CASE DIGEST: Solidbank v. NLRC (G.R. No. 165951; March 30, 2010)

CASE DIGEST: SOLIDBANK CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, et al., Respondents. G.R. No. 165951; March 30, 2010.

FACTS: Sometime in May 2000, petitioner decided to cease its commercial banking operations and forthwith surrendered to the Bangko Central ng Pilipinas its expanded banking license. For this reason, petitioner sent individual letters to its employees, including respondents, advising them of its decision to cease operations and informing them that their employment would be terminated. Petitioner sent to the Department of Labor and Employment a letter informing said office of the termination of its employees.

Petitioner granted to its employees separation pay equivalent to 150% of gross monthly pay per year of service, and cash equivalent of earned and accrued vacation and sick leaves as a result of their dismissal. Upon receipt of their separation pay, the employees of petitioner, including respondents, individually signed a "Release, Waiver, and Quitclaim."

Thereafter, respondents filed with the Labor Arbiter (LA) complaints for illegal dismissal, underpayment of separation pay, plus damages and attorneys fees.

The LA ruled that respondents were validly terminated. The LA, however, inspired by compassionate justice, awarded financial assistance of one months salary to respondents. The NLRC ruled that the closure of a business is an authorized cause sanctioned under Article 283 of the Labor Code and one that is ultimately a management prerogative. The NLRC, however, modified the LAs Decision by increasing the amount of financial assistance to two months salary out of compassionate justice.

Petitioner filed a motion for reconsideration but the same was denied. Hence, this present petition.

ISSUE: Was the award of financial assistance valid?

HELD: Yes. Based on Article 283, in case of cessation of operations, the employer is only required to pay his employees a separation pay of one month pay or at least one-half month pay for every year of service, whichever is higher. That is all that the law requires.
In the case at bar, petitioner paid respondents the following: (a) separation pay computed at 150% of their gross monthly pay per year of service; and (b) cash equivalent of earned and accrued vacation and sick leaves. Clearly, petitioner had gone over and above the requirements of the law. Despite this, however, petitioner has been ordered to pay respondents an additional amount, equivalent to one months salary, as a form of financial assistance.

After a thorough consideration of the circumstances at bar, this Court finds that the award of financial assistance is bereft of legal basis and serves to penalize petitioner who has complied with the requirements of the law.

Moreover, a review of jurisprudence relating to the application of "compassionate and social justice" in granting financial assistance in labor cases shows that the same has been generally used in instances when an employee has been dismissed for a just cause under Article 282 of the Labor Code and not when an employee has been dismissed for an authorized cause under Article 283.

As a general rule, an employee who has been dismissed for any of the just causes enumerated under Article 282 of the Labor Code is not entitled to separation pay. Although by way of exception, the grant of separation pay or some other financial assistance may be allowed to an employee dismissed for just causes on the basis of equity.

The reason that the law does not statutorily grant separation pay or financial assistance in instances of termination due to a just cause is precisely because the cause for termination is due to the acts of the employee. In such instances, however, this Court, inspired by compassionate and social justice, has in the past awarded financial assistance to dismissed employees when circumstances warranted such an award. Looking now at Article 283, this Court holds that the same was drafted by the legislature, taking the best interest of laborers in mind. It is clear that the causes of the termination of an employee under Article 283 are due to circumstances beyond their control, such as when management decides to reduce personnel based on valid grounds, or when the employer decides to cease operations. Thus, the bias towards labor is very apparent, as the employer is statutorily required to pay separation pay, the amount of which is also statutorily prescribed. GRANTED.
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