G.R. No. 117473 - Reahs Corp. vs. National Labor Relations Commission

Petitioners filed a petition for certiorari under Rule 65 seeking to annul and set aside a NLRC decision dated April 29, 1994.
The NLRC decision affirmed the Labor Arbiter’s ruling which had held individual petitioners jointly and severally liable with Reah’s Corporation in paying the private respondents’ claims.
The claims involved allegations of underpayment of wages, holiday pay, 13th month pay, and separation pay.

Alleged employment from September 5, 1977, to November 6, 1990, as a supervisor at the health and sauna parlor of the respondents.
Received a daily salary of P50.00.
Claimed that the establishment was abruptly closed on November 6, 1990, without proper notice, resulting in unpaid wages, separation pay, and other benefits.
Claimed to work a minimum of 12 hours a day without receiving overtime compensation.

Alleged employment from December 16, 1986, to November 6, 1990, at the same establishment with a daily salary of P26.00.
Claimed to have worked 13 hours a day without being paid overtime.

Alleged that they were hired as waitresses on May 20, 1990, and worked until the closure of the establishment on November 6, 1990.
Claimed to have been paid on a commission basis at P0.25 per bottle of beer sold or consumed, working 10 hours daily without overtime pay.

Complainants Edna Wahingon, Susan dela Cruz, Sonia dela Cruz, and Victoria Padilla

Alleged employment as attendants, hired on different dates until November 6, 1990.
Received commission-based pay at twenty (20%) percent of the service fee based on different rates (P90.00 for ordinary service and P110.00 for VIP service).
Claimed to work 11 hours a day without overtime pay.
Asserted that the closure of the health parlor was illegal as no proper notification was given.

Reah’s Corporation acquired the business assets of Ms. Soledad Domingo’s Rainbow Sauna, which included operations such as a sing-along coffee shop and a massage clinic.
It is alleged that Bonifacio Red began working as a roomboy at P50.00/day under different arrangements, including being provided living quarters and a cash advance of P1,200.00 for a temporary absence.
His re-employment on January 1, 1990, was subject to the condition of refunding the cash advance.
The respondents justified the closure citing poor business performance, an increase in rental costs, and the failure of Meralco to reconnect electrical services, leading to business losses.

Dismissal of the private respondents’ complaints for unfair labor practices and illegal dismissal.
Award of separation pay to all eight private respondents.
Only Bonifacio Red and Benedicto Tulabing were found entitled to labor standard benefits (underpayment of wages, holiday pay, and 13th month pay) as the others were deemed employed on a commission basis.
Award of attorney’s fees amounting to 10% of the money claims to Red and Tulabing.

Petitioners (including individual corporate officers Castulo, Pascua, and Valenzuela) contended that:

Article 283 of the Labor Code exempts an establishment from paying separation pay when closure is due to serious business losses or financial reverses.
As corporate officers, they should not be held jointly and severally liable with Reah’s Corporation unless there is evidence of criminal negligence in causing the closure.

The petitioners challenged both the imposition of joint liability for separation pay and the award of attorney’s fees, claiming misinterpretation of Article 283 and absence of findings of unfair labor practice or illegal dismissal.

Whether or not the petitioners, particularly the corporate officers Castulo, Pascua, and Valenzuela, can be held jointly and severally liable with Reah’s Corporation for the payment of separation pay under Article 283 of the Labor Code.
Whether the corporate officers can be held liable for additional labor standard benefits such as underpayment of wages, holiday pay, and 13th month pay in the absence of findings of unfair labor practices or illegal dismissal.
Whether there is a legal basis for the NLRC’s award of 10% attorney’s fees to private respondents Red and Tulabing.