G.R. No. 146225 , November 25, 2004
NASIPIT LUMBER COMPANY and PHILIPPINE WALLBOARD CORPORATION, petitioners, vs. NATIONAL ORGANIZATION OF WORKINGMEN (NOWM) AND ITS 30 MEMBERS, respondents.

FACTS

Petitioners Nasipit Lumber Company and its affiliate, Philippine Wallboard Corporation, employed the thirty individual respondents who were members of respondent union NOWM. The union, through its mother federation WAWU-ALU-TUCP, issued a resolution stating that its members would not report for work starting February 19, 1996, due to the company’s failure to pay accrued benefits, including health bonuses, 13th month pay, and backlog payrolls amounting to P1.8 million. A DOLE inspection subsequently found the company in violation of various labor standards.
The petitioners claimed they had suspended operations due to severe financial losses incurred in 1994 and 1995, as shown in consolidated statements of income and expenses filed with the BIR. They argued that the respondents’ employment was terminated due to this bona fide suspension of operations. The respondents, however, filed a complaint for illegal cessation of operations and non-payment of separation pay and other benefits.

ISSUE

Whether the cessation of the petitioners’ business operations was bona fide, thereby justifying the termination of the respondents’ employment without liability for separation pay.

RULING

The Supreme Court ruled that the cessation was not bona fide and affirmed the award of separation pay. The legal logic centered on the burden of proof for an employer claiming suspension of operations due to serious business losses. The Court found the petitioners’ evidence insufficient. The consolidated financial statements submitted to the BIR were deemed self-serving and lacked corroborating evidence. The petitioners’ actions contradicted their claim of dire financial straits; they continued to employ workers at minimal wages and, significantly, granted financial assistance to employees in February 1996, after the alleged suspension had begun. Furthermore, the petitioners failed to provide the required notice to employees regarding the suspension. These factors collectively demonstrated that the purported suspension was not motivated by genuine financial necessity but was a pretext. Consequently, the termination of the respondents’ employment was unjustified. The Court modified the appellate decision, ordering the petitioners to pay, jointly and severally, each respondent separation pay equivalent to one-half month’s pay for every year of service.