G.R. No. 193136. July 10, 2019.
ABS-CBN BROADCASTING CORPORATION, Petitioner, vs. HONORATO C. HILARIO, substituted by GLORIA Z. HILARIO, and DINDO B. BANTING, Respondents.

FACTS

Petitioner ABS-CBN Broadcasting Corporation engaged Creative Creatures, Inc. (CCI) as an independent contractor for set and prop design after abolishing its internal Scenic Department. CCI was incorporated by Edmund Ty together with several ABS-CBN officers. Respondents Honorato Hilario and Dindo Banting were regular employees of CCI. In 2003, Ty retired from CCI and subsequently formed a new company, Dream Weaver Visual Exponents, Inc. (DWVEI), which then secured the service contract from ABS-CBN. CCI’s board subsequently decided to cease operations and shorten its corporate term, citing Ty’s vital retirement and that the company was merely “breaking even.” Respondents were terminated and received separation pay and executed quitclaims.
Respondents filed an illegal dismissal complaint against both CCI and ABS-CBN. They argued the closure was in bad faith, a mere subterfuge to circumvent labor laws, as the same business operations continued through DWVEI, which was essentially a mere successor and alter ego of CCI, with ABS-CBN’s involvement.

ISSUE

Whether ABS-CBN Broadcasting Corporation should be held jointly and severally liable with CCI for the illegal dismissal of the respondents.

RULING

Yes, ABS-CBN is jointly and severally liable. The Supreme Court affirmed the findings of the Court of Appeals and the NLRC that the closure of CCI was not done in good faith. The legal logic rests on the doctrine of piercing the corporate veil and the principle that a closure to circumvent labor laws constitutes illegal dismissal. The Court found that CCI was not an independent contractor but was effectively a labor-only contractor for ABS-CBN, which exercised control over the employees’ work. More critically, the cessation of CCI’s operations was not genuine.
The formation of DWVEI by the same managing director, Ty, to perform identical services for ABS-CBN immediately after CCI’s closure demonstrates that the business did not cease but was merely continued under a different corporate guise. This scheme was designed to pre-terminate the employment of CCI’s regular employees and rehire them under a new entity without security of tenure. ABS-CBN, as the principal that benefited from the services and was intricately involved in the corporate setup of both CCI and its successor, cannot hide behind corporate separateness. The corporate veil is pierced to prevent injustice, making ABS-CBN solidarily liable with CCI for the illegal dismissal. The quitclaims executed by respondents, having been signed under circumstances where they had no choice following their illegal termination, are void. Thus, ABS-CBN and CCI are ordered to jointly pay full backwages, separation pay, and legal interest.