G.R. No. 155098 September 16, 2005
CAPITOL MEDICAL CENTER, INC. and DR. THELMA NAVARETTE-CLEMENTE, Petitioners, vs. DR. CESAR E. MERIS, Respondent.

FACTS

Petitioner Capitol Medical Center hired respondent Dr. Cesar Meris in 1974 as Chief of its Industrial Service Unit (ISU), which provided medical services to hospital employees and external corporate clients. On March 31, 1992, Dr. Meris received a notice from the hospital president, Dr. Thelma Navarette-Clemente, advising him of the management’s decision to abolish the ISU effective April 30, 1992, citing the almost extinct demand for its services due to the prevailing trend of companies allocating health care to HMOs. Consequently, his position was terminated, though he was offered to return to private practice as a consultant.
Dr. Meris filed a complaint for illegal dismissal, contending the closure was a mere ploy for his ouster after he refused to retire, and that the ISU was not truly abolished as it continued operations under Dr. Clemente. The Labor Arbiter and the NLRC upheld the closure as a valid exercise of management prerogative, ordering separation pay. The Court of Appeals reversed, finding the dismissal illegal.

ISSUE

Whether the termination of Dr. Meris, due to the alleged closure of the ISU, was valid and complied with legal requirements for dismissal.

RULING

The Supreme Court affirmed the Court of Appeals and declared the dismissal illegal. The closure of a department as a ground for dismissal under Article 283 of the Labor Code requires that the cessation of operations must be genuine and not a mere subterfuge to circumvent the employee’s right to security of tenure. The Court found that Capitol failed to substantiate its claim of substantial business losses or a legitimate closure. The evidence, including income statements, showed a continuous increase in the ISU’s revenue in the years preceding the dismissal. The purported “Analysis of Income and Expenses” presented by management was prepared only after the dismissal and contained irregular entries, thus failing to meet the standard of sufficient and adequate proof.
Furthermore, the Court ruled that Capitol did not comply with procedural due process. Article 283 mandates that the employer must serve a written notice on the worker and the Department of Labor and Employment at least one month before the intended date of termination. Capitol admitted it did not notify the DOLE. This procedural lapse, coupled with the substantive finding that the closure was not bona fide—as the ISU’s functions merely transferred to Dr. Clemente—invalidated the termination. Consequently, Dr. Meris was entitled to backwages, separation pay in lieu of reinstatement, and attorney’s fees. However, the awards for moral and exemplary damages were deleted for lack of proof of bad faith.