Shell Oil Workers Union v. Shell Company of the Philippines, Ltd.

,
G.R. No. L-28607, May 31, 1971
SUMMARY: The insistence on the part of respondent Shell Company of the Philippines to
dissolve its security guard section stationed at its Pandacan Installation, notwithstanding
its continuance assured by an existing collective bargaining contract, resulted in a strike
called by petitioner Shell Oil Workers' Union. Against its decision declaring the strike
illegal primarily on the ground that such dissolution was a valid exercise of a
management prerogative, this appeal is taken. With due recognition that the system of
industrial democracy fostered in the regime of unionization and collective bargaining
leaves room for the free exercise of management rights, but unable to close our eyes to
the violation of a contract still in force implicit in such dissolution thus giving rise to an
unf air labor practice, we cannot sustain respondent Court of Industrial Relations.

FACTS: The deep-rooted differences between the parties that led to the subsequent strike
were made clear in the presidential certification. "Before this Court for resolution is the
labor dispute between the petitioner Shell Oil Workers' Union, Union for brevity, and the
respondent Shell Company of the Philippines Limited. Said dispute was a result of the
transfer by the Company of the eighteen (18) security guards to its other department
and the consequent hiring of a private security agency to undertake the work of said
security guards.

Petitioner "filed the petition alleging, among others, that the eighteen (18) security
guards affected are part of the bargaining unit and covered by the existing collective
bargaining contract, and as such, their transfers and eventual dismissals are illegal being
done in violation of the existing contract. It, therefore, prayed that said security guards
be reinstated.

The Company maintained that in contracting out the security service and redeploying the
18 security guards affected, it was merely performing its legitimate prerogative to adopt
the most efficient and economical method of operation; that said guards were transferred
to other sections with increase, except for four (4) guards, in rates of pay and with
transfer bonus; that the 18 guards concerned were dismissed for wilfully refusing to obey
the transfer order; and that the strike staged by the Union on is illegal.

According to a study made by the Shell Company for the purpose of improving the
productivity, organization and efficiency of its Pandacan Installation recommended its
dissolution, if an outside agency to perform such service were to be hired, there would be
a savings of P96,000.00 annually in addition to further economy consequent on the
elimination to overtime an administration expenses.

On August 26, 1966, a collective bargaining contract was executed between the Union
and the Shell Company effective from the first of the month of that year to December
31, 1969. It contained the usual grievance procedure and no strike clauses. More
relevant to the case before this Court, however, was the inclusion of the category of the
security guards in such collective bargaining contract. Nonetheless, Shell Company was
bent on doing away with the security guard section, to be replaced by an outside security
agency. That was communicated to the Union in a panel to panel meeting on May 3,
1967. Two days later, there was a meeting of the Union where a majority of the members
made clear that should there be such a replacement of the company guards by a private
security agency, there would be a strike.

On the afternoon of May 24, 1967, a notice of reassignment effective at 8:00 o'clock the
next morning was handed to the guards affected. At 10:00 o'clock that evening, there
was a meeting by the Union attended by ten officers and a majority of the members
wherein it was agreed viva voce that if there would be an implementation of the circular
dissolving- the security section to be replaced by guards from an outside agency, the
Union would go on strike immediately The strike was declared at half-past 7:00 o'clock in
the morning of May 25, 1967 when security guards from an outside agency were trying to
pass the main gate of the Shell Company to start their work, With the picket Iine
established, they were unable to enter

It was not until June 27, 1967, however, that the Presidential certification came. There
was a return to work order on July 6, 1967 by respondent Court, by virtue of which
pending the resolution of the case, the Shell Company was not to lockout the employees
involved and the employees in turn were not to strike. The decision of respondent Court
was rendered declaring that no unfair labor practice was committed by Shell Company in
dissolving its security guards from an outside agency, as such a step was well within
management prerogative. Hence for it, the strike was illegal, there being no compliance
with the statutory requisites before an economic strike could be staged.

