G.R. No. 80352 September 29, 1989
BENJAMIN G. INDINO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), and DASMARIÑAS INDUSTRIAL & STEELWORKS CORPORATION and/or PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (PNCC), Formerly CONSTRUCTION DEVELOPMENT CORPORATION OF THE PHILIPPINES (CDCP), respondents.

FACTS

Petitioner Benjamin Indino was employed by PNCC in 1974 and transferred to its sister corporation, Dasmariñas Industrial & Steelworks Corporation (DISC), in 1981. On July 27, 1983, while on leave, he received a termination notice from DISC citing business reverses and retrenchment. Indino filed an illegal dismissal complaint, but the parties entered into a compromise agreement on September 30, 1983. Under this agreement, Indino agreed to return to work on October 1, 1983, at any project or office assigned, and to accept 50% of back wages. Both parties moved for the dismissal of the case, mutually foregoing any further claims. Indino was reinstated as Project Administrative Officer III at DISC’s central office.
Barely two months after his reinstatement, on December 14, 1983, DISC issued another termination notice to Indino, again citing project completion and economic difficulties as grounds for retrenchment. He received separation pay but filed a new complaint for illegal dismissal in 1985, arguing the termination violated the compromise agreement and was in bad faith. The Labor Arbiter and the NLRC dismissed his complaint, upholding the termination as a valid exercise of management prerogative due to alleged business losses.

ISSUE

Was the dismissal of petitioner Benjamin Indino a valid retrenchment, or was it an illegal dismissal executed in bad faith?

RULING

The Supreme Court granted the petition, annulling the NLRC resolutions and declaring the dismissal illegal. The legal logic centered on the failure of DISC to prove the factual and legal requisites for a valid retrenchment. The Court emphasized that retrenchment, as an authorized cause for termination under Article 283 of the Labor Code, requires clear and convincing evidence of actual or imminent substantial business losses. DISC merely made general allegations of “business reverses” and “critical economic situation” without presenting audited financial statements, profit and loss accounts, or other documentary evidence to substantiate the claimed necessity for downsizing.
Furthermore, the Court found the termination was executed in bad faith, constituting a circumvention of the binding compromise agreement. The second termination notice, issued a mere two months after reinstatement under a settlement that foreclosed claims from the first dismissal, used virtually identical language as the first. This timing and repetition indicated a deliberate scheme to dismiss Indino, not a bona fide retrenchment. The compromise agreement was a final settlement that restored the employer-employee relationship; DISC could not unilaterally nullify it by dismissing Indino shortly after without just cause. The Court also pierced the corporate veil between DISC and PNCC, noting Indino’s continuous service from 1974, to prevent injustice and ensure full labor benefits. DISC was ordered to reinstate Indino without loss of seniority and pay three years of back wages.