G.R. No. 151378. March 28, 2005 JAKA FOOD PROCESSING CORPORATION, Petitioners, vs. DAR IN PACOT, RO!

ERT PARO"INOG, DA#ID !ISNAR, MAR$ON DOMINGO, R"OE$ $ESCANO a%& JONAT"AN CAGA!CA!, Respondents. DECISION GARCIA, J.: Assailed and sought to be set aside in this appeal by way o a petition or review on !ertiorari under rule "# o the Rules o Court are the ollowing issuan!es o the Court o Appeals in CA$%.R. SP. No. #&'"(, to wit) 1. D'c()(o% &a*'& 1+ No,'-.'r 2001,* reversing and setting aside an earlier de!ision o the National +abor Relations Co,,ission -N+RC./ and 2. R')o/0*(o% &a*'& 8 Ja%0ar1 2002,0 denying petitioner1s ,otion or re!onsideration. 2he ,aterial a!ts ,ay be brie ly stated, as ollows) Respondents Darwin Pa!ot, Robert Parohinog, David 3isnar, 4arlon Do,ingo, Rhoel +es!ano and 5onathan Cagab!ab were earlier hired by petitioner 5A6A 7oods Pro!essing Corporation -5A6A, or short. until the latter ter,inated their e,ploy,ent on August 0&, *&&( be!ause the !orporation was 8in dire inan!ial straits8. It is not disputed, however, that the ter,ination was e e!ted without 5A6A !o,plying with the re9uire,ent under Arti!le 0': o the +abor Code regarding the servi!e o a written noti!e upon the e,ployees and the Depart,ent o +abor and E,ploy,ent at least one -*. ,onth be ore the intended date o ter,ination. In ti,e, respondents separately iled with the regional Arbitration 3ran!h o the National +abor Relations Co,,ission -N+RC. !o,plaints or illegal dis,issal, underpay,ent o wages and nonpay,ent o servi!e in!entive leave and *:th ,onth pay against 5A6A and its ;RD 4anager, Rosana Castelo. A ter due pro!eedings, the +abor Arbiter rendered a de!ision: de!laring the ter,ination illegal and ordering 5A6A and its ;RD 4anager to reinstate respondents with ull ba!<wages, and separation pay i reinstate,ent is not possible. 4ore spe!i i!ally the de!ision dispositively reads) =;ERE7ORE, >udg,ent is hereby rendered de!laring as illegal the ter,ination o !o,plainants and ordering respondents to reinstate the, to their positions with ull ba!<wages whi!h as o 5uly :?, *&&' have already a,ounted to P::&,(@'.??. Respondents are also ordered to pay !o,plainants the a,ount o P0,((#.?? representing the unpaid servi!e in!entive leave pay o Parohinog, +es!ano and Cagab!ab an the a,ount o P*&,0:&.&@ as pay,ent or *&&( *:th ,onth pay as alluded in the above !o,putation. I !o,plainants !ould not be reinstated, respondents are ordered to pay the, separation pay e9uivalent to one ,onth salary or very -si!. year o servi!e. SO ORDERED. 2here ro,, 5A6A went on appeal to the N+RC, whi!h, in a de!ision dated August :?, *&&&," a ir,ed in toto that o the +abor Arbiter. 5A6A iled a ,otion or re!onsideration. A!ting thereon, the N+RC !a,e out with another de!ision dated 5anuary 0', 0???, # this ti,e ,odi ying its earlier de!ision, thus) "EREFORE, pre,ises !onsidered, the instant ,otion or re!onsideration is hereby %RAN2ED and the !hallenged de!ision o this Co,,ission AdatedB :? August *&&& and the de!ision o the +abor Arbiter CCC are hereby ,odi ied by reversing an setting aside the awards o ba!<wages, servi!e in!entive leave pay. Ea!h o the !o,plainants$appellees shall be entitled to a separation pay e9uivalent to one ,onth. In addition, respondents$appellants is -si!. ordered to pay ea!h o the !o,plainants$appellees the su, o P0,???.?? as inde,ni i!ation or its ailure to observe due pro!ess in e e!ting the retren!h,ent.

