EN BANC [ G.R. No.

151378, March 28, 2005 ]

JAKA FOOD PROCE !NG CORPORA"!ON, PE"!"!ONER, # . DAR$!N PACO", ROBER" PARO%!NOG, DA#!D B! NAR, MAR&ON DOM!NGO, R%OE& &E CANO AND JONA"%AN CAGABCAB, RE PONDEN" . DEC!
GARC!A, J.' Assailed and sought to be set aside in this appeal by way of a petition for review on certiorari under rule 45 of the Rules of Court are the following issuances of the Court of Appeals in CA-G.R. SP. o. 5!"4#$ to wit% &. D(c)*)o+ ,a-(, 1. No/(01(r 2001$'&( reversing and setting aside an earlier decision of the ational )abor Relations Co**ission + )RC,- and

!ON

.. R(*o23-)o+ ,a-(, 8 Ja+3ar4 2002$'.( denying petitioner/s *otion for reconsideration. 0he *aterial facts *ay be briefly stated$ as follows% Respondents 1arwin Pacot$ Robert Parohinog$ 1avid 2isnar$ 3arlon 1o*ingo$ Rhoel )escano and 4onathan Cagabcab were earlier hired by petitioner 4A5A 6oods Processing Corporation +4A5A$ for short, until the latter ter*inated their e*ploy*ent on August .!$ &!!# because the corporation was 7in dire financial straits8. 9t is not disputed$ however$ that the ter*ination was effected without 4A5A co*plying with the re:uire*ent under Article ."; of the )abor Code regarding the service of a written notice upon the e*ployees and the 1epart*ent of )abor and <*ploy*ent at least one +&, *onth before the intended date of ter*ination. 9n ti*e$ respondents separately filed with the regional Arbitration 2ranch of the ational )abor Relations Co**ission + )RC, co*plaints for illegal dis*issal$ underpay*ent of wages and nonpay*ent of service incentive leave and &;th *onth pay against 4A5A and its =R1 3anager$ Rosana Castelo. After due proceedings$ the )abor Arbiter rendered a decision';( declaring the ter*ination illegal and ordering 4A5A and its =R1 3anager to reinstate respondents with full bac>wages$ and separation pay if reinstate*ent is not possible. 3ore specifically the decision dispositively reads% ?=<R<6@R<$ Audg*ent is hereby rendered declaring as illegal the ter*ination of co*plainants and ordering respondents to reinstate the* to their positions with full bac>wages which as of 4uly ;B$ &!!" have already a*ounted to P;;!$#C".BB. Respondents are also ordered to pay co*plainants the a*ount of P.$##5.BB representing the unpaid service incentive leave pay of Parohinog$ )escano and Cagabcab an the a*ount of P&!$.;!.!C as pay*ent for &!!# &;th