ISSUES: Whether or not the Company commits unfair labor practice in contracting out its
security service to an independent professional security agency and reassigning the 18
guards to other sections of the Company. (Yes)

Whether or not the dismissal of the 18 security guards are justified. (No, except those
who committed violent acts during the strike)

Whether or not the strike called by the Union is legal. (No)

HELD: It is the contention of Shell Company, sustained by respondent Court, that the
dissolution of the security guard section to be replaced by an outside agency is a
management prerogative. The Union argues otherwise, relying on the assurance of the
continued existence of a security guard section at least, during the lifetime of the
collective bargaining agreement.

It is the opinion of the Court, that while management has the final say on such matter,
the labor union is not to be completely left out. What was done by Shell Company in
informing the Union as to the step it was intending to take on the proposed dissolution of
the security guard section to be replaced by an outside agency is praise-worthy. Thereby,
in the words of Chief Justice Warren, there is likely to be achieved "peaceful
accommodation of conflicting interest." In this particular case though, what was
stipulated in an existing collective bargaining contract certainly precluded Shell Company
from carrying out what otherwise would have been within its prerogative if to do so would
be violative 'thereof.

The crucial question thus is whether the then existing collective bargaining contract
running for three years f rom August 1, 1966 to December 31, 1969 constituted a bar to
such a decision reached by management? The answer must be in the affirmative. As
correctly stressed in the brief for the petitioner, there was specific coverage concerning
the security guard section in the collective bargaining contract. It was thus an assurance
of security of tenure, at least, during the lifetime of the agreement. Nor is it a sufficient
answer, as set forth in the decision of respondent Court, that while such a section would
be abolished, the guards would not be unemployed as they would be transferred to
another position with an increase in pay and with a transfer bonus. For what is involved is
the integrity of the agreement reached, the terms of which should be binding on both
parties.
What renders the stand of Shell Company even more vulnerable is the f act that as set
forth in its brief and as found by respondent Court as far back as 1964, it had already
been studying the matter of dissolving the security guard section and contracting- out
such service to an outside agency. Apparently, it had reached a decision to that effect for
implementation the next year. In July 1966, there was a joint consultation between it and
the Union on the matter. Nonetheless on August 26,1966, a collective bargaining contract
was entered into which, as indicated above, did assure the continued existence of the
security guard section. The Shell Company did not have to agree to such a stipulation. Or
it could have reserved the right to effect a dissolution and reassign the guards. It did not
do so.
The Shell Company, in failing: to manifest fealty to what was stipulated in an existing
collective bargaining contract, was thus guilty of an unfair labor practice. Such a doctrine
first found expression in Republic Savings Bank v. Court of Industrial Relations:

It being expressly provided in the Industrial Peace Act that [an] unfair labor
practice is committed by a labor union or its agent by its refusal 'to bargain
collectively with the employer' and this Court having decided in the Republic
Savings Bank case that collective bargaining does not end with the execution of
an agreement, being a continuous process, the duty to bargain necessarily
imposing on the parties the obligation to live up to the terms of such a collective
bargaining agreement if entered into, it is undeniable that non-compliance
therewith constitutes an unfair labor practice."

Accordingly, the unfair labor practice strike called by the Union did have the impress of
validity. Rightly, labor is justified in making use of such a weapon in its arsenal to
counteract what is clearly outlawed by the Industrial Peace Act. That would be one way
to assure that the objectives of unionization and collective bargaining would not be
thwarted. There is this categorial pronouncement from the present Chief Justice: "Again,
the legality of the strike follows as a corollary to the finding of fact, made in the decision
appealed fromwhich is supported by substantial evidenceto the effect that the strike
had been triggered by the Company's failure to abide by the terms ano conditions of its
collective bargaining- agreement with the Union, by the discrimination, resorted to by the
company, with regard to hire and tenure of employment, and the dismissal of employees
due to union activities, as well as the refusal of the company to bargain collectively in
good faith."

