Kristine’s Note: Sorry kung mahaba.

You don’t
CASE 146 have to include the ones with “Additional Info”
or the query-answer portions. Just adding it
G.R. No. 152039. April 8, 2005 kasi nadiscuss ni sir yun.

F.F. MARINE CORPORATION and/or MR. ERIC A. CRUZ, Petitioners, vs. THE HONORABLE SECOND DIVISION NATIONAL LABOR
RELATIONS COMMISSION and RICARDO M. MAGNO, Respondents.

FACTS:

Petitioner F.F. Marine Corporation (FFMC) was “forced” to undertake a retrenchment program as its operations have been
negatively and heavily affected by the Asian economic crisis. Respondent Magno was among the dismissed employees. He received
his separation pay equivalent to 9 years. He and the other affected employees executed a release and quitclaim in favour of
petitioners. Magno filed a complaint for illegal dismissal and damages. He claimed that he and some of the affected 21 employees
were beguiled into accepting the separation pay on the pretext that the dredging machine wehre he was assigned was temporarily
stalled in Zambales.

The corporation stressed that they have complied with the due process and the requirements laid down by the laws. Further, they
state that they have been experiencing financial problems, showing financial statements that resulted to losses and a deficit. Thus, it
was necessary for the retrenchment program has to push through. The petitioner also alleged that they have initially explored ways
of minimizing its losses by cutting expenses.

ISSUE: Whether or not the dismissal of the respondent is based on an authorized just cause.

RULING: NO.

Retrenchment is one of the economic grounds to dismiss employees. It is resorted to by an employer primarily to avoid or minimize
business losses. The law recognizes this under Article 283 of the Labor Code. However, the employer bears the burden to prove his
allegation of economic or business reverses. The employer's failure to prove it necessarily means that the employee's dismissal was
not justified.

There are three (3) basic requisites for a valid retrenchment to exist, to wit: (a) the retrenchment is necessary to prevent losses and
such losses are proven; (b) written notice to the employees and to the DOLE at least one (1) month prior to the intended date of
retrenchment; and (c) payment of separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher.

In the case at bar, petitioners seek to justify the retrenchment on the ground of serious business losses brought about by the Asian
economic crisis. To prove their claim, petitioners adduced before the Labor Arbiter the 1994 and 1995 Financial Statements.
Said Financial Statements, however, were prepared only by petitioners' accountant and approved by the manager Bernadette
Rosales.[34] They were not audited by an independent external auditor. This Court has ruled that financial statements audited by
independent external auditors constitute the normal method of proof of the profit and loss performance of a company. Petitioners'
failure to adduce financial statements duly audited by independent external auditor casts doubt on their claim of losses for financial
statements are easy

FOR ADDITIONAL INFO

QUERY: Magno prayed for a separation pay in lieu of reinstatement. Valid?

ANSWER: YES.

It is well-settled that when a person is illegally dismissed, he is entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages. In the event, however, that reinstatement is no longer feasible, or if the employee decides not
to be reinstated, the employer shall pay him separation pay in lieu of reinstatement. Such a rule is likewise observed in the case of a
strained employer-employee relationship or when the work or position formerly held by the dismissed employee no longer exists. In
sum, an illegally dismissed employee is entitled to: (1) either reinstatement if viable or separation pay if reinstatement is no longer
viable, and (2) backwages.

QUERY: How should his separation pay be computed?

ANSWER: The separation pay may be computed at one (1) month pay, or one (1/2) month pay for every year of service, whichever
is higher. It is noteworthy that the separation pay being awarded in the instant case is due to illegal dismissal; hence, it is different
from the amount of separation pay provided for in Article 283 in case of retrenchment to prevent losses or in case of closure or
cessation of the employer's business, in either of which the separation pay is equivalent to at least one (1) month or one-half (1/2)
month pay for every year of service, whichever is higher.

CASE 147

G.R. No. L-56398 July 23, 1987

FACTS:

Concepcion was hired by Asiaworld as its advertising sales director. There were several times that she did not avail of her vacation
leave benefits because the company president and her immediate supervisor requested her to help with advertising campaigns. She
was promoted Vice President for marketing and her salary was increased.

Later, she was advised in writing that her services would be terminated because of continued losses. She was offered a one month’s
salary for her more than 3 years of service. Concepcion filed a complaint with the Minister of Labor and Employment for dismissal
and for recovery of unpaid earned and unused vacation leave credits and reimbursements of advances for the petitioner.

ISSUE: Whether or not the cause of the petitioner’s dismissal was just and proper.

RULING: NO.

The only justification presented by the petitioner for dismissing the private respondent was its financial statement showing a loss for
the year 1977 only. Asiaworld failed to show that fair and reasonable standards were used in ascertaining who would be dismissed
and who would be retained among its employees.

