G.R. Nos. 164813 & 174590; August 14, 2009
LOWE, INC., MARIA ELIZABETH (“MARILES”) L. GUSTILO, and RAUL M. CASTRO, Petitioners, vs. COURT OF APPEALS and IRMA M. MUTUC, Respondents.

FACTS

Petitioner Lowe, Inc., an advertising agency, hired respondent Irma M. Mutuc as a Creative Director on June 23, 2000, and she attained regular status on February 26, 2001. In 2001, citing a reduction in clients’ advertising budgets, Lowe implemented a redundancy program and terminated Mutuc’s services on October 31, 2001. Mutuc filed a complaint for illegal dismissal. The Labor Arbiter dismissed the complaint, ruling the dismissal was valid due to redundancy and awarding separation pay. The National Labor Relations Commission (NLRC) reversed this decision, declaring the dismissal illegal and awarding backwages and moral damages.
Both parties elevated the case to the Court of Appeals via separate petitions. In CA-G.R. SP No. 80531, Lowe challenged the finding of illegal dismissal and the personal liability of its officers, Gustilo and Castro. The Court of Appeals affirmed the NLRC. In CA-G.R. SP No. 80473, Mutuc contested the NLRC’s computation of backwages only up to the promulgation of its decision. The Court of Appeals granted Mutuc’s petition, modifying the award to compute backwages up to the finality of its decision.

ISSUE

The core issues were: (1) whether Mutuc was illegally dismissed; (2) whether corporate officers Gustilo and Castro could be held personally liable; and (3) the proper period for computing backwages.

RULING

The Supreme Court denied the petitions and affirmed the Court of Appeals’ decisions. On the first issue, the Court found the dismissal illegal. While redundancy is an authorized cause for termination, the employer bears the burden of proving it was done in good faith. Here, Lowe failed to substantiate its claim of a business downturn necessitating redundancy. The criteria of “seniority and efficiency” used to select Mutuc were not objectively applied, and the company continued to hire for similar positions after her termination, indicating the dismissal was a pretext. Thus, the termination was not a bona fide redundancy but an illegal dismissal.
On the second issue, the Court held corporate officers Gustilo and Castro personally liable for the monetary awards. Personal liability of corporate officers attaches when they act with malice or in bad faith in effecting an employee’s dismissal. The finding that the redundancy was not implemented in good faith and was a subterfuge for dismissal made the officers who orchestrated it solidarily liable with the corporation for the resulting damages to Mutuc.
Regarding the third issue, the Court upheld the proper computation of backwages. For an illegally dismissed employee, backwages are awarded from the time compensation was withheld until the finality of the judgment. The Court of Appeals correctly modified the NLRC’s award to compute backwages from the date of dismissal up to the finality of its decision, in accordance with settled jurisprudence. All other awards by the NLRC and the appellate court were sustained.