*onth pay as alluded in the above co*putation. 9f co*plainants could not be reinstated$ respondents are ordered to pay the* separation pay e:uivalent to one *onth salary for very +sic, year of service. S@ @R1<R<1. 0herefro*$ 4A5A went on appeal to the )RC$ which$ in a decision dated August ;B$ &!!!$ '4( affir*ed in toto that of the )abor Arbiter. 4A5A filed a *otion for reconsideration. Acting thereon$ the )RC ca*e out with another decision dated 4anuary ."$ .BBB$'5( this ti*e *odifying its earlier decision$ thus% $%EREFORE$ pre*ises considered$ the instant *otion for reconsideration is hereby GRA 0<1 and the challenged decision of this Co**ission 'dated( ;B August &!!! and the decision of the )abor Arbiter DDD are hereby *odified by reversing an setting aside the awards of bac>wages$ service incentive leave pay. <ach of the co*plainants-appellees shall be entitled to a separation pay e:uivalent to one *onth. 9n addition$ respondents-appellants is +sic, ordered to pay each of the co*plainants-appellees the su* of P.$BBB.BB as inde*nification for its failure to observe due process in effecting the retrench*ent. S@ @R1<R<1. 0heir *otion for reconsideration having been denied by the )RC in its resolution of April ."$ .BBB$'C( respondents went to the Court of Appeals via a petition for certiorari$ thereat doc>eted as CA-G.R. SP o. 5!"4#. As stated at the outset hereof$ the Court of Appeals$ in a decision dated ove*ber &C$ .BBB$ applying the doctrine laid down by this Court in Serrano vs. NLRC$'#( reversed and set aside the )RC/s decision of 4anuary ."$ .BBB$ thus% $%EREFORE$ the decision dated 4anuary ."$ .BBB of the ational )abor Relations Co**ission is RE#ER ED and E" A !DE and another one entered ordering respondent 4A5A 6oods Processing Corporation to pay petitioners separation pay e:uivalent to one +&, *onth salary$ the proportionate &;th *onth pay and$ in addition$ full bac>wages fro* the ti*e their e*ploy*ent was ter*inated on August .!$ &!!# up to the ti*e the 1ecision herein beco*es final. S@ @R1<R<1. 0his ti*e$ 4A5A *oved for a reconsideration but its *otion was denied by the appellate court in its resolution of 4anuary "$ .BB.. =ence$ 4A5A/s present recourse$ sub*itting$ for our consideration$ the following issues% 79. ?=<0=<R @R @0 0=< C@ER0 @6 APP<A)S C@RR<C0)F A?AR1<1 G6E)) 2AC5?AG<S/ 0@ R<SP@ 1< 0S. 99. ?=<0=<R @R @0 0=< ASSA9)<1 1<C9S9@ C@RR<C0)F A?AR1<1 S<PARA09@ PAF 0@ R<SP@ 1< 0S8. As we see it$ there is only one :uestion that re:uires resolution$ i.e. what are the legal i*plications of a situation where an e*ployee is dis*issed for cause but such dis*issal was effected without the e*ployer/s co*pliance with the notice re:uire*ent under the )abor Code.

0his$ certainly$ is not a case of first i*pression. 9n the very recent case of Agabon vs. NLRC$ '"( we had the opportunity to resolve a si*ilar :uestion. 0herein$ we found that the e*ployees co**itted a grave offense$ i.e.$ abandon*ent$ which is a for* of a neglect of duty which$ in turn$ is one of the Aust causes enu*erated under Article .". of the )abor Code. 9n said case$ we upheld the validity of the dis*issal despite non-co*pliance with the notice re:uire*ent of the )abor Code. =owever$ we re:uired the e*ployer to pay the dis*issed e*ployees the a*ount of P;B$BBB.BB$ representing no*inal da*ages for non-co*pliance with statutory due process$ thus% 7?here the dis*issal is for a Aust cause$ as in the instant case$ the lac> of statutory due process should not nullify the dis*issal$ or render it illegal$ or ineffectual. =owever$ the e*ployer should inde*nify the e*ployee for the violation of his statutory rights$ as ruled in Reta vs. National Labor Relations Commission. 0he inde*nity to be i*posed should be stiffer to discourage the abhorrent practice of Gdis*iss now$ pay later$/ which we sought to deter in the Serrano ruling. 0he sanction should be in the nature of inde*nification or penalty and should depend on the facts of each case$ ta>ing into special consideration the gravity of the due process violation of the e*ployer. DDD DDD DDD

0he violation of petitioners/ right to statutory due process by the private respondent warrants the pay*ent of inde*nity in the for* of no*inal da*ages. 0he a*ount of such da*ages is addressed to the sound discretion of the court$ ta>ing into account the relevant circu*stances. Co+*),(r)+5 -h( 6r(/a)2)+5 c)rc30*-a+c(* )+ -h( ca*( a- 1ar, 7( ,((0 )6ro6(r -o 8)9 )- a- P30,000.00. ?e believe this for* of da*ages would serve to deter e*ployers fro* future violations of the statutory due process rights of e*ployees. At the very least$ it provides a vindication or recognition of this funda*ental right granted to the latter under the )abor Code and its 9*ple*enting Rules$8 +<*phasis supplied,. 0he difference between Agabon and the instant case is that in the for*er$ the dis*issal was based on a Aust cause under Article .". of the )abor Code while in the present case$ respondents were dis*issed due to retrench*ent$ which is one of the authoriHed causes under Article ."; of the sa*e Code. At this point$ we note that there are divergent i*plications of a dis*issal for Aust cause under Article .".$ on one hand$ and a dis*issal for authoriHed cause under Article .";$ on the other. A dis*issal for :3*- ca3*( under Article .". i*plies that the e*ployee concerned has co**itted$ or is guilty of$ so*e violation against the e*ployer$ i.e. the e*ployee has co**itted so*e serious *isconduct$ is guilty of so*e fraud against the e*ployer$ or$ as in Agabon$ he has neglected his duties. 0hus$ it can be said that the e*ployee hi*self initiated the dis*issal process. @n another breath$ a dis*issal for an a3-hor);(, ca3*( under Article ."; does not necessarily i*ply delin:uency or culpability on the part of the e*ployee. 9nstead$ the dis*issal process is initiated by the e*ployer/s eDercise of his *anage*ent prerogative$ i.e. when the e*ployer opts to install labor saving devices$ when he decides to cease business operations or when$ as in this case$ he underta>es to i*ple*ent a retrench*ent progra*. 0he clear-cut distinction between a dis*issal for Aust cause under Article .". and a dis*issal for