SO ORDERED. 2heir ,otion or re!onsideration having been denied by the N+RC in its resolution o April 0', 0???,@ respondents went to the Court o Appeals via a petition or !ertiorari, thereat do!<eted as CA$%.R. SP No. #&'"(. As stated at the outset hereo , the Court o Appeals, in a de!ision dated Nove,ber *@, 0???, applying the do!trine laid down by this Court in Serrano vs. NLRC,( reversed and set aside the N+RC1s de!ision o 5anuary 0', 0???, thus) "EREFORE, the de!ision dated 5anuary 0', 0??? o the National +abor Relations Co,,ission is RE#ERSEDand SET ASIDE and another one entered ordering respondent 5A6A 7oods Pro!essing Corporation to pay petitioners separation pay e9uivalent to one -*. ,onth salary, the proportionate *:th ,onth pay and, in addition, ull ba!<wages ro, the ti,e their e,ploy,ent was ter,inated on August 0&, *&&( up to the ti,e the De!ision herein be!o,es inal. SO ORDERED. 2his ti,e, 5A6A ,oved or a re!onsideration but its ,otion was denied by the appellate !ourt in its resolution o 5anuary ', 0??0. ;en!e, 5A6A1s present re!ourse, sub,itting, or our !onsideration, the ollowing issues) 8I. =;E2;ER OR NO2 2;E CODR2 O7 APPEA+S CORREC2+E A=ARDED F7D++ 3AC6=A%ES1 2O RESPONDEN2S. II. =;E2;ER OR NO2 2;E ASSAI+ED DECISION CORREC2+E A=ARDED SEPARA2ION PAE 2O RESPONDEN2S8. As we see it, there is only one 9uestion that re9uires resolution, i.e. what are the legal i,pli!ations o a situation where an e,ployee is dis,issed or !ause but su!h dis,issal was e e!ted without the e,ployer1s !o,plian!e with the noti!e re9uire,ent under the +abor Code. 2his, !ertainly, is not a !ase o irst i,pression. In the very re!ent !ase o Agabon vs. NLRC,' we had the opportunity to resolve a si,ilar 9uestion. 2herein, we ound that the e,ployees !o,,itted a grave o ense, i.e.,abandon,ent, whi!h is a or, o a negle!t o duty whi!h, in turn, is one o the >ust !auses enu,erated under Arti!le 0'0 o the +abor Code. In said !ase, we upheld the validity o the dis,issal despite non$!o,plian!e with the noti!e re9uire,ent o the +abor Code. ;owever, we re9uired the e,ployer to pay the dis,issed e,ployees the a,ount o P:?,???.??, representing no,inal da,ages or non$ !o,plian!e with statutory due pro!ess, thus) 8=here the dis,issal is or a >ust !ause, as in the instant !ase, the la!< o statutory due pro!ess should not nulli y the dis,issal, or render it illegal, or ine e!tual. ;owever, the e,ployer should inde,ni y the e,ployee or the violation o his statutory rights, as ruled in Reta vs. National Labor Relations Commission. 2he inde,nity to be i,posed should be sti er to dis!ourage the abhorrent pra!ti!e o Fdis,iss now, pay later,1 whi!h we sought to deter in the Serrano ruling. 2he san!tion should be in the nature o inde,ni i!ation or penalty and should depend on the a!ts o ea!h !ase, ta<ing into spe!ial !onsideration the gravity o the due pro!ess violation o the e,ployer. CCC CCC CCC 2he violation o petitioners1 right to statutory due pro!ess by the private respondent warrants the pay,ent o inde,nity in the or, o no,inal da,ages. 2he a,ount o su!h da,ages is addressed to the sound dis!retion o the !ourt, ta<ing into a!!ount the relevant !ir!u,stan!es. Co%)(&'r(%2 *h' 3r',a(/(%2 c(rc0-)*a%c') (% *h' ca)' a* .ar, 4' &''- (* 3ro3'r *o 5(6 (* a* P30,000.00. =e believe this or, o da,ages would serve to deter e,ployers ro, uture violations o the statutory due pro!ess rights o e,ployees. At the very least, it provides a vindi!ation or re!ognition o this unda,ental right granted to the latter under the +abor Code and its I,ple,enting Rules,8 -E,phasis supplied.. 2he di eren!e between Agabon and the instant !ase is that in the or,er, the dis,issal was based on a >ust !ause under Arti!le 0'0 o the +abor Code while in the present !ase, respondents were dis,issed due to retren!h,ent, whi!h is one o the authoriGed !auses under Arti!le 0': o the sa,e Code.

