Republic of the Philippines

COURT OF APPEALS
Manila

TENTH DIVISION
BIGG'S INC., Petitioner,

CA-G.R. SP No. 110909

Members: LAMPAS PERALTA, F., Chairperson, ACOSTA, F. P., and GACUTAN, A. A., JJ.: Promulgated: FEBRUARY 28, 2013

- versus -

NAGKAKAISANG MANGGAGAWA NG BIGG'S, rep. by DOMINGO S. SINFUEGO, UNION PRESIDENT, Respondents.

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DECISION
ACOSTA, J.:
Before Us is a Petition for Review1 under Rule 43 of the 1997 Rules of Civil Procedure filed by Petitioner Bigg's Inc. (hereinafter Petitioner), assailing the Decision2 dated 12 September 2009 of Voluntary Arbitrator Milagros Ramin Francia in AC664-NCMBV-0402-06-2009, on the matter of the arbitration of the Validity of Closure of Naid's Outlet Resulting to Subsequent Termination of Four (4) Affected Employees, and where the Voluntary Arbitrator ruled in favor of Respondent Nagkakaisang Manggagawa ng Bigg's (hereinafter Respondent).

THE FACTS
As summarized by the Voluntary Arbitrator:
1 2 Rollo, pp. 3-15. Id.,pp. 19-26.

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Domingo Sinfuego, Ariel Agrada, Antonia Caotal, and Violeta Caparado are the four (4) employees who were terminated as a consequence of the closure of Naid's Outlet situated at Padian St., Naga City. All four (4) employees are permanent employees of respondent Bigg's Inc. and members of the complainant employees'union. The four (4) employees received on 20 May 2009 a Notice of Termination from the respondent, for the reason of huge operating losses due to poor sales leading to the complete shut down of Naid's Store at Padian Street, Naga City. Complainant in reaction to the notice received sent a letter dated 24 May 2009 to respondent asking for a Grievance Committee Meeting in conformity with their Collective Bargaining Agreement (CBA) and as a consequence thereof, the Grievance Committee met but no agreement was reached hence the matter was elevated to the National Conciliation and Mediation Board (NCMB) for preventive mediation. In said meeting complainant alleged that respondent's representative Ms. Del Finando made a categorical statement that respondent has not been having financial losses xxx. In the preventive mediation that was called complainant requested respondent to place the union members involved in any of the outlets of the respondent in lieu of casual employees and respondent agreed to study the union's request. At the next preventive mediation conference, respondent manifested that Naid's outlet will be closed on 20 June 2009 and the members involved will be terminated. Complainant reiterated their request to have the union members involved accomodated to the permanent vacant positions being held by casual employees of respondent's third party contractors and while respondent denied having vacant positions or third party casual employees, respondent agreed to check and verify the same and the management would consider the employees request to continue employment. On June 20, 2009, the Naid's Outlet was closed and the four (4) employees were barred from reporting for work and while there was still another preventive mediation conference, parties were not able to reach a mutually acceptable agreement thus requested for voluntary arbitration. xxx Respondents['] claim is that the closure of Naid's Outlet in Naga City and the consequent termination of its workers is a management prerogative. Such a decision was finally made by respondent's management after two (2)

