ALABANG COUNTRY CLUB INC., ET AL. VS.

NATIONAL LABOR RELATIONS

COMMISSION, ET AL.
G.R. No. 157611. August 9, 2005
Facts:
Petitioner Alabang Country Club Inc. (ACCI), is a stock, non-profit corporation that operates and
maintains a country club and various sports and recreational facilities for the exclusive use of its
members. Sometime in 1993, Francisco Ferrer, then President of ACCI, requested its Internal Auditor, to
conduct a study on the profitability of ACCIs Food and Beverage Department (F & B Department).
Consequently, report showed that from 1989 to 1993, F & B Department had been incurring substantial
losses. Realizing that it was no longer profitable for ACCI to maintain its own F & B Department, the
management decided to cease from operating the department and to open the same to a contractor, such
as a concessionaire, which would be willing to operate its own food and beverage business within the club.
Thus, ACCI sent its F & B Department employees individual letters informing them that their services
were being terminated and that they would be paid separation pay. The Union in turn, with the authority
of individual respondents, filed a complaint for illegal dismissal.
Issue:
Whether or not the clubs right to terminate its employees for an authorized cause, particularly to secure
its continued viability and existence is valid.
Held:
When petitioner decided to cease operating its F & B Department and open the same to a concessionaire,
it did not reduce the number of personnel assigned thereat. It terminated the employment of all personnel
assigned at the department.
Petitioners failure to prove that the closure of its F & B Department was due to substantial losses
notwithstanding, the Court finds that individual respondents were dismissed on the ground of closure or
cessation of an undertaking not due to serious business losses or financial reverses, which is allowed
under Article 283 of the Labor Code. The closure of operation of an establishment or undertaking not due
to serious business losses or financial reverses includes both the complete cessation of operations and the
cessation of only part of a companys activities.
ANTONIO CATATISTA, ET AL. VS. NLRC, ET AL.
G.R. NO. 102422, AUGUST 3, 1995
ROMERO, J.

FACTS
Petitioners were regular plantation workers in Hacienda Binanlutan, one of the sixhaciendas
operated and managed by private respondent Victorias Milling Company,Inc. Sometime in June 1984,
private respondent decided to permanently stop and close its sugarcane operations in Hacienda
Binanlutan "due to low sugar prices which affected the viability and profitability of said hacienda" and
convert it instead into anipil-ipil plantation. In view of such decision, management subsequently held a
conference with all thirteen field workers to explain to them the reason for this move, as well as the
computation of their termination pay. In a letter dated July 10, 1984, each of the thirteen petitioners was
formally informed of private respondent's decision to close and stop sugarcane operations and the reason
for such closure. Petitioners received their termination pay or retirement pay under the pension plan,
whichever was higher.
ISSUE:
Whether or not the closure of the business is in good faith to merit termination of its employees?
HELD:
Yes.

The termination of employment of the employees of Hacienda Binanlutan brought about by the closure is
to be considered as retrenchment as Hacienda Binanlutan is only one of the six haciendas of private
respondent. Therefore, it has to abide by the following requisites: (a) the losses expected should be
substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be
reasonably imminent; (c) the retrenchment must be reasonably necessary and likely to effectively prevent
the expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses
sought to be forestalled, must be proved by sufficient and convincing evidence.
Having determined that private respondent suffered losses and had to resort to retrenchment of its
employees in Hacienda Binanlutan to prevent further losses, this Court holds that private respondent was
within its rights in closing Hacienda Binanlutan and in terminating the service of petitioners.
Article 283 of the Labor Code provides, inter alia, that the employer may terminate the employment of his
employees to prevent losses. For an employer to validly terminate the service of his employees under this
ground, he has to comply with two requirements, namely: (a) serving a written notice on the workers and
the Department of Labor and Employment at least one month before the taking effect of the closure, and
(b) payment of separation pay equivalent to one month pay or at least one-half (l/2) month pay for every
year of service, whichever is higher, with a fraction of at least six months to be considered one whole year.
In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business
operations or undertaking even if he is not suffering from serious business losses or financial reverses, as
long as he pays his employees their termination pay in the amount corresponding to their length of
service.
Galaxi Steel Workers Union vs. NLRC,
G.R. No. 165757,
October 17, 2006