At this point, we note that there are divergent i,pli!ations o a dis,issal or >ust !ause under Arti!le 0'0, on one hand, and a dis,issal or authoriGed !ause under Arti!le 0':, on the other. A dis,issal or 70)* ca0)' under Arti!le 0'0 i,plies that the e,ployee !on!erned has !o,,itted, or is guilty o , so,e violation against the e,ployer, i.e. the e,ployee has !o,,itted so,e serious ,is!ondu!t, is guilty o so,e raud against the e,ployer, or, as in Agabon, he has negle!ted his duties. 2hus, it !an be said that the e,ployee hi,sel initiated the dis,issal pro!ess. On another breath, a dis,issal or an a0*hor(8'& ca0)' under Arti!le 0': does not ne!essarily i,ply delin9uen!y or !ulpability on the part o the e,ployee. Instead, the dis,issal pro!ess is initiated by the e,ployer1s eCer!ise o his ,anage,ent prerogative, i.e. when the e,ployer opts to install labor saving devi!es, when he de!ides to !ease business operations or when, as in this !ase, he underta<es to i,ple,ent a retren!h,ent progra,. 2he !lear$!ut distin!tion between a dis,issal or >ust !ause under Arti!le 0'0 and a dis,issal or authoriGed !ause under Arti!le 0': is urther rein or!ed by the a!t that in the irst, pay,ent o separation pay, as a rule, is not re9uired, while in the se!ond, the law re9uires pay,ent o separation pay.& 7or these reasons, there ought to be a di eren!e in treat,ent when the ground or dis,issal is one o the >ust !auses under Arti!le 0'0, and when based on one o the authoriGed !auses under Arti!le 0':. A!!ordingly, it is wise to hold that) -*. i the dis,issal is based on a >ust !ause under Arti!le 0'0 but the e,ployer ailed to !o,ply with the noti!e re9uire,ent, the san!tion to be i,posed upon hi, should be tempered be!ause the dis,issal pro!ess was, in e e!t, initiated by an a!t i,putable to the e,ployee/ and -0. i the dis,issal is based on an authoriGed !ause under Arti!le 0': but the e,ployer ailed to !o,ply with the noti!e re9uire,ent, the san!tion should be stiffer be!ause the dis,issal pro!ess was initiated by the e,ployer1s eCer!ise o his ,anage,ent prerogative. 2he re!ords be ore us reveal that, indeed, 5A6A was su ering ro, serious business losses at the ti,e it ter,inated respondents1 e,ploy,ent. As aptly ound by the N+RC) 8A !are ul study o the eviden!e presented by the respondent$appellant !orporation shows that the audited 7inan!ial State,ent o the !orporation or the periods *&&@, *&&( and *&&' were sub,itted by the respondent$appellant !orporation, 2he State,ent o In!o,e and De i!it ound in the Audited 7inan!ial State,ent o the respondent$appellant !orporation !learly shows the ollowing in *&&@, the de i!it o the respondent$appellant !orporation was P*'',0*',"*&.?? or &".**H o the sto!<holder1s Asi!B e9uity whi!h a,ounts to P0??,???,???.??. In *&&( when the retren!h,ent progra, o respondent$appellant !orporation was underta<en, the de i!it ballooned to P0"(,000,#@&.?? or *0:.@*H o the sto!<holders1 e9uity, thus a !apital de i!ien!y or i,pair,ent o e9uity ensued. In *&&', the de i!it grew to P:##,(&",'&(.?? or *((H o the sto!