Unconvincing evidence

The determination to cease or suspend operations for economic reasons is a recognized management prerogative that the State will not interfere with because no business or undertaking is required to continue operating at a loss just to maintain its workers in employment. But the management must prove that the closure is done in good faith. This is illustrated in this case of a lumber company (NLC) and its affiliate (PWC).

The case involved 30 workers employed by NLC and PWC at its processing plant. They were all members of a union (NOWM) that has a collective bargaining agreement (CBA) with NLC/PWC. After down-scaling its operations in 1995 allegedly because of economic losses, the 30 workers continued to work at the processing plant although each of them received monthly pay of only P600. By January, 1996, LC had not paid the 30 workers’ benefits and salaries per the CBA and the Labor Code, particularly the balance of the health bonus for 1994, the balance of the 13th month pay and the remaining backlog payrolls amounting to P1.8 million. Despite a conciliation conference on January 29, 1996, no agreement was arrived at, although NLC/PWC granted financial assistance of P300 for rank and file workers, P400 for security guards, P500 for middle managers and P750 for the company staff on February 9, 1996. Such unequal financial assistance added fuel to the growing ire of the union members due to the failure of NLC/PWC to pay what was due them. So on February 18, 1996, the general membership of the union approved a resolution that the 30 workers would not report for work anymore beginning February 19, 1996 unless they are paid their salaries and benefits. NLC/PWC was informed of this resolution in a letter of the same date.

On November 18, 1996, the union and the 30 workers filed a complaint before the NLRC against NLC and PWC for illegal cessation of business operations that resulted in their constructive dismissal, non-payment of separation pay, underpayment of salary and salary in arrears for one year.

For its part NLC and PWC averred that they did not terminate the employment of the 30 workers, and they merely suspended their operations. According to them such suspension was based on their comparative financial statements for the years 1994 and 1995 which they filed with the BIR on April 15, 1996 showing that NLC and PWC incurred net losses of P13,540,816 and P11,742,013 respectively. They contended that they were ready to resume operations in January 1996 were it not for the union resolution that the workers should not report for work any further. They then concluded that because the workers refused to report for work even after the lapse of six months, they are not entitled to the separation pay as it would place a premium on the individual workers’ refusal to report for work. Were they correct?

No. NLC and PWC merely down-scaled their operations in 1995 and did not suspend the same because of economic difficulties. The workers continued to work at the processing plant although each of them received a salary of only P600. They dismissed the workers when the latter refused to report for work after they obstinately refused to heed and agree to the workers’ just demands to pay the benefits and backlog wages due the workers. Their claim of suspending operations in 1994 and 1995 was merely an afterthought to justify their dismissal of the workers.

While NLC/PWC may close or suspend operations due to economic reasons, they have to prove with sufficient and convincing evidence that such closure or suspension is done bona fide or in good faith. They however failed to prove with convincing evidence a bona fide suspension of their operations in 1994, 1995 and even in January 1996 due to acute economic losses in their operations. First, the financial statements for 1994 and 1995 showing huge losses were unsigned, unverified and filed only on April 15, 1996 with the BIR. Such documents have no probative value. Second, despite the alleged losses in 1994 and 1995, they continued employing respondent although each of them received a monthly salary of only P600. Third, in their claim that they were ready to resume in January 1996 were it not for union’s resolution that the workers should not report for work belies their contention that they sustained huge losses. They never gave notice to the workers of the suspension of their operations and, thereafter, that they were ready to resume such operation in January 1996. Fourth, they even gave financial assistance to the employees on February 9, 1996.

So, NLC and PWC should pay the individual workers their separation pay equivalent to 1/2 month salary for every year of service (Nasipit vs. National Organization of Workingmen, et. al. G.R. 146225, November 25, 2004).

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