Facts:
Galaxie is a corporation engaged in the business of manufacturing and sale of re-bars and steel billets
which are used primarily in the construction of high-rise buildings. On account of serious business losses
which occurred in 1997 up to mid-1999 totaling around P127,000,000.00, Galaxie decided to close down
its business operations. Galaxie thus filed on July 30, 1999 a written notice with the DOLE informing the
latter of its intended closure and the consequent termination of its employees effective August 31, 1999.
And it posted the notice of closure on the corporate bulletin board. Petitioners Galaxie Steel Workers
Union and Galaxie employees filed a complaint for illegal dismissal, unfair labor practice, and money
claims against Galaxie. The Labor Arbiter declared valid Galaxies closure of business but nevertheless
ordered it to pay the employees separation pay, pro-rata 13th month pay, and vacation and sick leave
credits. The NLRC upheld the Labor Arbiters decision. CA upheld the NLRC decision. Hence, the present
petition for review.
Issues:
Whether or not petitioners are entitled to separation pay.
Whether or not the written notice posted by Galaxie on the company bulletin board sufficiently complies
with the notice requirement under Article 283 of the Labor Code.
Ruling:
In this case, the Labor Arbiter, the NLRC, and the CA were unanimous in ruling that Galaxies closure or
cessation of business operations was due to serious business losses or financial reverses, and not because
of any alleged anti-union position. The Court finds no reason to modify such finding. In any event,
petitioners contend that Galaxie did not serve written notices of the closure of business operations upon
its employees, it having merely posted a notice on the company bulletin board. Indeed, Galaxies
documentary evidence shows that it had been experiencing serious financial losses at the time it closed
business operations.
Respecting petitioners claim for separation pay, in North Davao Mining Corporation v. National Labor
Relations Commission, this Court held that Article 283 governs the grant of separation benefits "in case of

closures or cessation of operation" of business establishments "NOT due to serious business losses or
financial reverses . . ." Where, the closure then is due to serious business losses, the Labor Code does not
impose any obligation upon the employer to pay separation benefits. The denial of petitioners claim for
separation pay was thus in order.
With regard to the notice requirement, the Labor Arbiter found, and it was upheld by the NLRC and the
Court of Appeals, that the written notice of closure or cessation of Galaxies business operations was
posted on the company bulletin board one month prior to its effectivity. The mere posting on the company
bulletin board does not, however, meet the requirement under Article 283 of "serving a written notice on
the workers." The purpose of the written notice is to inform the employees of the specific date of
termination or closure of business operations, and must be served upon them at least one month before
the date of effectivity to give them sufficient time to make the necessary arrangements. In order to meet
the foregoing purpose, service of the written notice must be made individually upon each and every
employee of the company.
Industrial Timber Corp. vs. Ababon,
G.R. No. 164518,
Janury 25, 2006 and March 28, 2007

