officers of Crispa, Inc., already concede, albeit quite
belatedly, in its Reply to Comment of Public Respondent,[19] the
finding of public respondent NLRC that petitioners utterly failed to
establish the alleged financial losses borne by Crispa, Inc.,[20] thus
making the company guilty of illegal dismissal against the private
respondents. According to petitioners, what they are actually assailing
is the decision of the NLRC holding them solidarily liable with the
company for the payment of separation pay and backwages to the
private respondents. It is the contention of the petitioners that the
award of backwages and separation pay is a corporate obligation and
must therefore be assumed by Crispa, Inc. alone.

We do not agree. A corporation is a juridical entity with legal

personality separate and distinct from those acting for and in its behalf
and, in general, from the people comprising it. The general rule is that
obligations incurred by the corporation, acting through its directors,
officers and employees, are its sole liabilities.[21]There are times,
however, when solidary liabilities may be incurred but only when
exceptional circumstances warrant such as in the following cases:

“1. When directors and trustees or, in appropriate cases, the officers of
a corporation: (a) vote for or assent to patently unlawful acts of the
corporation; (b) act in bad faith or with gross negligence in directing
the corporate affairs; (c) are guilty of conflict of interest to the
prejudice of the corporation, its stockholders or members, and other
persons;

2. When a director or officer has consented to the issuance of watered

stocks or who, having knowledge thereof, did not forthwith file with
the corporate secretary his written objection thereto;

3. When a director, trustee or officer has contractually agreed or

stipulated to hold himself personally and solidarily liable with the
corporation; or

4. When a director, trustee or officer is made, by specific provision of

law, personally liable for his corporate action.”[22]

In labor cases, particularly, corporate directors and officers are

solidarily liable with the corporation for the termination of
employment of corporate employees done with malice or in bad
faith.[23] In this case, it is undisputed that petitioners have a direct hand
in the illegal dismissal of respondent employees. They were the ones,
who as high-ranking officers and directors of Crispa, Inc., signed the
Board Resolution retrenching the private respondents on the feigned
ground of serious business losses that had no basis apart from an
unsigned and unaudited Profit and Loss Statement which, to repeat,
had no evidentiary value whatsoever. This is indicative of bad faith on
the part of petitioners for which they can be held jointly and severally
liable with Crispa, Inc. for all the money claims of the illegally
terminated respondent employees in this case.

WHEREFORE, finding no grave abuse of discretion on the part of

the public respondent NLRC, the instant petition is
hereby DISMISSED.

Costs against petitioners.

SO ORDERED.

Bellosillo, Vitug, and Kapunan, JJ., concur.

Padilla, J., (Chairman), on leave.

EN BANC
G.R. NO. 151378, March 28, 2005
JAKA FOOD PROCESSING CORPORATION, PETITIONER, VS. DARWIN
PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO,
RHOEL LESCANO AND JONATHAN CAGABCAB, RESPONDENTS.

DECISION

GARCIA, J.:

Assailed and sought to be set aside in this appeal by way of a petition for review
on certiorari under rule 45 of the Rules of Court are the following issuances of
the Court of Appeals in CA-G.R. SP. No. 59847, to wit:

1. Decision dated 16 November 2001,[1] reversing and setting aside an

earlier decision of the National Labor Relations Commission (NLRC);
and
 2. Resolution dated 8 January 2002,[2] denying petitioner’s motion for
reconsideration.

The material facts may be briefly stated, as follows:

Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo,

Rhoel Lescano and Jonathan Cagabcab were earlier hired by petitioner JAKA
Foods Processing Corporation (JAKA, for short) until the latter terminated their
employment on August 29, 1997 because the corporation was “in dire financial
straits”. It is not disputed, however, that the termination was effected without
JAKA complying with the requirement under Article 283 of the Labor Code
regarding the service of a written notice upon the employees and the
Department of Labor and Employment at least one (1) month before the
intended date of termination.

