Case Summary (G.R. No. 224099)
Key Dates
• January 3, 2011 – Notice of employment termination (effective February 3, 2011) due to cessation of operations.
• October–November 2011 – Petitioners allege transfer of machines and client job orders to Pacific Carpet.
• September 29, 2014 – Labor Arbiter decision dismissing complaints for illegal dismissal and unfair labor practice.
• February 27, 2015 & March 31, 2015 – NLRC decision and resolution affirming Labor Arbiter.
• January 8, 2016 & April 11, 2016 – Court of Appeals decision and resolution dismissing petition for certiorari.
• June 21, 2017 – Supreme Court decision affirming CA.
Applicable Law
• 1987 Constitution (right to self-organization; policy of social justice)
• Labor Code of the Philippines (as amended):
– Article 298 (formerly Art. 283) – Authorized causes for termination (closure or cessation of operations).
– Article 259 (formerly Art. 248) – Unfair labor practices (interference with self-organization).
• Corporate Law – Separate juridical personality; alter ego doctrine; piercing the corporate veil.
Antecedents
Petitioners alleged that their January 3, 2011 termination, effective February 3, 2011, was a sham “closure” to transfer operations to Pacific Carpet. They pointed to transferred job orders and machinery removals. Phil Carpet contended it suffered continuous losses (P4.1 M in 2006; P53.28 M in 2008; P47.79 M in 2009; P26.59 M unaudited loss by October 2010), prompting genuine cessation. It complied with one-month notice to DOLE and paid separation benefits, securing voluntary quitclaims.
Ruling of the Labor Arbiter
Dismissed complaints for illegal dismissal and unfair labor practice:
• Found bona fide cessation due to serious business losses, supported by audited statements.
• Noted compliance with procedural notice and payment of separation pay.
• Concluded absence of any union-related motive to terminate.
Ruling of the NLRC
Affirmed the Labor Arbiter (February 27, 2015 Decision; March 31, 2015 Resolution):
• Losses and bona fide closure established.
• Procedural requirements of closure met.
Ruling of the Court of Appeals
Dismissed petition for certiorari (January 8, 2016 Decision; April 11, 2016 Resolution):
• No bad faith in closure; no convincing proof of secret transfer of operations or assets to Pacific Carpet.
• Union members’ dismissal not unfair labor practice, given economic necessity.
• Separate corporate personality respected; sale of machines evidenced by invoices.
Issues
- Lawfulness of termination
- Whether termination constituted unfair labor practice
- Liability of Pacific Carpet for Phil Carpet’s obligations
- Validity and binding effect of petitioners’ quitclaims
Supreme Court Ruling
Lawful Cause for Termination
Under Article 298, an employer may terminate for bona fide closure or cessation of operations, provided:
- Written notice to employees and DOLE at least one month before closure;
- Closure must be bona fide and not meant to evade labor rights;
- Payment of separation pay (one month pay or one-half month pay per year of service).
Here, substantial evidence (audited financial statements) established continuous losses from 2007 to 2010. Phil Carpet gave proper notice, paid separation benefits, and genuinely ceased operations. Absent any misapprehension of facts, these findings stand.
Unfair Labor Practice
Article 259 prohibits acts that interfere with employees’ right to self-organization. The burden rests on petitioners to prove coercion or discriminatory motive. Good faith is presumed; allegations of “union busting” were unsupported by specific evidence of prohibited acts. Hence, no unfair labor practice.
Corporate Personality and Alter Ego Doctrine
A subsidiary’s separate legal personality is respected unless the corporate veil is used to perpetrate fraud, evade obligati
Case Syllabus (G.R. No. 224099)
Facts (Antecedents)
- Petitioners were regular employees of Philippine Carpet Manufacturing Corporation (Phil Carpet).
- On January 3, 2011, Phil Carpet notified them of employment termination effective February 3, 2011, citing cessation of operations due to serious business losses.
- Petitioners alleged the “closure” was a pretense to transfer job orders and machinery to Pacific Carpet Manufacturing Corporation (Pacific Carpet), Phil Carpet’s wholly owned subsidiary.
- Evidence of transfer: petitioners claimed client job orders moved to Pacific and machines relocated between October–November 2011.
- Phil Carpet’s defense: global recession, stiffer competition, market changes caused continuous losses—P4.1M (2006), P12.8M (2007), P53.28M (2008), P47.79M (2009); unaudited losses of P26.59M by October 2010.
- Cost-cutting measures since 2007 included voluntary redundancy, early retirement, and closure of the car-carpet division.
- Production capacity fell from about 6,000 sqm/month (2002) to 350 sqm/month (2009–2010).
- Board approved cessation of manufacturing; notices served to DOLE and employees at least one month prior; separation pay and individual quitclaims executed before DOLE officials.
Procedural History
- Petitioners filed five consolidated complaints for illegal dismissal and unfair labor practice (NLRC NCR Case Nos. 01-00109-14; 01-00230-14; 01-00900-14; 01-01025-14; 01-01133-14).
- Labor Arbiter (LA) dismissed complaints on September 29, 2014.
- NLRC affirmed LA in Decision dated February 27, 2015; denied reconsideration on March 31, 2015.
- Court of Appeals (CA) dismissed petition for certiorari on January 8, 2016; denied reconsideration on April 11, 2016.
- Petitioners filed petition for review under Rule 45 before the Supreme Court (G.R. No. 224099, June 21, 2017).
Issues
- Whether petitioners were terminated for a lawful cause under Article 298 of the Labor Code.
- Whether the termination constituted unfair labor practice (ULP) against union officers/members.
- Whether Pacific Carpet can be held liable for Phil Carpet’s obligations (piercing the corporate veil).
- Whether the quitclaims executed by petitioners are valid and binding.
Labor Arbiter Ruling
- Found Phil C