<holders1 e9uity. 7ro, *&&@ to *&&(, the de i!it grew by ,ore that - sic. :*H while in *&&' the de i!it grew by ,ore than "(H. 2he State,ent o In!o,e and De i!it o the respondent$appellant !orporation to prove its alleged losses was prepared by an independent auditor, S%I J Co. It !onvin!ingly showed that the respondent$appellant !orporation was in dire inan!ial straits, whi!h the !o,plainants$appellees ailed to dispute. 2he losses in!urred by the respondent$appellant !orporation are !learly substantial and su i!iently proven with !lear and satis a!tory eviden!e. +osses in!urred were ade9uately shown with respondent$appellant1s audited inan!ial state,ent. ;aving established the loss in!urred by the respondent$appellant !orporation, it ne!essarily ne!essarily - sic. ollows that the ground in support o retren!h,ent eCisted at the ti,e the !o,plainants$appellees were ter,inated. =e !annot there ore sustain the indings o the +abor Arbiter that the alleged losses o the respondent$appellant was Asi!B not well substantiated by substantial proo s. It is there ore logi!al or the !orporation to i,ple,ent a retren!h,ent progra, to prevent urther losses.8*? Noteworthy it is, ,oreover, to state that herein respondents did not assail the oregoing inding o the N+RC whi!h, in!identally, was also a ir,ed by the Court o Appeals. It is, there ore, established that there was ground or respondents1 dis,issal, i.e., retren!h,ent, whi!h is one o the authoriGed !auses enu,erated under Arti!le 0': o the +abor Code. +i<ewise, it is established that 5A6A ailed to !o,ply with the noti!e re9uire,ent under the sa,e Arti!le. Considering the a!tual !ir!u,stan!es in the

instant !ase and the above ratio!ination, we, there ore, dee, it proper to iC the inde,nity at P#?,???.??. =e li<ewise ind the Court o Appeals to have been in error when it ordered 5A6A to pay respondents separation pay e9uivalent to one -*. ,onth salary or every year o servi!e. 2his is be!ause in Reahs Corporation vs. NLRC,** we ,ade the ollowing de!laration) 82he rule, there ore, is that in all !ases o business !losure or !essation o operation or underta<ing o the e,ployer, the a e!ted e,ployee is entitled to separation pay. 2his is !onsistent with the state poli!y o treating labor as a pri,ary so!ial e!ono,i! or!e, a ording ull prote!tion to its rights as well as its wel are. Th' '6c'3*(o% () 4h'% *h' c/o)0r' o5 .0)(%')) or c'))a*(o% o5 o3'ra*(o%) () &0' *o )'r(o0) .0)(%')) /o))') or 5(%a%c(a/ r','r)')9 &0/1 3ro,'&, (% 4h(ch ca)', *h' r(2h* o5 a55'c*'& '-3/o1'') *o )'3ara*(o% 3a1 () /o)* 5or o.,(o0) r'a)o%). CCC8. -E,phasis supplied. "EREFORE, the instant petition is %RAN2ED. A!!ordingly, the assailed de!ision and resolution o the Court o Appeals respe!tively dated Nove,ber *@, 0??* and 5anuary ', 0??0 are hereby SE2 ASIDE and a new one entered upholding the legality o the dis,issal but ordering petitioner to pay ea!h o the respondents the a,ount o P#?,???.??, representing no,inal da,ages or non$!o,plian!e with statutory due pro!ess. SO ORDERED.