As the Solicitor General correctly stated, there must be fair and reasonable criteria to be used in selecting employees to be
dismissed, such as: (a) less preferred status (e.g. temporary employee); (b) efficiency rating, and (c) seniority. In the case at bar, the
petitioner never denied the fact that the private respondent was performing her job satisfactorily so much so that its income from
sales advertising increased.

Secondly, both the Regional Director and the respondent Minister found that after the private respondent's termination, the
petitioner hired a new employee to take the former's position.

FOR ADDITIONAL INFO

QUERY: For the order of reinstatement, since there was a new employee hired to fill in Concepcion’s former post, and that there was
no showing that an equivalent position is available for the latter, how should the petitioner be compensated?

ANSWER:

If the respondent had been a laborer, clerk, or other rank and file employee, there would be no problem in ordering her
reinstatement with facility. But she was Vice President for Marketing of Asiaworld. An officer in such a key position can work
effectively only if she enjoys the full trust and confidence of top management.

As ruled in Balaquezon EWTU v. Zamora (97 SCRA 5, 8), “It should be underscored that the backwages are being awarded on the
basis of equity or in the nature of a severance pay. This means that a monetary award is to be paid to the striking employees as an
alternative to reinstatement which can no longer be effected in view of the long passage of time or because of the 'realities of the
situation.”

The award of backwages with modifications as an alternative to reinstatement is then affirmed by the Court

CASE 148

G.R. No. 109002 April 12, 2000

DELA SALLE UNIVERSITY, petitioner,

x-----------------------x

G.R. No. 110072 April 12, 2000

DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION-NATIONAL FEDERATION OF TEACHERS AND EMPLOYEES UNION (DLSUEA-
NAFTEU), petitioner, vs.
DELA SALLE UNIVERSITY and BUENAVENTURA MAGSALIN, respondents.

FACTS:

Dela Salle University and DLSUEA-NAFTEU entered into a 3-year CBA. Within 60 days after the CBA’s expiry, the union sent a new set
of proposed CBA. The negotiations were unsuccessful and the union filed a notice of strike. Eleven issues that were proposed by the
union were raised during the mediation, 5 of which were resolved. The parties executed partially the CBA. The rest of the six issues
include the use of the "last-in-first-out" method in case of retrenchment and transfer to other schools or units. For this, the
voluntary arbitrator upheld the ". . . elementary right and prerogative of the management of the University to select and/or choose
its employees, a right equally recognized by the Constitution and the law. The employer, in the exercise of this right, can adopt valid
and equitable grounds as basis for lay-off or separation, like performance, qualifications, competence, etc. Similarly, the right to
transfer or reassign an employee is an employer's exclusive right and prerogative."

ISSUE: Whether or not the “last-in-first-out” method of lay-off is a proper method for retrenchment and transfer of employees in the
University.

RULING:NO.

As an exercise of management prerogative, the University has the right to adopt valid and equitable grounds as basis for terminating
or transferring employees. The University asserts that its management prerogative and counters that "[w]hile it is recognized that
this right of employees and workers to 'participate in policy and decision-making processes affecting their rights and benefits as may
be provided by law' has been enshrined in the Constitution (Article III, [should be Article XIII], Section 3, par. 2), said participation,
however, does not automatically entitle the Union to dictate as to how an employer should choose the employees to be affected by
a retrenchment program. The employer still retains the prerogative to determine the reasonable basis for selecting such
employees."

CASE 149

G.R. No. L-23495 September 30, 1970

LVN PICTURES EMPLOYEES AND WORKERS ASSOCIATION (NLU). petitioner, vs. LVN PICTURES, INC., respondent.

G.R. No. L-26432 September 30, 1970

LVN PICTURES CHECKERS UNION (NLU), petitioner, vs. LVN PICTURES, INC. and/or DALISAY PICTURES INC., and the COURT OF
INDUSTRIAL RELATIONS,respondents.

FACTS:

The LVN Pictures, Inc. (hereinafter referred to as the LVN) was a corporation engaged in the business of producing Tagalog movies.
For the period 1957 to 1961, the company suffered heavy losses in its movie production due to causes beyond its control. Despite
this, LVN continued to operate. It proposed to the Union a change of payment of salaries and wages to “pakiao” system per picture.
The proposal was rejected. In the stockholders’ meeting, it was agreed that LVN stop producing new moving pictues and to finish
only the pictures that were under production. Because of this and the rejection of the new method of payment of salaries and
wages, the BOD of LVN decided to close its movie production.

LVN was compelled to dismiss all its personnel employed in the said movie production, among them are 84 employees of the
EWA/NLU.