Facts:
Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant located at Agusan,
Pequeo, Butuan City, leased to Industrial Timber Corporation (ITC) on August 30, 1985 for a period of
five years. Thereafter, ITC commenced operation of the plywood plant and hired 387 workers. On March
16, 1990, ITC notified the Department of Labor and Employment (DOLE) and its workers that effective
March 19, 1990 it will undergo a no plant operation due to lack of raw materials and will resume only
after it can secure logs for milling. Meanwhile, IPGC notified ITC of the expiration of the lease contract in
August 1990 and its intention not to renew the same. On June 26, 1990, ITC notified the DOLE and its
workers of the plants shutdown due to the non-renewal of anti-pollution permit that expired in April
1990. This fact and the alleged lack of logs for milling constrained ITC to lay off all its workers until
further notice. This was followed by a final notice of closure or cessation of business operations on August
17, 1990 with an advice for all the workers to collect the benefits due them under the law and CBA. On
October 15, 1990, IPGC took over the plywood plant after it was issued a Wood Processing Plant Permit
No. WPR-1004-081791-042, which included the anti-pollution permit, by the Department of
Environment and Natural Resources (DENR) coincidentally on the same day the ITC ceased operation of
the plant. This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for illegal
dismissal, unfair labor practice and damages. They alleged, among others, that the cessation of ITCs
operation was intended to bust the union and that both corporations are one and the same entity being
controlled by one owner.
Issue:
Whether or not Ababon, et al. were illegally dismissed due to the closure of ITCs business; and whether
they are entitled to separation pay, backwages, and other monetary awards.
Ruling:
Under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business
operations: (a) service of a written notice to the employees and to the DOLE at least one month before the
intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment to the
employees of termination pay amounting to one month pay or at least one-half month pay for every year
of service, whichever is higher. As borne out from the records, respondent ITC actually underwent no
plant operation since 19 March 1990 due to lack of log supply. This fact is admitted by complainants
(Minutes of hearing, 28 October 1991). Since then several subsequent incidents prevented respondent
ITC to resume its business operations e.g. expiration and non-renewal of the wood processing plant
permit, anti-pollution permit, and the lease contract on the plywood plant.

NORTH DAVAO MINING CORPORATION V. NLRC

254 SCRA 721
J. PANGANIBAN
FACTS
Petitioner was incorporated in 1974 as a 100% privately owned company, but was co-owned by PNB later
as a result of a conversion into equity of a portion of loans obtained by petitioner from said bank. PNB
later transferred all its loans to and equity in North Davao in favor of the national government.
Respondent Wilfredo Guillema is one among several employees of petitioner who were separated by
reason of the companys closure, and who were thecomplainants.3.On May 31, 1992, petitioner completely
ceased operations due to serious business reverses. From 1988 until its closure in 1992, North Davao
suffered net losses averaging P 3 billion per year each of the five years prior to its closure.
When it ceased operations, its remaining employees were separated and given the equivalent of 12.5 days
pay for every year of service, computed on their basic monthly pay, in addition to the commutation to cash
of their unused vacation and sickleaves.5.However, it appears that, during the life of the petitioner
corporation, from the beginning of operations in 1981 until its closure in 1992, it had been paying
separation pay equivalent to 30 days pay for every year of service.6.The NLRC ruled affirming the Labor
Arbiters decision that the separation pay equivalent to 30 days pay for every year of service has ripened
into an obligation and depriving respondents would be discriminatory. Issue:
Whether or not an employer whose business operations ceased due to serious business losses or financial
reverses is obliged to pay separation pay to its employees separated by reason of such closure.
HELD
NO. The companys practice of giving one months pay for every year of service could no longer be
continued precisely because the company could not afford it anymore. It was forced to close down on
account of accumulated losses of over P20 billion. The fact that less separation benefits were granted
when the company finally met its business death cannot be characterized as discrimination. Such action
was dictated not by a discriminatory management option but by its complete inability to continue its
business life due to accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. To require it
to continue being generous when it is no longer in a position to do so would certainly be unduly
oppressive, unfair and most revolting to the conscience.
REAHS CORPORATION VS. NLRC
271 SCRA 247
PADILLA, J.
FACTS
This is a petition for certiorari to annul and set aside the decision rendered by the National Labor
Relations Commission (NLRC) which affirmed the decision of the labor arbiter holding individual
petitioners jointly and severally liable with petitioner Reahs Corporation to pay private respondents
claims for underpayment of wages, holiday pay, 13th month pay and separation pay. Reahs is engaged in
the business of a sing-along, coffee shop and massage clinic and the private respondents were employees
therein. Petitioners claim that due to poor business, increase in the rental cost and the failure of Meralco
to reconnect the electrical services in the establishment, it suffered losses leading to its closure.
Petitioners contend mainly that Article 283 of the Labor Code, exempts establishment(s) from payment
of termination pay when the closure of the business is due to serious business loses or financial reverses ;
that petitioners Castulo, Pascua and Valenzuela, while admittedly the acting chairman of the board, board
member and accountant-acting manager respectively of Reahs Corporation, cannot be held jointly and
severally liable with Reahs unless there is evidence to show that the cause of the closure of the business
was due to the criminal negligence of the officers.
ISSUE
Whether or not petitioners-officers can be held jointly and severally liable with the corporation in the
payment of separation pay to private respondents under Article 283 of the Labor Code.

