Case Digest: Plastimer & Bin v. Gopo, et al.

G.R. No. 183390 : February 16, 2011




The Personnel and Administration Manager of Plastimer Industrial Corporation (Plastimer) issued a Memorandum informing all its employees of the decision of the Board of Directors to downsize and reorganize its business operations due to withdrawal of investments and shares of stocks which resulted in the change of its corporate structure. The employees of Plastimer, herein respondents, were served written notices of their termination effective 13 June 2004. On 24 May 2004, Plastimer and Plastimer Industrial Corporation Christian Brotherhood (PICCB), the incumbent sole and exclusive collective bargaining representative of all rank and file employees, entered into a Memorandum of Agreement (MOA) relative to the terms and conditions that would govern the retrenchment of the affected employees. On 26 May 2004, Plastimer submitted to the DOLE an Establishment Termination Report containing the list of the employees affected by the reorganization and downsizing. The affected employees, including respondents, signed individual "Release Waiver and Quitclaim."

Thereafter, respondents filed a complaint against Plastimer and its President Teo Kee Bin before the Labor Arbiter for illegal dismissal with prayer for reinstatement and full backwages, underpayment of separation pay, moral and exemplary damages and attorneys fees. Respondents alleged that they did not voluntarily relinquish their jobs and that they were required to sign the waivers and quitclaims without giving them an opportunity to read them and without explaining their contents. Respondents further alleged that Plastimer failed to establish the causes/valid reasons for the retrenchment and to comply with the one-month notice to the DOLE as well as the standard prescribed under the CBA between Plastimer and the employees. Petitioners countered that the retrenchment was a management prerogative and that respondents got their retrenchment or separation pay even before the effective date of their separation from service.

The Labor Arbiter ruled that petitioners were able to prove that there was a substantial withdrawal of stocks that led to the downsizing of the workforce.

The NLRC affirmed the Labor Arbiters decision. The NLRC noted that respondents did not signify any protest to the MOA entered into between Plastimer and PICCB. The NLRC held that there was no proof that respondents were intimidated or coerced into signing the waivers and quitclaims because they were assisted by the union President and their counsel. The NLRC ruled that the filing of the complaint was just an afterthought on the part of respondents.

The CA reversed the NLRC decision. The Court of Appeals ruled that there was no valid cause for retrenchment. It noted that the change of management and majority stock ownership was brought about by execution of deeds of assignment by several stockholders in favor of other stockholders. Further ruled that Plastimer failed to use a reasonable and fair standard or criteria in ascertaining who would be dismissed and who would be retained among its employees. The Court of Appeals ruled that the MOA between Plastimer and PICCB only recognized the need for partial retrenchment and the computation of retrenchment pay without disclosing the criteria in the selection of the employees to be retrenched.

Petitioners filed an MR, but the same was denied.

ISSUE: Whether respondents were illegally retrenched by petitioners.

HELD: The decision of the Court of Appeals is overruled.


Article 283 of the Labor Code provides:

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 workers and the Department 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 to 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 one (1) whole year.

In this case, Plastimer submitted the notice of termination of employment to the DOLE on 26 May 2004. However, notice to the affected employees were given to them on 14 May 2004 or 30 days before the effectivity of their termination from employment on 13 June 2004. While notice to the DOLE was short of the one-month notice requirement, the affected employees were sufficiently informed of their retrenchment 30 days before its effectivity. Petitioners failure to comply with the one-month notice to the DOLE is only a procedural infirmity and does not render the retrenchment illegal. InAgabon v. NLRC, 485 Phil. 248 (2004), we ruled that when the dismissal is for a just cause, the absence of proper notice should not nullify the dismissal or render it illegal or ineffectual. Instead, the employer should indemnify the employee for the violation of his statutory rights. Here, the failure to fully comply with the one-month notice of termination of employment did not render the retrenchment illegal but it entitles respondents to nominal damages.


Article 283 of the Labor Code recognizes retrenchment to prevent losses as a right of the management to meet clear and continuing economic threats or during periods of economic recession to prevent losses. There is no need for the employer to wait for substantial losses to materialize before exercising ultimate and drastic option to prevent such losses. Mendros, Jr. v. Mitsubishi Motors Phils. Corporation (MMPC), G.R. No. 169780, 16 February 2009


The Court has ruled that a waiver or quitclaim is a valid and binding agreement between the parties, provided that it constitutes a credible and reasonable settlement, and that the one accomplishing it has done so voluntarily and with a full understanding of its import.

Respondents were sufficiently apprised of their rights under the waivers and quitclaims that they signed.

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