Case Digest (G.R. No. 193136)
Facts:
The case involves ABS-CBN Broadcasting Corporation (petitioner) and respondents Honorato C. Hilario, substituted by Gloria Z. Hilario, and Dindo B. Banting. The events leading to the case began when ABS-CBN, a domestic corporation engaged in broadcasting, initially operated its Scenic Department for set design and props. In 1995, the Scenic Department was abolished, and Creative Creatures, Inc. (CCI) was formed by Edmund Ty and several ABS-CBN officers to take over these functions. Respondent Hilario was hired by CCI as a Designer in March 1995 and later became a Set Controller, while respondent Banting joined as a Metal Craftsman in April 1999 and rose to Assistant Set Controller.
In June 2003, Ty retired from CCI and entered into a consultancy agreement with ABS-CBN. Subsequently, CCI's Board decided to cease operations due to financial difficulties, with the closure effective October 5, 2003. Both respondents received termination letters citing the closure and were ...
Case Digest (G.R. No. 193136)
Facts:
Background of the Parties:
- ABS-CBN Broadcasting Corporation (ABS-CBN) is a domestic corporation engaged in broadcasting television and radio content. Initially, its Scenic Department handled the design and construction of props and sets for its shows. Later, ABS-CBN engaged independent contractors for these tasks.
- Creative Creatures, Inc. (CCI) was incorporated in 1995 by Edmund Ty, along with some officers of ABS-CBN, to handle the design and construction of sets and props for television programs, theater presentations, and other events. CCI was formed after ABS-CBN abolished its Scenic Department.
Employment of Respondents:
- Honorato C. Hilario was hired by CCI in March 1995 as a Designer and rose to the position of Set Controller, earning a monthly salary of P9,973.24 as of October 5, 2003.
- Dindo B. Banting was hired by CCI in April 1999 as a Metal Craftsman and became an Assistant Set Controller, earning a monthly salary of P8,820.73 as of October 5, 2003.
Closure of CCI:
- In June 2003, Edmund Ty retired as Managing Director of CCI to form his own company. He entered into a Consultancy Agreement with ABS-CBN for set design and production.
- CCI’s Board of Directors decided to close the company by shortening its corporate term to October 31, 2003, citing that CCI was merely "breaking even" and that Ty’s retirement was a significant loss to the company.
- On September 4 and 5, 2003, respondents were served notices of CCI’s closure effective October 5, 2003. They received separation pay and executed quitclaims.
Formation of DWVEI:
- In August 2003, Ty formed Dream Weaver Visual Exponents, Inc. (DWVEI), which engaged in the same business as CCI. ABS-CBN subsequently engaged DWVEI for its set and prop needs.
Labor Complaint:
- On September 24, 2003, respondents filed a complaint for illegal dismissal, illegal deduction, and non-payment of meal allowances against CCI and ABS-CBN before the NLRC. They argued that CCI’s closure was a scheme to circumvent labor laws, as CCI continued to operate under DWVEI.
Issue:
- (Unlock)
Ruling:
- (Unlock)
Ratio:
- Illegal Dismissal: Under Article 298 of the Labor Code, an employer may terminate employees due to the closure of business operations, provided the closure is bona fide and not intended to circumvent labor laws. In this case, CCI’s closure was not bona fide, as it was done to terminate employees and continue operations under DWVEI.
- Piercing the Corporate Veil: The doctrine of piercing the corporate veil applies when a corporation is used as a mere alter ego or instrumentality of another corporation. Here, CCI was controlled by ABS-CBN, and its operations were dependent on ABS-CBN. Thus, ABS-CBN and CCI were treated as a single entity, making ABS-CBN jointly and severally liable for the illegal dismissal.
- Separation Pay in Lieu of Reinstatement: Reinstatement is the general remedy for illegal dismissal, but when reinstatement is no longer viable (e.g., due to the passage of time or the death of the employee), separation pay is awarded. In this case, separation pay equivalent to one month’s salary for every year of service was granted.
Disposition
- The Court affirmed the CA’s decision with modification:
- ABS-CBN and CCI were ordered to pay respondents full backwages from October 5, 2003, up to the finality of the decision, less the amount received via quitclaims.
- Separation pay equivalent to one month’s salary for every year of service was awarded.
- Interest of 6% per annum on the total monetary award was imposed from the date of dismissal until finality, and 12% per annum thereafter until full payment.