GR 80975; (June, 1989) (Digest)
G.R. No. 80975 June 22, 1989
RURAL BANK OF COTABATO, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FELISA G. EUGENIO, EDNA C. TAN and BESSIE A. BAJAR, respondents.
FACTS
Petitioner Rural Bank of Cotabato, Inc. terminated the employment of private respondents Felisa G. Eugenio, Edna C. Tan, and Bessie A. Bajar effective November 1, 1984, citing serious financial problems as grounds for retrenchment. The bank offered separation pay equivalent to one-half month’s salary for every year of service. The employees rejected this offer, contending the retrenchment was invalid because the bank had been profitable in preceding years. They demanded a higher separation pay of one month’s salary per year of service and filed a complaint for illegal dismissal.
The Executive Labor Arbiter ruled in favor of the employees, declaring the dismissal illegal and awarding the higher separation pay, plus attorney’s fees, moral and exemplary damages, and litigation costs. The National Labor Relations Commission (NLRC) affirmed this decision. During the NLRC appeal, respondent Edna C. Tan entered into a compromise agreement with the bank, leading to a joint motion to dismiss her case. Nonetheless, the NLRC resolution sustained the award for all three employees.
ISSUE
Whether the NLRC committed grave abuse of discretion in affirming the illegal dismissal ruling and the corresponding awards, despite the bank’s claim of valid retrenchment due to financial losses and the existence of a compromise agreement with one employee.
RULING
The Supreme Court dismissed the petition, upholding the NLRC’s finding of illegal dismissal, but modified the resolution regarding Edna C. Tan. The Court found no grave abuse of discretion by the NLRC. For a retrenchment to be valid, it must be necessitated by serious financial losses. The bank failed to substantiate this claim. While it admitted earning profits from 1981 to 1984, it argued these were offset by obligations to the Central Bank. The Court, agreeing with the Solicitor General, noted the bank’s failure to account for its substantial credits and receivables from loans, which logically should exceed its liabilities; otherwise, it would have ceased operations. The alleged future losses from the withdrawal of tax exemptions under Presidential Decree No. 1955 were deemed speculative, as no implementing rules existed at the time of termination. Thus, the retrenchment lacked factual basis, constituting illegal dismissal.
Consequently, the award of one month’s salary per year of service as separation pay, plus attorney’s fees and damages, was justified due to the bank’s willful refusal to pay rightful claims. However, the award for Edna C. Tan was erroneous, as her compromise agreement with the bank settled all her claims. The NLRC resolution was modified to reflect this settlement. The petition was dismissed for lack of merit as to respondents Eugenio and Bajar.