In time, respondents separately filed with the regional Arbitration Branch of the
National Labor Relations Commission (NLRC) complaints for illegal dismissal,
underpayment of wages and nonpayment of service incentive leave and 13th
month pay against JAKA and its HRD Manager, Rosana Castelo.

After due proceedings, the Labor Arbiter rendered a decision[3] declaring the
termination illegal and ordering JAKA and its HRD Manager to reinstate
respondents with full backwages, and separation pay if reinstatement is not
possible. More specifically the decision dispositively reads:
WHEREFORE, judgment is hereby rendered declaring as illegal the termination
of complainants and ordering respondents to reinstate them to their positions
with full backwages which as of July 30, 1998 have already amounted to
P339,768.00. Respondents are also ordered to pay complainants the amount of
P2,775.00 representing the unpaid service incentive leave pay of Parohinog,
Lescano and Cagabcab an the amount of P19,239.96 as payment for 1997 13th
month pay as alluded in the above computation.

If complainants could not be reinstated, respondents are ordered to pay them

separation pay equivalent to one month salary for very (sic) year of service.

SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated
August 30, 1999,[4] affirmed in toto that of the Labor Arbiter.
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out
with another decision dated January 28, 2000,[5] this time modifying its earlier
decision, thus:
WHEREFORE, premises considered, the instant motion for reconsideration is
hereby GRANTED and the challenged decision of this Commission [dated] 30
August 1999 and the decision of the Labor Arbiter xxx are hereby modified by
reversing an setting aside the awards of backwages, service incentive leave pay.
Each of the complainants-appellees shall be entitled to a separation pay
equivalent to one month. In addition, respondents-appellants is (sic) ordered to
pay each of the complainants-appellees the sum of P2,000.00 as indemnification
for its failure to observe due process in effecting the retrenchment.

SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its
resolution of April 28, 2000,[6] respondents went to the Court of Appeals via a
petition for certiorari, thereat docketed as CA-G.R. SP No. 59847.

As stated at the outset hereof, the Court of Appeals, in a decision dated

November 16, 2000, applying the doctrine laid down by this Court in Serrano vs.
NLRC,[7]reversed and set aside the NLRC’s decision of January 28, 2000, thus:
WHEREFORE, the decision dated January 28, 2000 of the National Labor
Relations Commission is REVERSED and SET ASIDE and another one
entered ordering respondent JAKA Foods Processing Corporation to pay
petitioners separation pay equivalent to one (1) month salary, the proportionate
13th month pay and, in addition, full backwages from the time their
employment was terminated on August 29, 1997 up to the time the Decision
herein becomes final.

SO ORDERED.
This time, JAKA moved for a reconsideration but its motion was denied by the
appellate court in its resolution of January 8, 2002.

Hence, JAKA’s present recourse, submitting, for our consideration, the

following issues:
“I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY
AWARDED ‘FULL BACKWAGES’ TO RESPONDENTS.
II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY
AWARDED SEPARATION PAY TO RESPONDENTS”.
As we see it, there is only one question that requires resolution, i.e. what are the
legal implications of a situation where an employee is dismissed for cause but
such dismissal was effected without the employer’s compliance with the notice
requirement under the Labor Code.

This, certainly, is not a case of first impression. In the very recent case
of Agabon vs. NLRC,[8] we had the opportunity to resolve a similar question.
Therein, we found that the employees committed a grave offense, i.e.,
abandonment, which is a form of a neglect of duty which, in turn, is one of the
just causes enumerated under Article 282 of the Labor Code. In said case, we
upheld the validity of the dismissal despite non-compliance with the notice
requirement of the Labor Code. However, we required the employer to pay the
dismissed employees the amount of P30,000.00, representing nominal damages
for non-compliance with statutory due process, thus:
“Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta vs. National Labor Relations
Commission. The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of ‘dismiss now, pay later,’ which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.

xxx xxx xxx

The violation of petitioners’ right to statutory due process by the private

respondent warrants the payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances. Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to deter employers
from future violations of the statutory due process rights of employees. At the
very least, it provides a vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its Implementing Rules,”
(Emphasis supplied).
The difference between Agabon and the instant case is that in the former, the
dismissal was based on a just cause under Article 282 of the Labor Code while
in the present case, respondents were dismissed due to retrenchment, which is
one of the authorized causes under Article 283 of the same Code.