The right to self-organization so sedulously guarded by the Industrial Peace Act explicitly
includes the right "to engage in concerted activities for the purpose of collective
bargaining and to the mutual aid or protection." There cannot be the least doubt that a
strike as form of concerted activity has the stamp of legitimacy. As a matter of fact, a
strike may not be staged only when, during the pendency of an industrial dispute, the
Court of Industrial Relations has issued the proper injunction against the laborers A strike
then, in the apt phrase of Justice J.B.L. Reyes, is "an institutionalized factor of democratic
growth."27

Respondent Court must have unduly impressed by the evidence submitted by the Shell
Company to the effect that the strike was marred by acts of force, intimidation and
violence. Attention was likewise called to the fact that even on the following day, with
police officials stationed at the strike-bound area, molotov bombs did explode and the
streets were obstructed with wooden planks containing protruding nails. Moreover, in the
branches of the Shell Company in Iloilo City as well as in Bacolod, on dates unspecified,
physical injuries appeared to have been inflicted on management personnel. Respondent
Court in the appealed decision did penalize with loss of employment the ten individuals
responsible for such acts

In the light of the foregoing, there being a valid unfair labor practice strike, the loss of
employment decreed by respondent Court on all the Union officers cannot stand. The
premise on which such penalty was decreed was the illegality of the strike. We rule
differently. Hence, its imposition is unwarranted. It is to be made clear, however, that
because of the commission of specific serious acts of violence, the Union's President,
Gregorio Bacsa, as well as its Assistant Auditor, Conrado Pea, did incur such a penalty.

On this point, it may be observed further that even if there was a mistake in good faith
by the Union that an unfair labor practice was committed by the Shell Company when
such was not the case. still the wholesale termination of employee status of all the
officers of the Union, decreed by respondent Court, hardly commends itself for approval.
Such a drastic blow to a labor organization, leaving it leaderless, has serious
repercussions. The immediate effect is to weaken the Union
WHEREFORE, the decision of respondent Court of Industrial Relations is reversed, the
finding of illegality of the strike declared by the Shell Oil Workers' not being in
accordance with law. Accordingly, the dismissal by the Shell Company of the eighteen
security guards, with the exception of Ernesto Crisostomo, who was found guilty of
committing a serious act of violence is set aside and they are declared reinstated.

The other workers who committed serious acts of violence are terminated. The workers
who committed acts of violence but not serious in character are allowed to be reinstated
but not entitled to backpay.

Compex Electronics Employees Association (CEEA) v. NLRC et al.,

G.R. No. 121315, July 19, 1999

FACTS: Complex Electronics Corporation (Complex) was engaged in the manufacture of

electronic products. It was actually a subcontractor of electronic products where its
customers gave their job orders, sent their own materials and consigned their equipment
to it. The customers were foreign-based companies with different product lines and
specifications requiring the employment of workers with specific skills for each product
line. Thus, there was the AMS Line for the Adaptive Micro System, Inc., the Heril Line for
Heril Co., Ltd., the Lite-On Line for the Lite-On Philippines Electronics Co., etc. The rank
and file workers of Complex were organized into a union known as the Complex
Electronics Employees Association, herein referred to as the Union.

On March 4, 1992, Complex received a facsimile message from Lite-On Philippines

Electronics Co., requiring it to lower its price by 10%. The full text reads as follows: This is
to inform your office that Taiwan required you to reduce your assembly cost since it is
higher by 50% and no longer competitive with that of mainland China. It is further
instructed that Complex Price be patterned with that of other sources, which is 10%
lower.

Complex informed its Lite-On personnel that such request of lowering their selling price
by 10% was not feasible as they were already incurring losses at the present prices of
their products. Under such circumstances, Complex regretfully informed the employees
that it was left with no alternative but to close down the operations of the Lite-On Line.
The company, however, promised that: Complex will follow the law by giving the people
to be retrenched the necessary 1 month notice, the Company will try to prolong the work
for as many people as possible for as long as it can by looking for job slots for them in
another line, and the company will give the employees to be retrenched a retrenchment
pay as provided for by law i.e. half a month for every year of service in accordance with
Article 283 of the Labor Code of Philippines. The Union, on the other hand, pushed for a
retrenchment pay equivalent to one (1) month salary for every year of service, which
Complex refused.

Complex filed a notice of closure of the Lite-On Line with the Department of Labor and
Employment (DOLE) and the retrenchment of the ninety-seven (97) affected employees.
The Union filed a notice of strike with the National Conciliation and Mediation Board
(NCMB) and later conducted a strike vote which resulted in a yes vote.

In the evening of April 6, 1992, the machinery, equipment and materials being used for
production at Complex were pulled out from the company premises and transferred to
the premises of Ionics Circuit, Inc. (Ionics) at Cabuyao, Laguna. The following day, a total
closure of company operation was effected at Complex.

