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ENBANC

[G.R.No.151378.March28,2005]

JAKA FOOD PROCESSING CORPORATION, petitioner, vs. DARWIN PACOT,


ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL
LESCANOandJONATHANCAGABCAB,respondents.
DECISION
GARCIA,J.:

Assailedandsoughttobesetasideinthisappealbywayofapetitionforreviewoncertiorariunder
rule 45 of the Rules of Court are the following issuances of the Court of Appeals in CAG.R. SP. No.
59847,towit:
[1]
1. Decision dated 16 November 2001, reversing and setting aside an earlier decision of the National
LaborRelationsCommission(NLRC)and
[2]
2.Resolutiondated8January2002, denyingpetitionersmotionforreconsideration.

Thematerialfactsmaybebrieflystated,asfollows:
Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and
Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for
short)untilthelatterterminatedtheiremploymentonAugust29,1997becausethecorporationwasindire
financial straits. It is not disputed, however, that the termination was effected without JAKA complying
withtherequirementunderArticle283oftheLaborCoderegardingtheserviceofawrittennoticeupon
theemployeesandtheDepartmentofLaborandEmploymentatleastone(1)monthbeforetheintended
dateoftermination.
In time, respondents separately filed with the regional Arbitration Branch of the National Labor
RelationsCommission(NLRC)complaintsforillegaldismissal,underpaymentofwagesandnonpayment
ofserviceincentiveleaveand13thmonthpayagainstJAKAanditsHRDManager,RosanaCastelo.
[3]
Afterdueproceedings,theLaborArbiterrenderedadecision declaringtheterminationillegaland
orderingJAKAanditsHRDManagertoreinstaterespondentswithfullbackwages,andseparationpayif
reinstatementisnotpossible.Morespecificallythedecisiondispositivelyreads:
WHEREFORE,judgmentisherebyrendereddeclaringasillegaltheterminationofcomplainantsandordering
respondentstoreinstatethemtotheirpositionswithfullbackwageswhichasofJuly30,1998havealready
amountedtoP339,768.00.RespondentsarealsoorderedtopaycomplainantstheamountofP2,775.00representing
theunpaidserviceincentiveleavepayofParohinog,LescanoandCagabcabantheamountofP19,239.96as
paymentfor199713thmonthpayasalludedintheabovecomputation.
Ifcomplainantscouldnotbereinstated,respondentsareorderedtopaythemseparationpayequivalenttoonemonth
salaryforvery(sic)yearofservice.
SOORDERED.

[4]
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30, 1999,
affirmedintotothatoftheLaborArbiter.
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another decision
[5]
datedJanuary28,2000, thistimemodifyingitsearlierdecision,thus:
WHEREFORE,premisesconsidered,theinstantmotionforreconsiderationisherebyGRANTEDandthe
challengeddecisionofthisCommission[dated]30August1999andthedecisionoftheLaborArbiterxxxare
herebymodifiedbyreversingansettingasidetheawardsofbackwages,serviceincentiveleavepay.Eachofthe
complainantsappelleesshallbeentitledtoaseparationpayequivalenttoonemonth.Inaddition,respondents
appellantsis(sic)orderedtopayeachofthecomplainantsappelleesthesumofP2,000.00asindemnificationforits
failuretoobservedueprocessineffectingtheretrenchment.
SOORDERED.
TheirmotionforreconsiderationhavingbeendeniedbytheNLRCinitsresolutionofApril28,2000,
[6]
respondentswenttotheCourtofAppealsviaapetitionforcertiorari,thereatdocketedasCAG.R.SP
No.59847.
Asstatedattheoutsethereof,theCourtofAppeals,inadecisiondatedNovember16,2000,applying
[7]
thedoctrinelaiddownbythisCourtinSerranovs.NLRC, reversedandsetasidetheNLRCsdecision
ofJanuary28,2000,thus:
WHEREFORE,thedecisiondatedJanuary28,2000oftheNationalLaborRelationsCommissionisREVERSED
andSETASIDEandanotheroneenteredorderingrespondentJAKAFoodsProcessingCorporationtopay
petitionersseparationpayequivalenttoone(1)monthsalary,theproportionate13thmonthpayand,inaddition,full
backwagesfromthetimetheiremploymentwasterminatedonAugust29,1997uptothetimetheDecisionherein
becomesfinal.
SOORDERED.
Thistime,JAKAmovedforareconsiderationbutitsmotionwasdeniedbytheappellatecourtinits
resolutionofJanuary8,2002.
Hence,JAKAspresentrecourse,submitting,forourconsideration,thefollowingissues:
I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED FULL BACKWAGES TO
RESPONDENTS.
II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY TO
RESPONDENTS.

