G.R. No. L-68661 July 22, 1986
NATIONAL FEDERATION OF LABOR UNION (NAFLU) AND TERESITA LORENZO, ET AL., petitioners, vs. HON. MINISTER BLAS OPLE, as Minister of Labor and Employment; LAWMAN INDUSTRIAL/LIBRA GARMENTS/DOLPHIN ENTERPRISES, respondents.

FACTS

The National Federation of Labor Union (NAFLU) was the certified bargaining agent for the employees of Lawman Industrial Corporation. After a strike was settled in July 1982, with an agreement on wage increases and benefits, Lawman unilaterally declared a temporary shutdown in September 1982. Despite a promise to normalize operations by January 1983, the company failed to reopen. Investigations revealed that during this period, Lawman had dismantled its machinery and transferred operations to a new location, operating successively under the names Libra Garments and Dolphin Garments, manufacturing the same products and hiring new workers while the original unionized employees were locked out.
The Minister of Labor, in an order dated March 17, 1983, assumed jurisdiction, directed the return-to-work of affected employees, and enjoined the company from transferring assets or terminating employees. However, in a subsequent order dated July 31, 1984, the Minister, while finding Lawman guilty of unfair labor practice for effecting an illegal lockout and operating a run-away shop, denied the petitioners’ reinstatement. The order instead granted separation pay, reasoning that the company had declared an intention to close and could no longer resume operations.

ISSUE

Whether the petitioners, having been found to be victims of unfair labor practice, are entitled to reinstatement to their former positions without loss of seniority rights and with backwages, notwithstanding the alleged closure of the original company.

RULING

Yes. The Supreme Court granted the petition and ordered reinstatement. The legal logic is anchored on the doctrine of alter ego and the imperative remedy for unfair labor practice. The Court found that the Minister of Labor committed a grave abuse of discretion by refusing reinstatement after explicitly finding the company guilty of unfair labor practice. The cessation of Lawman’s operations was not a legitimate closure but a calculated scheme to bust the union, evidenced by the immediate transfer of business to Libra/Dolphin Garments, which manufactured identical products using the same machinery.
The principle established is that a company cannot evade its labor obligations, particularly reinstatement as a consequence of unfair labor practice, by merely changing its corporate name or transferring its operations to an alter ego. Since Libra/Dolphin Garments was a mere continuation and instrumentality of Lawman Industrial, it must bear the consequences of the latter’s illegal acts. The alleged financial losses presented by the company were deemed unsubstantial and more apparent than real, as financial data indicated a sales upswing at the time of the shutdown. Consequently, the proper remedy is reinstatement of the illegally dismissed employees to their positions in the alter-ego company, Libra/Dolphin Garments, with full seniority rights and backwages limited to three years, following prevailing jurisprudence. The award of separation pay in lieu of reinstatement was erroneous where a finding of unfair labor practice exists and a bona fide closure is not proven.