HELD
Article 283 provides as an authorized cause in the termination of employment the closing or cessation of
operation of the establishment or undertaking. However, the burden of proving that the termination was
for a valid or authorized cause shall rest on the employer. In the absence of such proof of serious business
losses or financial reverses, the employer closing his business is obligated to pay his employees and
workers their separation pay. In the case at bar, the corporations alleged serious business losses and
financial reverses were not amply shown or proved. To justify solidary liability, there must be an
allegation or showing that the officers of the corporation deliberately or maliciously designed to evade the
financial obligation of the corporation to its employees, or a showing that the officers indiscriminately
stopped its business to perpetrate an illegal act, as a vehicle for the evasion of existing obligations, in
circumvention of statutes, and to confuse legitimate issues. In this case, the issue is not limited to
payment of separation pay but also payment of labor standard benefits such as underpayment of wages,
holiday pay and 13th month pay. In fine, these officers were conscious that the corporation was violating
labor standard provisions but they did not act to correct theses violations, instead, they abruptly closed
business. Neither did they offer separation pay to the employees as they conveniently resorted to a lame
excuse that they suffered serious business losses, knowing fully well that they had no substantial proof in
their hands to prove such losses.
ANTONIO CARAG vs. NLRC
G.R. No. 147590
April 2, 2007
National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union
(MACLU), on behalf of all of MACs rank and file employees, filed a complaint against filed a complaint
against MAC for illegal dismissal brought about by its illegal closure of business. They included in their
complaint Mariveles Apparel Corporations Chairman of the Board Antonio Carag in order to be solidarily
liable for the illegal dismissal and illegal closure of business. According to the Labor Union of MAC, the
Corporation suddenly closed its business without following the notice as laid down in the Labor Law of
the Philippines. The Labor Arbiter decided in favor of the Labor Union and held that Antonio Carag being
the owner of the corporation be solidarily liable for the payment of separation pay and backwages
of the rank and file employees. Antonio Carag questioned the decision of the Labor Arbiter and alleged
that the Corporation and its officers have separate and distinct personality and the latter cannot be h eld
liable for the payment of separation pay and backwages of the rank and file employees. Antonio
Carag questioned the decision of the Labor Arbiter and alleged that the Corporation and its officer shave
separate and distinct personality and the latter cannot be held liable solidarily in cases of payment of
damages held liable solidarily in cases of payment of damages.
Issue:
Whether or not Carag may be held liable for the payment of the dismissed employees in the closure of
business.
Held:
NO.
Neither does bad faith arise automatically just because a corporation fails to comply with the notice
requirement of labor laws on company closure or dismissal of employees. The failure to give notice is not
an unlawful act because the law does not define such failure as unlawful. Such failure to give notice is a
violation of procedural due process but does not amount to an unlawful or criminal act. Such procedural
defect is called illegal dismissal because it fails to comply with mandatory procedural requirements, but it
is not illegal in the sense that it constitutes an unlawful or criminal act.
For a wrongdoing to make a director personally liable for debts of the corporation, the wrongdoing
approved or assented to by the director must be a patently unlawful act. Mere failure to comply with the
notice requirement of labor laws on company closure or dismissal of employees does not amount to a
patently unlawful act. Patently unlawful acts are those declared unlawful by law which imposes penalties
for commission of such unlawful acts. There must be a law declaring the act unlawful and penalizing the
act.

