G.R. No. 90634-35, June 6, 1990
Carmelcraft Corporation and/or Carmen V. Yulo, President and General Manager, Petitioners, vs. National Labor Relations Commission, Carmelcraft Employees Union, Progressive Federation of Labor, represented by its Local President George Obana, Respondents.

FACTS

After the Carmelcraft Employees Union registered and sought recognition, the petitioners refused. The union consequently filed a petition for certification election in June 1987. On July 13, 1987, Carmelcraft Corporation, through its President Carmen Yulo, announced the cessation of operations effective August 13, 1987, citing serious financial losses. Operations ceased as announced. The union then filed complaints for illegal lockout, unfair labor practice, and payment of unpaid wages and benefits.
The Labor Arbiter found the shutdown illegal and violative of the employees’ right to self-organization, granting the monetary claims. The NLRC affirmed but modified the decision, additionally ordering payment of separation pay equivalent to one month’s pay per year of service.

ISSUE

Whether the National Labor Relations Commission committed grave abuse of discretion in affirming the Labor Arbiter’s decision that the company closure constituted an unfair labor practice and in awarding separation pay and unpaid benefits to the employees.

RULING

The Supreme Court dismissed the petition, finding no grave abuse of discretion by the NLRC. The Court upheld the finding that the closure was an unfair labor practice designed to discourage unionization, not a legitimate business decision. The company’s justification—a meager loss of P1,603.88 as of December 31, 1986, against a P3 million capitalization—was deemed “preposterous” and not credible, especially since the closure was announced merely eight months after the alleged loss and shortly after the union filed for certification election. This timing indicated the real motive was to interfere with the employees’ right to self-organization under Article 248 of the Labor Code.
The Court also rejected the petitioners’ defense that the employees executed valid waivers for unpaid benefits. Such waivers, even if voluntary, are void for being contrary to public policy enshrined in the Constitution and the Civil Code, which protect labor and social justice. The subordinate position of employees renders them vulnerable to coercive agreements. Furthermore, the Court held Carmen Yulo jointly and severally liable with the corporation. As president, general manager, and owner, she effectively was the corporation and could not evade personal liability, especially by raising the argument only at a late stage. The petitioners’ conduct demonstrated bad faith in exploiting employees and undermining their right to organize.