A complaint was, thereafter, filed with the Labor Arbitration Branch of the NLRC for unfair
labor practice, illegal closure/illegal lockout, money claims. The Union alleged that the
pull-out of the machinery, equipment and materials from the company premises, which
resulted to the sudden closure of the company was in violation of Sections 3 and 8, Rule
XIII, Book V of the Labor Code of the Philippines4 and the existing CBA. Ionics was
impleaded as a party defendant because the officers and management personnel of
Complex were also holding office at Ionics with Lawrence Qua as the President of both
companies.

Complex, on the other hand, averred that since the time the Union filed its
notice of strike, there was a significant decline in the quantity and quality of
the products in all of the production lines. The delivery schedules were not met
prompting the customers to lodge complaints against them. Fearful that the
machinery, equipment and materials would be rendered inoperative and
unproductive due to the impending strike of the workers, the customers
ordered their pull-out and transfer to Ionics. Thus, Complex was compelled to
cease operations.

Ionics contended that it was an entity separate and distinct from Complex and had been
in existence since July 5, 1984 or eight (8) years before the labor dispute arose at
Complex. Like Complex, it was also engaged in the semi-conductor business where the
machinery, equipment and materials were consigned to them by their customers. While
admitting that Lawrence Qua, the President of Complex was also the President of Ionics,
the latter denied having Qua as their owner. Ionics further argued that the hiring of some
displaced workers of Complex was an exercise of management prerogatives. Likewise,
the transfer of the machinery, equipment and materials from Complex was the decision
of the owners who were common customers of Complex and Ionics.

DECISION OF THE LA: Labor Arbiter rendered a decision the dispositive portion of which
reads: respondent Complex Electronics Corporation and/or Ionics Circuit Incorporated
and/or Lawrence Qua, to reinstate the 531 above-listed employees to their former
position. The charge of slowdown strike filed by respondent Complex against the union is
hereby dismissed for lack of merit.

DECISION OF THE NLRC: The assailed decision is hereby ordered vacated and set aside,
and a new one entered ordering respondent Complex Electronics Corporation to pay 531
complainants equivalent to one month pay in lieu of notice and separation pay
equivalent to one month pay for every year of service and a fraction of six months
considered as one whole year. (No reinstatement here)

On petition, the Union presented additional documentary evidence which consisted of a

newspaper clipping in the Manila Bulletin bearing the picture of Lawrence Qua with the
following inscription:
RECERTIFICATION. The Cabuyao (Laguna) operation of Ionic Circuits, Inc. consisting of
plants 2, 3, 4 and 5 was recertified to ISO 9002 as electronics contract manufacturer by
the TUV, a rating firm with headquarters in Munich, Germany. Lawrence Qua, Ionics
president and chief executive officer, holds the plaque of recertification presented by
Gunther Theisz (3rd from left), regional manager of TUV Products Services Asia during
ceremonies held at Sta. Elena Golf Club.

The Union claimed that the said clipping showed that both corporations, Ionics and
Complex are one and the same. In answer to this allegation, Ionics explained that the
photo which appeared at the Manila Bulletin issue pertained only to respondent Ionics
recertification of ISO 9002. There was no mention about Complex Electronics
Corporation. Ionics claimed that a mere photo is insufficient to conclude that Ionics and
Complex are one and the same.

ISSUES: Whether or not Complex committed illegal lockout/illegal dismissal (NO);

Whether or not Complex and Ionics are one and the same (NO); Whether or not Complex
is guilty of unfair labor practices (NO)

HELD: The Union anchors its position on the fact that Lawrence Qua is both the president
of Complex and Ionics and that both companies have the same set of Board of Directors.
It claims that business has not ceased at Complex but was merely transferred to Ionics, a
runaway shop. To prove that Ionics was just a runaway shop, petitioner asserts that out of
the 80,000 shares comprising the increased capital stock of Ionics, it was Complex that
owns majority of said shares with P1,200,000.00 Thus, according to the Union, there is a
clear ground to pierce the veil of corporate fiction.

The Union further posits that there was an illegal lockout/illegal dismissal considering
that the company had a gross sales of P61,967,559 from a capitalization of
P1,500,000.00. It even ranked number thirty among the top fifty corporations in
Muntinlupa. Complex, therefore, cannot claim that it was losing in its business which
necessitated its closure.

