G.R. No. 197852 October 19, 2015
PASIG AGRICULTURAL DEVELOPMENT AND INDUSTRIAL SUPPLY CORPORATION and CELESTINO E. DAMIAN, Petitioners vs. WILSON NIEVAREZ, ALBERTO HALINA, GLORY VIC NUEVO, RICKY TORRES and CORNELIO BALLE, Respondents

FACTS

Petitioner Pasig Agricultural Development and Industrial Supply Corporation (PADISCOR) is a domestic corporation, with petitioner Celestino E. Damian as its general manager. Respondents are regular employees of PADISCOR. On June 17, 2006, PADISCOR sent notices to respondents Nievarez, Torres, and Nuevo, and later on September 5, 2006, to respondents Balle and Halina, informing them of a temporary lay-off from employment for six months. The company cited financial losses, lack of capital, and undesirable personnel misconduct as reasons. Separately, Nievarez was suspended for 15 days for insubordination. Consequently, respondents filed complaints for illegal suspension, illegal lay-off, non-payment of service incentive leave and paternity leave, damages, and attorney’s fees. The Labor Arbiter dismissed the complaints for illegal lay-off and illegal suspension but awarded service incentive leave pay. The National Labor Relations Commission (NLRC) affirmed this decision. The Court of Appeals, however, modified the NLRC’s resolutions, declaring the temporary lay-off illegal due to petitioners’ failure to substantiate financial losses with convincing evidence like financial statements, and remanded the case for computation of backwages.

ISSUE

Whether the Court of Appeals erred in ruling that the temporary lay-off of respondents was illegal due to petitioners’ failure to present financial statements to prove financial losses.

RULING

The Supreme Court denied the petition, affirming the Court of Appeals’ ruling. The Court held that while a temporary lay-off not exceeding six months, as analogously governed by Article 286 (now Article 301) of the Labor Code, is a management prerogative, the employer must still substantiate the claimed economic or business reasons with sufficient and convincing evidence. In this case, PADISCOR failed to provide adequate proof, such as audited financial statements, to support its allegation of financial losses necessitating the lay-off. Mere allegations and the submission of lay-off notices and termination reports to the DOLE were insufficient. Consequently, the temporary lay-off was declared illegal, and the remand to the Labor Arbiter for computation of backwages was proper. The Court emphasized that the burden of proving the validity of the lay-off rests on the employer.