G.R. No. L-18418 and L-18419; November 29, 1962
Mindanao Motor Line, Inc., et al., petitioners, vs. Hon. Court of Industrial Relations, et al., respondents. Aboitiz & Co., Inc., petitioner, vs. Hon. Court of Industrial Relations, et al., respondents.

FACTS

The Mindanao Federation of Labor and certain laid-off employees filed an unfair labor practice complaint against Mindanao Motor Line, Inc., its managers Jesus Moraza and Enrique Ponce, and Aboitiz & Co., Inc. The complaint alleged interference with the employees’ right to organize. The respondents claimed the layoffs on February 1, 1955, were due to heavy financial losses necessitating the suspension of a specific bus line, and that the dismissed employees received proper notice and separation pay. They also asserted that Mindanao Motor Line was a separate corporate entity from Aboitiz & Co.
The Court of Industrial Relations found the respondents guilty of unfair labor practice. In its order, it initially directed only Mindanao Motor Line to pay back wages to the employees from their dismissal date until June 10, 1958, the day before the line’s certificate of public convenience was cancelled, without ordering reinstatement. Subsequently, the court corrected its order to hold all respondents—Mindanao Motor Line, Aboitiz & Co., and the individual managers—jointly and severally liable for the back wages.

ISSUE

The primary issues were: (1) whether an award of back wages is legally permissible in the absence of an order for reinstatement; and (2) whether the corporate officers and the affiliated company, Aboitiz & Co., could be held solidarily liable for the payment.

RULING

The Supreme Court affirmed the award of back wages but modified the liability of the parties. On the first issue, the Court ruled that the payment of back wages does not absolutely presuppose reinstatement. While back wages typically accompany a reinstatement order, it is not an inflexible rule. Where an employer is found guilty of unfair labor practice, the illegally dismissed employees are entitled to compensation for the wages lost during the period of illegal separation, even if reinstatement is rendered impossible—as in this case, where the business operation had been suspended and its franchise cancelled. The financial consequence is a proper remedy for the unfair labor practice.
On the second issue, the Court held that the individual managers, Enrique Ponce and Jesus Moraza, should not be held solidarily liable. They were corporate agents who acted within the scope of their authority as resident manager and general manager, respectively. In the absence of evidence showing they acted in bad faith or with negligence, liability should attach to the corporate employer, not its officers. However, the Court sustained the solidary liability of Aboitiz & Co., Inc. with Mindanao Motor Line. The evidence demonstrated that Aboitiz & Co. exercised control and supervision over the management and operations of Mindanao Motor Line, provided its funds, shared the same business address, and its manager recommended the line suspension that led to the layoffs. This control justified piercing the veil of corporate fiction to prevent injustice. The award was further modified to deduct any earnings the employees had from other employment during their separation.