Sangwoo Philippines & Tadeo v. Sangwoo Employee Union

G.R. No. 173154 : December 9, 2013
Perlas Bernabe, J.
Facts:
On September 15, 2003, SPI temporarily ceased operations. Thereafter, it successively filed two (2) letters
with the DOLE for the extension of the temporary shutdown until March 15, 2004. Meanwhile, on
October 28, 2003, SPEU filed a complaint for unfair labor practice, illegal closure, illegal dismissal,
damages and attorneys fees before the Regional Arbiitraton Branch IV of the NLRC.Subsequently, SPI
posted, in conspicuous places within the company premises, notices of its permanent closure and
cessation of business operations, effective March 16, 2004, due to serious economic losses and financial
reverses. Forthwith, SPI offered separation benefits of one-half () month pay for every year of service to
each of its employees. 234 employees of SPI accepted the offer, received the said sums and executed
quitclaims. Those who refused the offer, i.e., the minority employees, were nevertheless given until March
25, 2004 to accept their checks and correspondingly, execute quitclaims. However, the minority
employees did not claim the said checks.
The LA ruled in favor of SPI. The LA found that SPI was indeed suffering from serious business losses.
Consequently, SPI was not guilty of unfair labor practice, and similarly observed that it duly complied
with the requirement of furnishing notices of closure to its employees and the DOLE. Lastly, since SPIs
closure of business was due to serious business losses, it was not mandated by law to grant separation
benefits to the minority employees. The NLRC sustained the ruling of the LA, albeit with modification
saying employees are entitled to payment of separation pay equivalent to one-half (1/2) month pay for
every year of service.
CA held they are not entitled to separation pay considering that the companys closure was due to serious
business losses.
Issues:
1.

Whether or not the minority employees are entitled to separation pay

2. Whether or not SPI complied with the notice requirement of the Labor Code.
Held:
Closure of Business
Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of
business operations and/or an actual locking-up of the doors of establishment, usually due to financial
losses.
The employer is generally required to give separation benefits to its employees, unless the closure is due
to serious business losses. Article [297] of the Labor Code does not obligate an employer to pay separation
benefits when the closure is due to serious losses. To require an employer to be generous when it is no
longer in a position to do so, in our view, would be unduly oppressive, unjust, and unfair to the employer.
Ours is a system of laws, and the law in protecting the rights of the working man, authorizes neither the
oppression nor the self-destruction of the employer. (GSWU-NAFLU-KMU) v. NLRC, G.R. No. 165757,
October 17, 2006).
On notice requirement
Article 297 of the Labor Code provides that before any employee is terminated due to closure of business,
it must give a one (1) month prior written notice to the employee and to the DOLE.
With regard to the notice requirement, the Labor Arbiter found, and it was upheld by the NLRC and the
Court of Appeals, that thewritten notice of closure or cessation ofGalaxiesbusiness operations was posted
on the company bulletin board one month prior to its effectivity.
The mere posting on the company bulletin board does not, however, meet the requirement under Article
[297] of "serving a written notice on the workers." In order to meet the foregoing purpose, service of the
written notice must be made individually upon each and every employee of the company.

