GR 151818; (October, 2005) (Digest)
G.R. No. 151818 October 14, 2005
ORIENTAL PETROLEUM and MINERALS CORPORATION, Petitioner, vs. MARCIANO V. FUENTES, et al., Respondents.
FACTS
Petitioner Oriental Petroleum and Minerals Corporation informed respondents of their termination due to a retrenchment program, offering separation pay per its retirement plan. Respondents sought clarification and requested additional benefits, including enhanced separation pay, bonuses, and leave conversions. Petitioner countered with a modified offer, which respondents found unsatisfactory. Consequently, respondents filed complaints for illegal retrenchment.
The Labor Arbiter ruled the retrenchment illegal, awarding full backwages, separation pay, and attorney’s fees. The National Labor Relations Commission (NLRC) reversed this, finding the retrenchment valid based on petitioner’s audited financial statements showing substantial net losses, decreased assets, and increased liabilities, which necessitated cost-cutting measures like asset sales. The Court of Appeals then reinstated the Labor Arbiter’s decision, annulling the NLRC ruling.
ISSUE
Was the retrenchment of respondents legally valid?
RULING
No, the retrenchment was illegal. For retrenchment to be a valid authorized cause for termination under Article 283 of the Labor Code, the employer must prove it is reasonably necessary and likely to prevent business losses. Proof of actual or imminent financial losses must be substantial, clear, and convincing. While petitioner presented audited financial statements indicating losses, the Supreme Court found these insufficient to justify retrenchment.
The financial documents, prepared months after the termination notices, failed to convincingly demonstrate that the losses were serious, actual, and imminent at the precise time respondents were dismissed. Retrenchment is a drastic measure requiring strict scrutiny of the employer’s claim of economic justification. The evidence did not meet the high standard of proof required to show that terminating the employees was an imperative necessity to prevent further losses. Therefore, the dismissal on the ground of retrenchment lacked legal basis. The Court affirmed the Court of Appeals decision reinstating the Labor Arbiter’s ruling, declaring the termination illegal and upholding the awards for backwages, separation pay in lieu of reinstatement, and attorney’s fees.