The Unions contentions are untenable.

A runaway shop is defined as an industrial plant moved by its owners from one location
to another to escape union labor regulations or state laws, but the term is also used to
describe a plant removed to a new location in order to discriminate against employees at
the old plant because of their union activities. It is one wherein the employer moves its
business to another location or it temporarily closes its business for anti-union purposes.
A runaway shop in this sense, is a relocation motivated by anti-union animus rather
than for business reasons. In this case, however, Ionics was not set up merely for the
purpose of transferring the business of Complex. At the time the labor dispute arose at
Complex, Ionics was already existing as an independent company.

The mere fact that one or more corporations are owned or controlled by the same or
single stockholder is not a sufficient ground for disregarding separate corporate
personalities.

Ionics may be engaged in the same business as that of Complex, but this fact alone is
not enough reason to pierce the veil of corporate fiction of the corporation. Well-settled is
the rule that a corporation has a personality separate and distinct from that of its officers
and stockholders. This fiction of corporate entity can only be disregarded in certain cases
such as when it is used to defeat public convenience, justify wrong, protect fraud, or
defend crime. To disregard said separate juridical personality of a corporation, the
wrongdoing must be clearly and convincingly established.

As to the additional documentary evidence which consisted of a newspaper clipping filed

by petitioner Union, we agree with respondent Ionics that the photo/newspaper clipping
itself does not prove that Ionics and Complex are one and the same entity. The
photo/newspaper clipping merely showed that some plants of Ionics were recertified to
ISO 9002 and does not show that there is a relation between Complex and Ionics except
for the fact that Lawrence Qua was also the president of Ionics. However, as we have
stated above, the mere fact that both of the corporations have the same president is not
in itself sufficient to pierce the veil of corporate fiction of the two corporations.

We, likewise, disagree with the Union that there was in this case an illegal lockout/illegal
dismissal. Lockout is the temporary refusal of employer to furnish work as a result of an
industrial or labor dispute. It may be manifested by the employers act of excluding
employees who are union members. In the present case, there was a complete cessation
of the business operations at Complex not because of the labor dispute. It should be
recalled that, before the labor dispute, Complex had already informed the employees
that they would be closing the Lite-On Line. When Complex filed a notice of closure of its
Lite-On Line, the employees filed a notice of strike which greatly alarmed the customers
of Complex and this led to the pull-out of their equipment, machinery and materials from
Complex. Thus, without the much needed equipment, Complex was unable to continue
its business. It was left with no other choice except to shut down the entire business. The
closure, therefore, was not motivated by the union activities of the employees, but rather
by necessity since it can no longer engage in production without the much needed
materials, equipment and machinery.
At first glance after reading the decision a quo, it would seem that the closure of
respondents operation is not justified. However, a deeper examination of the records
along with the evidence, would show that the closure, although it was done abruptly as
there was no compliance with the 30-day prior notice requirement, said closure was not
intended to circumvent the provisions of the Labor Code on termination of employment.
The closure of operation by Complex was not without valid reasons. Customers of
respondent alarmed by the pending labor dispute and the imminent strike to be foisted
by the union, as shown by their strike vote, directed respondent Complex to pull-out its
equipment, machinery and materials to other safe bonded warehouse. Respondent being
mere consignees of the equipment, machinery and materials were without any recourse
but to oblige the customers directive.

As to the claim of petitioner Union that Complex was gaining profit, the financial
statements for the years 1990, 1991 and 1992 issued by the auditing and accounting
firm Sycip, Gorres and Velayo readily show that Complex was indeed continuously
experiencing deficit and losses. Nonetheless, whether or not Complex was incurring great
losses, it is still one of the managements prerogative to close down its business as long
as it is done in good faith

Going now to the issue of personal liability of Lawrence Qua, it is settled that in the
absence of malice or bad faith, a stockholder or an officer of a corporation cannot be
made personally liable for corporate liabilities.