At this point, we note that there are divergent implications of a dismissal for just
cause under Article 282, on one hand, and a dismissal for authorized cause
under Article 283, on the other.

A dismissal for just cause under Article 282 implies that the employee
concerned has committed, or is guilty of, some violation against the
employer, i.e. the employee has committed some serious misconduct, is guilty of
some fraud against the employer, or, as in Agabon, he has neglected his duties.
Thus, it can be said that the employee himself initiated the dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does
not necessarily imply delinquency or culpability on the part of the employee.
Instead, the dismissal process is initiated by the employer’s exercise of his
management prerogative, i.e. when the employer opts to install labor saving
devices, when he decides to cease business operations or when, as in this case,
he undertakes to implement a retrenchment program.

The clear-cut distinction between a dismissal for just cause under Article 282
and a dismissal for authorized cause under Article 283 is further reinforced by
the fact that in the first, payment of separation pay, as a rule, is not required,
while in the second, the law requires payment of separation pay.[9]

For these reasons, there ought to be a difference in treatment when the ground
for dismissal is one of the just causes under Article 282, and when based on one
of the authorized causes under Article 283.

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause
under Article 282 but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should be tempered because
the dismissal process was, in effect, initiated by an act imputable to the
employee; and (2) if the dismissal is based on an authorized cause under Article
283 but the employer failed to comply with the notice requirement, the sanction
should be stiffer because the dismissal process was initiated by the employer’s
exercise of his management prerogative.

The records before us reveal that, indeed, JAKA was suffering from serious
business losses at the time it terminated respondents’ employment. As aptly
found by the NLRC:
“A careful study of the evidence presented by the respondent-appellant
corporation shows that the audited Financial Statement of the corporation for
the periods 1996, 1997 and 1998 were submitted by the respondent-appellant
corporation, The Statement of Income and Deficit found in the Audited
Financial Statement of the respondent-appellant corporation clearly shows the
following in 1996, the deficit of the respondent-appellant corporation was
P188,218,419.00 or 94.11% of the stockholder’s [sic] equity which amounts to
P200,000,000.00. In 1997 when the retrenchment program of respondent-
appellant corporation was undertaken, the deficit ballooned to P247,222,569.00
or 123.61% of the stockholders’ equity, thus a capital deficiency or impairment
of equity ensued. In 1998, the deficit grew to P355,794,897.00 or 177% of the
stockholders’ equity. From 1996 to 1997, the deficit grew by more that (sic)
31% while in 1998 the deficit grew by more than 47%.

The Statement of Income and Deficit of the respondent-appellant corporation

to prove its alleged losses was prepared by an independent auditor, SGV & Co.
It convincingly showed that the respondent-appellant corporation was in dire
financial straits, which the complainants-appellees failed to dispute. The losses
incurred by the respondent-appellant corporation are clearly substantial and
sufficiently proven with clear and satisfactory evidence. Losses incurred were
adequately shown with respondent-appellant’s audited financial statement.
Having established the loss incurred by the respondent-appellant corporation, it
necessarily necessarily (sic) follows that the ground in support of retrenchment
existed at the time the complainants-appellees were terminated. We cannot
therefore sustain the findings of the Labor Arbiter that the alleged losses of the
respondent-appellant was [sic] not well substantiated by substantial proofs. It is
therefore logical for the corporation to implement a retrenchment program to
prevent further losses.”[10]
Noteworthy it is, moreover, to state that herein respondents did not assail the
foregoing finding of the NLRC which, incidentally, was also affirmed by the
Court of Appeals.