authoriHed cause under Article ."; is further reinforced by the fact that in the first$ pay*ent of separation pay$ as a rule$ is not re:uired$ while in the second$ the law re:uires pay*ent of separation pay.'!( 6or these reasons$ there ought to be a difference in treat*ent when the ground for dis*issal is one of the Aust causes under Article .".$ and when based on one of the authoriHed causes under Article .";. Accordingly$ it is wise to hold that% +&, if the dis*issal is based on a Aust cause under Article .". but the e*ployer failed to co*ply with the notice re:uire*ent$ the sanction to be i*posed upon hi* should be tempered because the dis*issal process was$ in effect$ initiated by an act i*putable to the e*ployee- and +., if the dis*issal is based on an authoriHed cause under Article ."; but the e*ployer failed to co*ply with the notice re:uire*ent$ the sanction should be stiffer because the dis*issal process was initiated by the e*ployer/s eDercise of his *anage*ent prerogative. 0he records before us reveal that$ indeed$ 4A5A was suffering fro* serious business losses at the ti*e it ter*inated respondents/ e*ploy*ent. As aptly found by the )RC% 7A careful study of the evidence presented by the respondent-appellant corporation shows that the audited 6inancial State*ent of the corporation for the periods &!!C$ &!!# and &!!" were sub*itted by the respondent-appellant corporation$ 0he State*ent of 9nco*e and 1eficit found in the Audited 6inancial State*ent of the respondent-appellant corporation clearly shows the following in &!!C$ the deficit of the respondent-appellant corporation was P&""$.&"$4&!.BB or !4.&&I of the stoc>holder/s 'sic( e:uity which a*ounts to P.BB$BBB$BBB.BB. 9n &!!# when the retrench*ent progra* of respondent-appellant corporation was underta>en$ the deficit ballooned to P.4#$...$5C!.BB or &.;.C&I of the stoc>holders/ e:uity$ thus a capital deficiency or i*pair*ent of e:uity ensued. 9n &!!"$ the deficit grew to P;55$#!4$"!#.BB or &##I of the stoc>holders/ e:uity. 6ro* &!!C to &!!#$ the deficit grew by *ore that +sic, ;&I while in &!!" the deficit grew by *ore than 4#I. 0he State*ent of 9nco*e and 1eficit of the respondent-appellant corporation to prove its alleged losses was prepared by an independent auditor$ SGJ K Co. 9t convincingly showed that the respondent-appellant corporation was in dire financial straits$ which the co*plainants-appellees failed to dispute. 0he losses incurred by the respondent-appellant corporation are clearly substantial and sufficiently proven with clear and satisfactory evidence. )osses incurred were ade:uately shown with respondent-appellant/s audited financial state*ent. =aving established the loss incurred by the respondent-appellant corporation$ it necessarily necessarily +sic, follows that the ground in support of retrench*ent eDisted at the ti*e the co*plainants-appellees were ter*inated. ?e cannot therefore sustain the findings of the )abor Arbiter that the alleged losses of the respondent-appellant was 'sic( not well substantiated by substantial proofs. 9t is therefore logical for the corporation to i*ple*ent a retrench*ent progra* to prevent further losses.8 '&B( oteworthy it is$ *oreover$ to state that herein respondents did not assail the foregoing finding of the )RC which$ incidentally$ was also affir*ed by the Court of Appeals. 9t is$ therefore$ established that there was ground for respondents/ dis*issal$ i.e.$ retrench*ent$ which is one of the authoriHed causes enu*erated under Article ."; of the )abor Code. )i>ewise$ it is established that 4A5A failed to co*ply with the notice re:uire*ent under the sa*e