By and large, we cannot hold respondents guilty of unfair labor practice as

found by the Labor Arbiter since the closure of operation of Complex was not
established by strong evidence that the purpose of said closure was to
interfere with the employees right to selforganization and collective
bargaining. As very clearly established, the closure was triggered by the customers
pull-out of their equipment, machinery and materials, who were alarmed by the
pending labor dispute and the imminent strike by the union, and as a
protection to their interest pulled-out of business from Complex who had no
recourse but to cease operation to prevent further losses. The indiscretion
committed by the Union in filing the notice of strike, which to our mind is not
the proper remedy to question the amount of benefits due the complainants
who will be retrenched at the closure of the Lite-On Line, gave a wrong signal
to customers of Complex, which consequently resulted in the loss of
employment of not only a few but to all of the workers. It may be worth saying
that the right to strike should only be a remedy of last resort and must not be
used as a show of force against the employer.

Complex claims that the respondent NLRC erred in ordering them to pay the Union one
(1) month pay as indemnity for failure to give notice to its employees at least thirty (30)
days before such closure since it was quite clear that the employees were notified of the
impending closure of the Lite-On Line as early as March 9, 1992. Moreover, the abrupt
cessation of operations was brought about by the sudden pull-out of the customers which
rendered it impossible for Complex to observe the required thirty (30) days notice. The
purpose of the notice requirement is to enable the proper authorities to determine after
hearing whether such closure is being done in good faith.

While the law acknowledges the management prerogative of closing the business, it does
not, however, allow the business establishment to disregard the requirements of the law.
The well settled rule is that the employer shall be sanctioned for non-compliance with the
requirements of, or for failure to observe due process in terminating from service its
employee.

We, therefore, find no grave abuse of discretion on the part of the NLRC in ordering
Complex to pay one (1) month salary by way of indemnity. It must be borne in mind that
what is at stake is the means of livelihood of the workers so they are at least entitled to
be formally informed of the management decisions regarding their employment.
Complex, likewise, maintains that it is not liable for the payment of separation pay since
Article 283 of the Labor Code awards separation pay only in cases of closure not due to
serious business reversals

It is settled that in case of closures or cessation of operation of business establishments

not due to serious business losses or financial reverses, the employees are always given
separation benefits.
In the instant case, notwithstanding the financial losses suffered by Complex, such was,
however, not the main reason for its closure. Complex admitted in its petition that the
main reason for the cessation of the operations was the pull-out of the materials,
equipment and machinery from the premises of the corporation as dictated by its
customers

WHEREFORE, premises considered, the assailed decision of the NLRC is AFFIRMED.

Me-Shurn Corporation v. Me-Shurn Workers Union-FSM,

G. R. No. 156292, Jan. 11, 2005, 448 SCRA 41

SUMMARY: To justify the closure of a business and the termination of the services of the
concerned employees, the law requires the employer to prove that it suffered substantial
actual losses. The cessation of a companys operations shortly after the organization of a
labor union, as well as the resumption of business barely a month after, gives credence
to the employees claim that the closure was meant to discourage union membership
and to interfere in union activities. These acts constitute unfair labor practices.

FACTS: On June 7, 1998, the regular rank and file employees of Me-Shurn Corporation
organized Me-Shurn Workers Union-FSM, an affiliate of the February Six Movement
(FSM).6 Respondent union had a pending application for registration with the Bureau of
Labor Relations (BLR). Ten days later, or on June 17, 1998, petitioner corporation started
placing on forced leave all the rank and file employees who were members of the unions
bargaining unit.8

Respondent union filed a Petition for Certification Election with the Med-Arbitration Unit of
the Department of Labor and Employment (DOLE).

Instead of filing an answer to the Petition, the corporation filed a comment stating that it
would temporarily lay off employees and cease operations, on account of its alleged
inability to meet the export quota required by the Board of Investment.

While the Petition was pending, 184 union members allegedly submitted a
retraction/withdrawal thereof on July 14, 1998. As a consequence, the med-arbiter
dismissed the Petition. On May 7, 1999, Department of Labor and Employment (DOLE)
Undersecretary Rosalinda Dimapilis-Baldoz granted the unions appeal and ordered the
holding of a certification election among the rank and file employees of the corporation.

Meanwhile, on August 4, 1998, respondent union filed a Notice of Strike against

petitioner corporation on the ground of unfair labor practice (illegal lockout and union
busting).