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years of considerable and substantial losses in 2007 and 2008 and with greater losses incurred in 2009 despite efforts to reverse its financial losses. Management sent notices of closure to the Department of Labor and Employment (DOLE) Region V which the latter received on May 20, 2009 and accomplished its Termination Report and later the DOLE conducted the investigation and inspection of the premises of the Naid's. Respondent also sent a formal Notice of Termination to the affected employees, also received by them on 20 May 2009 and had offered the affected employees a geenrous package of separation pay which complainant's rejected and complained of illegal termination. Respondent maintains that the closure of Naid's Naga Outlet is a valid exercise of management prerogative. Respondent claims that an employer has the right to close an establishment or undertaking just as no law forces anyone to go into business nor compel anybody to continue the same. Along this line it is respondent's stand that it can choose to close only a branch, a department, a plant or a shop to enhance it's profits and protect its investments, citing the case of Danzas Intercontinental, Inc., vs. Daguman, April 15, 2005 and Cama vs. Joni's Food Services, Inc., March 10, 2004[.] Respondent likewise claims that it is an employer's prerogative to close or abolish a department or section of his establishment for economic reasons such as to minimize expenses and reduce capitalization just like management's prerogative to close the entire establishment and cease operations due to adverse economic conditions. Thus, respondnet claims that the termination of the four (4) complaining employees at the Naid's Naga Outlet was valid. The closure of the Naid's Outlet was for economic reasons and a valid ground for it's closure and the termination of the affected employees is but a consequence of the valid closure of the Naid's Outlet. Supporting this stand of the respondent are the written notice of termination, the offer to give a generous separation package pursuant to Art. 282 of the Labor Code of the Philippines. On the other hand, complainant argues that while it is management's prerogative to close business and as

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employer likewise has the right to terminate the services of permanent employees despite the constitutional provisions on the security of tenure of employees, complainant herein disputes the respondent's incorporated act of terminating the complainant union's four (4) members as not falling within the ambit of the causes authorized by law, citing the provisions of Article 282 and 277 of the Labor Code. Likewise complainant argues that respondent has the obligation to prove that it has been incurring huge operating losses due to poor sales for the past two years in accordance with the standards for retrenchment laid down in the case of Central Azucarera de la Carlota vs. NLRC et al., G.R. No. 100092, Dec. 29, 1995 xxx. The attached income Statements according to the complainant do not have evidentiary value in the absence of any showing that it was signed by a certified public accountant and audited by an independent auditor and neither was there a financial report or other similar documentary evidence submitted to the DOLE to prove that respondent has indeed suffered substantial operating losses for the past two (2) years. Arguing further Naid's Outlet being the smallest of respondent's corporate operations and with the least personnel, the alleged losses are statistically just a very small percentage of respondent's corporate operations, not substantial but merely d{e} minimis. Further commenting on the position paper of the respondent[,] complainant claims that although the closure of the Naid's Outlet valid, still the termination of it's employee is illegal on ground of respondent's manifest bad faith as tested from the ruling of the Supreme Courtin Villena vs. NLRC, 193 SCRA 686 xxx.3

On 12 September 2009, the Voluntary Arbitrator rendered her Decision, the dispositive portion of which reads:
In view of the foregoing premises this Voluntary Arbitrator holds that respondent failed to prove the closure of Naid's Store to be in accordance with the requirements where the closure has been based on considerable business losses. Thus, the consequential termination of the four (4) permanent employees of the complainant union cannot likewise be rendered valid and therefore orders their reinstatement to other outlets without loss of seniority rights and privileges, pay their
3 Id., pp. 20-23.

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backwages and other benefits due them from their termination until their reinstatement. For lack of evidence, attorney's fees cannot be awarded and so with the costs of the suit. SO ORDERED.4

Hence, this Petition.

ISSUES
Petitioner now comes to Us raising the following issues:
I. The Voluntary Arbitrator seriously erred and gravely abused her discretion in disregarding the right of the petitioners to CLOSE the subject branch/outlet as part of management prerogative and in applying the strict standards for retrenchment in this case. II. The Voluntary Arbitrator seriously erred and gravely abused her discretion in applying the standards of and requiring an audited financial statement as justification for the CLOSURE of subject branch/outlet. III. The Voluntary Arbitrator seriously erred and gravely abused her discretion in ordering REINSTATEMENT and payment of backwages.5

OUR RULING
Considering that the issues submitted by the Petitioner are closely intertwined, We shall discuss them jointly. The Petitioner essentially argues that what occurred in his establishment was closure and not retrenchment. It argues that closure can occur under two scenarios, i.e, 1) due to serious business losses; and 2) bona fide closure, as what happened in the instant case. And as ruled by the Supreme Court in Industrial
4 5 Id., pp. 25-26. Id., p. 7.

