Labor 2: Case Digest Group 3: Banaag, Bernal, Brillo, Caga

WATERFRONT CEBU CITY HOTEL v. MA. MELANIE P JIMENEZ

GR No. 174214, 13 June 2012

FACTS:
Jimenez, Baguio, Carillo, and Roble were hired for Club Waterfront
(the Club), which catered to high stakes gamblers. Jimenez was hired
on Sept 4, 1996, Baguio was hired on June 1, 1996, Carillo on May 26,
1998, and Roble on Sept 1, 1999.

On May 12, 2003 Jimenez, et al. received letters of termination due to

temporary suspension of the business club. The next day Waterfront
Cebu City Hotel (the Waterfront Hotel) served the DOLE with the
Notice of Suspension of Business. The dismissed employees were
offered separation pay equivalent to half-month pay for every year of
service.

The dismissed employees filed a case for illegal dismissal before the
Labor Arbiter. They refused to believe the business was suffering
losses. But the Arbiter held that the closure was a valid exercise of
management prerogative. They were also ordered to pay the correct
amount of separation pay.

On appeal, the NLRC affirmed the Arbiter, citing as proof the financial
statements submitted by Waterfront.

Jimenez, et al. appealed with the Court of Appeals; the court reversed
the NLRC decision. The court held that, absent any legal or valid
cause, the dismissal was illegal. Also, that the dismissal was illegal,
and that the employees were entitled to full backwages, among other
legal fees.

ISSUE:
Whether the termination of the employment of the employees is valid.

RATIO:
Retrenchment is the termination of employment initiated by the
employer through no fault of and without prejudice to the employees.
It is resorted to during periods of business recession, industrial
depression, or seasonal fluctuations or 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 of automation. It is an act of the employer of
dismissing employees because of losses in the operation of a
business, lack of work, and considerable reduction on the volume of
his business.

In case of retrenchment, proof of financial losses becomes the

determining factor in proving its legitimacy. In establishing a unilateral

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claim of actual or potential losses, financial statements audited by

independent external auditors constitute the normal method of proof of
profit and loss performance of a company.

For a valid retrenchment, the following elements must be present:

(1) That retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de minimis,
but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the
employer;
(2) That the employer served written notice both to the employees and
to the Department of Labor and Employment at least one month prior
to the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay
equivalent to one (1) month pay or at least ½ month pay for every year
of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees
in good faith for the advancement of its interest and not to defeat or
circumvent the employees’ right to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining
who would be dismissed and who would be retained among the
employees, such as status, efficiency, seniority, physical fitness, age,
and financial hardship for certain workers.

All these elements were successfully proven by the Waterfront Hotel.

First, the huge losses suffered by the Club for the past two years had
forced the Waterfront Hotel to close it down to avert further losses
which would eventually affect the operations of the Waterfront Hotel.
Second, all 45 employees working under the Club were served with
notice of termination. The corresponding notice was likewise served to
the DOLE one month prior to retrenchment. Third, the employees were
offered separation pay, most of whom have accepted and opted not to
join in this complaint. Fourth, cessation of or withdrawal from business
operations was bona fide in character and not impelled by a motive to
defeat or circumvent the tenurial rights of employees. As a matter of
fact, as of this writing, the Club has not resumed operations. Neither is
there a showing that Waterfront carried out the closure of the business
in bad faith. No labor dispute existed between management and the
employees when the latter were terminated.

COMMENT:
Although we agree that “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,” (Alabang Country
Club, Inc. v. NLRC, 503 Phil. 937 (2005)), we however could not
understand why the Supreme Court still considered the dismissal valid

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in spite of the erroneous cause for termination of employment availed

by the employer. Quoting the Supreme Court, “Verily, retrenchment
and not closure was effected to warrant the valid dismissal of
respondents. The Waterfront Hotel has not totally ceased its
operations. It merely closed down a department.”

Art. 298 of the Labor Code lumps the authorized causes together but
it does not mean that they are interchangeable. In fact, in a catena of
cases, the elements of such causes have been enumerated and even
differentiated from one another. This proves that they should not be
treated as interchangeable, as in fact, they are not. However, such
principle was not followed in this case. In spite of the error of the
employer, the dismissal was considered valid. Had this been a criminal
case, the error would have been fatal to the Waterfront Hotel’s cause.

Granted that the nature of labor cases is different from that of criminal
cases, the fact is what is being considered here is the employment of
Jimenez, et al. Such employment as already laid down in
jurisprudence, “is a property right, and the wrongful interference
therewith is an actionable wrong. The right is considered to be property
within the protection of the constitutional guarantee of due process of
law”. Is it not the case that employees were denied due process? From
the Labor Arbiter up to the Appellate Court, the parties were focused
on the topic of closure of business of the employer. They were given
opportunities to substantiate their claims and defend their cause. But
when it reached the Supreme Court, It tells the employer the latter
availed of a wrong cause then off-handedly waves it off and rules in
favor of the employer. In our humble opinion, if the case was indeed
one of retrenchments the employees should have been given the
chance to refute the same because the two are not one and the same
nor are they interchangeable. Nor did the Supreme Court consider in
its decision the documents that Jimenez and the others employees
presented refuting the allegations of the Waterfront Hotel that the Club
was suffering from losses.

As to the NLRC’s award and computation of separation pay in favor of

Jimenez and the others employees, we believe that for most of the
separation pay provided are not in accordance with what the law
provides.