G.R. No. 191475 ; December 11, 2013
PHILIPPINE CARPET MANUFACTURING CORPORATION, et al., Petitioners, vs. IGNACIO B. TAGYAMON, et al., Respondents.

FACTS

Petitioner Philippine Carpet Manufacturing Corporation (PCMC) terminated the employment of respondents, who were regular employees, on the ground of retrenchment due to a purported slump in market demand. Some respondents received a formal retrenchment memorandum, while others, according to PCMC, availed of a voluntary retirement program and executed deeds of release, waiver, and quitclaim. The respondents filed complaints for illegal dismissal, arguing that the retrenchment was invalid, as PCMC was not actually suffering losses, a fact previously established in a related Supreme Court case involving the same company (the Philcea case). They contended that their acceptance of separation pay and signing of quitclaims did not bar their action.
PCMC defended the termination as a valid exercise of management prerogative due to an authorized cause. It also argued that the respondents were estopped from questioning their separation after accepting benefits and that their complaint was filed after an unreasonable delay, invoking the principle of laches. The Labor Arbiter and the National Labor Relations Commission dismissed the complaints, citing voluntary retirement, laches, and estoppel.

ISSUE

Whether the Court of Appeals erred in reversing the NLRC and finding the dismissal of the respondents to be illegal.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The Court held that the principle of laches was erroneously applied by the labor tribunals. An action for illegal dismissal prescribes in four years from the time of dismissal. Since the respondents filed their complaint within this prescriptive period, laches could not be invoked to bar their claim. The defense of laches requires a finding of unreasonable delay prejudicial to the other party, which was not present here as the action was timely.
On the substantive issue, the Court applied the doctrine of stare decisis, citing its prior ruling in the Philcea case involving the same company and substantially similar factual circumstances. In that case, it was established that PCMC was not suffering serious business losses or imminent financial reverses that would justify retrenchment. The purported grounds for termination in the present case were identical. Consequently, the retrenchment of the respondents who received the memorandum was illegal for lack of a valid authorized cause.
Regarding the respondents who allegedly voluntarily retired, the Court ruled that their deeds of release and quitclaim were executed under a mistaken belief that the company was losing money, a belief induced by PCMC’s misrepresentation. Such quitclaims, being based on a false premise, are void and do not constitute a waiver of their right to contest the legality of their separation. Therefore, all respondents were illegally dismissed and entitled to reinstatement with full backwages, or separation pay in lieu of reinstatement, and moral damages.