Case Summary (G.R. No. 169136)
Procedural Background
The case originated from a Petition for Review on Certiorari filed with the Court of Appeals, which was prompted by a complaint for illegal dismissal by the respondents against G.J.T. Rebuilders. Initially, the Labor Arbiter ruled in favor of the respondents, finding insufficient evidence of serious business losses to justify the company's closure. This decision was appealed to the National Labor Relations Commission (NLRC), which ruled in favor of the petitioners, citing serious business losses. Subsequently, the Court of Appeals reversed the NLRC's decision and reinstated the Labor Arbiter's ruling.
Statutory Framework
The applicable law in this case is Article 283 of the Labor Code of the Philippines, which governs the termination of employment due to closure or cessation of operations due to serious business losses. This article stipulates that employees are entitled to separation pay unless the closure is due to serious business losses, in which case, employers must present compelling evidence demonstrating such losses.
Requirement of Proof of Serious Business Losses
The Supreme Court emphasized that employers seeking to justify closures on the grounds of serious business losses bear the burden of proof. It requires them to present financial statements over a sufficient timeframe to demonstrate a significant decline in business viability. A single financial statement is generally inadequate; instead, an ongoing pattern of financial loss is pivotal in legitimizing a claim of serious losses.
Evaluation of G.J.T. Rebuilders' Financial Losses
In the current case, G.J.T. Rebuilders presented financial statements showing a net income of P61,157.00 in 1996 and a net loss of P316,210.00 in 1997. The Supreme Court found the two-year period provided insufficient evidence of a continual trend of losses necessary to substantiate the claim of serious business losses, especially considering that one of the years showed a profit.
Obligation to Pay Separation Pay
Since G.J.T. Rebuilders failed to establish that the business closure was the result of serious business losses, the Supreme Court concluded that the respondents were entitled to separation pay. The Court outlined that separation pay must be calculated based on whichever is higher: one month's pay or one-half month's pay for every year of service, pursuant to the stipulations under Article 283 of the Labor Code.
Nominal Damages for Procedural Non-Compliance
Additionally, G.J.T. Rebuilders was found liable for nominal damages due to non-compliance with procedural requirements concerning notice of closure. The law mandates that employers provide written notice to employees and the Department of Labor and Employment at least one month prior to closure. The failure to comply resulted in the obligation to pay each respondent nominal damages amounting to P10,000.00.
Attorney’s Fees
The Supreme Court concluded
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Case Overview
- This case involves a Petition for Review on Certiorari filed by G.J.T. Rebuilders Machine Shop and the Trillana spouses against the decision of the Court of Appeals which granted the petition of employees Ricardo Ambos, Russell Ambos, and Benjamin Putian.
- The primary issue revolves around the alleged serious business losses claimed by G.J.T. Rebuilders as the basis for the closure of its establishment and the non-payment of separation pay to the dismissed employees.
Background of the Case
- G.J.T. Rebuilders, a single proprietorship owned by Godofredo and Juliana Trillana, engaged in steel works and metal fabrication, employed three machinists: Ricardo Ambos, Russell Ambos, and Benjamin Putian.
- The business operated in the Far East Asia (FEA) Building in Mandaluyong City but was partially destroyed by a fire on September 8, 1996.
- Following the fire, the building owner issued a notice for tenants to vacate, which G.J.T. Rebuilders ignored, continuing operations until it officially closed on December 15, 1997.
- The Trillana spouses filed an Affidavit of Closure with the Department of Labor and Employment on February 16, 1998, and a sworn application to retire its business operations shortly thereafter.
Events Leading to the Legal Dispute
- After the closure, the employees filed a complaint for illegal dismissal, seeking separation pay and other benefits.
- G.J.T. Rebuilders contended that its closure was due to serious business losses stemming from the fire and subsequent decline in service demand.
- The Labor Arbiter initially ruled in favor of the employees, stating G.J.T. Rebuilders failed to prove the serious business losses claimed.