G.R. No. 187691 January 13, 2016
OLYMPIA HOUSING, INC., Petitioner, vs. ALLAN LAPASTORA and IRENE UBALUBAO, Respondents.

FACTS

The case stemmed from a complaint for illegal dismissal, backwages, benefits, and regularization filed by respondents Allan Lapastora and Irene Ubalubao against petitioner Olympia Housing, Inc. (OHI), the manager of Olympia Executive Residences. The complaint also impleaded Felix Limcaoco and Fast Manpower and Allied Services Company, Inc. (Fast Manpower). Lapastora and Ubalubao alleged they worked as room attendants for OHI from March 1995 and June 1997, respectively, until they were placed on floating status on February 24, 2000, via a memorandum from Fast Manpower. They claimed OHI was their direct employer, paying their salaries and exercising control through time cards, disciplinary reports, and room assignments. They were dismissed after petitioning for regularization and being implicated, without evidence, in a theft case.
OHI and Limcaoco claimed Lapastora and Ubalubao were employees of Fast Manpower, an independent contractor with which OHI had a service contract for room attendants. Fast Manpower supported this, stating it deployed the respondents and placed them on floating status for violating house rules, not dismissing them.
On August 22, 2000, a memorandum of agreement transferred the management of the condominium hotel from OHI to HSAI-Raintree, Inc. OHI subsequently informed the DOLE of its cessation of operations and issued termination notices to its employees. This led to a separate illegal dismissal case (Ocampo v. OHI) by other employees, which was dismissed by the NLRC, a ruling eventually affirmed by the Supreme Court.
The Labor Arbiter (LA) ruled that Lapastora and Ubalubao were regular employees of OHI, illegally dismissed, and ordered their reinstatement with full backwages and benefits. The NLRC affirmed this decision. The Court of Appeals also dismissed OHI’s petition, affirming the NLRC. OHI filed the instant petition, arguing that the cessation of its operations was a supervening event limiting liability and that the doctrine of stare decisis based on Ocampo v. OHI should apply. During the proceedings, respondent Ubalubao filed a Motion to Dismiss/Withdraw her complaint, which was granted.

ISSUE

Whether the Court of Appeals erred in affirming the NLRC’s decision which held that: (1) an employer-employee relationship existed between OHI and respondents; (2) respondents were illegally dismissed; and (3) OHI’s cessation of operations was not a supervening event that would negate the award of reinstatement and full backwages.

RULING

The Supreme Court denied the petition and affirmed the CA decision with modification regarding the awards to the remaining respondent, Allan Lapastora.
1. On the existence of an employer-employee relationship: The Court affirmed the findings of the LA, NLRC, and CA that OHI was the employer of Lapastora and Ubalubao. The four-fold test for employment (selection and engagement, payment of wages, power of dismissal, and power of control) was satisfied. Evidence showed OHI exercised control through its supervisors, issued time cards and disciplinary reports, and its housekeeping coordinator attested to OHI’s role in selecting employees and paying their salaries. The contract between OHI and Fast Manpower was deemed a scheme to circumvent labor laws, and Fast Manpower was found not to be a legitimate independent contractor as it did not carry on an independent business or undertake the performance of its contract according to its own manner and method.
2. On the legality of dismissal: The Court upheld the finding of illegal dismissal. OHI failed to prove any valid or authorized cause for terminating Lapastora and Ubalubao. Their placement on “floating status” for over six months was tantamount to constructive dismissal. The alleged theft incident was not substantiated as a just cause for termination.
3. On the effect of OHI’s cessation of operations: The Court ruled that OHI’s closure of business on October 1, 2000, was a supervening event that rendered reinstatement impossible. However, this event occurred after the illegal dismissal in February 2000. Therefore, while reinstatement is no longer feasible, OHI’s liability for illegal dismissal is not extinguished. The closure merely converts the remedy from reinstatement to separation pay. The award of backwages is computed only from the date of illegal dismissal (February 24, 2000) until the date of business closure (October 1, 2000), not until actual reinstatement. The principle of stare decisis from Ocampo v. OHI does not apply because the facts and issues are distinct; Ocampo involved a challenge to the validity of the closure itself, while this case involves a prior illegal dismissal.
DISPOSITIVE PORTION:
The CA Decision was AFFIRMED with MODIFICATION. OHI is ORDERED to pay Allan Lapastora: (1) separation pay in lieu of reinstatement, computed from March 1995 to October 2000; (2) backwages computed from February 24, 2000 to October 1, 2000; (3) service incentive leave pay and 13th month pay; and (4) attorney’s fees. The case against Irene Ubalubao was dismissed based on her withdrawal.