G.R. No. L-40103 June 24, 1983
ARCADIO DUAY, SOLEDAD MAPA, ET AL., petitioners, vs. COURT OF INDUSTRIAL RELATIONS and INSULAR LUMBER CO. (PHILS.), INC., respondents.

FACTS

The Acting Prosecutor of the Iloilo branch of the Court of Industrial Relations (CIR) filed a complaint on behalf of 176 petitioners, charging Insular Lumber Company (ILCO) and the Allied Workers Association of the Philippines (AWA) with unfair labor practice. The petitioners alleged that after ILCO entered into a collective bargaining agreement (CBA) with AWA containing terms they considered onerous, they resigned from the union and stopped paying dues. ILCO subsequently dismissed them, which the petitioners claimed was an act of discrimination to discourage union activity, constituting unfair labor practice under Republic Act No. 875 .
ILCO and AWA denied the allegations, asserting that the petitioners remained union members and paid dues via check-off until their separation. The company contended that the dismissals were due to a necessary retrenchment program initiated in 1959 to forestall business closure, caused by economic difficulties such as exhaustion of timber resources, stiff foreign competition, and high taxes. The CIR found that the lay-offs occurred over a period from January 1960 to April 1961 as part of this planned streamlining.

ISSUE

The primary issue is whether the termination of the petitioners’ employment constituted unfair labor practice or was a lawful dismissal due to retrenchment based on economic grounds.

RULING

The Supreme Court affirmed the CIR resolution, dismissing the petition. The Court upheld the finding that the dismissals were due to retrenchment necessitated by ILCO’s economic difficulties and not due to the petitioners’ union activities. The legal logic centered on the distinction between dismissals under the unfair labor practice provisions of Republic Act No. 875 and dismissals under the Termination Pay Law ( Republic Act No. 1787 , amending Republic Act No. 1052 ).
For unfair labor practice under Section 4 of RA 875, the employer’s act must discriminate to encourage or discourage union membership. The CIR’s factual findings, which the Supreme Court found no reason to overturn, established that the lay-off plan predated the union resignations and was applied to both union and non-union members alike. The rehiring of some dismissed workers and their dependents further negated the claim of anti-union animus.
Consequently, the dismissal was for an authorized cause under the Termination Pay Law. The Court clarified that retrenchment to prevent business closure is a “just cause” for termination under this law, but it is distinct from the complete “closing or cessation of operation” of the entire enterprise. Since the termination was due to retrenchment and not a complete shutdown, ILCO was liable for separation pay, as correctly ordered by the CIR en banc, subject to deductions for any gratuities already received under the CBA. The petitioners’ claim for reinstatement with back wages, which is a remedy for illegal dismissal, was therefore without basis.