Asweseeit,thereisonlyonequestionthatrequiresresolution,i.e.whatarethelegalimplicationsof
a situation where an employee is dismissed for cause but such dismissal was effected without the
employerscompliancewiththenoticerequirementundertheLaborCode.
[8]
This,certainly,isnotacaseoffirstimpression.IntheveryrecentcaseofAgabonvs.NLRC, we
had the opportunity to resolve a similar question. Therein, we found that the employees committed a
graveoffense,i.e.,abandonment, which is a form of a neglect of duty which, in turn, is one of the just
causes enumerated under Article 282 of the Labor Code. In said case, we upheld the validity of the
dismissaldespitenoncompliancewiththenoticerequirementoftheLaborCode.However,werequired
theemployertopaythedismissedemployeestheamountofP30,000.00,representingnominaldamages
fornoncompliancewithstatutorydueprocess,thus:

Wherethedismissalisforajustcause,asintheinstantcase,thelackofstatutorydueprocessshouldnotnullifythe
dismissal,orrenderitillegal,orineffectual.However,theemployershouldindemnifytheemployeefortheviolation
ofhisstatutoryrights,asruledinRetavs.NationalLaborRelationsCommission.Theindemnitytobeimposed
shouldbestiffertodiscouragetheabhorrentpracticeofdismissnow,paylater,whichwesoughttodeterinthe
Serranoruling.Thesanctionshouldbeinthenatureofindemnificationorpenaltyandshoulddependonthefactsof
eachcase,takingintospecialconsiderationthegravityofthedueprocessviolationoftheemployer.
xxxxxxxxx
Theviolationofpetitionersrighttostatutorydueprocessbytheprivaterespondentwarrantsthepaymentof
indemnityintheformofnominaldamages.Theamountofsuchdamagesisaddressedtothesounddiscretionofthe
court,takingintoaccounttherelevantcircumstances.Consideringtheprevailingcircumstancesinthecaseat
bar,wedeemitpropertofixitatP30,000.00.Webelievethisformofdamageswouldservetodeteremployers
fromfutureviolationsofthestatutorydueprocessrightsofemployees.Attheveryleast,itprovidesavindicationor
recognitionofthisfundamentalrightgrantedtothelatterundertheLaborCodeanditsImplementingRules,
(Emphasissupplied).
ThedifferencebetweenAgabonandtheinstantcaseisthatintheformer,thedismissalwasbased
on a just cause under Article 282 of the Labor Code while in the present case, respondents were
dismissed due to retrenchment, which is one of the authorized causes under Article 283 of the same
Code.
Atthispoint,wenotethattherearedivergentimplicationsofadismissalforjustcauseunderArticle
282,ononehand,andadismissalforauthorizedcauseunderArticle283,ontheother.
AdismissalforjustcauseunderArticle282impliesthattheemployeeconcernedhascommitted,or
is guilty of, some violation against the employer, i.e. the employee has committed some serious
misconduct,isguiltyofsomefraudagainsttheemployer,or,asinAgabon,hehasneglectedhisduties.
Thus,itcanbesaidthattheemployeehimselfinitiatedthedismissalprocess.
Onanotherbreath,adismissalforanauthorizedcauseunderArticle283doesnotnecessarilyimply
delinquencyorculpabilityonthepartoftheemployee.Instead,thedismissalprocessisinitiatedbythe
employers exercise of his management prerogative, i.e. when the employer opts to install labor saving
devices, when he decides to cease business operations or when, as in this case, he undertakes to
implementaretrenchmentprogram.
The clearcut distinction between a dismissal for just cause under Article 282 and a dismissal for
authorizedcauseunderArticle283isfurtherreinforcedbythefactthatinthefirst,paymentofseparation
[9]
pay,asarule,isnotrequired,whileinthesecond,thelawrequirespaymentofseparationpay.
Forthesereasons,thereoughttobeadifferenceintreatmentwhenthegroundfordismissalisoneof
thejustcausesunderArticle282,andwhenbasedononeoftheauthorizedcausesunderArticle283.
Accordingly,itiswisetoholdthat:(1)ifthedismissalisbasedonajustcauseunderArticle282but
theemployerfailedtocomplywiththenoticerequirement,thesanctiontobeimposeduponhimshouldbe
temperedbecausethedismissalprocesswas,ineffect,initiatedbyanactimputabletotheemployeeand
(2)ifthedismissalisbasedonanauthorizedcauseunderArticle283buttheemployerfailedtocomply
withthenoticerequirement,thesanctionshouldbestifferbecausethedismissalprocesswasinitiatedby
theemployersexerciseofhismanagementprerogative.
The records before us reveal that, indeed, JAKA was suffering from serious business losses at the
timeitterminatedrespondentsemployment.AsaptlyfoundbytheNLRC:
AcarefulstudyoftheevidencepresentedbytherespondentappellantcorporationshowsthattheauditedFinancial
Statementofthecorporationfortheperiods1996,1997and1998weresubmittedbytherespondentappellant
corporation,TheStatementofIncomeandDeficitfoundintheAuditedFinancialStatementoftherespondent

