G.R. No. 173154 - Sangwoo Phils., Inc. vs. Sangwoo Phils., Inc. Employees Union-OLALIA

On July 25, 2003, during collective bargaining agreement (CBA) negotiations between Sangwoo Philippines, Inc. Employees Union-Olalia (SPEU) and Sangwoo Philippines, Inc. (SPI), SPI filed a letter-notice with the Department of Labor and Employment (DOLE) indicating a temporary suspension of operations for one (1) month, starting September 15, 2003, due to a lack of orders from its buyers.
SPEU received a copy of the letter-notice and negotiations over the CBA continued despite the suspension notice.

On September 10, 2003, the parties entered into a handwritten Memorandum of Agreement which, among other provisions, detailed employees’ wages and benefits for the next two (2) years and stipulated that in the event of a temporary shutdown, all machineries and raw materials would remain in SPI’s premises.
SPI temporarily ceased operations on September 15, 2003 and subsequently filed two successive letters with the DOLE to extend the shutdown until March 15, 2004.

On October 28, 2003, SPEU filed a complaint before the Regional Arbitration Branch IV of the NLRC for unfair labor practice, illegal closure, illegal dismissal, damages, and attorney’s fees.
On February 12, 2004, SPI posted notices within its premises of its permanent closure and cessation of business operations, effective March 16, 2004, citing serious economic losses and financial reverses, and furnished the DOLE and SPEU with copies of these notices.

In connection with its permanent closure, SPI offered separation benefits equivalent to one-half (½) month pay for every year of service to all employees.
While 234 employees accepted the offer, the minority employees refused and did not claim the offered checks, even after being given until March 25, 2004, to accept and execute quitclaims.

On June 4, 2004, the Labor Arbiter ruled in favor of SPI, holding that the closure was valid due to serious business losses and that SPI had complied with notice requirements.
The NLRC modified the LA ruling in its Resolution dated January 26, 2005 by upholding the closure as due to serious business losses but holding that since the majority of employees received separation benefits, the minority employees were also entitled to separation pay.

In April and June 2005, the CA issued a temporary restraining order (TRO) and a writ of preliminary injunction enjoining enforcement of the NLRC decision.
Following an unsuccessful settlement offer by SPI of financial assistance amounting to P15,000.00 to each minority employee, the CA, in its Decision dated January 12, 2006, ruled that the minority employees were not entitled to separation pay given the valid closure due to serious business losses.
Nevertheless, the CA mandated SPI to pay financial assistance of P15,000.00 to each minority employee.
Motions for reconsideration filed by both parties were denied in the CA Resolution dated June 14, 2006.

Whether the minority employees are entitled to receive separation pay when the company’s closure was due to serious business losses.

Whether SPI complied with the notice requirement mandated by Article 297 (formerly Article 283) of the Labor Code by merely posting the notice of closure as opposed to serving individually addressed written notices to each employee.