It is, therefore, established that there was ground for respondents’ dismissal, i.e.,
retrenchment, which is one of the authorized causes enumerated under Article
283 of the Labor Code. Likewise, it is established that JAKA failed to comply
with the notice requirement under the same Article. Considering the factual
circumstances in the instant case and the above ratiocination, we, therefore,
deem it proper to fix the indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered
JAKA to pay respondents separation pay equivalent to one (1) month salary for
every year of service. This is because in Reahs Corporation vs. NLRC,[11] we made
the following declaration:
“The rule, therefore, is that in all cases of business closure or cessation of
operation or undertaking of the employer, the affected employee is entitled to
separation pay. This is consistent with the state policy of treating labor as a
primary social economic force, affording full protection to its rights as well as its
welfare. The exception is when the closure of business or cessation of
operations is due to serious business losses or financial reverses; duly
proved, in which case, the right of affected employees to separation pay is
lost for obvious reasons. xxx”. (Emphasis supplied)
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed
decision and resolution of the Court of Appeals respectively dated November
16, 2001 and January 8, 2002 are hereby SET ASIDE and a new one entered
upholding the legality of the dismissal but ordering petitioner to pay each of the
respondents the amount of P50,000.00, representing nominal damages for non-
compliance with statutory due process.

SO ORDERED.

Davide, Jr., C.J., Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-

Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Chico-Nazario, JJ., concur.

Puno, J., reiterates dissent in Agaban & Serrano.

Panganiban, J., reiterates dissent in Agaban v. NLRC, GR 158693, Nov. 17, 2004,
and Serrano v. NLRC, 380 Phil. 416, Jan. 27, 2000.

Tinga, J., only in the result. See separate opinion.

 SECOND DIVISION
G.R. No. 54334, January 22, 1986
KIOK LOY, DOING BUSINESS UNDER THE NAME AND STYLE
SWEDEN ICE CREAM PLANT, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION (NLRC) AND PAMBANSANG KILUSAN NG
PAGGAWA (KILUSAN), RESPONDENTS.

DECISION

CUEVAS, J.:

Petition for CERTIORARI to annul the decision[1] of the National Labor

Relations Commission (NLRC) dated July 20, 1979 which found petitioner
Sweden Ice Cream guilty of unfair labor practice for unjustified refusal to
bargain, in violation of par. (g) of Article 249[2] of the New Labor Code,[3] and
declared the draft proposal of the Union for a collective bargaining agreement as
the governing collective bargaining agreement between the employees and the
management.

The pertinent background facts are as follows:

In a certification election held on October 3, 1978, the Pambansang Kilusan ng

Paggawa (Union for short), a legitimate labor federation, won and was
subsequently certified in a resolution dated November 29, 1978 by the Bureau
of Labor Relations as the sole and exclusive bargaining agent of the rank-and-
file employees of Sweden Ice Cream Plant (Company for short). The Com-
pany's motion for reconsideration of the said resolution was denied on January
25, 1978.

Thereafter, and more specifically on December 7, 1978, the Union

furnished[4] the Company with two copies of its proposed collective bargaining
agreement. At the same time, it requested the Company for its counter
proposals. Eliciting no response to the aforesaid request, the Union again wrote
the Company reiterating its request for collective bargaining negotiations and for
the Company to furnish them with its counter proposals. Both requests were
ignored and remained unacted upon by the Company.
Left with no other alternative in its attempt to bring the Company to the
bargaining table, the Union, on February 14, 1979, filed a "Notice of Strike",
with the Bureau of Labor Relations (BLR) on ground of unresolved economic
issues in collective bargaining.[5]

Conciliation proceedings then followed during the thirty-day statutory cooling-

off period. But all attempts towards an amicable settlement failed, prompting
the Bureau of Labor Relations to certify the case to the National Labor
Relations Commission (NLRC) for compulsory arbitration pursuant to
Presidential Decree No. 823, as amended. The labor arbiter, Andres Fidelino, to
whom the case was assigned, set the initial hearing for April 29, 1979. For
failure however, of the parties to submit their respective position papers as
required, the said hearing was cancelled and reset to another date. Meanwhile,
the Union submitted its position paper. The Company did not, and instead
requested for a resetting which was granted. The Company was directed anew
to submit its financial statements for the years 1976, 1977, and 1978.

