G.R. No. 204782 , September 18, 2019
GENUINO AGRO-INDUSTRIAL DEVELOPMENT CORPORATION, PETITIONER, VS. ARMANDO G. ROMANO, JAY A. CABRERA AND MOISES V. SARMIENTO, RESPONDENTS.

FACTS

Respondents Armando G. Romano, Jay A. Cabrera, and Moises V. Sarmiento worked as brine men at an ice plant in Turbina, Calamba, Laguna. Romano was hired through Vicar General Contractor and Management Services (Vicar), while Cabrera and Sarmiento were hired through L.C. Moreno General Contractor and Management Services. Vicar later became the sole agency supplying employees to the plant. In September 2004, a work schedule was implemented where each worker would not report for work for 15 consecutive days within a 90-day cycle. When Romano reported back on June 25, 2005, he was informed his employment was terminated. Cabrera and Sarmiento were similarly dismissed on July 10, 2005. The respondents filed a complaint for illegal dismissal against Genuino Ice Company Inc. and Vicar. Genuino Ice claimed the respondents were employees of its affiliate, petitioner Genuino Agro-Industrial Development Corporation, and were contractual employees of Vicar and L.C. Moreno deployed to the petitioner’s ice plant. The petitioner asserted it shut down its block ice production facilities due to a decline in demand, leading to a reduction of workers from six to two, which affected the respondents. The respondents amended their complaint to implead the petitioner. The Labor Arbiter ruled the respondents were regular employees of the petitioner, performing necessary functions for several years (since 1988 for Romano and Sarmiento, and 1992 for Cabrera), and found Vicar to be a labor-only contractor. The dismissal was declared illegal as the petitioner failed to prove the closure was for an authorized cause. The Labor Arbiter ordered reinstatement and payment of backwages. The NLRC affirmed the decision. The petitioner argued before the Court of Appeals that the respondents were retrenched due to a partial closure, a supervening event warranting modification of the award to separation pay instead of reinstatement and backwages, and that it was only liable for nominal damages due to lack of proper notice. The CA found no grave abuse of discretion in the NLRC’s decision, noting the petitioner failed to prove financial losses or compliance with procedural requirements for retrenchment and failed to sufficiently prove the closure of the department or lack of equivalent positions.

ISSUE

1. Whether the Court of Appeals erred in affirming the NLRC’s decision that the respondents were illegally dismissed and entitled to reinstatement and full backwages, instead of finding valid retrenchment and limiting liability to nominal damages or separation pay.

RULING

The Supreme Court denied the petition and affirmed the CA decision. The Court held that for a dismissal due to retrenchment to be valid, the employer must prove: (a) the retrenchment is necessary to prevent losses; (b) written notice to employees and the DOLE at least one month before effectivity; (c) payment of separation pay; (d) good faith in implementing retrenchment; and (e) fair and reasonable criteria in selecting employees to be dismissed. The petitioner failed to discharge this burden. It did not provide substantial evidence, such as audited financial statements, to prove actual or imminent substantial losses justifying retrenchment. It also failed to serve the required written notices to the respondents and the DOLE. The claim of partial closure was unsubstantiated. The dismissal was therefore illegal. The Court also rejected the argument that liability should be limited to nominal damages, as this applies only where the dismissal is for a just or authorized cause but procedural due process was not observed. Here, the dismissal was not for a just or authorized cause. The award of reinstatement and full backwages was proper. The petitioner’s claim of supervening events (closure of the plant) was not proven; it failed to show the department where respondents worked had closed or that no equivalent positions existed in its other branches. The respondents remained entitled to reinstatement. The Court modified the award to include separation pay in lieu of reinstatement, as the respondents had expressed willingness to receive it, and ordered the monetary awards to earn legal interest.