G.R. No. L-23010 July 9, 1971
H. ARONSON & CO., INC., THE PHOTO MATERIALS CO., INC. and MEDEL OFFICE MATERIALS & PAPER CO., INC., petitioners, vs. ASSOCIATED LABOR UNION, ALEJANDRO CENIZA, LORENZO SOLON, LUCAS ATIENZA, HOSPICIO CASTILLO, EULOGIO GERNALE, PETRONIO BUSTAMANTE, CATALINA ARANAS, MARIA CABATINGAN and THE COURT OF INDUSTRIAL RELATIONS, respondents.

FACTS

Petitioners appeal from a Court of Industrial Relations (CIR) order finding them guilty of unfair labor practice and ordering the reinstatement of eight union-member employees with back wages. H. Aronson & Co., Inc., a family-controlled corporation, had a history of labor disputes with respondent Associated Labor Union. After union members staged successful strikes in 1958, a collective bargaining agreement was executed in 1959, granting significant benefits. Subsequently, on January 6, 1960, Aronson notified all employees of their termination effective July 31, 1961, citing poor business and a plan to dissolve the corporation. The company then amended its articles to shorten its corporate life to expire precisely on July 31, 1961.
Shortly thereafter, two new corporations, Photo Materials Co., Inc. and Medel Office Materials & Paper Co., Inc., were incorporated. Their combined authorized capital matched Aronson’s, and their business purposes were identical to the divisions of Aronson’s former business. The individual respondents, all union members, were made to stop work on July 15, 1961, ahead of the stated termination date. Non-union employees, however, were retained until July 31 and were subsequently absorbed by the two new corporations, which began operations using Aronson’s former stock, equipment, and business premises.

ISSUE

Whether the petitioners committed unfair labor practice by dismissing the individual respondents and subsequently transferring business operations to newly formed corporations to avoid dealing with the union.

RULING

Yes. The Supreme Court affirmed the CIR’s finding of unfair labor practice. The legal logic centers on the doctrine against circumventing labor obligations through the guise of corporate dissolution and reorganization. The Court scrutinized the sequence and nature of the corporate actions. The timing was highly suspect: the termination notices and corporate life amendment preceded the formation of the new entities, which had identical business purposes and capital. Crucially, the new corporations absorbed the non-union workforce and assets of the old company, continuing its business operations seamlessly.
The Court rejected the defense of business losses due to import quota reductions. If this were the true cause, it would be illogical for the same controlling family to immediately establish new companies in the same line of business. The evidence established that the real cause for terminating the union members was their membership and activities with the Associated Labor Union, particularly their success in securing a collective bargaining agreement. The act of dissolving the original corporation and creating alter ego corporations to continue the business while discarding union employees constitutes a blatant interference with the right to self-organization, falling under unfair labor practices as defined by Republic Act No. 875 . The CIR correctly ordered reinstatement with back wages to remedy this discriminatory dismissal.