PNCC SKYWAY CORPORATION (PSC) vs.

THE SECRETARY OF LABOR &

EMPLOYMENT, PNCC SKYWAY TRAFFIC MANAGEMENT, AND SECURITY DIVISION
WORKERS ORGANIZATION
G.R. No. 196110 | February 06, 2017
DOCTRINE: 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.
FACTS: The Philippine National Construction Corporation was awarded by the Toll Regulatory
Board with the franchise of constructing, operating and maintaining the north and south
expressways, including the South Metro Manila Skyway. On 1998, it created petitioner PNCC
Skyway Corporation for the purpose of taking charge of its traffic safety, maintaining its facilities
and collecting toll.
Eight years later, the Citra Metro Manila Tollway Corporation, a private investor entered into an
agreement with the TRB and the PNCC to transfer the operation of the Skyway from petitioner
PSC to the Skyway O & M Corporation. The said transfer provided for a five-month transition
period from July 2007 until the full torn-over of the Skyway at December 31, 2007 upon which
petitioner PSC will close its operation.
3 days before the flail transfer of the operation of the Skyway to SOMCO, petitioner PSC served
termination letters to its employees, many of whom were members of private respondent PNCC
Skyway Traffic Management and Security Division Worker's Organization. According to the letter,
PSC has no choice but to close its operations resulting in the termination of its employees effective
January 31, 2008. However, the employees are entitled to receive separation pay amounting to
250% of the basic monthly pay for every year of service, among others things. Petitioner PSC,
likewise, served a notice of termination to the DOLE.
Private respondent Union, immediately upon receipt of the termination letters, filed a Notice of
Strike before the DOLE alleging that the closure of the operation of PSC is tantamount to union-
busting because it is a means of terminating employees who are members thereof. Furthermore,
the notices of termination were served on its employees 3 days before petitioner PSC ceases its
operations, thereby violating the employees' right to due process. As a matter of fact, the
employees were no longer allowed to work as of January 1, 2008. Private respondent Union, thus,
prayed that petitioner PSC be held guilty of unfair labor practice and illegal dismissal. It, likewise,
prayed for the reinstatement of all dismissed employees, along with the award of backwages,
moral and exemplary damages, and attorney's fees.
PSC denied that the closure of its operation was intended to remove employees who are members
of private respondent Union. Instead, it claimed that it was done in good faith and in the exercise
of management prerogative, considering that it was anchored on an agreement between the TRB,
the PNCC and the private investor Citra. PSC likewise denied that it had violated the right to due
process of its employees, considering that the notices of termination were served on December
28, 2007 while the termination was effective only on January 31, 2008, PSC alleged that the Union
was guilty of an illegal strike when it started a strike on the same day it filed a notice of strike on
December 28, 2007.
Public respondent Secretary of Labor and Employment found that there was an authorized cause
for the closure of the operation of PSC albeit it failed to comply with the procedural requirements
set forth under Article 283 of the Labor Code. On appeal, the Court of Appeals dismissed PSC's
petition. The appellate court held that the Secretary of Labor was correct in saying that the
extension of the employee's employment in paper only and the payment of the employee's
salaries for said period cannot substitute for the PSC's failure to comply with the due process
requirements. Thus, the SOLE cannot be said to have acted capriciously or whimsically, in the
exercise of his official duties.
ISSUE: Whether or not procedural requirements of Article 283 of the Labor Code on notice are
complied with by the petitioner considering that the alleged effectivity of the termination was made
one month from the notice of termination and that the affected employees were paid for the said
month.
RULING: No. public respondent SOLE committed no grave abuse of discretion in its resolution
that while there was an authorized cause for the closure of PSC's operations and the subsequent
termination of its employees, it however failed to comply with the procedural requirements set
forth under Article 283 of the Labor Code, that is, by serving notices of termination upon the
employees and the DOLE at least 1 month before the intended date thereof.
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.
In the instant case, while both the SOLE and the appellate court found the closure of PSC's
business operation to be bona fide, the required notices were, however, served on the employees
and the DOLE only 3 days before the closure of the company. PSC contends that it had
substantially complied with the 1 month notice requirement since the termination of its employees
was made effective only on January 31, 2008, or more than 1 month after it had given the notice
of termination on December 28, 2007. It insists that they have in fact paid the affected employees
for the said period covered by the supposed one-month notice. We disagree.

The required written notice under Article 283 of the Labor Code 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 (1) month before the date of effectivity to give them sufficient time to make the necessary
arrangements. The purpose of this requirement is to give employees time to prepare for the
eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the veracity of the
alleged cause of termination. Thus, considering that the notices of termination were given merely
three (3) days before the cessation of the PSC's operation, it defeats the very purpose of the
required notice and the mandate of Article 283 of the Labor Code. Neither the payment of
employees' salaries for the said one-month period nor the employees' alleged actual knowledge
of the ASTOA is sufficient to replace the formal and written notice required by the law.

Moreover, as early as July 2007, PSC already had knowledge of the eventual take-over by
SOMCO of the Skyway by December 31, 2007. Thus, considering that PSC had ample time of
more than 5 months to serve the notice of termination to its employees, its failure to comply with
the notice requirement under Article 283 of the Labor Code is inexcusable.