GR 125887; (March, 1998) (Digest)
G.R. No. 125887 March 11, 1998
SOMERVILLE STAINLESS STEEL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION AND JERRY MACANDOG, REYNALDO MIRANDA, ROBERTO TAGALA, ET AL., respondents.
FACTS
Somerville Stainless Steel Corporation (SSSC), engaged in manufacturing stainless steel kitchen equipment, retrenched 23 employees on June 30, 1993. The company claimed the retrenchment was due to serious business losses caused by an economic and power crisis. The retrenched employees, many of whom were union officers, argued the dismissal was without just cause and in bad faith to bust their union, which was insisting on renegotiating their Collective Bargaining Agreement (CBA). The company had previously withheld CBA benefits starting March 16, 1993. The employees received retrenchment notices in their pay envelopes on May 31, 1994, but were barred from company premises starting June 16, 1993, leading them to stage a picket. The Labor Arbiter ruled in favor of the employees, ordering SSSC to pay backwages, damages, separation pay, and proportionate 13th-month pay. The National Labor Relations Commission (NLRC) affirmed the decision but deleted awards for employees who had withdrawn their complaints.
ISSUE
Was the retrenchment of the private respondents by Somerville Stainless Steel Corporation justified?
RULING
No, the retrenchment was not justified. The Supreme Court affirmed the NLRC’s decision, holding that SSSC failed to prove the retrenchment was necessary to prevent substantial losses. The company’s evidence, primarily unaudited financial statements showing a net loss, was insufficient and unconvincing. The Court emphasized that to justify retrenchment under Article 283 of the Labor Code, the employer must prove: (1) the losses are substantial and not merely de minimis; (2) the substantial loss is reasonably imminent; (3) retrenchment is reasonably necessary and likely to prevent the expected losses, and is a measure of last resort after exploring less drastic means; and (4) the losses are proved by sufficient and convincing evidence. SSSC did not meet this burden. The retrenchment was deemed illegal, and the company was ordered to pay the awarded backwages, separation pay, and proportionate 13th-month pay to the employees.