Chou Fang Kuen (alias Sammy Chou, the other petitioner herein) and Raquel Lamayra
(the Filipino administrative manager of the corporation) imposed a precondition for the
resumption of operation and the rehiring of laid off workers. He allegedly required the
remaining union officers to sign an Agreement containing a guarantee that upon their
return to work, no union or labor organization would be organized. Instead, the union
officers were to serve as mediators between labor and management. The operations of
the corporation resumed in September 1998.
On November 5, 1998, the union reorganized and elected a new set of officers.
Respondent Rosalina Cruz was elected president.15 Thereafter, it filed two Complaints
chargeing petitioner corporation with unfair labor practice, illegal dismissal,
underpayment of wages and deficiency in separation pay.

The corporation countered that because of economic reversals, it was compelled to close
and cease its operations to prevent serious business losses; that under Article 283 of the
Labor Code, it had the right to do so; that in August 1998, it had paid its 342 laid off
employees separation pay and benefits in the total amount of P1,682,863.88; and that by
virtue of these payments, the cases had already become moot and academic. It also
averred that its resumption of operations in September 1998 had been announced and
posted at the Bataan Export Processing Zone, and that some of the former employees
had reapplied.

DECISION OF THE LA: Dismissed the Complaints for lack of merit. He ruled that (1) actual
and expected losses justified the closure of petitioner corporation and its dismissal of its
employees; (2) the voluntary acceptance of separation pay by the workers precluded
them from questioning the validity of their dismissal; and (3) the claim for separation pay
lacked factual basis.

DECISION OF THE NLRC: On appeal, the NLRC reversed the Decision of Labor Arbiter
Isorena. Finding petitioners guilty of unfair labor practice, the Commission ruled that the
closure of the corporation shortly after respondent union had been organized, as well as
the dismissal of the employees, had been effected under false pretenses. The true reason
therefor was allegedly to bar the formation of the union. Accordingly, the NLRC held that
the illegally dismissed employees were entitled to back wages.

On appeal to the CA, Petitioners added that respondent unions personality to represent
the affected employees had already been repudiated by the workers themselves in the
certification election conducted by the DOLE.

DECISION OF THE CA: The CA dismissed the Petition because of the failure of petitioners
to submit sufficient proof of business losses. It found that they had wanted merely to
abort or frustrate the formation of respondent union. The burden of proving that the
dismissal of the employees was for a valid or authorized cause rested on the employer.

The appellate court further affirmed the unions legal personality to represent the
employees. It held that (1) registration was not a prerequisite to the right of a labor
organization to litigate; and (2) the cases may be treated as representative suits, with
respondent union acting for the benefit of all its members.

ISSUES: Whether the dismissal of the employees of petitioner Meshurn Corporation is for
an authorized cause (NO)

Whether respondents can maintain a suit against petitioners. (YES)

HELD: First Issue: Validity of the Dismissal

The reason invoked by petitioners to justify the cessation of corporate operations was
alleged business losses. Yet, other than generally referring to the financial crisis in 1998
and to their supposed difficulty in obtaining an export quota, interestingly, they never
presented any report on the financial operations of the corporation during the period
before its shutdown. Neither did they submit any credible evidence to substantiate their
allegation of business losses.

Basic is the rule in termination cases that the employer bears the burden of showing that
the dismissal was for a just or authorized cause. Otherwise, the dismissal is deemed
unjustified.
However, as previously stated, in all the proceedings before the two quasi-judicial bodies
and even before the CA, no evidence was submitted to show the corporations alleged
business losses. It is only now that petitioners have belatedly submitted the corporations
income tax returns from 1996 to 1999 as proof of alleged continued losses during those
years.

Again, elementary is the principle barring a party from introducing fresh defenses and
facts at the appellate stage. Petitioners must bear the consequence of their neglect.
Indeed, their unexplained failure to present convincing evidence of losses at the early
stages of the case clearly belies the credibility of their present claim.

Obviously, on the basis of the evidenceor the lack thereofthe appellate court cannot
be faulted for ruling that the NLRC did not gravely abuse its discretion in finding that the
closure of petitioner corporation was not due to alleged financial losses.

At any rate, even if we admit these additional pieces of evidence, the circumstances
surrounding the cessation of operations of the corporation reveal the doubtful character
of its supposed financial reason.

