G.R. No. 80352 September 29, 1989
BENJAMIN G. INDINO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), and DASMARIÑAS INDUSTRIAL & STEELWORKS CORPORATION and/or PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (PNCC), Formerly CONSTRUCTION DEVELOPMENT CORPORATION OF THE PHILIPPINES (CDCP), respondents.

FACTS

Petitioner Benjamin Indino was employed by PNCC in 1974 and transferred to its sister corporation, Dasmariñas Industrial & Steelworks Corporation (DISC), in 1981. On July 27, 1983, while on leave, he received a termination notice from DISC citing business reverses and retrenchment. Indino filed an illegal dismissal complaint, but the parties entered into a compromise agreement on September 30, 1983. Under this joint motion to dismiss, Indino agreed to return to work on October 1, 1983, at any project or office assigned, and accepted 50% of back wages. In return, both parties mutually waived all claims under the case.
Indino was reinstated on October 1, 1983. However, barely two months later, on December 14, 1983, DISC issued another termination notice to Indino, again citing the need to reduce workforce and operating costs due to completed projects and a critical economic situation. He received separation pay but subsequently filed a new complaint for illegal dismissal, arguing the termination violated the compromise agreement and was done in bad faith. The Labor Arbiter and the NLRC dismissed his complaint, upholding the termination as a valid exercise of management prerogative due to retrenchment.

ISSUE

Whether the respondent DISC validly terminated the petitioner’s employment on the ground of retrenchment.

RULING

The Supreme Court granted the petition, annulling the NLRC resolutions. The legal logic centered on the failure of DISC to prove the essential requisites for a valid retrenchment and the evident bad faith in terminating Indino shortly after a compromise agreement secured his reinstatement. For retrenchment to be justified, the employer must prove: (1) substantial losses imminently expected or already incurred; (2) the retrenchment is reasonably necessary to prevent further losses; and (3) fair and reasonable criteria were used in selecting employees to be dismissed. DISC failed to substantiate any actual or imminent substantial losses with clear and convincing evidence, such as audited financial statements.
Furthermore, the timing and circumstances indicated the termination was a pretext for illegal dismissal. The second termination notice, issued a mere two months after a settlement that guaranteed Indino’s reinstatement, used nearly identical language as the first, discredited notice. This rapid succession demonstrated a lack of good faith and an intent to circumvent the binding compromise agreement, which constituted the law between the parties. The Court also pierced the corporate veil between DISC and PNCC, ruling that the separate corporate fiction could not be used to defeat Indino’s rightful claims, as his employment history spanned both sister corporations. DISC was ordered to reinstate Indino with three years of back wages.