Case Digest: Sangwoo v. Sangwoo Employees

G.R. No. 173154 : December 9, 2013


FACTS: During the collective bargaining agreement (CBA) negotiations between Sangwoo Philippines, Inc. Employees Union Olalia (SPEU) and Sangwoo Philippines, Inc.(SPI), the latter filed with the Department of Labor and Employment (DOLE) a letter-notice of temporary suspension of operations for one (1) month, beginning September 15, 2003, due to lack of orders from its buyers.Negotiations on the CBA, however, continued and on September 10, 2003, the parties signed a handwritten Memorandum of Agreement, which, among others, specified the employees wages and benefits for the next two (2) years, and that in the event of a temporary shutdown, all machineries and raw materials would not be taken out of the SPI premises.

On September 15, 2003, SPI temporarily ceased operations. Thereafter, it successively filed two (2) letters with the DOLE for the extension of the temporary shutdown until March 15, 2004. Meanwhile, on October 28, 2003, SPEU filed a complaint for unfair labor practice, illegal closure, illegal dismissal, damages and attorneys fees before the Regional Arbiitraton Branch IV of the NLRC.Subsequently, SPI posted, in conspicuous places within the company premises, notices of its permanent closure and cessation of business operations, effective March 16, 2004, due to serious economic losses and financial reverses. Forthwith, SPI offered separation benefits of one-half () month pay for every year of service to each of its employees. 234 employees of SPI accepted the offer, received the said sums and executed quitclaims. Those who refused the offer, i.e., the minority employees, were nevertheless given until March 25, 2004 to accept their checks and correspondingly, execute quitclaims. However, the minority employees did not claim the said checks.

The LA ruled in favor of SPI. The LA found that SPI was indeed suffering from serious business losses. Consequently, SPI was not guilty of unfair labor practice, and similarly observed that it duly complied with the requirement of furnishing notices of closure to its employees and the DOLE. Lastly, since SPIs closure of business was due to serious business losses, it was not mandated by law to grant separation benefits to the minority employees.

Aggrieved, SPEU filed an Appeal Memorandumbefore the NLRC.

The NLRC sustained the ruling of the LA, albeit with modification. While it upheld SPIs closure due to serious business losses, it ruled that the members of SPEU are entitled to payment of separation pay equivalent to one-half () month pay for every year of service.

The CA issued a TRO, which enjoined the enforcement of the NLRC resolution. Thereafter, the CA issued a writ of preliminary injunction against the same.

SPI sent a Formal Offer of Settlement to SPEU offering the amount ofP15,000.00 as financial assistance to each of the minority employees. Then, SPI sent a Reiteration of Formal Offer of Settlement to SPEU, reasserting its previous offer of financial assistance. However, settlement talks broke down as SPEU did not accept SPIs offer.

However, with regard to the minority employees, CA held they are not entitled to separation pay considering that the companys closure was due to serious business losses.

Hence, this Petition for Certiorari.
Whether or not the minority employees are entitled to separation pay 
Whether or not SPI complied with the notice requirement of Article 297 of the Labor Code.
HELD: The petition is partly meritorious

LABOR LAW closure of business

Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of establishment, usually due to financial losses.

The employer is generally required to give separation benefits to its employees, unless the closure is due to serious business losses. Article [297] of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to serious losses. To require an employer to be generous when it is no longer in a position to do so, in our view, would be unduly oppressive, unjust, and unfair to the employer. Ours is a system of laws, and the law in protecting the rights of the working man, authorizes neither the oppression nor the self-destruction of the employer. Galaxie Steel Workers Union (GSWU-NAFLU-KMU) v. NLRC, G.R. No. 165757, October 17, 2006

In this case, the LA, NLRC, and the CA all consistently found that SPI indeed suffered from serious business losses which resulted in its permanent shutdown and accordingly, held the companys closure to be valid. As such, SPI should not be directed to give financial assistance amounting toP15,000.00 to each of the minority employees based on the Formal Offer of Settlement. If at all, such formal offer should be deemed only as a calculated move on SPIs part to further minimize the expenses that it will be bound to incur should litigation drag on, and not as an indication that it was still financially sustainable. However, since SPEU chose not to accept, said offer did not ripen into an enforceable obligation on the part of SPI from which financial assistance could have been realized by the minority employees.

LABOR LAW - Notice of Closure

Article 297 of the Labor Code provides that before any employee is terminated due to closure of business, it must give a one (1) month prior written notice to the employee and to the DOLE.

With regard to the notice requirement, the Labor Arbiter found, and it was upheld by the NLRC and the Court of Appeals, that thewritten notice of closure or cessation ofGalaxiesbusiness operations was posted on the company bulletin board one month prior to its effectivity.

The mere posting on the company bulletin board does not, however, meet the requirement under Article [297] of "serving a written notice on the workers." In order to meet the foregoing purpose, service of the written notice must be made individually upon each and every employee of the company.

Keeping with these principles, the Court finds that the LA, NLRC, and CA erred in ruling that SPI complied with the notice requirement when it merely posted various copies of its notice of closure in conspicuous places within the business premises. As earlier explained, SPI was required to serve written notices of termination to its employees, which it, however, failed to do. It is well to stress that while SPI had a valid ground to terminate its employees, i.e., closure of business, its failure to comply with the proper procedure for termination renders it liable to pay the employee nominal damages for such omission.

Based on existing jurisprudence, in the case of Industrial Timber Corporation v. Ababon, 520 Phil. 522, (2006), the Court reduced the amount of nominal damages awarded to employees fromP50,000.00 toP10,000.00 since the authorized cause of termination was the employers closure or cessation of business which was done in good faith and due to circumstances beyond the employers control.

In this case, considering that SPI closed down its operations due to serious business losses and that said closure appears to have been done in good faith, the Court, similar to the case of Industrial Timber - deems it just to reduce the amount of nominal damages to be awarded to each of the minority employees from P50,000.00 to Pl0,000.00.