First, the claim of petitioners that they were compelled to close down the company to
prevent further losses is belied by their resumption of operations barely a month after
the corporation supposedly folded up.

Moreover, petitioners attribute their loss mainly to their failure to obtain an export quota
from the Garments and Textile Export Board (GTEB). Yet, as pointed out by respondents,
the corporation resumed its business without first obtaining an export quota from the
GTEB. Besides, these export quotas pertain only to business with companies in the
United States and do not preclude the corporation from exporting its products to other
countries. In other words, the business that petitioner corporation engaged in did not
depend entirely on exports to the United States.

Second, the Statements of Income and Deficit for the years 1996 and 1997 show that at
the beginning of 1996, the corporation had a deficit of P2,474,505. Yet, the closure was
effected only after more than a year from such year-end deficit; that is, in the middle of
1998, shortly after the formation of the union.

On the other hand, the Statement of Income and Deficit for the year 1998 does not
reflect the extent of the losses that petitioner corporation allegedly suffered in the
months prior to its closure in July/August 1998. This document is not an adequate and
competent proof of the alleged losses, considering that it resumed operations in the
succeeding month of September.

If petitioners were seriously desirous of averting losses, why did the corporation not close
in 1996 or earlier, when it began incurring deficits? They have not satisfactorily explained
why the workers dismissal was effected only after the formation of respondent union in
September 1998.

We also take note of the allegation that after several years of attempting to organize a
union, the employees finally succeeded on June 7, 1998. Ten days later, without any valid
notice, all of them were placed on forced leave, allegedly because of lack of quota.

All these considerations give credence to their claim that the closure of the corporation
was a mere subterfuge, a systematic approach intended to dampen the enthusiasm of
the union members.28

Third, as a condition for the rehiring of the employees, the union officers were made to
sign an agreement that they would not form any union upon their return to work. This
move was contrary to law.
Fourth, notwithstanding the Petition for Certification Election filed by respondents and
despite knowledge of the pendency thereof, petitioners recognized a newly formed union
and hastily signed with it an alleged Collective Bargaining Agreement. Their preference
for the new union was at the expense of respondent union.

Fifth, petitioners were not able to prove their allegation that some of the employees
contracts had expired even before the cessation of operations. We find this claim
inconsistent with their position that all 342 employees of the corporation were paid their
separation pay plus accrued benefits in August 1998.

Sixth, proper written notices of the closure were not sent to the DOLE and the employees
at least one month before the effectivity date of the termination, as required under the
Labor Code. Notice to the DOLE is mandatory to enable the proper authorities to
ascertain whether the closure and/or dismissals were being done in good faith and not
just as a pretext for evading compliance with the employers just obligations to the
affected employees.

All these factors strongly give credence to the contention of respondents that the real
reason behind the shutdown of the corporation was the formation of their union. Note
that, to constitute an unfair labor practice, the dismissal need not entirely and
exclusively be motivated by the unions activities or affiliations. It is enough that the
discrimination was a contributing factor. If the basic inspiration for the act of the
employer is derived from the affiliation or activities of the union, the formers assignment
of another reason, no matter how seemingly valid, is unavailing.

Concededly, the determination to cease operations is a management prerogative that

the State does not usually interfere in. Indeed, no business can be required to continue
operating at a loss, simply to maintain the workers in employment. That would be a
taking of property without due process of law. But where it is manifest that the closure is
motivated not by a desire to avoid further losses, but to discourage the workers from
organizing themselves into a union for more effective negotiations with management, the
State is bound to intervene.

Second Issue: Legal Personality of Respondent Union

Neither are we prepared to believe petitioners argument that respondent union was not
legitimate. It should be pointed out that on June 29, 1998, it filed a Petition for
Certification Election. While this Petition was initially dismissed by the med-arbiter on the
basis of a supposed retraction, note that the appeal was granted and that Undersecretary
Dimapilis-Baldoz ordered the holding of a certification election.

The DOLE would not have entertained the Petition if the union were not a legitimate labor
organization within the meaning of the Labor Code. Verily, the union has the requisite
personality to sue in its own name in order to challenge the unfair labor practice
committed by petitioners against it and its members.

WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against
the petitioners.