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Timber Corp., vs. Ababon,6 all that is required of the employer under the second category are: a) written notices to the affected employees and to the DOLE at least one (1) month before the implementation; b) the cessation of business must be in good faith; and 3) payment of termination pay equivalent to one (1) month pay or one-half () month pay for every year of service, which ever is higher. In this case, the Petitioner alleged that although it submitted annual financial statements, the same is of no moment considering that it will pay the affected employees the separation pay required by law for closure. Therefore, the Petitioner submits that the standards or requisites in order to effect a valid retrenchment should not have been applied by the Voluntary Arbitrator. We Agree with the Petitioner. At this juncture, it is well to review the pertinent provisions of the law affecting the instant situation.
Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the worker and the [Department] of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or 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 one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year.

G.R. Nos. 164518 and 164965, January 25, 2006.

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As stated, Article 283 of the Labor Code lumped in one provision the authorized causes of retrenchment and closure or cessation of business operation. In so stating the requisites, the Labor Code did not distinguish between the two (2) in providing for the requisite of giving the needed separation pay of one (1) month or at least one-half (1/8) month for every year of service. In the instant case, it was truly within the ambit of the management prerogative of the Petitioner to effect the closure of the branch (partial closure) as recognized by the Voluntary Arbitrator. It must be pointed out that the Petitioner was fairly consistent with its theory of closure right from the onset of this case before the Voluntary Arbitrator. And in whatever manner We put it, the fact remains that the Petitioner complied with the requirements of the law in notifying the affected employees7 and the DOLE8 one (1) month before the scheduled closure coupled with the offer of separation pay even at sixty percent (60%) of their basic pay. There was also nothing that can prove that the Petitioner was in bad faith in the closure of the branch. Hence, We cannot rule that what was effected in the the instant case was retrenchment and not closure. In Eastridge Golf Club Inc., vs Eastridge Golf Club Inc., Union Super et al.,9 the Supreme Court held:
Closure or cessation of business is the complete or partial cessation of the operations and/or shut-down of the establishment of the employer. It is carried out to either stave off the financial ruin or promote the business interest of the employer. Unlike retrenchment, closure or cessation of business, as an authorized cause of termination of employment, need not depend for validity on evidence of actual or imminent reversal of the employer's fortune. Article 283 authorizes termination of employment due to business closure, regardless of the underlying reasons and motivations therefor, be it financial losses or not. In the case under review, the cause invoked by petitioner in terminating the employment of respondents is not retrenchment but cessation of a single aspect of its business undertaking, i.e., the F&B Department. This is
7 8 9 Rollo, pp. 49-53. Id., pp. 46-47. G.R. No. 166760, August 22, 2008.

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evident in the notices of termination it sent to respondents where petitioner indicated that it had withdrawn from the direct operation of the F&B Department and had transferred the management thereof to the concessionaire. Also, in the various office memoranda it posted, petitioner explained that the underlying reason for the cessation of its F&B undertaking was that the economic depression had affected its sales and operations and resulted in increased overhead expenses and decreased incomes. Cessation of its F&B operations being the cause invoked by petitioner to terminate the employment of respondents, it need not present evidence of financial losses to justify such business decision. Thus, the Court agrees with petitioner that the CA erred when it declared that, for lack of evidence of financial losses, petitioner's cessation of its F&B operations was not a valid cause to terminate the employment of respondents.

The Voluntary Arbitrator however had a strained interpretation of the law in derogation of the recognized prerogative of the management in ceasing operations even if the same is a mere branch. The Voluntary Arbitrator placed so much emphasis on the fact that the losses alleged must be proven by the Petitioner in order to effect the valid separation of the Respondents. He ruled that the submitted statements which was not signed by an independent auditor does not carry weight. To the contrary, the Supreme Court in Manatad vs. Philippine Telegraph and Telephone Corp.,10 even ruled in a case of retrenchment as follows:
Retrenchment is the termination of employment initiated by the employer through no fault of the employees and without prejudice to the latter, resorted to by management during periods of business recession; industrial depression; or seasonal fluctuations, during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program, or the introduction of new methods or more efficient machinery or automation. Retrenchment is a valid management prerogative. It is, however, subject to faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence. In the
10 G.R. No. 172363, March 7, 2008.