appellantcorporationclearlyshowsthefollowingin1996,thedeficitoftherespondentappellantcorporationwas
P188,218,419.00or94.11%ofthestockholders[sic]equitywhichamountstoP200,000,000.00.In1997whenthe
retrenchmentprogramofrespondentappellantcorporationwasundertaken,thedeficitballoonedtoP247,222,569.00
or123.61%ofthestockholdersequity,thusacapitaldeficiencyorimpairmentofequityensued.In1998,thedeficit
grewtoP355,794,897.00or177%ofthestockholdersequity.From1996to1997,thedeficitgrewbymorethat(sic)
31%whilein1998thedeficitgrewbymorethan47%.
TheStatementofIncomeandDeficitoftherespondentappellantcorporationtoproveitsallegedlosseswas
preparedbyanindependentauditor,SGV&Co.Itconvincinglyshowedthattherespondentappellantcorporation
wasindirefinancialstraits,whichthecomplainantsappelleesfailedtodispute.Thelossesincurredbythe
respondentappellantcorporationareclearlysubstantialandsufficientlyprovenwithclearandsatisfactoryevidence.
Lossesincurredwereadequatelyshownwithrespondentappellantsauditedfinancialstatement.Havingestablished
thelossincurredbytherespondentappellantcorporation,itnecessarilynecessarily(sic)followsthatthegroundin
supportofretrenchmentexistedatthetimethecomplainantsappelleeswereterminated.Wecannotthereforesustain
thefindingsoftheLaborArbiterthattheallegedlossesoftherespondentappellantwas[sic]notwellsubstantiated
bysubstantialproofs.Itisthereforelogicalforthecorporationtoimplementaretrenchmentprogramtoprevent
[10]

furtherlosses.

Noteworthyitis,moreover,tostatethathereinrespondentsdidnotassailtheforegoingfindingofthe
NLRCwhich,incidentally,wasalsoaffirmedbytheCourtofAppeals.
Itis,therefore,establishedthattherewasgroundforrespondentsdismissal,i.e.,retrenchment,which
is one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is
establishedthatJAKAfailedtocomplywiththenoticerequirementunderthesameArticle.Considering
thefactualcircumstancesintheinstantcaseandtheaboveratiocination,we,therefore,deemitproperto
fixtheindemnityatP50,000.00.
WelikewisefindtheCourtofAppealstohavebeeninerrorwhenitorderedJAKAtopayrespondents
separation pay equivalent to one (1) month salary for every year of service. This is because in Reahs
[11]
Corporationvs.NLRC,
wemadethefollowingdeclaration:
Therule,therefore,isthatinallcasesofbusinessclosureorcessationofoperationorundertakingoftheemployer,
theaffectedemployeeisentitledtoseparationpay.Thisisconsistentwiththestatepolicyoftreatinglaborasa
primarysocialeconomicforce,affordingfullprotectiontoitsrightsaswellasitswelfare.Theexceptioniswhen
theclosureofbusinessorcessationofoperationsisduetoseriousbusinesslossesorfinancialreversesduly
proved,inwhichcase,therightofaffectedemployeestoseparationpayislostforobviousreasons.xxx.
(Emphasissupplied)
WHEREFORE,theinstantpetitionisGRANTED.Accordingly,theassaileddecisionandresolutionof
theCourtofAppealsrespectivelydatedNovember16,2001andJanuary8,2002areherebySETASIDE
andanewoneenteredupholdingthelegalityofthedismissalbutorderingpetitionertopayeachofthe
respondentstheamountofP50,000.00,representingnominaldamagesfornoncompliancewithstatutory
dueprocess.
SOORDERED.
Davide, Jr., C.J., Quisumbing, YnaresSantiago, SandovalGutierrez, Carpio, AustriaMartinez,
Corona,CarpioMorales,Callejo,Sr.,Azcuna,andChicoNazario,JJ.,concur.
Puno,J.,reiteratedissentinAgaban&Serrano.
Panganiban, J., reiterate dissent in Agaban v. NLRC, GR 158693, Nov. 17, 2004, and Serrano v.
NLRC,380Phil.416,Jan.27,2000.
Tinga,J.,onlyintheresult.Seeseparateopinion.

[1]

[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]

Annex C, Petition Rollo, pp. 53, et seq. Penned by Associate Justice Marina L. Buzon and concurred in by Associate
JusticesBuenaventuraJ.GuerreroandAliciaL.SantosoftheThirdDivision.
AnnexE1,PetitionRollo,pp.84,etseq.
Annex1,RespondentsCommentRollo,pp.117,etseq.
Annex2,RespondentsCommentRollo,pp.123,etseq.
AnnexB,PetitionRollo,pp.39,etseq.
AnnexE,PetitionRollo,pp.80,etseq.
380Phils.416[2000]andResolutionontheMotionforReconsideration,387Phils.345[2000].
G.R.No.158693,promulgated17November2004.
ART. 283. x x x In case of termination due to the installation of labor saving devices or redundancy, the worker affected
therebyshallbeentitledtoaseparationpayequivalenttoatleasthisone(1)monthpayortoatleastone(1)monthpay
for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures of
cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least onehalf (1/2) month pay for every year of service,
whicheverishigher.Afractionofatleastsix(6)monthsshallbeconsideredasone(1)wholeyear.

[10]
[11]

Rollo,pp.4849.
271SCRA247,254[1997].

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