Article. Considering the factual circu*stances in the instant case and the above ratiocination$ we$ therefore$ dee* it proper to fiD the inde*nity at P5B$BBB.BB. ?e li>ewise find the Court of Appeals to have been in error when it ordered 4A5A to pay respondents separation pay e:uivalent to one +&, *onth salary for every year of service. 0his is because in Reahs Corporation vs. NLRC$'&&( we *ade the following declaration% 70he rule$ therefore$ is that in all cases of business closure or cessation of operation or underta>ing of the e*ployer$ the affected e*ployee is entitled to separation pay. 0his is consistent with the state policy of treating labor as a pri*ary social econo*ic force$ affording full protection to its rights as well as its welfare. "h( (9c(6-)o+ )* 7h(+ -h( c2o*3r( o8 13*)+(** or c(**a-)o+ o8 o6(ra-)o+* )* ,3( -o *(r)o3* 13*)+(** 2o**(* or 8)+a+c)a2 r(/(r*(*< ,324 6ro/(,, )+ 7h)ch ca*(, -h( r)5h- o8 a88(c-(, (062o4((* -o *(6ara-)o+ 6a4 )* 2o*- 8or o1/)o3* r(a*o+*. DDD8. +<*phasis supplied, $%EREFORE$ the instant petition is GRA 0<1. Accordingly$ the assailed decision and resolution of the Court of Appeals respectively dated ove*ber &C$ .BB& and 4anuary "$ .BB. are hereby S<0 AS91< and a new one entered upholding the legality of the dis*issal but ordering petitioner to pay each of the respondents the a*ount of P5B$BBB.BB$ representing no*inal da*ages for non-co*pliance with statutory due process. O ORDERED. Davide, Jr., C.J., Quisumbing, Ynares Santiago, Sandoval !utierre", Carpio, Austria #artine", Corona, Carpio #orales, Calle$o, Sr., A"%una$ and Chi%o Na"ario, JJ.$ concur. &uno, J.$ reiterates dissent in Agaban K Serrano. &anganiban, J.$ reiterates dissent in Agaban v. )RC$ ;"B Phil. 4&C$ 4an. .#$ .BBB. )RC$ GR &5"C!;$ ov. &#$ .BB4$ and Serrano v.

'inga, J.$ only in the result. See separate opinion.

'&(

AnneD 7C8$ Petition- Rollo$ pp. 5;$ et se:.- Penned by Associate 4ustice 3arina ). 2uHon and concurred in by Associate 4ustices 2uenaventura 4. Guerrero and Alicia ). Santos of the 0hird 1ivision.
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AnneD 7<-&8$ Petition- Rollo$ pp. "4$ et se:. AnneD 7&8$ Respondent/s Co**ent- Rollo$ pp. &&#$ et se:. AnneD 7.8$ Respondent/s Co**ent Rollo$ pp. &.;$ et se:. AnneD 728$ Petition- Rollo$ pp. ;!$ et se:. AnneD 7<8$ Petition- Rollo$ pp. "B$ et se:.

';(

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'5(

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;"B Phils. 4&C '.BBB( and Resolution on the 3otion for Reconsideration$ ;"# Phils. ;45 '.BBB(.
'"(

G.R.

o. &5"C!;$ pro*ulgated &#

ove*ber .BB4.

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7AR0. .";. D D D 9n case of ter*ination due to the installation of labor saving devices or redundancy$ the wor>er affected thereby shall be entitled to a separation pay e:uivalent to at least his one +&, *onth pay or to at least one +&, *onth pay for every year of service$ whichever is higher. 9n case of retrench*ent to prevent losses and in cases of closures of cessation of operations of establish*ent or underta>ing not due to serious business losses or financial reverses$ the separation pay shall be e:uivalent to one +&, *onth pay or at least one-half +&L., *onth pay for every year of service$ whichever is higher. A fraction of at least siD +C, *onths shall be considered as one +&, whole year.8
'&B(

Rollo$ pp. 4"-4!. .#& SCRA .4#$ .54 '&!!#(.

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