GR 154818; (August, 2005) (Digest)
G.R. No. 154818 . August 11, 2005.
STANLEY GARMENTS SPECIALIST AND/OR ANICIA CO, Petitioners, vs. GEORGE GOMEZ, ET AL., Respondents.
FACTS
Respondents were employees of petitioner Stanley Garments Specialist, a garment manufacturing company. On December 17, 1997, the company ceased operations, resulting in the termination of respondents’ services. Petitioners claimed the closure was due to serious business losses from an economic slowdown, and they notified the Department of Labor and Employment (DOLE) via a letter dated December 12, 1997. They later filed an Establishment Termination Report in January 1998. Respondents, however, alleged the dismissal was illegal, contending the company did not actually suffer losses and that petitioners subsequently set up a similar business, Webengton Garments Manufacturing, in Malabon City.
The Labor Arbiter initially ruled the termination was lawful. On appeal, the National Labor Relations Commission (NLRC) reversed the decision, declaring the dismissal illegal. The NLRC found petitioners failed to comply with the mandatory one-month prior written notice to each employee and, more critically, failed to substantiate their claim of serious financial losses with proof. The Court of Appeals affirmed the NLRC’s finding of illegal dismissal.
ISSUE
Whether the termination of respondents’ employment was legal.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals’ decision with modification. The termination was illegal. The legal logic is anchored on the employer’s dual burden under the Labor Code when terminating employment due to closure. First, the procedural requirement: the employer must serve a written notice to both the employee and the DOLE at least one month before the intended date of termination. Second, the substantive requirement: the employer bears the burden of proving that the closure was due to serious business losses or financial reverses.
Petitioners failed on both counts. Their December 12, 1997 letter to the DOLE, filed just days before the December 17 closure, did not constitute the required one-month prior notice to the employees themselves. More decisively, petitioners merely alleged grave financial losses but presented no competent evidence, such as audited financial statements, to prove such losses actually existed. Mere allegation is not evidence. The failure to prove a authorized cause for termination renders the dismissal illegal. Consequently, respondents are entitled to full backwages and other benefits. However, given the circumstances, the Court awarded separation pay in lieu of reinstatement, equivalent to one-half month’s pay for every year of service, plus full backwages.