The case was further reset to May 11, 1979 due to the withdrawal of the
Company's counsel of record, Atty. Rodolfo dela Cruz. On May 24, 1978, Atty.
Fortunato Panganiban formally entered his appearance as counsel for the
Company only to request for another postponement allegedly for the purpose of
acquainting himself with the case. Meanwhile, the Company submitted its
position paper on May 28, 1979.

When the case was called for hearing on June 4, 1979 as scheduled, the
Company's representative, Mr. Ching, who was supposed to be examined, failed
to appear. Atty. Panganiban then requested for another postponement which
the labor arbiter denied. He also ruled that the Company has waived its right to
present further evidence and, therefore, considered the case submitted for
resolution.

On July 18, 1979, labor arbiter Andres Fidelino submitted its report to the
National Labor Relations Commission. On July 20, 1979, the National Labor
Relations Commission rendered its decision, the dispositive portion of which
reads as follows:
"WHEREFORE, the respondent Sweden Ice Cream is hereby declared guilty of
unjustified refusal to bargain, in violation of Section (g) Article 248 (now Article
249), of P.D. 442, as amended. Further, the draft proposal for a collective
bargaining agreement (Exh. "E") hereto attached and made an integral part of
this decision, sent by the Union (Private respondent) to the respondent
(petitioner herein) and which is hereby found to be reasonable under the
premises, is hereby declared to be the collective agreement which should govern
the relationship between the parties herein.

SO ORDERED." (Words in parenthesis supplied)

Petitioner now comes before. Us assailing the aforesaid decision contending
that the National Labor Relations Commission acted without or in excess of its
jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction in
rendering the challenged decision. On August 4, 1980, this Court dismissed the
petition for lack of merit. Upon motion of the petitioner, however, the
Resolution of dismissal was reconsidered and the petition was given due course
in a Resolution dated April 1, 1981.

Petitioner Company now maintains that its right to procedural due process has
been violated when it was precluded from presenting further evidence in
support of its stand and when its request for further postponement was denied.
Petitioner further contends that the National Labor Relations Commission's
finding of unfair labor practice for refusal to bargain is not supported by law
and the evidence considering that it was only on May 24, 1979 when the Union
furnished them with a copy of the proposed Collective Bargaining Agreement
and it was only then that they came to know of the Union's, demands; and
finally, that the Collective Bargaining Agreement approved and adopted by the
National Labor Relations Commission is unreasonable and lacks legal basis.

The petition lacks merit. Consequently, its dismissal is in order.

Collective bargaining which is defined as negotiations towards a collective

agreement,[6] is one of the democratic frameworks under the New Labor Code,
designed to stabilize the relation between labor and management and to create a
climate of sound and stable industrial peace. It is a mutual responsibility of the
employer and the Union and is characterized as a legal obligation. So much so
that Article 249, par. (g) of the Labor Code makes it an unfair labor practice for
an employer to refuse "to meet and convene promptly and expeditiously in good
faith for the purpose of negotiating an agreement with respect to wages, hours
of work, and all other terms and conditions of employment including proposals
for adjusting any grievance or question arising under such an agreement and
executing a contract incorporating such agreement, if requested by either party".

While it is a mutual obligation of the parties to bargain, the employer, however,

is not under any legal duty to initiate contract negotiation.[7] The mechanics of
collective bargaining is set in motion only when the following jurisdictional
preconditions are present, namely, (1) possession of the status of majority
representation of the employees' representative in accordance with any of the
means of selection or designation provided for by the Labor Code; (2) proof of
majority representation; and (3) a demand to bargain under Article 251, par. (a)
of the New Labor Code ….. all of which preconditions are undisputedly
present in the instant case.

From the over-all conduct of petitioner company in relation to the task of

negotiation, there can be no doubt that the Union has a valid cause to complain
against its (Company's) attitude, the totality of which is indicative of the latter's,
disregard of, and failure to live up to, what is enjoined by the Labor Code - to
bargain in good faith.

