G.R. No. 116839 - Labor Congress of the Philippines vs. National Labor Relations Commission

The petitioners are the Labor Congress of the Philippines (LCP), representing its member employees of Lucky Textile Mills, Inc. (Lucky) and formerly members of their exclusive bargaining agent, Nagkakaisang Manggagawa sa Lucky – NAFLU.
The respondents include the National Labor Relations Commission (NLRC), Lucky Textile Mills, Inc., and other textile firms allegedly connected to Lucky through leasing arrangements.
Lucky is a corporation engaged in textile manufacturing in Meycauayan, Bulacan, which suffered financial losses, a common issue among textile companies following adverse economic conditions brought on by the Gulf Crisis.

In the later part of 1980, Lucky experienced severe financial reversals due to the slowdown in production and walkouts by its workers.
In February 1991, employees, through their union NAFLU, staged a strike demanding the across-the-board implementation of Wage Order No. RB-III-01.
The strike was declared illegal by both the Labor Arbiter and the NLRC after lasting about four months, effectively halting production.

As a consequence of the prolonged strike and ongoing financial losses, Lucky notified the Department of Labor and Employment (DOLE) and its union by sending letters dated March 12 and 15, 1991, about its planned closure effective April 18, 1991.
On June 13, 1991, Lucky entered into an agreement with NAFLU. Key terms of the agreement included:

Acceptance of the business closure and termination of employment as of the effective date.
Lifting of the picket line and dismantling of barricades.
Payment of separation/retirement pay to the employees, who in turn signed release papers (or quitclaims) upon payment.

After the closure, Lucky made earnest efforts to sell its factory and equipment. Failing that, it resorted to leasing its building and equipment to three separate corporations: Family Textile Inc., New World Textile Company, and Walden Textile Industries.
Former employees, under the belief that operations might resume, later sought reinstatement. Their subsequent actions included lodging complaints for alleged unfair labor practices, illegal lockout, and illegal dismissal.

The complete closure of Lucky was not necessary for financial reasons but was instead a maneuver to bust the union.
Lucky established the other textile firms merely as conduits to continue doing business covertly, thereby evading management obligations and circumventing collective bargaining agreements.
The employees were coerced into accepting separation pay and signing quitclaims under desperate circumstances.

The closure was a genuine exercise of its management prerogative under Article 283 of the Labor Code, necessitated by severe financial losses.
Proper notification had been provided to both the DOLE and the union at least one month prior to closure, in strict compliance with the law.
The quitclaims and release papers were voluntarily executed by the employees upon reception of separation/retirement pay, and there was no evidence that these documents were explained poorly or obtained by duress.

The NLRC, in affirming the Labor Arbiter’s decision, held that all procedural and substantive requirements were complied with, and that the separate corporate existence of the other respondents was conclusively established through documentary evidence.

Whether the closure of Lucky Textile Mills, Inc. was a valid exercise of management prerogative under Article 283 of the Labor Code, or whether it was, in fact, a pretext for union busting.

Examination of whether the legal requirements for closure pursuant to Article 283 were strictly complied with.
Consideration of any evidence suggesting that closure was used as a tool to circumvent labor law obligations.

Whether the establishment and operation of the other textile corporations (Family Textile Inc., New World Textile Company, and Walden Textile Industries) were mere extensions or adummies of Lucky aimed at masking the true purpose of evading labor responsibilities.

Analysis of documentary evidence to determine the independent corporate existence of these entities.
Whether the petitioners’ assertions based primarily on self-serving affidavits suffice to pierce the corporate veil.

Whether the execution of quitclaims and release papers by the employees, allegedly without proper explanation or under pressure, can be considered valid and binding.

The voluntariness of the employees’ acceptance of their separation/retirement pay.
The effect of such documents on their claim to security of tenure and other labor rights.