MPCEU FUR-TUCP v. Manila Polo Club, Inc.

G.R. 172846– July 24, 2013

J. Peralta

Topic: Termination of Employment by Employer – Authorized Causes. – Closure of Business

Doctrine: Retrenchment and Business Closure are two different things. The biggest difference is that
retrenchment requires for an employer to prove financial losses as a reason for the termination of employment
relationship, while Business Closure only requires that cessation of business operations be done in good faith.

Petitioner: Manila Polo Club Employees’ Union (MPCEU) FUR-TUCP

Respondent: Manila Polo Club, Inc.

Summary: MPCEU filed a case against Manila Polo Club upon the termination of the former’s employee
members after MPC closed its food and beverage [F&B] outlets. The SC ruled in favor of MPC stating that the
closure of its business operation is a valid exercise of its management prerogative, which entails the termination
of all employees working under such department. The court also ruled that since this is a case of cessation of
business, and not one of retrenchment, it is of no matter for MPC to show and prove its financial condition to
justify the cessation of its business operation.

FACTS:
 MPCEU [an affiliate of Federations of Unions of Rizal (FUP)-TUCP] is the recognized labor
organization of Manila Polo Club [MPC], a membership organization which provides recreation and
sports facilities to its proprietary members, their dependents, and guests.
 December 2001: MPC’s Board of Directors resolved to completely terminate the operations of its Food
and Beverage [F&B] outlets, except the Last Chukker, due to yearly losses [~PHP10.1M] in 6 out of the
previous 8 fiscal years.
 March 22, 2002: The Board approved the implementation of the retrenchment program of employees
directly and indirectly involved with the operations of the F&B outlets. The employees were given their
separation pay based on the number of years they were in service. [Not important naman, pero just in case
ma’am asks]
o 2 years and Below: 1 month pay
o 2 years to 9 years: ½ month pay for every year of service
o At least 10 years; 1 month pay for every year of service
o At least 15 years: 1.25 month(s) pay for every year of service
o At least 20 years: 1.5 month(s) pay for every year of service
 In line with this, MPC sent the notices to the petitioner and the affected employees via registered mail
informing them of the termination of the employment relationship on April 2002 and the directive not to
report to work effective immediately. An Establishment Termination Report was also submitted to DOLE.
 March 25, 2002: Unaware of the sent notices, the employees were surprised when they were prevented
to enter the club premises as they reported for work. They later learned that the F&B operations of
respondent had been awarded to Makati Skyline, Inc. effective that day. When the management refused
to a meeting, MPCEU filed a Notice of Strike before the NCMB for illegal dismissal, violation of the
CBA, union busting, and unfair labor practices. This notice was, however, withdrawn.
 May 10, 2002: MPCEU again filed a Notice of Strike. A month after, the parties agreed to reger to the
Voluntary Arbitrator the issue of retrenchment of 117 union members, with a qualification that “the
retrenched employees subject of the VA will receive separation package without executing quitclaim and
release, and without prejudice to the decision of the voluntary arbitrator.”
 VA Ruling: The VA dismissed MPCEU’s complaint for lack of merit, but without prejudice to the
payment of separation pay to the affected employees.
 CA Ruling: Affirmed VA’s ruling in toto.

ISSUE + HELD:
1. W/N the “retrenchment” of the 117 union members is legal [YES, but it’s a closure of business not
retrenchment]
 The Court first ruled that the case at bar is not one of retrenchment. Rather, it invovles a closure of business
undertaking. The requirements and consequences of the two are different.
o Retrenchment: The reduction of personnel for the purpose of cutting down on costs of operations
in terms of salaries and wages because of losses in operation of a business occasioned by lack of
work and considerable reduction in the volume of business. Requirements:
 [Important requirement. Without this, retrenchment is illegal] It is necessary to prevent
losses and it is proven by sufficient and convincing evidence (e.g. audited financial
statements), and that retrenchment is the only effective measure to prevent such losses
 [Without this, retrenchment is valid, but management is liable for nominal damages of
P50k] Written notice is served on to the employees and the DOLE at least 1 month prior
date of retrenchment
 Retrenched employees receive their separation pay equivalent to 1 month pay or at least
½ month pay for every year of service, whichever is higher
o Closure of a Business or Undertaking: 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. It is required that management closes the entire establishment or to
abolish a department or section thereof.
 For closure of business, LC283 provides that the reason for cessation may be due to (1)
serious business losses/financial reverses, or (2) "otherwise”. For the first kind, the
employer must sufficiently prove its allegation of substantial losses, and on the second
kind, the employer can lawfully close shop anytime as long as cessation of business
operations was bona fide in character and not impelled by a motive to defeat tenurial
rights of employees
 In both cases, the employer must pay his employees their termination pay in the amount
corresponding to their length of service.
 In the case of Alabang Country Club, Inc, the Court ruled that ACCI need not prove their financial losses
when it also closed its F&B department since the law contemplates that for any bon 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. This falls squarely under management prerogrative to close or
cease its business operations, as long as it’s done in good faith.
 On the other hand, the Court ruled in favor of the employees in the Eastridge Golf Club, Inc. case when
Eastridge turned over to a concessionaire its F&B Department. It was found that the transfer was only
simulated and was done in bad faith. Evidence presented (payroll, Philhealth contributions, SSS
contribution, etc.) proved that Eastridge remained to be the employer of the F&B staff.
 In this case: The instant case is resemblant of the Alabang Country Club, Inc. case. The Court expressly
said that it need not dwell on the financial condition of MPC. This is a case of closure of business
operations – not retrenchment – since MPC terminated the employment of all personnel, and not just
reduced their number.
o The closure of the F&B Department was due to legitimate business considerations, a resolution
which the Court has no business interfering with.
o Good faith in the cessation was also evident. The reason behind it was due to losses it has been
incurring since 1994 + MPC even helped the employees find gainful employment after the
termination of their employment.
o Further, there was no indication of bad faith. It was not motivated by any specific and clearly
determinable union activity of the employees; rather, it was truly dictated by economic necessity.
Despite petitioner's allegations, no convincing and credible proofs were presented to establish the
claim that such closure qualifies as an act of union-busting and ULP.
o Finally, it should be noted that the separation packages of all 117 union members were already
paid during the pendency of the case. The Court treated such receipt of separation pay as valid
and binding between the parties.
RULING: WHEREFORE, the foregoing considered, the instant Petition isDENIED. The February 2, 2006
Decision and May 29, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 73127 sustaining in toto the
August 28, 2002 Decision and September 13, 2002 Resolution of Voluntary Arbitrator Jesus B. Diamonon, which
dismissed petitioner's complaint for illegal retrenchment, are AFFIRMED.