Asian Alcohol v NLRC GR 131108 March 25, 1999 FACTS
The Parsons family who 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 whose positions positions were abolished due 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 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 th vacation, emergency, and seniority leave credits, 13 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 NLRC complaints for illegal dismissal with a prayer for reinstatement and backwages. Moral damages and attorney’s fees. They alleged 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 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 dismiss workers during periods of business recession and 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 ½ 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 petitioner’s 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.
