GR 148532; (April, 2004) (Digest)
G.R. No. 148532; April 14, 2004
EMCO PLYWOOD CORPORATION and JIMMY LIM, petitioners, vs. PERFERIO ABELGAS, et al., respondents.
FACTS
Petitioner EMCO Plywood Corporation, a wood processing company, informed the Department of Labor and Employment (DOLE) of its intention to retrench 104 workers due to alleged financial difficulties from lack of raw materials, machinery breakdown, low market demand, and the expiration of its sawmill permit. However, EMCO ultimately terminated 250 employees, including the respondents. The affected employees received separation pay and executed quitclaims.
The respondents filed a complaint for illegal dismissal. The Labor Arbiter dismissed the complaint, a decision affirmed by the National Labor Relations Commission (NLRC). The NLRC ruled that the retrenchment was valid, accepting EMCO’s claim of financial losses. The respondents elevated the case to the Court of Appeals via a petition for certiorari.
ISSUE
Was the retrenchment of the respondents by EMCO Plywood Corporation valid and justified?
RULING
No, the retrenchment was illegal. The Supreme Court affirmed the Court of Appeals’ decision, which had reversed the NLRC. For retrenchment to be a valid exercise of management prerogative to prevent losses, the employer must prove by sufficient and convincing evidence that the losses are substantial, serious, actual, and real. The employer must also demonstrate that the retrenchment was reasonably necessary and likely to be effective in preventing the expected losses, and that it was done in good faith.
The Court found that EMCO failed to discharge this burden of proof. The financial statements it presented for 1991 and 1992 showed net profits, not losses. An alleged downturn in 1993 was not substantiated by audited financial statements or other independent evidence. The claim of imminent losses was based on a bare assertion, not on objective and proven facts. Furthermore, the company retrenched more than twice the number of workers it had originally notified the DOLE about, casting doubt on the good faith and necessity of the measure. Consequently, the termination of the respondents constituted illegal dismissal. The Court ordered their reinstatement with full backwages. Where reinstatement was no longer feasible, EMCO was ordered to pay separation pay in addition to backwages, with amounts received under the quitclaims to be deducted therefrom.