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 petitioners had a history of labor disputes, including a pending wage exemption case before the Supreme Court and a DOLE inspection finding multiple labor standard violations, such as underpayment of 13th month pay and unpaid wages. On February 18, 1996, the general membership of the certified bargaining unit issued a resolution stating that the thirty members would not report for work starting February 19, 1996, due to the company’s failure to pay accrued benefits. The petitioners subsequently claimed they had suspended operations due to alleged financial losses incurred in 1994 and 1995, as shown by Consolidated Statements of Income and Expenses filed with the BIR in April 1996.
The respondents filed a complaint for illegal cessation of operations and non-payment of separation pay. The Labor Arbiter dismissed the complaint, but the NLRC reversed, declaring the cessation illegal and awarding separation pay. The Court of Appeals affirmed the NLRC’s decision. The petitioners appealed to the Supreme Court, arguing that the cessation was due to serious business losses and that the respondents had abandoned their work through the union resolution.

ISSUE

Whether the cessation of the petitioners’ business operations was justified, thereby negating liability for separation pay.

RULING

The Supreme Court denied the petition and affirmed the CA decision with modification. The Court held that the petitioners failed to substantiate their claim of serious business losses justifying the suspension of operations. The purported evidence, Consolidated Statements of Income and Expenses filed belatedly in April 1996, were deemed barren of probative weight as they were unsupported by other financial documents. The petitioners’ conduct contradicted their claim of financial distress; they continued to employ workers and even granted financial assistance to employees in February 1996. Furthermore, the Court found no evidence that the petitioners formally notified employees of a suspension of operations. The union resolution was a reaction to unpaid benefits and did not constitute abandonment, as the employees’ absence was a concerted action based on a legitimate grievance. Consequently, the cessation was illegal. The petitioners were ordered to pay, jointly and severally, separation pay equivalent to one-half month’s pay for every year of service to each of the thirty individual respondents.