G.R. No. 112661 . May 30, 2001.
SIMEON DE LEON, ET AL., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC), FORTUNE TOBACCO CORPORATION and/or MAGNUM INTEGRATED SERVICES, INC. (formerly FORTUNE INTEGRATED SERVICES, INC.), respondents.

FACTS

The petitioners were security guards employed by Fortune Integrated Services, Inc. (FISI), a corporation providing security services exclusively to Fortune Tobacco Corporation (FTC) and other companies within the Lucio Tan group. On February 1, 1991, the incorporators and stockholders of FISI sold all their shares to a new group of stockholders, who subsequently amended the Articles of Incorporation to change the corporate name to Magnum Integrated Services, Inc. (MISI). Shortly thereafter, on October 15, 1991, FTC terminated its security services contract with FISI/MISI. This termination led to the displacement of 582 security guards, including the petitioners. FTC immediately engaged two other security agencies to replace them.
During this period, the Fortune Tobacco Labor Union, which included the petitioners, became active and sent a notice of strike to FISI/MISI. The petitioners subsequently filed a complaint for illegal dismissal, unfair labor practice, and refund of cash bond before the NLRC. The Labor Arbiter ruled in favor of the petitioners, but the NLRC reversed this decision on appeal. The NLRC held that the termination was due to a lawful cessation of the service contract between FTC and FISI/MISI, and that no employer-employee relationship existed between the petitioners and FTC.

ISSUE

Whether the petitioners were illegally dismissed and whether the corporate veil of FISI/MISI should be pierced to hold Fortune Tobacco Corporation solidarily liable.

RULING

The Supreme Court granted the petition, reversed the NLRC resolutions, and held the petitioners were illegally dismissed. The Court applied the doctrine of piercing the corporate veil, finding that FISI was a mere labor-only contractor and an instrumentality of FTC. The records established that FISI and FTC shared the same owners and business address, and FISI operated solely to provide security services to FTC and its affiliated companies. The purported sale of shares and change of corporate name to MISI was deemed a scheme to terminate the security guards and bust their newly organized union, which had begun demanding compliance with labor standards. This maneuver constituted an unfair labor practice aimed at interfering with the employees’ right to self-organization.
Consequently, FTC could not hide behind the separate corporate personality of FISI/MISI to evade liability. The termination of the service contract and the subsequent dismissal of the petitioners were declared illegal. Under Article 279 of the Labor Code, illegally dismissed employees are entitled to reinstatement without loss of seniority rights and full backwages. Where reinstatement is no longer feasible, separation pay must be awarded in lieu thereof. The Court ordered respondents to pay the petitioners full backwages and to reinstate them, or alternatively, to award separation pay.