We are in total conformity with respondent NLRC's pronouncement that

petitioner Company is GUILTY of unfair labor practice. It has been
indubitably established that (1) respondent Union was a duly certified bargaining
agent; (2) it made a definite request to bargain, accompanied with a copy of the
proposed Collective Bargaining Agreement, to the Company not only once but
twice which were left unanswered and unacted upon; and (3) the Company
made no counter proposal whatsoever all of which conclusively indicate lack of
a sincere desire to negotiate.[8] A Company's refusal to make counter proposal if
considered in relation to the entire bargaining process, may indicate bad faith
and this is specially true where the Union's request for a counter proposal is left
unanswered.[9]Even during the period of compulsory arbitration before the
NLRC, petitioner Company's, approach and attitude - - stalling the negotiation
by a series of postponements, non-appearance at the hearing conducted, and
undue delay in submitting its financial statements, lead to no other conclusion
except that it is unwilling to negotiate and reach an agreement with the Union.
Petitioner has not at any instance, evinced good faith or willingness to discuss
freely and fully the claims and demands set forth by the Union much less justify
its opposition thereto.[10]

The case at bar is not a case of first impression, for in the Herald Delivery Carriers
Union (PAFLU) vs. Herald Publications[11] the rule had been laid down that "unfair
labor practice is committed when it is shown that the respondent employer,
after having been served with a written bargaining proposal by the petitioning.
Union, did not even bother to submit an answer or reply to the said proposal.
This doctrine was reiterated anew in Bradman vs. Court of Industrial
Relations[12] wherein it was further ruled that "while the law does not compel the
parties to reach an agreement, it does contemplate that both parties will
approach the negotiation with an open mind and make a reasonable effort to
reach a common ground of agreement''.

As a last-ditch attempt to effect a reversal of the decision sought to be reviewed,

petitioner capitalizes on the issue of due process claiming, that it was denied the
right to be heard and present its side when the Labor Arbiter denied the
Company's motion for further postponement.

Petitioner's aforesaid submittal failed to impress Us. Considering the various

postponements granted in its behalf, the claimed denial of due process appeared
totally bereft of any legal and factual support. As herein earlier stated, petitioner
had not even honored respondent Union with any reply to the latter's successive
letters, all geared towards bringing the Company to the bargaining table. It did
not even bother to furnish or serve the Union with its counter proposal despite
persistent requests made therefor. Certainly, the moves and over-all behavior of
petitioner-company were in total derogation of the policy enshrined in the New
Labor Code which is aimed towards expediting settlement of economic
disputes. Hence, this Court is not prepared to affix its imprimatur to such an
illegal, scheme and dubious maneuvers.

Neither are WE persuaded by petitioner-company's stand that the Collective

Bargaining Agreement which was approved and adopted by the NLRC is a total
nullity for it lacks the company's consent, much less its argument that once the
Collective Bargaining Agreement is implemented, the Company will face the
prospect of closing down because it has to pay a staggering amount of economic
benefits to the Union that will equal if not exceed its capital. Such a stand and
the evidence in support thereof should have been presented before the Labor
Arbiter which is the proper forum for the purpose.

We agree with the pronouncement that it is not obligatory upon either side of a
labor controversy to precipitately accept or agree to the proposals of the other.
But an erring party should not be tolerated and allowed with impunity to resort
to schemes feigning negotiations by going through empty gestures.[13] More so,
as in the instant case, where the intervention of the National Labor Relations
Commission was properly sought for after conciliation efforts undertaken by the
BLR failed. The instant case being a certified one, it must be resolved by the
NLRC pursuant to the mandate of P.D. 873, as amended, which authorizes the
said body to determine the reasonableness of the terms and conditions of
employment embodied in any Collective Bargaining Agreement. To that extent,
utmost deference to its findings of reasonableness of any Collective Bargaining
Agreement as the governing agreement by the employees and management must
be accorded due respect by this Court.

WHEREFORE, the instant petition is DISMISSED. The temporary

restraining order issued on August 27,1980, is LIFTED and SET ASIDE.

No pronouncement as to costs.

SO ORDERED.