G.R. No. L-27880 September 30, 1971
PHILIPPINE ENGINEERING CORPORATION, petitioner, vs. COURT OF INDUSTRIAL RELATIONS and FREE LABOR UNION, respondents.

FACTS

Petitioner Philippine Engineering Corporation (PEC) had a collective bargaining agreement (CBA) with respondent Free Labor Union, effective until December 31, 1963. After its expiry, the union repeatedly sought to negotiate a new CBA, but PEC’s management consistently deferred discussions. On February 1, 1965, PEC notified employees at its Raon Street machine shop of their impending termination, though assuring them through a Department of Labor conciliator that the shop was not closing. Subsequently, on May 31, 1965, PEC closed the Raon shop, dismantled and transferred machinery, and dismissed about 57 union members (70% of the union). It retained a smaller group, including union officers, for maintenance work. PEC then began selling its machinery and subcontracting machine jobs to other shops while continuing to hire new employees.

ISSUE

Whether the closure of the machine shop and the dismissal of the union members constituted an unfair labor practice under Republic Act No. 875 .

RULING

Yes, the Court affirmed the CIR’s finding of unfair labor practice. The legal logic centered on the distinction between a bona fide closure due to serious financial losses and a closure intended to circumvent the union’s right to collective bargaining. The Court held that the burden of proof to establish a legitimate business closure rests on the employer. PEC failed to discharge this burden. The evidence showed the closure was not due to genuine financial necessity but was motivated by anti-union sentiment. Critical facts undermining PEC’s claim included its continued operation by subcontracting work, its ongoing hiring of new personnel, and its pattern of evading CBA negotiations prior to the dismissals. The retention of union leaders while mass-dismissing rank-and-file members further indicated discriminatory intent. Consequently, the dismissals violated Section 4(a)(1) and (4) of R.A. 875 as acts interfering with the right to self-organization. The CIR’s order to cease and desist and to pay three months’ back wages was upheld. However, the order for reinstatement was eliminated, as the Court found the closure of the specific shop to be a fait accompli, making reinstatement to the former positions impracticable. The CIR correctly exercised jurisdiction as the complaint alleged unfair labor practices.