On July 18, 1961 the EWA filed a complaint charging the LVN with violations of section 4(a) (1) and (4) of Republic Act 875 (Industrial
Peace Act), consisting of alleged union interference by the LVN and/or discriminatory dismissal of 84 employees and workers
because of the membership in the EWA.

ISSUE: Whether or not the dismissal of the 84 employees was grounded on authorized cause.

RULING: YES.

“An employer may close his business, provided the same is done in good faith and is due to causes beyond his control. To rule
otherwise would be oppressive and inhuman."

The respondent CIR found for a fact, and our own independent study of the evidence shows, that the LVN suffered tremendous
losses, completely depleting its capital which was needed to operate and continue its business of producing moving pictures. In
order to avoid immediate lay-off of employees and the closure of its business, the LVN proposed to the EWA a change in the
payment of salaries and wages of the employees and workers from salary or wage basis to the "pakiao" system; and when this was
rejected by the union, it offered to reduce the monthly compensation of all the employees (except those receiving less than P175 a
month and the daily wage earners) regardless of their union membership, and this too was rejected. In order to avoid further losses
and in view of the refusal of the union to cooperate in alleviating its mounting losses, the LVN was left with no alternative but to
close its movie production as of May 31, 1961 and to dismiss its employees. This what LVN had the right to do, and it did so in good
faith. We are not unmindful of the plight of the employees in this case, but we consider it oppressive to compel the LVN to continue
its business of producing movies when to do so would only result in its incurring further losses.

Under the Termination Pay Law (R.A. 1052, sec. 1, as amended by R.A. 1787), one of the just causes for terminating an employment
without a definite period by the employer, is the closing or cessation of operations of the establishment or enterprise, unless the
closing is for the purpose of defeating the intention of the said law. Since the LVN in good faith stopped its movie production
business on May 31, 1961, it could therefore legally dismiss its employees. But before doing so, it gave them sufficient notice and an
ample period within which to look for other employments. Therefore, contrary to the petitioners' allegation, the Termination Pay
Law applies.

FOR ADDITIONAL INFO

QUERY: Are these 84 employees entitled to separation pay considering that the company has not much assets to pay them (since
they incurred heavy losses).

ANSER: NO.

It is now settled that when the employment is terminated for a just cause as defined in section 1 of Rep. Act 1052, as amended by
Rep. Act 1787, because of the losses incurred by the business, the employee whose services are terminated or dispensed with is not
entitled to separation pay.

CASE 150
[G.R. No. 148340. January 26, 2004]
J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and JOSE F.
MASCARINAS, respondents.

FACTS:

Due to decline in the sales of heavy equipment, Jesusa Adlawan Trading and General Services (JAT) temporarily suspended its
operations starting on March 1998. On May 1998, it indefinitely closed shop. Private respondent, who was hired as a probationary
employee in April 1997, filed a complaint against the company for illegal dismissal and underpayment of wages because he was
“required to sign a piece of paper”. When he refused, his employment was terminated.
On December 14, 1998, JAT filed an Establishment Termination Report with the Department of Labor and Employment (DOLE),
notifying the latter of its decision to close its business operations due to business losses and financial reverses.

ISSUE: Whether or not the private respondent was dismissed legally.

RULING: YES. The dismissal was based on valid grounds.

In the event, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business operations,
namely: (a) service of a written notice to the employees and to the DOLE at least one (1) month before the intended date thereof;
(b) the cessation of business must be bona fide in character; and (c) payment to the employees of termination pay amounting to at
least one-half (1/2) month pay for every year of service, or one (1) month pay, whichever is higher.

All the requisites were present. The petitioners notified the workers of its decision to permanently close through written letters
dated November 25m 1998. It also submitted a termination report to the DOLE. Next, the closure of business operation by petitioner
is not tainted with bad faith or other circumstance that arouses undue suspicion of malicious intent. The decision to close arrived
after a suspension of operation for several months precipitated by a slowdown in sales without prospects of improving. Thus, the
closing was justified.

FOR ADDITIONAL INFO

QUERY: What is the rule with regards to separation pay during the closure of business operations?

ANSWER: The Court held in this case that “the closure of business operation is allowed under the Labor Code, provided separation
pay be paid to the terminated employee. It is settled that in case of closure or cessation of operation of a business establishment
not due to serious business losses or financial reverses, the employees are always given separation benefits. The amount of
separation pay must be computed from the time private respondent commenced employment with petitioners until the time the
latter ceased operations.

QUERY: Will the private respondent be entitled to backwages?

ANSWER: NO.

Considering that private respondent was not illegally dismissed, however, no backwages need to be awarded. Backwages in
general are granted on grounds of equity for earnings which a worker or employee has lost due to illegal dismissal. It is well settled
that backwages may be granted only when there is a finding of illegal dismissal.

GOODLUCK SA ATIN!