MANILA POLO CLUB EMPLOYEES' UNION (MPCEU) FUR-TUCP, Petitioner, v. MANILA

POLO CLUB, INC., Respondent.
G.R. No. 172846: July 24, 2013
PERALTA,J.
Facts:
On December 13, 2001, the Board of Directors of respondent Manila Polo Club, Inc., unanimously
resolved to completely terminate the entire operations of its Food and Beverage (F & B) outlets, except the
Last Chukker, and award its operations to a qualified restaurant operator or caterer.
Subsequently, on March 22, 2002, respondents Board approved the implementation of the retrenchment
program of employees who are directly and indirectly involved with the operations of the F & B outlets
and authorized then General Manager Philippe D. Bartholomi to pay the employees separation pay. On
even date, respondent sent notices to the petitioner and the affected employees (via registered mail) as
well as submitted an Establishment Termination Report to the DOLE.
Issue:
Whether or not the petitioners were lawfully dismissed.
Held:
Yes.
However, it is apparent from the records that this case involves a closure of business undertaking, not
retrenchment. The legal requirements and consequences of these two authorized causes in the
termination of employment are discernible.
Retrenchment is the reduction of personnel for the purpose of cutting down on costs of operations in
terms of salaries and wages resorted to by an employer because of losses in operation of business
occasioned by lack of work and considerable reduction in the volume of business.
Closure of a business or undertaking due to business losses is the reversal of fortune of the employer
whereby there is a complete cessation of business operations to prevent further financial drain upon an
employer who cannot pay anymore his employees since business has already stopped.
For any bona fide reason, an employer can lawfully close shop anytime. Just as no law forces anyone to go
into business, no law can compel anybody to continue the same. It would be stretching the intent and
spirit of the law if a court interferes with management's prerogative to close or cease its business
operations just because the business is not suffering from any loss or because of the desire to provide the
workers continued employment. In fine, management's exercise of its prerogative to close a section,
branch, department, plant or shop will be upheld as long as it is done in good faith to advance the
employer's interest and not for the purpose of defeating or circumventing the rights of employees under
the law or a valid agreement.
Cheniver Deco Print Technics Corporation v. NLRC,
G.R. No. 122876,
February 17, 2000
QUISUMBING, J.
Facts:
Cheniver Deco Print Technics Corporation conducts a printing business in Sta. Cruz Makati. The
Company informed its workers that it was going to transfer its site in Makati to Batangas. It gave its
employees time to inform the management of their willingness to go with petitioner, otherwise, they
would find replacements. The Union advised the company that its members were not willing to transfer
to the new site.
Issue:
Are the employees entitled to separation pay by virtue of their refusal to transfer to the business in
Batangas.

Held:
Yes. Although there is no complete dissolution of petitioners undertaking, but a mere relocation; the
phrase, closure or cessation of operation of an establishment not due to serious business losses or
reverses, under Article 283 of the Labor Code includes the cessation of only part of a companys business.
Cheniver Deco Print Technics Corporation had a legitimate reason to relocate its plant due to the
expiration of the lease contract in Makati; however, it is still required to pay its workers separation pay.
Cessation of operation not due to serious business losses is an authorized cause for termination; and the
Labor Code provides that such terminated employees are entitled to separation pay of 1 month pay or at
least month for every year of service, whichever is higher.
National Federation of Labor v. NLRC,
G.R. No. 127718,
March 2, 2000
DE LEON, JR., J.
Petitioners are members of the NFL, employed by Patalon Coconut Estate in Zamboanga City. Pursuant
to RA 6657, the Comprehensive Agrarian Reform Law, the Patalon Cocount Estate was awarded to the
Patalon Estate Reform Association, of which the petitioners are members and co-owners. As a result of
this acquisition, the Patalon Estate shut down operations and the employment of the petitioners were
severed. Petitioners did not receive separation pays. They became co-owners of the land and
subsequently filed a complaint for illegal dismissal.
Issue:
Should Patalon Coconut Estate, who had been compelled to cease operations because of compulsory
acquisition by the government of his land for purposes of agrarian reform, be made liable to pay
separation pay to the petitioners?
Held:
No. The peculiar circumstance in the case at bar involves neither the closure of an establishment nor a
reduction in personnel as contemplated in Article 283. The closure contemplated in 283 is a voluntary act
on the part of the employer. The Labor Code does not contemplate a situation where the closure is forced
upon the employer. As such, petitioners are not entitled to separation pay as private respondents did not
voluntary shut down operations as they even sought to be exempted from the coverage of RA 6657.