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discharge of these requirements, it is the employer who bears the onus, being in the nature of affirmative defense. For a valid retrenchment, the following requisites must be complied with: (a) the retrenchment is necessary to prevent losses and such losses are proven; (b) written notice to the employees and to the DOLE at least one month prior to the intended date of retrenchment; and (c) payment of separation pay equivalent to one-month pay or at least one-half month pay for every year of service, whichever is higher. xxx In fact, even granting arguendo that respondent was not experiencing losses, it is still authorized by Article 283 of the Labor Code to cease its business operations. Explicit in the said provision is that closure or cessation of business operations is allowed even if the business is not undergoing economic losses. The owner, for any bona fide reason, can lawfully close shop[.] Just as no law forces anyone to go into business, no law can compel anybody to continue in it. It would indeed be stretching the intent and spirit of the law if we were to unjustly interfere with the management's prerogative to close or cease its business operations, just because said business operations are not suffering any loss or simply to provide the worker's continued employment. The law recognizes the right of every business entity to reduce its work force if the same is made necessary by compelling economic factors which would endanger its existence or stability. In spite of overwhelming support granted by the social justice provisions of our Constitution in favor of labor, the fundamental law itself guarantees, even during the process of tilting the scales of social justice towards workers and employees, "the right of enterprises to reasonable returns of investment and to expansion and growth." To hold otherwise would not only be oppressive and inhuman, but also counter-productive and ultimately subversive of the nation's thrust towards a resurgence in our economy which would ultimately benefit the majority of our people. Where appropriate and where conditions are in accord with law and jurisprudence, the Court has authorized valid reductions in the work force to forestall business losses, the hemorrhaging of capital, or even to recognize an obvious reduction in the volume of business which has rendered certain employees redundant.

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We also find that the respondent complied with the requisite notices to the employee and the DOLE to effect a valid retrenchment. Petitioner failed to refute that she received the written notice of retrenchment from respondent on 16 November 1998. Although respondent failed to furnish DOLE with a formal letter notifying it of the retrenchment, it still substantially complied with the requirement. Since the National Conciliation and Mediation Board, the reconciliatory arm of DOLE, supervised the negotiation for separation package, we agree with the Court of Appeals that it would be superfluous to still require respondent to serve notice of the retrenchment to DOLE. The separation package offered by respondent to its employees was way above the minimum requirement set by law. Aside from the separation pay equivalent to onemonth salary for every year of service, respondent offered additional monetary benefits such as one and a half month salary, pro-rated 13th month pay, conversion of unused sick and vacation leave credits, and Health Maintenance Organization and group life insurance coverage until full payment of the separation package.

Thus, there is truly no need for the Petitioner to prove even by substantial evidence that is was suffering losses to effect a partial closure of the business as ruled in the above case of Eastridge. And this ruling was even bolstered by the Supreme Court in the aforecited Manatad case that even if what occurred was a retrenchment, it is still within the ambit of management prerogative to sever the employment of workers absent any evidence of bad faith of the employer coupled with the latter's full compliance with the requisites of notice and payment of severance pay for both kinds of authorized causes of termination under Article 283 of the Labor Code. In sum, considering the above disquisition, the Voluntary Arbitrator gravely erred in rendering the assailed Decision.

WHEREFORE, the instant Petition is hereby GRANTED. The assailed Decision is REVERSED and SET ASIDE and a new one entered:

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1. Declaring the termination of the four (4) affected employees, namely: Domingo Sinfuego, Ariel Agrada, Antonia Caotal and Violeta Caparado as VALID and LEGAL; 2. Ordering the Petitioner to pay the four (4) affected employees their separation pay and other benefits as stated in its Letters to said employees all dated 19 May 2009. SO ORDERED.

FRANCISCO P. ACOSTA
Associate Justice

WE CONCUR:

FERNANDA LAMPAS PERALTA Associate Justice

ANGELITA A. GACUTAN Associate Justice

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CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

FERNANDA LAMPAS PERALTA Associate Justice

Chairperson, Tenth Division