G.R. No. 175345 - Payno vs. Orizon Trading Corp. and Orata Trading

Baltazar L. Payno was employed as an electrician by Orata Trading, a single proprietorship in the signboard and billboard advertising sector, starting on October 21, 1993.
He was later promoted to senior installer.
On April 11, 2000, Payno was informed that Orata Trading would cease operations and that Orizon Trading Corporation would take over.
Payno inquired about his employment status and separation pay, but was told that Orizon Trading would absorb Orata Trading's employees without any changes in salary or rank, requiring him to sign a new employment contract.

On May 4, 2000, Payno filed a complaint against Orizon Trading for separation pay due to Orata Trading's closure, although he continued working for Orizon.
On June 3, 2000, he was told he could not report for work unless he signed the new contract.
The general manager offered him P7,000.00 as separation pay, which he deemed insufficient given his seven years of service.
Payno subsequently filed an Amended Complaint on June 5, 2000, adding "illegal dismissal" as a cause of action.

The Labor Arbiter ruled in favor of Payno on July 6, 2001, finding no evidence of resignation.
The Arbiter noted Payno's long tenure and the immediate filing of the complaint contradicted claims of resignation.
Respondents failed to prove the reasons for Orata Trading's closure and were found guilty of constructively dismissing Payno.
Payno was awarded separation pay, back wages, moral damages, and attorney's fees.

Both parties appealed the Labor Arbiter's decision.
On December 15, 2004, the NLRC affirmed the finding of illegal dismissal but modified the award of damages and attorney's fees.
The NLRC included additional benefits in the back wages calculation and reduced the attorney's fees.

Respondents filed a petition for certiorari with the Court of Appeals, which ruled in their favor on July 18, 2006.
The CA found no basis for the illegal dismissal claim, asserting that Payno's continued employment and receipt of salary contradicted his claims.
The CA concluded that Payno had effectively resigned when his demand for a larger separation pay was not met.

Payno filed a petition with the Supreme Court, which examined the conflicting findings of the CA and labor tribunals.
The Supreme Court determined that the burden of proof lay with the employer to establish the validity of the dismissal.
The Court found no evidence of Payno's intent to resign, noting that filing a complaint for illegal dismissal was inconsistent with resignation.

The Supreme Court highlighted that under Article 283 of the Labor C...continue reading