G.R. No. 190001 ; March 23, 2011
GENUINO ICE COMPANY, INC., HECTOR S. GENUINO and EDGAR A. CARRIAGA, Petitioners, vs. ERIC Y. LAVA and EDDIE BOY SODELA, Respondents.

FACTS

Petitioner Genuino Ice Company, Inc. (GICI) hired respondents Eric Y. Lava and Eddie Boy Sodela as ice plant machine operators. In March 2005, due to a continuous decline in demand for ice products, GICI partially shut down its plant facilities and implemented a work rotation/reduction of workdays program affecting seven workers, including the respondents. On September 30, 2005, GICI issued a memorandum deleting the respondents’ names from the work schedule, effectively barring them from the company premises. The respondents filed a complaint for illegal dismissal.
Petitioners alleged that the respondents were contractual employees under the control of contractors VICAR and MORENO, thus no employer-employee relationship existed with GICI. They also argued that the partial shutdown excused them from the 30-day notice requirement for termination. The Labor Arbiter (LA) found that the respondents were GICI’s employees, noting VICAR’s role was akin to labor-only contracting, making GICI solidarily liable. The LA ruled the retrenchment was valid due to the permanent nature of the shutdown but procedurally defective, awarding separation pay at one-half month salary per year of service.
The National Labor Relations Commission (NLRC) reversed the LA, finding illegal dismissal. The Court of Appeals (CA) affirmed the NLRC, noting petitioners failed to prove actual or impending financial losses to justify retrenchment and presented no supporting documentary evidence. The CA also found no basis to hold GICI’s president, Hector S. Genuino, solidarily liable. Petitioners elevated the case to the Supreme Court solely on the issue of the validity of the retrenchment.

ISSUE

Whether the retrenchment of the respondents was valid, thereby constituting a valid termination of their employment.

RULING

The Supreme Court dismissed the petition for lack of merit, affirming the CA and NLRC with modification.
The Court held that for a valid retrenchment under Article 283 of the Labor Code, three requisites must be met: (1) proof that retrenchment is necessary to prevent actual or impending losses; (2) service of written notices to employees and the DOLE at least one month prior; and (3) payment of separation pay equivalent to one month pay or at least one-half month pay per year of service, whichever is higher.
The Court found no reason to reverse the NLRC and CA findings that petitioners failed to present any documentary evidence to substantiate the claimed business losses or to show GICI’s financial condition before and during the retrenchment. In the absence of grave abuse of discretion, these factual findings are final.
The CA correctly affirmed the award of full backwages and separation pay in lieu of reinstatement, as the respondents were illegally dismissed and their positions no longer existed. However, the Court modified the CA decision to specify the correct computation: separation pay shall be computed at one month pay for every year of service, with a fraction of at least six months considered one whole year. Backwages shall be computed from the date of termination (September 30, 2005) until the finality of the Supreme Court’s decision.
The dispositive portion awarded full backwages from September 30, 2005, until finality of the decision and separation pay computed from the respondents’ first day of employment up to the finality of the decision.